diff --git a/.gitignore b/.gitignore
index 0410070..40b0228 100755
--- a/.gitignore
+++ b/.gitignore
@@ -6,7 +6,7 @@
 *.DS_Store
 
 # NPM
-node_modules
+/node_modules
 npm-debug.log
 
 # Build
diff --git a/README.md b/README.md
index 79b129d..b9f0097 100644
--- a/README.md
+++ b/README.md
@@ -67,8 +67,8 @@ module.exports = {
   moduleFileExtensions: defaults.moduleFileExtensions.concat("marko"),
   // preprocesses Marko files.
   transform: { "\\.marko$": "@marko/jest" },
-  // transforms top level `.marko` files in the Marko package.
-  transformIgnorePatterns: ["node_modules/(?!(marko)/)"]
+  // transforms `.marko` files in node_modules as well
+  transformIgnorePatterns: ["node_modules/.*(?<!\\.marko)$"]
   browser: true
 };
 ```
@@ -131,16 +131,16 @@ In the above example config, any tests with `*.browser.js` will run in a JSDOM c
 
 ## Using tags from npm
 
-By default Jest will not transform any `.marko` files within your `node_modules` folder. Marko recommends publishing the original source Marko files when publishing to npm. To get around this you can use the [`transformIgnorePatterns`](https://jestjs.io/docs/en/tutorial-react-native#transformignorepatterns-customization) option in Jest and whitelist any packages which contain Marko tags.
+By default Jest will not transform any `.marko` files within your `node_modules` folder. Marko recommends publishing the original source Marko files when publishing to npm. To get around this you can use the [`transformIgnorePatterns`](https://jestjs.io/docs/en/tutorial-react-native#transformignorepatterns-customization) option in Jest and whitelist `.marko` files.
 
-The `@marko/jest` preset by will scan your `node_modules` and build the appropriate ignore pattern for you. If you are just using the `@marko/jest` transformer standalone then you will have to do this yourself, like so:
+The `@marko/jest` preset sets the ignore pattern for you. If you are just using the `@marko/jest` transformer standalone then you will have to do this yourself, like so:
 
 **jest.config.js**
 
