diff --git a/docs/site/Importing-LB3-models.md b/docs/site/Importing-LB3-models.md
index 9284db890f1e..9ef79f264cab 100644
--- a/docs/site/Importing-LB3-models.md
+++ b/docs/site/Importing-LB3-models.md
@@ -60,24 +60,6 @@ _The tracking GitHub issue:
 
 Workaround: define relational metadata & navigational properties manually.
 
-### Models inheriting from custom base class
-
-_The tracking GitHub issue:
-[loopback-next#3813](https://github.com/strongloop/loopback-next/issues/3813)_
-
-Models inheriting from application-specific models (including LB3 built-in
-models like `User`) cannot be imported yet.
-
-Workaround:
-
-1. Modify your LB3 model to inherit from `Model`, `PersistedModel` or
-   `KeyValueModel`.
-
-2. Import the model to LB4
-
-3. Update the imported model to inherit for the desired application-specific
-   model.
-
 ### MongoDB's `ObjectID` type
 
 The tracking GitHub issue:
diff --git a/packages/cli/generators/import-lb3-models/index.js b/packages/cli/generators/import-lb3-models/index.js
index 5343e222064b..4808ba8091d1 100644
--- a/packages/cli/generators/import-lb3-models/index.js
+++ b/packages/cli/generators/import-lb3-models/index.js
@@ -48,6 +48,10 @@ module.exports = class Lb3ModelImporter extends BaseGenerator {
       this.destinationPath(),
       this.artifactInfo.outDir,
     );
+    this.artifactInfo.modelDir = path.resolve(
+      this.artifactInfo.rootDir,
+      utils.modelsDir,
+    );
     return super.setOptions();
   }
 
@@ -99,6 +103,14 @@ Learn more at https://loopback.io/doc/en/lb4/Importing-LB3-models.html
     this.modelNames = answers.modelNames;
   }
 
+  async loadExistingLb4Models() {
+    debug(`model list dir ${this.artifactInfo.modelDir}`);
+    this.existingLb4ModelNames = await utils.getArtifactList(
+      this.artifactInfo.modelDir,
+      'model',
+    );
+  }
+
   async migrateSelectedModels() {
     if (this.shouldExit()) return;
     this.modelFiles = [];
@@ -136,6 +148,20 @@ Learn more at https://loopback.io/doc/en/lb4/Importing-LB3-models.html
     );
     debug('LB4 model data', templateData);
 
+    if (!templateData.isModelBaseBuiltin) {
+      const baseName = templateData.modelBaseClass;
+      if (
+        !this.existingLb4ModelNames.includes(baseName) &&
+        !this.modelNames.includes(baseName)
+      ) {
+        this.log(
+          'Adding %s (base of %s) to the list of imported models.',
+          chalk.yellow(baseName),
+          chalk.yellow(name),
+        );
+        this.modelNames.push(baseName);
+      }
+    }
     const fileName = utils.getModelFileName(name);
     const fullTargetPath = path.resolve(this.artifactInfo.relPath, fileName);
     debug('Model %s output file', name, fullTargetPath);
diff --git a/packages/cli/generators/import-lb3-models/migrate-model.js b/packages/cli/generators/import-lb3-models/migrate-model.js
index 4e5aca904fe1..22e7f8a3f770 100644
--- a/packages/cli/generators/import-lb3-models/migrate-model.js
+++ b/packages/cli/generators/import-lb3-models/migrate-model.js
@@ -17,6 +17,7 @@ const {
   findBuiltinType,
 } = require('../model/property-definition');
 const chalk = require('chalk');
+const {isDeepStrictEqual} = require('util');
 
 module.exports = {
   importLb3ModelDefinition,
@@ -43,12 +44,29 @@ function importLb3ModelDefinition(modelCtor, log) {
 
   logNamingIssues(modelName, log);
 
