diff --git a/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduleone.mod b/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduleone.mod
--- a/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduleone.mod
+++ b/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduleone.mod
@@ -1,5 +1,3 @@
-!mod$ v1 sum:449b70509dd4bce3
+!mod$ v1 sum:d380ce014c8955d8
 module basictestmoduleone
-type::t2
-end type
 end
diff --git a/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduletwo.mod b/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduletwo.mod
--- a/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduletwo.mod
+++ b/flang/test/Flang-Driver/Inputs/module-dir/basictestmoduletwo.mod
@@ -1,3 +1,5 @@
-!mod$ v1 sum:563b9a1f049282d2
+!mod$ v1 sum:6c4101164527e745
 module basictestmoduletwo
+type::t2
+end type
 end
diff --git a/flang/test/Flang-Driver/include-module.f90 b/flang/test/Flang-Driver/include-module.f90
deleted file mode 100644
--- a/flang/test/Flang-Driver/include-module.f90
+++ /dev/null
@@ -1,56 +0,0 @@
-! Ensure argument -I works as expected with module files.
-
-! REQUIRES: new-flang-driver
-
-!--------------------------
-! FLANG DRIVER (flang-new)
-!--------------------------
-! RUN: not %flang-new -fsyntax-only -I %S/Inputs -I %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED
-! RUN: not %flang-new -fsyntax-only -I %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
-! RUN: not %flang-new -fsyntax-only -I %S/Inputs -J %S/Inputs/module-dir %s 2>&1 | FileCheck %s --check-prefix=INCLUDED
-! RUN: not %flang-new -fsyntax-only -J %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
-! RUN: not %flang-new -fsyntax-only -I %S/Inputs -module-dir %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED
-! RUN: not %flang-new -fsyntax-only -module-dir %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
-! RUN: not %flang-new -fsyntax-only -J %S/Inputs/module-dir -J %S/Inputs/ %s  2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
-! RUN: not %flang-new -fsyntax-only -J %S/Inputs/module-dir -module-dir %S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
-! RUN: not %flang-new -fsyntax-only -module-dir %S/Inputs/module-dir -J%S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
-
-!-----------------------------------------
-! FRONTEND FLANG DRIVER (flang-new -fc1)
-!-----------------------------------------
-! RUN: not %flang-new -fc1 -fsyntax-only -I %S/Inputs -I %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED
-! RUN: not %flang-new -fc1 -fsyntax-only -I %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
-! RUN: not %flang-new -fc1 -fsyntax-only -I %S/Inputs -J %S/Inputs/module-dir %s 2>&1 | FileCheck %s --check-prefix=INCLUDED
-! RUN: not %flang-new -fc1 -fsyntax-only -J %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
-! RUN: not %flang-new -fc1 -fsyntax-only -I %S/Inputs -module-dir %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED
-! RUN: not %flang-new -fc1 -fsyntax-only -module-dir %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
-! RUN: not %flang-new -fc1 -fsyntax-only -J %S/Inputs/module-dir -J %S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
-! RUN: not %flang-new -fc1 -fsyntax-only -J %S/Inputs/module-dir -module-dir %S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
-! RUN: not %flang-new -fc1 -fsyntax-only -module-dir %S/Inputs/module-dir -J%S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
-
-!-----------------------------------------
-! EXPECTED OUTPUT FOR MISSING MODULE FILE
-!-----------------------------------------
-! SINGLEINCLUDE:error: Cannot read module file for module 'basictestmoduletwo'
-! SINGLEINCLUDE-NOT:error: Cannot read module file for module 'basictestmoduletwo'
-! SINGLEINCLUDE-NOT:error: Derived type 't1' not found
-! SINGLEINCLUDE:error: Derived type 't2' not found
-
-!-----------------------------------------
-! EXPECTED OUTPUT FOR MISSING MODULE FILE
-!-----------------------------------------
-! DOUBLEINCLUDE:error: Only one '-module-dir/-J' option allowed
-
-!---------------------------------------
-! EXPECTED OUTPUT FOR ALL MODULES FOUND
-!---------------------------------------
-! INCLUDED-NOT:error: Cannot read module file
-! INCLUDED-NOT:error: Derived type 't1' not found
-! INCLUDED:error: Derived type 't2' not found
-
-program test_dash_I_with_mod_files
-    USE basictestmoduleone
-    USE basictestmoduletwo
-    type(t1) :: x1 ! t1 defined in Inputs/basictestmoduleone.mod
-    type(t2) :: x2 ! t2 defined in Inputs/module-dir/basictestmoduleone.mod
-end
diff --git a/flang/test/Flang-Driver/use-module-error.f90 b/flang/test/Flang-Driver/use-module-error.f90
new file mode 100644
--- /dev/null
+++ b/flang/test/Flang-Driver/use-module-error.f90
@@ -0,0 +1,25 @@
+! Ensure that multiple module directories are not allowed
+
+! REQUIRES: new-flang-driver
+
+!--------------------------
+! FLANG DRIVER (flang-new)
+!--------------------------
