diff --git a/setup.c b/setup.c
index 06004f15874fbcbab50eafd272c5898a34fcdcfe..145eca50f41d811c4c8fcb21ed2604e6b2971aba 100644
--- a/setup.c
+++ b/setup.c
@@ -227,9 +227,20 @@ const char *setup_git_directory_gently(int *nongit_ok)
 		if (PATH_MAX - 40 < strlen(gitdirenv))
 			die("'$%s' too big", GIT_DIR_ENVIRONMENT);
 		if (is_git_directory(gitdirenv)) {
+			static char buffer[1024 + 1];
+			const char *retval;
+
 			if (!work_tree_env)
 				return set_work_tree(gitdirenv);
-			return NULL;
+			retval = get_relative_cwd(buffer, sizeof(buffer) - 1,
+					get_git_work_tree());
+			if (!retval || !*retval)
+				return NULL;
+			set_git_dir(make_absolute_path(gitdirenv));
+			if (chdir(work_tree_env) < 0)
+				die ("Could not chdir to %s", work_tree_env);
+			strcat(buffer, "/");
+			return retval;
 		}
 		if (nongit_ok) {
 			*nongit_ok = 1;
diff --git a/t/t1501-worktree.sh b/t/t1501-worktree.sh
index 732216184ffc255a385aac81ba970edfc6a9e83a..7ee3820ce97b6c26c9465685a7bc64a962aad3cb 100755
--- a/t/t1501-worktree.sh
+++ b/t/t1501-worktree.sh
@@ -103,4 +103,13 @@ test_expect_success 'repo finds its work tree from work tree, too' '
 	 test sub/dir/tracked = "$(git ls-files)")
 '
 
+test_expect_success '_gently() groks relative GIT_DIR & GIT_WORK_TREE' '
+	cd repo.git/work/sub/dir &&
+	GIT_DIR=../../.. GIT_WORK_TREE=../.. GIT_PAGER= \
+		git diff --exit-code tracked &&
+	echo changed > tracked &&
+	! GIT_DIR=../../.. GIT_WORK_TREE=../.. GIT_PAGER= \
+		git diff --exit-code tracked
+'
+
 test_done