diff --git a/packages/compiler-cli/ngcc/src/entry_point_finder/targeted_entry_point_finder.ts b/packages/compiler-cli/ngcc/src/entry_point_finder/targeted_entry_point_finder.ts
index 35a63a5698..2dcffe8942 100644
--- a/packages/compiler-cli/ngcc/src/entry_point_finder/targeted_entry_point_finder.ts
+++ b/packages/compiler-cli/ngcc/src/entry_point_finder/targeted_entry_point_finder.ts
@@ -150,13 +150,35 @@ export class TargetedEntryPointFinder implements EntryPointFinder {
         break;
       }
     }
-    // If we get here then none of the `basePaths` matched the `entryPointPath`, which
-    // is somewhat unexpected and means that this entry-point lives completely outside
-    // any of the `basePaths`.
-    // All we can do is assume that his entry-point is a primary entry-point to a package.
-    return entryPointPath;
-  }
 
+    // We couldn't find a `packagePath` using `basePaths` so try to find the nearest `node_modules`
+    // that contains the `entryPointPath`, if there is one, and use it as a `basePath`.
+    let packagePath = entryPointPath;
+    let scopedPackagePath = packagePath;
+    let containerPath = this.fs.dirname(packagePath);
+    while (!this.fs.isRoot(containerPath) && !containerPath.endsWith('node_modules')) {
+      scopedPackagePath = packagePath;
+      packagePath = containerPath;
+      containerPath = this.fs.dirname(containerPath);
+    }
+
+    if (this.fs.exists(join(packagePath, 'package.json'))) {
+      // The directory directly below `node_modules` is a package - use it
+      return packagePath;
+    } else if (
+        this.fs.basename(packagePath).startsWith('@') &&
+        this.fs.exists(join(scopedPackagePath, 'package.json'))) {
+      // The directory directly below the `node_modules` is a scope and the directory directly
+      // below that is a scoped package - use it
+      return scopedPackagePath;
+    } else {
+      // If we get here then none of the `basePaths` contained the `entryPointPath` and the
+      // `entryPointPath` contains no `node_modules` that contains a package or a scoped
+      // package. All we can do is assume that this entry-point is a primary entry-point to a
+      // package.
+      return entryPointPath;
+    }
+  }
 
   /**
    * Split the given `path` into path segments using an FS independent algorithm.
diff --git a/packages/compiler-cli/ngcc/src/entry_point_finder/utils.ts b/packages/compiler-cli/ngcc/src/entry_point_finder/utils.ts
index 7a43c237a7..2f8329eae4 100644
--- a/packages/compiler-cli/ngcc/src/entry_point_finder/utils.ts
+++ b/packages/compiler-cli/ngcc/src/entry_point_finder/utils.ts
@@ -30,7 +30,7 @@ import {PathMappings} from '../utils';
 export function getBasePaths(
     sourceDirectory: AbsoluteFsPath, pathMappings: PathMappings | undefined): AbsoluteFsPath[] {
   const fs = getFileSystem();
-  let basePaths = [sourceDirectory];
+  const basePaths = [sourceDirectory];
   if (pathMappings) {
     const baseUrl = resolve(pathMappings.baseUrl);
     Object.values(pathMappings.paths).forEach(paths => paths.forEach(path => {
diff --git a/packages/compiler-cli/ngcc/test/entry_point_finder/targeted_entry_point_finder_spec.ts b/packages/compiler-cli/ngcc/test/entry_point_finder/targeted_entry_point_finder_spec.ts
index 63d317fd2d..0bbd51fbfb 100644
--- a/packages/compiler-cli/ngcc/test/entry_point_finder/targeted_entry_point_finder_spec.ts
+++ b/packages/compiler-cli/ngcc/test/entry_point_finder/targeted_entry_point_finder_spec.ts
@@ -166,6 +166,81 @@ runInEachFileSystem(() => {
             ]);
       });
 
