diff --git a/sparse-index.c b/sparse-index.c
index a881f85181..2c0a18380f 100644
--- a/sparse-index.c
+++ b/sparse-index.c
@@ -308,8 +308,24 @@ void expand_index(struct index_state *istate, struct pattern_list *pl)
 	 * continue. A NULL pattern set indicates a full expansion to a
 	 * full index.
 	 */
-	if (pl && !pl->use_cone_patterns)
+	if (pl && !pl->use_cone_patterns) {
 		pl = NULL;
+	} else {
+		/*
+		 * We might contract file entries into sparse-directory
+		 * entries, and for that we will need the cache tree to
+		 * be recomputed.
+		 */
+		cache_tree_free(&istate->cache_tree);
+
+		/*
+		 * If there is a problem creating the cache tree, then we
+		 * need to expand to a full index since we cannot satisfy
+		 * the current request as a sparse index.
+		 */
+		if (cache_tree_update(istate, 0))
+			pl = NULL;
+	}
 
 	if (!istate->repo)
 		istate->repo = the_repository;
@@ -327,8 +343,14 @@ void expand_index(struct index_state *istate, struct pattern_list *pl)
 	full = xcalloc(1, sizeof(struct index_state));
 	memcpy(full, istate, sizeof(struct index_state));
 
+	/*
+	 * This slightly-misnamed 'full' index might still be sparse if we
+	 * are only modifying the list of sparse directories. This hinges
+	 * on whether we have a non-NULL pattern list.
+	 */
+	full->sparse_index = pl ? INDEX_PARTIALLY_SPARSE : INDEX_EXPANDED;
+
 	/* then change the necessary things */
-	full->sparse_index = 0;
 	full->cache_alloc = (3 * istate->cache_alloc) / 2;
 	full->cache_nr = 0;
 	ALLOC_ARRAY(full->cache, full->cache_alloc);
@@ -340,11 +362,22 @@ void expand_index(struct index_state *istate, struct pattern_list *pl)
 		struct cache_entry *ce = istate->cache[i];
 		struct tree *tree;
 		struct pathspec ps;
+		int dtype;
 
 		if (!S_ISSPARSEDIR(ce->ce_mode)) {
 			set_index_entry(full, full->cache_nr++, ce);
 			continue;
 		}
+
+		/* We now have a sparse directory entry. Should we expand? */
+		if (pl &&
+		    path_matches_pattern_list(ce->name, ce->ce_namelen,
+					      NULL, &dtype,
+					      pl, istate) == NOT_MATCHED) {
+			set_index_entry(full, full->cache_nr++, ce);
+			continue;
+		}
+
 		if (!(ce->ce_flags & CE_SKIP_WORKTREE))
 			warning(_("index entry is a directory, but not sparse (%08x)"),
 				ce->ce_flags);
@@ -370,7 +403,7 @@ void expand_index(struct index_state *istate, struct pattern_list *pl)
 	/* Copy back into original index. */
 	memcpy(&istate->name_hash, &full->name_hash, sizeof(full->name_hash));
 	memcpy(&istate->dir_hash, &full->dir_hash, sizeof(full->dir_hash));
-	istate->sparse_index = 0;
+	istate->sparse_index = pl ? INDEX_PARTIALLY_SPARSE : INDEX_EXPANDED;
 	free(istate->cache);
 	istate->cache = full->cache;
 	istate->cache_nr = full->cache_nr;