diff --git a/CHANGELOG.md b/CHANGELOG.md
index 3203b1e853e0..5c46758f80dd 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,10 @@
 ## master
 
+### Fixes
+
+* `[jest-resolve]` Update node module resolution algorithm to correctly handle
+  symlinked paths ([#5085](https://github.com/facebook/jest/pull/5085))
+
 ## 22.4.2
 
 ### Fixes
diff --git a/appveyor.yml b/appveyor.yml
index 0ce7d699fc34..f48ec1c833ea 100644
--- a/appveyor.yml
+++ b/appveyor.yml
@@ -6,6 +6,7 @@ init:
   # debugging Appveyor build. More info:
   # https://www.appveyor.com/docs/how-to/rdp-to-build-worker/
   - ps: iex ((new-object net.webclient).DownloadString('https://raw.githubusercontent.com/appveyor/ci/master/scripts/enable-rdp.ps1'))
+  - git config --global core.symlinks true
 
 install:
   - ps: Install-Product node $env:nodejs_version x64
diff --git a/packages/jest-resolve/package.json b/packages/jest-resolve/package.json
index 6e52ab37dc7e..c6259e8b9cd7 100644
--- a/packages/jest-resolve/package.json
+++ b/packages/jest-resolve/package.json
@@ -9,7 +9,8 @@
   "main": "build/index.js",
   "dependencies": {
     "browser-resolve": "^1.11.2",
-    "chalk": "^2.0.1"
+    "chalk": "^2.0.1",
+    "realpath-native": "^1.0.0"
   },
   "devDependencies": {
     "jest-haste-map": "^22.4.2"
diff --git a/packages/jest-resolve/src/__mocks__/bar/node_modules/bar/index.js b/packages/jest-resolve/src/__mocks__/bar/node_modules/bar/index.js
new file mode 100644
index 000000000000..e69de29bb2d1
diff --git a/packages/jest-resolve/src/__mocks__/bar/node_modules/foo b/packages/jest-resolve/src/__mocks__/bar/node_modules/foo
new file mode 120000
index 000000000000..99d688a4b56a
--- /dev/null
+++ b/packages/jest-resolve/src/__mocks__/bar/node_modules/foo
@@ -0,0 +1 @@
+../../foo/node_modules/foo
\ No newline at end of file
diff --git a/packages/jest-resolve/src/__mocks__/foo/node_modules/dep/index.js b/packages/jest-resolve/src/__mocks__/foo/node_modules/dep/index.js
new file mode 100644
index 000000000000..e69de29bb2d1
diff --git a/packages/jest-resolve/src/__mocks__/foo/node_modules/foo/index.js b/packages/jest-resolve/src/__mocks__/foo/node_modules/foo/index.js
new file mode 100644
index 000000000000..e69de29bb2d1
diff --git a/packages/jest-resolve/src/__tests__/resolve.test.js b/packages/jest-resolve/src/__tests__/resolve.test.js
index 7806495d8ee9..91986a73ac5f 100644
--- a/packages/jest-resolve/src/__tests__/resolve.test.js
+++ b/packages/jest-resolve/src/__tests__/resolve.test.js
@@ -129,6 +129,19 @@ describe('resolveModule', () => {
       require.resolve('../__mocks__/mockJsxDependency.native.jsx'),
     );
   });
+
+  it('is possible to resolve node modules by resolving their realpath', () => {
+    const resolver = new Resolver(moduleMap, {
+      extensions: ['.js'],
+    });
+    const src = require.resolve(
+      '../../src/__mocks__/bar/node_modules/foo/index.js',
+    );
+    const resolved = resolver.resolveModule(src, 'dep');
+    expect(resolved).toBe(
+      require.resolve('../../src/__mocks__/foo/node_modules/dep/index.js'),
+    );
+  });
 });
 
 describe('getMockModule', () => {
@@ -203,6 +216,16 @@ describe('Resolver.getModulePaths() -> nodeModulesPaths()', () => {
       map: [],
       mocks: [],
     });
+
+    // Mocking realpath to function the old way, where it just looks at
+    // pathstrings instead of actually trying to access the physical directory.
+    // This test suite won't work otherwise, since we cannot make assumptions
+    // about the test environment when it comes to absolute paths.
+    jest.doMock('realpath-native', () => {
+      return {
+        sync: dirInput => dirInput,
+      };
+    });
   });
 
   afterAll(() => {
diff --git a/packages/jest-resolve/src/node_modules_paths.js b/packages/jest-resolve/src/node_modules_paths.js
index 21383dca2d52..52da44372758 100644
--- a/packages/jest-resolve/src/node_modules_paths.js
+++ b/packages/jest-resolve/src/node_modules_paths.js
@@ -11,6 +11,7 @@
 
 import type {Path} from 'types/Config';
 import path from 'path';
+import {sync as realpath} from 'realpath-native';
 
 type NodeModulesPathsOptions = {|
   moduleDirectory?: Array<string>,
@@ -37,11 +38,17 @@ export default function nodeModulesPaths(
     prefix = '\\\\';
   }
 
