diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/META-INF/MANIFEST.MF b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/META-INF/MANIFEST.MF
new file mode 100644
index 0000000000..a8ffcc8a80
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/META-INF/MANIFEST.MF
@@ -0,0 +1,6 @@
+Bundle-ManifestVersion: 2
+Bundle-SymbolicName: p2Repository.repositoryRef.target;singleton:=true
+Bundle-Version: 1.0.0.qualifier
+Require-Bundle: org.eclipse.core.runtime,
+ org.eclipse.epsilon.picto
+Bundle-Name: p2Repository.repositoryRef.target
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/build.properties b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/build.properties
new file mode 100644
index 0000000000..7594fab8d5
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/build.properties
@@ -0,0 +1,2 @@
+bin.includes = META-INF/,\
+               .
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/pom.xml b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/pom.xml
new file mode 100644
index 0000000000..e3d5a77795
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/pom.xml
@@ -0,0 +1,42 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<project xmlns="http://maven.apache.org/POM/4.0.0"
+	xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
+	xsi:schemaLocation="http://maven.apache.org/POM/4.0.0 https://maven.apache.org/maven-v4_0_0.xsd">
+	<modelVersion>4.0.0</modelVersion>
+
+	<groupId>tycho-its-project.p2Repository.repositoryRef.targetresolution</groupId>
+	<artifactId>p2Repository.repositoryRef.target</artifactId>
+	<version>1.0.0-SNAPSHOT</version>
+	<packaging>eclipse-plugin</packaging>
+
+	<build>
+		<plugins>
+			<plugin>
+				<groupId>org.eclipse.tycho</groupId>
+				<artifactId>tycho-maven-plugin</artifactId>
+				<version>${tycho-version}</version>
+				<extensions>true</extensions>
+			</plugin>
+			<plugin>
+				<groupId>org.eclipse.tycho</groupId>
+				<artifactId>target-platform-configuration</artifactId>
+				<version>${tycho-version}</version>
+				<configuration>
+					<target>
+						<file>
+							${project.basedir}/test-target.target
+						</file>
+					</target>
+					<referencedRepositoryMode>ignore</referencedRepositoryMode>
+					<!--
+					The project requires a bundle from Epsilon and Eclipse.
+					The target platform only uses the Epsilon update site.
+					Epsilon update site uses referenced repositories so using its update site alone
+					should be enough to resolve the transitive dependencies.
+					However, we explicitly ignore referenced sites, so this should lead to
+					a resolution failure -->
+				</configuration>
+			</plugin>
+		</plugins>
+	</build>
+</project>
\ No newline at end of file
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/test-target.target b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/test-target.target
new file mode 100644
index 0000000000..9047bf81e9
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.ignore/test-target.target
@@ -0,0 +1,15 @@
+<?xml version="1.0" encoding="UTF-8" standalone="no"?>
+<?pde version="3.8"?>
+<target name="test-target.target" sequenceNumber="1">
+	<locations>
+		<!-- Epsilon update site uses referenced repositories so using its update site alone
+			should be enough to resolve the transitive dependencies -->
+		<location includeAllPlatforms="false" includeConfigurePhase="true"
+			includeMode="planner" includeSource="true" type="InstallableUnit">
+			<unit id="org.eclipse.epsilon.picto"
+				version="0.0.0" />
+			<repository
+				location="https://download.eclipse.org/epsilon/updates/2.4/" />
+		</location>
+	</locations>
+</target>
\ No newline at end of file
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/META-INF/MANIFEST.MF b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/META-INF/MANIFEST.MF
new file mode 100644
index 0000000000..a8ffcc8a80
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/META-INF/MANIFEST.MF
@@ -0,0 +1,6 @@
+Bundle-ManifestVersion: 2
+Bundle-SymbolicName: p2Repository.repositoryRef.target;singleton:=true
+Bundle-Version: 1.0.0.qualifier
+Require-Bundle: org.eclipse.core.runtime,
+ org.eclipse.epsilon.picto
+Bundle-Name: p2Repository.repositoryRef.target
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/build.properties b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/build.properties
new file mode 100644
index 0000000000..7594fab8d5
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/build.properties
@@ -0,0 +1,2 @@
+bin.includes = META-INF/,\
+               .
