diff --git a/garden-service/src/build-dir.ts b/garden-service/src/build-dir.ts
index 9dcea3f724..69b928bf9e 100644
--- a/garden-service/src/build-dir.ts
+++ b/garden-service/src/build-dir.ts
@@ -18,9 +18,9 @@ import { LogEntry } from "./logger/log-entry"
 import { ModuleConfig } from "./config/module"
 import { ConfigGraph } from "./config-graph"
 import { exec } from "./util/util"
-import { LogLevel } from "./logger/log-node"
 import { deline } from "./util/string"
 import { Profile } from "./util/profiling"
+import { syncWithOptions } from "./util/sync"
 
 const minRsyncVersion = "3.1.0"
 const versionRegex = /rsync  version ([\d\.]+)  /
@@ -99,9 +99,8 @@ export class BuildDir {
       return
     }
 
-    const files = module.version.files
-      // Normalize to relative POSIX-style paths
-      .map((f) => normalize(isAbsolute(f) ? relative(module.path, f) : f))
+    // Normalize to relative POSIX-style paths
+    const files = module.version.files.map((f) => normalize(isAbsolute(f) ? relative(module.path, f) : f))
 
     await this.sync({
       module,
@@ -245,36 +244,7 @@ export class BuildDir {
 
     log.debug(logMsg)
 
-    // rsync benefits from file lists being sorted
-    files && files.sort()
-    let input: string | undefined
-
-    if (withDelete) {
-      syncOpts.push("--prune-empty-dirs")
-
-      if (files === undefined) {
-        syncOpts.push("--delete")
-      } else {
-        // Workaround for this issue: https://stackoverflow.com/questions/1813907
-        syncOpts.push("--include-from=-", "--exclude=*", "--delete-excluded")
-
-        // -> Make sure the file list is anchored (otherwise filenames are matched as patterns)
-        files = files.map((f) => "/" + f)
-
-        input = "/**/\n" + files.join("\n")
-      }
-    } else if (files !== undefined) {
-      syncOpts.push("--files-from=-")
-      input = files.join("\n")
-    }
-
-    // Avoid rendering the full file list except when at the silly log level
-    if (log.root.level === LogLevel.silly) {
-      log.silly(`File list: ${JSON.stringify(files)}`)
-      log.silly(`Rsync args: ${[...syncOpts, sourcePath, destinationPath].join(" ")}`)
-    }
-
-    await exec("rsync", [...syncOpts, sourcePath, destinationPath], { input })
+    await syncWithOptions({ log, syncOpts, sourcePath, destinationPath, withDelete, files })
   }
 }
 
diff --git a/garden-service/src/plugins/kubernetes/hot-reload.ts b/garden-service/src/plugins/kubernetes/hot-reload.ts
index ff2a414f8a..e7312227c6 100644
--- a/garden-service/src/plugins/kubernetes/hot-reload.ts
+++ b/garden-service/src/plugins/kubernetes/hot-reload.ts
@@ -11,7 +11,7 @@ import normalizePath = require("normalize-path")
 import { V1Deployment, V1DaemonSet, V1StatefulSet } from "@kubernetes/client-node"
 import { ContainerModule, ContainerHotReloadSpec } from "../container/config"
 import { RuntimeError, ConfigurationError } from "../../exceptions"
-import { resolve as resolvePath, dirname, posix } from "path"
+import { resolve as resolvePath, dirname, posix, relative, resolve } from "path"
 import { deline, gardenAnnotationKey } from "../../util/string"
 import { set, sortBy, flatten } from "lodash"
 import { Service } from "../../types/service"
@@ -28,8 +28,9 @@ import { normalizeLocalRsyncPath } from "../../util/fs"
 import { createWorkloadManifest } from "./container/deployment"
 import { kubectl } from "./kubectl"
 import { labelSelectorToString } from "./util"
-import { exec } from "../../util/util"
 import { KubeApi } from "./api"
+import { syncWithOptions } from "../../util/sync"
+import { Module } from "../../types/module"
 
 export const RSYNC_PORT_NAME = "garden-rsync"
 
@@ -297,15 +298,39 @@ export async function syncToService({ ctx, service, hotReloadSpec, namespace, wo
 
   const doSync = async () => {
     const portForward = await getPortForward({ ctx, log, namespace, targetResource, port: RSYNC_PORT })
+    const module = service.module
 
     const syncResult = await Bluebird.map(hotReloadSpec.sync, ({ source, target }) => {
-      const src = rsyncSourcePath(service.sourceModule.path, source)
-      const destination = `rsync://localhost:${portForward.localPort}/volume/root/${rsyncTargetPath(target)}`
-      const tmpDir = `/tmp/${rsyncTargetPath(target)}`.slice(0, -1) // Trim the trailing slash
+      const sourcePath = rsyncSourcePath(service.sourceModule.path, source)
+      const destinationPath = `rsync://localhost:${portForward.localPort}/volume/root/${rsyncTargetPath(target)}`
 
