diff --git a/packages/ngtools/webpack/src/paths-plugin.ts b/packages/ngtools/webpack/src/paths-plugin.ts
index 60f845ccd140..7b050963f227 100644
--- a/packages/ngtools/webpack/src/paths-plugin.ts
+++ b/packages/ngtools/webpack/src/paths-plugin.ts
@@ -8,6 +8,7 @@
 
 import * as path from 'path';
 import { CompilerOptions } from 'typescript';
+
 import type { Configuration } from 'webpack';
 
 // eslint-disable-next-line @typescript-eslint/no-empty-interface
@@ -16,6 +17,9 @@ export interface TypeScriptPathsPluginOptions extends Pick<CompilerOptions, 'pat
 // Extract Resolver type from Webpack types since it is not directly exported
 type Resolver = Exclude<Exclude<Configuration['resolve'], undefined>['resolver'], undefined>;
 
+// eslint-disable-next-line @typescript-eslint/no-explicit-any
+type DoResolveValue = any;
+
 interface PathPattern {
   starIndex: number;
   prefix: string;
@@ -154,8 +158,29 @@ export class TypeScriptPathsPlugin {
         // For example, if the first one resolves, any others are not needed and do not need
         // to be created.
         const replacements = findReplacements(originalRequest, this.patterns);
+        const basePath = this.baseUrl ?? '';
+
+        const attemptResolveRequest = (request: DoResolveValue): Promise<DoResolveValue | null> => {
+          return new Promise((resolve, reject) => {
+            resolver.doResolve(
+              target,
+              request,
+              '',
+              resolveContext,
+              (error: Error | null, result: DoResolveValue) => {
+                if (error) {
+                  reject(error);
+                } else if (result) {
+                  resolve(result);
+                } else {
+                  resolve(null);
+                }
+              },
+            );
+          });
+        };
 
-        const tryResolve = () => {
+        const tryNextReplacement = () => {
           const next = replacements.next();
           if (next.done) {
             callback();
@@ -163,31 +188,45 @@ export class TypeScriptPathsPlugin {
             return;
           }
 
-          const potentialRequest = {
+          const targetPath = path.resolve(basePath, next.value);
+          // If there is no extension. i.e. the target does not refer to an explicit
+          // file, then this is a candidate for module/package resolution.
+          const canBeModule = path.extname(targetPath) === '';
+
+          // Resolution in the target location, preserving the original request.
+          // This will work with the `resolve-in-package` resolution hook, supporting
+          // package exports for e.g. locally-built APF libraries.
+          const potentialRequestAsPackage = {
             ...request,
-            request: path.resolve(this.baseUrl ?? '', next.value),
+            path: targetPath,
             typescriptPathMapped: true,
           };
 
-          resolver.doResolve(
-            target,
-            potentialRequest,
-            '',
-            resolveContext,
-            // eslint-disable-next-line @typescript-eslint/no-explicit-any
-            (error: Error | null, result: any) => {
-              if (error) {
-                callback(error);
-              } else if (result) {
-                callback(undefined, result);
-              } else {
-                tryResolve();
-              }
-            },
-          );
+          // Resolution in the original callee location, but with the updated request
+          // to point to the mapped target location.
+          const potentialRequestAsFile = {
+            ...request,
+            request: targetPath,
+            typescriptPathMapped: true,
+          };
+
+          let resultPromise = attemptResolveRequest(potentialRequestAsFile);
+
+          // If the request can be a module, we configure the resolution to try package/module
+          // resolution if the file resolution did not have a result.
+          if (canBeModule) {
+            resultPromise = resultPromise.then(
+              (result) => result ?? attemptResolveRequest(potentialRequestAsPackage),
+            );
+          }
+
+          // If we have a result, complete. If not, and no error, try the next replacement.
+          resultPromise
+            .then((res) => (res === null ? tryNextReplacement() : callback(undefined, res)))
+            .catch((error) => callback(error));
         };
 
-        tryResolve();
+        tryNextReplacement();
       },
     );
   }
diff --git a/tests/legacy-cli/e2e/tests/build/library-with-demo-app.ts b/tests/legacy-cli/e2e/tests/build/library-with-demo-app.ts
new file mode 100644
index 000000000000..02066a53070a
--- /dev/null
+++ b/tests/legacy-cli/e2e/tests/build/library-with-demo-app.ts
@@ -0,0 +1,84 @@
+/**
+ * @license
+ * Copyright Google LLC All Rights Reserved.
+ *
+ * Use of this source code is governed by an MIT-style license that can be
+ * found in the LICENSE file at https://angular.io/license
+ */
+
+import { createDir, writeFile } from '../../utils/fs';
+import { ng } from '../../utils/process';
+import { updateJsonFile } from '../../utils/project';
+
+export default async function () {
+  await ng('generate', 'library', 'mylib');
+  await createLibraryEntryPoint('secondary', 'SecondaryModule', 'index.ts');
+  await createLibraryEntryPoint('another', 'AnotherModule', 'index.ts');
+
+  // Scenario #1 where we use wildcard path mappings for secondary entry-points.
+  await updateJsonFile('tsconfig.json', (json) => {
+    json.compilerOptions.paths = { 'mylib': ['dist/mylib'], 'mylib/*': ['dist/mylib/*'] };
+  });
+
+  await writeFile(
+    'src/app/app.module.ts',
+    `
+      import {NgModule} from '@angular/core';
+      import {BrowserModule} from '@angular/platform-browser';
+      import {SecondaryModule} from 'mylib/secondary';
+      import {AnotherModule} from 'mylib/another';
+
+      import {AppComponent} from './app.component';
+
+      @NgModule({
+        declarations: [
+          AppComponent
+        ],
+        imports: [
+          SecondaryModule,
+          AnotherModule,
+          BrowserModule
+        ],
+        providers: [],
+        bootstrap: [AppComponent]
+      })
+      export class AppModule { }
+    `,
+  );
+
+  await ng('build', 'mylib');
+  await ng('build');
+
+  // Scenario #2 where we don't use wildcard path mappings.
+  await updateJsonFile('tsconfig.json', (json) => {
+    json.compilerOptions.paths = {
+      'mylib': ['dist/mylib'],
+      'mylib/secondary': ['dist/mylib/secondary'],
+      'mylib/another': ['dist/mylib/another'],
+    };
+  });
+
+  await ng('build');
+}
+
+async function createLibraryEntryPoint(name: string, moduleName: string, entryFileName: string) {
+  await createDir(`projects/mylib/${name}`);
+  await writeFile(
+    `projects/mylib/${name}/${entryFileName}`,
+    `
+      import {NgModule} from '@angular/core';
+
+      @NgModule({})
+      export class ${moduleName} {}
+    `,
+  );
+
+  await writeFile(
+    `projects/mylib/${name}/ng-package.json`,
+    JSON.stringify({
+      lib: {
+        entryFile: entryFileName,
+      },
+    }),
+  );
+}