diff --git a/cabal-testsuite/PackageTests/Install/T7297-8909-7236/cabal.test.hs b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/cabal.test.hs
index 729108f273f..2583cdac2e3 100644
--- a/cabal-testsuite/PackageTests/Install/T7297-8909-7236/cabal.test.hs
+++ b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/cabal.test.hs
@@ -11,6 +11,9 @@ main = cabalTest $ do
         runInstalledExe' "my-exe" []
           >>= assertOutputContains ("hi" ++ show v)
 
+      installExternalWithTgt tgt v = withRepo "repo" (installWithTgt tgt v)
+
+
     cabal "install" (commonOpts 1) -- no target
     runInstalledExe' "my-exe" []
       >>= assertOutputContains "hi1"
@@ -20,3 +23,6 @@ main = cabalTest $ do
     installWithTgt "my-exe" 4
     installWithTgt "all" 5
     installWithTgt "all:exes" 6
+
+    -- And test it works when installing from an external repo (think Hackage)
+    installExternalWithTgt "external-lib" 2
diff --git a/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/CHANGELOG.md b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/CHANGELOG.md
new file mode 100644
index 00000000000..fbf078ff958
--- /dev/null
+++ b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/CHANGELOG.md
@@ -0,0 +1,5 @@
+# Revision history for external-lib0100
+
+## 0.1.0.0 -- YYYY-mm-dd
+
+* First version. Released on an unsuspecting world.
diff --git a/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/Main.hs b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/Main.hs
new file mode 100644
index 00000000000..38bfcb0221f
--- /dev/null
+++ b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/Main.hs
@@ -0,0 +1,25 @@
+{-# LANGUAGE CPP #-}
+
+#ifdef TEST1
+main = putStrLn "hi1"
+#endif
+
+#ifdef TEST2
+main = putStrLn "hi2"
+#endif
+
+#ifdef TEST3
+main = putStrLn "hi3"
+#endif
+
+#ifdef TEST4
+main = putStrLn "hi4"
+#endif
+
+#ifdef TEST5
+main = putStrLn "hi5"
+#endif
+
+#ifdef TEST6
+main = putStrLn "hi6"
+#endif
diff --git a/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/external-lib.cabal b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/external-lib.cabal
new file mode 100644
index 00000000000..bc501812d3b
--- /dev/null
+++ b/cabal-testsuite/PackageTests/Install/T7297-8909-7236/repo/external-lib-0.1.0.0/external-lib.cabal
@@ -0,0 +1,18 @@
+cabal-version:   3.0
+name:            external-lib
+version:         0.1.0.0
+license:         NONE
+author:          matthewtpickering@gmail.com
+maintainer:      Matthew Pickering
+build-type:      Simple
+extra-doc-files: CHANGELOG.md
+
+common warnings
+    ghc-options: -Wall
+
+executable my-exe
+    import:           warnings
+    main-is: Main.hs
+    build-depends:    base
+    hs-source-dirs:   .
+    default-language: Haskell2010