diff --git a/crates/oxc_resolver/src/cache.rs b/crates/oxc_resolver/src/cache.rs
index 9e01ce243..3d8659a16 100644
--- a/crates/oxc_resolver/src/cache.rs
+++ b/crates/oxc_resolver/src/cache.rs
@@ -74,7 +74,7 @@ impl<Fs: FileSystem> Cache<Fs> {
         let mut tsconfig_string = self
             .fs
             .read_to_string(&tsconfig_path)
-            .map_err(|_| ResolveError::NotFound(tsconfig_path.to_path_buf()))?;
+            .map_err(|_| ResolveError::TsconfigNotFound(tsconfig_path.to_path_buf()))?;
         let mut tsconfig =
             TsConfig::parse(&tsconfig_path, &mut tsconfig_string).map_err(|error| {
                 ResolveError::from_serde_json_error(tsconfig_path.to_path_buf(), &error)
diff --git a/crates/oxc_resolver/src/error.rs b/crates/oxc_resolver/src/error.rs
index d85c09b6b..6dc108c61 100644
--- a/crates/oxc_resolver/src/error.rs
+++ b/crates/oxc_resolver/src/error.rs
@@ -22,6 +22,10 @@ pub enum ResolveError {
     #[error("Path not found {0}")]
     NotFound(PathBuf),
 
+    /// Tsconfig not found
+    #[error("Tsconfig not found {0}")]
+    TsconfigNotFound(PathBuf),
+
     #[error("{0}")]
     IOError(IOError),
 
diff --git a/crates/oxc_resolver/src/lib.rs b/crates/oxc_resolver/src/lib.rs
index fe420da6b..1e73d4553 100644
--- a/crates/oxc_resolver/src/lib.rs
+++ b/crates/oxc_resolver/src/lib.rs
@@ -910,7 +910,7 @@ impl<Fs: FileSystem> ResolverGeneric<Fs> {
         ctx: &mut ResolveContext,
     ) -> ResolveState {
         let Some(tsconfig_path) = &self.options.tsconfig else { return Ok(None) };
-        let tsconfig = self.load_tsconfig(tsconfig_path, ctx)?;
+        let tsconfig = self.load_tsconfig(tsconfig_path)?;
         let paths = tsconfig.resolve(cached_path.path(), specifier);
         for path in paths {
             let cached_path = self.cache.value(&path);
@@ -921,11 +921,7 @@ impl<Fs: FileSystem> ResolverGeneric<Fs> {
         Ok(None)
     }
 
-    fn load_tsconfig(
-        &self,
-        path: &Path,
-        ctx: &mut ResolveContext,
-    ) -> Result<Arc<TsConfig>, ResolveError> {
+    fn load_tsconfig(&self, path: &Path) -> Result<Arc<TsConfig>, ResolveError> {
         self.cache.tsconfig(path, |tsconfig| {
             let directory = self.cache.value(tsconfig.directory());
             // Extend tsconfig
@@ -935,10 +931,8 @@ impl<Fs: FileSystem> ResolverGeneric<Fs> {
                     None => return Err(ResolveError::Specifier(SpecifierError::Empty)),
                     Some(b'/') => PathBuf::from(tsconfig_extend_specifier),
                     Some(b'.') => tsconfig.directory().normalize_with(tsconfig_extend_specifier),
-                    _ => {
-                        let mut new_ctx = ResolveContext::default();
-                        new_ctx.0.depth = ctx.depth + 1;
-                        self.clone_with_options(ResolveOptions {
+                    _ => self
+                        .clone_with_options(ResolveOptions {
                             description_files: vec![],
                             extensions: vec![],
                             main_files: vec!["tsconfig.json".into()],
@@ -947,15 +941,18 @@ impl<Fs: FileSystem> ResolverGeneric<Fs> {
                         .load_package_self_or_node_modules(
                             &directory,
                             tsconfig_extend_specifier,
-                            &mut new_ctx,
-                        )?
-                        .to_path_buf()
-                    }
+                            &mut ResolveContext::default(),
+                        )
+                        .map_err(|err| match err {
+                            ResolveError::NotFound(path) => ResolveError::TsconfigNotFound(path),
+                            _ => err,
+                        })?
+                        .to_path_buf(),
                 };
                 extended_tsconfig_paths.push(extended_tsconfig_path);
             }
             for extended_tsconfig_path in extended_tsconfig_paths {
-                let extended_tsconfig = self.load_tsconfig(&extended_tsconfig_path, ctx)?;
+                let extended_tsconfig = self.load_tsconfig(&extended_tsconfig_path)?;
                 tsconfig.extend_tsconfig(&extended_tsconfig);
             }
             // Load project references