diff --git a/src/compiler/checker.ts b/src/compiler/checker.ts
index 18e392e914da9..6ffe705294e79 100644
--- a/src/compiler/checker.ts
+++ b/src/compiler/checker.ts
@@ -3900,8 +3900,6 @@ namespace ts {
                         compilerOptions,
                         contextFile,
                         context.tracker.moduleResolverHost,
-                        context.tracker.moduleResolverHost.getSourceFiles!(), // TODO: GH#18217
-                        { importModuleSpecifierPreference: "non-relative" },
                         host.redirectTargetsMap,
                     );
                     links.specifierCache = links.specifierCache || createMap();
diff --git a/src/compiler/moduleSpecifiers.ts b/src/compiler/moduleSpecifiers.ts
index 51835103c52f9..e56951cb5078c 100644
--- a/src/compiler/moduleSpecifiers.ts
+++ b/src/compiler/moduleSpecifiers.ts
@@ -27,11 +27,21 @@ namespace ts.moduleSpecifiers {
         compilerOptions: CompilerOptions,
         importingSourceFile: SourceFile,
         host: ModuleSpecifierResolutionHost,
-        files: ReadonlyArray<SourceFile>,
-        preferences: ModuleSpecifierPreferences,
         redirectTargetsMap: RedirectTargetsMap,
     ): string {
-        return first(first(getModuleSpecifiers(moduleSymbol, compilerOptions, importingSourceFile, host, files, preferences, redirectTargetsMap)));
+        const isBundle = (compilerOptions.out || compilerOptions.outFile);
+        if (isBundle && host.getCommonSourceDirectory) {
+            // For declaration bundles, we need to generate absolute paths relative to the common source dir for imports,
+            // just like how the declaration emitter does for the ambient module declarations - we can easily accomplish this
+            // using the `baseUrl` compiler option (which we would otherwise never use in declaration emit) and a non-relative
+            // specifier preference
+            compilerOptions = {
+                ...compilerOptions,
+                baseUrl: host.getCommonSourceDirectory(),
+            };
+        }
+        const preferences: ModuleSpecifierPreferences = { importModuleSpecifierPreference: isBundle ? "non-relative" : "relative" };
+        return first(first(getModuleSpecifiers(moduleSymbol, compilerOptions, importingSourceFile, host, host.getSourceFiles ? host.getSourceFiles() : [importingSourceFile], preferences, redirectTargetsMap)));
     }
 
     // For each symlink/original for a module, returns a list of ways to import that file.
diff --git a/src/compiler/types.ts b/src/compiler/types.ts
index cb0550124e5e3..9c2d7ed916f10 100644
--- a/src/compiler/types.ts
+++ b/src/compiler/types.ts
@@ -5334,6 +5334,7 @@ namespace ts {
         fileExists?(path: string): boolean;
         readFile?(path: string): string | undefined;
         getSourceFiles?(): ReadonlyArray<SourceFile>; // Used for cached resolutions to find symlinks without traversing the fs (again)
+        getCommonSourceDirectory?(): string;
     }
 
     // Note: this used to be deprecated in our public API, but is still used internally
diff --git a/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.js b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.js
new file mode 100644
index 0000000000000..acda44b64c24b
--- /dev/null
+++ b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.js
@@ -0,0 +1,50 @@
+//// [tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling.ts] ////
+
+//// [scalar.ts]
+export interface Scalar {
+	(): string;
+	value: number;
+}
+
+export function scalar(value: string): Scalar {
+	return null as any;
+}
+//// [spacing.ts]
+import { scalar } from '../lib/operators/scalar';
+
+export default {
+	get xs() {
+		return scalar("14px");
+	}
+};
+
+
+//// [scalar.js]
+"use strict";
+Object.defineProperty(exports, "__esModule", { value: true });
+function scalar(value) {
+    return null;
+}
+exports.scalar = scalar;
+//// [spacing.js]
+"use strict";
+Object.defineProperty(exports, "__esModule", { value: true });
+var scalar_1 = require("../lib/operators/scalar");
+exports.default = {
