diff --git a/git.c b/git.c
index 387eabe38c..e5f1811b6b 100644
--- a/git.c
+++ b/git.c
@@ -306,7 +306,7 @@ static int handle_options(const char ***argv, int *argc, int *envchanged)
 		} else if (!strcmp(cmd, "--shallow-file")) {
 			(*argv)++;
 			(*argc)--;
-			set_alternate_shallow_file(the_repository, (*argv)[0], 1);
+			setenv(GIT_SHALLOW_FILE_ENVIRONMENT, (*argv)[0], 1);
 			if (envchanged)
 				*envchanged = 1;
 		} else if (!strcmp(cmd, "-C")) {
diff --git a/setup.c b/setup.c
index 1d8c193375..85fad0d77d 100644
--- a/setup.c
+++ b/setup.c
@@ -1046,7 +1046,6 @@ static void setup_git_env_internal(struct repository *repo,
 				   const char *git_dir)
 {
 	char *git_replace_ref_base;
-	const char *shallow_file;
 	const char *replace_ref_base;
 	struct set_gitdir_args args = { NULL };
 	struct strvec to_free = STRVEC_INIT;
@@ -1067,10 +1066,6 @@ static void setup_git_env_internal(struct repository *repo,
 							  : "refs/replace/");
 	update_ref_namespace(NAMESPACE_REPLACE, git_replace_ref_base);
 
-	shallow_file = getenv(GIT_SHALLOW_FILE_ENVIRONMENT);
-	if (shallow_file)
-		set_alternate_shallow_file(repo, shallow_file, 0);
-
 	if (git_env_bool(NO_LAZY_FETCH_ENVIRONMENT, 0))
 		fetch_if_missing = 0;
 }
@@ -1774,8 +1769,13 @@ 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);
 	}
 
 	repo->bare_cfg = format->is_bare;
diff --git a/shallow.c b/shallow.c
index 07cae44ae5..c063b3deaf 100644
--- a/shallow.c
+++ b/shallow.c
@@ -21,12 +21,10 @@
 #include "statinfo.h"
 #include "trace.h"
 
-void set_alternate_shallow_file(struct repository *r, const char *path, int override)
+void set_alternate_shallow_file(struct repository *r, const char *path)
 {
 	if (r->parsed_objects->is_shallow != -1)
 		BUG("is_repository_shallow must not be called before set_alternate_shallow_file");
-	if (r->parsed_objects->alternate_shallow_file && !override)
-		return;
 	free(r->parsed_objects->alternate_shallow_file);
 	r->parsed_objects->alternate_shallow_file = xstrdup_or_null(path);
 }
diff --git a/shallow.h b/shallow.h
index e20ca4c21b..6a64db42c9 100644
--- a/shallow.h
+++ b/shallow.h
@@ -10,7 +10,7 @@
 struct oid_array;
 struct strvec;
 
-void set_alternate_shallow_file(struct repository *r, const char *path, int override);
+void set_alternate_shallow_file(struct repository *r, const char *path);
 int register_shallow(struct repository *r, const struct object_id *oid);
 int unregister_shallow(const struct object_id *oid);
 int is_repository_shallow(struct repository *r);