diff --git a/.github/python/find_changed_files.py b/.github/python/find_changed_files.py
index 6dc73449..c0c61752 100644
--- a/.github/python/find_changed_files.py
+++ b/.github/python/find_changed_files.py
@@ -1,15 +1,17 @@
 #!/usr/bin/env python
 
-## This script is used to generate scan *.nf.test files for function/process/workflow name and return as a JSON list
-# It is functionally similar to nf-test list but fills a gap until feature https://github.com/askimed/nf-test/issues/196 is added
+# This script is used to identify *.nf.test files for changed functions/processs/workflows/pipelines and *.nf-test files
+# with changed dependencies, then return as a JSON list
 
 import argparse
 import json
 import logging
 import re
+import yaml
 
 from itertools import chain
 from pathlib import Path
+from git import Repo
 
 
 def parse_args() -> argparse.Namespace:
@@ -23,11 +25,40 @@ def parse_args() -> argparse.Namespace:
         description="Scan *.nf.test files for function/process/workflow name and return as a JSON list"
     )
     parser.add_argument(
-        "-p",
-        "--paths",
+        "-r",
+        "--head_ref",
+        required=True,
+        help="Head reference branch (Source branch for a PR).",
+    )
+    parser.add_argument(
+        "-b",
+        "--base_ref",
+        required=True,
+        help="Base reference branch (Target branch for a PR).",
+    )
+    parser.add_argument(
+        "-x",
+        "--ignored_files",
         nargs="+",
-        default=["."],
-        help="List of directories or files to scan",
+        default=[
+            ".git/*",
+            ".gitpod.yml",
+            ".prettierignore",
+            ".prettierrc.yml",
+            "*.md",
+            "*.png",
+            "modules.json",
+            "pyproject.toml",
+            "tower.yml",
+        ],
+        help="List of files or file substrings to ignore.",
+    )
+    parser.add_argument(
+        "-i",
+        "--include",
+        type=Path,
+        default=".github/python/include.yaml",
+        help="Path to an include file containing a YAML of key value pairs to include in changed files. I.e., return the current directory if an important file is changed.",
     )
     parser.add_argument(
         "-l",
@@ -47,26 +78,109 @@ def parse_args() -> argparse.Namespace:
     return parser.parse_args()
 
 
-def find_files(paths: list[str]) -> list[Path]:
+def read_yaml_inverted(file_path: str) -> dict:
     """
-    Find all files matching pattern *.nf.test recursively from a list of paths.
+    Read a YAML file and return its contents as a dictionary but reversed, i.e. the values become the keys and the keys become the values.
 
     Args:
-        paths (list): List of directories or files to scan.
+        file_path (str): The path to the YAML file.
 
     Returns:
-        list: List of files matching the pattern *.nf.test.
+        dict: The contents of the YAML file as a dictionary inverted.
     """
-    # this is a bit clunky
-    result = []
-    for path in paths:
-        path_obj = Path(path)
+    with open(file_path, "r") as f:
+        data = yaml.safe_load(f)
+
+    # Invert dictionary of lists into contents of lists are keys, values are the original keys
+    # { "key": ["item1", "item2] } --> { "item1": "key", "item2": "key" }
+    return {value: key for key, values in data.items() for value in values}
+
+
+def find_changed_files(
+    branch1: str,
+    branch2: str,
+    ignore: list[str],
+) -> list[Path]:
+    """
+    Find all *.nf.tests that are associated with files that have been changed between two specified branches.
+
+    Args:
+        branch1 (str)      : The first branch being compared
+        branch2 (str)      : The second branch being compared
+        ignore  (list)     : List of files or file substrings to ignore.
+
+    Returns:
+        list: List of files matching the pattern *.nf.test that have changed between branch2 and branch1.
+    """
+    # create repo
+    repo = Repo(".")
+    # identify commit on branch1
+    branch1_commit = repo.commit(branch1)
+    # identify commit on branch2
+    branch2_commit = repo.commit(branch2)
+    # compare two branches
+    diff_index = branch1_commit.diff(branch2_commit)
+
+    # Start empty list of changed files
+    changed_files = []
+
+    # For every file that has changed between commits
+    for file in diff_index:
+        # Get pathlib.Path object
+        filepath = Path(file.a_path)
+        # If file does not match any in the ignore list, add containing directory to changed_files
+        if not any(filepath.match(ignored_path) for ignored_path in ignore):
+            changed_files.append(filepath)
+
+    # Uniqueify the results before returning for efficiency
+    return list(set(changed_files))
+
+
+def detect_include_files(
+    changed_files: list[Path], include_files: dict[str, str]
+) -> list[Path]:
+    """
+    Detects the include files based on the changed files.
+
+    Args:
+        changed_files (list[Path]): List of paths to the changed files.
+        include_files (dict[str, str]): Key-value pairs to return if a certain file has changed. If a file in a directory has changed, it points to a different directory.
+
+    Returns:
+        list[Path]: List of paths to representing the keys of the include_files dictionary, where a value matched a path in changed_files.
+    """
+    new_changed_files = []
+    for filepath in changed_files:
+        # If file is in the include_files, we return the key instead of the value
+        for include_path, include_key in include_files.items():
+            if filepath.match(include_path):
+                new_changed_files.append(Path(include_key))
+    return new_changed_files
+
+
+def detect_nf_test_files(changed_files: list[Path]) -> list[Path]:
+    """
+    Detects and returns a list of nf-test files from the given list of changed files.
+
+    Args:
+        changed_files (list[Path]): A list of file paths.
+
+    Returns:
+        list[Path]: A list of nf-test file paths.
+    """
+    result: list[Path] = []
+    for path in changed_files:
         # If Path is the exact nf-test file add to list:
-        if path_obj.match("*.nf.test"):
-            result.append(path_obj)
+        if path.match("*.nf.test") and path.exists():
+            result.append(path)
         # Else recursively search for nf-test files:
         else:
-            for file in path_obj.rglob("*.nf.test"):
+            # Get the enclosing dir so files in the same dir can be found.
+            # e.g.
+            # dir/
+            # ├─ main.nf
+            # ├─ main.nf.test
+            for file in path.parent.rglob("*.nf.test"):
                 result.append(file)
     return result
 
