diff --git a/src/test/loader.ts b/src/test/loader.ts
index 1102d4ae82..8ad810ec86 100644
--- a/src/test/loader.ts
+++ b/src/test/loader.ts
@@ -22,6 +22,7 @@ import { Suite } from './test';
 import { SerializedLoaderData } from './ipc';
 import * as path from 'path';
 import * as url from 'url';
+import * as fs from 'fs';
 import { ProjectImpl } from './project';
 import { Reporter } from '../../types/testReporter';
 import { LaunchConfig } from '../../types/test';
@@ -74,9 +75,9 @@ export class Loader {
 
     // Resolve script hooks relative to the root dir.
     if (this._config.globalSetup)
-      this._config.globalSetup = path.resolve(rootDir, this._config.globalSetup);
+      this._config.globalSetup = resolveScript(this._config.globalSetup, rootDir);
     if (this._config.globalTeardown)
-      this._config.globalTeardown = path.resolve(rootDir, this._config.globalTeardown);
+      this._config.globalTeardown = resolveScript(this._config.globalTeardown, rootDir);
 
     const configUse = mergeObjects(this._defaultConfig.use, this._config.use);
     this._config = mergeObjects(mergeObjects(this._defaultConfig, this._config), { use: configUse });
@@ -444,3 +445,10 @@ function resolveReporters(reporters: Config['reporter'], rootDir: string): Repor
     return [require.resolve(id, { paths: [ rootDir ] }), arg];
   });
 }
+
+function resolveScript(id: string, rootDir: string) {
+  const localPath = path.resolve(rootDir, id);
+  if (fs.existsSync(localPath))
+    return localPath;
+  return require.resolve(id, { paths: [rootDir] });
+}
diff --git a/tests/playwright-test/global-setup.spec.ts b/tests/playwright-test/global-setup.spec.ts
index 2898e04c08..a661bed8da 100644
--- a/tests/playwright-test/global-setup.spec.ts
+++ b/tests/playwright-test/global-setup.spec.ts
@@ -21,7 +21,7 @@ test('globalSetup and globalTeardown should work', async ({ runInlineTest }) =>
     'playwright.config.ts': `
       import * as path from 'path';
       module.exports = {
-        globalSetup: './globalSetup.ts',
+        globalSetup: './globalSetup',
         globalTeardown: path.join(__dirname, 'globalTeardown.ts'),
       };
     `,
@@ -54,7 +54,7 @@ test('globalTeardown runs after failures', async ({ runInlineTest }) => {
       import * as path from 'path';
       module.exports = {
         globalSetup: 'globalSetup.ts',
-        globalTeardown: 'globalTeardown.ts',
+        globalTeardown: './globalTeardown.ts',
       };
     `,
     'globalSetup.ts': `
@@ -85,7 +85,7 @@ test('globalTeardown does not run when globalSetup times out', async ({ runInlin
     'playwright.config.ts': `
       import * as path from 'path';
       module.exports = {
-        globalSetup: 'globalSetup.ts',
+        globalSetup: './globalSetup.ts',
         globalTeardown: 'globalTeardown.ts',
         globalTimeout: 1000,
       };
@@ -119,7 +119,7 @@ test('globalSetup should be run before requiring tests', async ({ runInlineTest
     'playwright.config.ts': `
       import * as path from 'path';
       module.exports = {
-        globalSetup: 'globalSetup.ts',
+        globalSetup: './globalSetup.ts',
       };
     `,
     'globalSetup.ts': `
@@ -143,7 +143,7 @@ test('globalSetup should work with sync function', async ({ runInlineTest }) =>
     'playwright.config.ts': `
       import * as path from 'path';
       module.exports = {
-        globalSetup: 'globalSetup.ts',
+        globalSetup: './globalSetup.ts',
       };
     `,
     'globalSetup.ts': `
@@ -167,7 +167,7 @@ test('globalSetup should throw when passed non-function', async ({ runInlineTest
     'playwright.config.ts': `
       import * as path from 'path';
       module.exports = {
-        globalSetup: 'globalSetup.ts',
+        globalSetup: './globalSetup.ts',
       };
     `,
     'globalSetup.ts': `
@@ -187,7 +187,7 @@ test('globalSetup should work with default export and run the returned fn', asyn
     'playwright.config.ts': `
       import * as path from 'path';
       module.exports = {
-        globalSetup: 'globalSetup.ts',
+        globalSetup: './globalSetup.ts',
       };
     `,
     'globalSetup.ts': `
@@ -212,3 +212,28 @@ test('globalSetup should work with default export and run the returned fn', asyn
   expect(output).toContain(`%%setup: 42`);
   expect(output).toContain(`%%teardown: 42`);
 });
+
+test('globalSetup should allow requiring a package from node_modules', async ({ runInlineTest }) => {
+  const { results } = await runInlineTest({
+    'playwright.config.ts': `
+      import * as path from 'path';
+      module.exports = {
+        globalSetup: 'my-global-setup'
+      };
+    `,
+    'node_modules/my-global-setup/index.js': `
+      module.exports = async () => {
+        await new Promise(f => setTimeout(f, 100));
+        global.value = 42;
+        process.env.FOO = String(global.value);
+      };
+    `,
+    'a.test.js': `
+      const { test } = pwt;
+      test('should work', async ({}, testInfo) => {
+        expect(process.env.FOO).toBe('42');
+      });
+    `,
+  });
+  expect(results[0].status).toBe('passed');
+});
\ No newline at end of file