diff --git a/docs/api/vi.md b/docs/api/vi.md
index 5c50cb9b0..cb091998c 100644
--- a/docs/api/vi.md
+++ b/docs/api/vi.md
@@ -139,15 +139,22 @@ vi.mock('./path/to/module.js', () => {
 
 :::
 
-If there is a `__mocks__` folder alongside a file that you are mocking, and the factory is not provided, Vitest will try to find a file with the same name in the `__mocks__` subfolder and use it as an actual module. If you are mocking a dependency, Vitest will try to find a `__mocks__` folder in the [root](/config/root) of the project (default is `process.cwd()`). You can tell Vitest where the dependencies are located through the [`deps.moduleDirectories`](/config/deps#deps-moduledirectories) config option.
+If the factory is not provided, Vitest looks for a file with the same name in a `__mocks__` folder and uses it instead of the original module:
+
+- If the path is a package name, like `axios` or `@company/utils/format`, Vitest looks in the `__mocks__` folder in the [root](/config/root) of the project (default is `process.cwd()`) for a file with this path and any extension, for example, `__mocks__/@company/utils/format.ts`. This also applies to a package that is linked from outside of `node_modules`, like a workspace package in a monorepo.
+- If the module resolves to a file outside of `node_modules`, Vitest looks in the `__mocks__` folder next to that file for a file with the same name and extension, for example, `src/__mocks__/increment.js` for `src/increment.js`. For a package name, Vitest does this only if the root `__mocks__` folder doesn't have the file.
+
+Vitest treats files in other [`deps.moduleDirectories`](/config/deps#deps-moduledirectories) the same as files in `node_modules`.
 
 For example, you have this file structure:
 
 ```
 - __mocks__
+  - @company
+    - utils.js
   - axios.js
 - src
-  __mocks__
+  - __mocks__
     - increment.js
   - increment.js
 - tests
@@ -162,13 +169,18 @@ import { vi } from 'vitest'
 // axios is a default export from `__mocks__/axios.js`
 import axios from 'axios'
 
+// format is a named export from `__mocks__/@company/utils.js`,
+// even if `@company/utils` is a workspace package
+import { format } from '@company/utils'
+
 // increment is a named export from `src/__mocks__/increment.js`
-import { increment } from '../increment.js'
+import { increment } from '../src/increment.js'
 
 vi.mock('axios')
-vi.mock('../increment.js')
+vi.mock('@company/utils')
+vi.mock('../src/increment.js')
 
-axios.get(`/apples/${increment(1)}`)
+axios.get(`/apples/${format(increment(1))}`)
 ```
 
 ::: warning
diff --git a/docs/config/deps.md b/docs/config/deps.md
index dad21d838..220f7579d 100644
--- a/docs/config/deps.md
+++ b/docs/config/deps.md
@@ -113,11 +113,13 @@ By default, Vitest assumes you are using a bundler to bypass this and will not f
 - **Type:** `string[]`
 - **Default:** `['node_modules']`
 
-A list of directories that should be treated as module directories. This config option affects the behavior of [`vi.mock`](/api/vi#vi-mock): when no factory is provided and the path of what you are mocking matches one of the `moduleDirectories` values, Vitest will try to resolve the mock by looking for a `__mocks__` folder in the [root](/config/root) of the project.
+A list of directories that contain dependencies. Vitest adds a slash before and after each value and checks if the path of a file includes it: `'vendor'` matches every file inside a `vendor` folder, and an absolute path matches only the files inside that folder. Vitest always includes `node_modules`.
 
-This option will also affect if a file should be treated as a module when externalizing dependencies. By default, Vitest imports external modules with native Node.js bypassing Vite transformation step.
+Vitest treats a file inside one of these directories as a dependency:
 
