diff --git a/tools/ci/test_build_system_cmake.sh b/tools/ci/test_build_system_cmake.sh
index 81ed61ff5..de4de4985 100755
--- a/tools/ci/test_build_system_cmake.sh
+++ b/tools/ci/test_build_system_cmake.sh
@@ -258,6 +258,41 @@ EOF
         || failure "Custom bootloader source files should be built instead of the original's"
     rm -rf components
 
+    print_status "Empty directory not treated as a component"
+    clean_build_dir
+    mkdir -p components/esp32 && idf.py reconfigure
+    ! grep "$PWD/components/esp32"  $PWD/build/project_description.json || failure "Failed to build with empty esp32 directory in components"
+    rm -rf components
+
+    print_status "If a component directory is added to COMPONENT_DIRS, its subdirectories are not added"
+    clean_build_dir
+    mkdir -p main/test
+    echo "register_component()" > main/test/CMakeLists.txt
+    idf.py reconfigure
+    ! grep "$PWD/main/test" $PWD/build/project_description.json || failure "COMPONENT_DIRS has added component subdirectory to the build"
+    grep "$PWD/main" $PWD/build/project_description.json || failure "COMPONENT_DIRS parent component directory should be included in the build"
+    rm -rf main/test
+
+    print_status "If a component directory is added to COMPONENT_DIRS, its sibling directories are not added"
+    clean_build_dir
+    mkdir -p mycomponents/mycomponent 
+    echo "register_component()" > mycomponents/mycomponent/CMakeLists.txt
+    # first test by adding single component directory to EXTRA_COMPONENT_DIRS
+    mkdir -p mycomponents/esp32
+    echo "register_component()" > mycomponents/esp32/CMakeLists.txt
+    idf.py reconfigure -DEXTRA_COMPONENT_DIRS=$PWD/mycomponents/mycomponent 
+    ! grep "$PWD/mycomponents/esp32" $PWD/build/project_description.json || failure "EXTRA_COMPONENT_DIRS has added a sibling directory"
+    grep "$PWD/mycomponents/mycomponent" $PWD/build/project_description.json || failure "EXTRA_COMPONENT_DIRS valid sibling directory should be in the build"
+    rm -rf mycomponents/esp32
+    # now the same thing, but add a components directory
+    mkdir -p esp32
+    echo "register_component()" > esp32/CMakeLists.txt
+    idf.py reconfigure -DEXTRA_COMPONENT_DIRS=$PWD/mycomponents 
+    ! grep "$PWD/esp32" $PWD/build/project_description.json || failure "EXTRA_COMPONENT_DIRS has added a sibling directory"
+    grep "$PWD/mycomponents/mycomponent" $PWD/build/project_description.json || failure "EXTRA_COMPONENT_DIRS valid sibling directory should be in the build"
+    rm -rf esp32
+    rm -rf mycomponents
+
     print_status "All tests completed"
     if [ -n "${FAILURES}" ]; then
         echo "Some failures were detected:"
diff --git a/tools/cmake/scripts/expand_requirements.cmake b/tools/cmake/scripts/expand_requirements.cmake
index 1918e1073..613bcc6b9 100644
--- a/tools/cmake/scripts/expand_requirements.cmake
+++ b/tools/cmake/scripts/expand_requirements.cmake
@@ -102,51 +102,49 @@ endfunction()
 # earlier in the component_dirs list take precedence.
 function(components_find_all component_dirs component_paths component_names test_component_names)
     # component_dirs entries can be files or lists of files
-    set(paths "")
-    set(names "")
-    set(test_names "")
+    set(_paths "")
+    set(_names "")
+    set(_test_names "")
 
     # start by expanding the component_dirs list with all subdirectories
     foreach(dir ${component_dirs})
-        # Iterate any subdirectories for values
-        file(GLOB subdirs LIST_DIRECTORIES true "${dir}/*")
-        foreach(subdir ${subdirs})
-            set(component_dirs "${component_dirs};${subdir}")
-        endforeach()
-    endforeach()
-
-    # Look for a component in each component_dirs entry
-    foreach(dir ${component_dirs})
-        debug("Looking for CMakeLists.txt in ${dir}")
-        file(GLOB component "${dir}/CMakeLists.txt")
-        if(component)
-            debug("CMakeLists.txt file ${component}")
-            get_filename_component(component "${component}" DIRECTORY)
-            get_filename_component(name "${component}" NAME)
+        if(EXISTS ${dir}/CMakeLists.txt)
+            get_filename_component(_path "${dir}" ABSOLUTE)
+            get_filename_component(_name "${_path}" NAME)
             if(NOT name IN_LIST names)
-                list(APPEND names "${name}")
-                list(APPEND paths "${component}")
-
-                # Look for test component directory
-                file(GLOB test "${component}/test/CMakeLists.txt")
-                if(test)
-                    list(APPEND test_names "${name}")
-                endif()
+                list(APPEND _names "${_name}")
+                list(APPEND _paths "${_path}")
             endif()
-        else()  # no CMakeLists.txt file
-            # test for legacy component.mk and warn
-            file(GLOB legacy_component "${dir}/component.mk")
-            if(legacy_component)
+
+            if(EXISTS "${_path}/test/CMakeLists.txt")
+                list(APPEND _test_names "${_name}")
+            endif()
+        else()
+            if(EXISTS ${dir}/component.mk)
                 get_filename_component(legacy_component "${legacy_component}" DIRECTORY)
                 message(WARNING "Component ${legacy_component} contains old-style component.mk but no CMakeLists.txt. "
                     "Component will be skipped.")
+            else()
+                if(NOT __recursing) # recurse only once
+                    file(GLOB subdirs LIST_DIRECTORIES true "${dir}/*")
+
+                    set(__recursing 1)
+                    components_find_all("${subdirs}" __paths __names __test_names)
+                    set(__recursing 0)
+
+                    if(__paths)
+                        list(APPEND _paths "${__paths}")
+                        list(APPEND _names "${__names}")
+                        list(APPEND _test_names "${__test_names}")
+                    endif()
+                endif()
             endif()
         endif()
     endforeach()
 
-    set(${component_paths} ${paths} PARENT_SCOPE)
-    set(${component_names} ${names} PARENT_SCOPE)
-    set(${test_component_names} ${test_names} PARENT_SCOPE)
+    set(${test_component_names} "${_test_names}" PARENT_SCOPE)
+    set(${component_paths} "${_paths}" PARENT_SCOPE)
+    set(${component_names} "${_names}" PARENT_SCOPE)
 endfunction()