diff --git a/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/LSPXMLCatalogResolver.java b/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/LSPXMLCatalogResolver.java
new file mode 100644
index 0000000000..e771893dbd
--- /dev/null
+++ b/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/LSPXMLCatalogResolver.java
@@ -0,0 +1,33 @@
+package org.eclipse.lemminx.extensions.contentmodel.uriresolver;
+
+import java.io.IOException;
+
+import org.apache.xerces.impl.xs.XSDDescription;
+import org.apache.xerces.util.XMLCatalogResolver;
+import org.apache.xerces.xni.XMLResourceIdentifier;
+import org.apache.xerces.xni.XNIException;
+
+class LSPXMLCatalogResolver extends XMLCatalogResolver {
+
+	public LSPXMLCatalogResolver(String[] catalogs) {
+		super(catalogs);
+	}
+
+	@Override
+	public String resolveIdentifier(XMLResourceIdentifier resourceIdentifier) throws IOException, XNIException {
+		if (isXSDInclude(resourceIdentifier)) {
+			return resourceIdentifier.getExpandedSystemId();
+		}
+		return super.resolveIdentifier(resourceIdentifier);
+	}
+
+	private boolean isXSDInclude(XMLResourceIdentifier resourceIdentifier) {
+		if (resourceIdentifier != null && resourceIdentifier instanceof XSDDescription
+				&& resourceIdentifier.getNamespace() != null) {
+			XSDDescription description = (XSDDescription) resourceIdentifier;
+			int contextType = description.getContextType();
+			return contextType == XSDDescription.CONTEXT_INCLUDE || contextType == XSDDescription.CONTEXT_IMPORT;
+		}
+		return false;
+	}
+}
diff --git a/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/XMLCatalogResolverExtension.java b/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/XMLCatalogResolverExtension.java
index d684c65c3f..f0aeed0d04 100644
--- a/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/XMLCatalogResolverExtension.java
+++ b/org.eclipse.lemminx/src/main/java/org/eclipse/lemminx/extensions/contentmodel/uriresolver/XMLCatalogResolverExtension.java
@@ -120,7 +120,7 @@ public boolean setCatalogs(String[] catalogs) {
 				}
 			}
 			if (xmlCatalogFiles.size() > 0) {
-				XMLCatalogResolver catalogResolver = new XMLCatalogResolver(xmlCatalogFiles.toArray(new String[0]));
+				XMLCatalogResolver catalogResolver = new LSPXMLCatalogResolver(xmlCatalogFiles.toArray(new String[0]));
 				setCatalogResolver(catalogResolver);
 			} else {
 				setCatalogResolver(null);
diff --git a/org.eclipse.lemminx/src/test/java/org/eclipse/lemminx/extensions/contentmodel/XMLSchemaDiagnosticsTest.java b/org.eclipse.lemminx/src/test/java/org/eclipse/lemminx/extensions/contentmodel/XMLSchemaDiagnosticsTest.java
index 384492b1ac..788e5d9a30 100644
--- a/org.eclipse.lemminx/src/test/java/org/eclipse/lemminx/extensions/contentmodel/XMLSchemaDiagnosticsTest.java
+++ b/org.eclipse.lemminx/src/test/java/org/eclipse/lemminx/extensions/contentmodel/XMLSchemaDiagnosticsTest.java
@@ -1006,6 +1006,15 @@ public void diagnosticRelatedInformationWithSchemaLocationSyntaxProblem() throws
 				diagnostic);
 	}
 
+	@Test
+	public void testWithCatalogAndXSDInclude() throws BadLocationException {
+		String xml = "<document xmlns=\"http://foobar.com/test\">\r\n" + //
+				"	<page></page>\r\n" + //
+				"</document>";
+		Diagnostic diagnostic = d(1, 2, 1, 6, XMLSchemaErrorCode.cvc_complex_type_2_4_b);
+		XMLAssert.testDiagnosticsFor(xml, "src/test/resources/catalogs/include/catalog-include.xml", diagnostic);
+	}
+
 	private static void testDiagnosticsFor(String xml, Diagnostic... expected) {
 		XMLAssert.testDiagnosticsFor(xml, "src/test/resources/catalogs/catalog.xml", expected);
 	}
diff --git a/org.eclipse.lemminx/src/test/resources/catalogs/include/catalog-include.xml b/org.eclipse.lemminx/src/test/resources/catalogs/include/catalog-include.xml
new file mode 100644
index 0000000000..8a1f1c4b22
--- /dev/null
+++ b/org.eclipse.lemminx/src/test/resources/catalogs/include/catalog-include.xml
@@ -0,0 +1,5 @@
+<catalog xmlns="urn:oasis:names:tc:entity:xmlns:xml:catalog">
+  <uri
+      name="http://foobar.com/test"
+      uri="./test.xsd" />
+</catalog>
\ No newline at end of file
diff --git a/org.eclipse.lemminx/src/test/resources/catalogs/include/test-include.xsd b/org.eclipse.lemminx/src/test/resources/catalogs/include/test-include.xsd
new file mode 100644
index 0000000000..3350c15828
--- /dev/null
+++ b/org.eclipse.lemminx/src/test/resources/catalogs/include/test-include.xsd
@@ -0,0 +1,19 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<xs:schema xmlns:xs="http://www.w3.org/2001/XMLSchema" elementFormDefault="qualified" targetNamespace="http://foobar.com/test" xmlns:test="http://foobar.com/test">
+  <xs:element name="document">
+    <xs:complexType>
+      <xs:sequence>
+        <xs:element maxOccurs="unbounded" ref="test:page"/>
+      </xs:sequence>
+    </xs:complexType>
+  </xs:element>
+  <xs:element name="page" type="test:page-content"/>
+  <xs:complexType name="page-content">
+    <xs:sequence>
+      <xs:element ref="test:title"/>
+      <xs:element ref="test:content"/>
+    </xs:sequence>
+  </xs:complexType>
+  <xs:element name="title" type="xs:string"/>
+  <xs:element name="content" type="xs:string"/>
+</xs:schema>
\ No newline at end of file
diff --git a/org.eclipse.lemminx/src/test/resources/catalogs/include/test.xml b/org.eclipse.lemminx/src/test/resources/catalogs/include/test.xml
new file mode 100644
index 0000000000..139d9df704
--- /dev/null
+++ b/org.eclipse.lemminx/src/test/resources/catalogs/include/test.xml
@@ -0,0 +1,13 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<document xmlns="http://foobar.com/test">
+	<page>
+	<title></title><content></content></page>  
+<page>  
+    <title>Page 1</title>
+    <content>Content for page 1</content>
+  </page>
+  <page>
+    <title>Page 2</title>
+    <content>Content for page 2</content>
+  </page>
+</document>     
\ No newline at end of file
diff --git a/org.eclipse.lemminx/src/test/resources/catalogs/include/test.xsd b/org.eclipse.lemminx/src/test/resources/catalogs/include/test.xsd
new file mode 100644
index 0000000000..1f688d704b
--- /dev/null
+++ b/org.eclipse.lemminx/src/test/resources/catalogs/include/test.xsd
@@ -0,0 +1,4 @@
+<?xml version="1.0" encoding="UTF-8"?>
+<xs:schema xmlns:xs="http://www.w3.org/2001/XMLSchema" elementFormDefault="qualified" targetNamespace="http://foobar.com/test" xmlns:test="http://foobar.com/test">
+  <xs:include schemaLocation="test-include.xsd"/>
+</xs:schema> 
\ No newline at end of file