+  const baseDefinition = modelCtor.base.definition;
+  const baseProps = {...baseDefinition.properties};
+
+  // Core LB3 models like PersistedModel come with an id property that's
+  // injected by juggler. We don't want to inherit that property, because
+  // in LB4, we want models to define the id property explicitly.
+  if (isCoreModel(modelCtor.base)) {
+    delete baseProps.id;
+  }
+
   const templateData = {
     name: modelName,
     className: pascalCase(modelName),
     ...migrateBaseClass(modelCtor.settings.base),
-    properties: migrateModelProperties(modelCtor.definition.properties),
-    settings: migrateModelSettings(modelCtor.definition.settings, log),
+    properties: migrateModelProperties(
+      modelCtor.definition.properties,
+      baseProps,
+    ),
+    settings: migrateModelSettings(
+      modelCtor.definition.settings,
+      baseDefinition.settings,
+      log,
+    ),
   };
 
   const settings = templateData.settings;
@@ -59,7 +77,7 @@ function importLb3ModelDefinition(modelCtor, log) {
   return templateData;
 }
 
-function migrateModelProperties(properties) {
+function migrateModelProperties(properties = {}, inherited = {}) {
   const templateData = {};
 
   // In LB 3.x, primary keys are typically contributed by connectors later in
@@ -72,7 +90,16 @@ function migrateModelProperties(properties) {
     });
 
   for (const prop in properties) {
-    const def = migratePropertyDefinition(properties[prop]);
+    const propDef = properties[prop];
+
+    // Skip the property if it was inherited from the base model (the parent)
+    const baseProp = inherited[prop];
+    if (baseProp && isDeepStrictEqual(propDef, baseProp)) {
+      delete templateData[prop];
+      continue;
+    }
+
+    const def = migratePropertyDefinition(propDef);
     templateData[prop] = createPropertyTemplateData(def);
   }
 
@@ -132,14 +159,13 @@ function migrateBaseClass(base) {
     };
   }
 
-  // TODO: handle inheritance from application models
-  throw new Error(
-    'Models inheriting from app-specific models cannot be migrated yet. ' +
-      `Base model configured: ${baseModelName}`,
-  );
+  return {
+    modelBaseClass: baseModelName,
+    isModelBaseBuiltin: false,
+  };
 }
 
-function migrateModelSettings(settings = {}, log) {
+function migrateModelSettings(settings = {}, inherited = {}, log) {
   // Shallow-clone the object to prevent modification of external data
   settings = {...settings};
 
@@ -147,6 +173,16 @@ function migrateModelSettings(settings = {}, log) {
   // LB3 models allow additional properties by default
   settings.strict = settings.strict === true;
 
+  // Remove settings inherited from the base model
+  for (const key in inherited) {
+    // Always emit the value of 'strict' setting, make it explicit
+    if (key === 'strict') continue;
+
+    if (isDeepStrictEqual(settings[key], inherited[key])) {
+      delete settings[key];
+    }
+  }
+
   if (settings.forceId === 'auto') {
     // The value 'auto' is used when a parent model wants to let the child
     // model make the decision automatically, depending on whether the child
@@ -204,3 +240,10 @@ function migrateModelSettings(settings = {}, log) {
 
   return settings;
 }
+
+function isCoreModel(modelCtor) {
+  const name = modelCtor.modelName;
+  return (
+    name === 'Model' || name === 'PersistedModel' || name === 'KeyValueModel'
+  );
+}
diff --git a/packages/cli/package.json b/packages/cli/package.json
index e7d2e945c2b6..7812caf88bb6 100644
--- a/packages/cli/package.json
+++ b/packages/cli/package.json
@@ -28,6 +28,7 @@
     "@types/ejs": "^3.0.1",
     "@types/node": "^10.17.16",
     "glob": "^7.1.6",
+    "loopback": "^3.26.0",
     "loopback-datasource-juggler": "^4.18.1",
     "mem-fs": "^1.1.3",
     "mem-fs-editor": "^6.0.0",
@@ -50,7 +51,6 @@
     "json5": "^2.1.1",
     "latest-version": "^5.1.0",
     "lodash": "^4.17.15",
-    "loopback": "^3.26.0",
     "minimist": "^1.2.0",
     "mkdirp": "^1.0.3",
     "natural-compare": "^1.4.0",
diff --git a/packages/cli/snapshots/integration/generators/import-lb3-models.integration.snapshots.js b/packages/cli/snapshots/integration/generators/import-lb3-models.integration.snapshots.js
index 7b852937c5f2..ac9c1f8ef17a 100644
--- a/packages/cli/snapshots/integration/generators/import-lb3-models.integration.snapshots.js
+++ b/packages/cli/snapshots/integration/generators/import-lb3-models.integration.snapshots.js
@@ -11,13 +11,7 @@ exports[`lb4 import-lb3-models imports CoffeeShop model from lb3-example app 1`]
 import {Entity, model, property} from '@loopback/repository';
 
