diff --git a/src/lib/functions/registry.js b/src/lib/functions/registry.js
index d4332a16ed2..7a55c0576d4 100644
--- a/src/lib/functions/registry.js
+++ b/src/lib/functions/registry.js
@@ -1,17 +1,19 @@
 // @ts-check
 const { mkdir } = require('fs').promises
-const { isAbsolute, join } = require('path')
+const { extname, isAbsolute, join } = require('path')
 const { env } = require('process')
 
 const terminalLink = require('terminal-link')
 
-const { NETLIFYDEVERR, NETLIFYDEVLOG, chalk, log, warn } = require('../../utils')
+const { NETLIFYDEVERR, NETLIFYDEVLOG, NETLIFYDEVWARN, chalk, log, warn } = require('../../utils')
 const { getLogMessage } = require('../log')
 
 const { NetlifyFunction } = require('./netlify-function')
 const runtimes = require('./runtimes')
 const { watchDebounced } = require('./watcher')
 
+const ZIP_EXTENSION = '.zip'
+
 class FunctionsRegistry {
   constructor({ capabilities, config, isConnected = false, projectRoot, settings, timeouts }) {
     this.capabilities = capabilities
@@ -141,6 +143,13 @@ class FunctionsRegistry {
       )
     }
 
+    // This fixes the bug described here https://github.com/netlify/zip-it-and-ship-it/issues/637
+    // If the current function's file is a zip bundle, we ignore it and log a helpful message.
+    if (extname(func.mainFile) === ZIP_EXTENSION) {
+      log(`${NETLIFYDEVWARN} Skipped bundled function ${chalk.yellow(name)}. Unzip the archive to load it from source.`)
+      return
+    }
+
     this.functions.set(name, func)
     this.buildFunctionAndWatchFiles(func)