diff --git a/builtin-read-tree.c b/builtin-read-tree.c
index 5785401753..726fb0b588 100644
--- a/builtin-read-tree.c
+++ b/builtin-read-tree.c
@@ -45,7 +45,7 @@ static int read_cache_unmerged(void)
 				continue;
 			cache_tree_invalidate_path(active_cache_tree, ce->name);
 			last = ce;
-			ce->ce_flags |= CE_REMOVE;
+			continue;
 		}
 		*dst++ = ce;
 	}
diff --git a/t/t7104-reset.sh b/t/t7104-reset.sh
new file mode 100755
index 0000000000..f136ee7bb5
--- /dev/null
+++ b/t/t7104-reset.sh
@@ -0,0 +1,46 @@
+#!/bin/sh
+
+test_description='reset --hard unmerged'
+
+. ./test-lib.sh
+
+test_expect_success setup '
+
+	mkdir before later &&
+	>before/1 &&
+	>before/2 &&
+	>hello &&
+	>later/3 &&
+	git add before hello later &&
+	git commit -m world &&
+
+	H=$(git rev-parse :hello) &&
+	git rm --cached hello &&
+	echo "100644 $H 2	hello" | git update-index --index-info &&
+
+	rm -f hello &&
+	mkdir -p hello &&
+	>hello/world &&
+	test "$(git ls-files -o)" = hello/world
+
+'
+
+test_expect_success 'reset --hard should restore unmerged ones' '
+
+	git reset --hard &&
+	git ls-files --error-unmatch before/1 before/2 hello later/3 &&
+	test -f hello
+
+'
+
+test_expect_success 'reset --hard did not corrupt index nor cached-tree' '
+
+	T=$(git write-tree) &&
+	rm -f .git/index &&
+	git add before hello later &&
+	U=$(git write-tree) &&
+	test "$T" = "$U"
+
+'
+
+test_done