diff --git a/dir.c b/dir.c
index 8209f8b8af1..e7b89fe6fee 100644
--- a/dir.c
+++ b/dir.c
@@ -1078,10 +1078,9 @@ static void prep_exclude(struct dir_struct *dir, const char *base, int baselen)
 		    (!untracked || !untracked->valid ||
 		     /*
 		      * .. and .gitignore does not exist before
-		      * (i.e. null exclude_sha1 and skip_worktree is
-		      * not set). Then we can skip loading .gitignore,
-		      * which would result in ENOENT anyway.
-		      * skip_worktree is taken care in read_directory()
+		      * (i.e. null exclude_sha1). Then we can skip
+		      * loading .gitignore, which would result in
+		      * ENOENT anyway.
 		      */
 		     !is_null_sha1(untracked->exclude_sha1))) {
 			/*
@@ -1880,7 +1879,6 @@ static struct untracked_cache_dir *validate_untracked_cache(struct dir_struct *d
 						      const struct pathspec *pathspec)
 {
 	struct untracked_cache_dir *root;
-	int i;
 
 	if (!dir->untracked || getenv("GIT_DISABLE_UNTRACKED_CACHE"))
 		return NULL;
@@ -1932,15 +1930,6 @@ static struct untracked_cache_dir *validate_untracked_cache(struct dir_struct *d
 	if (dir->exclude_list_group[EXC_CMDL].nr)
 		return NULL;
 
-	/*
-	 * An optimization in prep_exclude() does not play well with
-	 * CE_SKIP_WORKTREE. It's a rare case anyway, if a single
-	 * entry has that bit set, disable the whole untracked cache.
-	 */
-	for (i = 0; i < active_nr; i++)
-		if (ce_skip_worktree(active_cache[i]))
-			return NULL;
-
 	if (!ident_in_untracked(dir->untracked)) {
 		warning(_("Untracked cache is disabled on this system."));
 		return NULL;
diff --git a/t/t7063-status-untracked-cache.sh b/t/t7063-status-untracked-cache.sh
index bd4806c12a0..ff23f4e94e9 100755
--- a/t/t7063-status-untracked-cache.sh
+++ b/t/t7063-status-untracked-cache.sh
@@ -354,4 +354,123 @@ EOF
 	test_cmp ../expect ../actual
 '
 
+test_expect_success 'set up for sparse checkout testing' '
+	echo two >done/.gitignore &&
+	echo three >>done/.gitignore &&
+	echo two >done/two &&
+	git add -f done/two done/.gitignore &&
+	git commit -m "first commit"
+'
+
+test_expect_success 'status after commit' '
+	: >../trace &&
+	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
+	git status --porcelain >../actual &&
+	cat >../status.expect <<EOF &&
+?? .gitignore
+?? dtwo/
+EOF
+	test_cmp ../status.expect ../actual &&
+	cat >../trace.expect <<EOF &&
+node creation: 0
+gitignore invalidation: 0
+directory invalidation: 0
+opendir: 1
+EOF
+	test_cmp ../trace.expect ../trace
+'
+
+test_expect_success 'untracked cache correct after commit' '
+	test-dump-untracked-cache >../actual &&
+	cat >../expect <<EOF &&
+info/exclude 13263c0978fb9fad16b2d580fb800b6d811c3ff0
+core.excludesfile 0000000000000000000000000000000000000000
+exclude_per_dir .gitignore
+flags 00000006
+/ e6fcc8f2ee31bae321d66afd183fcb7237afae6e recurse valid
+.gitignore
+dtwo/
+/done/ 0000000000000000000000000000000000000000 recurse valid
+/dthree/ 0000000000000000000000000000000000000000 recurse check_only valid
+/dtwo/ 0000000000000000000000000000000000000000 recurse check_only valid
+two
+EOF
+	test_cmp ../expect ../actual
+'
+
+test_expect_success 'set up sparse checkout' '
+	echo "done/[a-z]*" >.git/info/sparse-checkout &&
+	test_config core.sparsecheckout true &&
+	git checkout master &&
+	git update-index --untracked-cache &&
+	git status --porcelain >/dev/null && # prime the cache
+	test_path_is_missing done/.gitignore &&
+	test_path_is_file done/one
+'
+
+test_expect_success 'create files, some of which are gitignored' '
+	echo three >done/three && # three is gitignored
+	echo four >done/four && # four is gitignored at a higher level
+	echo five >done/five # five is not gitignored
+'
+
+test_expect_success 'test sparse status with untracked cache' '
+	: >../trace &&
+	avoid_racy &&
+	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
+	git status --porcelain >../status.actual &&
+	cat >../status.expect <<EOF &&
+?? .gitignore
+?? done/five
+?? dtwo/
+EOF
+	test_cmp ../status.expect ../status.actual &&
+	cat >../trace.expect <<EOF &&
+node creation: 0
+gitignore invalidation: 1
+directory invalidation: 2
+opendir: 2
+EOF
+	test_cmp ../trace.expect ../trace
+'
+
+test_expect_success 'untracked cache correct after status' '
+	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
+/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' '
+	avoid_racy &&
+	: >../trace &&
+	GIT_TRACE_UNTRACKED_STATS="$TRASH_DIRECTORY/trace" \
+	git status --porcelain >../status.actual &&
+	cat >../status.expect <<EOF &&
+?? .gitignore
+?? done/five
+?? dtwo/
+EOF
+	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