-Setting this option will _override_ the default, if you wish to still search `node_modules` for packages include it along with any other options:
+- [`vi.mock`](/api/vi#vi-mock) without a factory looks for the mock only in the `__mocks__` folder in the [root](/config/root) of the project.
+- Vitest [externalizes](/config/server#server-deps-external) JavaScript files that Node.js can import directly, for example, a `.js` file in a package with `"type": "module"`. Vitest imports these files with native Node.js, Vite plugins don't transform them, and `vi.mock` doesn't apply to the modules that they import.
+- Vitest prefixes string values of [`server.deps.inline`](/config/server#server-deps-inline) and [`server.deps.external`](/config/server#server-deps-external) with these directories.
 
 ```ts
 import { defineConfig } from 'vitest/config'
@@ -125,8 +127,16 @@ import { defineConfig } from 'vitest/config'
 export default defineConfig({
   test: {
     deps: {
-      moduleDirectories: ['node_modules', path.resolve('../../packages')],
-    }
+      moduleDirectories: ['vendor'],
+    },
   },
 })
 ```
+
+::: tip
+You don't need this option to mock a workspace package in a monorepo. If you call `vi.mock` with a package name, Vitest looks in the root `__mocks__` folder even if the package resolves outside of `node_modules`.
+:::
+
+::: warning
+Don't add a directory that contains the source files of your project. For example, if the project is in `packages/app`, the value `packages` makes Vitest treat the files in `packages/app` as dependencies too.
+:::
diff --git a/docs/config/server.md b/docs/config/server.md
index e7c3623e2..2f16741b2 100644
--- a/docs/config/server.md
+++ b/docs/config/server.md
@@ -20,7 +20,7 @@ Normally, Vitest should do this automatically.
 ### server.deps.external
 
 - **Type:** `(string | RegExp)[]`
-- **Default:** files inside [`moduleDirectories`](/config/deps#moduledirectories)
+- **Default:** files inside [`moduleDirectories`](/config/deps#deps-moduledirectories)
 
 Specifies modules that should not be transformed by Vite and should instead be processed directly by the engine. These modules are imported via native dynamic `import` and bypass both transformation and resolution phases.
 
@@ -43,7 +43,7 @@ External modules and their dependencies are not present in the module graph and
 Typically, packages under `node_modules` are externalized.
 
 ::: tip
-If a string is provided, it is first normalized by prefixing the `/node_modules/` or other [`moduleDirectories`](/config/deps#moduledirectories) segments (for example, `'react'` becomes `/node_modules/react/`), and the resulting string is then matched against the full file path. For example, package `@company/some-name` located inside `packages/some-name` should be specified as `some-name`, and `packages` should be included in `deps.moduleDirectories`.
+If a string is provided, it is first normalized by prefixing the `/node_modules/` or other [`moduleDirectories`](/config/deps#deps-moduledirectories) segments (for example, `'react'` becomes `/node_modules/react/`), and the resulting string is then matched against the full file path. For example, package `@company/some-name` located inside `packages/some-name` should be specified as `some-name`, and `packages` should be included in `deps.moduleDirectories`.
 
 If a `RegExp` is provided, it is matched against the full file path.
 :::
@@ -58,7 +58,7 @@ Specifies modules that should be transformed and resolved by Vite. These modules
 Typically, your source files are inlined.
 
 ::: tip
-If a string is provided, it is first normalized by prefixing the `/node_modules/` or other [`moduleDirectories`](/config/deps#moduledirectories) segments (for example, `'react'` becomes `/node_modules/react/`), and the resulting string is then matched against the full file path. For example, package `@company/some-name` located inside `packages/some-name` should be specified as `some-name`, and `packages` should be included in `deps.moduleDirectories`.
+If a string is provided, it is first normalized by prefixing the `/node_modules/` or other [`moduleDirectories`](/config/deps#deps-moduledirectories) segments (for example, `'react'` becomes `/node_modules/react/`), and the resulting string is then matched against the full file path. For example, package `@company/some-name` located inside `packages/some-name` should be specified as `some-name`, and `packages` should be included in `deps.moduleDirectories`.
 
