diff --git a/libcst/codemod/visitors/_apply_type_annotations.py b/libcst/codemod/visitors/_apply_type_annotations.py
index 2ac44c023..a459d300e 100644
--- a/libcst/codemod/visitors/_apply_type_annotations.py
+++ b/libcst/codemod/visitors/_apply_type_annotations.py
@@ -145,15 +145,28 @@ def _get_qualified_name_and_dequalified_node(
         dequalified_node = node.attr if isinstance(node, cst.Attribute) else node
         return qualified_name, dequalified_node
 
+    def _module_and_target(self, qualified_name: str) -> Tuple[str, str]:
+        relative_prefix = ""
+        while qualified_name.startswith("."):
+            relative_prefix += "."
+            qualified_name = qualified_name[1:]
+        split = qualified_name.rsplit(".", 1)
+        if len(split) == 1:
+            qualifier, target = "", split[0]
+        else:
+            qualifier, target = split
+        return (relative_prefix + qualifier, target)
+
     def _handle_qualification_and_should_qualify(self, qualified_name: str) -> bool:
         """
         Basd on a qualified name and the existing module imports, record that
         we need to add an import if necessary and return whether or not we
         should use the qualified name due to a preexisting import.
         """
-        split_name = qualified_name.split(".")
-        if len(split_name) > 1 and qualified_name not in self.existing_imports:
-            module, target = ".".join(split_name[:-1]), split_name[-1]
+        module, target = self._module_and_target(qualified_name)
+        if module in ("", "builtins"):
+            return False
+        elif qualified_name not in self.existing_imports:
             if module == "builtins":
                 return False
             elif module in self.existing_imports:
diff --git a/libcst/codemod/visitors/tests/test_apply_type_annotations.py b/libcst/codemod/visitors/tests/test_apply_type_annotations.py
index 4a63ab29e..54aec5d4e 100644
--- a/libcst/codemod/visitors/tests/test_apply_type_annotations.py
+++ b/libcst/codemod/visitors/tests/test_apply_type_annotations.py
@@ -123,6 +123,32 @@ def run_test_case_with_flags(
                 FOO: Union[Example, int] = bar()
                 """,
             ),
+            "with_relative_imports": (
+                """
+                from .relative0 import T0
+                from ..relative1 import T1
+                from . import relative2
+
+                x0: typing.Optional[T0]
+                x1: typing.Optional[T1]
+                x2: typing.Optional[relative2.T2]
+                """,
+                """
+                x0 = None
+                x1 = None
+                x2 = None
+                """,
+                """
+                from ..relative1 import T1
+                from .relative0 import T0
+                from .relative2 import T2
+                from typing import Optional
+
+                x0: Optional[T0] = None
+                x1: Optional[T1] = None
+                x2: Optional[T2] = None
+                """,
+            ),
         }
     )
     def test_annotate_globals(self, stub: str, before: str, after: str) -> None: