diff --git a/packages/typescript-estree/src/create-program/createWatchProgram.ts b/packages/typescript-estree/src/create-program/createWatchProgram.ts
index 5d975f7d6d1..f60905a9879 100644
--- a/packages/typescript-estree/src/create-program/createWatchProgram.ts
+++ b/packages/typescript-estree/src/create-program/createWatchProgram.ts
@@ -395,11 +395,12 @@ function maybeInvalidateProgram(
     const folderWatchCallbacks = folderWatchCallbackTrackingMap.get(current);
     if (folderWatchCallbacks) {
       folderWatchCallbacks.forEach(cb => {
-        cb(currentDir, ts.FileWatcherEventKind.Changed);
+        if (currentDir !== current) {
+          cb(currentDir, ts.FileWatcherEventKind.Changed);
+        }
         cb(current!, ts.FileWatcherEventKind.Changed);
       });
       hasCallback = true;
-      break;
     }
 
     next = canonicalDirname(current);
diff --git a/packages/typescript-estree/src/create-program/shared.ts b/packages/typescript-estree/src/create-program/shared.ts
index 8aceb204c47..be60f245374 100644
--- a/packages/typescript-estree/src/create-program/shared.ts
+++ b/packages/typescript-estree/src/create-program/shared.ts
@@ -38,12 +38,14 @@ function getCanonicalFileName(filePath: string): CanonicalPath {
   return correctPathCasing(normalized) as CanonicalPath;
 }
 
+function ensureAbsolutePath(p: string, extra: Extra): string {
+  return path.isAbsolute(p)
+    ? p
+    : path.join(extra.tsconfigRootDir || process.cwd(), p);
+}
+
 function getTsconfigPath(tsconfigPath: string, extra: Extra): CanonicalPath {
-  return getCanonicalFileName(
-    path.isAbsolute(tsconfigPath)
-      ? tsconfigPath
-      : path.join(extra.tsconfigRootDir || process.cwd(), tsconfigPath),
-  );
+  return getCanonicalFileName(ensureAbsolutePath(tsconfigPath, extra));
 }
 
 function canonicalDirname(p: CanonicalPath): CanonicalPath {
@@ -84,6 +86,7 @@ export {
   canonicalDirname,
   CanonicalPath,
   DEFAULT_COMPILER_OPTIONS,
+  ensureAbsolutePath,
   getCanonicalFileName,
   getScriptKind,
   getTsconfigPath,
diff --git a/packages/typescript-estree/src/parser.ts b/packages/typescript-estree/src/parser.ts
index fb62c090bb7..6a9e0a1c6b5 100644
--- a/packages/typescript-estree/src/parser.ts
+++ b/packages/typescript-estree/src/parser.ts
@@ -11,6 +11,7 @@ import { createSourceFile } from './create-program/createSourceFile';
 import { Extra, TSESTreeOptions, ParserServices } from './parser-options';
 import { getFirstSemanticOrSyntacticError } from './semantic-or-syntactic-errors';
 import { TSESTree } from './ts-estree';
+import { ensureAbsolutePath } from './create-program/shared';
 
 /**
  * This needs to be kept in sync with the top-level README.md in the
@@ -145,6 +146,7 @@ function applyParserOptionsToExtra(options: TSESTreeOptions): void {
   } else {
     extra.filePath = getFileName(extra);
   }
+  extra.filePath = ensureAbsolutePath(extra.filePath, extra);
 
   /**
    * The JSX AST changed the node type for string literals
diff --git a/packages/typescript-estree/tests/lib/persistentParse.ts b/packages/typescript-estree/tests/lib/persistentParse.ts
index bdeed2f5538..fd9cbdc93bb 100644
--- a/packages/typescript-estree/tests/lib/persistentParse.ts
+++ b/packages/typescript-estree/tests/lib/persistentParse.ts
@@ -10,6 +10,7 @@ const CONTENTS = {
   'bat/baz/bar': 'console.log("bat/baz/bar")',
 };
 
+const cwdCopy = process.cwd();
 const tmpDirs = new Set<tmp.DirResult>();
 afterEach(() => {
   // stop watching the files and folders
@@ -18,6 +19,9 @@ afterEach(() => {
   // clean up the temporary files and folders
   tmpDirs.forEach(t => t.removeCallback());
   tmpDirs.clear();
+
+  // restore original cwd
+  process.chdir(cwdCopy);
 });
 
 function writeTSConfig(dirName: string, config: Record<string, unknown>): void {
@@ -54,14 +58,24 @@ function setup(tsconfig: Record<string, unknown>, writeBar = true): string {
   return tmpDir.name;
 }
 
-function parseFile(filename: keyof typeof CONTENTS, tmpDir: string): void {
-  parseAndGenerateServices(CONTENTS.foo, {
+function parseFile(
+  filename: keyof typeof CONTENTS,
+  tmpDir: string,
+  relative?: boolean,
+): void {
+  parseAndGenerateServices(CONTENTS[filename], {
     project: './tsconfig.json',
     tsconfigRootDir: tmpDir,
-    filePath: path.join(tmpDir, 'src', `${filename}.ts`),
+    filePath: relative
+      ? path.join('src', `${filename}.ts`)
+      : path.join(tmpDir, 'src', `${filename}.ts`),
   });
 }
 
+function existsSync(filename: keyof typeof CONTENTS, tmpDir = ''): boolean {
+  return fs.existsSync(path.join(tmpDir, 'src', `${filename}.ts`));
+}
+
 function baseTests(
   tsConfigExcludeBar: Record<string, unknown>,
   tsConfigIncludeAll: Record<string, unknown>,
@@ -161,6 +175,27 @@ function baseTests(
     expect(() => parseFile('foo', PROJECT_DIR)).not.toThrow();
     expect(() => parseFile('bar', PROJECT_DIR)).not.toThrow();
   });
+
+  it('should work with relative paths', () => {
+    const PROJECT_DIR = setup(tsConfigIncludeAll, false);
+    process.chdir(PROJECT_DIR);
+
+    // parse once to: assert the config as correct, and to make sure the program is setup
+    expect(() => parseFile('foo', PROJECT_DIR, true)).not.toThrow();
+    // bar should throw because it doesn't exist yet
+    expect(() => parseFile('bar', PROJECT_DIR, true)).toThrow();
+
+    // write a new file and attempt to parse it
+    writeFile(PROJECT_DIR, 'bar');
+
+    // make sure that file is correctly created
+    expect(existsSync('bar')).toEqual(true);
+    expect(existsSync('bar', PROJECT_DIR)).toEqual(true);
+
+    // both files should parse fine now
+    expect(() => parseFile('foo', PROJECT_DIR, true)).not.toThrow();
+    expect(() => parseFile('bar', PROJECT_DIR, true)).not.toThrow();
+  });
 }
 
 describe('persistent parse', () => {