diff --git a/MODULE.bazel.lock b/MODULE.bazel.lock
index ac7b39f567a5cc..f1ac3e85d1bbd4 100644
--- a/MODULE.bazel.lock
+++ b/MODULE.bazel.lock
@@ -2741,7 +2741,7 @@
       "general": {
         "bzlTransitiveDigest": "qF4MUyoxY7fCY0kaWtM87qFtK+boKcqviSosJqqpaDI=",
         "accumulatedFileDigests": {
-          "@@//src/test/tools/bzlmod:MODULE.bazel.lock": "e591609d4999da0cac2aad19df3ff8a1e42f3f032fb16308037d0d9e555f369f",
+          "@@//src/test/tools/bzlmod:MODULE.bazel.lock": "2ac47b971c5b12765dc679ce4137864f67f02f867f43ec22f86ecc203b905a1c",
           "@@//:MODULE.bazel": "f291782aef1d2989f49c0e884b32ec8d7814ae48c598b6f3060870ccb3f5c0b6"
         },
         "envVariables": {},
diff --git a/compile.sh b/compile.sh
index d91583d277cba8..3e95db7f75f902 100755
--- a/compile.sh
+++ b/compile.sh
@@ -67,6 +67,7 @@ bazel_build "src:bazel_nojdk${EXE_EXT}" \
   --action_env=PATH \
   --host_platform=@local_config_platform//:host \
   --platforms=@local_config_platform//:host \
+  --lockfile_mode=error \
   || fail "Could not build Bazel"
 bazel_bin_path="$(get_bazel_bin_path)/src/bazel_nojdk${EXE_EXT}"
 [ -e "$bazel_bin_path" ] \
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BUILD b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BUILD
index 6ecf0be408019c..a6300dede5c6f6 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BUILD
+++ b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BUILD
@@ -155,6 +155,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib/cmdline",
         "//src/main/java/com/google/devtools/build/lib/events",
         "//src/main/java/com/google/devtools/build/lib/packages",
+        "//src/main/java/com/google/devtools/build/lib/rules:repository/repo_recorded_input",
         "//src/main/java/com/google/devtools/build/lib/skyframe:sky_functions",
         "//src/main/java/com/google/devtools/build/lib/skyframe/serialization:visible-for-serialization",
         "//src/main/java/com/google/devtools/build/lib/skyframe/serialization/autocodec",
@@ -217,6 +218,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib/events",
         "//src/main/java/com/google/devtools/build/lib/packages",
         "//src/main/java/com/google/devtools/build/lib/profiler",
+        "//src/main/java/com/google/devtools/build/lib/rules:repository/repo_recorded_input",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_directory_value",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_function",
         "//src/main/java/com/google/devtools/build/lib/skyframe:bzl_load_failed_exception",
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BazelLockFileValue.java b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BazelLockFileValue.java
index 3ae71c57c66135..0855f0a1aa74e2 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BazelLockFileValue.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/BazelLockFileValue.java
@@ -37,7 +37,7 @@
 @GenerateTypeAdapter
 public abstract class BazelLockFileValue implements SkyValue, Postable {
 
-  public static final int LOCK_FILE_VERSION = 4;
+  public static final int LOCK_FILE_VERSION = 5;
 
   @SerializationConstant public static final SkyKey KEY = () -> SkyFunctions.BAZEL_LOCK_FILE;
 
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/GsonTypeAdapterUtil.java b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/GsonTypeAdapterUtil.java
index 808d83821d6291..2a4d28d960cee4 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/GsonTypeAdapterUtil.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/GsonTypeAdapterUtil.java
@@ -29,6 +29,7 @@
 import com.google.devtools.build.lib.cmdline.Label;
 import com.google.devtools.build.lib.cmdline.LabelSyntaxException;
 import com.google.devtools.build.lib.cmdline.RepositoryName;
+import com.google.devtools.build.lib.rules.repository.RepoRecordedInput;
 import com.google.devtools.build.lib.vfs.Path;
 import com.google.gson.Gson;
 import com.google.gson.GsonBuilder;
@@ -444,6 +445,20 @@ public Location read(JsonReader jsonReader) throws IOException {
     }
   }
 
+  private static final TypeAdapter<RepoRecordedInput.File> REPO_RECORDED_INPUT_FILE_TYPE_ADAPTER =
+      new TypeAdapter<>() {
+        @Override
+        public void write(JsonWriter jsonWriter, RepoRecordedInput.File value) throws IOException {
+          jsonWriter.value(value.toStringInternal());
+        }
+
+        @Override
+        public RepoRecordedInput.File read(JsonReader jsonReader) throws IOException {
+          return (RepoRecordedInput.File)
+              RepoRecordedInput.File.PARSER.parse(jsonReader.nextString());
+        }
+      };
+
   public static Gson createLockFileGson(Path moduleFilePath, Path workspaceRoot) {
     return new GsonBuilder()
         .setPrettyPrinting()
@@ -468,6 +483,7 @@ public static Gson createLockFileGson(Path moduleFilePath, Path workspaceRoot) {
         .registerTypeAdapter(ModuleExtensionId.IsolationKey.class, ISOLATION_KEY_TYPE_ADAPTER)
         .registerTypeAdapter(AttributeValues.class, new AttributeValuesAdapter())
         .registerTypeAdapter(byte[].class, BYTE_ARRAY_TYPE_ADAPTER)
+        .registerTypeAdapter(RepoRecordedInput.File.class, REPO_RECORDED_INPUT_FILE_TYPE_ADAPTER)
         .create();
   }
 
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/LockFileModuleExtension.java b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/LockFileModuleExtension.java
index 1443189e389a42..d526a79edacdd0 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/LockFileModuleExtension.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/LockFileModuleExtension.java
@@ -17,9 +17,9 @@
 import com.google.auto.value.AutoValue;
 import com.google.common.collect.ImmutableMap;
 import com.google.common.collect.ImmutableTable;
-import com.google.devtools.build.lib.cmdline.Label;
 import com.google.devtools.build.lib.cmdline.RepositoryName;
 import com.google.devtools.build.lib.events.ExtendedEventHandler.Postable;
+import com.google.devtools.build.lib.rules.repository.RepoRecordedInput;
 import com.ryanharter.auto.value.gson.GenerateTypeAdapter;
 import java.util.Optional;
 
@@ -41,7 +41,7 @@ public static Builder builder() {
   @SuppressWarnings("mutable")
   public abstract byte[] getBzlTransitiveDigest();
 
-  public abstract ImmutableMap<Label, String> getAccumulatedFileDigests();
+  public abstract ImmutableMap<RepoRecordedInput.File, String> getRecordedFileInputs();
 
   public abstract ImmutableMap<String, String> getEnvVariables();
 
@@ -65,7 +65,8 @@ public abstract static class Builder {
 
     public abstract Builder setBzlTransitiveDigest(byte[] digest);
 
-    public abstract Builder setAccumulatedFileDigests(ImmutableMap<Label, String> value);
+    public abstract Builder setRecordedFileInputs(
+        ImmutableMap<RepoRecordedInput.File, String> value);
 
     public abstract Builder setEnvVariables(ImmutableMap<String, String> value);
 
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/ModuleExtensionContext.java b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/ModuleExtensionContext.java
index cdddef1c3a1479..52151259200462 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/ModuleExtensionContext.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/ModuleExtensionContext.java
@@ -16,6 +16,7 @@
 
 import com.google.common.collect.ImmutableMap;
 import com.google.devtools.build.docgen.annot.DocCategory;
+import com.google.devtools.build.lib.analysis.BlazeDirectories;
 import com.google.devtools.build.lib.bazel.repository.downloader.DownloadManager;
 import com.google.devtools.build.lib.bazel.repository.starlark.StarlarkBaseExternalContext;
 import com.google.devtools.build.lib.runtime.ProcessWrapper;
@@ -50,6 +51,7 @@ public class ModuleExtensionContext extends StarlarkBaseExternalContext {
 
   protected ModuleExtensionContext(
       Path workingDirectory,
+      BlazeDirectories directories,
       Environment env,
       Map<String, String> envVariables,
       DownloadManager downloadManager,
@@ -62,13 +64,15 @@ protected ModuleExtensionContext(
       boolean rootModuleHasNonDevDependency) {
     super(
         workingDirectory,
+        directories,
         env,
         envVariables,
         downloadManager,
         timeoutScaling,
         processWrapper,
         starlarkSemantics,
-        remoteExecutor);
+        remoteExecutor,
+        /* allowWatchingFilesOutsideWorkspace= */ false);
     this.extensionId = extensionId;
     this.modules = modules;
     this.rootModuleHasNonDevDependency = rootModuleHasNonDevDependency;
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/SingleExtensionEvalFunction.java b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/SingleExtensionEvalFunction.java
index 38ca1ba625b32d..10a39168ba4b88 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/SingleExtensionEvalFunction.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/bzlmod/SingleExtensionEvalFunction.java
@@ -29,7 +29,6 @@
 import com.google.common.collect.Iterables;
 import com.google.common.collect.Maps;
 import com.google.common.collect.Table;
-import com.google.devtools.build.lib.actions.FileValue;
 import com.google.devtools.build.lib.analysis.BlazeDirectories;
 import com.google.devtools.build.lib.bazel.repository.RepositoryOptions.LockfileMode;
 import com.google.devtools.build.lib.bazel.repository.downloader.DownloadManager;
@@ -48,6 +47,7 @@
 import com.google.devtools.build.lib.profiler.ProfilerTask;
 import com.google.devtools.build.lib.profiler.SilentCloseable;
 import com.google.devtools.build.lib.rules.repository.NeedsSkyframeRestartException;
+import com.google.devtools.build.lib.rules.repository.RepoRecordedInput;
 import com.google.devtools.build.lib.rules.repository.RepositoryFunction;
 import com.google.devtools.build.lib.runtime.ProcessWrapper;
 import com.google.devtools.build.lib.runtime.RepositoryRemoteExecutor;
@@ -61,7 +61,6 @@
 import com.google.devtools.build.lib.util.Fingerprint;
 import com.google.devtools.build.lib.util.OS;
 import com.google.devtools.build.lib.vfs.Path;
-import com.google.devtools.build.lib.vfs.RootedPath;
 import com.google.devtools.build.skyframe.SkyFunction;
 import com.google.devtools.build.skyframe.SkyFunctionException;
 import com.google.devtools.build.skyframe.SkyFunctionException.Transience;
@@ -71,7 +70,6 @@
 import java.io.IOException;
 import java.util.ArrayList;
 import java.util.Arrays;
-import java.util.HashMap;
 import java.util.HashSet;
 import java.util.Iterator;
 import java.util.Map;
@@ -219,7 +217,7 @@ public SkyValue compute(SkyKey skyKey, Environment env)
                   extension.getEvalFactors(),
                   LockFileModuleExtension.builder()
                       .setBzlTransitiveDigest(extension.getBzlTransitiveDigest())
-                      .setAccumulatedFileDigests(moduleExtensionResult.getAccumulatedFileDigests())
+                      .setRecordedFileInputs(moduleExtensionResult.getRecordedFileInputs())
                       .setEnvVariables(extension.getEnvVars())
                       .setGeneratedRepoSpecs(generatedRepoSpecs)
                       .setModuleExtensionMetadata(moduleExtensionMetadata)
@@ -291,7 +289,7 @@ private SingleExtensionEvalValue tryGettingValueFromLockFile(
                 + extensionId
                 + "' have changed");
       }
-      if (didFilesChange(env, lockedExtension.getAccumulatedFileDigests())) {
+      if (didFilesChange(env, directories, lockedExtension.getRecordedFileInputs())) {
         diffRecorder.record(
             "One or more files the extension '" + extensionId + "' is using have changed");
       }
@@ -393,39 +391,13 @@ private static boolean didRepoMappingsChange(
   }
 