 If a `RegExp` is provided, it is matched against the full file path.
 :::
diff --git a/packages/mocker/src/node/redirect.ts b/packages/mocker/src/node/redirect.ts
index db9b1ae94..ebd6cfa0a 100644
--- a/packages/mocker/src/node/redirect.ts
+++ b/packages/mocker/src/node/redirect.ts
@@ -1,5 +1,6 @@
 import fs from 'node:fs'
 import nodeModule from 'node:module'
+import { isBareImport } from '@vitest/utils/helpers'
 import { basename, dirname, extname, join, resolve } from 'pathe'
 
 const { existsSync, readdirSync, statSync } = fs
@@ -8,43 +9,22 @@ export function findMockRedirect(
   root: string,
   mockPath: string,
   external: string | null,
+  rawId?: string,
 ): string | null {
   const path = external || mockPath
 
   // it's a node_module alias
   // all mocks should be inside <root>/__mocks__
   if (external || isNodeBuiltin(mockPath) || !existsSync(mockPath)) {
-    const mockDirname = dirname(path) // for nested mocks: @vueuse/integration/useJwt
-    const mockFolder = join(root, '__mocks__', mockDirname)
+    return findRootMock(root, path)
+  }
 
-    if (!existsSync(mockFolder)) {
-      return null
+  // a linked package (like a workspace dependency) resolves outside of node_modules
+  if (rawId && isBareImport(rawId)) {
+    const rootMock = findRootMock(root, rawId)
+    if (rootMock) {
+      return rootMock
     }
-
-    const baseOriginal = basename(path)
-
-    function findFile(mockFolder: string, baseOriginal: string): string | null {
-      const files = readdirSync(mockFolder)
-      for (const file of files) {
-        const baseFile = basename(file, extname(file))
-        if (baseFile === baseOriginal) {
-          const path = resolve(mockFolder, file)
-          // if the same name, return the file
-          if (statSync(path).isFile()) {
-            return path
-          } else {
-            // find folder/index.{js,ts}
-            const indexFile = findFile(path, 'index')
-            if (indexFile) {
-              return indexFile
-            }
-          }
-        }
-      }
-      return null
-    }
-
-    return findFile(mockFolder, baseOriginal)
   }
 
   const dir = dirname(path)
@@ -53,6 +33,38 @@ export function findMockRedirect(
   return existsSync(fullPath) ? fullPath : null
 }
 
+function findRootMock(root: string, path: string): string | null {
+  const mockDirname = dirname(path) // for nested mocks: @vueuse/integration/useJwt
+  const mockFolder = join(root, '__mocks__', mockDirname)
+
+  if (!existsSync(mockFolder)) {
+    return null
+  }
+
+  return findFile(mockFolder, basename(path))
+}
+
+function findFile(mockFolder: string, baseOriginal: string): string | null {
+  const files = readdirSync(mockFolder)
+  for (const file of files) {
+    const baseFile = basename(file, extname(file))
+    if (baseFile === baseOriginal) {
+      const path = resolve(mockFolder, file)
+      // if the same name, return the file
+      if (statSync(path).isFile()) {
+        return path
+      } else {
+        // find folder/index.{js,ts}
+        const indexFile = findFile(path, 'index')
+        if (indexFile) {
+          return indexFile
+        }
+      }
+    }
+  }
+  return null
+}
+
 const builtins = new Set([
   ...nodeModule.builtinModules,
   'assert/strict',
diff --git a/packages/mocker/src/node/resolver.ts b/packages/mocker/src/node/resolver.ts
index ccee56a20..850087d18 100644
--- a/packages/mocker/src/node/resolver.ts
+++ b/packages/mocker/src/node/resolver.ts
@@ -38,7 +38,7 @@ export class ServerMockResolver {
       return { mockType: 'autospy', resolvedId: id, resolvedUrl }
     }
 
-    const redirectUrl = findMockRedirect(this.server.config.root, fsPath, external)
+    const redirectUrl = findMockRedirect(this.server.config.root, fsPath, external, rawId)
 
     return {
       mockType: redirectUrl === null ? 'automock' : 'redirect',
diff --git a/packages/vitest/src/node/environments/staticMocks.ts b/packages/vitest/src/node/environments/staticMocks.ts
index 0b7d53c07..7c34d59a6 100644
--- a/packages/vitest/src/node/environments/staticMocks.ts
+++ b/packages/vitest/src/node/environments/staticMocks.ts
@@ -89,5 +89,5 @@ function findRedirect(
   const moduleDirectories = config.deps.moduleDirectories ?? ['/node_modules/']
   const external =
     !isAbsolute(id) || moduleDirectories.some((dir) => id.includes(dir)) ? specifier : null
-  return findMockRedirect(config.root, cleanUrl(id), external)
+  return findMockRedirect(config.root, cleanUrl(id), external, specifier)
 }
diff --git a/packages/vitest/src/node/types/config.ts b/packages/vitest/src/node/types/config.ts
index 3cfee7e15..3c881aca5 100644
--- a/packages/vitest/src/node/types/config.ts
+++ b/packages/vitest/src/node/types/config.ts
@@ -216,7 +216,8 @@ interface DepsOptions {
   interopDefault?: boolean
 
