diff --git a/config.c b/config.c
index 068fa4dcfa..a88df53fdb 100644
--- a/config.c
+++ b/config.c
@@ -1414,34 +1414,27 @@ static void configset_iter(struct config_set *cs, config_fn_t fn, void *data)
 
 void read_early_config(config_fn_t cb, void *data)
 {
+	struct strbuf buf = STRBUF_INIT;
+
 	git_config_with_options(cb, data, NULL, 1);
 
 	/*
-	 * Note that this is a really dirty hack that does the wrong thing in
-	 * many cases. The crux of the problem is that we cannot run
-	 * setup_git_directory() early on in git's setup, so we have no idea if
-	 * we are in a repository or not, and therefore are not sure whether
-	 * and how to read repository-local config.
-	 *
-	 * So if we _aren't_ in a repository (or we are but we would reject its
-	 * core.repositoryformatversion), we'll read whatever is in .git/config
-	 * blindly. Similarly, if we _are_ in a repository, but not at the
-	 * root, we'll fail to find .git/config (because it's really
-	 * ../.git/config, etc), unless setup_git_directory() was already called.
-	 * See t7006 for a complete set of failures.
-	 *
-	 * However, we have historically provided this hack because it does
-	 * work some of the time (namely when you are at the top-level of a
-	 * valid repository), and would rarely make things worse (i.e., you do
-	 * not generally have a .git/config file sitting around).
+	 * When setup_git_directory() was not yet asked to discover the
+	 * GIT_DIR, we ask discover_git_directory() to figure out whether there
+	 * is any repository config we should use (but unlike
+	 * setup_git_directory_gently(), no global state is changed, most
+	 * notably, the current working directory is still the same after the
+	 * call).
 	 */
-	if (!have_git_dir()) {
+	if (!have_git_dir() && discover_git_directory(&buf)) {
 		struct git_config_source repo_config;
 
 		memset(&repo_config, 0, sizeof(repo_config));
-		repo_config.file = ".git/config";
+		strbuf_addstr(&buf, "/config");
+		repo_config.file = buf.buf;
 		git_config_with_options(cb, data, &repo_config, 1);
 	}
+	strbuf_release(&buf);
 }
 
 static void git_config_check_init(void);
diff --git a/t/t7006-pager.sh b/t/t7006-pager.sh
index 304ae06c60..4f3794d415 100755
--- a/t/t7006-pager.sh
+++ b/t/t7006-pager.sh
@@ -360,19 +360,19 @@ test_pager_choices                       'git aliasedlog'
 test_default_pager        expect_success 'git -p aliasedlog'
 test_PAGER_overrides      expect_success 'git -p aliasedlog'
 test_core_pager_overrides expect_success 'git -p aliasedlog'
-test_core_pager_subdir    expect_failure 'git -p aliasedlog'
+test_core_pager_subdir    expect_success 'git -p aliasedlog'
 test_GIT_PAGER_overrides  expect_success 'git -p aliasedlog'
 
 test_default_pager        expect_success 'git -p true'
 test_PAGER_overrides      expect_success 'git -p true'
 test_core_pager_overrides expect_success 'git -p true'
-test_core_pager_subdir    expect_failure 'git -p true'
+test_core_pager_subdir    expect_success 'git -p true'
 test_GIT_PAGER_overrides  expect_success 'git -p true'
 
 test_default_pager        expect_success test_must_fail 'git -p request-pull'
 test_PAGER_overrides      expect_success test_must_fail 'git -p request-pull'
 test_core_pager_overrides expect_success test_must_fail 'git -p request-pull'
-test_core_pager_subdir    expect_failure test_must_fail 'git -p request-pull'
+test_core_pager_subdir    expect_success test_must_fail 'git -p request-pull'
 test_GIT_PAGER_overrides  expect_success test_must_fail 'git -p request-pull'
 
 test_default_pager        expect_success test_must_fail 'git -p'
@@ -380,7 +380,7 @@ test_PAGER_overrides      expect_success test_must_fail 'git -p'
 test_local_config_ignored expect_failure test_must_fail 'git -p'
 test_GIT_PAGER_overrides  expect_success test_must_fail 'git -p'
 
-test_expect_failure TTY 'core.pager in repo config works and retains cwd' '
+test_expect_success TTY 'core.pager in repo config works and retains cwd' '
 	sane_unset GIT_PAGER &&
 	test_config core.pager "cat >cwd-retained" &&
 	(