diff --git a/slug.go b/slug.go
index 4f6ca94..be0c66e 100644
--- a/slug.go
+++ b/slug.go
@@ -149,14 +149,21 @@ func packWalkFn(root, src, dst string, tarW *tar.Writer, meta *Meta, dereference
 			return nil
 		}
 
-		if m := matchIgnoreRule(subpath, ignoreRules); m {
-			return nil
+		if m, r := matchIgnoreRule(subpath, ignoreRules); m && !(r.val == "**/*" && info.IsDir()) {
+			if info.IsDir() {
+				return filepath.SkipDir
+			} else {
+				return nil
+			}
 		}
 
 		// Catch directories so we don't end up with empty directories,
 		// the files are ignored correctly
 		if info.IsDir() {
-			if m := matchIgnoreRule(subpath+string(os.PathSeparator), ignoreRules); m {
+			if m, r := matchIgnoreRule(subpath+string(os.PathSeparator), ignoreRules); m {
+				if r.val != "**/*" { // Represents the `*` rule
+					return filepath.SkipDir
+				}
 				return nil
 			}
 		}
diff --git a/slug_test.go b/slug_test.go
index 20a611f..ae9c052 100644
--- a/slug_test.go
+++ b/slug_test.go
@@ -75,7 +75,7 @@ func TestPack(t *testing.T) {
 	// except for the .terraform/modules subdirectory.
 	for _, file := range fileList {
 		if strings.HasPrefix(file, ".terraform"+string(filepath.Separator)) &&
-			!strings.HasPrefix(file, filepath.Clean(".terraform/modules")) {
+			!strings.HasPrefix(file, filepath.Clean(".terraform/modules")) && file != ".terraform"+string(filepath.Separator) {
 			t.Fatalf("unexpected .terraform content: %s", file)
 		}
 	}
diff --git a/terraformignore.go b/terraformignore.go
index 4f478be..29748a4 100644
--- a/terraformignore.go
+++ b/terraformignore.go
@@ -74,22 +74,28 @@ func readRules(input io.Reader) []rule {
 	return rules
 }
 
-func matchIgnoreRule(path string, rules []rule) bool {
-	matched := false
+func matchIgnoreRule(path string, rules []rule) (bool, *rule) {
+	var matched *rule = nil
 	path = filepath.FromSlash(path)
-	for _, rule := range rules {
+	for idx := range rules {
+		rule := &rules[idx]
 		match, _ := rule.match(path)
 
 		if match {
-			matched = !rule.excluded
+			if rule.excluded {
+				return false, rule
+			}
+			if rule.val != "**/*" || matched == nil {
+				matched = rule
+			}
 		}
 	}
 
-	if matched {
+	if matched != nil {
 		debug(true, path, "Skipping excluded path:", path)
 	}
 
-	return matched
+	return matched != nil, matched
 }
 
 type rule struct {
@@ -200,9 +206,13 @@ var defaultExclusions = []rule{
 		excluded: false,
 	},
 	{
-		val:      filepath.Join("**", ".terraform", "**"),
+		val:      filepath.Join("**", ".terraform", "?**"),
 		excluded: false,
 	},
+	{
+		val:      filepath.Join("**", ".terraform", "modules"),
+		excluded: true,
+	},
 	{
 		val:      filepath.Join("**", ".terraform", "modules", "**"),
 		excluded: true,
diff --git a/terraformignore_test.go b/terraformignore_test.go
index a5a13ac..1063c1a 100644
--- a/terraformignore_test.go
+++ b/terraformignore_test.go
@@ -7,7 +7,7 @@ import (
 func TestTerraformIgnore(t *testing.T) {
 	// path to directory without .terraformignore
 	p := parseIgnoreFile("testdata/external-dir")
-	if len(p) != 3 {
+	if len(p) != 4 {
 		t.Fatal("A directory without .terraformignore should get the default patterns")
 	}
 
@@ -22,6 +22,10 @@ func TestTerraformIgnore(t *testing.T) {
 	paths := []file{
 		{
 			path:  ".terraform/",
+			match: false,
+		},
+		{
+			path:  ".terraform/plugins",
 			match: true,
 		},
 		{
@@ -106,7 +110,7 @@ func TestTerraformIgnore(t *testing.T) {
 		},
 	}
 	for i, p := range paths {
-		match := matchIgnoreRule(p.path, ignoreRules)
+		match, _ := matchIgnoreRule(p.path, ignoreRules)
 		if match != p.match {
 			t.Fatalf("%s at index %d should be %t", p.path, i, p.match)
 		}