+    get xs() {
+        return scalar_1.scalar("14px");
+    }
+};
+
+
+//// [scalar.d.ts]
+export interface Scalar {
+    (): string;
+    value: number;
+}
+export declare function scalar(value: string): Scalar;
+//// [spacing.d.ts]
+declare const _default: {
+    readonly xs: import("../lib/operators/scalar").Scalar;
+};
+export default _default;
diff --git a/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.symbols b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.symbols
new file mode 100644
index 0000000000000..683f3ccd71721
--- /dev/null
+++ b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.symbols
@@ -0,0 +1,29 @@
+=== tests/cases/compiler/src/lib/operators/scalar.ts ===
+export interface Scalar {
+>Scalar : Symbol(Scalar, Decl(scalar.ts, 0, 0))
+
+	(): string;
+	value: number;
+>value : Symbol(Scalar.value, Decl(scalar.ts, 1, 12))
+}
+
+export function scalar(value: string): Scalar {
+>scalar : Symbol(scalar, Decl(scalar.ts, 3, 1))
+>value : Symbol(value, Decl(scalar.ts, 5, 23))
+>Scalar : Symbol(Scalar, Decl(scalar.ts, 0, 0))
+
+	return null as any;
+}
+=== tests/cases/compiler/src/settings/spacing.ts ===
+import { scalar } from '../lib/operators/scalar';
+>scalar : Symbol(scalar, Decl(spacing.ts, 0, 8))
+
+export default {
+	get xs() {
+>xs : Symbol(xs, Decl(spacing.ts, 2, 16))
+
+		return scalar("14px");
+>scalar : Symbol(scalar, Decl(spacing.ts, 0, 8))
+	}
+};
+
diff --git a/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.types b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.types
new file mode 100644
index 0000000000000..032b8a1b59377
--- /dev/null
+++ b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling.types
@@ -0,0 +1,32 @@
+=== tests/cases/compiler/src/lib/operators/scalar.ts ===
+export interface Scalar {
+	(): string;
+	value: number;
+>value : number
+}
+
+export function scalar(value: string): Scalar {
+>scalar : (value: string) => Scalar
+>value : string
+
+	return null as any;
+>null as any : any
+>null : null
+}
+=== tests/cases/compiler/src/settings/spacing.ts ===
+import { scalar } from '../lib/operators/scalar';
+>scalar : (value: string) => import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+
+export default {
+>{	get xs() {		return scalar("14px");	}} : { readonly xs: import("tests/cases/compiler/src/lib/operators/scalar").Scalar; }
+
+	get xs() {
+>xs : import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+
+		return scalar("14px");
+>scalar("14px") : import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+>scalar : (value: string) => import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+>"14px" : "14px"
+	}
+};
+
diff --git a/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.js b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.js
new file mode 100644
index 0000000000000..c594c358981d2
--- /dev/null
+++ b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.js
@@ -0,0 +1,55 @@
+//// [tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling2.ts] ////
+
+//// [scalar.ts]
+export interface Scalar {
+	(): string;
+	value: number;
+}
+
+export function scalar(value: string): Scalar {
+	return null as any;
+}
+//// [spacing.ts]
+import { scalar } from '../lib/operators/scalar';
+
+export default {
+	get xs() {
+		return scalar("14px");
+	}
+};
+
+
+//// [dist.js]
+define("lib/operators/scalar", ["require", "exports"], function (require, exports) {
+    "use strict";
+    Object.defineProperty(exports, "__esModule", { value: true });
+    function scalar(value) {
+        return null;
+    }
+    exports.scalar = scalar;
+});
+define("settings/spacing", ["require", "exports", "lib/operators/scalar"], function (require, exports, scalar_1) {
+    "use strict";
+    Object.defineProperty(exports, "__esModule", { value: true });
+    exports.default = {
+        get xs() {
+            return scalar_1.scalar("14px");
+        }
+    };
+});
+
+
+//// [dist.d.ts]
+declare module "lib/operators/scalar" {
+    export interface Scalar {
+        (): string;
+        value: number;
+    }
+    export function scalar(value: string): Scalar;
