diff --git a/src/SpecBaseObject.php b/src/SpecBaseObject.php
index de65c2c..f811067 100644
--- a/src/SpecBaseObject.php
+++ b/src/SpecBaseObject.php
@@ -411,6 +411,12 @@ public function setDocumentContext(SpecObjectInterface $baseDocument, JsonPointe
         $this->_baseDocument = $baseDocument;
         $this->_jsonPointer = $jsonPointer;
 
+        // avoid recursion to get stuck in a loop
+        if ($this->_recursing) {
+            return;
+        }
+        $this->_recursing = true;
+
         foreach ($this->_properties as $property => $value) {
             if ($value instanceof DocumentContextInterface) {
                 $value->setDocumentContext($baseDocument, $jsonPointer->append($property));
@@ -422,6 +428,8 @@ public function setDocumentContext(SpecObjectInterface $baseDocument, JsonPointe
                 }
             }
         }
+
+        $this->_recursing = false;
     }
 
     /**
diff --git a/src/spec/Reference.php b/src/spec/Reference.php
index 9ab2b7d..b2e30d2 100644
--- a/src/spec/Reference.php
+++ b/src/spec/Reference.php
@@ -192,12 +192,16 @@ public function resolve(ReferenceContext $context = null)
             if ($referencedData === null) {
                 return null;
             }
-            /** @var $referencedObject SpecObjectInterface */
-            $referencedObject = new $this->_to($referencedData);
+
+            // transitive reference
+            if (isset($referencedData['$ref'])) {
+                return (new Reference($referencedData, $this->_to))->resolve(new ReferenceContext(null, $file));
+            } else {
+                /** @var $referencedObject SpecObjectInterface */
+                $referencedObject = new $this->_to($referencedData);
+            }
             if ($jsonReference->getJsonPointer()->getPointer() === '') {
                 $newContext = new ReferenceContext($referencedObject, $file);
-                $newContext->throwException = $context->throwException;
-                $referencedObject->setReferenceContext($newContext);
                 if ($referencedObject instanceof DocumentContextInterface) {
                     $referencedObject->setDocumentContext($referencedObject, $jsonReference->getJsonPointer());
                 }
@@ -206,9 +210,9 @@ public function resolve(ReferenceContext $context = null)
                 // the whole document. We do not know the base type of the file at this point,
                 // so base document must be null.
                 $newContext = new ReferenceContext(null, $file);
-                $newContext->throwException = $context->throwException;
-                $referencedObject->setReferenceContext($newContext);
             }
+            $newContext->throwException = $context->throwException;
+            $referencedObject->setReferenceContext($newContext);
 
             return $referencedObject;
         } catch (NonexistentJsonPointerReferenceException $e) {
diff --git a/tests/spec/ReferenceTest.php b/tests/spec/ReferenceTest.php
index 5f563a4..16f3361 100644
--- a/tests/spec/ReferenceTest.php
+++ b/tests/spec/ReferenceTest.php
@@ -2,6 +2,7 @@
 
 use cebe\openapi\Reader;
 use cebe\openapi\spec\OpenApi;
+use cebe\openapi\spec\Parameter;
 use cebe\openapi\spec\Reference;
 use cebe\openapi\spec\RequestBody;
 use cebe\openapi\spec\Response;
@@ -178,17 +179,22 @@ public function testResolveFileInSubdir()
         $this->assertEquals([], $openapi->getErrors());
         $this->assertTrue($result);
 
-        $this->assertInstanceOf(Reference::class, $petItems = $openapi->components->schemas['Pet']);
-        $this->assertInstanceOf(Reference::class, $petItems = $openapi->components->schemas['Dog']);
+        $this->assertInstanceOf(Reference::class, $openapi->components->schemas['Pet']);
+        $this->assertInstanceOf(Reference::class, $openapi->components->schemas['Dog']);
+        $this->assertInstanceOf(Reference::class, $openapi->components->parameters['Parameter.PetId']);
 
