diff --git a/__tests__/commands/install/integration.js b/__tests__/commands/install/integration.js
index 8c5766a124..7fd8051da3 100644
--- a/__tests__/commands/install/integration.js
+++ b/__tests__/commands/install/integration.js
@@ -55,6 +55,16 @@ test.concurrent('install should not hoist packages above their peer dependencies
   });
 });
 
+test.concurrent('install should resolve peer dependencies from same subtrees', async () => {
+  await runInstall({}, 'peer-dep-same-subtree', async (config): Promise<void> => {
+    expect(JSON.parse(await fs.readFile(`${config.cwd}/node_modules/d/node_modules/a/package.json`)).version).toEqual(
+      '1.0.0',
+    );
+    expect(JSON.parse(await fs.readFile(`${config.cwd}/node_modules//a/package.json`)).version).toEqual('1.1.0');
+    expect(await fs.exists(`${config.cwd}/node_modules/c/node_modules/a`)).toEqual(false);
+  });
+});
+
 test.concurrent('install optional subdependencies by default', async () => {
   await runInstall({}, 'install-optional-dependencies', async (config): Promise<void> => {
     expect(await fs.exists(`${config.cwd}/node_modules/dep-b`)).toEqual(true);
diff --git a/__tests__/fixtures/install/peer-dep-same-subtree/a-1.0.0/package.json b/__tests__/fixtures/install/peer-dep-same-subtree/a-1.0.0/package.json
new file mode 100644
index 0000000000..d1fe0d5f4b
--- /dev/null
+++ b/__tests__/fixtures/install/peer-dep-same-subtree/a-1.0.0/package.json
@@ -0,0 +1 @@
+{"name":"a", "version":"1.0.0"}
diff --git a/__tests__/fixtures/install/peer-dep-same-subtree/a-1.1.0/package.json b/__tests__/fixtures/install/peer-dep-same-subtree/a-1.1.0/package.json
new file mode 100644
index 0000000000..22e2844b7f
--- /dev/null
+++ b/__tests__/fixtures/install/peer-dep-same-subtree/a-1.1.0/package.json
@@ -0,0 +1 @@
+{"name":"a", "version":"1.1.0"}
diff --git a/__tests__/fixtures/install/peer-dep-same-subtree/b/package.json b/__tests__/fixtures/install/peer-dep-same-subtree/b/package.json
new file mode 100644
index 0000000000..6c0e5c34e2
--- /dev/null
+++ b/__tests__/fixtures/install/peer-dep-same-subtree/b/package.json
@@ -0,0 +1,7 @@
+{
+  "name":"b",
+  "version":"1.0.0",
+  "dependencies": {
+    "c": "file:../c"
+  }
+}
diff --git a/__tests__/fixtures/install/peer-dep-same-subtree/c/package.json b/__tests__/fixtures/install/peer-dep-same-subtree/c/package.json
new file mode 100644
index 0000000000..36b451ea97
--- /dev/null
+++ b/__tests__/fixtures/install/peer-dep-same-subtree/c/package.json
@@ -0,0 +1,7 @@
+{
+  "name":"c",
+  "version":"1.0.0",
+  "peerDependencies": {
+    "a": "^1.0.0"
+  }
+}
diff --git a/__tests__/fixtures/install/peer-dep-same-subtree/d/package.json b/__tests__/fixtures/install/peer-dep-same-subtree/d/package.json
new file mode 100644
index 0000000000..cf19c1cd85
--- /dev/null
+++ b/__tests__/fixtures/install/peer-dep-same-subtree/d/package.json
@@ -0,0 +1,7 @@
+{
+  "name":"d",
+  "version":"1.0.0",
+  "dependencies": {
+    "a": "file:../a-1.0.0"
+  }
+}
diff --git a/__tests__/fixtures/install/peer-dep-same-subtree/package.json b/__tests__/fixtures/install/peer-dep-same-subtree/package.json
new file mode 100644
index 0000000000..053cb276c5
--- /dev/null
+++ b/__tests__/fixtures/install/peer-dep-same-subtree/package.json
@@ -0,0 +1,9 @@
+{
+  "name": "peer-dep-same-subtree",
+  "dependencies": {
+    "a": "file:a-1.1.0",
+    "b": "file:b",
+    "c": "file:c",
+    "d": "file:d"
+  }
+}
diff --git a/src/package-linker.js b/src/package-linker.js
index 680e1f52e1..8f9a75f1d6 100644
--- a/src/package-linker.js
+++ b/src/package-linker.js
@@ -446,6 +446,21 @@ export default class PackageLinker {
       }
       const ref = pkg._reference;
       invariant(ref, 'Package reference is missing');
+      // TODO: We are taking the "shortest" ref tree but there may be multiple ref trees with the same length
+      const refTree = ref.requests.map(req => req.parentNames).sort((arr1, arr2) => arr1.length - arr2.length)[0];
+
+      const getLevelDistance = pkgRef => {
+        let minDistance = Infinity;
+        for (const req of pkgRef.requests) {
+          const distance = refTree.length - req.parentNames.length;
+
+          if (distance >= 0 && distance < minDistance && req.parentNames.every((name, idx) => name === refTree[idx])) {
+            minDistance = distance;
+          }
+        }
+
+        return minDistance;
+      };
 
       for (const peerDepName in peerDeps) {
         const range = peerDeps[peerDepName];
@@ -459,8 +474,8 @@ export default class PackageLinker {
           if (!(peerPkgRef && peerPkgRef.patterns)) {
             continue;
           }
-          const levelDistance = ref.level - peerPkgRef.level;
-          if (levelDistance >= 0 && levelDistance < resolvedLevelDistance) {
+          const levelDistance = getLevelDistance(peerPkgRef);
+          if (isFinite(levelDistance) && levelDistance < resolvedLevelDistance) {
             if (this._satisfiesPeerDependency(range, peerPkgRef.version)) {
               resolvedLevelDistance = levelDistance;
               resolvedPeerPkgPattern = peerPkgRef.patterns;
@@ -468,7 +483,7 @@ export default class PackageLinker {
                 this.reporter.lang(
                   'selectedPeer',
                   `${pkg.name}@${pkg.version}`,
-                  `${peerDepName}@${range}`,
+                  `${peerDepName}@${peerPkgRef.version}`,
                   peerPkgRef.level,
                 ),
               );