   private static boolean didFilesChange(
-      Environment env, ImmutableMap<Label, String> accumulatedFileDigests)
+      Environment env, BlazeDirectories directories, ImmutableMap<RepoRecordedInput.File, String> recordedFileInputs)
       throws InterruptedException, NeedsSkyframeRestartException {
-    // Turn labels into FileValue keys & get those values
-    Map<Label, FileValue.Key> fileKeys = new HashMap<>();
-    for (Label label : accumulatedFileDigests.keySet()) {
-      try {
-        RootedPath rootedPath = RepositoryFunction.getRootedPathFromLabel(label, env);
-        fileKeys.put(label, FileValue.key(rootedPath));
-      } catch (NeedsSkyframeRestartException e) {
-        throw e;
-      } catch (EvalException e) {
-        // Consider those exception to be a cause for invalidation
-        return true;
-      }
-    }
-    SkyframeLookupResult result = env.getValuesAndExceptions(fileKeys.values());
+    boolean upToDate = RepoRecordedInput.areAllValuesUpToDate(env, directories, recordedFileInputs);
     if (env.valuesMissing()) {
       throw new NeedsSkyframeRestartException();
     }
-
-    // Compare the collected file values with the hashes stored in the lockfile
-    for (Entry<Label, String> entry : accumulatedFileDigests.entrySet()) {
-      FileValue fileValue = (FileValue) result.get(fileKeys.get(entry.getKey()));
-      try {
-        if (!entry.getValue().equals(RepositoryFunction.fileValueToMarkerValue(fileValue))) {
-          return true;
-        }
-      } catch (IOException e) {
-        // Consider those exception to be a cause for invalidation
-        return true;
-      }
-    }
-    return false;
+    return !upToDate;
   }
 
   /**
@@ -956,7 +928,7 @@ public RunModuleExtensionResult run(
         }
       }
       return RunModuleExtensionResult.create(
-          moduleContext.getAccumulatedFileDigests(),
+          moduleContext.getRecordedFileInputs(),
           threadContext.getGeneratedRepoSpecs(),
           moduleExtensionMetadata,
           repoMappingRecorder.recordedEntries());
@@ -992,6 +964,7 @@ private ModuleExtensionContext createContext(
           rootUsage != null && rootUsage.getHasNonDevUseExtension();
       return new ModuleExtensionContext(
           workingDirectory,
+          directories,
           env,
           clientEnvironmentSupplier.get(),
           downloadManager,
@@ -1016,7 +989,7 @@ static final class SingleExtensionEvalFunctionException extends SkyFunctionExcep
   @AutoValue
   abstract static class RunModuleExtensionResult {
 
-    abstract ImmutableMap<Label, String> getAccumulatedFileDigests();
+    abstract ImmutableMap<RepoRecordedInput.File, String> getRecordedFileInputs();
 
     abstract ImmutableMap<String, RepoSpec> getGeneratedRepoSpecs();
 
@@ -1025,12 +998,12 @@ abstract static class RunModuleExtensionResult {
     abstract ImmutableTable<RepositoryName, String, RepositoryName> getRecordedRepoMappingEntries();
 
     static RunModuleExtensionResult create(
-        ImmutableMap<Label, String> accumulatedFileDigests,
+        ImmutableMap<RepoRecordedInput.File, String> recordedFileInputs,
         ImmutableMap<String, RepoSpec> generatedRepoSpecs,
         Optional<ModuleExtensionMetadata> moduleExtensionMetadata,
         ImmutableTable<RepositoryName, String, RepositoryName> recordedRepoMappingEntries) {
       return new AutoValue_SingleExtensionEvalFunction_RunModuleExtensionResult(
-          accumulatedFileDigests,
+          recordedFileInputs,
           generatedRepoSpecs,
           moduleExtensionMetadata,
           recordedRepoMappingEntries);
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/repository/BUILD b/src/main/java/com/google/devtools/build/lib/bazel/repository/BUILD
index b624864b06e4b6..2f6a957d8f9cd6 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/repository/BUILD
+++ b/src/main/java/com/google/devtools/build/lib/bazel/repository/BUILD
@@ -37,6 +37,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib/events",
         "//src/main/java/com/google/devtools/build/lib/packages",
         "//src/main/java/com/google/devtools/build/lib/repository:repository_events",
+        "//src/main/java/com/google/devtools/build/lib/rules:repository/repo_recorded_input",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_directory_value",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_function",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/resolved_file_value",
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD
index 4ce0fabc14a265..5811960f84619b 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD
+++ b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD
@@ -35,6 +35,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib/profiler",
         "//src/main/java/com/google/devtools/build/lib/repository:repository_events",
         "//src/main/java/com/google/devtools/build/lib/repository:request_repository_information_event",
+        "//src/main/java/com/google/devtools/build/lib/rules:repository/repo_recorded_input",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_directory_value",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_function",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/workspace_attribute_mapper",
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkBaseExternalContext.java b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkBaseExternalContext.java
index bdbdb08a2e5ffb..aaedebc5d51452 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkBaseExternalContext.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkBaseExternalContext.java
@@ -27,6 +27,7 @@
 import com.google.common.collect.Maps;
 import com.google.common.util.concurrent.Futures;
 import com.google.devtools.build.lib.actions.FileValue;
+import com.google.devtools.build.lib.analysis.BlazeDirectories;
 import com.google.devtools.build.lib.bazel.debug.WorkspaceRuleEvent;
 import com.google.devtools.build.lib.bazel.repository.DecompressorDescriptor;
 import com.google.devtools.build.lib.bazel.repository.DecompressorValue;
@@ -36,6 +37,8 @@
 import com.google.devtools.build.lib.bazel.repository.downloader.DownloadManager;
 import com.google.devtools.build.lib.bazel.repository.downloader.HttpUtils;
 import com.google.devtools.build.lib.cmdline.Label;
+import com.google.devtools.build.lib.cmdline.LabelConstants;
+import com.google.devtools.build.lib.cmdline.RepositoryName;
 import com.google.devtools.build.lib.events.Event;
 import com.google.devtools.build.lib.events.EventHandler;
 import com.google.devtools.build.lib.events.ExtendedEventHandler.FetchProgress;
@@ -47,6 +50,9 @@
 import com.google.devtools.build.lib.profiler.ProfilerTask;
 import com.google.devtools.build.lib.profiler.SilentCloseable;
 import com.google.devtools.build.lib.rules.repository.NeedsSkyframeRestartException;
+import com.google.devtools.build.lib.rules.repository.RepoRecordedInput;
+import com.google.devtools.build.lib.rules.repository.RepoRecordedInput.FileInsideWorkspace;
+import com.google.devtools.build.lib.rules.repository.RepoRecordedInput.FileOutsideWorkspace;
 import com.google.devtools.build.lib.rules.repository.RepositoryFunction;
 import com.google.devtools.build.lib.rules.repository.RepositoryFunction.RepositoryFunctionException;
 import com.google.devtools.build.lib.runtime.ProcessWrapper;
@@ -54,15 +60,16 @@
 import com.google.devtools.build.lib.runtime.RepositoryRemoteExecutor.ExecutionResult;
 import com.google.devtools.build.lib.skyframe.ActionEnvironmentFunction;
 import com.google.devtools.build.lib.util.OsUtils;
+import com.google.devtools.build.lib.util.Pair;
 import com.google.devtools.build.lib.util.io.OutErr;
 import com.google.devtools.build.lib.vfs.FileSystemUtils;
 import com.google.devtools.build.lib.vfs.Path;
 import com.google.devtools.build.lib.vfs.PathFragment;
+import com.google.devtools.build.lib.vfs.Root;
 import com.google.devtools.build.lib.vfs.RootedPath;
 import com.google.devtools.build.lib.vfs.Symlinks;
 import com.google.devtools.build.skyframe.SkyFunction.Environment;
 import com.google.devtools.build.skyframe.SkyFunctionException.Transience;
-import com.google.devtools.build.skyframe.SkyKey;
 import java.io.File;
 import java.io.IOException;
 import java.io.OutputStream;
@@ -133,6 +140,7 @@ private interface AsyncTask {
   private static final int MAX_PROFILE_ARGS_LEN = 512;
 
   protected final Path workingDirectory;
+  protected final BlazeDirectories directories;
   protected final Environment env;
   protected final ImmutableMap<String, String> envVariables;
   private final StarlarkOS osObject;
@@ -140,21 +148,25 @@ private interface AsyncTask {
   protected final double timeoutScaling;
   @Nullable private final ProcessWrapper processWrapper;
   protected final StarlarkSemantics starlarkSemantics;
-  private final HashMap<Label, String> accumulatedFileDigests = new HashMap<>();
+  private final HashMap<RepoRecordedInput.File, String> recordedFileInputs = new HashMap<>();
   private final HashSet<String> accumulatedEnvKeys = new HashSet<>();
   private final RepositoryRemoteExecutor remoteExecutor;
   private final List<AsyncTask> asyncTasks;
+  private final boolean allowWatchingFilesOutsideWorkspace;
 
   protected StarlarkBaseExternalContext(
       Path workingDirectory,
+      BlazeDirectories directories,
       Environment env,
       Map<String, String> envVariables,
       DownloadManager downloadManager,
       double timeoutScaling,
       @Nullable ProcessWrapper processWrapper,
       StarlarkSemantics starlarkSemantics,
-      @Nullable RepositoryRemoteExecutor remoteExecutor) {
+      @Nullable RepositoryRemoteExecutor remoteExecutor,
+      boolean allowWatchingFilesOutsideWorkspace) {
     this.workingDirectory = workingDirectory;
+    this.directories = directories;
     this.env = env;
     this.envVariables = ImmutableMap.copyOf(envVariables);
     this.osObject = new StarlarkOS(this.envVariables);
@@ -164,6 +176,7 @@ protected StarlarkBaseExternalContext(
     this.starlarkSemantics = starlarkSemantics;
     this.remoteExecutor = remoteExecutor;
     this.asyncTasks = new ArrayList<>();
+    this.allowWatchingFilesOutsideWorkspace = allowWatchingFilesOutsideWorkspace;
   }
 
   public boolean ensureNoPendingAsyncTasks(EventHandler eventHandler, boolean forSuccessfulFetch) {
@@ -194,8 +207,8 @@ protected void registerAsyncTask(AsyncTask task) {
   protected abstract String getIdentifyingStringForLogging();
 
   /** Returns the file digests used by this context object so far. */
-  public ImmutableMap<Label, String> getAccumulatedFileDigests() {
-    return ImmutableMap.copyOf(accumulatedFileDigests);
+  public ImmutableMap<RepoRecordedInput.File, String> getRecordedFileInputs() {
+    return ImmutableMap.copyOf(recordedFileInputs);
   }
 
