diff --git a/packages/playwright-test/src/common/compilationCache.ts b/packages/playwright-test/src/common/compilationCache.ts
index 3c4879c433..215bca061b 100644
--- a/packages/playwright-test/src/common/compilationCache.ts
+++ b/packages/playwright-test/src/common/compilationCache.ts
@@ -32,7 +32,7 @@ const cacheDir = process.env.PWTEST_CACHE_DIR || path.join(os.tmpdir(), 'playwri
 
 const sourceMaps: Map<string, string> = new Map();
 const memoryCache = new Map<string, MemoryCache>();
-const fileDependencies = new Map<string, string[]>();
+const fileDependencies = new Map<string, Set<string>>();
 
 Error.stackTraceLimit = 200;
 
@@ -92,7 +92,7 @@ export function serializeCompilationCache(): any {
   return {
     sourceMaps: [...sourceMaps.entries()],
     memoryCache: [...memoryCache.entries()],
-    fileDependencies: [...fileDependencies.entries()],
+    fileDependencies: [...fileDependencies.entries()].map(([filename, deps]) => ([filename, [...deps]])),
   };
 }
 
@@ -107,7 +107,7 @@ export function addToCompilationCache(payload: any) {
   for (const entry of payload.memoryCache)
     memoryCache.set(entry[0], entry[1]);
   for (const entry of payload.fileDependencies)
-    fileDependencies.set(entry[0], entry[1]);
+    fileDependencies.set(entry[0], new Set(entry[1]));
 }
 
 function calculateCachePath(content: string, filePath: string, isModule: boolean): string {
@@ -134,8 +134,11 @@ export function stopCollectingFileDeps(filename: string) {
   if (!depsCollector)
     return;
   depsCollector.delete(filename);
-  const deps = [...depsCollector!].filter(f => !belongsToNodeModules(f));
-  fileDependencies.set(filename, deps);
+  for (const dep of depsCollector) {
+    if (belongsToNodeModules(dep))
+      depsCollector.delete(dep);
+  }
+  fileDependencies.set(filename, depsCollector);
   depsCollector = undefined;
 }
 
@@ -147,6 +150,14 @@ export function fileDependenciesForTest() {
   return fileDependencies;
 }
 
+export function collectAffectedTestFiles(dependency: string, testFileCollector: Set<string>) {
+  testFileCollector.add(dependency);
+  for (const [testFile, deps] of fileDependencies) {
+    if (deps.has(dependency))
+      testFileCollector.add(testFile);
+  }
+}
+
 // These two are only used in the dev mode, they are specifically excluding
 // files from packages/playwright*. In production mode, node_modules covers
 // that.
diff --git a/packages/playwright-test/src/common/transform.ts b/packages/playwright-test/src/common/transform.ts
index 1a63e777c9..24ad15ae42 100644
--- a/packages/playwright-test/src/common/transform.ts
+++ b/packages/playwright-test/src/common/transform.ts
@@ -221,10 +221,8 @@ function installTransform(): () => void {
 }
 
 const collectCJSDependencies = (module: Module, dependencies: Set<string>) => {
-  if (dependencies.has(module.filename))
-    return;
   module.children.forEach(child => {
-    if (!belongsToNodeModules(child.filename)) {
+    if (!belongsToNodeModules(child.filename) && !dependencies.has(child.filename)) {
       dependencies.add(child.filename);
       collectCJSDependencies(child, dependencies);
     }
diff --git a/packages/playwright-test/src/internalsForTest.ts b/packages/playwright-test/src/internalsForTest.ts
index 84b9c0b352..0b45178627 100644
--- a/packages/playwright-test/src/internalsForTest.ts
+++ b/packages/playwright-test/src/internalsForTest.ts
@@ -19,6 +19,6 @@ import { fileDependenciesForTest } from './common/compilationCache';
 
 export function fileDependencies() {
   return Object.fromEntries([...fileDependenciesForTest().entries()].map(entry => (
-    [path.basename(entry[0]),  entry[1].map(f => path.basename(f))]
+    [path.basename(entry[0]), [...entry[1]].map(f => path.basename(f)).sort()]
   )));
 }
diff --git a/packages/playwright-test/src/runner/watchMode.ts b/packages/playwright-test/src/runner/watchMode.ts
index 8d5b81bfbb..130c561a48 100644
--- a/packages/playwright-test/src/runner/watchMode.ts
+++ b/packages/playwright-test/src/runner/watchMode.ts
@@ -23,7 +23,7 @@ import type { Matcher } from '../util';
 import { createTaskRunnerForWatch } from './tasks';
 import type { TaskRunnerState } from './tasks';
 import { buildProjectsClosure, filterProjects } from './projectUtils';
-import { clearCompilationCache } from '../common/compilationCache';
+import { clearCompilationCache, collectAffectedTestFiles } from '../common/compilationCache';
 import type { FullResult, TestCase } from 'packages/playwright-test/reporter';
 import chokidar from 'chokidar';
 import { WatchModeReporter } from './reporters';
@@ -149,14 +149,19 @@ ${colors.dim('press')} ${colors.bold('h')} ${colors.dim('to show help, press')}
   }
 }
 
