diff --git a/packages/kit/src/module/install.ts b/packages/kit/src/module/install.ts
index 39a460cbed..22101dfdbf 100644
--- a/packages/kit/src/module/install.ts
+++ b/packages/kit/src/module/install.ts
@@ -1,10 +1,12 @@
 import { existsSync, promises as fsp, lstatSync } from 'node:fs'
+import { pathToFileURL } from 'node:url'
 import type { ModuleMeta, Nuxt, NuxtConfig, NuxtModule } from '@nuxt/schema'
 import { dirname, isAbsolute, join, resolve } from 'pathe'
 import { defu } from 'defu'
 import { createJiti } from 'jiti'
+import { resolve as resolveModule } from 'mlly'
 import { useNuxt } from '../context'
-import { resolveAlias } from '../resolve'
+import { resolveAlias, resolvePath } from '../resolve'
 import { logger } from '../logger'
 
 const NODE_MODULES_RE = /[/\\]node_modules[/\\]/
@@ -77,11 +79,14 @@ export async function loadNuxtModuleInstance (nuxtModule: string | NuxtModule, n
   // Import if input is string
   if (typeof nuxtModule === 'string') {
     const paths = [join(nuxtModule, 'nuxt'), join(nuxtModule, 'module'), nuxtModule, join(nuxt.options.rootDir, nuxtModule)]
-
-    for (const parentURL of nuxt.options.modulesDir) {
-      for (const path of paths) {
+    for (const path of paths) {
+      for (const parentURL of nuxt.options.modulesDir) {
         try {
-          const src = jiti.esmResolve(path, { parentURL: parentURL.replace(/\/node_modules\/?$/, '') })
+          const resolved = resolveAlias(path, nuxt.options.alias)
+          const src = isAbsolute(resolved)
+            ? await resolvePath(resolved, { cwd: parentURL, fallbackToOriginal: false, extensions: nuxt.options.extensions })
+            : await resolveModule(resolved, { url: pathToFileURL(parentURL.replace(/\/node_modules\/?$/, '')), extensions: nuxt.options.extensions })
+
           nuxtModule = await jiti.import(src, { default: true }) as NuxtModule
 
           // nuxt-module-builder generates a module.json with metadata including the version
@@ -92,7 +97,7 @@ export async function loadNuxtModuleInstance (nuxtModule: string | NuxtModule, n
           break
         } catch (error: unknown) {
           const code = (error as Error & { code?: string }).code
-          if (code === 'MODULE_NOT_FOUND' || code === 'ERR_PACKAGE_PATH_NOT_EXPORTED' || code === 'ERR_MODULE_NOT_FOUND' || code === 'ERR_UNSUPPORTED_DIR_IMPORT') {
+          if (code === 'MODULE_NOT_FOUND' || code === 'ERR_PACKAGE_PATH_NOT_EXPORTED' || code === 'ERR_MODULE_NOT_FOUND' || code === 'ERR_UNSUPPORTED_DIR_IMPORT' || code === 'ENOTDIR') {
             continue
           }
           logger.error(`Error while importing module \`${nuxtModule}\`: ${error}`)