diff --git a/setup.c b/setup.c
index aad9ace0af..9dcecda65b 100644
--- a/setup.c
+++ b/setup.c
@@ -1054,14 +1054,32 @@ static int safe_directory_cb(const char *key, const char *value, void *d)
 	return 0;
 }
 
-static int ensure_valid_ownership(const char *path)
+/*
+ * Check if a repository is safe, by verifying the ownership of the
+ * worktree (if any), the git directory, and the gitfile (if any).
+ *
+ * Exemptions for known-safe repositories can be added via `safe.directory`
+ * config settings; for non-bare repositories, their worktree needs to be
+ * added, for bare ones their git directory.
+ */
+static int ensure_valid_ownership(const char *gitfile,
+				const char *worktree, const char *gitdir)
 {
-	struct safe_directory_data data = { .path = path };
+	struct safe_directory_data data = {
+		.path = worktree ? worktree : gitdir
+	};
 
 	if (!git_env_bool("GIT_TEST_ASSUME_DIFFERENT_OWNER", 0) &&
-	    is_path_owned_by_current_user(path))
+	   (!gitfile || is_path_owned_by_current_user(gitfile)) &&
+	   (!worktree || is_path_owned_by_current_user(worktree)) &&
+	   (!gitdir || is_path_owned_by_current_user(gitdir)))
 		return 1;
 
+	/*
+	 * data.path is the "path" that identifies the repository and it is
+	 * constant regardless of what failed above. data.is_safe should be
+	 * initialized to false, and might be changed by the callback.
+	 */
 	read_very_early_config(safe_directory_cb, &data);
 
 	return data.is_safe;
@@ -1149,6 +1167,8 @@ static enum discovery_result setup_git_directory_gently_1(struct strbuf *dir,
 		current_device = get_device_or_die(dir->buf, NULL, 0);
 	for (;;) {
 		int offset = dir->len, error_code = 0;
+		char *gitdir_path = NULL;
+		char *gitfile = NULL;
 
 		if (offset > min_offset)
 			strbuf_addch(dir, '/');
@@ -1159,21 +1179,50 @@ static enum discovery_result setup_git_directory_gently_1(struct strbuf *dir,
 			if (die_on_error ||
 			    error_code == READ_GITFILE_ERR_NOT_A_FILE) {
 				/* NEEDSWORK: fail if .git is not file nor dir */
-				if (is_git_directory(dir->buf))
+				if (is_git_directory(dir->buf)) {
 					gitdirenv = DEFAULT_GIT_DIR_ENVIRONMENT;
+					gitdir_path = xstrdup(dir->buf);
+				}
 			} else if (error_code != READ_GITFILE_ERR_STAT_FAILED)
 				return GIT_DIR_INVALID_GITFILE;
-		}
+		} else
+			gitfile = xstrdup(dir->buf);
+		/*
+		 * Earlier, we tentatively added DEFAULT_GIT_DIR_ENVIRONMENT
+		 * to check that directory for a repository.
+		 * Now trim that tentative addition away, because we want to
+		 * focus on the real directory we are in.
+		 */
 		strbuf_setlen(dir, offset);
 		if (gitdirenv) {
-			if (!ensure_valid_ownership(dir->buf))
-				return GIT_DIR_INVALID_OWNERSHIP;
-			strbuf_addstr(gitdir, gitdirenv);
-			return GIT_DIR_DISCOVERED;
+			enum discovery_result ret;
+
+			if (ensure_valid_ownership(gitfile,
+						 dir->buf,
+				 (gitdir_path ? gitdir_path : gitdirenv))) {
+				strbuf_addstr(gitdir, gitdirenv);
+				ret = GIT_DIR_DISCOVERED;
+			} else
+				ret = GIT_DIR_INVALID_OWNERSHIP;
+
+			/*
+			 * Earlier, during discovery, we might have allocated
+			 * string copies for gitdir_path or gitfile so make
+			 * sure we don't leak by freeing them now, before
+			 * leaving the loop and function.
+			 *
+			 * Note: gitdirenv will be non-NULL whenever these are
+			 * allocated, therefore we need not take care of releasing
+			 * them outside of this conditional block.
+			 */
+			free(gitdir_path);
+			free(gitfile);
+
+			return ret;
 		}
 
 		if (is_git_directory(dir->buf)) {
-			if (!ensure_valid_ownership(dir->buf))
+			if (!ensure_valid_ownership(NULL, NULL, dir->buf))
 				return GIT_DIR_INVALID_OWNERSHIP;
 			strbuf_addstr(gitdir, ".");
 			return GIT_DIR_BARE;
@@ -1306,7 +1355,7 @@ const char *setup_git_directory_gently(int *nongit_ok)
 			struct strbuf quoted = STRBUF_INIT;
 
 			sq_quote_buf_pretty(&quoted, dir.buf);
-			die(_("unsafe repository ('%s' is owned by someone else)\n"
+			die(_("detected dubious ownership in repository at '%s'\n"
 			      "To add an exception for this directory, call:\n"
 			      "\n"
 			      "\tgit config --global --add safe.directory %s"),