diff --git a/dvc/ignore.py b/dvc/ignore.py
index 71569b38b3..bcdf814917 100644
--- a/dvc/ignore.py
+++ b/dvc/ignore.py
@@ -274,7 +274,7 @@ def _get_trie_pattern(self, dirname):
 
     def _is_ignored(self, path, is_dir=False):
         if self._outside_repo(path):
-            return True
+            return False
         dirname, basename = os.path.split(os.path.normpath(path))
         ignore_pattern = self._get_trie_pattern(dirname)
         if ignore_pattern:
@@ -296,6 +296,7 @@ def is_ignored_dir(self, path, ignore_subrepos=True):
         return self._is_ignored(path, True)
 
     def is_ignored_file(self, path):
+        path = os.path.abspath(path)
         return self._is_ignored(path, False)
 
     def _outside_repo(self, path):
diff --git a/tests/func/test_ignore.py b/tests/func/test_ignore.py
index 042329f79c..097dfe374a 100644
--- a/tests/func/test_ignore.py
+++ b/tests/func/test_ignore.py
@@ -158,10 +158,17 @@ def test_match_nested(tmp_dir, dvc):
 def test_ignore_external(tmp_dir, scm, dvc, tmp_path_factory):
     tmp_dir.gen(".dvcignore", "*.backup\ntmp")
     ext_dir = TmpDir(os.fspath(tmp_path_factory.mktemp("external_dir")))
-    ext_dir.gen({"y.backup": "y", "tmp": "ext tmp"})
+    ext_dir.gen({"y.backup": "y", "tmp": {"file": "ext tmp"}})
 
     result = {relpath(f, ext_dir) for f in dvc.tree.walk_files(ext_dir)}
-    assert result == {"y.backup", "tmp"}
+    assert result == {"y.backup", os.path.join("tmp", "file")}
+    assert (
+        dvc.tree.dvcignore.is_ignored_dir(os.fspath(ext_dir / "tmp")) is False
+    )
+    assert (
+        dvc.tree.dvcignore.is_ignored_file(os.fspath(ext_dir / "y.backup"))
+        is False
+    )
 
 
 def test_ignore_subrepo(tmp_dir, scm, dvc):