   /** Returns set of environment variable keys encountered so far. */
@@ -1131,17 +1144,14 @@ public StarlarkPath path(Object path) throws EvalException, InterruptedException
   protected StarlarkPath getPath(String method, Object path)
       throws EvalException, InterruptedException {
     if (path instanceof String) {
-      PathFragment pathFragment = PathFragment.create(path.toString());
-      return new StarlarkPath(
-          pathFragment.isAbsolute()
-              ? workingDirectory.getFileSystem().getPath(pathFragment)
-              : workingDirectory.getRelative(pathFragment));
+      return new StarlarkPath(workingDirectory.getRelative(path.toString()));
     } else if (path instanceof Label) {
       return getPathFromLabel((Label) path);
     } else if (path instanceof StarlarkPath) {
       return (StarlarkPath) path;
     } else {
-      throw Starlark.errorf("%s can only take a string or a label.", method);
+      // This can never happen because we check it in the Starlark interpreter.
+      throw new IllegalArgumentException("expected string or label for path");
     }
   }
 
@@ -1150,22 +1160,35 @@ protected StarlarkPath getPath(String method, Object path)
       doc = "Reads the content of a file on the filesystem.",
       useStarlarkThread = true,
       parameters = {
-          @Param(
-              name = "path",
-              allowedTypes = {
-                  @ParamType(type = String.class),
-                  @ParamType(type = Label.class),
-                  @ParamType(type = StarlarkPath.class)
-              },
-              doc = "path of the file to read from."),
+        @Param(
+            name = "path",
+            allowedTypes = {
+              @ParamType(type = String.class),
+              @ParamType(type = Label.class),
+              @ParamType(type = StarlarkPath.class)
+            },
+            doc = "path of the file to read from."),
+        @Param(
+            name = "watch",
+            defaultValue = "'auto'",
+            positional = false,
+            named = true,
+            doc =
+                "whether to <a href=\"#watch\">watch</a> the file. Can be the string 'yes', 'no', "
+                    + "or 'auto'. Passing 'yes' is equivalent to immediately invoking the "
+                    + "<a href=\"#watch\"><code>watch()</code></a> method; passing 'no' does not "
+                    + "attempt to watch the file; passing 'auto' will only attempt to watch the "
+                    + "file when it is legal to do so (see <code>watch()</code> docs for more "
+                    + "information.")
       })
-  public String readFile(Object path, StarlarkThread thread)
+  public String readFile(Object path, String watch, StarlarkThread thread)
       throws RepositoryFunctionException, EvalException, InterruptedException {
     StarlarkPath p = getPath("read()", path);
     WorkspaceRuleEvent w =
         WorkspaceRuleEvent.newReadEvent(
             p.toString(), getIdentifyingStringForLogging(), thread.getCallerLocation());
     env.getListener().post(w);
+    maybeWatch(p, ShouldWatch.fromString(watch));
     try {
       return FileSystemUtils.readContent(p.getPath(), ISO_8859_1);
     } catch (IOException e) {
@@ -1173,6 +1196,116 @@ public String readFile(Object path, StarlarkThread thread)
     }
   }
 
+  protected Pair<RepoRecordedInput.File, RootedPath> toRootedPath(Path path) {
+    if (path.startsWith(directories.getWorkspace())) {
+      // The file is under the workspace root.
+      PathFragment relPath = path.relativeTo(directories.getWorkspace());
+      return Pair.of(
+          new FileInsideWorkspace(RepositoryName.MAIN, relPath),
+          RootedPath.toRootedPath(Root.fromPath(directories.getWorkspace()), relPath));
+    }
+    Path outputBaseExternal =
+        directories.getOutputBase().getRelative(LabelConstants.EXTERNAL_REPOSITORY_LOCATION);
+    if (path.startsWith(outputBaseExternal)) {
+      PathFragment relPath = path.relativeTo(outputBaseExternal);
+      if (!relPath.isEmpty()) {
+        // The file is under a repo root.
+        String repoName = relPath.getSegment(0);
+        PathFragment repoRelPath =
+            relPath.relativeTo(PathFragment.createAlreadyNormalized(repoName));
+        return Pair.of(
+            new FileInsideWorkspace(RepositoryName.createUnvalidated(repoName), repoRelPath),
+            RootedPath.toRootedPath(
+                Root.fromPath(outputBaseExternal.getChild(repoName)), repoRelPath));
+      }
+    }
+    // The file is just under a random absolute path.
+    return Pair.of(
+        new FileOutsideWorkspace(path.asFragment()),
+        RootedPath.toRootedPath(Root.absoluteRoot(path.getFileSystem()), path));
+  }
+
+  protected enum ShouldWatch {
+    YES,
+    NO,
+    AUTO;
+
+    static ShouldWatch fromString(String s) throws EvalException {
+      switch (s) {
+        case "yes":
+          return YES;
+        case "no":
+          return NO;
+        case "auto":
+          return AUTO;
+      }
+      throw Starlark.errorf(
+          "bad value for 'watch' parameter; want 'yes', 'no', or 'auto', got %s", s);
+    }
+  }
+
+  protected void maybeWatch(StarlarkPath starlarkPath, ShouldWatch shouldWatch)
+      throws EvalException, RepositoryFunctionException, InterruptedException {
+    if (shouldWatch == ShouldWatch.NO) {
+      return;
+    }
+    Path path = starlarkPath.getPath();
+    Pair<RepoRecordedInput.File, RootedPath> pair = toRootedPath(path);
+    if (path.startsWith(workingDirectory)) {
+      // The file is under the working directory. Don't watch it, as it would cause a dependency
+      // cycle.
+      if (shouldWatch == ShouldWatch.AUTO) {
+        return;
+      }
+      throw Starlark.errorf("attempted to watch file under working directory");
+    }
+    if (!allowWatchingFilesOutsideWorkspace && pair.first instanceof FileOutsideWorkspace) {
+      if (shouldWatch == ShouldWatch.AUTO) {
+        return;
+      }
+      throw Starlark.errorf(
+          "attempted to watch file outside workspace, but it's prohibited in the current context");
+    }
+    try {
+      FileValue fileValue =
+          (FileValue) env.getValueOrThrow(FileValue.key(pair.second), IOException.class);
+      if (fileValue == null) {
+        throw new NeedsSkyframeRestartException();
+      }
+      if (!fileValue.isFile() || fileValue.isSpecialFile()) {
+        throw Starlark.errorf("Not a regular file: %s", pair.second.asPath().getPathString());
+      }
+
+      recordedFileInputs.put(pair.first, RepoRecordedInput.File.fileValueToMarkerValue(fileValue));
+    } catch (IOException e) {
+      throw new RepositoryFunctionException(e, Transience.TRANSIENT);
+    }
+  }
+
+  @StarlarkMethod(
+      name = "watch",
+      doc =
+          "Tells Bazel to watch for changes to the given file. Any changes to the file will "
+              + "invalidate this repository or module extension, and cause it to be refetched or "
+              + "re-evaluated next time.<p>Note that attempting to watch files inside the repo "
+              + "currently being fetched, or inside the working directory of the current module "
+              + "extension, will result in an error. A module extension attempting to watch a file "
+              + "outside the current Bazel workspace will also result in an error.",
+      parameters = {
+        @Param(
+            name = "path",
+            allowedTypes = {
+              @ParamType(type = String.class),
+              @ParamType(type = Label.class),
+              @ParamType(type = StarlarkPath.class)
+            },
+            doc = "path of the file to watch."),
+      })
+  public void watchForStarlark(Object path)
+      throws RepositoryFunctionException, EvalException, InterruptedException {
+    maybeWatch(getPath("watch()", path), ShouldWatch.YES);
+  }
+
   // Create parent directories for the given path
   protected static void makeDirectories(Path path) throws IOException {
     Path parent = path.getParentDirectory();
@@ -1530,26 +1663,12 @@ private StarlarkPath findCommandOnPath(String program) throws IOException {
   // Resolve the label given by value into a file path.
   protected StarlarkPath getPathFromLabel(Label label) throws EvalException, InterruptedException {
     RootedPath rootedPath = RepositoryFunction.getRootedPathFromLabel(label, env);
-    SkyKey fileSkyKey = FileValue.key(rootedPath);
-    FileValue fileValue;
+    StarlarkPath starlarkPath = new StarlarkPath(rootedPath.asPath());
     try {
-      fileValue = (FileValue) env.getValueOrThrow(fileSkyKey, IOException.class);
-    } catch (IOException e) {
-      throw Starlark.errorf("%s", e.getMessage());
-    }
-
-    if (fileValue == null) {
-      throw new NeedsSkyframeRestartException();
-    }
-    if (!fileValue.isFile() || fileValue.isSpecialFile()) {
-      throw Starlark.errorf("Not a regular file: %s", rootedPath.asPath().getPathString());
-    }
-
-    try {
-      accumulatedFileDigests.put(label, RepositoryFunction.fileValueToMarkerValue(fileValue));
-    } catch (IOException e) {
-      throw Starlark.errorf("%s", e.getMessage());
+      maybeWatch(starlarkPath, ShouldWatch.AUTO);
+    } catch (RepositoryFunctionException e) {
+      throw Starlark.errorf("%s", e.getCause().getMessage());
     }
-    return new StarlarkPath(rootedPath.asPath());
+    return starlarkPath;
   }
 }
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkPath.java b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkPath.java
index dc70f674cd0a27..8f0193410bbb4d 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkPath.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkPath.java
@@ -41,7 +41,7 @@
     name = "path",
     category = DocCategory.BUILTIN,
     doc = "A structure representing a file to be used inside a repository.")
-final class StarlarkPath implements StarlarkValue {
+public final class StarlarkPath implements StarlarkValue {
   private final Path path;
 
   StarlarkPath(Path path) {
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContext.java b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContext.java
index 246228875f8788..8e051c7981f0dd 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContext.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContext.java
@@ -18,6 +18,7 @@
 import com.google.common.collect.ImmutableMap;
 import com.google.common.collect.ImmutableSet;
 import com.google.devtools.build.docgen.annot.DocCategory;
+import com.google.devtools.build.lib.analysis.BlazeDirectories;
 import com.google.devtools.build.lib.bazel.debug.WorkspaceRuleEvent;
 import com.google.devtools.build.lib.bazel.repository.DecompressorDescriptor;
 import com.google.devtools.build.lib.bazel.repository.DecompressorValue;
@@ -74,7 +75,6 @@ public class StarlarkRepositoryContext extends StarlarkBaseExternalContext {
   private final Rule rule;
   private final RepositoryName repoName;
   private final PathPackageLocator packageLocator;
-  private final Path workspaceRoot;
   private final StructImpl attrObject;
   private final ImmutableSet<PathFragment> ignoredPatterns;
   private final SyscallCache syscallCache;
@@ -96,23 +96,24 @@ public class StarlarkRepositoryContext extends StarlarkBaseExternalContext {
       StarlarkSemantics starlarkSemantics,
       @Nullable RepositoryRemoteExecutor remoteExecutor,
       SyscallCache syscallCache,
-      Path workspaceRoot)
+      BlazeDirectories directories)
       throws EvalException {
     super(
         outputDirectory,
+        directories,
         environment,
         env,
         downloadManager,
         timeoutScaling,
         processWrapper,
         starlarkSemantics,
-        remoteExecutor);
+        remoteExecutor,
+        /* allowWatchingFilesOutsideWorkspace= */ true);
     this.rule = rule;
     this.repoName = RepositoryName.createUnvalidated(rule.getName());
     this.packageLocator = packageLocator;
     this.ignoredPatterns = ignoredPatterns;
     this.syscallCache = syscallCache;
-    this.workspaceRoot = workspaceRoot;
     WorkspaceAttributeMapper attrs = WorkspaceAttributeMapper.of(rule);
     ImmutableMap.Builder<String, Object> attrBuilder = new ImmutableMap.Builder<>();
     for (String name : attrs.getAttributeNames()) {
@@ -143,7 +144,7 @@ public String getName() {
       structField = true,
       doc = "The path to the root workspace of the bazel invocation.")
   public StarlarkPath getWorkspaceRoot() {
-    return new StarlarkPath(workspaceRoot);
+    return new StarlarkPath(directories.getWorkspace());
   }
 
