diff --git a/lib/shrinkwrap.js b/lib/shrinkwrap.js
index 75d58bf8e4f0b..bd8c0abbaa205 100644
--- a/lib/shrinkwrap.js
+++ b/lib/shrinkwrap.js
@@ -111,7 +111,6 @@ function shrinkwrapDeps (deps, top, tree, seen) {
     var pkginfo = deps[moduleName(child)] = {}
     var requested = getRequested(child) || child.package._requested || {}
     var linked = child.isLink || child.isInLink
-    var linkedFromHere = linked && path.relative(top.realpath, child.realpath)[0] !== '.'
     pkginfo.version = childVersion(top, child, requested)
     if (requested.type === 'git' && child.package._from) {
       pkginfo.from = child.package._from
@@ -142,7 +141,7 @@ function shrinkwrapDeps (deps, top, tree, seen) {
       })
     }
     // iterate into children on non-links and links contained within the top level package
-    if (child.children.length && (!child.isLink || linkedFromHere)) {
+    if (child.children.length) {
       pkginfo.dependencies = {}
       shrinkwrapDeps(pkginfo.dependencies, top, child, seen)
     }
diff --git a/test/tap/ci-with-local-dependency.js b/test/tap/ci-with-local-dependency.js
new file mode 100644
index 0000000000000..10efedee40063
--- /dev/null
+++ b/test/tap/ci-with-local-dependency.js
@@ -0,0 +1,83 @@
+var fs = require('graceful-fs')
+var path = require('path')
+
+var mkdirp = require('mkdirp')
+var osenv = require('osenv')
+var rimraf = require('rimraf')
+var test = require('tap').test
+
+var common = require('../common-tap.js')
+
+var pkg = common.pkg
+
+var EXEC_OPTS = { cwd: pkg, stdio: [0, 1, 2] }
+
+var localDependencyJson = {
+  name: 'local-dependency',
+  version: '0.0.0',
+  dependencies: {
+    underscore: '1.5.1'
+  }
+}
+
+var dependentJson = {
+  name: 'dependent',
+  version: '0.0.0',
+  dependencies: {
+    'local-dependency': '../local-dependency'
+  }
+}
+
+var target = path.resolve(pkg, '../local-dependency')
+
+test('setup', function (t) {
+  cleanup()
+  t.end()
+})
+
+test('\'npm install\' should install local pkg from sub path', function (t) {
+  setup()
+  common.npm(['install', '--loglevel=silent'], EXEC_OPTS, function (err, code) {
+    if (err) throw err
+    t.equal(code, 0, 'npm install exited with code')
+    t.ok(fs.statSync(path.resolve(pkg, 'node_modules/local-dependency/package.json')).isFile(), 'local dependency package.json exists')
+    t.ok(fs.statSync(path.resolve(pkg, 'node_modules/local-dependency/node_modules/underscore')).isDirectory(), 'transitive dependency installed')
+    t.end()
+  })
+})
+
+test('\'npm ci\' should work', function (t) {
+  common.npm(['ci', '--loglevel=silent'], EXEC_OPTS, function (err, code) {
+    if (err) throw err
+    t.equal(code, 0, 'npm install exited with code')
+    t.ok(fs.statSync(path.resolve(pkg, 'node_modules/local-dependency/package.json')).isFile(), 'local dependency package.json exists')
+    t.ok(fs.statSync(path.resolve(pkg, 'node_modules/local-dependency/node_modules/underscore')).isDirectory(), 'transitive dependency installed')
+    t.end()
+  })
+})
+
+test('cleanup', function (t) {
+  cleanup()
+  t.end()
+})
+
+function cleanup () {
+  process.chdir(osenv.tmpdir())
+  rimraf.sync(pkg)
+  rimraf.sync(target)
+}
+
+function setup () {
+  cleanup()
+  mkdirp.sync(target)
+  fs.writeFileSync(
+    path.join(target, 'package.json'),
+    JSON.stringify(localDependencyJson, null, 2)
+  )
+  mkdirp.sync(pkg)
+  fs.writeFileSync(
+    path.join(pkg, 'package.json'),
+    JSON.stringify(dependentJson, null, 2)
+  )
+  process.chdir(pkg)
+}
diff --git a/test/tap/spec-local-specifiers.js b/test/tap/spec-local-specifiers.js
index 7b6cacf12cb69..16fac002566fa 100644
--- a/test/tap/spec-local-specifiers.js
+++ b/test/tap/spec-local-specifiers.js
@@ -585,7 +585,9 @@ test('save behavior', function (t) {
       var deps = pjson.dependencies || {}
       t.is(deps['sb-transitive'], 'file:../sb-transitive', 'package.json')
       var sdep = shrinkwrap.dependencies['sb-transitive'] || {}
-      t.like(sdep, {bundled: null, dependencies: null, version: 'file:../sb-transitive'}, 'npm-shrinkwrap.json direct dep')
+      var tdep = sdep.dependencies.sbta
+      t.like(tdep, {bundled: null, version: 'file:../sb-transitive/sbta'}, 'npm-shrinkwrap.json transitive dep')
+      t.like(sdep, {bundled: null, version: 'file:../sb-transitive'}, 'npm-shrinkwrap.json direct dep')
       t.done()
     })
   })