diff --git a/ChangeLog.md b/ChangeLog.md
index 19acc3d0fe..0727afc837 100644
--- a/ChangeLog.md
+++ b/ChangeLog.md
@@ -13,6 +13,10 @@ Major changes:
 
 Behavior changes:
 
+* File watching now takes into account specified targets, old behavior could
+  be restored using the new flag `--watch-all`
+  [#5310](https://github.com/commercialhaskell/stack/issues/5310)
+
 Other enhancements:
 
 * `stack ls dependencies json` now includes fields `sha256` and `size` for
diff --git a/doc/build_command.md b/doc/build_command.md
index 295bcffcea..c8e5765d03 100644
--- a/doc/build_command.md
+++ b/doc/build_command.md
@@ -157,7 +157,10 @@ all of them, please use `stack build --help`. Some particularly convenient ones
 worth mentioning here since they compose well with the rest of the build system
 as described:
 
-* `--file-watch` will rebuild your project every time a file changes
+* `--file-watch` will rebuild your project every time a file changes, by default
+  it will take into account all files belonging to the targets you specify,
+  alternatively one could specify `--watch-all` which will make Stack watch
+  any local files (from project packages or from local dependencies)
 * `--exec "cmd [args]"` will run a command after a successful build
 
 To come back to the composable approach described above, consider this final
diff --git a/src/Stack/Build.hs b/src/Stack/Build.hs
index c918290ef9..d4f05de350 100644
--- a/src/Stack/Build.hs
+++ b/src/Stack/Build.hs
@@ -68,11 +68,22 @@ build msetLocalFiles = do
 
     checkSubLibraryDependencies (Map.elems $ smProject sourceMap)
 
+    boptsCli <- view $ envConfigL.to envConfigBuildOptsCLI
     -- Set local files, necessary for file watching
     stackYaml <- view stackYamlL
     for_ msetLocalFiles $ \setLocalFiles -> do
-      files <- sequence
-        [lpFiles lp | lp <- allLocals]
+      files <-
+        if boptsCLIWatchAll boptsCli
+        then sequence [lpFiles lp | lp <- allLocals]
+        else forM allLocals $ \lp -> do
+          let pn = packageName (lpPackage lp)
+          case Map.lookup pn (smtTargets $ smTargets sourceMap) of
+            Nothing ->
+              pure Set.empty
+            Just (TargetAll _) ->
+              lpFiles lp
+            Just (TargetComps components) ->
+              lpFilesForComponents components lp
       liftIO $ setLocalFiles $ Set.insert stackYaml $ Set.unions files
 
     checkComponentsBuildable allLocals
@@ -81,7 +92,6 @@ build msetLocalFiles = do
     (installedMap, globalDumpPkgs, snapshotDumpPkgs, localDumpPkgs) <-
         getInstalled installMap
 
-    boptsCli <- view $ envConfigL.to envConfigBuildOptsCLI
     baseConfigOpts <- mkBaseConfigOpts boptsCli
     plan <- constructPlan baseConfigOpts localDumpPkgs loadPackage sourceMap installedMap (boptsCLIInitialBuildSteps boptsCli)
 
diff --git a/src/Stack/Options/BuildParser.hs b/src/Stack/Options/BuildParser.hs
index a81f49d189..2d87cd3ee6 100644
--- a/src/Stack/Options/BuildParser.hs
+++ b/src/Stack/Options/BuildParser.hs
@@ -71,6 +71,9 @@ buildOptsParser cmd =
           help
               "Like --file-watch, but polling the filesystem instead of using events") <|>
      pure NoFileWatch) <*>
+    switch
+        (long "watch-all" <>
+         help "Watch all local files not taking targets into account") <*>
     many (cmdOption
              (long "exec" <>
               metavar "CMD [ARGS]" <>
diff --git a/src/Stack/Types/Config/Build.hs b/src/Stack/Types/Config/Build.hs
index c22bf4ac29..c329293793 100644
--- a/src/Stack/Types/Config/Build.hs
+++ b/src/Stack/Types/Config/Build.hs
@@ -133,6 +133,7 @@ defaultBuildOptsCLI = BuildOptsCLI
     , boptsCLIGhcOptions = []
     , boptsCLIBuildSubset = BSAll
     , boptsCLIFileWatch = NoFileWatch
+    , boptsCLIWatchAll = False
     , boptsCLIExec = []
     , boptsCLIOnlyConfigure = False
     , boptsCLICommand = Build
@@ -166,6 +167,7 @@ data BuildOptsCLI = BuildOptsCLI
     , boptsCLIFlags :: !(Map ApplyCLIFlag (Map FlagName Bool))
     , boptsCLIBuildSubset :: !BuildSubset
     , boptsCLIFileWatch :: !FileWatchOpts
+    , boptsCLIWatchAll :: !Bool
     , boptsCLIExec :: ![(String, [String])]
     , boptsCLIOnlyConfigure :: !Bool
     , boptsCLICommand :: !BuildCommand
diff --git a/src/Stack/Types/Package.hs b/src/Stack/Types/Package.hs
index e3a580bbb6..a177e252a0 100644
--- a/src/Stack/Types/Package.hs
+++ b/src/Stack/Types/Package.hs
@@ -320,6 +320,14 @@ instance Show (MemoizedWith env a) where
 lpFiles :: HasEnvConfig env => LocalPackage -> RIO env (Set.Set (Path Abs File))
 lpFiles = runMemoizedWith . fmap (Set.unions . M.elems) . lpComponentFiles
 
+lpFilesForComponents :: HasEnvConfig env
+                     => Set NamedComponent
+                     -> LocalPackage
+                     -> RIO env (Set.Set (Path Abs File))
+lpFilesForComponents components lp = runMemoizedWith $ do
+  componentFiles <- lpComponentFiles lp
+  pure $ mconcat (M.elems (M.restrictKeys componentFiles components))
+
 -- | A location to install a package into, either snapshot or local
 data InstallLocation = Snap | Local
     deriving (Show, Eq)