diff --git a/extensions/typescript-language-features/package.json b/extensions/typescript-language-features/package.json
index db64686da89..d79c8e9a8c1 100644
--- a/extensions/typescript-language-features/package.json
+++ b/extensions/typescript-language-features/package.json
@@ -37,10 +37,11 @@
     "Programming Languages"
   ],
   "dependencies": {
+    "@vscode/extension-telemetry": "0.4.6",
     "jsonc-parser": "^2.2.1",
     "semver": "5.5.1",
-    "@vscode/extension-telemetry": "0.4.6",
-    "vscode-nls": "^5.0.0"
+    "vscode-nls": "^5.0.0",
+    "vscode-uri": "^3.0.3"
   },
   "devDependencies": {
     "@types/node": "14.x",
diff --git a/extensions/typescript-language-features/src/languageFeatures/tsconfig.ts b/extensions/typescript-language-features/src/languageFeatures/tsconfig.ts
index a181276f36e..56668f9fb31 100644
--- a/extensions/typescript-language-features/src/languageFeatures/tsconfig.ts
+++ b/extensions/typescript-language-features/src/languageFeatures/tsconfig.ts
@@ -4,9 +4,12 @@
  *--------------------------------------------------------------------------------------------*/
 
 import * as jsonc from 'jsonc-parser';
-import { basename, dirname, join } from 'path';
+import * as nls from 'vscode-nls';
 import * as vscode from 'vscode';
+import { basename, dirname, join, posix } from 'path';
 import { coalesce, flatten } from '../utils/arrays';
+import { exists } from '../utils/fs';
+import { Utils } from 'vscode-uri';
 
 function mapChildren<R>(node: jsonc.Node | undefined, f: (x: jsonc.Node) => R): R[] {
 	return node && node.type === 'array' && node.children
@@ -14,6 +17,14 @@ function mapChildren<R>(node: jsonc.Node | undefined, f: (x: jsonc.Node) => R):
 		: [];
 }
 
+const openExtendsLinkCommandId = '_typescript.openExtendsLink';
+type OpenExtendsLinkCommandArgs = {
+	resourceUri: vscode.Uri
+	extendsValue: string
+};
+
+const localize = nls.loadMessageBundle();
+
 class TsconfigLinkProvider implements vscode.DocumentLinkProvider {
 
 	public provideDocumentLinks(
@@ -38,21 +49,18 @@ class TsconfigLinkProvider implements vscode.DocumentLinkProvider {
 			return undefined;
 		}
 
-		if (extendsNode.value.startsWith('.')) {
-			return new vscode.DocumentLink(
-				this.getRange(document, extendsNode),
-				vscode.Uri.file(join(dirname(document.uri.fsPath), extendsNode.value + (extendsNode.value.endsWith('.json') ? '' : '.json')))
-			);
-		}
-
-		const workspaceFolder = vscode.workspace.getWorkspaceFolder(document.uri);
-		if (!workspaceFolder) {
+		const extendsValue: string = extendsNode.value;
+		if (extendsValue.startsWith('/')) {
 			return undefined;
 		}
+		const args: OpenExtendsLinkCommandArgs = {
+			resourceUri: document.uri,
+			extendsValue: extendsValue
+		};
 
 		return new vscode.DocumentLink(
 			this.getRange(document, extendsNode),
-			vscode.Uri.joinPath(workspaceFolder.uri, 'node_modules', extendsNode.value + (extendsNode.value.endsWith('.json') ? '' : '.json'))
+			vscode.Uri.parse(`command:${openExtendsLinkCommandId}?${JSON.stringify(args)}`)
 		);
 	}
 
@@ -110,6 +118,67 @@ class TsconfigLinkProvider implements vscode.DocumentLinkProvider {
 	}
 }
 