   @StarlarkMethod(
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryFunction.java b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryFunction.java
index 70dcb78cfa75b2..1800444e73b385 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryFunction.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryFunction.java
@@ -253,7 +253,7 @@ private RepositoryDirectoryValue.Builder fetchInternal(
               starlarkSemantics,
               repositoryRemoteExecutor,
               syscallCache,
-              directories.getWorkspace());
+              directories);
 
       if (starlarkRepositoryContext.isRemotable()) {
         // If a rule is declared remotable then invalidate it if remote execution gets
@@ -310,10 +310,7 @@ private RepositoryDirectoryValue.Builder fetchInternal(
       }
 
       // Modify marker data to include the files used by the rule's implementation function.
-      for (Map.Entry<Label, String> entry :
-          starlarkRepositoryContext.getAccumulatedFileDigests().entrySet()) {
-        recordedInputValues.put(new RepoRecordedInput.LabelFile(entry.getKey()), entry.getValue());
-      }
+      recordedInputValues.putAll(starlarkRepositoryContext.getRecordedFileInputs());
 
       // Ditto for environment variables accessed via `getenv`.
       for (String envKey : starlarkRepositoryContext.getAccumulatedEnvKeys()) {
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidNdkRepositoryFunction.java b/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidNdkRepositoryFunction.java
index f0d939bee3939f..8526baeb6bbea9 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidNdkRepositoryFunction.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidNdkRepositoryFunction.java
@@ -250,13 +250,16 @@ public boolean isLocal(Rule rule) {
 
   @Override
   public boolean verifyRecordedInputs(
-      Rule rule, Map<RepoRecordedInput, String> recordedInputValues, Environment env)
+      Rule rule,
+      BlazeDirectories directories,
+      Map<RepoRecordedInput, String> recordedInputValues,
+      Environment env)
       throws InterruptedException {
     WorkspaceAttributeMapper attributes = WorkspaceAttributeMapper.of(rule);
     if (attributes.isAttributeValueExplicitlySpecified("path")) {
       return true;
     }
-    return super.verifyRecordedInputs(rule, recordedInputValues, env);
+    return super.verifyRecordedInputs(rule, directories, recordedInputValues, env);
   }
 
   @Override
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidSdkRepositoryFunction.java b/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidSdkRepositoryFunction.java
index 7862cc453c76e5..09d9654b79660e 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidSdkRepositoryFunction.java
+++ b/src/main/java/com/google/devtools/build/lib/bazel/rules/android/AndroidSdkRepositoryFunction.java
@@ -179,13 +179,16 @@ public boolean isLocal(Rule rule) {
 
   @Override
   public boolean verifyRecordedInputs(
-      Rule rule, Map<RepoRecordedInput, String> recordedInputValues, Environment env)
+      Rule rule,
+      BlazeDirectories directories,
+      Map<RepoRecordedInput, String> recordedInputValues,
+      Environment env)
       throws InterruptedException {
     WorkspaceAttributeMapper attributes = WorkspaceAttributeMapper.of(rule);
     if (attributes.isAttributeValueExplicitlySpecified("path")) {
       return true;
     }
-    return super.verifyRecordedInputs(rule, recordedInputValues, env);
+    return super.verifyRecordedInputs(rule, directories, recordedInputValues, env);
   }
 
   @Override
diff --git a/src/main/java/com/google/devtools/build/lib/bazel/rules/android/BUILD b/src/main/java/com/google/devtools/build/lib/bazel/rules/android/BUILD
index cab8c2ca49eb8b..0071154ae013a1 100644
--- a/src/main/java/com/google/devtools/build/lib/bazel/rules/android/BUILD
+++ b/src/main/java/com/google/devtools/build/lib/bazel/rules/android/BUILD
@@ -46,6 +46,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib/io:inconsistent_filesystem_exception",
         "//src/main/java/com/google/devtools/build/lib/packages",
         "//src/main/java/com/google/devtools/build/lib/packages/semantics",
+        "//src/main/java/com/google/devtools/build/lib/rules:repository/repo_recorded_input",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_directory_value",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_function",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/workspace_attribute_mapper",
diff --git a/src/main/java/com/google/devtools/build/lib/rules/BUILD b/src/main/java/com/google/devtools/build/lib/rules/BUILD
index d82dc2c7e4878a..9008af56c56a3e 100644
--- a/src/main/java/com/google/devtools/build/lib/rules/BUILD
+++ b/src/main/java/com/google/devtools/build/lib/rules/BUILD
@@ -307,6 +307,7 @@ java_library(
     deps = [
         ":repository/new_local_repository_rule",
         ":repository/new_repository_file_handler",
+        ":repository/repo_recorded_input",
         ":repository/repository_directory_value",
         ":repository/repository_function",
         ":repository/resolved_file_value",
@@ -345,6 +346,7 @@ java_library(
     name = "repository/new_repository_file_handler",
     srcs = ["repository/NewRepositoryFileHandler.java"],
     deps = [
+        ":repository/repo_recorded_input",
         ":repository/repository_function",
         ":repository/workspace_attribute_mapper",
         "//src/main/java/com/google/devtools/build/lib/actions:file_metadata",
@@ -360,6 +362,28 @@ java_library(
     ],
 )
 
+java_library(
+    name = "repository/repo_recorded_input",
+    srcs = ["repository/RepoRecordedInput.java"],
+    deps = [
+        ":repository/repository_directory_value",
+        "//src/main/java/com/google/devtools/build/lib/actions:file_metadata",
+        "//src/main/java/com/google/devtools/build/lib/analysis:blaze_directories",
+        "//src/main/java/com/google/devtools/build/lib/cmdline",
+        "//src/main/java/com/google/devtools/build/lib/cmdline:LabelValidator",
+        "//src/main/java/com/google/devtools/build/lib/skyframe:action_environment_function",
+        "//src/main/java/com/google/devtools/build/lib/skyframe:client_environment_value",
+        "//src/main/java/com/google/devtools/build/lib/skyframe:precomputed_value",
+        "//src/main/java/com/google/devtools/build/lib/skyframe:repository_mapping_value",
+        "//src/main/java/com/google/devtools/build/lib/vfs",
+        "//src/main/java/com/google/devtools/build/lib/vfs:pathfragment",
+        "//src/main/java/com/google/devtools/build/skyframe",
+        "//src/main/java/com/google/devtools/build/skyframe:skyframe-objects",
+        "//third_party:guava",
+        "//third_party:jsr305",
+    ],
+)
+
 java_library(
     name = "repository/repository_directory_value",
     srcs = ["repository/RepositoryDirectoryValue.java"],
@@ -382,7 +406,6 @@ java_library(
     srcs = [
         "repository/LocalRepositoryFunction.java",
         "repository/NeedsSkyframeRestartException.java",
-        "repository/RepoRecordedInput.java",
         "repository/RepositoryDelegatorFunction.java",
         "repository/RepositoryDirectoryDirtinessChecker.java",
         "repository/RepositoryFunction.java",
@@ -391,6 +414,7 @@ java_library(
     ],
     deps = [
         ":repository/local_repository_rule",
+        ":repository/repo_recorded_input",
         ":repository/repository_directory_value",
         ":repository/resolved_file_value",
         ":repository/workspace_attribute_mapper",
diff --git a/src/main/java/com/google/devtools/build/lib/rules/repository/NewRepositoryFileHandler.java b/src/main/java/com/google/devtools/build/lib/rules/repository/NewRepositoryFileHandler.java
index 8f2100ae4a6a73..4eee9852198cc8 100644
--- a/src/main/java/com/google/devtools/build/lib/rules/repository/NewRepositoryFileHandler.java
+++ b/src/main/java/com/google/devtools/build/lib/rules/repository/NewRepositoryFileHandler.java
@@ -147,9 +147,11 @@ public void finishFile(
         // Link x/FILENAME to <build_root>/x.FILENAME.
         symlinkFile(fileValue, filename, outputDirectory);
         try {
+          Label label = getFileAttributeAsLabel(rule);
           recordedInputValues.put(
-              new RepoRecordedInput.LabelFile(getFileAttributeAsLabel(rule)),
-              RepositoryFunction.fileValueToMarkerValue(fileValue));
+              new RepoRecordedInput.FileInsideWorkspace(
+                  label.getRepository(), label.toPathFragment()),
+              RepoRecordedInput.File.fileValueToMarkerValue(fileValue));
         } catch (IOException e) {
           throw new RepositoryFunctionException(e, Transience.TRANSIENT);
         }
diff --git a/src/main/java/com/google/devtools/build/lib/rules/repository/RepoRecordedInput.java b/src/main/java/com/google/devtools/build/lib/rules/repository/RepoRecordedInput.java
index 512335744419e0..4a404b36e16f01 100644
--- a/src/main/java/com/google/devtools/build/lib/rules/repository/RepoRecordedInput.java
+++ b/src/main/java/com/google/devtools/build/lib/rules/repository/RepoRecordedInput.java
@@ -14,17 +14,19 @@
 
 package com.google.devtools.build.lib.rules.repository;
 
+import static com.google.common.collect.ImmutableSet.toImmutableSet;
+
+import com.google.common.base.Preconditions;
 import com.google.common.base.Splitter;
+import com.google.common.io.BaseEncoding;
 import com.google.devtools.build.lib.actions.FileValue;
-import com.google.devtools.build.lib.cmdline.Label;
+import com.google.devtools.build.lib.analysis.BlazeDirectories;
 import com.google.devtools.build.lib.cmdline.LabelValidator;
 import com.google.devtools.build.lib.cmdline.RepositoryName;
 import com.google.devtools.build.lib.skyframe.ActionEnvironmentFunction;
 import com.google.devtools.build.lib.skyframe.ClientEnvironmentValue;
-import com.google.devtools.build.lib.skyframe.PackageLookupValue;
 import com.google.devtools.build.lib.skyframe.PrecomputedValue;
 import com.google.devtools.build.lib.skyframe.RepositoryMappingValue;
-import com.google.devtools.build.lib.vfs.Path;
 import com.google.devtools.build.lib.vfs.PathFragment;
 import com.google.devtools.build.lib.vfs.Root;
 import com.google.devtools.build.lib.vfs.RootedPath;
@@ -33,6 +35,7 @@
 import java.io.IOException;
 import java.util.Comparator;
 import java.util.List;
+import java.util.Map;
 import java.util.Objects;
 import javax.annotation.Nullable;
 
