diff --git a/__tests__/host.spec.ts b/__tests__/host.spec.ts
index 8d16ef6f..14240dd9 100644
--- a/__tests__/host.spec.ts
+++ b/__tests__/host.spec.ts
@@ -15,10 +15,14 @@ setTypescriptModule(ts);
 };
 
 const defaultConfig = { fileNames: [], errors: [], options: {} };
+const defaultFilter = () => true;
 
 const unaryFunc = "const unary = (x: string): string => x.reverse()";
 const unaryFuncSnap = { text: unaryFunc };
 
+const binaryFunc = "const binary = (a: number, b: number): number => a - b";
+const binaryFuncSnap = { text: binaryFunc };
+
 // host.ts uses `/` normalized path, as does TS itself (https://github.com/microsoft/TypeScript/blob/7f022c58fb8b7253f23c49f0d9eee6fde82b477b/src/compiler/path.ts#L4)
 const local = (x: string) => normalize(path.resolve(__dirname, x));
 const testDir = local("__temp/host");
@@ -37,14 +41,18 @@ test("LanguageServiceHost", async () => {
 	const testOpts = { test: "this is a test" };
 	const config = { ...defaultConfig, options: testOpts };
 	const transformers = [() => ({})];
-	const host = new LanguageServiceHost(config, transformers, testDir);
+	const host = new LanguageServiceHost(config, transformers, testDir, defaultFilter);
 
 	// test core snapshot functionality
 	expect(host.getScriptSnapshot(testFile)).toEqual(unaryFuncSnap);
 	expect(host.getScriptVersion(testFile)).toEqual("1");
 
-	expect(host.setSnapshot(testFile, unaryFunc)).toEqual(unaryFuncSnap); // version 2
+	expect(host.setSnapshot(testFile, unaryFunc)).toEqual(unaryFuncSnap); // unchanged
 	expect(host.getScriptSnapshot(testFile)).toEqual(unaryFuncSnap); // get from dict
+	expect(host.getScriptVersion(testFile)).toEqual("1");
+
+	expect(host.setSnapshot(testFile, binaryFunc)).toEqual(binaryFuncSnap); // version 2
+	expect(host.getScriptSnapshot(testFile)).toEqual(binaryFuncSnap);
 	expect(host.getScriptVersion(testFile)).toEqual("2");
 
 	expect(host.getScriptSnapshot(nonExistent)).toBeFalsy();
@@ -89,7 +97,7 @@ test("LanguageServiceHost - getCustomTransformers", () => {
 		after: () => "testAfter",
 		afterDeclarations: () => "testAfterDeclarations",
 	})];
-	const host = new LanguageServiceHost(config, transformers as any, testDir);
+	const host = new LanguageServiceHost(config, transformers as any, testDir, defaultFilter);
 
 	host.setLanguageService(true as any);
 	const customTransformers = host.getCustomTransformers();
@@ -107,13 +115,13 @@ test("LanguageServiceHost - getCustomTransformers -- undefined cases", () => {
 	const config = { ...defaultConfig };
 
 	// no LS and no transformers cases
-	let host = new LanguageServiceHost(config, undefined as any, testDir);
+	let host = new LanguageServiceHost(config, undefined as any, testDir, defaultFilter);
 	expect(host.getCustomTransformers()).toBeFalsy(); // no LS
 	host.setLanguageService(true as any);
 	expect(host.getCustomTransformers()).toBeFalsy(); // no transformers
 
 	// empty transformers case
-	host = new LanguageServiceHost(config, [], testDir);
+	host = new LanguageServiceHost(config, [], testDir, defaultFilter);
 	host.setLanguageService(true as any);
 	expect(host.getCustomTransformers()).toBeFalsy(); // empty transformers
 });
diff --git a/src/host.ts b/src/host.ts
index b0a2b615..d5b0d0b8 100644
--- a/src/host.ts
+++ b/src/host.ts
@@ -11,7 +11,7 @@ export class LanguageServiceHost implements tsTypes.LanguageServiceHost
 	private service?: tsTypes.LanguageService;
 	private fileNames: Set<string>;
 
-	constructor(private parsedConfig: tsTypes.ParsedCommandLine, private transformers: TransformerFactoryCreator[], private cwd: string)
+	constructor(private parsedConfig: tsTypes.ParsedCommandLine, private transformers: TransformerFactoryCreator[], private cwd: string, private filter: (id: string | unknown) => boolean)
 	{
 		this.fileNames = new Set(parsedConfig.fileNames);
 	}
@@ -27,14 +27,27 @@ export class LanguageServiceHost implements tsTypes.LanguageServiceHost
 		this.service = service;
 	}
 
-	public setSnapshot(fileName: string, source: string): tsTypes.IScriptSnapshot
+	public setSnapshot(fileName: string, source: string, forcedUpdate = false): tsTypes.IScriptSnapshot
 	{
 		fileName = normalize(fileName);
 
+		// don't update the snapshot if there are no changes
+		const prevSnapshot = this.snapshots[fileName];
+		if (prevSnapshot?.getText(0, prevSnapshot.getLength()) === source) {
+			if (forcedUpdate) {
+				this.versions[fileName] = (this.versions[fileName] || 0) + 1;
+			}
+
+			return prevSnapshot;
+		}
+
 		const snapshot = tsModule.ScriptSnapshot.fromString(source);
 		this.snapshots[fileName] = snapshot;
 		this.versions[fileName] = (this.versions[fileName] || 0) + 1;
-		this.fileNames.add(fileName);
+
+		if (this.filter(fileName))
+			this.fileNames.add(fileName);
+
 		return snapshot;
 	}
 
@@ -46,7 +59,7 @@ export class LanguageServiceHost implements tsTypes.LanguageServiceHost
 			return this.snapshots[fileName];
 
 		const source = tsModule.sys.readFile(fileName);
-		if (source)
+		if (source !== undefined)
 			return this.setSnapshot(fileName, source);
 
 		return undefined;
diff --git a/src/index.ts b/src/index.ts
index 3ccca119..bbdcc891 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -174,7 +174,7 @@ const typescript: PluginImpl<RPT2Options> = (options) =>
 
 			filter = createFilter(context, pluginOptions, parsedConfig);
 
-			servicesHost = new LanguageServiceHost(parsedConfig, pluginOptions.transformers, pluginOptions.cwd);
+			servicesHost = new LanguageServiceHost(parsedConfig, pluginOptions.transformers, pluginOptions.cwd, filter);
 			service = tsModule.createLanguageService(servicesHost, documentRegistry);
 			servicesHost.setLanguageService(service);
 
@@ -245,7 +245,8 @@ const typescript: PluginImpl<RPT2Options> = (options) =>
 			if (!filter(id))
 				return undefined;
 
-			const snapshot = servicesHost.setSnapshot(id, code);
+			// force version update under watch mode to ensure recompile
+			const snapshot = servicesHost.setSnapshot(id, code, watchMode);
 
 			// getting compiled file from cache or from ts
 			const result = cache.getCompiled(id, snapshot, () =>