diff --git a/lib/PnpPlugin.js b/lib/PnpPlugin.js
index e418d717..8f151774 100644
--- a/lib/PnpPlugin.js
+++ b/lib/PnpPlugin.js
@@ -51,6 +51,19 @@ module.exports = class PnpPlugin {
 						});
 					}
 				} catch (error) {
+					if (
+						error.code === "MODULE_NOT_FOUND" &&
+						error.pnpCode === "UNDECLARED_DEPENDENCY"
+					) {
+						// This is not a PnP managed dependency.
+						// Try to continue resolving with our alternatives
+						if (resolveContext.log) {
+							resolveContext.log(`request is not managed by the pnpapi`);
+							for (const line of error.message.split("\n").filter(Boolean))
+								resolveContext.log(`  ${line}`);
+						}
+						return callback();
+					}
 					return callback(error);
 				}
 
diff --git a/lib/ResolverFactory.js b/lib/ResolverFactory.js
index b92ba5ea..2f981e34 100644
--- a/lib/ResolverFactory.js
+++ b/lib/ResolverFactory.js
@@ -375,15 +375,17 @@ exports.createResolver = function(options) {
 			new SelfReferencePlugin("raw-module", exportsField, "resolve-as-module")
 		);
 	});
-	if (pnpApi) {
-		plugins.push(new PnpPlugin("raw-module", pnpApi, "relative"));
-	}
 	modules.forEach(item => {
-		if (Array.isArray(item))
+		if (Array.isArray(item)) {
 			plugins.push(
 				new ModulesInHierachicDirectoriesPlugin("raw-module", item, "module")
 			);
-		else plugins.push(new ModulesInRootPlugin("raw-module", item, "module"));
+			if (item.includes("node_modules") && pnpApi) {
+				plugins.push(new PnpPlugin("raw-module", pnpApi, "relative"));
+			}
+		} else {
+			plugins.push(new ModulesInRootPlugin("raw-module", item, "module"));
+		}
 	});
 
 	// module
diff --git a/test/fixtures/pnp-a/m2/a.js b/test/fixtures/pnp-a/m2/a.js
new file mode 100644
index 00000000..997c1051
--- /dev/null
+++ b/test/fixtures/pnp-a/m2/a.js
@@ -0,0 +1,3 @@
+module.exports = function a() {
+	return "This is nested m1/a";
+};
diff --git a/test/pnp.js b/test/pnp.js
index cf537c6e..98ce9b19 100644
--- a/test/pnp.js
+++ b/test/pnp.js
@@ -42,7 +42,10 @@ describe("pnp", () => {
 				if (pnpApi.mocks.has(request)) {
 					return pnpApi.mocks.get(request);
 				} else {
-					throw new Error(`No way`);
+					const err = /** @type {any} */ (new Error(`No way`));
+					err.code = "MODULE_NOT_FOUND";
+					err.pnpCode = "UNDECLARED_DEPENDENCY";
+					throw err;
 				}
 			}
 		});
@@ -50,7 +53,11 @@ describe("pnp", () => {
 			extensions: [".ts", ".js"],
 			aliasFields: ["browser"],
 			fileSystem: nodeFileSystem,
-			pnpApi
+			alias: {
+				alias: path.resolve(fixture, "pkg")
+			},
+			pnpApi,
+			modules: ["node_modules", path.resolve(fixture, "../pnp-a")]
 		});
 	});
 	it("should resolve by going through the pnp api", done => {
@@ -145,7 +152,7 @@ describe("pnp", () => {
 			done();
 		});
 	});
-	it("should skip normal modules when pnp resolves", done => {
+	it("should prefer normal modules over pnp resolves", done => {
 		pnpApi.mocks.set("m1/a.js", path.resolve(fixture, "pkg/a.js"));
 		resolver.resolve(
 			{},
@@ -153,7 +160,52 @@ describe("pnp", () => {
 			"m1/a.js",
 			{},
 			(err, result) => {
-				if (!err) return done(new Error("Resolving should fail"));
+				if (err) return done(err);
+				result.should.equal(path.resolve(fixture, "../node_modules/m1/a.js"));
+				done();
+			}
+		);
+	});
+	it("should prefer alias over pnp resolves", done => {
+		pnpApi.mocks.set(
+			"alias/index.js",
+			path.resolve(fixture, "pkg/dir/index.js")
+		);
+		resolver.resolve(
+			{},
+			path.resolve(__dirname, "fixtures"),
+			"alias/index.js",
+			{},
+			(err, result) => {
+				if (err) return done(err);
+				result.should.equal(path.resolve(fixture, "pkg/index.js"));
+				done();
+			}
+		);
+	});
+	it("should prefer pnp over modules after node_modules", done => {
+		pnpApi.mocks.set("m2/a.js", path.resolve(fixture, "pkg/index.js"));
+		resolver.resolve(
+			{},
+			path.resolve(__dirname, "fixtures"),
+			"m2/a.js",
+			{},
+			(err, result) => {
+				if (err) return done(err);
+				result.should.equal(path.resolve(fixture, "pkg/index.js"));
+				done();
+			}
+		);
+	});
+	it("should fallback to alternatives when pnp resolving fails", done => {
+		resolver.resolve(
+			{},
+			path.resolve(__dirname, "fixtures"),
+			"m2/a.js",
+			{},
+			(err, result) => {
+				if (err) return done(err);
+				result.should.equal(path.resolve(fixture, "../pnp-a/m2/a.js"));
 				done();
 			}
 		);