@@ -65,7 +68,7 @@ public abstract static class Parser {
      * Parses a recorded input from the post-colon substring that identifies the specific input: for
      * example, the {@code MY_ENV_VAR} part of {@code ENV:MY_ENV_VAR}.
      */
-    public abstract RepoRecordedInput parse(String s, Path baseDirectory);
+    public abstract RepoRecordedInput parse(String s);
   }
 
   private static final Comparator<RepoRecordedInput> COMPARATOR =
@@ -76,22 +79,55 @@ public abstract static class Parser {
    * Parses a recorded input from its string representation.
    *
    * @param s the string representation
-   * @param baseDirectory the path to a base directory that any filesystem paths should be resolved
-   *     relative to
    * @return The parsed recorded input object, or {@code null} if the string representation is
    *     invalid
    */
   @Nullable
-  public static RepoRecordedInput parse(String s, Path baseDirectory) {
+  public static RepoRecordedInput parse(String s) {
     List<String> parts = Splitter.on(':').limit(2).splitToList(s);
     for (Parser parser : new Parser[] {File.PARSER, EnvVar.PARSER, RecordedRepoMapping.PARSER}) {
       if (parts.get(0).equals(parser.getPrefix())) {
-        return parser.parse(parts.get(1), baseDirectory);
+        return parser.parse(parts.get(1));
       }
     }
     return null;
   }
 
+  /**
+   * Returns whether all values are still up-to-date for each recorded input. If Skyframe values are
+   * missing, the return value should be ignored; callers are responsible for checking {@code
+   * env.valuesMissing()} and triggering a Skyframe restart if needed.
+   */
+  public static boolean areAllValuesUpToDate(
+      Environment env,
+      BlazeDirectories directories,
+      Map<? extends RepoRecordedInput, String> recordedInputValues)
+      throws InterruptedException {
+    env.getValuesAndExceptions(
+        recordedInputValues.keySet().stream()
+            .map(rri -> rri.getSkyKey(directories))
+            .filter(Objects::nonNull)
+            .collect(toImmutableSet()));
+    if (env.valuesMissing()) {
+      return false;
+    }
+    for (Map.Entry<? extends RepoRecordedInput, String> recordedInputValue :
+        recordedInputValues.entrySet()) {
+      if (!recordedInputValue
+          .getKey()
+          .isUpToDate(env, directories, recordedInputValue.getValue())) {
+        return false;
+      }
+    }
+    return true;
+  }
+
+  @Override
+  public abstract boolean equals(Object obj);
+
+  @Override
+  public abstract int hashCode();
+
   @Override
   public final String toString() {
     return getParser().getPrefix() + ":" + toStringInternal();
@@ -106,26 +142,31 @@ public int compareTo(RepoRecordedInput o) {
    * Returns the post-colon substring that identifies the specific input: for example, the {@code
    * MY_ENV_VAR} part of {@code ENV:MY_ENV_VAR}.
    */
-  abstract String toStringInternal();
+  public abstract String toStringInternal();
 
   /** Returns the parser object for this type of recorded inputs. */
   public abstract Parser getParser();
 
-  /** Returns the {@link SkyKey} that is necessary to determine {@link #isUpToDate}. */
-  public abstract SkyKey getSkyKey();
+  /**
+   * Returns the {@link SkyKey} that is necessary to determine {@link #isUpToDate}. Can be null if
+   * no SkyKey is needed.
+   */
+  @Nullable
+  public abstract SkyKey getSkyKey(BlazeDirectories directories);
 
   /**
    * Returns whether the given {@code oldValue} is still up-to-date for this recorded input. This
-   * method can assume that {@link #getSkyKey()} is already evaluated; it can request further
-   * Skyframe evaluations, and if any values are missing, this method can return any value (doesn't
-   * matter what) and will be reinvoked after a Skyframe restart.
+   * method can assume that {@link #getSkyKey(BlazeDirectories)} is already evaluated; it can
+   * request further Skyframe evaluations, and if any values are missing, this method can return any
+   * value (doesn't matter what) and will be reinvoked after a Skyframe restart.
    */
-  public abstract boolean isUpToDate(Environment env, @Nullable String oldValue)
+  public abstract boolean isUpToDate(
+      Environment env, BlazeDirectories directories, @Nullable String oldValue)
       throws InterruptedException;
 
   /** Represents a file input accessed during the repo fetch. */
   public abstract static class File extends RepoRecordedInput {
-    static final Parser PARSER =
+    public static final Parser PARSER =
         new Parser() {
           @Override
           public String getPrefix() {
@@ -133,15 +174,16 @@ public String getPrefix() {
           }
 
           @Override
-          public RepoRecordedInput parse(String s, Path baseDirectory) {
+          public RepoRecordedInput parse(String s) {
             if (LabelValidator.isAbsolute(s)) {
-              return new LabelFile(Label.parseCanonicalUnchecked(s));
+              int doubleSlash = s.indexOf("//");
+              int skipAts = s.startsWith("@@") ? 2 : s.startsWith("@") ? 1 : 0;
+              return new FileInsideWorkspace(
+                  RepositoryName.createUnvalidated(s.substring(skipAts, doubleSlash)),
+                  // For backwards compatibility, treat colons as slashes.
+                  PathFragment.create(s.substring(doubleSlash + 2).replace(':', '/')));
             }
-            Path path = baseDirectory.getRelative(s);
-            return new AbsolutePathFile(
-                RootedPath.toRootedPath(
-                    Root.fromPath(path.getParentDirectory()),
-                    PathFragment.create(path.getBaseName())));
+            return new FileOutsideWorkspace(PathFragment.create(s));
           }
         };
 
@@ -149,42 +191,94 @@ public RepoRecordedInput parse(String s, Path baseDirectory) {
     public Parser getParser() {
       return PARSER;
     }
+
+    /**
+     * Convert to a {@link com.google.devtools.build.lib.actions.FileValue} to a String appropriate
+     * for placing in a repository marker file.
+     *
+     * @param fileValue The value to convert. It must correspond to a regular file.
+     */
+    public static String fileValueToMarkerValue(FileValue fileValue) throws IOException {
+      Preconditions.checkArgument(fileValue.isFile() && !fileValue.isSpecialFile());
+      // Return the file content digest in hex. fileValue may or may not have the digest available.
+      byte[] digest = fileValue.realFileStateValue().getDigest();
+      if (digest == null) {
+        // Fast digest not available, or it would have been in the FileValue.
+        digest = fileValue.realRootedPath().asPath().getDigest();
+      }
+      return BaseEncoding.base16().lowerCase().encode(digest);
+    }
   }
 
-  /** Represents a file input accessed during the repo fetch that is addressable by a label. */
-  public static final class LabelFile extends File {
-    final Label label;
+  /**
+   * Represents a file input accessed during the repo fetch that is within the current Bazel
+   * workspace.
+   *
+   * <p>This is <em>almost</em> like being addressable by a label, but includes the extra corner
+   * case of files inside a repo but not within any package due to missing BUILD files. For example,
+   * the file {@code @@foo//:abc.bzl} is addressable by a label if the file {@code @@foo//:BUILD}
+   * exists. But if the BUILD file doesn't exist, the {@code abc.bzl} file should still be
+   * "watchable"; it's just that {@code @@foo//:abc.bzl} is technically not a valid label.
+   */
+  public static final class FileInsideWorkspace extends File {
+    private final RepositoryName repoName;
+    private final PathFragment pathFragment;
+
+    public FileInsideWorkspace(RepositoryName repoName, PathFragment pathFragment) {
+      this.repoName = repoName;
+      this.pathFragment = pathFragment;
+    }
 
-    public LabelFile(Label label) {
-      this.label = label;
+    @Override
+    public boolean equals(Object o) {
+      if (this == o) return true;
+      if (!(o instanceof FileInsideWorkspace)) return false;
+      FileInsideWorkspace that = (FileInsideWorkspace) o;
+      return Objects.equals(repoName, that.repoName)
+          && Objects.equals(pathFragment, that.pathFragment);
     }
 
     @Override
-    String toStringInternal() {
-      return label.toString();
+    public int hashCode() {
+      return Objects.hash(repoName, pathFragment);
     }
 
     @Override
-    public SkyKey getSkyKey() {
-      return PackageLookupValue.key(label.getPackageIdentifier());
+    public String toStringInternal() {
+      // We store `@@foo//abc/def:ghi.bzl` as just `@@foo//abc/def/ghi.bzl`. See class javadoc for
+      // more context.
+      return repoName + "//" + pathFragment;
     }
 
     @Override
-    public boolean isUpToDate(Environment env, @Nullable String oldValue)
+    @Nullable
+    public SkyKey getSkyKey(BlazeDirectories directories) {
+      return repoName.isMain() ? null : RepositoryDirectoryValue.key(repoName);
+    }
+
+    @Override
+    public boolean isUpToDate(
+        Environment env, BlazeDirectories directories, @Nullable String oldValue)
         throws InterruptedException {
-      PackageLookupValue pkgLookupValue = (PackageLookupValue) env.getValue(getSkyKey());
-      if (pkgLookupValue == null || !pkgLookupValue.packageExists()) {
-        return false;
+      Root root;
+      if (repoName.isMain()) {
+        root = Root.fromPath(directories.getWorkspace());
+      } else {
+        RepositoryDirectoryValue repoDirValue =
+            (RepositoryDirectoryValue) env.getValue(getSkyKey(directories));
+        if (repoDirValue == null || !repoDirValue.repositoryExists()) {
+          return false;
+        }
+        root = Root.fromPath(repoDirValue.getPath());
       }
-      RootedPath rootedPath =
-          RootedPath.toRootedPath(pkgLookupValue.getRoot(), label.toPathFragment());
+      RootedPath rootedPath = RootedPath.toRootedPath(root, pathFragment);
       SkyKey fileKey = FileValue.key(rootedPath);
       try {
         FileValue fileValue = (FileValue) env.getValueOrThrow(fileKey, IOException.class);
         if (fileValue == null || !fileValue.isFile() || fileValue.isSpecialFile()) {
           return false;
         }
-        return oldValue.equals(RepositoryFunction.fileValueToMarkerValue(fileValue));
+        return oldValue.equals(fileValueToMarkerValue(fileValue));
       } catch (IOException e) {
         return false;
       }
@@ -192,35 +286,53 @@ public boolean isUpToDate(Environment env, @Nullable String oldValue)
   }
 
   /**
-   * Represents a file input accessed during the repo fetch that is <i>not</i> addressable by a
-   * label. This most likely means that it's outside any known Bazel workspace.
+   * Represents a file input accessed during the repo fetch that is outside the current Bazel
+   * workspace. This file is addressed by its absolute path.
    */
-  public static final class AbsolutePathFile extends File {
-    final RootedPath path;
+  public static final class FileOutsideWorkspace extends File {
+    private final PathFragment path;
 
-    public AbsolutePathFile(RootedPath path) {
+    public FileOutsideWorkspace(PathFragment path) {
+      Preconditions.checkArgument(path.isAbsolute());
       this.path = path;
     }
 
