diff --git a/setup.c b/setup.c
index e6e749ec4b..c3301f5ab8 100644
--- a/setup.c
+++ b/setup.c
@@ -1726,6 +1726,31 @@ int daemonize(void)
 #define DEFAULT_GIT_TEMPLATE_DIR "/usr/share/git-core/templates"
 #endif
 
+struct template_dir_cb_data {
+	char *path;
+	int initialized;
+};
+
+static int template_dir_cb(const char *key, const char *value, void *d)
+{
+	struct template_dir_cb_data *data = d;
+
+	if (strcmp(key, "init.templatedir"))
+		return 0;
+
+	if (!value) {
+		data->path = NULL;
+	} else {
+		char *path = NULL;
+
+		FREE_AND_NULL(data->path);
+		if (!git_config_pathname((const char **)&path, key, value))
+			data->path = path ? path : xstrdup(value);
+	}
+
+	return 0;
+}
+
 const char *get_template_dir(const char *option_template)
 {
 	const char *template_dir = option_template;
@@ -1733,15 +1758,13 @@ const char *get_template_dir(const char *option_template)
 	if (!template_dir)
 		template_dir = getenv(TEMPLATE_DIR_ENVIRONMENT);
 	if (!template_dir) {
-		static const char *init_template_dir;
-		static int initialized;
+		static struct template_dir_cb_data data;
 
-		if (!initialized) {
-			git_config_get_pathname("init.templatedir",
-						&init_template_dir);
-			initialized = 1;
+		if (!data.initialized) {
+			git_protected_config(template_dir_cb, &data);
+			data.initialized = 1;
 		}
-		template_dir = init_template_dir;
+		template_dir = data.path;
 	}
 	if (!template_dir) {
 		static char *dir;
diff --git a/t/t7400-submodule-basic.sh b/t/t7400-submodule-basic.sh
index eae6a46ef3..3e8cf9b885 100755
--- a/t/t7400-submodule-basic.sh
+++ b/t/t7400-submodule-basic.sh
@@ -1436,4 +1436,35 @@ test_expect_success 'recursive clone respects -q' '
 	test_must_be_empty actual
 '
 
+test_expect_success '`submodule init` and `init.templateDir`' '
+	mkdir -p tmpl/hooks &&
+	write_script tmpl/hooks/post-checkout <<-EOF &&
+	echo HOOK-RUN >&2
+	echo I was here >hook.run
+	exit 1
+	EOF
+
+	test_config init.templateDir "$(pwd)/tmpl" &&
+	test_when_finished \
+		"git config --global --unset init.templateDir || true" &&
+	(
+		sane_unset GIT_TEMPLATE_DIR &&
+		NO_SET_GIT_TEMPLATE_DIR=t &&
+		export NO_SET_GIT_TEMPLATE_DIR &&
+
+		git config --global init.templateDir "$(pwd)/tmpl" &&
+		test_must_fail git submodule \
+			add "$submodurl" sub-global 2>err &&
+		git config --global --unset init.templateDir &&
+		grep HOOK-RUN err &&
+		test_path_is_file sub-global/hook.run &&
+
+		git config init.templateDir "$(pwd)/tmpl" &&
+		git submodule add "$submodurl" sub-local 2>err &&
+		git config --unset init.templateDir &&
+		! grep HOOK-RUN err &&
+		test_path_is_missing sub-local/hook.run
+	)
+'
+
 test_done