diff --git a/src/index.ts b/src/index.ts
index 26444ac..81fe684 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -215,8 +215,8 @@ function mergeWithRule({
             throw new TypeError("Trying to merge non-objects");
           }
 
-          // @ts-ignore: These should be objects now
-          ret[k] = { ...v, ...lastValue };
+          // deep merge
+          ret[k] = merge(v, lastValue);
           break;
         case CustomizeRule.Prepend:
           if (!bMatches.length) {
diff --git a/test/merge-with-rules.test.ts b/test/merge-with-rules.test.ts
index 4fa6699..0a52219 100644
--- a/test/merge-with-rules.test.ts
+++ b/test/merge-with-rules.test.ts
@@ -1187,6 +1187,80 @@ describe("Merge with rules", function () {
         },
       })(conf1, conf2)
     ).toEqual(expected);
-  })
+  });
+
+  it("should deep merge options", function () {
+    const base = {
+      module: {
+        rules: [
+          {
+            test: /\.scss$/,
+            use: [
+              {
+                loader: "css-loader",
+                options: {
+                  modules: {
+                    localIdentName: "[hash:base64]",
+                  },
+                },
+              },
+            ],
+          },
+        ],
+      },
+    };
+    const development = {
+      module: {
+        rules: [
+          {
+            test: /\.scss$/,
+            use: [
+              {
+                loader: "css-loader",
+                options: {
+                  modules: {
+                    namedExport: true,
+                  },
+                },
+              },
+            ],
+          },
+        ],
+      },
+    };
+    const result = {
+      module: {
+        rules: [
+          {
+            test: /\.scss$/,
+            use: [
+              {
+                loader: "css-loader",
+                options: {
+                  modules: {
+                    localIdentName: "[hash:base64]",
+                    namedExport: true,
+                  },
+                },
+              },
+            ],
+          },
+        ],
+      },
+    };
 
+    expect(
+      mergeWithRules({
+        module: {
+          rules: {
+            test: CustomizeRule.Match,
+            use: {
+              loader: CustomizeRule.Match,
+              options: CustomizeRule.Merge,
+            },
+          },
+        },
+      })(base, development)
+    ).toEqual(result);
+  });
 });