 ```javascript
 module.exports = {
   ...,
-  transformIgnorePatterns: ["node_modules/(?!(marko|@marko-tags|another-package-with-marko-tags)/)"]
+  transformIgnorePatterns: ["node_modules/.*(?<!\\.marko)$"]
 };
 ```
 
diff --git a/jest-preset.js b/jest-preset.js
index 59b95a2..0bb6b4b 100644
--- a/jest-preset.js
+++ b/jest-preset.js
@@ -1,11 +1,4 @@
-const fs = require("fs");
-const path = require("path");
 const { defaults } = require("jest-config");
-const escapeRegexp = require("escape-string-regexp");
-const { package, path: packagePath } = require("read-pkg-up").sync({
-  normalize: false
-});
-const nodeModulesPath = path.join(packagePath, "../node_modules");
 
 module.exports = {
   // uses a webpack style resolver, the default one has many issues.
@@ -18,18 +11,6 @@ module.exports = {
     "\\.[tj]s$": "babel-jest"
   },
   // Jest ignores node_module transforms by default.
-  // Here we whitelist all node_modules that contain a `marko.json`.
-  // Only checks for node_modules listed in package.json, same as Marko taglib scanning.
-  transformIgnorePatterns: [
-    `node_modules/(?!(${Object.keys(package.dependencies || {})
-      .concat(Object.keys(package.devDependencies || {}))
-      .concat(Object.keys(package.peerDependencies || {}))
-      .filter((name, i, all) => all.indexOf(name) === i)
-      .filter(name =>
-        fs.existsSync(path.join(nodeModulesPath, name, "marko.json"))
-      )
-      .map(escapeRegexp)
-      .concat("marko")
-      .join("|")})/)`
-  ]
+  // Here we whitelist all `.marko` files.
+  transformIgnorePatterns: ["node_modules/.*(?<!\\.marko)$"]
 };
diff --git a/package.json b/package.json
index 2834b59..a979047 100644
--- a/package.json
+++ b/package.json
@@ -6,9 +6,7 @@
   "bugs": "https://github.com/marko-js/jest/issues",
   "dependencies": {
     "enhanced-resolve-jest": "^1.0.2",
-    "escape-string-regexp": "^2.0.0",
     "jest-config": "^24.8.0",
-    "read-pkg-up": "^6.0.0",
     "tslib": "^1.10.0"
   },
   "devDependencies": {
diff --git a/test/browser.test.ts b/test/browser.test.ts
index c3105ff..30df6f2 100644
--- a/test/browser.test.ts
+++ b/test/browser.test.ts
@@ -1,5 +1,6 @@
 import Example from "./fixtures/example.marko";
 import Mockable from "./fixtures/mockable.marko";
+import Project from "./fixtures/project/index.marko";
 
 afterEach(() => {
   document.body.innerHTML = "";
@@ -21,3 +22,11 @@ test("can be mocked", async () => {
     `"<div>Hello Mocked</div>"`
   );
 });
+
+test("transforms templates in node_modules", async () => {
+  const result = await Project.render({});
+  result.appendTo(document.body).getComponent();
+  expect(document.body.innerHTML).toMatchInlineSnapshot(
+    `"<div class=\\"direct\\"><div class=\\"indirect\\">Hello World</div></div>"`
+  );
+});
diff --git a/test/fixtures/project/index.marko b/test/fixtures/project/index.marko
new file mode 100644
index 0000000..c3ba87d
--- /dev/null
+++ b/test/fixtures/project/index.marko
@@ -0,0 +1,3 @@
+<direct-tag>
+  Hello World
+</direct-tag>
\ No newline at end of file
diff --git a/test/fixtures/project/index.marko.d.ts b/test/fixtures/project/index.marko.d.ts
new file mode 100644
index 0000000..0a3c1f1
--- /dev/null
+++ b/test/fixtures/project/index.marko.d.ts
@@ -0,0 +1,2 @@
+declare let x: any;
+export = x;
diff --git a/test/fixtures/project/node_modules/direct/index.marko b/test/fixtures/project/node_modules/direct/index.marko
new file mode 100644
index 0000000..a381eb2
--- /dev/null
+++ b/test/fixtures/project/node_modules/direct/index.marko
@@ -0,0 +1,5 @@
+<div.direct>
+  <indirect-tag>
+    <${input.renderBody}/>
+  </indirect-tag>
+</div>
\ No newline at end of file
diff --git a/test/fixtures/project/node_modules/direct/marko.json b/test/fixtures/project/node_modules/direct/marko.json
new file mode 100644
index 0000000..63ac777
--- /dev/null
+++ b/test/fixtures/project/node_modules/direct/marko.json
@@ -0,0 +1,5 @@
+{
+  "<direct-tag>": {
+    "template": "./index.marko"
+  }
+}
\ No newline at end of file
diff --git a/test/fixtures/project/node_modules/direct/node_modules/indirect/index.marko b/test/fixtures/project/node_modules/direct/node_modules/indirect/index.marko
new file mode 100644
index 0000000..f8886cf
--- /dev/null
+++ b/test/fixtures/project/node_modules/direct/node_modules/indirect/index.marko
@@ -0,0 +1,3 @@
+<div.indirect>
+  <${input.renderBody}/>
+</div>
\ No newline at end of file
diff --git a/test/fixtures/project/node_modules/direct/node_modules/indirect/marko.json b/test/fixtures/project/node_modules/direct/node_modules/indirect/marko.json
new file mode 100644
index 0000000..0a42f7d
--- /dev/null
+++ b/test/fixtures/project/node_modules/direct/node_modules/indirect/marko.json
@@ -0,0 +1,5 @@
+{
+  "<indirect-tag>": {
+    "template": "./index.marko"
+  }
+}
\ No newline at end of file
diff --git a/test/fixtures/project/node_modules/direct/node_modules/indirect/package.json b/test/fixtures/project/node_modules/direct/node_modules/indirect/package.json
new file mode 100644
index 0000000..67dfab3
--- /dev/null
+++ b/test/fixtures/project/node_modules/direct/node_modules/indirect/package.json
@@ -0,0 +1,3 @@
+{
+  "name": "direct"
+}
\ No newline at end of file
diff --git a/test/fixtures/project/node_modules/direct/package.json b/test/fixtures/project/node_modules/direct/package.json
new file mode 100644
index 0000000..4b09544
--- /dev/null
+++ b/test/fixtures/project/node_modules/direct/package.json
@@ -0,0 +1,6 @@
+{
+  "name": "indirect",
+  "dependencies": {
+    "indirect": "*"
+  }
+}
\ No newline at end of file
diff --git a/test/fixtures/project/package.json b/test/fixtures/project/package.json
new file mode 100644
index 0000000..9cb1d13
--- /dev/null
+++ b/test/fixtures/project/package.json
@@ -0,0 +1,5 @@
+{
+  "dependencies": {
+    "direct": "*"
+  }
+}
\ No newline at end of file
diff --git a/test/server.test.ts b/test/server.test.ts
index 93097e0..21bbfe6 100644
--- a/test/server.test.ts
+++ b/test/server.test.ts
@@ -1,5 +1,6 @@
 import Example from "./fixtures/example.marko";
 import Mockable from "./fixtures/mockable.marko";
+import Project from "./fixtures/project/index.marko";
 
 test("server rendering", () => {
   expect(Example.renderSync({}).toString()).toMatchInlineSnapshot(
@@ -13,3 +14,9 @@ test("can be mocked", async () => {
     `"<div>Hello Mocked</div>"`
   );
 });
+
+test("transforms templates in node_modules", () => {
+  expect(Project.renderSync({}).toString()).toMatchInlineSnapshot(
+    `"<div class=\\"direct\\"><div class=\\"indirect\\">Hello World</div></div>"`
+  );
+});