@@ -102,7 +216,7 @@ def process_files(files: list[Path]) -> list[str]:
     return result
 
 
-def generate(
+def convert_nf_test_files_to_test_types(
     lines: list[str], types: list[str] = ["function", "process", "workflow", "pipeline"]
 ) -> dict[str, list[str]]:
     """
@@ -115,15 +229,12 @@ def generate(
     Returns:
         dict: Dictionary with function, process and workflow lists.
     """
-    result: dict[str, list[str]] = {
-        "function": [],
-        "process": [],
-        "workflow": [],
-        "pipeline": [],
-    }
+    # Populate empty dict from types
+    result: dict[str, list[str]] = {key: [] for key in types}
+
     for line in lines:
         words = line.split()
-        if len(words) == 2:
+        if len(words) == 2 and re.match(r'^".*"$', words[1]):
             keyword = words[0]
             name = words[1].strip("'\"")  # Strip both single and double quotes
             if keyword in types:
@@ -131,16 +242,62 @@ def generate(
     return result
 
 
+def find_changed_dependencies(paths: list[Path], tags: list[str]) -> list[Path]:
+    """
+    Find all *.nf.test files with changed dependencies from a list of paths.
+
+    Args:
+        paths (list): List of directories or files to scan.
+        tags (list): List of tags identified as having changes.
+
+    Returns:
+        list: List of *.nf.test files with changed dependencies.
+    """
+
+    result: list[Path] = []
+
+    nf_test_files = detect_nf_test_files(paths)
+
+    # find nf-test files with changed dependencies
+    for nf_test_file in nf_test_files:
+        with open(nf_test_file, "r") as f:
+            lines = f.readlines()
+            # Get all tags from nf-test file
+            # Make case insensitive with .casefold()
+            tags_in_nf_test_file = [
+                tag.casefold().replace("/", "_")
+                for tag in convert_nf_test_files_to_test_types(lines, types=["tag"])[
+                    "tag"
+                ]
+            ]
+            # Check if tag in nf-test file appears in a tag.
+            # Use .casefold() to be case insensitive
+            if any(
+                tag.casefold().replace("/", "_") in tags_in_nf_test_file for tag in tags
+            ):
+                result.append(nf_test_file)
+
+    return result
+
+
 if __name__ == "__main__":
 
     # Utility stuff
     args = parse_args()
     logging.basicConfig(level=args.log_level)
 
-    # Parse nf-test files for targets of tests
-    files = find_files(args.paths)
-    lines = process_files(files)
-    result = generate(lines)
+    # Parse nf-test files for target test tags
+    changed_files = find_changed_files(args.head_ref, args.base_ref, args.ignored_files)
+
+    # If an additional include YAML is added, we detect additional changed dirs to include
+    if args.include:
+        include_files = read_yaml_inverted(args.include)
+        changed_files = changed_files + detect_include_files(
+            changed_files, include_files
+        )
+    nf_test_files = detect_nf_test_files(changed_files)
+    lines = process_files(nf_test_files)
+    result = convert_nf_test_files_to_test_types(lines)
 
     # Get only relevant results (specified by -t)
     # Unique using a set
@@ -148,5 +305,13 @@ def generate(
         {item for sublist in map(result.get, args.types) for item in sublist}
     )
 
