diff --git a/odb.c b/odb.c
index cf6e7938c0..ed1d63f4bd 100644
--- a/odb.c
+++ b/odb.c
@@ -1004,26 +1004,29 @@ int odb_write_object_stream(struct object_database *odb,
 }
 
 struct object_database *odb_new(struct repository *repo,
-				const char *primary_source,
-				const char *secondary_sources)
+				enum odb_new_flags flags)
 {
-	struct object_database *o = xmalloc(sizeof(*o));
-	char *to_free = NULL;
+	char *primary_source = NULL, *secondary_sources = NULL;
+	struct object_database *o;
 
-	memset(o, 0, sizeof(*o));
+	CALLOC_ARRAY(o, 1);
 	o->repo = repo;
 	pthread_mutex_init(&o->replace_mutex, NULL);
 	string_list_init_dup(&o->submodule_source_paths);
 
+	if (flags & ODB_NEW_HONOR_ENV) {
+		primary_source = xstrdup_or_null(getenv(DB_ENVIRONMENT));
+		secondary_sources = xstrdup_or_null(getenv(ALTERNATE_DB_ENVIRONMENT));
+	}
 	if (!primary_source)
-		primary_source = to_free = xstrfmt("%s/objects", repo->commondir);
+		primary_source = xstrfmt("%s/objects", repo->commondir);
+
 	o->sources = odb_source_new(o, primary_source, true);
 	o->sources_tail = &o->sources->next;
-	o->alternate_db = xstrdup_or_null(secondary_sources);
+	o->alternate_db = secondary_sources;
 	o->inmemory_objects = &odb_source_inmemory_new(o)->base;
 
-	free(to_free);
-
+	free(primary_source);
 	return o;
 }
 
diff --git a/odb.h b/odb.h
index 7995bed97b..8ec335c7f7 100644
--- a/odb.h
+++ b/odb.h
@@ -100,6 +100,20 @@ struct object_database {
 	struct string_list submodule_source_paths;
 };
 
+enum odb_new_flags {
+	/*
+	 * Honor environment variables when constructing the object database
+	 * sources. This makes us respect the following environment variables:
+	 *
+	 *   - GIT_OBJECT_DIRECTORY to override the primary object directory.
+	 *
+	 *   - GIT_ALTERNATE_OBJECT_DIRECTORIES to override alternates.
+	 *
+	 * Environment variables may be backend-specific.
+	 */
+	ODB_NEW_HONOR_ENV = (1 << 0),
+};
+
 /*
  * Create a new object database for the given repository.
  *
@@ -112,8 +126,7 @@ struct object_database {
  * Returns the newly created object database.
  */
 struct object_database *odb_new(struct repository *repo,
-				const char *primary_source,
-				const char *alternate_sources);
+				enum odb_new_flags flags);
 
 /* Free the object database and release all resources. */
 void odb_free(struct object_database *o);
diff --git a/setup.c b/setup.c
index 825572f5f1..5dfab3e79e 100644
--- a/setup.c
+++ b/setup.c
@@ -1765,7 +1765,7 @@ int apply_repository_format(struct repository *repo,
 			    enum apply_repository_format_flags flags,
 			    struct strbuf *err)
 {
-	char *object_directory = NULL, *alternate_object_directories = NULL;
+	enum odb_new_flags odb_new_flags = 0;
 
 	if (verify_repository_format(format, err) < 0)
 		return -1;
@@ -1779,8 +1779,6 @@ int apply_repository_format(struct repository *repo,
 	if (flags & APPLY_REPOSITORY_FORMAT_HONOR_ENV) {
 		const char *shallow_file;
 
-		object_directory = xstrdup_or_null(getenv(DB_ENVIRONMENT));
-		alternate_object_directories = xstrdup_or_null(getenv(ALTERNATE_DB_ENVIRONMENT));
 		shallow_file = getenv(GIT_SHALLOW_FILE_ENVIRONMENT);
 		if (shallow_file)
 			set_alternate_shallow_file(repo, shallow_file);
@@ -1803,11 +1801,10 @@ int apply_repository_format(struct repository *repo,
 	repo->repository_format_precious_objects =
 		format->precious_objects;
 
-	repo->objects = odb_new(repo, object_directory,
-				alternate_object_directories);
+	if (flags & APPLY_REPOSITORY_FORMAT_HONOR_ENV)
+		odb_new_flags |= ODB_NEW_HONOR_ENV;
+	repo->objects = odb_new(repo, odb_new_flags);
 
-	free(alternate_object_directories);
-	free(object_directory);
 	return 0;
 }
 
diff --git a/t/unit-tests/u-odb-inmemory.c b/t/unit-tests/u-odb-inmemory.c
index 6844bfc37c..db323e10fd 100644
--- a/t/unit-tests/u-odb-inmemory.c
+++ b/t/unit-tests/u-odb-inmemory.c
@@ -38,7 +38,7 @@ static void cl_assert_object_info(struct odb_source_inmemory *source,
 
 void test_odb_inmemory__initialize(void)
 {
-	odb = odb_new(&repo, "", "");
+	odb = odb_new(&repo, 0);
 }
 
 void test_odb_inmemory__cleanup(void)