diff --git a/builtin/init-db.c b/builtin/init-db.c
index 0b0557138d..cc09fca81b 100644
--- a/builtin/init-db.c
+++ b/builtin/init-db.c
@@ -195,8 +195,14 @@ static int create_default_files(const char *template_path)
 	 * First copy the templates -- we might have the default
 	 * config file there, in which case we would want to read
 	 * from it after installing.
+	 *
+	 * Before reading that config, we also need to clear out any cached
+	 * values (since we've just potentially changed what's available on
+	 * disk).
 	 */
 	copy_templates(template_path);
+	git_config_clear();
+	reset_shared_repository();
 	git_config(git_default_config, NULL);
 
 	/*
diff --git a/cache.h b/cache.h
index 67ec356c7a..b2d77f3eb4 100644
--- a/cache.h
+++ b/cache.h
@@ -669,8 +669,15 @@ extern size_t delta_base_cache_limit;
 extern unsigned long big_file_threshold;
 extern unsigned long pack_size_limit_cfg;
 
+/*
+ * Accessors for the core.sharedrepository config which lazy-load the value
+ * from the config (if not already set). The "reset" function can be
+ * used to unset "set" or cached value, meaning that the value will be loaded
+ * fresh from the config file on the next call to get_shared_repository().
+ */
 void set_shared_repository(int value);
 int get_shared_repository(void);
+void reset_shared_repository(void);
 
 /*
  * Do replace refs need to be checked this run?  This variable is
diff --git a/environment.c b/environment.c
index 20a870c3d7..abf3cb66e5 100644
--- a/environment.c
+++ b/environment.c
@@ -350,3 +350,8 @@ int get_shared_repository(void)
 	}
 	return the_shared_repository;
 }
+
+void reset_shared_repository(void)
+{
+	need_shared_repository_from_config = 1;
+}
diff --git a/t/t1301-shared-repo.sh b/t/t1301-shared-repo.sh
index 7c28642f2e..1312004f8c 100755
--- a/t/t1301-shared-repo.sh
+++ b/t/t1301-shared-repo.sh
@@ -181,4 +181,36 @@ test_expect_success POSIXPERM 'remote init does not use config from cwd' '
 	test_cmp expect actual
 '
 
+test_expect_success POSIXPERM 're-init respects core.sharedrepository (local)' '
+	git config core.sharedrepository 0666 &&
+	umask 0022 &&
+	echo whatever >templates/foo &&
+	git init --template=templates &&
+	echo "-rw-rw-rw-" >expect &&
+	modebits .git/foo >actual &&
+	test_cmp expect actual
+'
+
+test_expect_success POSIXPERM 're-init respects core.sharedrepository (remote)' '
+	rm -rf child.git &&
+	umask 0022 &&
+	git init --bare --shared=0666 child.git &&
+	test_path_is_missing child.git/foo &&
+	git init --bare --template=../templates child.git &&
+	echo "-rw-rw-rw-" >expect &&
+	modebits child.git/foo >actual &&
+	test_cmp expect actual
+'
+
+test_expect_success POSIXPERM 'template can set core.sharedrepository' '
+	rm -rf child.git &&
+	umask 0022 &&
+	git config core.sharedrepository 0666 &&
+	cp .git/config templates/config &&
+	git init --bare --template=../templates child.git &&
+	echo "-rw-rw-rw-" >expect &&
+	modebits child.git/HEAD >actual &&
+	test_cmp expect actual
+'
+
 test_done