   /**
-   * A list of directories relative to the config file that should be treated as module directories.
+   * A list of directories that contain dependencies. A file is a dependency if its path includes `/<directory>/`.
+   * `node_modules` is always included.
    *
    * @default ['node_modules']
    */
diff --git a/packages/vitest/src/runtime/moduleRunner/bareModuleMocker.ts b/packages/vitest/src/runtime/moduleRunner/bareModuleMocker.ts
index b11b0922f..f566e5164 100644
--- a/packages/vitest/src/runtime/moduleRunner/bareModuleMocker.ts
+++ b/packages/vitest/src/runtime/moduleRunner/bareModuleMocker.ts
@@ -232,8 +232,12 @@ export class BareModuleMocker implements TestModuleMocker {
     return registry.get(url)
   }
 
-  public findMockRedirect(mockPath: string, external: string | null): string | null {
-    return findMockRedirect(this.root, mockPath, external)
+  public findMockRedirect(
+    mockPath: string,
+    external: string | null,
+    rawId?: string,
+  ): string | null {
+    return findMockRedirect(this.root, mockPath, external, rawId)
   }
 
   public mockObject(
@@ -297,7 +301,7 @@ export class BareModuleMocker implements TestModuleMocker {
     } else if (mockType === 'autospy') {
       registry.register('autospy', originalId, id, url)
     } else {
-      const redirect = this.findMockRedirect(id, external)
+      const redirect = this.findMockRedirect(id, external, originalId)
       if (redirect) {
         registry.register('redirect', originalId, id, url, redirect)
       } else {
diff --git a/packages/vitest/src/runtime/moduleRunner/moduleMocker.ts b/packages/vitest/src/runtime/moduleRunner/moduleMocker.ts
index 83cede027..e96249095 100644
--- a/packages/vitest/src/runtime/moduleRunner/moduleMocker.ts
+++ b/packages/vitest/src/runtime/moduleRunner/moduleMocker.ts
@@ -305,7 +305,7 @@ export class VitestMocker extends BareModuleMocker {
     let mock = this.getDependencyMock(id)
 
     if (!mock) {
-      const redirect = this.findMockRedirect(id, external)
+      const redirect = this.findMockRedirect(id, external, rawId)
       if (redirect) {
         mock = new RedirectedModule(rawId, id, rawId, redirect)
       } else {
diff --git a/packages/vitest/src/runtime/moduleRunner/nativeModuleMocker.ts b/packages/vitest/src/runtime/moduleRunner/nativeModuleMocker.ts
index 1259521d1..8ee502d3c 100644
--- a/packages/vitest/src/runtime/moduleRunner/nativeModuleMocker.ts
+++ b/packages/vitest/src/runtime/moduleRunner/nativeModuleMocker.ts
@@ -245,7 +245,7 @@ export { __${index} as "${key}" }
     const external =
       !isAbsolute(filename) || this.isModuleDirectory(resolvedId) ? normalizeModuleId(rawId) : null
     // file is not mocked, automock or redirect it
-    const redirect = this.findMockRedirect(filename, external)
+    const redirect = this.findMockRedirect(filename, external, rawId)
     if (redirect) {
       return import(pathToFileURL(redirect).toString())
     }
diff --git a/test/e2e/test/mocking.test.ts b/test/e2e/test/mocking.test.ts
index 59d64930b..44c253968 100644
--- a/test/e2e/test/mocking.test.ts
+++ b/test/e2e/test/mocking.test.ts
@@ -825,6 +825,49 @@ test('mock works without loading original', () => {
   },
 )
 
