diff --git a/lib/commands/command-install.bash b/lib/commands/command-install.bash
index a8c769f0a..20ed3910a 100644
--- a/lib/commands/command-install.bash
+++ b/lib/commands/command-install.bash
@@ -62,6 +62,7 @@ install_one_local_tool() {
     exit 1
   fi
 }
+
 install_local_tool_versions() {
   local plugins_path
   plugins_path=$(get_plugin_path)
@@ -70,12 +71,45 @@ install_local_tool_versions() {
   search_path=$(pwd)
 
   local some_tools_installed
+  local some_plugin_not_installed
+
+  local tool_versions_path
+  tool_versions_path=$(find_tool_versions)
 
+  # Locate all the plugins installed in the system
+  local plugins_installed
   if ls "$plugins_path" &>/dev/null; then
     for plugin_path in "$plugins_path"/*; do
       local plugin_name
       plugin_name=$(basename "$plugin_path")
+      plugins_installed="$plugins_installed $plugin_name"
+    done
+    plugins_installed=$(printf "%s" "$plugins_installed" | tr " " "\n")
+  fi
+
+  if [ -z "$plugins_installed" ]; then
+    printf "Install plugins first to be able to install tools\\n"
+    exit 1
+  fi
+
+  # Locate all the plugins defined in the versions file.
+  local tools_file
+  if [ -f "$tool_versions_path" ]; then
+    tools_file=$(strip_tool_version_comments "$tool_versions_path" | cut -d ' ' -f 1)
+    for plugin_name in $tools_file; do
+      if ! printf '%s\n' "${plugins_installed[@]}" | grep -q "^$plugin_name\$"; then
+        printf "%s plugin is not installed\n" "$plugin_name"
+        some_plugin_not_installed='yes'
+      fi
+    done
+  fi
 
+  if [ -n "$some_plugin_not_installed" ]; then
+    exit 1
+  fi
+
+  if [ -n "$plugins_installed" ]; then
+    for plugin_name in $plugins_installed; do
       local plugin_version_and_path
       plugin_version_and_path="$(find_versions "$plugin_name" "$search_path")"
 
@@ -88,9 +122,6 @@ install_local_tool_versions() {
         done
       fi
     done
-  else
-    printf "Install plugins first to be able to install tools\\n"
-    exit 1
   fi
 
   if [ -z "$some_tools_installed" ]; then
diff --git a/test/install_command.bats b/test/install_command.bats
index 127a23ecc..0d990c5e3 100644
--- a/test/install_command.bats
+++ b/test/install_command.bats
@@ -133,6 +133,24 @@ teardown() {
   [ ! -f $ASDF_DIR/installs/dummy/1.1.0/version ]
 }
 
+@test "install_command fails if the plugin is not installed" {
+  cd $PROJECT_DIR
+  echo 'other_dummy 1.0.0' > $PROJECT_DIR/.tool-versions
+
+  run asdf install
+  [ "$status" -eq 1 ]
+  [ "$output" =  "other_dummy plugin is not installed" ]
+}
+
+@test "install_command fails if the plugin is not installed without collisions" {
+  cd $PROJECT_DIR
+  printf "dummy 1.0.0\ndum 1.0.0" > $PROJECT_DIR/.tool-versions
+
+  run asdf install
+  [ "$status" -eq 1 ]
+  [ "$output" =  "dum plugin is not installed" ]
+}
+
 @test "install_command fails when tool is specified but no version of the tool is configured in config file" {
   echo 'dummy 1.0.0' > $PROJECT_DIR/.tool-versions
   run asdf install other-dummy