-async function runChangedTests(config: FullConfigInternal, failedTestIds: Set<string>, projectClosure: FullProjectInternal[], files: Set<string>) {
+async function runChangedTests(config: FullConfigInternal, failedTestIdCollector: Set<string>, projectClosure: FullProjectInternal[], changedFiles: Set<string>) {
   const commandLineFileMatcher = config._internal.cliFileFilters.length ? createFileMatcherFromFilters(config._internal.cliFileFilters) : () => true;
 
+  // Resolve files that depend on the changed files.
+  const testFiles = new Set<string>();
+  for (const file of changedFiles)
+    collectAffectedTestFiles(file, testFiles);
+
   // Collect projects with changes.
   const filesByProject = new Map<FullProjectInternal, string[]>();
   for (const project of projectClosure) {
     const projectFiles: string[] = [];
-    for (const file of files) {
+    for (const file of testFiles) {
       if (!file.startsWith(project.testDir))
         continue;
       if (project._internal.type === 'dependency' || commandLineFileMatcher(file))
@@ -174,11 +179,11 @@ async function runChangedTests(config: FullConfigInternal, failedTestIds: Set<st
 
   // If there are affected dependency projects, do the full run, respect the original CLI.
   // if there are no affected dependency projects, intersect CLI with dirty files
-  const additionalFileMatcher = affectsAnyDependency ? () => true : (file: string) => files.has(file);
-  return await runTests(config, failedTestIds, projectsToIgnore, additionalFileMatcher);
+  const additionalFileMatcher = affectsAnyDependency ? () => true : (file: string) => testFiles.has(file);
+  return await runTests(config, failedTestIdCollector, projectsToIgnore, additionalFileMatcher);
 }
 
-async function runTests(config: FullConfigInternal, failedTestIds: Set<string>, projectsToIgnore?: Set<FullProjectInternal>, additionalFileMatcher?: Matcher) {
+async function runTests(config: FullConfigInternal, failedTestIdCollector: Set<string>, projectsToIgnore?: Set<FullProjectInternal>, additionalFileMatcher?: Matcher) {
   const reporter = new Multiplexer([new WatchModeReporter()]);
   const taskRunner = createTaskRunnerForWatch(config, reporter, projectsToIgnore, additionalFileMatcher);
   const context: TaskRunnerState = {
@@ -194,9 +199,9 @@ async function runTests(config: FullConfigInternal, failedTestIds: Set<string>,
   let hasFailedTests = false;
   for (const test of context.rootSuite?.allTests() || []) {
     if (test.outcome() === 'expected') {
-      failedTestIds.delete(test.id);
+      failedTestIdCollector.delete(test.id);
     } else {
-      failedTestIds.add(test.id);
+      failedTestIdCollector.add(test.id);
       hasFailedTests = true;
     }
   }
diff --git a/tests/playwright-test/watch.spec.ts b/tests/playwright-test/watch.spec.ts
index f0184d503c..d0ddf2fc61 100644
--- a/tests/playwright-test/watch.spec.ts
+++ b/tests/playwright-test/watch.spec.ts
@@ -24,13 +24,14 @@ test('should print dependencies in CJS mode', async ({ runInlineTest }) => {
         globalTeardown: './globalTeardown.ts',
       });
     `,
-    'helper.ts': `export function foo() {}`,
+    'helperA.ts': `export function foo() {}`,
+    'helperB.ts': `import './helperA';`,
     'a.test.ts': `
-      import './helper';
+      import './helperA';
       pwt.test('passes', () => {});
     `,
     'b.test.ts': `
-      import './helper';
+      import './helperB';
       pwt.test('passes', () => {});
     `,
     'globalTeardown.ts': `
@@ -46,8 +47,8 @@ test('should print dependencies in CJS mode', async ({ runInlineTest }) => {
   const output = stripAnsi(result.output);
   const deps = JSON.parse(output.match(/###(.*)###/)![1]);
   expect(deps).toEqual({
-    'a.test.ts': ['helper.ts'],
-    'b.test.ts': ['helper.ts'],
+    'a.test.ts': ['helperA.ts'],
+    'b.test.ts': ['helperA.ts', 'helperB.ts'],
   });
 });
 
@@ -61,13 +62,14 @@ test('should print dependencies in ESM mode', async ({ runInlineTest, nodeVersio
         globalTeardown: './globalTeardown.ts',
       });
     `,
-    'helper.ts': `export function foo() {}`,
+    'helperA.ts': `export function foo() {}`,
+    'helperB.ts': `import './helperA.js';`,
     'a.test.ts': `
-      import './helper.js';
+      import './helperA.js';
       pwt.test('passes', () => {});
     `,
     'b.test.ts': `
-      import './helper.js';
+      import './helperB.js';
       pwt.test('passes', () => {});
     `,
     'globalTeardown.ts': `
@@ -83,7 +85,7 @@ test('should print dependencies in ESM mode', async ({ runInlineTest, nodeVersio
   const output = stripAnsi(result.output);
   const deps = JSON.parse(output.match(/###(.*)###/)![1]);
   expect(deps).toEqual({
-    'a.test.ts': ['helper.ts'],
-    'b.test.ts': ['helper.ts'],
+    'a.test.ts': ['helperA.ts'],
+    'b.test.ts': ['helperA.ts', 'helperB.ts'],
   });
 });