diff --git a/cache.h b/cache.h
index c56315ccc3..fc5c5b5733 100644
--- a/cache.h
+++ b/cache.h
@@ -341,9 +341,11 @@ static inline enum object_type object_type(unsigned int mode)
 		OBJ_BLOB;
 }
 
+/* Double-check local_repo_env below if you add to this list. */
 #define GIT_DIR_ENVIRONMENT "GIT_DIR"
 #define GIT_NAMESPACE_ENVIRONMENT "GIT_NAMESPACE"
 #define GIT_WORK_TREE_ENVIRONMENT "GIT_WORK_TREE"
+#define GIT_PREFIX_ENVIRONMENT "GIT_PREFIX"
 #define DEFAULT_GIT_DIR_ENVIRONMENT ".git"
 #define DB_ENVIRONMENT "GIT_OBJECT_DIRECTORY"
 #define INDEX_ENVIRONMENT "GIT_INDEX_FILE"
@@ -365,13 +367,24 @@ static inline enum object_type object_type(unsigned int mode)
 #define GIT_LITERAL_PATHSPECS_ENVIRONMENT "GIT_LITERAL_PATHSPECS"
 
 /*
- * Repository-local GIT_* environment variables
- * The array is NULL-terminated to simplify its usage in contexts such
- * environment creation or simple walk of the list.
- * The number of non-NULL entries is available as a macro.
+ * This environment variable is expected to contain a boolean indicating
+ * whether we should or should not treat:
+ *
+ *   GIT_DIR=foo.git git ...
+ *
+ * as if GIT_WORK_TREE=. was given. It's not expected that users will make use
+ * of this, but we use it internally to communicate to sub-processes that we
+ * are in a bare repo. If not set, defaults to true.
  */
-#define LOCAL_REPO_ENV_SIZE 9
-extern const char *const local_repo_env[LOCAL_REPO_ENV_SIZE + 1];
+#define GIT_IMPLICIT_WORK_TREE_ENVIRONMENT "GIT_IMPLICIT_WORK_TREE"
+
+/*
+ * Repository-local GIT_* environment variables; these will be cleared
+ * when git spawns a sub-process that runs inside another repository.
+ * The array is NULL-terminated, which makes it easy to pass in the "env"
+ * parameter of a run-command invocation, or to do a simple walk.
+ */
+extern const char * const local_repo_env[];
 
 extern int is_bare_repository_cfg;
 extern int is_bare_repository(void);
diff --git a/environment.c b/environment.c
index 89d6c70c15..e2e75c1660 100644
--- a/environment.c
+++ b/environment.c
@@ -83,20 +83,20 @@ static const char *git_dir;
 static char *git_object_dir, *git_index_file, *git_graft_file;
 
 /*
- * Repository-local GIT_* environment variables
- * Remember to update local_repo_env_size in cache.h when
- * the size of the list changes
+ * Repository-local GIT_* environment variables; see cache.h for details.
  */
-const char * const local_repo_env[LOCAL_REPO_ENV_SIZE + 1] = {
+const char * const local_repo_env[] = {
 	ALTERNATE_DB_ENVIRONMENT,
 	CONFIG_ENVIRONMENT,
 	CONFIG_DATA_ENVIRONMENT,
 	DB_ENVIRONMENT,
 	GIT_DIR_ENVIRONMENT,
 	GIT_WORK_TREE_ENVIRONMENT,
+	GIT_IMPLICIT_WORK_TREE_ENVIRONMENT,
 	GRAFT_ENVIRONMENT,
 	INDEX_ENVIRONMENT,
 	NO_REPLACE_OBJECTS_ENVIRONMENT,
+	GIT_PREFIX_ENVIRONMENT,
 	NULL
 };
 
diff --git a/git.c b/git.c
index 39ba6b1461..850d3f5527 100644
--- a/git.c
+++ b/git.c
@@ -125,6 +125,7 @@ static int handle_options(const char ***argv, int *argc, int *envchanged)
 			static char git_dir[PATH_MAX+1];
 			is_bare_repository_cfg = 1;
 			setenv(GIT_DIR_ENVIRONMENT, getcwd(git_dir, sizeof(git_dir)), 0);
+			setenv(GIT_IMPLICIT_WORK_TREE_ENVIRONMENT, "0", 1);
 			if (envchanged)
 				*envchanged = 1;
 		} else if (!strcmp(cmd, "-c")) {
diff --git a/setup.c b/setup.c
index 1dee47e085..9107f54a07 100644
--- a/setup.c
+++ b/setup.c
@@ -523,6 +523,12 @@ static const char *setup_explicit_git_dir(const char *gitdirenv,
 			set_git_work_tree(core_worktree);
 		}
 	}
+	else if (!git_env_bool(GIT_IMPLICIT_WORK_TREE_ENVIRONMENT, 1)) {
+		/* #16d */
+		set_git_dir(gitdirenv);
+		free(gitfile);
+		return NULL;
+	}
 	else /* #2, #10 */
 		set_git_work_tree(".");
 
@@ -601,6 +607,8 @@ static const char *setup_bare_git_dir(char *cwd, int offset, int len, int *nongi
 	if (check_repository_format_gently(".", nongit_ok))
 		return NULL;
 
+	setenv(GIT_IMPLICIT_WORK_TREE_ENVIRONMENT, "0", 1);
+
 	/* --work-tree is set without --git-dir; use discovered one */
 	if (getenv(GIT_WORK_TREE_ENVIRONMENT) || git_work_tree_cfg) {
 		const char *gitdir;
@@ -794,9 +802,9 @@ const char *setup_git_directory_gently(int *nongit_ok)
 
 	prefix = setup_git_directory_gently_1(nongit_ok);
 	if (prefix)
-		setenv("GIT_PREFIX", prefix, 1);
+		setenv(GIT_PREFIX_ENVIRONMENT, prefix, 1);
 	else
-		setenv("GIT_PREFIX", "", 1);
+		setenv(GIT_PREFIX_ENVIRONMENT, "", 1);
 
 	if (startup_info) {
 		startup_info->have_repository = !nongit_ok || !*nongit_ok;
diff --git a/t/t1510-repo-setup.sh b/t/t1510-repo-setup.sh
index 80aedfca8c..cf2ee7885a 100755
--- a/t/t1510-repo-setup.sh
+++ b/t/t1510-repo-setup.sh
@@ -517,6 +517,25 @@ test_expect_success '#16c: bare .git has no worktree' '
 		"$here/16c/.git" "(null)" "$here/16c/sub" "(null)"
 '
 
+test_expect_success '#16d: bareness preserved across alias' '
+	setup_repo 16d unset "" unset &&
+	(
+		cd 16d/.git &&
+		test_must_fail git status &&
+		git config alias.st status &&
+		test_must_fail git st
+	)
+'
+
+test_expect_success '#16e: bareness preserved by --bare' '
+	setup_repo 16e unset "" unset &&
+	(
+		cd 16e/.git &&
+		test_must_fail git status &&
+		test_must_fail git --bare status
+	)
+'
+
 test_expect_success '#17: GIT_WORK_TREE without explicit GIT_DIR is accepted (bare case)' '
 	# Just like #16.
 	setup_repo 17a unset "" true &&