 @model({
-  settings: {
-    strict: false,
-    forceId: false,
-    replaceOnPUT: true,
-    validateUpsert: true,
-    idInjection: true
-  }
+  settings: {strict: false, forceId: false, validateUpsert: true, idInjection: true}
 })
 export class CoffeeShop extends Entity {
   @property({
@@ -62,3 +56,140 @@ exports[`lb4 import-lb3-models imports CoffeeShop model from lb3-example app 2`]
 export * from './coffee-shop.model';
 
 `;
+
+
+exports[`lb4 import-lb3-models imports a model inheriting from a custom base class 1`] = `
+import {model, property} from '@loopback/repository';
+import {UserBase} from '.';
+
+@model({settings: {strict: false, customCustomerSetting: true}})
+export class Customer extends UserBase {
+  @property({
+    type: 'boolean',
+  })
+  isPreferred?: boolean;
+
+  // Define well-known properties here
+
+  // Indexer property to allow additional data
+  // eslint-disable-next-line @typescript-eslint/no-explicit-any
+  [prop: string]: any;
+
+  constructor(data?: Partial<Customer>) {
+    super(data);
+  }
+}
+
+export interface CustomerRelations {
+  // describe navigational properties here
+}
+
+export type CustomerWithRelations = Customer & CustomerRelations;
+
+`;
+
+
+exports[`lb4 import-lb3-models imports a model inheriting from a custom base class 2`] = `
+import {model, property} from '@loopback/repository';
+import {User} from '.';
+
+@model({settings: {strict: false, customUserBaseSetting: true}})
+export class UserBase extends User {
+  @property({
+    type: 'boolean',
+    required: true,
+    default: false,
+  })
+  isAccountVerified: boolean;
+
+  // Define well-known properties here
+
+  // Indexer property to allow additional data
+  // eslint-disable-next-line @typescript-eslint/no-explicit-any
+  [prop: string]: any;
+
+  constructor(data?: Partial<UserBase>) {
+    super(data);
+  }
+}
+
+export interface UserBaseRelations {
+  // describe navigational properties here
+}
+
+export type UserBaseWithRelations = UserBase & UserBaseRelations;
+
+`;
+
+
+exports[`lb4 import-lb3-models imports a model inheriting from a custom base class 3`] = `
+import {Entity, model, property} from '@loopback/repository';
+
+@model({
+  settings: {
+    strict: false,
+    caseSensitiveEmail: true,
+    hidden: ['password', 'verificationToken'],
+    maxTTL: 31556926,
+    ttl: 1209600
+  }
+})
+export class User extends Entity {
+  @property({
+    type: 'number',
+    id: 1,
+    generated: true,
+    updateOnly: true,
+  })
+  id?: number;
+
+  @property({
+    type: 'string',
+  })
+  realm?: string;
+
+  @property({
+    type: 'string',
+  })
+  username?: string;
+
+  @property({
+    type: 'string',
+    required: true,
+  })
+  password: string;
+
+  @property({
+    type: 'string',
+    required: true,
+  })
+  email: string;
+
+  @property({
+    type: 'boolean',
+  })
+  emailVerified?: boolean;
+
+  @property({
+    type: 'string',
+  })
+  verificationToken?: string;
+
+  // Define well-known properties here
+
+  // Indexer property to allow additional data
+  // eslint-disable-next-line @typescript-eslint/no-explicit-any
+  [prop: string]: any;
+
+  constructor(data?: Partial<User>) {
+    super(data);
+  }
+}
+
+export interface UserRelations {
+  // describe navigational properties here
+}
+
+export type UserWithRelations = User & UserRelations;
+
+`;
diff --git a/packages/cli/test/fixtures/import-lb3-models/app-using-model-inheritance.js b/packages/cli/test/fixtures/import-lb3-models/app-using-model-inheritance.js
new file mode 100644
index 000000000000..0c0daa5be4dc
--- /dev/null
+++ b/packages/cli/test/fixtures/import-lb3-models/app-using-model-inheritance.js
@@ -0,0 +1,44 @@
+// Copyright IBM Corp. 2020. All Rights Reserved.
+// Node module: @loopback/cli
+// This file is licensed under the MIT License.
+// License text available at https://opensource.org/licenses/MIT
+
+'use strict';
+
+// In this file, we provide a LoopBack 3 application with a `Customer` model
+// inheriting from a custom `UserBase` model that's inheriting from the LB3
+// built-in model `User`.
+
+const loopback = require('loopback');
+const app = loopback();
+module.exports = app;
+
+app.dataSource('db', {connector: 'memory'});
+
+app.registry.createModel(
+  'UserBase',
+  {
+    isAccountVerified: {
+      type: 'boolean',
+      required: true,
+      default: false,
+    },
+  },
+  {
+    base: 'User',
+    customUserBaseSetting: true,
+  },
+);
+// Note that `UserBase` is not attached to any datasource!
+
+const Customer = app.registry.createModel(
+  'Customer',
+  {
+    isPreferred: 'boolean',
+  },
+  {
+    base: 'UserBase',
+    customCustomerSetting: true,
+  },
+);
+app.model(Customer, {dataSource: 'db'});
diff --git a/packages/cli/test/integration/generators/import-lb3-models.integration.js b/packages/cli/test/integration/generators/import-lb3-models.integration.js
index a468c5b689c7..c1ac32e74153 100644
--- a/packages/cli/test/integration/generators/import-lb3-models.integration.js
+++ b/packages/cli/test/integration/generators/import-lb3-models.integration.js
@@ -29,6 +29,10 @@ const COFFEE_SHOP_EXAMPLE = require.resolve(
   '../../../../../examples/lb3-application/lb3app/server/server',
 );
 
