diff --git a/src/loader.ts b/src/loader.ts
index c8453b3..fe63d0b 100644
--- a/src/loader.ts
+++ b/src/loader.ts
@@ -81,8 +81,21 @@ async function ESBuildLoader(
 		} else {
 			/* Detect tsconfig file */
 
-			// Webpack shouldn't be loading the same path multiple times so doesn't need to be cached
-			const tsconfig = getTsconfig(resourcePath, 'tsconfig.json', tsconfigCache);
+			let tsconfig;
+
+			try {
+				// Webpack shouldn't be loading the same path multiple times so doesn't need to be cached
+				tsconfig = getTsconfig(resourcePath, 'tsconfig.json', tsconfigCache);
+			} catch (error) {
+				if (resourcePath.split(path.sep).includes('node_modules')) {
+					this.emitWarning(
+						new Error(`[esbuild-loader] Error while discovering tsconfig.json in dependency: "${error?.toString()}"`),
+					);
+				} else {
+					throw error;
+				}
+			}
+
 			if (tsconfig) {
 				const fileMatcher = createFilesMatcher(tsconfig);
 				transformOptions.tsconfigRaw = fileMatcher(resourcePath) as TransformOptions['tsconfigRaw'];
diff --git a/tests/specs/tsconfig.ts b/tests/specs/tsconfig.ts
index e517a10..f40ba4d 100644
--- a/tests/specs/tsconfig.ts
+++ b/tests/specs/tsconfig.ts
@@ -2,7 +2,7 @@ import path from 'path';
 import { createRequire } from 'node:module';
 import { testSuite, expect } from 'manten';
 import { createFixture } from 'fs-fixture';
-import { execa } from 'execa';
+import { execa, type ExecaError } from 'execa';
 import { tsconfigJson } from '../utils.js';
 
 const webpackCli = path.resolve('node_modules/webpack-cli/bin/cli.js');
@@ -263,6 +263,80 @@ export default testSuite(({ describe }) => {
 				const code2 = await fixture.readFile('dist/index2.js', 'utf8');
 				expect(code2).toMatch('__publicField(this, "foo", 100);');
 			});
+
+			test('ignores tsconfig.json in third party dependencies', async () => {
+				await using fixture = await createFixture({
+					// Fake external dependency
+					node_modules: {
+						'fake-lib': {
+							'index.ts': 'export function testFn(): string { return "Hi!" }',
+							'package.json': JSON.stringify({
+								name: 'fake-lib',
+							}),
+							'tsconfig.json': tsconfigJson({
+								extends: 'something-imaginary',
+							}),
+						},
+					},
+					// Our project
+					src: {
+						'index.ts': `
+							import { testFn } from "fake-lib";
+
+							export default testFn;`,
+					},
+					'webpack.config.js': `
+					module.exports = {
+						mode: 'production',
+
+						optimization: {
+							minimize: false,
+						},
+
+						resolveLoader: {
+							alias: {
+								'esbuild-loader': ${JSON.stringify(esbuildLoader)},
+							},
+						},
+
+						resolve: {
+							extensions: ['.ts', '.js'],
+						},
+
+						module: {
+							rules: [
+								{
+									test: /.[tj]sx?$/,
+									loader: 'esbuild-loader',
+									options: {
+										target: 'es2015',
+									}
+								}
+							],
+						},
+
+						entry: {
+							index: './src/index.ts',
+						},
+					};
+					`,
+				});
+
+				let result;
+
+				try {
+					result = await execa(webpackCli, {
+						cwd: fixture.path,
+					});
+				} catch (error) {
+					result = error as ExecaError;
+				}
+				const { exitCode, stdout } = result;
+
+				// We log this as a warning, and continue the transform
+				expect(stdout).toMatch("Error while discovering tsconfig.json in dependency: \"Error: File 'something-imaginary' not found.\"");
+				expect(exitCode).toEqual(0);
+			});
 		});
 
 		describe('plugin', ({ test }) => {