diff --git a/git-sh-setup.sh b/git-sh-setup.sh
index 94e26ed5e8..8e427dab31 100644
--- a/git-sh-setup.sh
+++ b/git-sh-setup.sh
@@ -39,9 +39,15 @@ git_broken_path_fix () {
 
 # @@BROKEN_PATH_FIX@@
 
-die() {
-	echo >&2 "$@"
-	exit 1
+die () {
+	die_with_status 1 "$@"
+}
+
+die_with_status () {
+	status=$1
+	shift
+	echo >&2 "$*"
+	exit "$status"
 }
 
 GIT_QUIET=
diff --git a/git-submodule.sh b/git-submodule.sh
index c571d320d0..cfd5aa6049 100755
--- a/git-submodule.sh
+++ b/git-submodule.sh
@@ -448,7 +448,8 @@ cmd_update()
 	fi
 
 	cloned_modules=
-	module_list "$@" |
+	module_list "$@" | {
+	err=
 	while read mode sha1 stage path
 	do
 		if test "$stage" = U
@@ -511,16 +512,19 @@ Maybe you want to use 'update --init'?")"
 				update_module= ;;
 			esac
 
+			must_die_on_failure=
 			case "$update_module" in
 			rebase)
 				command="git rebase"
 				die_msg="$(eval_gettext "Unable to rebase '\$sha1' in submodule path '\$path'")"
 				say_msg="$(eval_gettext "Submodule path '\$path': rebased into '\$sha1'")"
+				must_die_on_failure=yes
 				;;
 			merge)
 				command="git merge"
 				die_msg="$(eval_gettext "Unable to merge '\$sha1' in submodule path '\$path'")"
 				say_msg="$(eval_gettext "Submodule path '\$path': merged in '\$sha1'")"
+				must_die_on_failure=yes
 				;;
 			*)
 				command="git checkout $subforce -q"
@@ -529,16 +533,51 @@ Maybe you want to use 'update --init'?")"
 				;;
 			esac
 
-			(clear_local_git_env; cd "$path" && $command "$sha1") || die $die_msg
-			say $say_msg
+			if (clear_local_git_env; cd "$path" && $command "$sha1")
+			then
+				say "$say_msg"
+			elif test -n "$must_die_on_failure"
+			then
+				die_with_status 2 "$die_msg"
+			else
+				err="${err};$die_msg"
+				continue
+			fi
 		fi
 
 		if test -n "$recursive"
 		then
-			(clear_local_git_env; cd "$path" && eval cmd_update "$orig_flags") ||
-			die "$(eval_gettext "Failed to recurse into submodule path '\$path'")"
+			(clear_local_git_env; cd "$path" && eval cmd_update "$orig_flags")
+			res=$?
+			if test $res -gt 0
+			then
+				die_msg="$(eval_gettext "Failed to recurse into submodule path '\$path'")"
+				if test $res -eq 1
+				then
+					err="${err};$die_msg"
+					continue
+				else
+					die_with_status $res "$die_msg"
+				fi
+			fi
 		fi
 	done
+
+	if test -n "$err"
+	then
+		OIFS=$IFS
+		IFS=';'
+		for e in $err
+		do
+			if test -n "$e"
+			then
+				echo >&2 "$e"
+			fi
+		done
+		IFS=$OIFS
+		exit 1
+	fi
+	}
 }
 
 set_name_rev () {
diff --git a/t/t7406-submodule-update.sh b/t/t7406-submodule-update.sh
index 60e33bed28..c679f36a4d 100755
--- a/t/t7406-submodule-update.sh
+++ b/t/t7406-submodule-update.sh
@@ -298,4 +298,148 @@ test_expect_success 'submodule update ignores update=rebase config for new submo
 	)
 '
 