+      it('should handle external node_modules folders (e.g. in a yarn workspace)', () => {
+        // Note that neither the basePath and targetPath contain each other
+        const basePath = _Abs('/nested_node_modules/packages/app/node_modules');
+        const targetPath = _Abs('/nested_node_modules/node_modules/package/entry-point');
+        loadTestFiles([
+          ...createPackage(_Abs('/nested_node_modules/node_modules'), 'package'),
+          ...createPackage(_Abs('/nested_node_modules/node_modules/package'), 'entry-point'),
+        ]);
+        const finder = new TargetedEntryPointFinder(
+            fs, config, logger, resolver, basePath, targetPath, undefined);
+        const {entryPoints} = finder.findEntryPoints();
+        expect(dumpEntryPointPaths(_Abs('/nested_node_modules'), entryPoints)).toEqual([
+          ['node_modules/package', 'node_modules/package/entry-point'],
+        ]);
+      });
+
+      it('should handle external node_modules folders (e.g. in a yarn workspace) for dependencies',
+         () => {
+           // The application being compiled is at `/project/packages/app` so the basePath sent to
+           // ngcc is the `node_modules` below it
+           const basePath = _Abs('/project/packages/app/node_modules');
+           // `packages/app` depends upon lib1, which has a private dependency on lib2 in its
+           // own `node_modules` folder
+           const lib2 = createPackage(
+               _Abs('/project/node_modules/lib1/node_modules'), 'lib2', ['lib3/entry-point']);
+           // `lib2` depends upon `lib3/entry-point` which has been hoisted all the way up to the
+           // top level `node_modules`
+           const lib3 = createPackage(_Abs('/project/node_modules'), 'lib3');
+           const lib3EntryPoint = createPackage(_Abs('/project/node_modules/lib3'), 'entry-point');
+           loadTestFiles([...lib2, ...lib3, ...lib3EntryPoint]);
+           // The targetPath being processed is `lib2` and we expect it to find the correct
+           // entry-point info for the `lib3/entry-point` dependency.
+           const targetPath = _Abs('/project/node_modules/lib1/node_modules/lib2');
+           const finder = new TargetedEntryPointFinder(
+               fs, config, logger, resolver, basePath, targetPath, undefined);
+           const {entryPoints} = finder.findEntryPoints();
+           expect(dumpEntryPointPaths(_Abs('/project/node_modules'), entryPoints)).toEqual([
+             ['lib3', 'lib3/entry-point'],
+             ['lib1/node_modules/lib2', 'lib1/node_modules/lib2'],
+           ]);
+         });
+
+      it('should handle external node_modules folders (e.g. in a yarn workspace) for scoped dependencies',
+         () => {
+           // The application being compiled is at `/project/packages/app` so the basePath sent to
+           // ngcc is the `node_modules` below it
+           const basePath = _Abs('/project/packages/app/node_modules');
+           // `packages/app` depends upon lib1, which has a private dependency on lib2 in its
+           // own `node_modules` folder
+           const lib2 = createPackage(
+               _Abs('/project/node_modules/lib1/node_modules'), 'lib2',
+               ['@scope/lib3/entry-point']);
+           // `lib2` depends upon `lib3/entry-point` which has been hoisted all the way up to the
+           // top level `node_modules`
+           const lib3 = createPackage(_Abs('/project/node_modules/@scope'), 'lib3');
+           const lib3EntryPoint = createPackage(
+               _Abs('/project/node_modules/@scope/lib3'), 'entry-point', ['lib4/entry-point']);
+           const lib4 =
+               createPackage(_Abs('/project/node_modules/@scope/lib3/node_modules'), 'lib4');
+           const lib4EntryPoint = createPackage(
+               _Abs('/project/node_modules/@scope/lib3/node_modules/lib4'), 'entry-point');
+           loadTestFiles([...lib2, ...lib3, ...lib3EntryPoint, ...lib4, ...lib4EntryPoint]);
+           // The targetPath being processed is `lib2` and we expect it to find the correct
+           // entry-point info for the `lib3/entry-point` dependency.
+           const targetPath = _Abs('/project/node_modules/lib1/node_modules/lib2');
+           const finder = new TargetedEntryPointFinder(
+               fs, config, logger, resolver, basePath, targetPath, undefined);
+           const {entryPoints} = finder.findEntryPoints();
+           expect(dumpEntryPointPaths(_Abs('/project/node_modules'), entryPoints)).toEqual([
+             ['@scope/lib3/node_modules/lib4', '@scope/lib3/node_modules/lib4/entry-point'],
+             ['@scope/lib3', '@scope/lib3/entry-point'],
+             ['lib1/node_modules/lib2', 'lib1/node_modules/lib2'],
+           ]);
+         });
+
       it('should handle dependencies via pathMappings', () => {
         const basePath = _Abs('/path_mapped/node_modules');
         const targetPath = _Abs('/path_mapped/node_modules/test');