diff --git a/snowpack/src/sources/local.ts b/snowpack/src/sources/local.ts
index 203ca6fb3b..d100039dc3 100644
--- a/snowpack/src/sources/local.ts
+++ b/snowpack/src/sources/local.ts
@@ -452,10 +452,8 @@ export class PackageSourceLocal implements PackageSource {
     }
 
     // Check to see if this package is marked as external, in which case skip the build.
-    for (const externalPackage of config.packageOptions.external) {
-      if (_packageName === externalPackage || _packageName.startsWith(externalPackage + '/')) {
-        return;
-      }
+    if(this.isExternal(_packageName, spec)) {
+      return;
     }
 
     await this.installPackage(_packageName, source);
@@ -684,10 +682,8 @@ export class PackageSourceLocal implements PackageSource {
     const [packageName] = parsePackageImportSpecifier(spec);
 
     // If this import is marked as external, do not transform the original spec
-    for (const externalPackage of config.packageOptions.external) {
-      if (packageName === externalPackage || packageName.startsWith(externalPackage + '/')) {
-        return spec;
-      }
+    if(this.isExternal(packageName, spec)) {
+      return spec;
     }
 
     const isSymlink = !entrypoint.includes(path.join('node_modules', packageName));
@@ -742,4 +738,14 @@ export class PackageSourceLocal implements PackageSource {
   getCacheFolder() {
     return this.cacheDirectory;
   }
+
+  private isExternal(packageName: string, specifier: string): boolean {
+    const {config} = this;
+    for (const external of config.packageOptions.external) {
+      if (packageName === external || specifier === external || packageName.startsWith(external + '/')) {
+        return true;
+      }
+    }
+    return false;
+  }
 }
diff --git a/test/snowpack/config/packageOptions.external/index.test.js b/test/snowpack/config/packageOptions.external/index.test.js
index c1f6e76705..d3db0aa245 100644
--- a/test/snowpack/config/packageOptions.external/index.test.js
+++ b/test/snowpack/config/packageOptions.external/index.test.js
@@ -24,4 +24,44 @@ describe('packageOptions.external', () => {
 
     expect(result['index.js']).toContain(`import 'fs';`);
   });
+
+  it('Does not install externals that are deep package imports', async () => {
+    const result = await testFixture({
+      'packages/some-thing/main.js': dedent`
+        export default 'ok';
+      `,
+      'packages/some-thing/deep.js': dedent`
+        export default 'oops';
+      `,
+      'packages/some-thing/package.json': dedent`
+        {
+          "version": "1.0.0",
+          "name": "some-thing",
+          "module": "main.js"
+        }
+      `,
+      'package.json': dedent`
+        {
+          "version": "1.0.1",
+          "name": "@snowpack/test-config-external",
+          "dependencies": {
+            "some-thing": "file:./packages/some-thing"
+          }
+        }
+      `,
+      'index.js': dedent`
+        import 'some-thing';
+        import 'some-thing/deep.js';
+      `,
+      'snowpack.config.js': dedent`
+        module.exports = {
+          packageOptions: {
+            external: ['some-thing/deep.js']
+          }
+        }
+      `
+    });
+
+    expect(result['index.js']).toContain(`import 'some-thing/deep.js';`);
+  })
 });