+const APP_USING_MODEL_INHERITANCE = require.resolve(
+  '../../fixtures/import-lb3-models/app-using-model-inheritance',
+);
+
 describe('lb4 import-lb3-models', function() {
   require('../lib/base-generator')(generator, {args: ['path-to-lb3-app']})();
 
@@ -91,4 +95,26 @@ describe('lb4 import-lb3-models', function() {
         'AccessToken, User, RoleMapping, Role, ACL, Scope, CoffeeShop.',
     );
   });
+
+  it('imports a model inheriting from a custom base class', async () => {
+    const outDir = path.join(SANDBOX_PATH, 'models-with-inheritance');
+
+    await testUtils
+      .executeGenerator(generator)
+      .inDir(SANDBOX_PATH, () => testUtils.givenLBProject(SANDBOX_PATH))
+      .withArguments(APP_USING_MODEL_INHERITANCE)
+      .withPrompts({
+        modelNames: ['Customer'],
+      })
+      .withOptions({outDir});
+
+    // Verify the source code generated for the selected model
+    expectFileToMatchSnapshot(`${outDir}/customer.model.ts`);
+
+    // Verify the source code generated for the custom base model
+    expectFileToMatchSnapshot(`${outDir}/user-base.model.ts`);
+
+    // Verify the source code generated for the imported LB3 user model
+    expectFileToMatchSnapshot(`${outDir}/user.model.ts`);
+  });
 });
diff --git a/packages/cli/test/unit/import-lb3-model/migrate-model.test.js b/packages/cli/test/unit/import-lb3-model/migrate-model.test.js
index 12400d5f37f1..e0b6d1ca3e3a 100644
--- a/packages/cli/test/unit/import-lb3-model/migrate-model.test.js
+++ b/packages/cli/test/unit/import-lb3-model/migrate-model.test.js
@@ -33,7 +33,6 @@ describe('importLb3ModelDefinition', () => {
       expect(toJSON(modelData.settings)).to.deepEqual({
         // By default, LB3 models are not strict
         strict: false,
-        replaceOnPUT: true,
       });
     });
 
