diff --git a/src/compiler/commandLineParser.ts b/src/compiler/commandLineParser.ts
index f462c7c1e91..249e2f30c29 100644
--- a/src/compiler/commandLineParser.ts
+++ b/src/compiler/commandLineParser.ts
@@ -286,7 +286,7 @@ namespace ts {
             name: "baseUrl",
             type: "string",
             isFilePath: true,
-            description: Diagnostics.Base_directory_to_resolve_relative_module_names
+            description: Diagnostics.Base_directory_to_resolve_non_absolute_module_names
         },
         {
             // this option can only be specified in tsconfig.json
diff --git a/src/compiler/diagnosticMessages.json b/src/compiler/diagnosticMessages.json
index 3fd364f0fa5..e8fd0d2a069 100644
--- a/src/compiler/diagnosticMessages.json
+++ b/src/compiler/diagnosticMessages.json
@@ -2361,7 +2361,7 @@
         "category": "Error",
         "code": 6082
     },
-    "Base directory to resolve relative module names.": {
+    "Base directory to resolve non-absolute module names.": {
         "category": "Message",
         "code": 6083
     },
diff --git a/src/compiler/program.ts b/src/compiler/program.ts
index b9ebef7c27f..66944354c40 100644
--- a/src/compiler/program.ts
+++ b/src/compiler/program.ts
@@ -98,7 +98,7 @@ namespace ts {
         return result;
     }
 
-    // Path mapping based module resolution strategy uses base url to resolve relative file names. This resolution strategy can be enabled 
+    // Path mapping based module resolution strategy uses base url to resolve non-absolute file names. This resolution strategy can be enabled 
     // by setting 'moduleResolution' option to 'baseUrl' and as it implied by the name it uses base url to resolve module names.
     // Base url can be specified:
     //   - explicitly via command line option 'baseUrl'. If this value is relative it will be computed relative to current directory.
@@ -161,12 +161,12 @@ namespace ts {
     // ]
     // @file: /a/b/c/src/form1.ts
     //     import {x} from "./form.content.ts"
-    // @file: /a/b/c/generated/form1.content.ts
+    // @file: /a/b/c/generated/form.content.ts
     //     export var x = ...
     // first './form.content.ts' needs to be converted to non-relative name.
-    // 1. convert it to absolute name '/a/b/c/src/form1.content.ts' ->
+    // 1. convert it to absolute name '/a/b/c/src/form.content.ts' ->
     //    find longest prefix in rootDirs that match this path, it will be './src' (after expansion '/a/b/c/src/') ->
-    //    suffix is form1.content.ts
+    //    suffix is form.content.ts
     // 2. apply path mappings to 'form1.content.ts' ->
     //    '*' pattern will be matched ->
     //    '*' substitution yields '/a/b/c/form1.content.ts' - file does not exists
@@ -176,6 +176,7 @@ namespace ts {
         Debug.assert(baseUrl !== undefined);
 
         const supportedExtensions = getSupportedExtensions(compilerOptions);
+        // NOTE: traceEnabled check is delibirately no inside the 'trace' at evert callside to avoid runtime impact of calling vararg function 
         const traceEnabled = isTraceEnabled(compilerOptions, host);
 