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/pom.xml b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/pom.xml
new file mode 100644
index 0000000000..6cb001a4a9
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/pom.xml
@@ -0,0 +1,40 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<project xmlns="http://maven.apache.org/POM/4.0.0"
+	xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"
+	xsi:schemaLocation="http://maven.apache.org/POM/4.0.0 https://maven.apache.org/maven-v4_0_0.xsd">
+	<modelVersion>4.0.0</modelVersion>
+
+	<groupId>tycho-its-project.p2Repository.repositoryRef.targetresolution</groupId>
+	<artifactId>p2Repository.repositoryRef.target</artifactId>
+	<version>1.0.0-SNAPSHOT</version>
+	<packaging>eclipse-plugin</packaging>
+
+	<build>
+		<plugins>
+			<plugin>
+				<groupId>org.eclipse.tycho</groupId>
+				<artifactId>tycho-maven-plugin</artifactId>
+				<version>${tycho-version}</version>
+				<extensions>true</extensions>
+			</plugin>
+			<plugin>
+				<groupId>org.eclipse.tycho</groupId>
+				<artifactId>target-platform-configuration</artifactId>
+				<version>${tycho-version}</version>
+				<configuration>
+					<target>
+						<file>
+							${project.basedir}/test-target.target
+						</file>
+					</target>
+					<!-- The default is
+					<referencedRepositoryMode>include</referencedRepositoryMode>
+					The project requires a bundle from Epsilon and Eclipse.
+					The target platform only uses the Epsilon update site.
+					Epsilon update site uses referenced repositories so using its update site alone
+					should be enough to resolve the transitive dependencies-->
+				</configuration>
+			</plugin>
+		</plugins>
+	</build>
+</project>
\ No newline at end of file
diff --git a/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/test-target.target b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/test-target.target
new file mode 100644
index 0000000000..9047bf81e9
--- /dev/null
+++ b/tycho-its/projects/p2Repository.repositoryRef.targetresolution.include/test-target.target
@@ -0,0 +1,15 @@
+<?xml version="1.0" encoding="UTF-8" standalone="no"?>
+<?pde version="3.8"?>
+<target name="test-target.target" sequenceNumber="1">
+	<locations>
+		<!-- Epsilon update site uses referenced repositories so using its update site alone
+			should be enough to resolve the transitive dependencies -->
+		<location includeAllPlatforms="false" includeConfigurePhase="true"
+			includeMode="planner" includeSource="true" type="InstallableUnit">
+			<unit id="org.eclipse.epsilon.picto"
+				version="0.0.0" />
+			<repository
+				location="https://download.eclipse.org/epsilon/updates/2.4/" />
+		</location>
+	</locations>
+</target>
\ No newline at end of file
diff --git a/tycho-its/src/test/java/org/eclipse/tycho/test/p2Repository/RepoRefLocationP2RepositoryIntegrationTest.java b/tycho-its/src/test/java/org/eclipse/tycho/test/p2Repository/RepoRefLocationP2RepositoryIntegrationTest.java
index b56c63bbf3..ec13224e39 100644
--- a/tycho-its/src/test/java/org/eclipse/tycho/test/p2Repository/RepoRefLocationP2RepositoryIntegrationTest.java
+++ b/tycho-its/src/test/java/org/eclipse/tycho/test/p2Repository/RepoRefLocationP2RepositoryIntegrationTest.java
@@ -19,6 +19,7 @@
 import static org.hamcrest.MatcherAssert.assertThat;
 import static org.hamcrest.Matchers.containsInAnyOrder;
 import static org.junit.Assert.assertEquals;
+import static org.junit.Assert.fail;
 
 import java.io.File;
 import java.util.List;
@@ -84,6 +85,25 @@ public void testAdditionOfOnlyProvidingRepos() throws Exception {
 				new RepositoryReference("https://download.eclipse.org/cbi/updates/license", TYPE_METADATA, ENABLED)));
 	}
 
+	@Test
+	public void testTargetResolutionWithReferencedRepositoryInclude() throws Exception {
+		// <referencedRepositoryMode>include</referencedRepositoryMode> is the default
+		Verifier verifier = getVerifier("/p2Repository.repositoryRef.targetresolution.include", false);
+		verifier.executeGoal("package");
+		verifier.verifyErrorFreeLog();
+	}
+
+	@Test
+	public void testTargetResolutionWithReferencedRepositoryIgnore() throws Exception {
+		Verifier verifier = getVerifier("/p2Repository.repositoryRef.targetresolution.ignore", false);
+		try {
+			verifier.executeGoal("package");
+			fail("Build should fail due to missing transitive dependency dependency");
+		} catch (VerificationException e) {
+			verifier.verifyTextInLog("requires 'osgi.bundle; org.eclipse.emf.ecore 0.0.0' but it could not be found");
+		}
+	}
+
 	private List<RepositoryReference> buildAndGetRepositoryReferences(String buildRoot, Consumer<Verifier> setup)
 			throws Exception, VerificationException {
 		Verifier verifier = getVerifier(buildRoot, false);