     @Override
-    String toStringInternal() {
-      return path.asPath().getPathString();
+    public boolean equals(Object o) {
+      if (this == o) return true;
+      if (!(o instanceof FileOutsideWorkspace)) return false;
+      FileOutsideWorkspace that = (FileOutsideWorkspace) o;
+      return Objects.equals(path, that.path);
+    }
+
+    @Override
+    public int hashCode() {
+      return Objects.hash(path);
+    }
+
+    @Override
+    public String toStringInternal() {
+      return path.getPathString();
     }
 
     @Override
-    public SkyKey getSkyKey() {
-      return FileValue.key(path);
+    public SkyKey getSkyKey(BlazeDirectories directories) {
+      return FileValue.key(
+          RootedPath.toRootedPath(
+              Root.absoluteRoot(directories.getOutputBase().getFileSystem()), path));
     }
 
     @Override
-    public boolean isUpToDate(Environment env, @Nullable String oldValue)
+    public boolean isUpToDate(
+        Environment env, BlazeDirectories directories, @Nullable String oldValue)
         throws InterruptedException {
       try {
-        FileValue fileValue = (FileValue) env.getValueOrThrow(getSkyKey(), IOException.class);
+        FileValue fileValue =
+            (FileValue) env.getValueOrThrow(getSkyKey(directories), IOException.class);
         if (fileValue == null || !fileValue.isFile() || fileValue.isSpecialFile()) {
           return false;
         }
-        return oldValue.equals(RepositoryFunction.fileValueToMarkerValue(fileValue));
+        return oldValue.equals(fileValueToMarkerValue(fileValue));
       } catch (IOException e) {
         return false;
       }
@@ -237,7 +349,7 @@ public String getPrefix() {
           }
 
           @Override
-          public RepoRecordedInput parse(String s, Path baseDirectory) {
+          public RepoRecordedInput parse(String s) {
             return new EnvVar(s);
           }
         };
@@ -248,27 +360,41 @@ public EnvVar(String name) {
       this.name = name;
     }
 
+    @Override
+    public boolean equals(Object o) {
+      if (this == o) return true;
+      if (!(o instanceof EnvVar)) return false;
+      EnvVar envVar = (EnvVar) o;
+      return Objects.equals(name, envVar.name);
+    }
+
+    @Override
+    public int hashCode() {
+      return Objects.hash(name);
+    }
+
     @Override
     public Parser getParser() {
       return PARSER;
     }
 
     @Override
-    String toStringInternal() {
+    public String toStringInternal() {
       return name;
     }
 
     @Override
-    public SkyKey getSkyKey() {
+    public SkyKey getSkyKey(BlazeDirectories directories) {
       return ActionEnvironmentFunction.key(name);
     }
 
     @Override
-    public boolean isUpToDate(Environment env, @Nullable String oldValue)
+    public boolean isUpToDate(
+        Environment env, BlazeDirectories directories, @Nullable String oldValue)
         throws InterruptedException {
       String v = PrecomputedValue.REPO_ENV.get(env).get(name);
       if (v == null) {
-        v = ((ClientEnvironmentValue) env.getValue(getSkyKey())).getValue();
+        v = ((ClientEnvironmentValue) env.getValue(getSkyKey(directories))).getValue();
       }
       // Note that `oldValue` can be null if the env var was not set.
       return Objects.equals(oldValue, v);
@@ -285,7 +411,7 @@ public String getPrefix() {
           }
 
           @Override
-          public RepoRecordedInput parse(String s, Path baseDirectory) {
+          public RepoRecordedInput parse(String s) {
             List<String> parts = Splitter.on(',').limit(2).splitToList(s);
             return new RecordedRepoMapping(
                 RepositoryName.createUnvalidated(parts.get(0)), parts.get(1));
@@ -300,25 +426,41 @@ public RecordedRepoMapping(RepositoryName sourceRepo, String apparentName) {
       this.apparentName = apparentName;
     }
 
+    @Override
+    public boolean equals(Object o) {
+      if (this == o) return true;
+      if (!(o instanceof RecordedRepoMapping)) return false;
+      RecordedRepoMapping that = (RecordedRepoMapping) o;
+      return Objects.equals(sourceRepo, that.sourceRepo)
+          && Objects.equals(apparentName, that.apparentName);
+    }
+
+    @Override
+    public int hashCode() {
+      return Objects.hash(sourceRepo, apparentName);
+    }
+
     @Override
     public Parser getParser() {
       return PARSER;
     }
 
     @Override
-    String toStringInternal() {
+    public String toStringInternal() {
       return sourceRepo.getName() + ',' + apparentName;
     }
 
     @Override
-    public SkyKey getSkyKey() {
+    public SkyKey getSkyKey(BlazeDirectories directories) {
       return RepositoryMappingValue.key(sourceRepo);
     }
 
     @Override
-    public boolean isUpToDate(Environment env, @Nullable String oldValue)
+    public boolean isUpToDate(
+        Environment env, BlazeDirectories directories, @Nullable String oldValue)
         throws InterruptedException {
-      RepositoryMappingValue repoMappingValue = (RepositoryMappingValue) env.getValue(getSkyKey());
+      RepositoryMappingValue repoMappingValue =
+          (RepositoryMappingValue) env.getValue(getSkyKey(directories));
       return repoMappingValue != RepositoryMappingValue.NOT_FOUND_VALUE
           && RepositoryName.createUnvalidated(oldValue)
               .equals(repoMappingValue.getRepositoryMapping().get(apparentName));
diff --git a/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryDelegatorFunction.java b/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryDelegatorFunction.java
index 3839956b709e64..979cbd9df3b7e6 100644
--- a/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryDelegatorFunction.java
+++ b/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryDelegatorFunction.java
@@ -93,7 +93,7 @@ public final class RepositoryDelegatorFunction implements SkyFunction {
 
   // The marker file version is inject in the rule key digest so the rule key is always different
   // when we decide to update the format.
-  private static final int MARKER_FILE_VERSION = 4;
+  private static final int MARKER_FILE_VERSION = 5;
 
   // Mapping of rule class name to RepositoryFunction.
   private final ImmutableMap<String, RepositoryFunction> handlers;
@@ -589,6 +589,7 @@ static String unescape(String str) {
   }
 
   private static class DigestWriter {
+    private final BlazeDirectories directories;
     private final Path markerPath;
     private final Rule rule;
     // not just Map<> to signal that iteration order must be deterministic
@@ -600,6 +601,7 @@ private static class DigestWriter {
         RepositoryName repositoryName,
         Rule rule,
         StarlarkSemantics starlarkSemantics) {
+      this.directories = directories;
       ruleKey = computeRuleKey(rule, starlarkSemantics);
       markerPath = getMarkerPath(directories, repositoryName.getName());
       this.rule = rule;
@@ -648,15 +650,14 @@ byte[] areRepositoryAndMarkerFileConsistent(
         return null;
       }
 
-      Path baseDirectory = rule.getPackage().getPackageDirectory();
       Map<RepoRecordedInput, String> recordedInputValues = new TreeMap<>();
       String content;
       try {
         content = FileSystemUtils.readContent(markerPath, UTF_8);
-        String markerRuleKey = readMarkerFile(content, baseDirectory, recordedInputValues);
+        String markerRuleKey = readMarkerFile(content, recordedInputValues);
         boolean verified = false;
         if (Preconditions.checkNotNull(ruleKey).equals(markerRuleKey)) {
-          verified = handler.verifyRecordedInputs(rule, recordedInputValues, env);
+          verified = handler.verifyRecordedInputs(rule, directories, recordedInputValues, env);
           if (env.valuesMissing()) {
             return null;
           }
@@ -678,7 +679,7 @@ Map<RepoRecordedInput, String> getRecordedInputValues() {
 
     @Nullable
     private static String readMarkerFile(
-        String content, Path baseDirectory, Map<RepoRecordedInput, String> recordedInputValues) {
+        String content, Map<RepoRecordedInput, String> recordedInputValues) {
       String markerRuleKey = null;
       Iterable<String> lines = Splitter.on('\n').split(content);
 
@@ -690,8 +691,7 @@ private static String readMarkerFile(
         } else {
           int sChar = line.indexOf(' ');
           if (sChar > 0) {
-            RepoRecordedInput input =
-                RepoRecordedInput.parse(unescape(line.substring(0, sChar)), baseDirectory);
+            RepoRecordedInput input = RepoRecordedInput.parse(unescape(line.substring(0, sChar)));
             if (input == null) {
               // ignore invalid entries.
               continue;
diff --git a/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryFunction.java b/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryFunction.java
index 9aa7f860412b9e..1533eaca58c46e 100644
--- a/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryFunction.java
+++ b/src/main/java/com/google/devtools/build/lib/rules/repository/RepositoryFunction.java
@@ -15,14 +15,10 @@
 package com.google.devtools.build.lib.rules.repository;
 
 import static com.google.common.base.Preconditions.checkState;
-import static com.google.common.collect.ImmutableSet.toImmutableSet;
 
 import com.google.common.annotations.VisibleForTesting;
 import com.google.common.base.Preconditions;
 import com.google.common.collect.ImmutableMap;
-import com.google.common.collect.ImmutableSet;
-import com.google.common.io.BaseEncoding;
-import com.google.devtools.build.lib.actions.FileValue;
 import com.google.devtools.build.lib.analysis.BlazeDirectories;
 import com.google.devtools.build.lib.analysis.RuleDefinition;
 import com.google.devtools.build.lib.cmdline.Label;
@@ -191,38 +187,12 @@ public abstract RepositoryDirectoryValue.Builder fetch(
    * is needed.
    */
   public boolean verifyRecordedInputs(
-      Rule rule, Map<RepoRecordedInput, String> recordedInputValues, Environment env)
+      Rule rule,
+      BlazeDirectories directories,
+      Map<RepoRecordedInput, String> recordedInputValues,
+      Environment env)
       throws InterruptedException {
-    ImmutableSet<SkyKey> skyKeys =
-        recordedInputValues.keySet().stream()
-            .map(RepoRecordedInput::getSkyKey)
-            .collect(toImmutableSet());
-    env.getValuesAndExceptions(skyKeys);
-    if (env.valuesMissing()) {
-      return false;
-    }
-    for (Map.Entry<RepoRecordedInput, String> recordedInputValue : recordedInputValues.entrySet()) {
-      if (!recordedInputValue.getKey().isUpToDate(env, recordedInputValue.getValue())) {
-        return false;
-      }
-    }
-    return true;
-  }
-  /**
-   * Convert to a {@link com.google.devtools.build.lib.actions.FileValue} to a String appropriate
-   * for placing in a repository marker file.
-   *
-   * @param fileValue The value to convert. It must correspond to a regular file.
-   */
-  public static String fileValueToMarkerValue(FileValue fileValue) throws IOException {
-    Preconditions.checkArgument(fileValue.isFile() && !fileValue.isSpecialFile());
-    // Return the file content digest in hex. fileValue may or may not have the digest available.
-    byte[] digest = fileValue.realFileStateValue().getDigest();
-    if (digest == null) {
-      // Fast digest not available, or it would have been in the FileValue.
-      digest = fileValue.realRootedPath().asPath().getDigest();
-    }
-    return BaseEncoding.base16().lowerCase().encode(digest);
+    return RepoRecordedInput.areAllValuesUpToDate(env, directories, recordedInputValues);
   }
 
