diff --git a/cli/args/flags.rs b/cli/args/flags.rs
index 85b8abefe1..f40d5aed41 100644
--- a/cli/args/flags.rs
+++ b/cli/args/flags.rs
@@ -1909,10 +1909,10 @@ On the first invocation with deno will download the proper binary and cache it i
         Arg::new("include")
           .long("include")
           .help(
-            cstr!("Includes an additional module or local data file in the compiled executable.
+            cstr!("Includes an additional module or file/directory in the compiled executable.
   <p(245)>Use this flag if a dynamically imported module or a web worker main module
-  fails to load in the executable or to embed a file in the executable. This flag can
-  be passed multiple times, to include multiple additional modules.</>",
+  fails to load in the executable or to embed a file or directory in the executable.
+  This flag can be passed multiple times, to include multiple additional modules.</>",
           ))
           .action(ArgAction::Append)
           .value_hint(ValueHint::FilePath)
diff --git a/cli/standalone/binary.rs b/cli/standalone/binary.rs
index 8153993137..39e508dc3b 100644
--- a/cli/standalone/binary.rs
+++ b/cli/standalone/binary.rs
@@ -620,9 +620,17 @@ impl<'a> DenoCompileBinaryWriter<'a> {
     };
     for include_file in include_files {
       let path = deno_path_util::url_to_file_path(include_file)?;
-      vfs
-        .add_file_at_path(&path)
-        .with_context(|| format!("Including {}", path.display()))?;
+      if path.is_dir() {
+        // TODO(#26941): we should analyze if any of these are
+        // modules in order to include their dependencies
+        vfs
+          .add_dir_recursive(&path)
+          .with_context(|| format!("Including {}", path.display()))?;
+      } else {
+        vfs
+          .add_file_at_path(&path)
+          .with_context(|| format!("Including {}", path.display()))?;
+      }
     }
     let mut remote_modules_store = RemoteModulesStoreBuilder::default();
     let mut code_cache_key_hasher = if self.cli_options.code_cache_enabled() {
diff --git a/tests/specs/compile/include_folder/__test__.jsonc b/tests/specs/compile/include_folder/__test__.jsonc
new file mode 100644
index 0000000000..eeaea53b65
--- /dev/null
+++ b/tests/specs/compile/include_folder/__test__.jsonc
@@ -0,0 +1,24 @@
+{
+  "tempDir": true,
+  "steps": [{
+    "if": "unix",
+    "args": "compile --allow-read=data --include data --output main main.js",
+    "output": "[WILDCARD]"
+  }, {
+    "if": "unix",
+    "commandName": "./main",
+    "args": [],
+    "output": "output.out",
+    "exitCode": 0
+  }, {
+    "if": "windows",
+    "args": "compile --allow-read=data --include data --output main.exe main.js",
+    "output": "[WILDCARD]"
+  }, {
+    "if": "windows",
+    "commandName": "./main.exe",
+    "args": [],
+    "output": "output.out",
+    "exitCode": 0
+  }]
+}
diff --git a/tests/specs/compile/include_folder/data/a.txt b/tests/specs/compile/include_folder/data/a.txt
new file mode 100644
index 0000000000..7898192261
--- /dev/null
+++ b/tests/specs/compile/include_folder/data/a.txt
@@ -0,0 +1 @@
+a
diff --git a/tests/specs/compile/include_folder/data/b.txt b/tests/specs/compile/include_folder/data/b.txt
new file mode 100644
index 0000000000..6178079822
--- /dev/null
+++ b/tests/specs/compile/include_folder/data/b.txt
@@ -0,0 +1 @@
+b
diff --git a/tests/specs/compile/include_folder/main.js b/tests/specs/compile/include_folder/main.js
new file mode 100644
index 0000000000..831d26167f
--- /dev/null
+++ b/tests/specs/compile/include_folder/main.js
@@ -0,0 +1,8 @@
+const dataDir = import.meta.dirname + "/data";
+const files = Array.from(
+  Deno.readDirSync(dataDir).map((entry) => dataDir + "/" + entry.name),
+);
+files.sort();
+for (const file of files) {
+  console.log(Deno.readTextFileSync(file).trim());
+}
diff --git a/tests/specs/compile/include_folder/output.out b/tests/specs/compile/include_folder/output.out
new file mode 100644
index 0000000000..422c2b7ab3
--- /dev/null
+++ b/tests/specs/compile/include_folder/output.out
@@ -0,0 +1,2 @@
+a
+b