+// https://github.com/vitest-dev/vitest/issues/7708
+test.for(['node', 'playwright'])(
+  'root __mocks__ applies to a linked package (%s)',
+  async (mode) => {
+    const { stderr, errorTree } = await runInlineTests(
+      {
+        './__mocks__/@test/test-dep-linked/ts.js': `export default 'mocked'`,
+        './mock.test.js': `
+import { test, expect, vi } from 'vitest'
+import value from '@test/test-dep-linked/ts'
+
+vi.mock('@test/test-dep-linked/ts')
+
+test('vi.mock loads the mock', () => {
+  expect(value).toBe('mocked')
+})
+    `,
+        './import-mock.test.js': `
+import { test, expect, vi } from 'vitest'
+
+test('vi.importMock loads the mock', async () => {
+  const mod = await vi.importMock('@test/test-dep-linked/ts')
+  expect(mod.default).toBe('mocked')
+})
+    `,
+      },
+      modeToConfig(mode),
+    )
+
+    expect(stderr).toBe('')
+    expect(errorTree()).toMatchInlineSnapshot(`
+    {
+      "import-mock.test.js": {
+        "vi.importMock loads the mock": "passed",
+      },
+      "mock.test.js": {
+        "vi.mock loads the mock": "passed",
+      },
+    }
+  `)
+  },
+)
+
 // https://github.com/vitest-dev/vitest/issues/8653
 test.for(['node', 'playwright'])(
   'in-source vi.mock applies only when its file is the test file (%s)',
diff --git a/test/e2e/test/no-module-runner.test.ts b/test/e2e/test/no-module-runner.test.ts
index 264141b11..4650e82f8 100644
--- a/test/e2e/test/no-module-runner.test.ts
+++ b/test/e2e/test/no-module-runner.test.ts
@@ -194,6 +194,37 @@ describe.runIf(module.registerHooks)('supported', () => {
     `)
   })
 
+  test('root __mocks__ applies to a linked package', async () => {
+    const { stderr, testTree } = await runNoViteModuleRunnerTests({
+      '__mocks__/@test/test-dep-linked/ts.js': `export default 'mocked'`,
+      'mock.test.js': `
+        import value from '@test/test-dep-linked/ts'
+        vi.mock('@test/test-dep-linked/ts')
+        test('vi.mock loads the mock', () => {
+          expect(value).toBe('mocked')
+        })
+      `,
+      'import-mock.test.js': `
+        test('vi.importMock loads the mock', async () => {
+          const mod = await vi.importMock('@test/test-dep-linked/ts')
+          expect(mod.default).toBe('mocked')
+        })
+      `,
+    })
+
+    expect(stderr).toBe('')
+    expect(testTree()).toMatchInlineSnapshot(`
+      {
+        "import-mock.test.js": {
+          "vi.importMock loads the mock": "passed",
+        },
+        "mock.test.js": {
+          "vi.mock loads the mock": "passed",
+        },
+      }
+    `)
+  })
+
   test('updating inline snapshots works', async () => {
     const { fs, stdout } = await runNoViteModuleRunnerTests(
       {
diff --git a/test/e2e/test/related-deps.test.ts b/test/e2e/test/related-deps.test.ts
index 898a051a9..4193bce71 100644
--- a/test/e2e/test/related-deps.test.ts
+++ b/test/e2e/test/related-deps.test.ts
@@ -519,6 +519,33 @@ test('a manual mock from __mocks__ runs only the test that mocks it', async () =
   `)
 })
 
+test('a root __mocks__ file of a linked package runs only the test that mocks it', async () => {
+  const { stderr, testTree } = await runInlineTests(
+    {
+      '__mocks__/@test/test-dep-linked/ts.js': `export default 'mocked'`,
+      'a.test.js': `
+        import { test, vi } from 'vitest'
+        import '@test/test-dep-linked/ts'
+
+        vi.mock('@test/test-dep-linked/ts')
+
+        test('a', () => {})
+      `,
+      'b.test.js': testFile('b', `import '@test/test-dep-linked/ts'`),
+    },
+    { related: ['__mocks__/@test/test-dep-linked/ts.js'] },
+  )
+
+  expect(stderr).toBe('')
+  expect(testTree()).toMatchInlineSnapshot(`
+    {
+      "a.test.js": {
+        "a": "passed",
+      },
+    }
+  `)
+})
+
 test('the environment comment is read when filtering and reused by the run', async () => {
   const root = `${process.cwd()}/vitest-test-${crypto.randomUUID()}`
   useFS(root, {