diff --git a/sequencer.c b/sequencer.c
index f2a10cc4f2..332a383b03 100644
--- a/sequencer.c
+++ b/sequencer.c
@@ -1862,12 +1862,15 @@ static int error_failed_squash(struct commit *commit,
 
 static int do_exec(const char *command_line)
 {
+	struct argv_array child_env = ARGV_ARRAY_INIT;
 	const char *child_argv[] = { NULL, NULL };
 	int dirty, status;
 
 	fprintf(stderr, "Executing: %s\n", command_line);
 	child_argv[0] = command_line;
-	status = run_command_v_opt(child_argv, RUN_USING_SHELL);
+	argv_array_pushf(&child_env, "GIT_DIR=%s", absolute_path(get_git_dir()));
+	status = run_command_v_opt_cd_env(child_argv, RUN_USING_SHELL, NULL,
+					  child_env.argv);
 
 	/* force re-reading of the cache */
 	if (discard_cache() < 0 || read_cache() < 0)
@@ -1897,6 +1900,8 @@ static int do_exec(const char *command_line)
 		status = 1;
 	}
 
+	argv_array_clear(&child_env);
+
 	return status;
 }
 
diff --git a/t/t3404-rebase-interactive.sh b/t/t3404-rebase-interactive.sh
index 3704dbb2ec..6a82d1ed87 100755
--- a/t/t3404-rebase-interactive.sh
+++ b/t/t3404-rebase-interactive.sh
@@ -108,6 +108,17 @@ test_expect_success 'rebase -i with the exec command runs from tree root' '
 	rm -fr subdir
 '
 
+test_expect_success 'rebase -i with exec allows git commands in subdirs' '
+	test_when_finished "rm -rf subdir" &&
+	test_when_finished "git rebase --abort ||:" &&
+	git checkout master &&
+	mkdir subdir && (cd subdir &&
+	set_fake_editor &&
+	FAKE_LINES="1 exec_cd_subdir_&&_git_rev-parse_--is-inside-work-tree" \
+		git rebase -i HEAD^
+	)
+'
+
 test_expect_success 'rebase -i with the exec command checks tree cleanness' '
 	git checkout master &&
 	set_fake_editor &&