diff --git a/cmd/atlas/internal/cmdext/reader.go b/cmd/atlas/internal/cmdext/reader.go
index 1d27a2fa974..c52a5d059b3 100644
--- a/cmd/atlas/internal/cmdext/reader.go
+++ b/cmd/atlas/internal/cmdext/reader.go
@@ -313,18 +313,22 @@ func parseHCLPaths(paths ...string) (*hclparse.Parser, error) {
 		case err != nil:
 			return nil, err
 		case stat.IsDir():
-			dir, err := os.ReadDir(path)
-			if err != nil {
-				return nil, err
-			}
-			for _, f := range dir {
-				// Skip nested dirs.
-				if f.IsDir() {
-					continue
+			err := filepath.Walk(path, func(fp string, info os.FileInfo, err error) error {
+				if err != nil {
+					return err
 				}
-				if err := mayParse(p, filepath.Join(path, f.Name())); err != nil {
-					return nil, err
+				if info.IsDir() {
+					return nil
 				}
+				if filepath.Ext(fp) == FileTypeHCL || strings.HasSuffix(fp, FileTypeTest) {
+					if err := mayParse(p, fp); err != nil {
+						return err
+					}
+				}
+				return nil
+			})
+			if err != nil {
+				return nil, err
 			}
 		default:
 			if err := mayParse(p, path); err != nil {