   public static RootedPath getRootedPathFromLabel(Label label, Environment env)
diff --git a/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD b/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD
index ab616727be0ce1..5a4dae694ace81 100644
--- a/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD
+++ b/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/BUILD
@@ -21,6 +21,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib:runtime",
         "//src/main/java/com/google/devtools/build/lib/analysis:analysis_cluster",
         "//src/main/java/com/google/devtools/build/lib/analysis:blaze_directories",
+        "//src/main/java/com/google/devtools/build/lib/analysis:server_directories",
         "//src/main/java/com/google/devtools/build/lib/bazel/repository/downloader",
         "//src/main/java/com/google/devtools/build/lib/bazel/repository/starlark",
         "//src/main/java/com/google/devtools/build/lib/cmdline",
@@ -69,6 +70,7 @@ java_test(
         "//src/main/java/com/google/devtools/build/lib:runtime",
         "//src/main/java/com/google/devtools/build/lib/analysis:analysis_cluster",
         "//src/main/java/com/google/devtools/build/lib/analysis:blaze_directories",
+        "//src/main/java/com/google/devtools/build/lib/analysis:server_directories",
         "//src/main/java/com/google/devtools/build/lib/bazel/repository/downloader",
         "//src/main/java/com/google/devtools/build/lib/bazel/repository/starlark",
         "//src/main/java/com/google/devtools/build/lib/cmdline",
diff --git a/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContextTest.java b/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContextTest.java
index 655e21734d7c40..dbe3d0987b38f0 100644
--- a/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContextTest.java
+++ b/src/test/java/com/google/devtools/build/lib/bazel/repository/starlark/StarlarkRepositoryContextTest.java
@@ -25,6 +25,9 @@
 import com.google.common.collect.ImmutableSet;
 import com.google.common.collect.ImmutableSortedMap;
 import com.google.common.io.CharStreams;
+import com.google.devtools.build.lib.analysis.BlazeDirectories;
+import com.google.devtools.build.lib.analysis.ServerDirectories;
+import com.google.devtools.build.lib.analysis.util.AnalysisMock;
 import com.google.devtools.build.lib.bazel.repository.downloader.DownloadManager;
 import com.google.devtools.build.lib.cmdline.RepositoryMapping;
 import com.google.devtools.build.lib.events.ExtendedEventHandler;
@@ -82,6 +85,7 @@
 public final class StarlarkRepositoryContextTest {
 
   private Scratch scratch;
+  private Path outputBase;
   private Path outputDirectory;
   private Root root;
   private Path workspaceFile;
@@ -94,6 +98,7 @@ public final class StarlarkRepositoryContextTest {
   @Before
   public void setUp() throws Exception {
     scratch = new Scratch("/");
+    outputBase = scratch.dir("/outputBase");
     outputDirectory = scratch.dir("/outputDir");
     root = Root.fromPath(scratch.dir("/wsRoot"));
     workspaceFile = scratch.file("/wsRoot/WORKSPACE");
@@ -159,6 +164,12 @@ private void setUpContextForRule(
             outputDirectory,
             ImmutableList.of(root),
             BazelSkyframeExecutorConstants.BUILD_FILES_BY_PRIORITY);
+    BlazeDirectories directories =
+        new BlazeDirectories(
+            new ServerDirectories(root.asPath(), outputBase, root.asPath()),
+            root.asPath(),
+            /* defaultSystemJavabase= */ null,
+            AnalysisMock.get().getProductName());
     context =
         new StarlarkRepositoryContext(
             rule,
@@ -169,11 +180,11 @@ private void setUpContextForRule(
             envVariables,
             downloader,
             1.0,
-            /*processWrapper=*/ null,
+            /* processWrapper= */ null,
             starlarkSemantics,
             repoRemoteExecutor,
             SyscallCache.NO_CACHE,
-            root.asPath());
+            directories);
   }
 
   private void setUpContextForRule(String name) throws Exception {
@@ -304,7 +315,7 @@ public void testRead() throws Exception {
     setUpContextForRule("test");
     context.createFile(context.path("foo/bar"), "foobar", true, true, thread);
 
-    String content = context.readFile(context.path("foo/bar"), thread);
+    String content = context.readFile(context.path("foo/bar"), "auto", thread);
     assertThat(content).isEqualTo("foobar");
   }
 
diff --git a/src/test/java/com/google/devtools/build/lib/rules/repository/BUILD b/src/test/java/com/google/devtools/build/lib/rules/repository/BUILD
index bea028bcb01688..ba165c318ed011 100644
--- a/src/test/java/com/google/devtools/build/lib/rules/repository/BUILD
+++ b/src/test/java/com/google/devtools/build/lib/rules/repository/BUILD
@@ -34,6 +34,7 @@ java_library(
         "//src/main/java/com/google/devtools/build/lib/packages/semantics",
         "//src/main/java/com/google/devtools/build/lib/pkgcache",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/local_repository_rule",
+        "//src/main/java/com/google/devtools/build/lib/rules:repository/repo_recorded_input",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_directory_value",
         "//src/main/java/com/google/devtools/build/lib/rules:repository/repository_function",
         "//src/main/java/com/google/devtools/build/lib/skyframe:bzl_compile",
diff --git a/src/test/java/com/google/devtools/build/lib/rules/repository/RepositoryFunctionTest.java b/src/test/java/com/google/devtools/build/lib/rules/repository/RepositoryFunctionTest.java
index 9a7f175d633e10..84bb5478ce15ee 100644
--- a/src/test/java/com/google/devtools/build/lib/rules/repository/RepositoryFunctionTest.java
+++ b/src/test/java/com/google/devtools/build/lib/rules/repository/RepositoryFunctionTest.java
@@ -127,7 +127,7 @@ public void testFileValueToMarkerValue() throws Exception {
     // Digest should be returned if the FileStateValue has it.
     FileStateValue fsv = new RegularFileStateValueWithDigest(3, new byte[] {1, 2, 3, 4});
     FileValue fv = new RegularFileValue(path, fsv);
-    assertThat(RepositoryFunction.fileValueToMarkerValue(fv)).isEqualTo("01020304");
+    assertThat(RepoRecordedInput.File.fileValueToMarkerValue(fv)).isEqualTo("01020304");
 
     // Digest should also be returned if the FileStateValue doesn't have it.
     FileStatus status = Mockito.mock(FileStatus.class);
@@ -136,6 +136,6 @@ public void testFileValueToMarkerValue() throws Exception {
     fsv = new RegularFileStateValueWithContentsProxy(3, FileContentsProxy.create(status));
     fv = new RegularFileValue(path, fsv);
     String expectedDigest = BaseEncoding.base16().lowerCase().encode(path.asPath().getDigest());
-    assertThat(RepositoryFunction.fileValueToMarkerValue(fv)).isEqualTo(expectedDigest);
+    assertThat(RepoRecordedInput.File.fileValueToMarkerValue(fv)).isEqualTo(expectedDigest);
   }
 }
diff --git a/src/test/py/bazel/bzlmod/bazel_fetch_test.py b/src/test/py/bazel/bzlmod/bazel_fetch_test.py
index 2981549af4bdad..5bf97be567499a 100644
--- a/src/test/py/bazel/bzlmod/bazel_fetch_test.py
+++ b/src/test/py/bazel/bzlmod/bazel_fetch_test.py
@@ -17,6 +17,7 @@
 import os
 import tempfile
 from absl.testing import absltest
+
 from src.test.py.bazel import test_base
 from src.test.py.bazel.bzlmod.test_utils import BazelRegistry
 
@@ -234,7 +235,7 @@ def testForceFetch(self):
         'extension.bzl',
         [
             'def _repo_rule_impl(ctx):',
-            '    file_content = ctx.read("' + file_path + '").strip()',
+            '    file_content = ctx.read("' + file_path + '", watch=False)',
             '    print(file_content)',
             '    ctx.file("BUILD")',
             'repo_rule = repository_rule(implementation=_repo_rule_impl)',
diff --git a/src/test/py/bazel/bzlmod/bazel_lockfile_test.py b/src/test/py/bazel/bzlmod/bazel_lockfile_test.py
index d94bd55675a8cc..850c26d75b8516 100644
--- a/src/test/py/bazel/bzlmod/bazel_lockfile_test.py
+++ b/src/test/py/bazel/bzlmod/bazel_lockfile_test.py
@@ -16,8 +16,10 @@
 
 import json
 import os
+import pathlib
 import tempfile
 from absl.testing import absltest
+
 from src.test.py.bazel import test_base
 from src.test.py.bazel.bzlmod.test_utils import BazelRegistry
 from src.test.py.bazel.bzlmod.test_utils import scratchFile
@@ -1934,6 +1936,62 @@ def testReproducibleExtensionInLockfileErrorMode(self):
         stderr,
     )
 
+  def testWatchingFileUnderWorkingDirectoryFails(self):
+    self.ScratchFile(
+        'MODULE.bazel',
+        [
+            'ext = use_extension("extension.bzl", "ext")',
+            'use_repo(ext, "repo")',
+        ],
+    )
+    self.ScratchFile('BUILD.bazel')
+    self.ScratchFile(
+        'extension.bzl',
+        [
+            'def _repo_rule_impl(ctx):',
+            '    ctx.file("BUILD", "filegroup(name=\'lala\')")',
+            'repo_rule = repository_rule(implementation=_repo_rule_impl)',
+            '',
+            'def _ext_impl(ctx):',
+            '    ctx.file("hello", "repo")',
+            '    repo_rule(name=ctx.read("hello", watch="yes"))',
+            'ext = module_extension(implementation=_ext_impl)',
+        ],
+    )
+
+    _, _, stderr = self.RunBazel(['build', '@repo'], allow_failure=True)
+    self.assertIn('attempted to watch file under working directory',
+                  '\n'.join(stderr))
+
+  def testWatchingFileOutsideWorkspaceFails(self):
+    outside_file = pathlib.Path(self._temp).joinpath('bleh')
+    scratchFile(outside_file, ['repo'])
+    self.ScratchFile(
+        'MODULE.bazel',
+        [
+            'ext = use_extension("extension.bzl", "ext")',
+            'use_repo(ext, "repo")',
+        ],
+    )
+    self.ScratchFile('BUILD.bazel')
+    self.ScratchFile(
+        'extension.bzl',
+        [
+            'def _repo_rule_impl(ctx):',
+            '    ctx.file("BUILD", "filegroup(name=\'lala\')")',
+            'repo_rule = repository_rule(implementation=_repo_rule_impl)',
+            '',
+            'def _ext_impl(ctx):',
+            '    repo_rule(name=ctx.read(%s, watch="yes"))' % repr(str(
+                outside_file)),
+            'ext = module_extension(implementation=_ext_impl)',
+        ],
+    )
+
+    _, _, stderr = self.RunBazel(['build', '@repo'], allow_failure=True)
+    self.assertIn('attempted to watch file outside workspace',
+                  '\n'.join(stderr))
+
 
 if __name__ == '__main__':
   absltest.main()
diff --git a/src/test/shell/bazel/starlark_repository_test.sh b/src/test/shell/bazel/starlark_repository_test.sh
index b7df798d38d5d6..f5826d94f75f86 100755
--- a/src/test/shell/bazel/starlark_repository_test.sh
+++ b/src/test/shell/bazel/starlark_repository_test.sh
@@ -2704,4 +2704,154 @@ EOF
   expect_log "I see: @@bar~//:data"
 }
 
