diff --git a/git.c b/git.c
index 9efd1a3ec1f..8a19974611f 100644
--- a/git.c
+++ b/git.c
@@ -20,6 +20,43 @@ const char git_more_info_string[] =
 
 static struct startup_info git_startup_info;
 static int use_pager = -1;
+static char orig_cwd[PATH_MAX];
+static const char *env_names[] = {
+	GIT_DIR_ENVIRONMENT,
+	GIT_WORK_TREE_ENVIRONMENT,
+	GIT_IMPLICIT_WORK_TREE_ENVIRONMENT,
+	GIT_PREFIX_ENVIRONMENT
+};
+static char *orig_env[4];
+static int saved_environment;
+
+static void save_env(void)
+{
+	int i;
+	if (saved_environment)
+		return;
+	saved_environment = 1;
+	if (!getcwd(orig_cwd, sizeof(orig_cwd)))
+		die_errno("cannot getcwd");
+	for (i = 0; i < ARRAY_SIZE(env_names); i++) {
+		orig_env[i] = getenv(env_names[i]);
+		if (orig_env[i])
+			orig_env[i] = xstrdup(orig_env[i]);
+	}
+}
+
+static void restore_env(void)
+{
+	int i;
+	if (*orig_cwd && chdir(orig_cwd))
+		die_errno("could not move to %s", orig_cwd);
+	for (i = 0; i < ARRAY_SIZE(env_names); i++) {
+		if (orig_env[i])
+			setenv(env_names[i], orig_env[i], 1);
+		else
+			unsetenv(env_names[i]);
+	}
+}
 
 static void commit_pager_choice(void) {
 	switch (use_pager) {
@@ -272,6 +309,7 @@ static int handle_alias(int *argcp, const char ***argv)
  * RUN_SETUP for reading from the configuration file.
  */
 #define NEED_WORK_TREE		(1<<3)
+#define NO_SETUP		(1<<4)
 
 struct cmd_struct {
 	const char *cmd;
@@ -352,7 +390,7 @@ static struct cmd_struct commands[] = {
 	{ "cherry", cmd_cherry, RUN_SETUP },
 	{ "cherry-pick", cmd_cherry_pick, RUN_SETUP | NEED_WORK_TREE },
 	{ "clean", cmd_clean, RUN_SETUP | NEED_WORK_TREE },
-	{ "clone", cmd_clone },
+	{ "clone", cmd_clone, NO_SETUP },
 	{ "column", cmd_column, RUN_SETUP_GENTLY },
 	{ "commit", cmd_commit, RUN_SETUP | NEED_WORK_TREE },
 	{ "commit-tree", cmd_commit_tree, RUN_SETUP },
@@ -378,8 +416,8 @@ static struct cmd_struct commands[] = {
 	{ "hash-object", cmd_hash_object },
 	{ "help", cmd_help },
 	{ "index-pack", cmd_index_pack, RUN_SETUP_GENTLY },
-	{ "init", cmd_init_db },
-	{ "init-db", cmd_init_db },
+	{ "init", cmd_init_db, NO_SETUP },
+	{ "init-db", cmd_init_db, NO_SETUP },
 	{ "log", cmd_log, RUN_SETUP },
 	{ "ls-files", cmd_ls_files, RUN_SETUP },
 	{ "ls-remote", cmd_ls_remote, RUN_SETUP_GENTLY },
@@ -484,6 +522,10 @@ static void handle_builtin(int argc, const char **argv)
 		struct cmd_struct *p = commands+i;
 		if (strcmp(p->cmd, cmd))
 			continue;
+		if (saved_environment && (p->option & NO_SETUP)) {
+			restore_env();
+			break;
+		}
 		exit(run_builtin(p, argc, argv));
 	}
 }
@@ -539,7 +581,10 @@ static int run_argv(int *argcp, const char ***argv)
 		 * of overriding "git log" with "git show" by having
 		 * alias.log = show
 		 */
-		if (done_alias || !handle_alias(argcp, argv))
+		if (done_alias)
+			break;
+		save_env();
+		if (!handle_alias(argcp, argv))
 			break;
 		done_alias = 1;
 	}
diff --git a/t/t0001-init.sh b/t/t0001-init.sh
index bbc9cb60dde..b8c0ffff8be 100755
--- a/t/t0001-init.sh
+++ b/t/t0001-init.sh
@@ -56,7 +56,7 @@ test_expect_success 'plain through aliased command, outside any git repo' '
 	check_config plain-aliased/.git false unset
 '
 
-test_expect_failure 'plain nested through aliased command' '
+test_expect_success 'plain nested through aliased command' '
 	(
 		git init plain-ancestor-aliased &&
 		cd plain-ancestor-aliased &&
@@ -68,7 +68,7 @@ test_expect_failure 'plain nested through aliased command' '
 	check_config plain-ancestor-aliased/plain-nested/.git false unset
 '
 
-test_expect_failure 'plain nested in bare through aliased command' '
+test_expect_success 'plain nested in bare through aliased command' '
 	(
 		git init --bare bare-ancestor-aliased.git &&
 		cd bare-ancestor-aliased.git &&