+test_expect_success 'submodule update continues after checkout error' '
+	(cd super &&
+	 git reset --hard HEAD &&
+	 git submodule add ../submodule submodule2 &&
+	 git submodule init &&
+	 git commit -am "new_submodule" &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../expect
+	 ) &&
+	 (cd submodule &&
+	  test_commit "update_submodule" file
+	 ) &&
+	 (cd submodule2 &&
+	  test_commit "update_submodule2" file
+	 ) &&
+	 git add submodule &&
+	 git add submodule2 &&
+	 git commit -m "two_new_submodule_commits" &&
+	 (cd submodule &&
+	  echo "" > file
+	 ) &&
+	 git checkout HEAD^ &&
+	 test_must_fail git submodule update &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../actual
+	 ) &&
+	 test_cmp expect actual
+	)
+'
+test_expect_success 'submodule update continues after recursive checkout error' '
+	(cd super &&
+	 git reset --hard HEAD &&
+	 git checkout master &&
+	 git submodule update &&
+	 (cd submodule &&
+	  git submodule add ../submodule subsubmodule &&
+	  git submodule init &&
+	  git commit -m "new_subsubmodule"
+	 ) &&
+	 git add submodule &&
+	 git commit -m "update_submodule" &&
+	 (cd submodule &&
+	  (cd subsubmodule &&
+	   test_commit "update_subsubmodule" file
+	  ) &&
+	  git add subsubmodule &&
+	  test_commit "update_submodule_again" file &&
+	  (cd subsubmodule &&
+	   test_commit "update_subsubmodule_again" file
+	  ) &&
+	  test_commit "update_submodule_again_again" file
+	 ) &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../expect &&
+	  test_commit "update_submodule2_again" file
+	 ) &&
+	 git add submodule &&
+	 git add submodule2 &&
+	 git commit -m "new_commits" &&
+	 git checkout HEAD^ &&
+	 (cd submodule &&
+	  git checkout HEAD^ &&
+	  (cd subsubmodule &&
+	   echo "" > file
+	  )
+	 ) &&
+	 test_must_fail git submodule update --recursive &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../actual
+	 ) &&
+	 test_cmp expect actual
+	)
+'
+
+test_expect_success 'submodule update exit immediately in case of merge conflict' '
+	(cd super &&
+	 git checkout master &&
+	 git reset --hard HEAD &&
+	 (cd submodule &&
+	  (cd subsubmodule &&
+	   git reset --hard HEAD
+	  )
+	 ) &&
+	 git submodule update --recursive &&
+	 (cd submodule &&
+	  test_commit "update_submodule_2" file
+	 ) &&
+	 (cd submodule2 &&
+	  test_commit "update_submodule2_2" file
+	 ) &&
+	 git add submodule &&
+	 git add submodule2 &&
+	 git commit -m "two_new_submodule_commits" &&
+	 (cd submodule &&
+	  git checkout master &&
+	  test_commit "conflict" file &&
+	  echo "conflict" > file
+	 ) &&
+	 git checkout HEAD^ &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../expect
+	 ) &&
+	 git config submodule.submodule.update merge &&
+	 test_must_fail git submodule update &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../actual
+	 ) &&
+	 test_cmp expect actual
+	)
+'
+test_expect_success 'submodule update exit immediately after recursive rebase error' '
+	(cd super &&
+	 git checkout master &&
+	 git reset --hard HEAD &&
+	 (cd submodule &&
+	  git reset --hard HEAD &&
+	  git submodule update --recursive
+	 ) &&
+	 (cd submodule &&
+	  test_commit "update_submodule_3" file
+	 ) &&
+	 (cd submodule2 &&
+	  test_commit "update_submodule2_3" file
+	 ) &&
+	 git add submodule &&
+	 git add submodule2 &&
+	 git commit -m "two_new_submodule_commits" &&
+	 (cd submodule &&
+	  git checkout master &&
+	  test_commit "conflict2" file &&
+	  echo "conflict" > file
+	 ) &&
+	 git checkout HEAD^ &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../expect
+	 ) &&
+	 git config submodule.submodule.update rebase &&
+	 test_must_fail git submodule update &&
+	 (cd submodule2 &&
+	  git rev-parse --max-count=1 HEAD > ../actual
+	 ) &&
+	 test_cmp expect actual
+	)
+'
 test_done