+function test_file_watching_inside_working_dir() {
+  # when reading a file inside the working directory (where the repo
+  # is to be fetched), we shouldn't watch it.
+  create_new_workspace
+  cat > MODULE.bazel <<EOF
+r = use_repo_rule("//:r.bzl", "r")
+r(name = "r")
+EOF
+  touch BUILD
+  cat > r.bzl <<EOF
+def _r(rctx):
+  rctx.file("BUILD", "filegroup(name='r')")
+  rctx.file("data.txt", "nothing")
+  print("I see: " + rctx.read("data.txt"))
+  rctx.file("data.txt", "something")
+r=repository_rule(_r)
+EOF
+
+  bazel build @r >& $TEST_log || fail "expected bazel to succeed"
+  expect_log "I see: nothing"
+
+  # Running Bazel again shouldn't cause a refetch, despite "data.txt"
+  # having been written to after the read.
+  bazel build @r >& $TEST_log || fail "expected bazel to succeed"
+  expect_not_log "I see:"
+}
+
+function test_file_watching_inside_working_dir_forcing_error() {
+  # when reading a file inside the working directory (where the repo
+  # is to be fetched), we shouldn't watch it. Forcing the watch should
+  # result in an error.
+  create_new_workspace
+  cat > MODULE.bazel <<EOF
+r = use_repo_rule("//:r.bzl", "r")
+r(name = "r")
+EOF
+  touch BUILD
+  cat > r.bzl <<EOF
+def _r(rctx):
+  rctx.file("BUILD", "filegroup(name='r')")
+  rctx.file("data.txt", "nothing")
+  print("I see: " + rctx.read("data.txt", watch="yes"))
+r=repository_rule(_r)
+EOF
+
+  bazel build @r >& $TEST_log && fail "expected bazel to fail"
+  expect_log "attempted to watch file under working directory"
+}
+
+function test_file_watching_outside_workspace() {
+  # when reading a file outside the Bazel workspace, we should watch it.
+  local outside_dir="${TEST_TMPDIR}/outside_dir"
+  mkdir -p "${outside_dir}"
+  echo nothing > ${outside_dir}/data.txt
+
+  create_new_workspace
+  cat > MODULE.bazel <<EOF
+r = use_repo_rule("//:r.bzl", "r")
+r(name = "r")
+EOF
+  touch BUILD
+  cat > r.bzl <<EOF
+def _r(rctx):
+  rctx.file("BUILD", "filegroup(name='r')")
+  print("I see: " + rctx.read("${outside_dir}/data.txt"))
+r=repository_rule(_r)
+EOF
+
+  bazel build @r >& $TEST_log || fail "expected bazel to succeed"
+  expect_log "I see: nothing"
+
+  # Running Bazel again shouldn't cause a refetch.
+  bazel build @r >& $TEST_log || fail "expected bazel to succeed"
+  expect_not_log "I see:"
+
+  # But changing the outside file should cause a refetch.
+  echo something > ${outside_dir}/data.txt
+  bazel build @r >& $TEST_log || fail "expected bazel to succeed"
+  expect_log "I see: something"
+}
+
+function test_file_watching_in_other_repo() {
+  # when reading a file in another repo, we should watch it.
+  local outside_dir="${TEST_TMPDIR}/outside_dir"
+  mkdir -p "${outside_dir}"
+  echo nothing > ${outside_dir}/data.txt
+
+  create_new_workspace
+  cat > MODULE.bazel <<EOF
+foo = use_repo_rule("//:r.bzl", "foo")
+foo(name = "foo")
+bar = use_repo_rule("//:r.bzl", "bar")
+bar(name = "bar", data = "nothing")
+EOF
+  touch BUILD
+  cat > r.bzl <<EOF
+def _foo(rctx):
+  rctx.file("BUILD", "filegroup(name='foo')")
+  # intentionally grab a file that's not directly addressable by a label
+  otherfile = rctx.path(Label("@bar//subpkg:BUILD")).dirname.dirname.get_child("data.txt")
+  print("I see: " + rctx.read(otherfile))
+foo=repository_rule(_foo)
+def _bar(rctx):
+  rctx.file("subpkg/BUILD")
+  rctx.file("data.txt", rctx.attr.data)
+bar=repository_rule(_bar, attrs={"data":attr.string()})
+EOF
+
+  bazel build @foo >& $TEST_log || fail "expected bazel to succeed"
+  expect_log "I see: nothing"
+
+  # Running Bazel again shouldn't cause a refetch.
+  bazel build @foo >& $TEST_log || fail "expected bazel to succeed"
+  expect_not_log "I see:"
+
+  # But changing the file inside @bar should cause @foo to refetch.
+  cat > MODULE.bazel <<EOF
+foo = use_repo_rule("//:r.bzl", "foo")
+foo(name = "foo")
+bar = use_repo_rule("//:r.bzl", "bar")
+bar(name = "bar", data = "something")
+EOF
+  bazel build @foo >& $TEST_log || fail "expected bazel to succeed"
+  expect_log "I see: something"
+}
+
+function test_file_watching_in_other_repo_cycle() {
+  create_new_workspace
+  cat > MODULE.bazel <<EOF
+foo = use_repo_rule("//:r.bzl", "foo")
+foo(name = "foo")
+bar = use_repo_rule("//:r.bzl", "bar")
+bar(name = "bar")
+EOF
+  touch BUILD
+  cat > r.bzl <<EOF
+def _foo(rctx):
+  rctx.file("BUILD", "filegroup(name='foo')")
+  print("I see: " + rctx.read(Label("@bar//:BUILD")))
+foo=repository_rule(_foo)
+def _bar(rctx):
+  rctx.file("BUILD", "filegroup(name='bar')")
+  print("I see: " + rctx.read(Label("@foo//:BUILD")))
+bar=repository_rule(_bar)
+EOF
+
+  bazel build @foo >& $TEST_log && fail "expected bazel to fail!"
+  expect_log "Circular definition of repositories"
+}
+
 run_suite "local repository tests"
diff --git a/src/test/tools/bzlmod/MODULE.bazel.lock b/src/test/tools/bzlmod/MODULE.bazel.lock
index b8c8061982c520..25946507c9318e 100644
--- a/src/test/tools/bzlmod/MODULE.bazel.lock
+++ b/src/test/tools/bzlmod/MODULE.bazel.lock
@@ -1,5 +1,5 @@
 {
-  "lockFileVersion": 4,
+  "lockFileVersion": 5,
   "moduleFileHash": "e3b0c44298fc1c149afbf4c8996fb92427ae41e4649b934ca495991b7852b855",
   "flags": {
     "cmdRegistries": [
@@ -1037,7 +1037,7 @@
     "@@apple_support~//crosstool:setup.bzl%apple_cc_configure_extension": {
       "general": {
         "bzlTransitiveDigest": "pMLFCYaRPkgXPQ8vtuNkMfiHfPmRBy6QJfnid4sWfv0=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "local_config_apple_cc": {
@@ -1063,7 +1063,7 @@
     "@@bazel_tools//tools/android:android_extensions.bzl%remote_android_tools_extensions": {
       "general": {
         "bzlTransitiveDigest": "vsrPPBNf8OgywAYLMcIL1oNm2R8WtbCIL9wgQBUecpA=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "android_tools": {
@@ -1089,7 +1089,7 @@
     "@@bazel_tools//tools/cpp:cc_configure.bzl%cc_configure_extension": {
       "general": {
         "bzlTransitiveDigest": "XWy8pzw7/6RclAFWd6/VfUdoXn2SdSpmHOrbfEFJ1ao=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "local_config_cc": {
@@ -1115,7 +1115,7 @@
     "@@bazel_tools//tools/osx:xcode_configure.bzl%xcode_configure_extension": {
       "general": {
         "bzlTransitiveDigest": "Qh2bWTU6QW6wkrd87qrU4YeY+SG37Nvw3A0PR4Y0L2Y=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "local_config_xcode": {
@@ -1133,7 +1133,7 @@
     "@@bazel_tools//tools/sh:sh_configure.bzl%sh_configure_extension": {
       "general": {
         "bzlTransitiveDigest": "hp4NgmNjEg5+xgvzfh6L83bt9/aiiWETuNpwNuF1MSU=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "local_config_sh": {
@@ -1148,7 +1148,7 @@
     "@@bazel_tools//tools/test:extensions.bzl%remote_coverage_tools_extension": {
       "general": {
         "bzlTransitiveDigest": "AL+K5m+GCP3XRzLPqpKAq4GsjIVDXgUveWm8nih4ju0=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "remote_coverage_tools": {
@@ -1168,7 +1168,7 @@
     "@@buildozer~//:buildozer_binary.bzl%buildozer_binary": {
       "general": {
         "bzlTransitiveDigest": "EleDU/FQ1+e/RgkW3aIDmdaxZEthvoWQhsqFTxiSgMI=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "buildozer_binary": {
@@ -1192,7 +1192,7 @@
     "@@rules_java~//java:extensions.bzl%toolchains": {
       "general": {
         "bzlTransitiveDigest": "Bm4ulErUcJjZtKeAt2etkB6sGO8evCgHQxbw4Px8q60=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "remotejdk21_linux_toolchain_config_repo": {
@@ -1696,8 +1696,8 @@
     "@@rules_jvm_external~//:extensions.bzl%maven": {
       "general": {
         "bzlTransitiveDigest": "yXprMX4LqzJwuZlbtT9WNeu7p2iEYw7j4R1NP9pc4Ow=",
-        "accumulatedFileDigests": {
-          "@@rules_jvm_external~//:rules_jvm_external_deps_install.json": "10442a5ae27d9ff4c2003e5ab71643bf0d8b48dcf968b4173fa274c3232a8c06"
+        "recordedFileInputs": {
+          "@@rules_jvm_external~//rules_jvm_external_deps_install.json": "10442a5ae27d9ff4c2003e5ab71643bf0d8b48dcf968b4173fa274c3232a8c06"
         },
         "envVariables": {},
         "generatedRepoSpecs": {
@@ -2718,7 +2718,7 @@
     "@@rules_jvm_external~//:non-module-deps.bzl%non_module_deps": {
       "general": {
         "bzlTransitiveDigest": "Td87llNSs5GZ/kAxu6pAqfEXBZ3HdkSqRmUzvIfbFWg=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "io_bazel_rules_kotlin": {
@@ -2744,7 +2744,7 @@
     "@@rules_python~//python/extensions:python.bzl%python": {
       "general": {
         "bzlTransitiveDigest": "NGtTMUqs2EEJeXu6mXdpmYRrQGZiJV7S3mxeod3Hm7M=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "pythons_hub": {
@@ -2772,7 +2772,7 @@
     "@@rules_python~//python/extensions/private:internal_deps.bzl%internal_deps": {
       "general": {
         "bzlTransitiveDigest": "5c1tkdV6L67SQOZWc9MUoS5ZnsSxeDKsh9urs01jZSM=",
-        "accumulatedFileDigests": {},
+        "recordedFileInputs": {},
         "envVariables": {},
         "generatedRepoSpecs": {
           "pypi__coverage_cp39_aarch64-apple-darwin": {