diff --git a/build/npm/dirs.js b/build/npm/dirs.js
new file mode 100644
index 00000000000..a6e2aec4067
--- /dev/null
+++ b/build/npm/dirs.js
@@ -0,0 +1,48 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+// Complete list of directories where yarn should be executed to install node modules
+exports.dirs = [
+	'',
+	'build',
+	'build/lib/watch',
+	'extensions',
+	'extensions/configuration-editing',
+	'extensions/css-language-features',
+	'extensions/css-language-features/server',
+	'extensions/debug-auto-launch',
+	'extensions/debug-server-ready',
+	'extensions/emmet',
+	'extensions/extension-editing',
+	'extensions/git',
+	'extensions/git-ui',
+	'extensions/github',
+	'extensions/github-authentication',
+	'extensions/grunt',
+	'extensions/gulp',
+	'extensions/html-language-features',
+	'extensions/html-language-features/server',
+	'extensions/image-preview',
+	'extensions/jake',
+	'extensions/json-language-features',
+	'extensions/json-language-features/server',
+	'extensions/markdown-language-features',
+	'extensions/merge-conflict',
+	'extensions/microsoft-authentication',
+	'extensions/npm',
+	'extensions/php-language-features',
+	'extensions/search-result',
+	'extensions/typescript-language-features',
+	'extensions/vscode-api-tests',
+	'extensions/vscode-colorize-tests',
+	'extensions/vscode-custom-editor-tests',
+	'extensions/vscode-notebook-tests',
+	'extensions/vscode-test-resolver',
+	'remote',
+	'remote/web',
+	'test/automation',
+	'test/integration/browser',
+	'test/smoke',
+];
diff --git a/build/npm/postinstall.js b/build/npm/postinstall.js
index 6a4d7a9f717..18ccef884a9 100644
--- a/build/npm/postinstall.js
+++ b/build/npm/postinstall.js
@@ -6,6 +6,7 @@
 const cp = require('child_process');
 const path = require('path');
 const fs = require('fs');
+const { dirs } = require('./dirs');
 const yarn = process.platform === 'win32' ? 'yarn.cmd' : 'yarn';
 
 /**
@@ -35,29 +36,39 @@ function yarnInstall(location, opts) {
 	}
 }
 
-yarnInstall('extensions'); // node modules shared by all extensions
+for (let dir of dirs) {
 
-if (!(process.platform === 'win32' && (process.arch === 'arm64' || process.env['npm_config_arch'] === 'arm64'))) {
-	const env = { ...process.env };
-	if (process.env['VSCODE_REMOTE_CC']) { env['CC'] = process.env['VSCODE_REMOTE_CC']; }
-	if (process.env['VSCODE_REMOTE_CXX']) { env['CXX'] = process.env['VSCODE_REMOTE_CXX']; }
-	if (process.env['VSCODE_REMOTE_NODE_GYP']) { env['npm_config_node_gyp'] = process.env['VSCODE_REMOTE_NODE_GYP']; }
-
-	yarnInstall('remote', { env }); // node modules used by vscode server
-	yarnInstall('remote/web'); // node modules used by vscode web
-}
-
-const allExtensionFolders = fs.readdirSync('extensions');
-const extensions = allExtensionFolders.filter(e => {
-	try {
-		let packageJSON = JSON.parse(fs.readFileSync(path.join('extensions', e, 'package.json')).toString());
-		return packageJSON && (packageJSON.dependencies || packageJSON.devDependencies);
-	} catch (e) {
-		return false;
+	if (dir === '') {
+		// `yarn` already executed in root
+		continue;
 	}
-});
 
-extensions.forEach(extension => yarnInstall(`extensions/${extension}`, { ignoreEngines: true }));
+	if (/^remote/.test(dir) && process.platform === 'win32' && (process.arch === 'arm64' || process.env['npm_config_arch'] === 'arm64')) {
+		// windows arm: do not execute `yarn` on remote folder
+		continue;
+	}
+
+	if (dir === 'build/lib/watch') {
+		// node modules for watching, specific to host node version, not electron
+		yarnInstallBuildDependencies();
+		continue;
+	}
+
+	let opts;
+
+	if (dir === 'remote') {
+		// node modules used by vscode server
+		const env = { ...process.env };
+		if (process.env['VSCODE_REMOTE_CC']) { env['CC'] = process.env['VSCODE_REMOTE_CC']; }
+		if (process.env['VSCODE_REMOTE_CXX']) { env['CXX'] = process.env['VSCODE_REMOTE_CXX']; }
+		if (process.env['VSCODE_REMOTE_NODE_GYP']) { env['npm_config_node_gyp'] = process.env['VSCODE_REMOTE_NODE_GYP']; }
+		opts = { env };
+	} else if (/^extensions\//.test(dir)) {
+		opts = { ignoreEngines: true };
+	}
+
+	yarnInstall(dir, opts);
+}
 
 function yarnInstallBuildDependencies() {
 	// make sure we install the deps of build/lib/watch for the system installed
@@ -77,10 +88,4 @@ runtime "${runtime}"`;
 	yarnInstall(watchPath);
 }
 
-yarnInstall(`build`); // node modules required for build
-yarnInstall('test/automation'); // node modules required for smoketest
-yarnInstall('test/smoke'); // node modules required for smoketest
-yarnInstall('test/integration/browser'); // node modules required for integration
-yarnInstallBuildDependencies(); // node modules for watching, specific to host node version, not electron
-
 cp.execSync('git config pull.rebase true');
diff --git a/extensions/css-language-features/package.json b/extensions/css-language-features/package.json
index 3a7c2a49058..f905a2b67ec 100644
--- a/extensions/css-language-features/package.json
+++ b/extensions/css-language-features/package.json
@@ -22,7 +22,6 @@
     "compile": "gulp compile-extension:css-language-features-client compile-extension:css-language-features-server",
     "watch": "gulp watch-extension:css-language-features-client watch-extension:css-language-features-server",
     "test": "node ../../node_modules/mocha/bin/mocha",
-    "postinstall": "cd server && yarn install",
     "install-client-next": "yarn add vscode-languageclient@next"
   },
   "categories": [
diff --git a/extensions/html-language-features/package.json b/extensions/html-language-features/package.json
index ec59830eb1a..be84bf07b05 100644
--- a/extensions/html-language-features/package.json
+++ b/extensions/html-language-features/package.json
@@ -20,7 +20,6 @@
   "scripts": {
     "compile": "npx gulp compile-extension:html-language-features-client compile-extension:html-language-features-server",
     "watch": "npx gulp watch-extension:html-language-features-client watch-extension:html-language-features-server",
-    "postinstall": "cd server && yarn install",
     "install-client-next": "yarn add vscode-languageclient@next"
   },
   "categories": [
diff --git a/extensions/json-language-features/package.json b/extensions/json-language-features/package.json
index 61744a22209..c36b2e6a359 100644
--- a/extensions/json-language-features/package.json
+++ b/extensions/json-language-features/package.json
@@ -20,7 +20,6 @@
     "scripts": {
         "compile": "gulp compile-extension:json-language-features-client compile-extension:json-language-features-server",
         "watch": "gulp watch-extension:json-language-features-client watch-extension:json-language-features-server",
-        "postinstall": "cd server && yarn install",
         "install-client-next": "yarn add vscode-languageclient@next"
     },
     "categories": [