         if (isRootedDiskPath(moduleName)) {
diff --git a/tests/baselines/reference/pathMappingBasedModuleResolution11.js b/tests/baselines/reference/pathMappingBasedModuleResolution11.js
new file mode 100644
index 00000000000..614357ec53f
--- /dev/null
+++ b/tests/baselines/reference/pathMappingBasedModuleResolution11.js
@@ -0,0 +1,38 @@
+//// [tests/cases/compiler/pathMappingBasedModuleResolution11.ts] ////
+
+//// [file1.ts]
+import {x} from "./file2" // should be resolved to 'generated/folder1/file2/file.ts' 
+
+export var z = x.toExponential();
+
+//// [file.ts]
+export {x} from "folder1/file3" // should be resolved to 'folder1/file3.ts' 
+
+//// [file3.ts]
+export var x = 1;
+
+//// [file3.ts]
+import {z as y} from "../folder1/file1" // should be resolved to 'folder1/file1.ts'
+let z = y.toLowerCase();
+
+
+//// [file3.js]
+define(["require", "exports"], function (require, exports) {
+    "use strict";
+    exports.x = 1;
+});
+//// [file.js]
+define(["require", "exports", "folder1/file3"], function (require, exports, file3_1) {
+    "use strict";
+    exports.x = file3_1.x; // should be resolved to 'folder1/file3.ts' 
+});
+//// [file1.js]
+define(["require", "exports", "./file2"], function (require, exports, file2_1) {
+    "use strict";
+    exports.z = file2_1.x.toExponential();
+});
+//// [file3.js]
+define(["require", "exports", "../folder1/file1"], function (require, exports, file1_1) {
+    "use strict";
+    var z = file1_1.z.toLowerCase();
+});
diff --git a/tests/baselines/reference/pathMappingBasedModuleResolution11.symbols b/tests/baselines/reference/pathMappingBasedModuleResolution11.symbols
new file mode 100644
index 00000000000..f453dafe2a2
--- /dev/null
+++ b/tests/baselines/reference/pathMappingBasedModuleResolution11.symbols
@@ -0,0 +1,29 @@
+=== tests/cases/compiler/root/folder1/file1.ts ===
+import {x} from "./file2" // should be resolved to 'generated/folder1/file2/file.ts' 
+>x : Symbol(x, Decl(file1.ts, 0, 8))
+
+export var z = x.toExponential();
+>z : Symbol(z, Decl(file1.ts, 2, 10))
+>x.toExponential : Symbol(Number.toExponential, Decl(lib.d.ts, --, --))
+>x : Symbol(x, Decl(file1.ts, 0, 8))
+>toExponential : Symbol(Number.toExponential, Decl(lib.d.ts, --, --))
+
+=== tests/cases/compiler/root/generated/folder1/file2/file.ts ===
+export {x} from "folder1/file3" // should be resolved to 'folder1/file3.ts' 
+>x : Symbol(x, Decl(file.ts, 0, 8))
+
+=== tests/cases/compiler/root/folder1/file3.ts ===
+export var x = 1;
+>x : Symbol(x, Decl(file3.ts, 0, 10))
+
+=== tests/cases/compiler/root/generated/folder2/file3.ts ===
+import {z as y} from "../folder1/file1" // should be resolved to 'folder1/file1.ts'
+>z : Symbol(y, Decl(file3.ts, 0, 8))
+>y : Symbol(y, Decl(file3.ts, 0, 8))
+
+let z = y.toLowerCase();
+>z : Symbol(z, Decl(file3.ts, 1, 3))
+>y.toLowerCase : Symbol(String.toLowerCase, Decl(lib.d.ts, --, --))
+>y : Symbol(y, Decl(file3.ts, 0, 8))
+>toLowerCase : Symbol(String.toLowerCase, Decl(lib.d.ts, --, --))
+
diff --git a/tests/baselines/reference/pathMappingBasedModuleResolution11.types b/tests/baselines/reference/pathMappingBasedModuleResolution11.types
new file mode 100644
index 00000000000..45717088577
--- /dev/null
+++ b/tests/baselines/reference/pathMappingBasedModuleResolution11.types
@@ -0,0 +1,32 @@
+=== tests/cases/compiler/root/folder1/file1.ts ===
+import {x} from "./file2" // should be resolved to 'generated/folder1/file2/file.ts' 
+>x : number
+
+export var z = x.toExponential();
+>z : string
+>x.toExponential() : string
+>x.toExponential : (fractionDigits?: number) => string
+>x : number
+>toExponential : (fractionDigits?: number) => string
+
+=== tests/cases/compiler/root/generated/folder1/file2/file.ts ===
+export {x} from "folder1/file3" // should be resolved to 'folder1/file3.ts' 
+>x : number
+
+=== tests/cases/compiler/root/folder1/file3.ts ===
+export var x = 1;
+>x : number
+>1 : number
+
+=== tests/cases/compiler/root/generated/folder2/file3.ts ===
+import {z as y} from "../folder1/file1" // should be resolved to 'folder1/file1.ts'
+>z : string
+>y : string
+
+let z = y.toLowerCase();
+>z : string
+>y.toLowerCase() : string
+>y.toLowerCase : () => string
+>y : string
+>toLowerCase : () => string
+
diff --git a/tests/cases/compiler/pathMappingBasedModuleResolution11.ts b/tests/cases/compiler/pathMappingBasedModuleResolution11.ts
new file mode 100644
index 00000000000..e0504126ca1
--- /dev/null
+++ b/tests/cases/compiler/pathMappingBasedModuleResolution11.ts
@@ -0,0 +1,34 @@
+// @module: amd
+
+// paths\rootDirs is defined in tsconfig.json
+// baseUrl is inferred from tsconfig.json
+
+// @filename: root/tsconfig.json
+{
+    "compilerOptions": {
+        "paths": {
+            "*": [
+                "*",
+                "generated/*/file"
+            ]
+        },
+        "rootDirs": [
+            ".",
+            "./generated"
+        ]
+    }
+}
+// @filename: root/folder1/file1.ts
+import {x} from "./file2" // should be resolved to 'generated/folder1/file2/file.ts' 
+
+export var z = x.toExponential();
+
+// @filename: root/generated/folder1/file2/file.ts
+export {x} from "folder1/file3" // should be resolved to 'folder1/file3.ts' 
+
+// @filename: root/folder1/file3.ts
+export var x = 1;
+
+// @filename: root/generated/folder2/file3.ts
+import {z as y} from "../folder1/file1" // should be resolved to 'folder1/file1.ts'
+let z = y.toLowerCase();