@@ -220,13 +219,33 @@ describe('importLb3ModelDefinition', () => {
       });
     });
 
-    it('refuses to import model extending a non-LB4-built-in (for now)', () => {
-      // Note: User is a built-in model in LB3
-      const MyModel = givenLb3Model('MyModel', {}, {base: 'User'});
-      expect(() => importLb3ModelDefinition(MyModel, log)).to.throw(
-        'Models inheriting from app-specific models cannot be migrated yet. ' +
-          'Base model configured: User',
-      );
+    it('supports LB3 built-in base classes not available in LB4', () => {
+      const Customer = givenLb3Model('Customer', {}, {base: 'User'});
+      const modelData = importLb3ModelDefinition(Customer, log);
+
+      const options = getModelTemplateOptions(modelData);
+      expect(options).to.containDeep({
+        modelBaseClass: 'User',
+        isModelBaseBuiltin: false,
+      });
+
+      log.resetHistory(); // ignore messages about ACLs & Relations
+    });
+
+    it('supports custom base classes', () => {
+      const {model: Admin} = givenLb3BaseAndChildModels({
+        model: {name: 'Admin'},
+        base: {name: 'MyUserBase'},
+      });
+      const modelData = importLb3ModelDefinition(Admin, log);
+
+      const options = getModelTemplateOptions(modelData);
+      expect(options).to.containDeep({
+        modelBaseClass: 'MyUserBase',
+        isModelBaseBuiltin: false,
+      });
+
+      log.resetHistory(); // disable assertion in afterEach hook
     });
   });
 
@@ -309,6 +328,43 @@ describe('importLb3ModelDefinition', () => {
     });
   });
 
+  context('inheritance', () => {
+    let Customer, modelData;
+    beforeEach(function defineCustomerInheritingFromUser() {
+      Customer = givenLb3Model(
+        'Customer',
+        {
+          isPreferred: {type: 'boolean', required: true},
+        },
+        {
+          base: 'User',
+          customCustomerSetting: true,
+        },
+      );
+      modelData = importLb3ModelDefinition(Customer, log);
+      log.resetHistory(); // ignore messages about ACLs & Relations
+    });
+
+    it('emits properties defined by the child model but not inherited', () => {
+      expect(Object.keys(modelData.properties)).to.deepEqual(['isPreferred']);
+      expect(modelData.properties)
+        .to.have.property('isPreferred')
+        .deepEqual({
+          type: `'boolean'`,
+          tsType: 'boolean',
+          required: true,
+        });
+    });
+
+    it('emits model-level settings defined by the model but not inherited', () => {
+      expect(toJSON(modelData.settings)).to.deepEqual({
+        // By default, LB3 models are not strict
+        strict: false,
+        customCustomerSetting: true,
+      });
+    });
+  });
+
   context('relations', () => {
     it('reports a warning', () => {
       const app = givenLb3App();
@@ -432,6 +488,26 @@ function givenLb3Model(
   return ModelCtor;
 }
 
+function givenLb3BaseAndChildModels({
+  model,
+  base,
+  dataSourceConfig = {connector: 'memory'},
+}) {
+  const app = givenLb3App();
+  app.dataSource('ds', dataSourceConfig);
+  const BaseCtor = app.registry.createModel(
+    base.name,
+    base.properties,
+    base.settings,
+  );
+  const ModelCtor = app.registry.createModel(model.name, model.properties, {
+    base: base.name,
+    ...model.settings,
+  });
+  app.model(ModelCtor, {dataSource: 'ds'});
+  return {model: ModelCtor, base: BaseCtor};
+}
+
 function getModelTemplateOptions(templateData) {
   const options = {...templateData};