diff --git a/lib/plugin.js b/lib/plugin.js
index 6e159719b..81337bf3c 100644
--- a/lib/plugin.js
+++ b/lib/plugin.js
@@ -11,7 +11,11 @@ module.exports = class VueLoaderPlugin {
 
     // find the rule that applies to vue files
     const vueRuleIndex = rawRules.findIndex((rule, i) => {
-      return !rule.enforce && rawNormalizedRules[i].resource(`foo.vue`)
+      // #1201 we need to skip the `include` check when locating the vue rule
+      const clone = Object.assign({}, rule)
+      delete clone.include
+      const normalized = RuleSet.normalizeRule(clone)
+      return !rule.enforce && normalized.resource(`foo.vue`)
     })
     const vueRule = rawRules[vueRuleIndex]
 
diff --git a/test/edgeCases.spec.js b/test/edgeCases.spec.js
new file mode 100644
index 000000000..96661a628
--- /dev/null
+++ b/test/edgeCases.spec.js
@@ -0,0 +1,34 @@
+const {
+  mockRender,
+  mockBundleAndRun
+} = require('./utils')
+
+const normalizeNewline = require('normalize-newline')
+
+test('vue rule with include', done => {
+  mockBundleAndRun({
+    entry: 'basic.vue',
+    modify: config => {
+      config.module.rules[0] = {
+        test: /\.vue$/,
+        include: /fixtures/,
+        loader: 'vue-loader'
+      }
+    }
+  }, ({ window, module, rawModule }) => {
+    const vnode = mockRender(module, {
+      msg: 'hi'
+    })
+
+    // <h2 class="red">{{msg}}</h2>
+    expect(vnode.tag).toBe('h2')
+    expect(vnode.data.staticClass).toBe('red')
+    expect(vnode.children[0].text).toBe('hi')
+
+    expect(module.data().msg).toContain('Hello from Component A!')
+    let style = window.document.querySelector('style').textContent
+    style = normalizeNewline(style)
+    expect(style).toContain('comp-a h2 {\n  color: #f00;\n}')
+    done()
+  })
+})