diff --git a/src/compiler/sys.ts b/src/compiler/sys.ts
index 86029e971ccad..e08890c0bab4e 100644
--- a/src/compiler/sys.ts
+++ b/src/compiler/sys.ts
@@ -1266,6 +1266,7 @@ namespace ts {
             let activeSession: import("inspector").Session | "stopping" | undefined;
             let profilePath = "./profile.cpuprofile";
 
+            let hitSystemWatcherLimit = false;
 
             const Buffer: {
                 new (input: string, encoding?: string): any;
@@ -1619,6 +1620,12 @@ namespace ts {
                             options = { persistent: true };
                         }
                     }
+
+                    if (hitSystemWatcherLimit) {
+                        sysLog(`sysLog:: ${fileOrDirectory}:: Defaulting to fsWatchFile`);
+                        return watchPresentFileSystemEntryWithFsWatchFile();
+                    }
+
                     try {
                         const presentWatcher = _fs.watch(
                             fileOrDirectory,
@@ -1635,6 +1642,8 @@ namespace ts {
                         // Catch the exception and use polling instead
                         // Eg. on linux the number of watches are limited and one could easily exhaust watches and the exception ENOSPC is thrown when creating watcher at that point
                         // so instead of throwing error, use fs.watchFile
+                        hitSystemWatcherLimit ||= e.code === "ENOSPC";
+                        sysLog(`sysLog:: ${fileOrDirectory}:: Changing to fsWatchFile`);
                         return watchPresentFileSystemEntryWithFsWatchFile();
                     }
                 }
@@ -1656,7 +1665,6 @@ namespace ts {
                  * Eg. on linux the number of watches are limited and one could easily exhaust watches and the exception ENOSPC is thrown when creating watcher at that point
                  */
                 function watchPresentFileSystemEntryWithFsWatchFile(): FileWatcher {
-                    sysLog(`sysLog:: ${fileOrDirectory}:: Changing to fsWatchFile`);
                     return watchFile(
                         fileOrDirectory,
                         createFileWatcherCallback(callback),
@@ -1796,7 +1804,7 @@ namespace ts {
             }
 
             function readDirectory(path: string, extensions?: readonly string[], excludes?: readonly string[], includes?: readonly string[], depth?: number): string[] {
-                return matchFiles(path, extensions, excludes, includes, useCaseSensitiveFileNames, process.cwd(), depth, getAccessibleFileSystemEntries, realpath);
+                return matchFiles(path, extensions, excludes, includes, useCaseSensitiveFileNames, process.cwd(), depth, getAccessibleFileSystemEntries, realpath, directoryExists);
             }
 
             function fileSystemEntryExists(path: string, entryKind: FileSystemEntryKind): boolean {
diff --git a/src/compiler/utilities.ts b/src/compiler/utilities.ts
index 94dd3e86cf113..d7e836d5d18e7 100644
--- a/src/compiler/utilities.ts
+++ b/src/compiler/utilities.ts
@@ -6490,7 +6490,7 @@ namespace ts {
     }
 
     /** @param path directory of the tsconfig.json */
-    export function matchFiles(path: string, extensions: readonly string[] | undefined, excludes: readonly string[] | undefined, includes: readonly string[] | undefined, useCaseSensitiveFileNames: boolean, currentDirectory: string, depth: number | undefined, getFileSystemEntries: (path: string) => FileSystemEntries, realpath: (path: string) => string): string[] {
+    export function matchFiles(path: string, extensions: readonly string[] | undefined, excludes: readonly string[] | undefined, includes: readonly string[] | undefined, useCaseSensitiveFileNames: boolean, currentDirectory: string, depth: number | undefined, getFileSystemEntries: (path: string) => FileSystemEntries, realpath: (path: string) => string, directoryExists: (path: string) => boolean): string[] {
         path = normalizePath(path);
         currentDirectory = normalizePath(currentDirectory);
 
@@ -6506,7 +6506,9 @@ namespace ts {
         const visited = new Map<string, true>();
         const toCanonical = createGetCanonicalFileName(useCaseSensitiveFileNames);
         for (const basePath of patterns.basePaths) {
-            visitDirectory(basePath, combinePaths(currentDirectory, basePath), depth);
+            if (directoryExists(basePath)) {
+                visitDirectory(basePath, combinePaths(currentDirectory, basePath), depth);
+            }
         }
 
         return flatten(results);
diff --git a/src/compiler/watchUtilities.ts b/src/compiler/watchUtilities.ts
index 647c0ffdd14d7..39256b39acb68 100644
--- a/src/compiler/watchUtilities.ts
+++ b/src/compiler/watchUtilities.ts
@@ -184,7 +184,7 @@ namespace ts {
             const rootResult = tryReadDirectory(rootDir, rootDirPath);
             let rootSymLinkResult: FileSystemEntries | undefined;
             if (rootResult !== undefined) {
-                return matchFiles(rootDir, extensions, excludes, includes, useCaseSensitiveFileNames, currentDirectory, depth, getFileSystemEntries, realpath);
+                return matchFiles(rootDir, extensions, excludes, includes, useCaseSensitiveFileNames, currentDirectory, depth, getFileSystemEntries, realpath, directoryExists);
             }
             return host.readDirectory!(rootDir, extensions, excludes, includes, depth);
 
diff --git a/src/harness/fakesHosts.ts b/src/harness/fakesHosts.ts
index 58b29a4c7ef98..898cfc048c32e 100644
--- a/src/harness/fakesHosts.ts
+++ b/src/harness/fakesHosts.ts
@@ -95,7 +95,7 @@ namespace fakes {
         }
 
         public readDirectory(path: string, extensions?: readonly string[], exclude?: readonly string[], include?: readonly string[], depth?: number): string[] {
-            return ts.matchFiles(path, extensions, exclude, include, this.useCaseSensitiveFileNames, this.getCurrentDirectory(), depth, path => this.getAccessibleFileSystemEntries(path), path => this.realpath(path));
+            return ts.matchFiles(path, extensions, exclude, include, this.useCaseSensitiveFileNames, this.getCurrentDirectory(), depth, path => this.getAccessibleFileSystemEntries(path), path => this.realpath(path), path => this.directoryExists(path));
         }
 
         public getAccessibleFileSystemEntries(path: string): ts.FileSystemEntries {
diff --git a/src/harness/virtualFileSystemWithWatch.ts b/src/harness/virtualFileSystemWithWatch.ts
index 62c6cd042ef93..77e3741d1fce8 100644
--- a/src/harness/virtualFileSystemWithWatch.ts
+++ b/src/harness/virtualFileSystemWithWatch.ts
@@ -922,7 +922,7 @@ interface Array<T> { length: number; [n: number]: T; }`
                     });
                 }
                 return { directories, files };
-            }, path => this.realpath(path));
+            }, path => this.realpath(path), path => this.directoryExists(path));
         }
 
         createHash(s: string): string {