diff --git a/crates/pack-api/src/project.rs b/crates/pack-api/src/project.rs
index 629261d44..f81409de0 100644
--- a/crates/pack-api/src/project.rs
+++ b/crates/pack-api/src/project.rs
@@ -82,6 +82,15 @@ pub struct WatchOptions {
     /// Enable polling at a certain interval if the native file watching doesn't work (e.g.
     /// docker).
     pub poll_interval: Option<Duration>,
+
+    /// Paths to ignore when watching for file changes.
+    /// By default, ignores: node_modules
+    #[serde(default = "default_ignored_paths")]
+    pub ignored: Vec<RcStr>,
+}
+
+pub fn default_ignored_paths() -> Vec<RcStr> {
+    vec!["node_modules".into()]
 }
 
 #[turbo_tasks::value]
@@ -588,16 +597,20 @@ impl Project {
             }
         }
 
-        if denied_paths.is_empty() {
+        // Get watched ignored paths from configuration
+        let watched_ignored = self.watch.ignored.clone();
+
+        if denied_paths.is_empty() && watched_ignored.is_empty() {
             Ok(DiskFileSystem::new(
                 PROJECT_FILESYSTEM_NAME.into(),
                 self.root_path.clone(),
             ))
         } else {
-            Ok(DiskFileSystem::new_with_denied_paths(
+            Ok(DiskFileSystem::new_with_watched_ignored(
                 PROJECT_FILESYSTEM_NAME.into(),
                 self.root_path.clone(),
                 denied_paths,
+                watched_ignored,
             ))
         }
     }
diff --git a/crates/pack-napi/src/pack_api/project.rs b/crates/pack-napi/src/pack_api/project.rs
index f2857e463..96ea57188 100644
--- a/crates/pack-napi/src/pack_api/project.rs
+++ b/crates/pack-napi/src/pack_api/project.rs
@@ -82,6 +82,10 @@ pub struct NapiWatchOptions {
     /// Enable polling at a certain interval if the native file watching doesn't work (e.g.
     /// docker).
     pub poll_interval_ms: Option<f64>,
+
+    /// Paths to ignore when watching for file changes.
+    /// By default, ignores: node_modules
+    pub ignored: Option<Vec<String>>,
 }
 
 #[napi(object)]
@@ -178,6 +182,10 @@ impl From<NapiWatchOptions> for WatchOptions {
                 .poll_interval_ms
                 .filter(|interval| !interval.is_nan() && interval.is_finite() && *interval > 0.0)
                 .map(|interval| Duration::from_secs_f64(interval / 1000.0)),
+            ignored: val
+                .ignored
+                .map(|v| v.into_iter().map(|s| s.into()).collect())
+                .unwrap_or_else(pack_api::project::default_ignored_paths),
         }
     }
 }
diff --git a/crates/pack-schema/src/lib.rs b/crates/pack-schema/src/lib.rs
index d7156d7b1..e8e9d9631 100644
--- a/crates/pack-schema/src/lib.rs
+++ b/crates/pack-schema/src/lib.rs
@@ -140,6 +140,11 @@ pub struct SchemaWatchOptions {
     /// Enable polling at a certain interval if the native file watching doesn't work (e.g. docker).
     #[serde(skip_serializing_if = "Option::is_none")]
     pub poll_interval: Option<u64>,
+
+    /// Paths to ignore when watching for file changes.
+    /// By default, ignores: node_modules
+    #[serde(skip_serializing_if = "Option::is_none")]
+    pub ignored: Option<Vec<String>>,
 }
 
 /// Environment variables for build-time injection
diff --git a/next.js b/next.js
index d78a3ebe0..eaa6d4cb6 160000
--- a/next.js
+++ b/next.js
@@ -1 +1 @@
-Subproject commit d78a3ebe0303e536179fc9ff497535a27bec4c90
+Subproject commit eaa6d4cb65d635448c1f5cfff6a51d4449beaf3f
diff --git a/packages/pack/src/binding.d.ts b/packages/pack/src/binding.d.ts
index 53142dc70..59d49efca 100644
--- a/packages/pack/src/binding.d.ts
+++ b/packages/pack/src/binding.d.ts
@@ -57,6 +57,11 @@ export interface NapiWatchOptions {
    * docker).
    */
   pollIntervalMs?: number
+  /**
+   * Paths to ignore when watching for file changes.
+   * By default, ignores: node_modules
+   */
+  ignored?: Array<string>
 }
 export interface NapiProjectOptions {
   /**