-  const paths = [basedirAbs];
-  let parsed = path.parse(basedirAbs);
+  // The node resolution algorithm (as implemented by NodeJS
+  // and TypeScript) traverses parents of the physical path,
+  // not the symlinked path
+  const physicalBasedir = realpath(basedirAbs);
+
+  const paths = [physicalBasedir];
+  let parsed = path.parse(physicalBasedir);
   while (parsed.dir !== paths[paths.length - 1]) {
-    paths.push(parsed.dir);
-    parsed = path.parse(parsed.dir);
+    const realParsedDir = realpath(parsed.dir);
+    paths.push(realParsedDir);
+    parsed = path.parse(realParsedDir);
   }
 
   const dirs = paths
diff --git a/yarn.lock b/yarn.lock
index 4fb55bb21993..1e32c1df1b78 100644
--- a/yarn.lock
+++ b/yarn.lock
@@ -4534,6 +4534,10 @@ jest-docblock@^21, jest-docblock@^21.0.0, jest-docblock@^21.2.0:
   version "21.2.0"
   resolved "https://registry.yarnpkg.com/jest-docblock/-/jest-docblock-21.2.0.tgz#51529c3b30d5fd159da60c27ceedc195faf8d414"
 
+jest-get-type@^21.2.0:
+  version "21.2.0"
+  resolved "https://onedrive.pkgs.visualstudio.com/_packaging/odsp-npm/npm/registry/jest-get-type/-/jest-get-type-21.2.0.tgz#f6376ab9db4b60d81e39f30749c6c466f40d4a23"
+
 jest-haste-map@^21:
   version "21.2.0"
   resolved "https://registry.yarnpkg.com/jest-haste-map/-/jest-haste-map-21.2.0.tgz#1363f0a8bb4338f24f001806571eff7a4b2ff3d8"
@@ -4545,6 +4549,39 @@ jest-haste-map@^21:
     sane "^2.0.0"
     worker-farm "^1.3.1"
 
+jest-message-util@^21.2.1:
+  version "21.2.1"
+  resolved "https://onedrive.pkgs.visualstudio.com/_packaging/odsp-npm/npm/registry/jest-message-util/-/jest-message-util-21.2.1.tgz#bfe5d4692c84c827d1dcf41823795558f0a1acbe"
+  dependencies:
+    chalk "^2.0.1"
+    micromatch "^2.3.11"
+    slash "^1.0.0"
+
+jest-mock@^21.2.0:
+  version "21.2.0"
+  resolved "https://onedrive.pkgs.visualstudio.com/_packaging/odsp-npm/npm/registry/jest-mock/-/jest-mock-21.2.0.tgz#7eb0770e7317968165f61ea2a7281131534b3c0f"
+
+jest-util@^21.2.1:
+  version "21.2.1"
+  resolved "https://onedrive.pkgs.visualstudio.com/_packaging/odsp-npm/npm/registry/jest-util/-/jest-util-21.2.1.tgz#a274b2f726b0897494d694a6c3d6a61ab819bb78"
+  dependencies:
+    callsites "^2.0.0"
+    chalk "^2.0.1"
+    graceful-fs "^4.1.11"
+    jest-message-util "^21.2.1"
+    jest-mock "^21.2.0"
+    jest-validate "^21.2.1"
+    mkdirp "^0.5.1"
+
+jest-validate@^21.2.1:
+  version "21.2.1"
+  resolved "https://onedrive.pkgs.visualstudio.com/_packaging/odsp-npm/npm/registry/jest-validate/-/jest-validate-21.2.1.tgz#cc0cbca653cd54937ba4f2a111796774530dd3c7"
+  dependencies:
+    chalk "^2.0.1"
+    jest-get-type "^21.2.0"
+    leven "^2.1.0"
+    pretty-format "^21.2.1"
+
 jquery@^3.2.1:
   version "3.2.1"
   resolved "https://registry.yarnpkg.com/jquery/-/jquery-3.2.1.tgz#5c4d9de652af6cd0a770154a631bba12b015c787"
@@ -6200,6 +6237,13 @@ prettier@^1.10.1:
   version "1.10.1"
   resolved "https://registry.yarnpkg.com/prettier/-/prettier-1.10.1.tgz#01423fea6957ea23618d37d339ef0e7f7c967fc6"
 
+pretty-format@^21.2.1:
+  version "21.2.1"
+  resolved "https://onedrive.pkgs.visualstudio.com/_packaging/odsp-npm/npm/registry/pretty-format/-/pretty-format-21.2.1.tgz#ae5407f3cf21066cd011aa1ba5fce7b6a2eddb36"
+  dependencies:
+    ansi-regex "^3.0.0"
+    ansi-styles "^3.2.0"
+
 pretty-format@^4.2.1:
   version "4.3.1"
   resolved "https://registry.yarnpkg.com/pretty-format/-/pretty-format-4.3.1.tgz#530be5c42b3c05b36414a7a2a4337aa80acd0e8d"