-      log.debug(`Hot-reloading from ${src} to ${destination}`)
+      log.debug(`Hot-reloading from ${sourcePath} to ${destinationPath}`)
 
-      return exec("rsync", ["-vrpztgo", "--temp-dir", tmpDir, src, destination])
+      const tmpDir = `/tmp/${rsyncTargetPath(target)}`.slice(0, -1) // Trim the trailing slash
+      const syncOpts = [
+        "--verbose",
+        "--recursive",
+        "--compress",
+        // Preserve modification times
+        "--times",
+        // Preserve owner + group
+        "--owner",
+        "--group",
+        // Copy permissions
+        "--perms",
+        // Set a temp directory outside of the target directory to avoid potential conflicts
+        "--temp-dir",
+        tmpDir,
+      ]
+
+      return syncWithOptions({
+        syncOpts,
+        sourcePath,
+        destinationPath,
+        withDelete: false,
+        log,
+        files: filesForSync(module, source),
+      })
     })
 
     const postSyncCommand = hotReloadSpec.postSyncCommand
@@ -345,3 +370,17 @@ export async function syncToService({ ctx, service, hotReloadSpec, namespace, wo
     })
   }
 }
+
+/**
+ * Returns the relative paths (from `source`) to each of `module.version.files` that is nested within `source`.
+ *
+ * So e.g. `source` = `mydir` would transform a tracked path `/path/to/module/mydir/subdir/myfile` to
+ * `subdir/myfile` in the output, and if `source` = `.` or `*`, it would be transformed to `mydir/subdir/myfile`.
+ */
+export function filesForSync(module: Module, source: string): string[] {
+  const normalizedSource = resolve(module.path, source.replace("**/", "").replace("*", ""))
+  const moduleFiles = module.version.files
+  const files = normalizedSource === "" ? moduleFiles : moduleFiles.filter((path) => path.startsWith(normalizedSource))
+  const normalizedFiles = files.map((f) => relative(normalizedSource, f))
+  return normalizedFiles
+}
diff --git a/garden-service/src/util/sync.ts b/garden-service/src/util/sync.ts
new file mode 100644
index 0000000000..a654c8f448
--- /dev/null
+++ b/garden-service/src/util/sync.ts
@@ -0,0 +1,72 @@
+/*
+ * Copyright (C) 2018-2020 Garden Technologies, Inc. <info@garden.io>
+ *
+ * This Source Code Form is subject to the terms of the Mozilla Public
+ * License, v. 2.0. If a copy of the MPL was not distributed with this
+ * file, You can obtain one at http://mozilla.org/MPL/2.0/.
+ */
+
+import { exec } from "./util"
+import { LogEntry } from "../logger/log-entry"
+import { LogLevel } from "../logger/log-node"
+
+/**
+ * Syncs `sourcePath` with `destinationPath` using `syncOpts`. Adds options to `syncOpts` as appropriate for the
+ * `withDelete` and `files` parameters.
+ *
+ * @param destinationPath
+ *   May be a local path or a remote destination.
+ * @param withDelete
+ *   If `true`, files/folders in `destinationPath` that are not in `sourcePath` will also be deleted.
+ * @param files
+ *   If provided, only those paths will be synced. Should be relative paths from `sourcePath`.
+ */
+export async function syncWithOptions({
+  log,
+  syncOpts,
+  sourcePath,
+  destinationPath,
+  withDelete,
+  files,
+}: {
+  log: LogEntry
+  syncOpts: string[]
+  sourcePath: string
+  destinationPath: string
+  withDelete: boolean
+  files?: string[]
+}): Promise<void> {
+  const opts = [...syncOpts] // We create a new array in case the caller wants to reuse the syncOpts array passed in.
+
+  // rsync benefits from file lists being sorted.
+  files && files.sort()
+
+  let input: string | undefined
+
+  if (withDelete) {
+    opts.push("--prune-empty-dirs")
+
+    if (files === undefined) {
+      opts.push("--delete")
+    } else {
+      // Workaround for this issue: https://stackoverflow.com/questions/1813907
+      opts.push("--include-from=-", "--exclude=*", "--delete-excluded")
+
+      // -> Make sure the file list is anchored (otherwise filenames are matched as patterns)
+      files = files.map((f) => "/" + f)
+
+      input = "/**/\n" + files.join("\n")
+    }
+  } else if (files !== undefined) {
+    opts.push("--files-from=-")
+    input = files.join("\n")
+  }
+
+  // Avoid rendering the full file list except when at the silly log level
+  if (log.root.level === LogLevel.silly) {
+    log.silly(`File list: ${JSON.stringify(files)}`)
+    log.silly(`Rsync args: ${[...opts, sourcePath, destinationPath].join(" ")}`)
+  }
+
+  await exec("rsync", [...opts, sourcePath, destinationPath], { input })
+}
diff --git a/garden-service/test/data/test-projects/include-exclude/module-a/garden.yml b/garden-service/test/data/test-projects/include-exclude/module-a/garden.yml
index 506273076e..c0bf435fcb 100644
--- a/garden-service/test/data/test-projects/include-exclude/module-a/garden.yml
+++ b/garden-service/test/data/test-projects/include-exclude/module-a/garden.yml
@@ -1,4 +1,5 @@
 kind: Module
 name: module-a
 type: test
-include: ["yes.txt"]
+include: ["yes.txt", "somedir/*"]
+exclude: ["somedir/nope.txt"]
\ No newline at end of file
diff --git a/garden-service/test/data/test-projects/include-exclude/module-a/somedir/nope.txt b/garden-service/test/data/test-projects/include-exclude/module-a/somedir/nope.txt
new file mode 100644
index 0000000000..c5cfed716a
--- /dev/null
+++ b/garden-service/test/data/test-projects/include-exclude/module-a/somedir/nope.txt
@@ -0,0 +1 @@
+Go away!
\ No newline at end of file
diff --git a/garden-service/test/data/test-projects/include-exclude/module-a/somedir/yes.txt b/garden-service/test/data/test-projects/include-exclude/module-a/somedir/yes.txt
new file mode 100644
index 0000000000..80cccdde3b
--- /dev/null
+++ b/garden-service/test/data/test-projects/include-exclude/module-a/somedir/yes.txt
@@ -0,0 +1 @@
+Oh hai!
\ No newline at end of file
diff --git a/garden-service/test/unit/src/plugins/kubernetes/hot-reload.ts b/garden-service/test/unit/src/plugins/kubernetes/hot-reload.ts
index 4f7ea0310a..21500c4a0f 100644
--- a/garden-service/test/unit/src/plugins/kubernetes/hot-reload.ts
+++ b/garden-service/test/unit/src/plugins/kubernetes/hot-reload.ts
@@ -9,14 +9,15 @@
 import { platform } from "os"
 import { expect } from "chai"
 import td from "testdouble"
-import { HotReloadableResource, rsyncSourcePath } from "../../../../../src/plugins/kubernetes/hot-reload"
+import { HotReloadableResource, rsyncSourcePath, filesForSync } from "../../../../../src/plugins/kubernetes/hot-reload"
 
