diff --git a/setup.c b/setup.c
index 7b648de027..1e5c2eacb1 100644
--- a/setup.c
+++ b/setup.c
@@ -2204,8 +2204,8 @@ void initialize_repository_version(int hash_algo,
 				   enum ref_storage_format ref_storage_format,
 				   int reinit)
 {
-	char repo_version_string[10];
-	int repo_version = GIT_REPO_VERSION;
+	struct strbuf repo_version = STRBUF_INIT;
+	int target_version = GIT_REPO_VERSION;
 
 	/*
 	 * Note that we initialize the repository version to 1 when the ref
@@ -2216,12 +2216,7 @@ void initialize_repository_version(int hash_algo,
 	 */
 	if (hash_algo != GIT_HASH_SHA1 ||
 	    ref_storage_format != REF_STORAGE_FORMAT_FILES)
-		repo_version = GIT_REPO_VERSION_READ;
-
-	/* This forces creation of new config file */
-	xsnprintf(repo_version_string, sizeof(repo_version_string),
-		  "%d", repo_version);
-	git_config_set("core.repositoryformatversion", repo_version_string);
+		target_version = GIT_REPO_VERSION_READ;
 
 	if (hash_algo != GIT_HASH_SHA1 && hash_algo != GIT_HASH_UNKNOWN)
 		git_config_set("extensions.objectformat",
@@ -2234,6 +2229,25 @@ void initialize_repository_version(int hash_algo,
 			       ref_storage_format_to_name(ref_storage_format));
 	else if (reinit)
 		git_config_set_gently("extensions.refstorage", NULL);
+
+	if (reinit) {
+		struct strbuf config = STRBUF_INIT;
+		struct repository_format repo_fmt = REPOSITORY_FORMAT_INIT;
+
+		strbuf_git_common_path(&config, the_repository, "config");
+		read_repository_format(&repo_fmt, config.buf);
+
+		if (repo_fmt.v1_only_extensions.nr)
+			target_version = GIT_REPO_VERSION_READ;
+
+		strbuf_release(&config);
+		clear_repository_format(&repo_fmt);
+	}
+
+	strbuf_addf(&repo_version, "%d", target_version);
+	git_config_set("core.repositoryformatversion", repo_version.buf);
+
+	strbuf_release(&repo_version);
 }
 
 static int is_reinit(void)
@@ -2333,7 +2347,7 @@ static int create_default_files(const char *template_path,
 		adjust_shared_perm(repo_get_git_dir(the_repository));
 	}
 
-	initialize_repository_version(fmt->hash_algo, fmt->ref_storage_format, 0);
+	initialize_repository_version(fmt->hash_algo, fmt->ref_storage_format, reinit);
 
 	/* Check filemode trustability */
 	path = git_path_buf(&buf, "config");
diff --git a/t/t5504-fetch-receive-strict.sh b/t/t5504-fetch-receive-strict.sh
index 138e6778a4..290d2a591a 100755
--- a/t/t5504-fetch-receive-strict.sh
+++ b/t/t5504-fetch-receive-strict.sh
@@ -171,7 +171,7 @@ test_expect_success 'fsck with invalid or bogus skipList input' '
 	test_must_fail git -c fsck.skipList=does-not-exist -c fsck.missingEmail=ignore fsck 2>err &&
 	test_grep "could not open.*: does-not-exist" err &&
 	test_must_fail git -c fsck.skipList=.git/config -c fsck.missingEmail=ignore fsck 2>err &&
-	test_grep "invalid object name: \[core\]" err
+	test_grep "invalid object name: " err
 '
 
 test_expect_success 'fsck with other accepted skipList input (comments & empty lines)' '
@@ -234,7 +234,7 @@ test_expect_success 'push with receive.fsck.skipList' '
 	test_grep "could not open.*: does-not-exist" err &&
 	git --git-dir=dst/.git config receive.fsck.skipList config &&
 	test_must_fail git push --porcelain dst bogus 2>err &&
-	test_grep "invalid object name: \[core\]" err &&
+	test_grep "invalid object name: " err &&
 
 	git --git-dir=dst/.git config receive.fsck.skipList SKIP &&
 	git push --porcelain dst bogus
@@ -263,7 +263,7 @@ test_expect_success 'fetch with fetch.fsck.skipList' '
 	test_grep "could not open.*: does-not-exist" err &&
 	git --git-dir=dst/.git config fetch.fsck.skipList dst/.git/config &&
 	test_must_fail git --git-dir=dst/.git fetch "file://$(pwd)" $refspec 2>err &&
-	test_grep "invalid object name: \[core\]" err &&
+	test_grep "invalid object name: " err &&
 
 	git --git-dir=dst/.git config fetch.fsck.skipList dst/.git/SKIP &&
 	git --git-dir=dst/.git fetch "file://$(pwd)" $refspec