+    # Parse files to identify nf-tests with changed dependencies
+    changed_dep_files = find_changed_dependencies([Path(".")], target_results)
+
+    # Combine target nf-test files and nf-test files with changed dependencies
+    all_nf_tests = [
+        str(test_path) for test_path in set(changed_dep_files + nf_test_files)
+    ]
+
     # Print to stdout
-    print(json.dumps(target_results))
+    print(json.dumps(all_nf_tests))
diff --git a/.github/python/include.yaml b/.github/python/include.yaml
new file mode 100644
index 00000000..a3629f4c
--- /dev/null
+++ b/.github/python/include.yaml
@@ -0,0 +1,10 @@
+".":
+  - ./.github/workflows/**
+  - ./nf-test.config
+  - ./nextflow.config
+tests:
+  - ./assets/*
+  - ./bin/*
+  - ./conf/*
+  - ./main.nf
+  - ./nextflow_schema.json
diff --git a/.github/workflows/ci.yml b/.github/workflows/ci.yml
index 8a8d0935..527048fe 100644
--- a/.github/workflows/ci.yml
+++ b/.github/workflows/ci.yml
@@ -27,8 +27,7 @@ jobs:
     name: Check for changes
     runs-on: ubuntu-latest
     outputs:
-      changes: ${{ steps.changed_files.outputs.any_modified }}
-      tags: ${{ steps.list.outputs.tags }}
+      nf_test_files: ${{ steps.list.outputs.nf_test_files }}
     steps:
       - uses: actions/setup-python@v4
         with:
@@ -39,60 +38,29 @@ jobs:
         with:
           fetch-depth: 0
 
-      - uses: tj-actions/changed-files@v42
-        id: changed_files
-        with:
-          dir_names: "true"
-          output_renamed_files_as_deleted_and_added: "true"
-          # Define list of additional rules for testing paths
-          # Mostly, we define additional 'pipeline' or 'all' tests here
-          files_yaml: |
-            ".":
-              - .github/workflows/**
-              - nf-test.config
-              - nextflow.config
-            tests:
-              - assets/*
-              - bin/*
-              - conf/*
-              - main.nf
-              - nextflow_schema.json
-
-          files_ignore: |
-            .git*
-            .gitpod.yml
-            .prettierignore
-            .prettierrc.yml
-            **.md
-            **.png
-            modules.json
-            pyproject.toml
-            tower.yml
-
-      - name: debug
+      - name: Install gitpython find changed files
         run: |
-          echo ${{ steps.changed_files.outputs.any_modified }}
-          echo ${{ steps.changed_files.outputs.all_changed_files }}
-          echo ${{ steps.changed_files.outputs.changed_keys }}
+          python -m pip install --upgrade pip
+          pip install gitpython pyyaml
 
-      - name: nf-test list tags
+      - name: List nf-test files
         id: list
-        if: ${{ steps.changed_files.outputs.any_modified }}
         run: |
-          echo tags=$(python \
+          echo nf_test_files=$(python \
             .github/python/find_changed_files.py \
             -t pipeline workflow process \
-            -p ${{ steps.changed_files.outputs.all_changed_files }} ${{ steps.changed_files.outputs.changed_keys }} \
+            --head_ref ${{ github.sha }} \
+            --base_ref origin/${{ github.base_ref }} \
           ) >> $GITHUB_OUTPUT
 
-      - name: debug2
+      - name: print list of nf-test files
         run: |
-          echo ${{ steps.list.outputs.tags }}
+          echo ${{ steps.list.outputs.nf_test_files }}
 
   test:
-    name: ${{ matrix.tags }} ${{ matrix.profile }} NF-${{ matrix.NXF_VER }}
+    name: ${{ matrix.nf_test_files }} ${{ matrix.profile }} NF-${{ matrix.NXF_VER }}
     needs: [changes]
-    if: needs.changes.outputs.changes
+    if: needs.changes.outputs.nf_test_files != '[]'
     runs-on: ubuntu-latest
     strategy:
       fail-fast: false
@@ -100,16 +68,16 @@ jobs:
         NXF_VER:
           - "latest-everything"
           - "23.04"
-        tags: ["${{ fromJson(needs.changes.outputs.tags) }}"]
+        nf_test_files: ["${{ fromJson(needs.changes.outputs.nf_test_files) }}"]
         profile:
           - "docker"
 
     steps:
       - name: Check out pipeline code
-        uses: actions/checkout@b4ffde65f46336ab88eb53be808477a3936bae11 # v4
+        uses: actions/checkout@v4
 
       - name: Install Nextflow
-        uses: nf-core/setup-nextflow@v1
+        uses: nf-core/setup-nextflow@v2
         with:
           version: "${{ matrix.NXF_VER }}"
 
@@ -140,7 +108,7 @@ jobs:
 
       - name: Run nf-test
         run: |
-          nf-test test --verbose --tag ${{ matrix.tags }} --profile "+${{ matrix.profile }}" --junitxml=test.xml --tap=test.tap
+          nf-test test --verbose ${{ matrix.nf_test_files }} --profile "+${{ matrix.profile }}" --junitxml=test.xml --tap=test.tap
 
       - uses: pcolby/tap-summary@v1
         with:
diff --git a/CHANGELOG.md b/CHANGELOG.md
index 8bba6e9d..b9232710 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -8,6 +8,7 @@ and this project adheres to [Semantic Versioning](https://semver.org/spec/v2.0.0
 ### Enhancements & fixes
 
 - [PR #299](https://github.com/nf-core/fetchngs/pull/299) - Template update for nf-core/tools v2.13.1
+- [PR #300](https://github.com/nf-core/fetchngs/pull/300) - Use file paths instead of tags for testing matrix, should make matrices more efficient
 
 ## [[1.12.0](https://github.com/nf-core/fetchngs/releases/tag/1.12.0)] - 2024-02-29