diff --git a/submodule.c b/submodule.c
index 268f25fc2c..5bb7e7a033 100644
--- a/submodule.c
+++ b/submodule.c
@@ -554,7 +554,8 @@ void show_submodule_inline_diff(FILE *f, const char *path,
 	cp.no_stdin = 1;
 
 	/* TODO: other options may need to be passed here. */
-	argv_array_push(&cp.args, "diff");
+	argv_array_pushl(&cp.args, "diff", "--submodule=diff", NULL);
+
 	argv_array_pushf(&cp.args, "--line-prefix=%s", line_prefix);
 	if (DIFF_OPT_TST(o, REVERSE_DIFF)) {
 		argv_array_pushf(&cp.args, "--src-prefix=%s%s/",
diff --git a/t/t4060-diff-submodule-option-diff-format.sh b/t/t4060-diff-submodule-option-diff-format.sh
index d4a3ffa69c..33ec26d755 100755
--- a/t/t4060-diff-submodule-option-diff-format.sh
+++ b/t/t4060-diff-submodule-option-diff-format.sh
@@ -775,4 +775,45 @@ test_expect_success 'diff --submodule=diff with moved nested submodule HEAD' '
 	test_cmp expected actual
 '
 
+test_expect_success 'diff --submodule=diff recurses into nested submodules' '
+	cat >expected <<-EOF &&
+	Submodule sm2 contains modified content
+	Submodule sm2 a5a65c9..280969a:
+	diff --git a/sm2/.gitmodules b/sm2/.gitmodules
+	new file mode 100644
+	index 0000000..3a816b8
+	--- /dev/null
+	+++ b/sm2/.gitmodules
+	@@ -0,0 +1,3 @@
+	+[submodule "nested"]
+	+	path = nested
+	+	url = ../sm2
+	Submodule nested 0000000...b55928c (new submodule)
+	diff --git a/sm2/nested/file b/sm2/nested/file
+	new file mode 100644
+	index 0000000..ca281f5
+	--- /dev/null
+	+++ b/sm2/nested/file
+	@@ -0,0 +1 @@
+	+nested content
+	diff --git a/sm2/nested/foo8 b/sm2/nested/foo8
+	new file mode 100644
+	index 0000000..db9916b
+	--- /dev/null
+	+++ b/sm2/nested/foo8
+	@@ -0,0 +1 @@
+	+foo8
+	diff --git a/sm2/nested/foo9 b/sm2/nested/foo9
+	new file mode 100644
+	index 0000000..9c3b4f6
+	--- /dev/null
+	+++ b/sm2/nested/foo9
+	@@ -0,0 +1 @@
+	+foo9
+	EOF
+	git diff --submodule=diff >actual 2>err &&
+	test_must_be_empty err &&
+	test_cmp expected actual
+'
+
 test_done