         $openapi->resolveReferences(new \cebe\openapi\ReferenceContext($openapi, $file));
 
-        $this->assertInstanceOf(Schema::class, $petItems = $openapi->components->schemas['Pet']);
-        $this->assertInstanceOf(Schema::class, $petItems = $openapi->components->schemas['Dog']);
+        $this->assertInstanceOf(Schema::class, $openapi->components->schemas['Pet']);
+        $this->assertInstanceOf(Schema::class, $openapi->components->schemas['Dog']);
+        $this->assertInstanceOf(Parameter::class, $openapi->components->parameters['Parameter.PetId']);
         $this->assertArrayHasKey('id', $openapi->components->schemas['Pet']->properties);
         $this->assertArrayHasKey('name', $openapi->components->schemas['Dog']->properties);
+        $this->assertEquals('petId', $openapi->components->parameters['Parameter.PetId']->name);
+        $this->assertInstanceOf(Schema::class, $openapi->components->parameters['Parameter.PetId']->schema);
+        $this->assertEquals('integer', $openapi->components->parameters['Parameter.PetId']->schema->type);
 
-        // second level reference inside of definitions.yaml
+        // second level references
         $this->assertArrayHasKey('food', $openapi->components->schemas['Dog']->properties);
         $this->assertInstanceOf(Schema::class, $openapi->components->schemas['Dog']->properties['food']);
         $this->assertArrayHasKey('id', $openapi->components->schemas['Dog']->properties['food']->properties);
@@ -199,6 +205,13 @@ public function testResolveFileInSubdir()
         $responseContent = $openapi->paths->getPath('/pets')->get->responses[200]->content['application/json'];
         $this->assertInstanceOf(Schema::class, $responseContent->schema);
         $this->assertEquals('A Pet', $responseContent->schema->description);
+
+        // third level reference back to original file
+        $this->assertCount(1, $parameters = $openapi->paths->getPath('/pets')->get->parameters);
+        $parameter = reset($parameters);
+        $this->assertEquals('petId', $parameter->name);
+        $this->assertInstanceOf(Schema::class, $parameter->schema);
+        $this->assertEquals('integer', $parameter->schema->type);
     }
 
     public function testResolveFileHttp()
diff --git a/tests/spec/data/reference/paths/pets.json b/tests/spec/data/reference/paths/pets.json
index 2e6bb58..21d9c34 100644
--- a/tests/spec/data/reference/paths/pets.json
+++ b/tests/spec/data/reference/paths/pets.json
@@ -1,5 +1,8 @@
 {
   "get": {
+    "parameters": [
+      {"$ref":  "../subdir.yaml#/components/parameters/Parameter.PetId"}
+    ],
     "responses": {
       "200": {
         "description": "return a pet",
diff --git a/tests/spec/data/reference/subdir.yaml b/tests/spec/data/reference/subdir.yaml
index 3c24e69..12da957 100644
--- a/tests/spec/data/reference/subdir.yaml
+++ b/tests/spec/data/reference/subdir.yaml
@@ -8,6 +8,9 @@ components:
       $ref: 'subdir/Pet.yaml'
     Dog:
       $ref: 'subdir/Dog.yaml'
+  parameters:
+    "Parameter.PetId":
+      "$ref": "./subdir/Parameter.PetId.json"
 paths:
   '/pet':
     get:
diff --git a/tests/spec/data/reference/subdir/Parameter.PetId.json b/tests/spec/data/reference/subdir/Parameter.PetId.json
new file mode 100644
index 0000000..dc7bc7e
--- /dev/null
+++ b/tests/spec/data/reference/subdir/Parameter.PetId.json
@@ -0,0 +1,10 @@
+{
+    "name": "petId",
+    "description": "Represents the id of a pet",
+    "in": "path",
+    "required": true,
+    "schema": {
+        "type": "integer"
+    },
+    "style": "simple"
+}