diff --git a/app/services/projects/transfer_service.rb b/app/services/projects/transfer_service.rb
index 5957f612e847b47fe2170720cdc11b9009258064..d3a8ae8d7c67002364c256503079fc615010924c 100644
--- a/app/services/projects/transfer_service.rb
+++ b/app/services/projects/transfer_service.rb
@@ -60,15 +60,8 @@ module Projects
         # Notifications
         project.send_move_instructions(@old_path)
 
-        # Move main repository
-        # TODO: check storage type and NOOP when not using Legacy
-        unless move_repo_folder(@old_path, @new_path)
-          raise TransferError.new('Cannot move project')
-        end
-
-        # Move wiki repo also if present
-        # TODO: check storage type and NOOP when not using Legacy
-        move_repo_folder("#{@old_path}.wiki", "#{@new_path}.wiki")
+        # Directories on disk
+        move_project_folders(project)
 
         # Move missing group labels to project
         Labels::TransferService.new(current_user, @old_group, project).execute
@@ -131,5 +124,20 @@ module Projects
     def execute_system_hooks
       SystemHooksService.new.execute_hooks_for(project, :transfer)
     end
+
+    def move_project_folders(project)
+      return if project.hashed_storage?(:repository)
+
+      # Move main repository
+      unless move_repo_folder(@old_path, @new_path)
+        raise TransferError.new("Cannot move project")
+      end
+
+      # Disk path is changed; we need to ensure we reload it
+      project.reload_repository!
+
+      # Move wiki repo also if present
+      move_repo_folder("#{@old_path}.wiki", "#{@new_path}.wiki")
+    end
   end
 end
diff --git a/changelogs/unreleased/sh-port-hashed-storage-transfer-fix.yml b/changelogs/unreleased/sh-port-hashed-storage-transfer-fix.yml
new file mode 100644
index 0000000000000000000000000000000000000000..c32afc90f6499d95813b96d7b466392b986e53a5
--- /dev/null
+++ b/changelogs/unreleased/sh-port-hashed-storage-transfer-fix.yml
@@ -0,0 +1,5 @@
+---
+title: Fix hashed storage with project transfers to another namespace
+merge_request:
+author:
+type: fixed
diff --git a/spec/services/projects/transfer_service_spec.rb b/spec/services/projects/transfer_service_spec.rb
index 2459f371a915289a6c9cc4b08e9e84b0901b3a62..2b1337bee7e44062fd133991f6bd017a4536e97f 100644
--- a/spec/services/projects/transfer_service_spec.rb
+++ b/spec/services/projects/transfer_service_spec.rb
@@ -42,6 +42,18 @@ describe Projects::TransferService do
         expect(service).to receive(:execute_system_hooks)
       end
     end
+
+    it 'disk path has moved' do
+      old_path = project.repository.disk_path
+      old_full_path = project.repository.full_path
+
+      transfer_project(project, user, group)
+
+      expect(project.repository.disk_path).not_to eq(old_path)
+      expect(project.repository.full_path).not_to eq(old_full_path)
+      expect(project.disk_path).not_to eq(old_path)
+      expect(project.disk_path).to start_with(group.path)
+    end
   end
 
   context 'when transfer fails' do
@@ -188,6 +200,26 @@ describe Projects::TransferService do
     end
   end
 
+  context 'when hashed storage in use' do
+    let(:hashed_project) { create(:project, :repository, :hashed, namespace: user.namespace) }
+
+    before do
+      group.add_owner(user)
+    end
+
+    it 'does not move the directory' do
+      old_path = hashed_project.repository.disk_path
+      old_full_path = hashed_project.repository.full_path
+
+      transfer_project(hashed_project, user, group)
+      project.reload
+
+      expect(hashed_project.repository.disk_path).to eq(old_path)
+      expect(hashed_project.repository.full_path).to eq(old_full_path)
+      expect(hashed_project.disk_path).to eq(old_path)
+    end
+  end
+
   describe 'refreshing project authorizations' do
     let(:group) { create(:group) }
     let(:owner) { project.namespace.owner }