diff --git a/packages/compiler-cli/src/ngtsc/incremental/src/state.ts b/packages/compiler-cli/src/ngtsc/incremental/src/state.ts
index b95983f6425e2..0fc92f770927e 100644
--- a/packages/compiler-cli/src/ngtsc/incremental/src/state.ts
+++ b/packages/compiler-cli/src/ngtsc/incremental/src/state.ts
@@ -69,6 +69,13 @@ export class IncrementalState implements DependencyTracker, MetadataReader, Meta
     metadata.fileDependencies.add(dep);
   }
 
+  trackFileDependencies(deps: ts.SourceFile[], src: ts.SourceFile) {
+    const metadata = this.ensureMetadata(src);
+    for (const dep of deps) {
+      metadata.fileDependencies.add(dep);
+    }
+  }
+
   getFileDependencies(file: ts.SourceFile): ts.SourceFile[] {
     if (!this.metadata.has(file)) {
       return [];
diff --git a/packages/compiler-cli/src/ngtsc/transform/src/compilation.ts b/packages/compiler-cli/src/ngtsc/transform/src/compilation.ts
index 381e5a2c488cf..8feac815a9221 100644
--- a/packages/compiler-cli/src/ngtsc/transform/src/compilation.ts
+++ b/packages/compiler-cli/src/ngtsc/transform/src/compilation.ts
@@ -307,13 +307,37 @@ export class IvyCompilation {
     const recordSpan = this.perf.start('recordDependencies');
     this.scopeRegistry !.getCompilationScopes().forEach(scope => {
       const file = scope.declaration.getSourceFile();
-      // Register the file containing the NgModule where the declaration is declared.
-      this.incrementalState.trackFileDependency(scope.ngModule.getSourceFile(), file);
-      scope.directives.forEach(
-          directive =>
-              this.incrementalState.trackFileDependency(directive.ref.node.getSourceFile(), file));
-      scope.pipes.forEach(
-          pipe => this.incrementalState.trackFileDependency(pipe.ref.node.getSourceFile(), file));
+      const ngModuleFile = scope.ngModule.getSourceFile();
+
+      // A change to any dependency of the declaration causes the declaration to be invalidated,
+      // which requires the NgModule to be invalidated as well.
+      const deps = this.incrementalState.getFileDependencies(file);
+      this.incrementalState.trackFileDependencies(deps, ngModuleFile);
+
+      // A change to the NgModule file should cause the declaration itself to be invalidated.
+      this.incrementalState.trackFileDependency(ngModuleFile, file);
+
+      // A change to any directive/pipe in the compilation scope should cause the declaration to be
+      // invalidated.
+      scope.directives.forEach(directive => {
+        const dirSf = directive.ref.node.getSourceFile();
+
+        // When a directive in scope is updated, the declaration needs to be recompiled as e.g.
+        // a selector may have changed.
+        this.incrementalState.trackFileDependency(dirSf, file);
+
+        // When any of the dependencies of the declaration changes, the NgModule scope may be
+        // affected so a component within scope must be recompiled. Only components need to be
+        // recompiled, as directives are not dependent upon the compilation scope.
+        if (directive.isComponent) {
+          this.incrementalState.trackFileDependencies(deps, dirSf);
+        }
+      });
+      scope.pipes.forEach(pipe => {
+        // When a pipe in scope is updated, the declaration needs to be recompiled as e.g.
+        // the pipe's name may have changed.
+        this.incrementalState.trackFileDependency(pipe.ref.node.getSourceFile(), file);
+      });
     });
     this.perf.stop(recordSpan);
   }
diff --git a/packages/compiler-cli/test/ngtsc/incremental_spec.ts b/packages/compiler-cli/test/ngtsc/incremental_spec.ts
index b84b7c2b6cc39..f46f25590c330 100644
--- a/packages/compiler-cli/test/ngtsc/incremental_spec.ts
+++ b/packages/compiler-cli/test/ngtsc/incremental_spec.ts
@@ -165,6 +165,62 @@ runInEachFileSystem(() => {
       expect(written).not.toContain('/foo_module.js');
     });
 
+    // https://github.com/angular/angular/issues/32416
+    it('should rebuild full NgModule scope when a dependency of a declaration has changed', () => {
+      env.write('component1.ts', `
+        import {Component} from '@angular/core';
+        import {SELECTOR} from './dep';
+  
+        @Component({selector: SELECTOR, template: 'cmp'})
+        export class Cmp1 {}
+      `);
+      env.write('component2.ts', `
+        import {Component} from '@angular/core';
+  
+        @Component({selector: 'cmp2', template: 'cmp2'})
+        export class Cmp2 {}
+      `);
+      env.write('dep.ts', `
+        export const SELECTOR = 'cmp';
+      `);
+      env.write('directive.ts', `
+        import {Directive} from '@angular/core';
+  
+        @Directive({selector: 'dir'})
+        export class Dir {}
+      `);
+      env.write('pipe.ts', `
+        import {Pipe} from '@angular/core';
+  
+        @Pipe({name: 'myPipe'})
+        export class MyPipe {}
+      `);
+      env.write('module.ts', `
+        import {NgModule} from '@angular/core';
+        import {Cmp1} from './component1';
+        import {Cmp2} from './component2';
+        import {Dir} from './directive';
+        import {MyPipe} from './pipe';
+  
+        @NgModule({declarations: [Cmp1, Cmp2, Dir, MyPipe]})
+        export class Mod {}
+      `);
+      env.driveMain();
+
+      // Pretend a change was made to 'dep'. Since this may affect the NgModule scope, like it does
+      // here if the selector is updated, all components in the module scope need to be recompiled.
+      env.flushWrittenFileTracking();
+      env.invalidateCachedFile('dep.ts');
+      env.driveMain();
+      const written = env.getFilesWrittenSinceLastFlush();
+      expect(written).not.toContain('/directive.js');
+      expect(written).not.toContain('/pipe.js');
+      expect(written).toContain('/component1.js');
+      expect(written).toContain('/component2.js');
+      expect(written).toContain('/dep.js');
+      expect(written).toContain('/module.js');
+    });
+
     it('should rebuild components where their NgModule declared dependencies have changed', () => {
       setupFooBarProgram(env);