diff --git a/.changeset/gorgeous-laws-rush.md b/.changeset/gorgeous-laws-rush.md
new file mode 100644
index 0000000000..663f64ca67
--- /dev/null
+++ b/.changeset/gorgeous-laws-rush.md
@@ -0,0 +1,5 @@
+---
+"supi": patch
+---
+
+The contents of a modified local tarball dependency should be reunpacked on install.
diff --git a/packages/headless/tsconfig.json b/packages/headless/tsconfig.json
index d2c18847d3..cb3b0bd042 100644
--- a/packages/headless/tsconfig.json
+++ b/packages/headless/tsconfig.json
@@ -77,6 +77,9 @@
     },
     {
       "path": "../read-projects-context"
+    },
+    {
+      "path": "../../privatePackages/test-fixtures"
     }
   ]
 }
diff --git a/packages/supi/src/install/link.ts b/packages/supi/src/install/link.ts
index c5c9e88430..07aa5c8e67 100644
--- a/packages/supi/src/install/link.ts
+++ b/packages/supi/src/install/link.ts
@@ -194,7 +194,6 @@ export default async function linkPackages (
       force: opts.force,
       lockfileDir: opts.lockfileDir,
       optional: opts.include.optionalDependencies,
-      registries: opts.registries,
       sideEffectsCacheRead: opts.sideEffectsCacheRead,
       skipped: opts.skipped,
       storeController: opts.storeController,
@@ -366,7 +365,6 @@ async function linkNewPackages (
     dryRun: boolean,
     force: boolean,
     optional: boolean,
-    registries: Registries,
     lockfileDir: string,
     sideEffectsCacheRead: boolean,
     skipped: Set<string>,
@@ -385,7 +383,7 @@ async function linkNewPackages (
         .filter((depPath) => depGraph[depPath])
     )
   } else {
-    newDepPathsSet = await selectNewFromWantedDeps(wantedRelDepPaths, currentLockfile, depGraph, opts)
+    newDepPathsSet = await selectNewFromWantedDeps(wantedRelDepPaths, currentLockfile, depGraph)
   }
 
   statsLogger.debug({
@@ -440,19 +438,20 @@ async function linkNewPackages (
 async function selectNewFromWantedDeps (
   wantedRelDepPaths: string[],
   currentLockfile: Lockfile,
-  depGraph: DependenciesGraph,
-  opts: {
-    registries: Registries,
-  }
+  depGraph: DependenciesGraph
 ) {
   const newDeps = new Set<string>()
-  const prevRelDepPaths = new Set(R.keys(currentLockfile.packages))
+  const prevDeps = currentLockfile.packages ?? {}
   await Promise.all(
     wantedRelDepPaths.map(
       async (depPath: string) => {
         const depNode = depGraph[depPath]
         if (!depNode) return
-        if (prevRelDepPaths.has(depPath)) {
+        const prevDep = prevDeps[depPath]
+        if (
+          prevDep &&
+          depNode.resolution['integrity'] === prevDep.resolution['integrity']
+        ) {
           if (await fs.exists(depNode.dir)) {
             return
           }
diff --git a/packages/supi/test/install/local.ts b/packages/supi/test/install/local.ts
index f1ea0575eb..7e1c8a129d 100644
--- a/packages/supi/test/install/local.ts
+++ b/packages/supi/test/install/local.ts
@@ -178,6 +178,9 @@ test('update tarball local package when its integrity changes', async (t) => {
 
   const lockfile2 = await project.readLockfile()
   t.equal(lockfile2.packages['file:../tar.tgz'].dependencies!['is-positive'], '2.0.0', 'the local tarball dep has been updated')
+
+  const manifestOfTarballDep = await import(path.resolve('node_modules/tar-pkg-with-dep/package.json'))
+  t.equal(manifestOfTarballDep.dependencies['is-positive'], '^2.0.0', 'the tarball dependency content was reunpacked')
 })
 
 // Covers https://github.com/pnpm/pnpm/issues/1878