diff --git a/src/tsconfig-loader.ts b/src/tsconfig-loader.ts
index 82db01c..6e32afb 100644
--- a/src/tsconfig-loader.ts
+++ b/src/tsconfig-loader.ts
@@ -108,45 +108,51 @@ export function loadTsconfig(
     return undefined;
   }
 
-  const configString = readFileSync(configFilePath);
-  const cleanedJson = StripBom(configString);
-  const config: Tsconfig = JSON5.parse(cleanedJson);
-  let extendedConfig = config.extends;
-
-  if (extendedConfig) {
+  // Compose a config object by looping through all tsconfig files for
+  // as long as 'extends' is set
+  let extensionPath: string | null = configFilePath;
+  let extendsDir: string = ".";
+  let config: Tsconfig = {};
+  while (extensionPath !== null) {
     if (
-      typeof extendedConfig === "string" &&
-      extendedConfig.indexOf(".json") === -1
+      typeof extensionPath === "string" &&
+      extensionPath.indexOf(".json") === -1
     ) {
-      extendedConfig += ".json";
+      extensionPath += ".json";
     }
 
-    const currentDir = path.dirname(configFilePath);
-    const base =
-      loadTsconfig(
-        path.join(currentDir, extendedConfig),
-        existsSync,
-        readFileSync
-      ) || {};
-
-    // baseUrl should be interpreted as relative to the base tsconfig,
-    // but we need to update it so it is relative to the original tsconfig being loaded
-    if (base && base.compilerOptions && base.compilerOptions.baseUrl) {
-      const extendsDir = path.dirname(extendedConfig);
-      base.compilerOptions.baseUrl = path.join(
-        extendsDir,
-        base.compilerOptions.baseUrl
-      );
-    }
+    const configString = readFileSync(extensionPath);
+    const cleanedJson = StripBom(configString);
+    const newConfig: Tsconfig = JSON5.parse(cleanedJson);
 
-    return {
-      ...base,
+    // Merge new and previous config. Since the loop is walking 'backwards'
+    // we need to make sure the 'old' config is prioritized over the 'new' one.
+    config = {
+      ...newConfig,
       ...config,
       compilerOptions: {
-        ...base.compilerOptions,
+        ...newConfig.compilerOptions,
         ...config.compilerOptions
       }
     };
+
+    // baseUrl should be interpreted as relative to the base tsconfig,
+    // but we need to update it so it is relative to the original tsconfig being loaded
+    // we therefore need to compose the 'extendsDir' path
+    extendsDir = newConfig.extends
+      ? path.join(extendsDir, path.dirname(newConfig.extends))
+      : extendsDir;
+    extensionPath = newConfig.extends
+      ? path.resolve(path.dirname(extensionPath), newConfig.extends)
+      : null;
   }
+
+  if (config.compilerOptions && config.compilerOptions.baseUrl) {
+    config.compilerOptions.baseUrl = path.join(
+      extendsDir,
+      config.compilerOptions.baseUrl
+    );
+  }
+
   return config;
 }
diff --git a/test/tsconfig-loader-tests.ts b/test/tsconfig-loader-tests.ts
index 002bcb4..29f5a64 100644
--- a/test/tsconfig-loader-tests.ts
+++ b/test/tsconfig-loader-tests.ts
@@ -108,7 +108,7 @@ describe("loadConfig", () => {
       path => path === "/root/dir1/tsconfig.json",
       _ => `{
           // my comment
-          "compilerOptions": { 
+          "compilerOptions": {
             "baseUrl": "hej"
           }
         }`
@@ -122,7 +122,7 @@ describe("loadConfig", () => {
       "/root/dir1/tsconfig.json",
       path => path === "/root/dir1/tsconfig.json",
       _ => `{
-          "compilerOptions": { 
+          "compilerOptions": {
             "baseUrl": "hej",
           },
         }`
@@ -161,7 +161,64 @@ describe("loadConfig", () => {
     assert.deepEqual(res, {
       extends: "../base-config.json",
       compilerOptions: {
-        baseUrl: "kalle",
+        baseUrl: "../kalle",
+        paths: { foo: ["bar2"] },
+        strict: true
+      }
+    });
+  });
+
+  it("It should correctly handle mutilple tsconfig 'extends'", () => {
+    const secondConfig = {
+      extends: "../tsconfig.json",
+      compilerOptions: {
+        strict: true,
+        baseUrl: "deut"
+      }
+    };
+    const secondConfigPath = join(
+      "/root",
+      "dir1",
+      "dir2",
+      "tsconfig.second.json"
+    );
+    const firstConfig = {
+      extends: "../base-config.json",
+      compilerOptions: { baseUrl: "k  alle", paths: { foo: ["bar2"] } }
+    };
+    const firstConfigPath = join("/root", "dir1", "tsconfig.json");
+    const baseConfig = {
+      compilerOptions: {
+        baseUrl: "olle",
+        strict: false,
+        paths: { foo: ["bar1"] }
+      }
+    };
+    const baseConfigPath = join("/root", "base-config.json");
+    const res = loadTsconfig(
+      join("/root", "dir1", "dir2", "tsconfig.second.json"),
+      path =>
+        path === firstConfigPath ||
+        path === secondConfigPath ||
+        path === baseConfigPath,
+      path => {
+        if (path === firstConfigPath) {
+          return JSON.stringify(firstConfig);
+        }
+        if (path === secondConfigPath) {
+          return JSON.stringify(secondConfig);
+        }
+        if (path === baseConfigPath) {
+          return JSON.stringify(baseConfig);
+        }
+        return "";
+      }
+    );
+
+    assert.deepEqual(res, {
+      extends: "../tsconfig.json",
+      compilerOptions: {
+        baseUrl: "../../deut",
         paths: { foo: ["bar2"] },
         strict: true
       }