+! RUN: not %flang -fsyntax-only -J %S/Inputs/module-dir -J %S/Inputs/ %s  2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
+! RUN: not %flang -fsyntax-only -J %S/Inputs/module-dir -module-dir %S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
+! RUN: not %flang -fsyntax-only -module-dir %S/Inputs/module-dir -J%S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
+
+!-----------------------------------------
+! FRONTEND FLANG DRIVER (flang-new -fc1)
+!-----------------------------------------
+! RUN: not %flang_fc1 -fsyntax-only -J %S/Inputs/module-dir -J %S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
+! RUN: not %flang_fc1 -fsyntax-only -J %S/Inputs/module-dir -module-dir %S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
+! RUN: not %flang_fc1 -fsyntax-only -module-dir %S/Inputs/module-dir -J%S/Inputs/ %s 2>&1 | FileCheck %s --check-prefix=DOUBLEINCLUDE
+
+!-----------------------------------------
+! EXPECTED OUTPUT FOR MISSING MODULE FILE
+!-----------------------------------------
+! DOUBLEINCLUDE:error: Only one '-module-dir/-J' option allowed
+
+program too_many_module_dirs
+end
diff --git a/flang/test/Flang-Driver/use-module.f90 b/flang/test/Flang-Driver/use-module.f90
new file mode 100644
--- /dev/null
+++ b/flang/test/Flang-Driver/use-module.f90
@@ -0,0 +1,60 @@
+! Checks that module search directories specified with `-J/-module-dir` and `-I` are handled correctly
+
+!--------------------------
+! FLANG DRIVER (flang-new)
+!--------------------------
+! RUN: %flang -fsyntax-only -I %S/Inputs -I %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED --allow-empty
+! RUN: %flang -fsyntax-only -I %S/Inputs -J %S/Inputs/module-dir %s 2>&1 | FileCheck %s --check-prefix=INCLUDED --allow-empty
+! RUN: %flang -fsyntax-only -I %S/Inputs -module-dir %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED --allow-empty
+
+! RUN: not %flang -fsyntax-only -I %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=MISSING_MOD2
+! RUN: not %flang -fsyntax-only -J %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=MISSING_MOD2
+! RUN: not %flang -fsyntax-only -module-dir %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=MISSING_MOD2
+
+! RUN: not %flang -fsyntax-only -I %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
+! RUN: not %flang -fsyntax-only -J %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
+! RUN: not %flang -fsyntax-only -module-dir %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
+
+!-----------------------------------------
+! FRONTEND FLANG DRIVER (flang-new -fc1)
+!-----------------------------------------
+! RUN: %flang_fc1 -fsyntax-only -I %S/Inputs -I %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED --allow-empty
+! RUN: %flang_fc1 -fsyntax-only -I %S/Inputs -J %S/Inputs/module-dir %s 2>&1 | FileCheck %s --check-prefix=INCLUDED --allow-empty
+! RUN: %flang_fc1 -fsyntax-only -I %S/Inputs -module-dir %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=INCLUDED --allow-empty
+
+! RUN: not %flang_fc1 -fsyntax-only -I %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=MISSING_MOD2
+! RUN: not %flang_fc1 -fsyntax-only -J %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=MISSING_MOD2
+! RUN: not %flang_fc1 -fsyntax-only -module-dir %S/Inputs %s  2>&1 | FileCheck %s --check-prefix=MISSING_MOD2
+
+! RUN: not %flang_fc1 -fsyntax-only -I %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
+! RUN: not %flang_fc1 -fsyntax-only -J %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
+! RUN: not %flang_fc1 -fsyntax-only -module-dir %S/Inputs/module-dir %s  2>&1 | FileCheck %s --check-prefix=SINGLEINCLUDE
+
+!------------------------------------
+! EXPECTED OUTPUT: all modules found
+!------------------------------------
+! INCLUDED-NOT: error
+
+!------------------------------------------------------------------
+! EXPECTED OUTPUT: include dir for `basictestingmoduletwo` is missing
+!------------------------------------------------------------------
+! MISSING_MOD2-NOT:error: Cannot read module file for module 'basictestmoduleone''
+! MISSING_MOD2-NOT:error: Derived type 't1' not found
+! MISSING_MOD2:error: Cannot read module file for module 'basictestmoduletwo'
+! MISSING_MOD2:error: Derived type 't2' not found
+
+!----------------------------------------------------------------------
+! EXPECTED OUTPUT: `Inputs` is not included, and hence `t1` is undefined
+!---------------------------------------------------------------------
+! SINGLEINCLUDE-NOT:error: Cannot read module file for module 'basictestmoduleone'
+! SINGLEINCLUDE:error: Derived type 't1' not found
+! SINGLEINCLUDE-NOT:error: Cannot read module file for module 'basictestmoduletwo'
+! SINGLEINCLUDE-NOT:error: Derived type 't2' not found
+
+
+program test_search_dirs_for_mod_files
+    USE basictestmoduleone
+    USE basictestmoduletwo
+    type(t1) :: x1 ! t1 defined in Inputs/basictestmoduleone.mod
+    type(t2) :: x2 ! t2 defined in Inputs/module-dir/basictestmoduleone.mod
+end