diff --git a/cache.h b/cache.h
index 958c96e14d..63823c3529 100644
--- a/cache.h
+++ b/cache.h
@@ -230,6 +230,7 @@ extern int get_sha1(const char *str, unsigned char *sha1);
 extern int get_sha1_hex(const char *hex, unsigned char *sha1);
 extern char *sha1_to_hex(const unsigned char *sha1);	/* static buffer result! */
 extern int read_ref(const char *filename, unsigned char *sha1);
+extern const char *resolve_ref(const char *path, unsigned char *sha1, int);
 
 /* General helper functions */
 extern void usage(const char *err) NORETURN;
diff --git a/refs.c b/refs.c
index d4f3612487..6aa6aec82d 100644
--- a/refs.c
+++ b/refs.c
@@ -7,40 +7,75 @@
 /* We allow "recursive" symbolic refs. Only within reason, though */
 #define MAXDEPTH 5
 
-int read_ref(const char *filename, unsigned char *sha1)
+const char *resolve_ref(const char *path, unsigned char *sha1, int reading)
 {
-	int depth = 0;
-	int ret = -1, fd;
+	int depth = MAXDEPTH, len;
+	char buffer[256];
 
-	while ((fd = open(filename, O_RDONLY)) >= 0) {
-		char buffer[256];
-		int len = read(fd, buffer, sizeof(buffer)-1);
+	for (;;) {
+		struct stat st;
+		char *buf;
+		int fd;
 
-		close(fd);
-		if (len < 0)
-			break;
+		if (--depth < 0)
+			return NULL;
 
-		buffer[len] = 0;
-		while (len && isspace(buffer[len-1]))
-			buffer[--len] = 0;
+		/* Special case: non-existing file.
+		 * Not having the refs/heads/new-branch is OK
+		 * if we are writing into it, so is .git/HEAD
+		 * that points at refs/heads/master still to be
+		 * born.  It is NOT OK if we are resolving for
+		 * reading.
+		 */
+		if (lstat(path, &st) < 0) {
+			if (reading || errno != ENOENT)
+				return NULL;
+			memset(sha1, 0, 20);
+			return path;
+		}
 
-		if (!strncmp(buffer, "ref:", 4)) {
-			char *buf;
-			if (depth > MAXDEPTH)
-				break;
-			depth++;
-			buf = buffer + 4;
-			len -= 4;
-			while (len && isspace(*buf))
-				buf++, len--;
-			filename = git_path("%.*s", len, buf);
-			continue;
+		/* Follow "normalized" - ie "refs/.." symlinks by hand */
+		if (S_ISLNK(st.st_mode)) {
+			len = readlink(path, buffer, sizeof(buffer)-1);
+			if (len >= 5 && !memcmp("refs/", buffer, 5)) {
+				path = git_path("%.*s", len, buffer);
+				continue;
+			}
 		}
-		if (len >= 40)
-			ret = get_sha1_hex(buffer, sha1);
-		break;
+
+		/*
+		 * Anything else, just open it and try to use it as
+		 * a ref
+		 */
+		fd = open(path, O_RDONLY);
+		if (fd < 0)
+			return NULL;
+		len = read(fd, buffer, sizeof(buffer)-1);
+		close(fd);
+
+		/*
+		 * Is it a symbolic ref?
+		 */
+		if (len < 4 || memcmp("ref:", buffer, 4))
+			break;
+		buf = buffer + 4;
+		len -= 4;
+		while (len && isspace(*buf))
+			buf++, len--;
+		while (len && isspace(buf[len-1]))
+			buf[--len] = 0;
+		path = git_path("%.*s", len, buf);
 	}
-	return ret;
+	if (len < 40 || get_sha1_hex(buffer, sha1))
+		return NULL;
+	return path;
+}
+
+int read_ref(const char *filename, unsigned char *sha1)
+{
+	if (resolve_ref(filename, sha1, 1))
+		return 0;
+	return -1;
 }
 
 static int do_for_each_ref(const char *base, int (*fn)(const char *path, const unsigned char *sha1))
diff --git a/update-ref.c b/update-ref.c
index 6919cead4b..4a1704c1a5 100644
--- a/update-ref.c
+++ b/update-ref.c
@@ -4,66 +4,6 @@
 
 static const char git_update_ref_usage[] = "git-update-ref <refname> <value> [<oldval>]";
 
-#define MAXDEPTH 5
-
-static const char *resolve_ref(const char *path, unsigned char *sha1)
-{
-	int depth = MAXDEPTH, len;
-	char buffer[256];
-
-	for (;;) {
-		struct stat st;
-		char *buf;
-		int fd;
-
-		if (--depth < 0)
-			return NULL;
-
-		/* Special case: non-existing file */
-		if (lstat(path, &st) < 0) {
-			if (errno != ENOENT)
-				return NULL;
-			memset(sha1, 0, 20);
-			return path;
-		}
-
-		/* Follow "normalized" - ie "refs/.." symlinks by hand */
-		if (S_ISLNK(st.st_mode)) {
-			len = readlink(path, buffer, sizeof(buffer)-1);
-			if (len >= 5 && !memcmp("refs/", buffer, 5)) {
-				path = git_path("%.*s", len, buffer);
-				continue;
-			}
-		}
-
-		/*
-		 * Anything else, just open it and try to use it as
-		 * a ref
-		 */
-		fd = open(path, O_RDONLY);
-		if (fd < 0)
-			return NULL;
-		len = read(fd, buffer, sizeof(buffer)-1);
-		close(fd);
-
-		/*
-		 * Is it a symbolic ref?
-		 */
-		if (len < 4 || memcmp("ref:", buffer, 4))
-			break;
-		buf = buffer + 4;
-		len -= 4;
-		while (len && isspace(*buf))
-			buf++, len--;
-		while (len && isspace(buf[len-1]))
-			buf[--len] = 0;
-		path = git_path("%.*s", len, buf);
-	}
-	if (len < 40 || get_sha1_hex(buffer, sha1))
-		return NULL;
-	return path;
-}
-
 static int re_verify(const char *path, unsigned char *oldsha1, unsigned char *currsha1)
 {
 	char buf[40];
@@ -97,7 +37,7 @@ int main(int argc, char **argv)
 	if (oldval && get_sha1(oldval, oldsha1) < 0)
 		die("%s: not a valid old SHA1", oldval);
 
-	path = resolve_ref(git_path("%s", refname), currsha1);
+	path = resolve_ref(git_path("%s", refname), currsha1, !!oldval);
 	if (!path)
 		die("No such ref: %s", refname);