diff --git a/lib/npm-installation-manager.ts b/lib/npm-installation-manager.ts
index 1fc8015910..462865fabc 100644
--- a/lib/npm-installation-manager.ts
+++ b/lib/npm-installation-manager.ts
@@ -20,15 +20,22 @@ export class NpmInstallationManager implements INpmInstallationManager {
 	}
 
 	public async getLatestCompatibleVersion(packageName: string): Promise<string> {
+		const configVersion = this.$staticConfig.version;
+		const isPreReleaseVersion = (<any>semver).prerelease(configVersion) !== null;
+		let cliVersionRange = `~${semver.major(configVersion)}.${(<any>semver).minor(configVersion)}.0`;
+		if (isPreReleaseVersion) {
+			// if the user has some 0-19 pre-release version, include pre-release versions in the search query.
+			cliVersionRange = `~${configVersion}`;
+		}
 
-		let cliVersionRange = `~${this.$staticConfig.version}`;
 		let latestVersion = await this.getLatestVersion(packageName);
 		if (semver.satisfies(latestVersion, cliVersionRange)) {
 			return latestVersion;
 		}
 		let data = await this.$npm.view(packageName, { "versions": true });
 
-		return semver.maxSatisfying(data, cliVersionRange) || latestVersion;
+		let maxSatisfying = semver.maxSatisfying(data, cliVersionRange);
+		return maxSatisfying || latestVersion;
 	}
 
 	public async install(packageName: string, projectDir: string, opts?: INpmInstallOptions): Promise<any> {
diff --git a/test/npm-installation-manager.ts b/test/npm-installation-manager.ts
index a65ca053b4..6e98828c14 100644
--- a/test/npm-installation-manager.ts
+++ b/test/npm-installation-manager.ts
@@ -146,6 +146,12 @@ describe("Npm installation manager tests", () => {
 			packageLatestVersion: "1.4.0",
 			cliVersion: "1.6.0-2016-10-01-182",
 			expectedResult: "1.4.0"
+		},
+		"When CLI Version has patch version larger than an existing package, should return max compliant package from the same major.minor version": {
+			versions: ["1.0.0", "1.0.1", "1.4.0", "2.5.0", "2.5.1", "2.5.2"],
+			packageLatestVersion: "3.0.0",
+			cliVersion: "2.5.4",
+			expectedResult: "2.5.2"
 		}
 	};