diff --git a/cmd/unity/cmd/project.go b/cmd/unity/cmd/project.go
index e311789..b8e0722 100644
--- a/cmd/unity/cmd/project.go
+++ b/cmd/unity/cmd/project.go
@@ -436,7 +436,9 @@ func (mt *moduleTester) deriveModules(dir string) (modules []*module, err error)
 			return fmt.Errorf("failed to create module instance at %s: %v", modDir, err)
 		}
 		modules = append(modules, m)
-		return nil
+		// Do not recurse within the cue.mod - otherwise we might find modules
+		// in the vendor
+		return filepath.SkipDir
 	})
 	return
 }
diff --git a/cmd/unity/cmd/testdata/scripts/test_project_simple.txt b/cmd/unity/cmd/testdata/scripts/test_project_simple.txt
index 6e7dd51..1930f73 100644
--- a/cmd/unity/cmd/testdata/scripts/test_project_simple.txt
+++ b/cmd/unity/cmd/testdata/scripts/test_project_simple.txt
@@ -17,6 +17,12 @@ stdout 'PASS'
 -- .unquote --
 cue.mod/tests/basic1.txt
 cue.mod/tests/basic2.txt
+-- cue.mod/pkg/acme.com/other/other.cue --
+package other
+
+y: 5
+-- cue.mod/pkg/acme.com/other/cue.mod/module.cue --
+module: "acme.com/other"
 -- cue.mod/module.cue --
 module: "mod.com"
 
@@ -40,4 +46,6 @@ Versions: ["PATH"]
 -- x.cue --
 package x
 
-x: 5
+import "acme.com/other"
+
+x: other.y