diff --git a/kyaml/kio/filters/container.go b/kyaml/kio/filters/container.go
index 50a411de6..705b39f0f 100644
--- a/kyaml/kio/filters/container.go
+++ b/kyaml/kio/filters/container.go
@@ -225,6 +225,11 @@ func (c *ContainerFilter) scope(dir string, nodes []*yaml.RNode) ([]*yaml.RNode,
 		}
 
 		resourceDir := path.Clean(path.Dir(p))
+		if path.Base(resourceDir) == functionsDirectoryName {
+			// Functions in the `functions` directory are scoped to
+			// themselves, and should see themselves as input
+			resourceDir = path.Dir(resourceDir)
+		}
 		if !strings.HasPrefix(resourceDir, dir) {
 			// this Resource doesn't fall under the function scope if it
 			// isn't in a subdirectory of where the function lives
diff --git a/kyaml/kio/filters/container_test.go b/kyaml/kio/filters/container_test.go
index 441f43a7f..c8152f128 100644
--- a/kyaml/kio/filters/container_test.go
+++ b/kyaml/kio/filters/container_test.go
@@ -868,3 +868,26 @@ metadata:
     config.kubernetes.io/index: '1'
 `, b.String())
 }
+
+func TestContainerFilter_scope(t *testing.T) {
+	cf := &ContainerFilter{}
+
+	fnR, err := yaml.Parse(`apiVersion: config.kubernetes.io/v1beta1
+kind: ConfigFunction
+metadata:
+  name: config-function
+  annotations:
+    config.kubernetes.io/path: 'functions/bar.yaml'
+`)
+	if !assert.NoError(t, err) {
+		return
+	}
+
+	inRs := []*yaml.RNode{fnR}
+	inScopeRs, notInScopeRs, err := cf.scope(".", inRs)
+	if !assert.NoError(t, err) {
+		return
+	}
+	assert.Len(t, inScopeRs, 1, "Number of in-scope Resources")
+	assert.Len(t, notInScopeRs, 0, "Number of out-of-scope Resources")
+}