diff --git a/setup.c b/setup.c
index 53ffeabc5b..7da7aa8984 100644
--- a/setup.c
+++ b/setup.c
@@ -2517,7 +2517,9 @@ static void repository_format_configure(struct repository_format *repo_fmt,
 		int env_algo = hash_algo_by_name(env);
 		if (env_algo == GIT_HASH_UNKNOWN)
 			die(_("unknown hash algorithm '%s'"), env);
-		repo_fmt->hash_algo = env_algo;
+		if (repo_fmt->version < 0 ||
+		    repo_fmt->hash_algo == GIT_HASH_UNKNOWN)
+			repo_fmt->hash_algo = env_algo;
 	} else if (cfg.hash != GIT_HASH_UNKNOWN) {
 		repo_fmt->hash_algo = cfg.hash;
 	}
diff --git a/t/t0001-init.sh b/t/t0001-init.sh
index 6dff8b75f1..c49d9e0d38 100755
--- a/t/t0001-init.sh
+++ b/t/t0001-init.sh
@@ -586,6 +586,18 @@ test_expect_success 'GIT_DEFAULT_HASH overrides init.defaultObjectFormat' '
 	echo sha256 >expected
 '
 
+for hash in sha1 sha256
+do
+	test_expect_success "reinit repository with GIT_DEFAULT_HASH=$hash does not change format" '
+		test_when_finished "rm -rf repo" &&
+		git init repo &&
+		git -C repo rev-parse --show-object-format >expect &&
+		GIT_DEFAULT_HASH=$hash git init repo &&
+		git -C repo rev-parse --show-object-format >actual &&
+		test_cmp expect actual
+	'
+done
+
 test_expect_success 'extensions.objectFormat is not allowed with repo version 0' '
 	test_when_finished "rm -rf explicit-v0" &&
 	git init --object-format=sha256 explicit-v0 &&