+const resolveNodeModulesPath = async (baseDirUri: vscode.Uri, pathCandidates: string[]): Promise<vscode.Uri | undefined> => {
+	let currentUri = baseDirUri;
+	const baseCandidate = pathCandidates[0];
+	const sepIndex = baseCandidate.startsWith('@') ? 2 : 1;
+	const moduleBasePath = baseCandidate.split(posix.sep).slice(0, sepIndex).join(posix.sep);
+	while (true) {
+		const moduleAbsoluteUrl = vscode.Uri.joinPath(currentUri, 'node_modules', moduleBasePath);
+		let moduleStat: vscode.FileStat | undefined;
+		try {
+			moduleStat = await vscode.workspace.fs.stat(moduleAbsoluteUrl);
+		} catch (err) { }
+		if (moduleStat && (moduleStat.type & vscode.FileType.Directory)) {
+			for (const uriCandidate of pathCandidates
+				.map((relativePath) => relativePath.split(posix.sep).slice(sepIndex).join(posix.sep))
+				// skip empty paths within module
+				.filter(Boolean)
+				.map((relativeModulePath) => vscode.Uri.joinPath(moduleAbsoluteUrl, relativeModulePath))
+			) {
+				if (await exists(uriCandidate)) {
+					return uriCandidate;
+				}
+			}
+			// Continue to loocking for potentially another version
+		}
+
+		const oldUri = currentUri;
+		currentUri = vscode.Uri.joinPath(currentUri, '..');
+		// Can't go next. Reached the system root
+		if (oldUri.path === currentUri.path) {
+			return;
+		}
+	}
+};
+
+// Reference: https://github.com/microsoft/TypeScript/blob/febfd442cdba343771f478cf433b0892f213ad2f/src/compiler/commandLineParser.ts#L3005
+/**
+* @returns Returns undefined in case of lack of result while trying to resolve from node_modules
+*/
+const getTsconfigPath = async (baseDirUri: vscode.Uri, extendsValue: string): Promise<vscode.Uri | undefined> => {
+	// Don't take into account a case, where tsconfig might be resolved from the root (see the reference)
+	// e.g. C:/projects/shared-tsconfig/tsconfig.json (note that C: prefix is optional)
+
+	const isRelativePath = ['./', '../'].some(str => extendsValue.startsWith(str));
+	if (isRelativePath) {
+		const absolutePath = vscode.Uri.joinPath(baseDirUri, extendsValue);
+		if (await exists(absolutePath) || absolutePath.path.endsWith('.json')) {
+			return absolutePath;
+		}
+		return absolutePath.with({
+			path: `${absolutePath.path}.json`
+		});
+	}
+
+	// Otherwise resolve like a module
+	return resolveNodeModulesPath(baseDirUri, [
+		extendsValue,
+		...extendsValue.endsWith('.json') ? [] : [`${extendsValue}.json`],
+		`${extendsValue}/tsconfig.json`,
+	]);
+};
+
 export function register() {
 	const patterns: vscode.GlobPattern[] = [
 		'**/[jt]sconfig.json',
@@ -122,5 +191,16 @@ export function register() {
 		languages.map(language =>
 			patterns.map((pattern): vscode.DocumentFilter => ({ language, pattern }))));
 
-	return vscode.languages.registerDocumentLinkProvider(selector, new TsconfigLinkProvider());
+	return vscode.Disposable.from(
+		vscode.commands.registerCommand(openExtendsLinkCommandId, async ({ resourceUri, extendsValue, }: OpenExtendsLinkCommandArgs) => {
+			const tsconfigPath = await getTsconfigPath(Utils.dirname(resourceUri), extendsValue);
+			if (tsconfigPath === undefined) {
+				vscode.window.showErrorMessage(localize('openTsconfigExtendsModuleFail', "Failed to resolve {0} as module", extendsValue));
+				return;
+			}
+			// Will suggest to create a .json variant if it doesn't exist yet (but only for relative paths)
+			await vscode.commands.executeCommand('vscode.open', tsconfigPath);
+		}),
+		vscode.languages.registerDocumentLinkProvider(selector, new TsconfigLinkProvider()),
+	);
 }