+}
+declare module "settings/spacing" {
+    const _default: {
+        readonly xs: import("lib/operators/scalar").Scalar;
+    };
+    export default _default;
+}
diff --git a/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.symbols b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.symbols
new file mode 100644
index 0000000000000..683f3ccd71721
--- /dev/null
+++ b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.symbols
@@ -0,0 +1,29 @@
+=== tests/cases/compiler/src/lib/operators/scalar.ts ===
+export interface Scalar {
+>Scalar : Symbol(Scalar, Decl(scalar.ts, 0, 0))
+
+	(): string;
+	value: number;
+>value : Symbol(Scalar.value, Decl(scalar.ts, 1, 12))
+}
+
+export function scalar(value: string): Scalar {
+>scalar : Symbol(scalar, Decl(scalar.ts, 3, 1))
+>value : Symbol(value, Decl(scalar.ts, 5, 23))
+>Scalar : Symbol(Scalar, Decl(scalar.ts, 0, 0))
+
+	return null as any;
+}
+=== tests/cases/compiler/src/settings/spacing.ts ===
+import { scalar } from '../lib/operators/scalar';
+>scalar : Symbol(scalar, Decl(spacing.ts, 0, 8))
+
+export default {
+	get xs() {
+>xs : Symbol(xs, Decl(spacing.ts, 2, 16))
+
+		return scalar("14px");
+>scalar : Symbol(scalar, Decl(spacing.ts, 0, 8))
+	}
+};
+
diff --git a/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.types b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.types
new file mode 100644
index 0000000000000..032b8a1b59377
--- /dev/null
+++ b/tests/baselines/reference/declarationEmitPrefersPathKindBasedOnBundling2.types
@@ -0,0 +1,32 @@
+=== tests/cases/compiler/src/lib/operators/scalar.ts ===
+export interface Scalar {
+	(): string;
+	value: number;
+>value : number
+}
+
+export function scalar(value: string): Scalar {
+>scalar : (value: string) => Scalar
+>value : string
+
+	return null as any;
+>null as any : any
+>null : null
+}
+=== tests/cases/compiler/src/settings/spacing.ts ===
+import { scalar } from '../lib/operators/scalar';
+>scalar : (value: string) => import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+
+export default {
+>{	get xs() {		return scalar("14px");	}} : { readonly xs: import("tests/cases/compiler/src/lib/operators/scalar").Scalar; }
+
+	get xs() {
+>xs : import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+
+		return scalar("14px");
+>scalar("14px") : import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+>scalar : (value: string) => import("tests/cases/compiler/src/lib/operators/scalar").Scalar
+>"14px" : "14px"
+	}
+};
+
diff --git a/tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling.ts b/tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling.ts
new file mode 100644
index 0000000000000..3cdce58fe652a
--- /dev/null
+++ b/tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling.ts
@@ -0,0 +1,22 @@
+// @declaration: true
+// @target: es5
+// @baseUrl: /.src/tests/cases/compiler
+// @outDir: ./dist
+// @rootDir: ./tests/cases/compiler/src
+// @filename: src/lib/operators/scalar.ts
+export interface Scalar {
+	(): string;
+	value: number;
+}
+
+export function scalar(value: string): Scalar {
+	return null as any;
+}
+// @filename: src/settings/spacing.ts
+import { scalar } from '../lib/operators/scalar';
+
+export default {
+	get xs() {
+		return scalar("14px");
+	}
+};
diff --git a/tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling2.ts b/tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling2.ts
new file mode 100644
index 0000000000000..df57d488fbb50
--- /dev/null
+++ b/tests/cases/compiler/declarationEmitPrefersPathKindBasedOnBundling2.ts
@@ -0,0 +1,23 @@
+// @declaration: true
+// @target: es5
+// @baseUrl: /.src/tests/cases/compiler
+// @module: amd
+// @outFile: ./dist.js
+// @rootDir: ./tests/cases/compiler/src
+// @filename: src/lib/operators/scalar.ts
+export interface Scalar {
+	(): string;
+	value: number;
+}
+
+export function scalar(value: string): Scalar {
+	return null as any;
+}
+// @filename: src/settings/spacing.ts
+import { scalar } from '../lib/operators/scalar';
+
+export default {
+	get xs() {
+		return scalar("14px");
+	}
+};