diff --git a/builtin/init-db.c b/builtin/init-db.c
index edc40ff574..0271285fad 100644
--- a/builtin/init-db.c
+++ b/builtin/init-db.c
@@ -463,7 +463,7 @@ int cmd_init_db(int argc, const char **argv, const char *prefix)
 		static char git_dir[PATH_MAX+1];
 
 		setenv(GIT_DIR_ENVIRONMENT,
-			getcwd(git_dir, sizeof(git_dir)), 0);
+			getcwd(git_dir, sizeof(git_dir)), argc > 0);
 	}
 
 	if (init_shared_repository != -1)
diff --git a/t/t0001-init.sh b/t/t0001-init.sh
index 675773479a..7c0a698b92 100755
--- a/t/t0001-init.sh
+++ b/t/t0001-init.sh
@@ -310,4 +310,18 @@ test_expect_success POSIXPERM 'init notices EPERM' '
 	)
 '
 
+test_expect_success 'init creates a new bare directory with global --bare' '
+	rm -rf newdir &&
+	git --bare init newdir &&
+	test -d newdir/refs
+'
+
+test_expect_success 'init prefers command line to GIT_DIR' '
+	rm -rf newdir &&
+	mkdir otherdir &&
+	GIT_DIR=otherdir git --bare init newdir &&
+	test -d newdir/refs &&
+	! test -d otherdir/refs
+'
+
 test_done