diff --git a/compiler/crates/relay-compiler/src/config.rs b/compiler/crates/relay-compiler/src/config.rs
index 4c2feb06a77e0..a793105321383 100644
--- a/compiler/crates/relay-compiler/src/config.rs
+++ b/compiler/crates/relay-compiler/src/config.rs
@@ -994,12 +994,12 @@ impl SingleProjectConfigFile {
                 }
             })?,
         );
-        for extension_dir in self.schema_extensions.iter() {
+        for extension_path in self.schema_extensions.iter() {
             paths.push(
-                canonicalize(root_dir.join(extension_dir.clone())).map_err(|_| {
-                    ConfigValidationError::ExtensionDirNotExistent {
+                canonicalize(root_dir.join(extension_path.clone())).map_err(|_| {
+                    ConfigValidationError::ExtensionPathNotExistent {
                         project_name: self.project_name,
-                        extension_dir: extension_dir.clone(),
+                        extension_path: extension_path.clone(),
                     }
                 })?,
             );
diff --git a/compiler/crates/relay-compiler/src/errors.rs b/compiler/crates/relay-compiler/src/errors.rs
index 0f45dcb71ba1b..4c2bc417fae8a 100644
--- a/compiler/crates/relay-compiler/src/errors.rs
+++ b/compiler/crates/relay-compiler/src/errors.rs
@@ -218,11 +218,11 @@ pub enum ConfigValidationError {
     },
 
     #[error(
-        "The `schemaExtensions` configured for project `{project_name}` does not exist at `{extension_dir}`."
+        "The `schemaExtensions` configured for project `{project_name}` does not exist at `{extension_path}`."
     )]
-    ExtensionDirNotExistent {
+    ExtensionPathNotExistent {
         project_name: ProjectName,
-        extension_dir: PathBuf,
+        extension_path: PathBuf,
     },
 
     #[error(
diff --git a/compiler/crates/relay-compiler/src/file_source/watchman_query_builder.rs b/compiler/crates/relay-compiler/src/file_source/watchman_query_builder.rs
index 2d542dd9942a1..73efb10a2552e 100644
--- a/compiler/crates/relay-compiler/src/file_source/watchman_query_builder.rs
+++ b/compiler/crates/relay-compiler/src/file_source/watchman_query_builder.rs
@@ -67,7 +67,7 @@ pub fn get_watchman_expr(config: &Config) -> Expr {
 
     let extension_roots = config.get_extension_roots();
     if !extension_roots.is_empty() {
-        let extensions_expr = expr_graphql_files_in_dirs(extension_roots);
+        let extensions_expr = expr_graphql_file_or_dir_contents(extension_roots);
         expressions.push(extensions_expr);
     }
 
@@ -132,13 +132,27 @@ fn expr_files_in_dirs(roots: Vec<PathBuf>) -> Expr {
 
 fn expr_graphql_files_in_dirs(roots: Vec<PathBuf>) -> Expr {
     Expr::All(vec![
-        // ending in *.graphql
+        // ending in *.graphql or *.gql
         Expr::Suffix(vec!["graphql".into(), "gql".into()]),
         // in one of the extension directories
         expr_files_in_dirs(roots),
     ])
 }
 
+// Expression to get all graphql items by path or path of containing folder.
+fn expr_graphql_file_or_dir_contents(paths: Vec<PathBuf>) -> Expr {
+    Expr::All(vec![
+        Expr::Suffix(vec!["graphql".into(), "gql".into()]),
+        Expr::Any(vec![
+            Expr::Name(NameTerm {
+                paths: paths.clone(),
+                wholename: true,
+            }),
+            expr_files_in_dirs(paths),
+        ]),
+    ])
+}
+
 /// Helper to create an `anyof` expression if multiple items are passed or just
 /// return the expression for a single item input `Vec`.
 /// Panics for empty expressions. These are not valid in Watchman. We could
diff --git a/packages/relay-compiler/README.md b/packages/relay-compiler/README.md
index 3213c568b1baf..42e965d006291 100644
--- a/packages/relay-compiler/README.md
+++ b/packages/relay-compiler/README.md
@@ -69,7 +69,7 @@ file sources, and "listen" to the file changes in the "watch" mode. If
   [string]
 - `excludes` Directories to ignore under `src`. [array] [default:
   ["\*\*/node_modules/\*\*", "\*\*/__mocks__/\*\*", "\*\*/__generated__/\*\*"]]
-- `schemaExtensions` List of directories with schema extensions. [array]
+- `schemaExtensions` List of files or directories with schema extensions. [array]
 - `schemaConfig`
   - `nodeInterfaceIdField` Configure the name of the globally unique ID field on
     the Node interface. Useful if you can't use the default `id` field name.
diff --git a/website/docs/guides/client-schema-extensions.md b/website/docs/guides/client-schema-extensions.md
index a9a0959e0d49c..ef9c7c4272e5c 100644
--- a/website/docs/guides/client-schema-extensions.md
+++ b/website/docs/guides/client-schema-extensions.md
@@ -29,9 +29,10 @@ The Relay Compiler fully supports client-side extensions of the schema, which al
 
 ## Extending the server schema
 
-To extend the server schema, create a new `.graphql` file inside your `--src` directory.
-Let's call it `./src/clientSchema.graphql`.
-This file needs to be in a folder referenced in the `"schemaExtensions"` of your Relay config.
+To extend the server schema, create a new `.graphql` file inside your `--src`
+directory.  Let's call it `./src/clientSchema.graphql`.  This file needs to be
+referenced in the `"schemaExtensions"` of your Relay config, either directly or
+via its folder.
 
 This schema describes what local data can be queried on the client.
 It can even be used to extend an existing server schema.