diff --git a/src/server/scriptInfo.ts b/src/server/scriptInfo.ts
index 53bbc6cba75..02d3bff1a0f 100644
--- a/src/server/scriptInfo.ts
+++ b/src/server/scriptInfo.ts
@@ -272,7 +272,7 @@ namespace ts.server {
 
     /*@internal*/
     export function isDynamicFileName(fileName: NormalizedPath) {
-        return fileName[0] === "^" || getBaseFileName(fileName)[0] === "^";
+        return fileName[0] === "^";
     }
 
     /*@internal*/
diff --git a/src/testRunner/unittests/tsserver/configuredProjects.ts b/src/testRunner/unittests/tsserver/configuredProjects.ts
index ae859be2b3d..7bc09a955c4 100644
--- a/src/testRunner/unittests/tsserver/configuredProjects.ts
+++ b/src/testRunner/unittests/tsserver/configuredProjects.ts
@@ -905,6 +905,24 @@ declare var console: {
                 ]
             });
         });
+
+        it("when file name starts with ^", () => {
+            const file: File = {
+                path: `${tscWatch.projectRoot}/file.ts`,
+                content: "const x = 10;"
+            };
+            const app: File = {
+                path: `${tscWatch.projectRoot}/^app.ts`,
+                content: "const y = 10;"
+            };
+            const tsconfig: File = {
+                path: `${tscWatch.projectRoot}/tsconfig.json`,
+                content: "{}"
+            };
+            const host = createServerHost([file, app, tsconfig, libFile]);
+            const service = createProjectService(host);
+            service.openClientFile(file.path);
+        });
     });
 
     describe("unittests:: tsserver:: ConfiguredProjects:: non-existing directories listed in config file input array", () => {
diff --git a/src/testRunner/unittests/tsserver/externalProjects.ts b/src/testRunner/unittests/tsserver/externalProjects.ts
index b2f9753024d..172d264242b 100644
--- a/src/testRunner/unittests/tsserver/externalProjects.ts
+++ b/src/testRunner/unittests/tsserver/externalProjects.ts
@@ -226,6 +226,27 @@ namespace ts.projectSystem {
             projectService.applyChangesInOpenFiles(arrayIterator(externalFiles));
         });
 
+        it("when file name starts with ^", () => {
+            const file: File = {
+                path: `${tscWatch.projectRoot}/file.ts`,
+                content: "const x = 10;"
+            };
+            const app: File = {
+                path: `${tscWatch.projectRoot}/^app.ts`,
+                content: "const y = 10;"
+            };
+            const host = createServerHost([file, app, libFile]);
+            const service = createProjectService(host);
+            service.openExternalProjects([{
+                projectFileName: `${tscWatch.projectRoot}/myproject.njsproj`,
+                rootFiles: [
+                    toExternalFile(file.path),
+                    toExternalFile(app.path)
+                ],
+                options: { },
+            }]);
+        });
+
         it("external project that included config files", () => {
             const file1 = {
                 path: "/a/b/f1.ts",