diff --git a/dir.c b/dir.c
index e7b89fe6fee9b73e2e6868790cf45caab8cdbdc5..cd4ac779a66ad2ff901cde926ae11c86b699993e 100644
--- a/dir.c
+++ b/dir.c
@@ -1297,7 +1297,7 @@ static enum exist_status directory_exists_in_index(const char *dirname, int len)
  */
 static enum path_treatment treat_directory(struct dir_struct *dir,
 	struct untracked_cache_dir *untracked,
-	const char *dirname, int len, int exclude,
+	const char *dirname, int len, int baselen, int exclude,
 	const struct path_simplify *simplify)
 {
 	/* The "len-1" is to strip the final '/' */
@@ -1324,7 +1324,8 @@ static enum path_treatment treat_directory(struct dir_struct *dir,
 	if (!(dir->flags & DIR_HIDE_EMPTY_DIRECTORIES))
 		return exclude ? path_excluded : path_untracked;
 
-	untracked = lookup_untracked(dir->untracked, untracked, dirname, len);
+	untracked = lookup_untracked(dir->untracked, untracked,
+				     dirname + baselen, len - baselen);
 	return read_directory_recursive(dir, dirname, len,
 					untracked, 1, simplify);
 }
@@ -1444,6 +1445,7 @@ static int get_dtype(struct dirent *de, const char *path, int len)
 static enum path_treatment treat_one_path(struct dir_struct *dir,
 					  struct untracked_cache_dir *untracked,
 					  struct strbuf *path,
+					  int baselen,
 					  const struct path_simplify *simplify,
 					  int dtype, struct dirent *de)
 {
@@ -1495,8 +1497,8 @@ static enum path_treatment treat_one_path(struct dir_struct *dir,
 		return path_none;
 	case DT_DIR:
 		strbuf_addch(path, '/');
-		return treat_directory(dir, untracked, path->buf, path->len, exclude,
-			simplify);
+		return treat_directory(dir, untracked, path->buf, path->len,
+				       baselen, exclude, simplify);
 	case DT_REG:
 	case DT_LNK:
 		return exclude ? path_excluded : path_untracked;
@@ -1557,7 +1559,7 @@ static enum path_treatment treat_path(struct dir_struct *dir,
 		return path_none;
 
 	dtype = DTYPE(de);
-	return treat_one_path(dir, untracked, path, simplify, dtype, de);
+	return treat_one_path(dir, untracked, path, baselen, simplify, dtype, de);
 }
 
 static void add_untracked(struct untracked_cache_dir *dir, const char *name)
@@ -1827,7 +1829,7 @@ static int treat_leading_path(struct dir_struct *dir,
 			break;
 		if (simplify_away(sb.buf, sb.len, simplify))
 			break;
-		if (treat_one_path(dir, NULL, &sb, simplify,
+		if (treat_one_path(dir, NULL, &sb, baselen, simplify,
 				   DT_DIR, NULL) == path_none)
 			break; /* do not recurse into it */
 		if (len <= baselen) {
diff --git a/t/t7063-status-untracked-cache.sh b/t/t7063-status-untracked-cache.sh
index 744e922699e6b3fa320af6b845bedf0940b9e7b0..22393b9511c65feb06798f41bae832a124e0cd57 100755
--- a/t/t7063-status-untracked-cache.sh
+++ b/t/t7063-status-untracked-cache.sh
@@ -408,7 +408,8 @@ test_expect_success 'set up sparse checkout' '
 	test_path_is_file done/one
 '
 
-test_expect_success 'create files, some of which are gitignored' '
+test_expect_success 'create/modify files, some of which are gitignored' '
+	echo two bis >done/two &&
 	echo three >done/three && # three is gitignored
 	echo four >done/four && # four is gitignored at a higher level
 	echo five >done/five # five is not gitignored
@@ -420,6 +421,7 @@ test_expect_success 'test sparse status with untracked cache' '
 	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
 	git status --porcelain >../status.actual &&
 	cat >../status.expect <<EOF &&
+ M done/two
 ?? .gitignore
 ?? done/five
 ?? dtwo/
@@ -459,6 +461,7 @@ test_expect_success 'test sparse status again with untracked cache' '
 	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
 	git status --porcelain >../status.actual &&
 	cat >../status.expect <<EOF &&
+ M done/two
 ?? .gitignore
 ?? done/five
 ?? dtwo/
@@ -473,4 +476,71 @@ EOF
 	test_cmp ../trace.expect ../trace
 '
 
+test_expect_success 'set up for test of subdir and sparse checkouts' '
+	mkdir done/sub &&
+	mkdir done/sub/sub &&
+	echo "sub" > done/sub/sub/file
+'
+
+test_expect_success 'test sparse status with untracked cache and subdir' '
+	avoid_racy &&
+	: >../trace &&
+	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
+	git status --porcelain >../status.actual &&
+	cat >../status.expect <<EOF &&
+ M done/two
+?? .gitignore
+?? done/five
+?? done/sub/
+?? dtwo/
+EOF
+	test_cmp ../status.expect ../status.actual &&
+	cat >../trace.expect <<EOF &&
+node creation: 2
+gitignore invalidation: 0
+directory invalidation: 1
+opendir: 3
+EOF
+	test_cmp ../trace.expect ../trace
+'
+
+test_expect_success 'verify untracked cache dump (sparse/subdirs)' '
+	test-dump-untracked-cache >../actual &&
+	cat >../expect <<EOF &&
+info/exclude 13263c0978fb9fad16b2d580fb800b6d811c3ff0
+core.excludesfile 0000000000000000000000000000000000000000
+exclude_per_dir .gitignore
+flags 00000006
+/ e6fcc8f2ee31bae321d66afd183fcb7237afae6e recurse valid
+.gitignore
+dtwo/
+/done/ 1946f0437f90c5005533cbe1736a6451ca301714 recurse valid
+five
+sub/
+/done/sub/ 0000000000000000000000000000000000000000 recurse check_only valid
+sub/
+/done/sub/sub/ 0000000000000000000000000000000000000000 recurse check_only valid
+file
+/dthree/ 0000000000000000000000000000000000000000 recurse check_only valid
+/dtwo/ 0000000000000000000000000000000000000000 recurse check_only valid
+two
+EOF
+	test_cmp ../expect ../actual
+'
+
+test_expect_success 'test sparse status again with untracked cache and subdir' '
+	avoid_racy &&
+	: >../trace &&
+	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
+	git status --porcelain >../status.actual &&
+	test_cmp ../status.expect ../status.actual &&
+	cat >../trace.expect <<EOF &&
+node creation: 0
+gitignore invalidation: 0
+directory invalidation: 0
+opendir: 0
+EOF
+	test_cmp ../trace.expect ../trace
+'
+
 test_done