diff --git a/src/testRunner/unittests/tsserver/projects.ts b/src/testRunner/unittests/tsserver/projects.ts
index 80e1efcac22d3..1bfe61934de31 100644
--- a/src/testRunner/unittests/tsserver/projects.ts
+++ b/src/testRunner/unittests/tsserver/projects.ts
@@ -1590,5 +1590,34 @@ namespace ts.projectSystem {
                 assert.isTrue(e.message.indexOf("Debug Failure. False expression: Found script Info still attached to project") === 0);
             }
         });
+        it("does not look beyond node_modules folders for default configured projects", () => {
+            const rootFilePath = server.asNormalizedPath("/project/index.ts");
+            const rootProjectPath = server.asNormalizedPath("/project/tsconfig.json");
+            const nodeModulesFilePath1 = server.asNormalizedPath("/project/node_modules/@types/a/index.d.ts");
+            const nodeModulesProjectPath1 = server.asNormalizedPath("/project/node_modules/@types/a/tsconfig.json");
+            const nodeModulesFilePath2 = server.asNormalizedPath("/project/node_modules/@types/b/index.d.ts");
+            const serverHost = createServerHost([
+                { path: rootFilePath, content: "import 'a'; import 'b';" },
+                { path: rootProjectPath, content: "{}" },
+                { path: nodeModulesFilePath1, content: "{}" },
+                { path: nodeModulesProjectPath1, content: "{}" },
+                { path: nodeModulesFilePath2, content: "{}" },
+            ]);
+            const projectService = createProjectService(serverHost, { useSingleInferredProject: true });
+
+            const openRootFileResult = projectService.openClientFile(rootFilePath);
+            assert.strictEqual(openRootFileResult.configFileName?.toString(), rootProjectPath);
+
+            const openNodeModulesFileResult1 = projectService.openClientFile(nodeModulesFilePath1);
+            assert.strictEqual(openNodeModulesFileResult1.configFileName?.toString(), nodeModulesProjectPath1);
+
+            const openNodeModulesFileResult2 = projectService.openClientFile(nodeModulesFilePath2);
+            assert.isUndefined(openNodeModulesFileResult2.configFileName);
+
+            const rootProject = projectService.findProject(rootProjectPath)!;
+            checkProjectActualFiles(rootProject, [rootProjectPath, rootFilePath, nodeModulesFilePath1, nodeModulesFilePath2]);
+
+            checkNumberOfInferredProjects(projectService, 0);
+        });
     });
 }