 import {
   removeTrailingSlashes,
   makeCopyCommand,
   configureHotReload,
 } from "../../../../../src/plugins/kubernetes/hot-reload"
-import { setPlatform } from "../../../../helpers"
+import { setPlatform, makeTestGarden, TestGarden, getDataDir } from "../../../../helpers"
+import { ConfigGraph } from "../../../../../src/config-graph"
 
 describe("configureHotReload", () => {
   it("should correctly augment a resource manifest with containers and volume for hot reloading", async () => {
@@ -288,3 +289,32 @@ describe("makeCopyCommand", () => {
     })
   })
 })
+
+describe("filesForSync", () => {
+  let garden: TestGarden
+  let graph: ConfigGraph
+  const projectRoot = getDataDir("test-projects", "include-exclude")
+
+  before(async () => {
+    garden = await makeTestGarden(projectRoot)
+    graph = await garden.getConfigGraph(garden.log)
+  })
+
+  it("should respect module include and exclude", async () => {
+    const moduleA = await graph.getModule("module-a")
+    const files = filesForSync(moduleA, "*")
+    expect(files).to.eql(["somedir/yes.txt", "yes.txt"])
+  })
+
+  it("should treat '.' sources the same as '*'", async () => {
+    const moduleA = await graph.getModule("module-a")
+    const files = filesForSync(moduleA, ".")
+    expect(files).to.eql(["somedir/yes.txt", "yes.txt"])
+  })
+
+  it("should filter files on source prefix, and return the relative path from the source path", async () => {
+    const moduleA = await graph.getModule("module-a")
+    const files = filesForSync(moduleA, "somedir")
+    expect(files).to.eql(["yes.txt"])
+  })
+})
diff --git a/garden-service/test/unit/src/vcs/vcs.ts b/garden-service/test/unit/src/vcs/vcs.ts
index 1883a73706..77ca1cc625 100644
--- a/garden-service/test/unit/src/vcs/vcs.ts
+++ b/garden-service/test/unit/src/vcs/vcs.ts
@@ -125,7 +125,10 @@ describe("VcsHandler", () => {
 
       const version = await handler.getTreeVersion(gardenA.log, moduleConfig)
 
-      expect(version.files).to.eql([resolve(moduleConfig.path, "yes.txt")])
+      expect(version.files).to.eql([
+        resolve(moduleConfig.path, "somedir/yes.txt"),
+        resolve(moduleConfig.path, "yes.txt"),
+      ])
     })
 
     it("should respect the exclude field, if specified", async () => {