diff --git a/builtin-ls-tree.c b/builtin-ls-tree.c
index 6472610ac2..1cb4dca277 100644
--- a/builtin-ls-tree.c
+++ b/builtin-ls-tree.c
@@ -6,6 +6,7 @@
 #include "cache.h"
 #include "blob.h"
 #include "tree.h"
+#include "commit.h"
 #include "quote.h"
 #include "builtin.h"
 
@@ -59,7 +60,24 @@ static int show_tree(const unsigned char *sha1, const char *base, int baselen,
 	int retval = 0;
 	const char *type = blob_type;
 
-	if (S_ISDIR(mode)) {
+	if (S_ISDIRLNK(mode)) {
+		/*
+		 * Maybe we want to have some recursive version here?
+		 *
+		 * Something like:
+		 *
+		if (show_subprojects(base, baselen, pathname)) {
+			if (fork()) {
+				chdir(base);
+				exec ls-tree;
+			}
+			waitpid();
+		}
+		 *
+		 * ..or similar..
+		 */
+		type = commit_type;
+	} else if (S_ISDIR(mode)) {
 		if (show_recursive(base, baselen, pathname)) {
 			retval = READ_TREE_RECURSIVE;
 			if (!(ls_options & LS_SHOW_TREES))
diff --git a/cache-tree.c b/cache-tree.c
index 9b73c8669a..6369cc7c53 100644
--- a/cache-tree.c
+++ b/cache-tree.c
@@ -326,7 +326,7 @@ static int update_one(struct cache_tree *it,
 			mode = ntohl(ce->ce_mode);
 			entlen = pathlen - baselen;
 		}
-		if (!missing_ok && !has_sha1_file(sha1))
+		if (mode != S_IFDIRLNK && !missing_ok && !has_sha1_file(sha1))
 			return error("invalid object %s", sha1_to_hex(sha1));
 
 		if (!ce->ce_mode)
diff --git a/read-cache.c b/read-cache.c
index 54573ce2ee..f458f50458 100644
--- a/read-cache.c
+++ b/read-cache.c
@@ -5,6 +5,7 @@
  */
 #include "cache.h"
 #include "cache-tree.h"
+#include "refs.h"
 
 /* Index extensions.
  *
@@ -91,6 +92,23 @@ static int ce_compare_link(struct cache_entry *ce, size_t expected_size)
 	return match;
 }
 
+static int ce_compare_gitlink(struct cache_entry *ce)
+{
+	unsigned char sha1[20];
+
+	/*
+	 * We don't actually require that the .git directory
+	 * under DIRLNK directory be a valid git directory. It
+	 * might even be missing (in case nobody populated that
+	 * sub-project).
+	 *
+	 * If so, we consider it always to match.
+	 */
+	if (resolve_gitlink_ref(ce->name, "HEAD", sha1) < 0)
+		return 0;
+	return hashcmp(sha1, ce->sha1);
+}
+
 static int ce_modified_check_fs(struct cache_entry *ce, struct stat *st)
 {
 	switch (st->st_mode & S_IFMT) {
@@ -102,6 +120,9 @@ static int ce_modified_check_fs(struct cache_entry *ce, struct stat *st)
 		if (ce_compare_link(ce, xsize_t(st->st_size)))
 			return DATA_CHANGED;
 		break;
+	case S_IFDIRLNK:
+		/* No need to do anything, we did the exact compare in "match_stat_basic" */
+		break;
 	default:
 		return TYPE_CHANGED;
 	}
@@ -127,6 +148,12 @@ static int ce_match_stat_basic(struct cache_entry *ce, struct stat *st)
 		    (has_symlinks || !S_ISREG(st->st_mode)))
 			changed |= TYPE_CHANGED;
 		break;
+	case S_IFDIRLNK:
+		if (!S_ISDIR(st->st_mode))
+			changed |= TYPE_CHANGED;
+		else if (ce_compare_gitlink(ce))
+			changed |= DATA_CHANGED;
+		break;
 	default:
 		die("internal error: ce_mode is %o", ntohl(ce->ce_mode));
 	}
@@ -250,9 +277,9 @@ int base_name_compare(const char *name1, int len1, int mode1,
 		return cmp;
 	c1 = name1[len];
 	c2 = name2[len];
-	if (!c1 && S_ISDIR(mode1))
+	if (!c1 && (S_ISDIR(mode1) || S_ISDIRLNK(mode1)))
 		c1 = '/';
-	if (!c2 && S_ISDIR(mode2))
+	if (!c2 && (S_ISDIR(mode2) || S_ISDIRLNK(mode2)))
 		c2 = '/';
 	return (c1 < c2) ? -1 : (c1 > c2) ? 1 : 0;
 }
@@ -334,8 +361,8 @@ int add_file_to_cache(const char *path, int verbose)
 	if (lstat(path, &st))
 		die("%s: unable to stat (%s)", path, strerror(errno));
 
-	if (!S_ISREG(st.st_mode) && !S_ISLNK(st.st_mode))
-		die("%s: can only add regular files or symbolic links", path);
+	if (!S_ISREG(st.st_mode) && !S_ISLNK(st.st_mode) && !S_ISDIR(st.st_mode))
+		die("%s: can only add regular files, symbolic links or git-directories", path);
 
 	namelen = strlen(path);
 	size = cache_entry_size(namelen);
diff --git a/sha1_file.c b/sha1_file.c
index 4304fe9bbc..ab915faa6b 100644
--- a/sha1_file.c
+++ b/sha1_file.c
@@ -13,6 +13,7 @@
 #include "commit.h"
 #include "tag.h"
 #include "tree.h"
+#include "refs.h"
 
 #ifndef O_NOATIME
 #if defined(__linux__) && (defined(__i386__) || defined(__PPC__))
@@ -2332,6 +2333,8 @@ int index_path(unsigned char *sha1, const char *path, struct stat *st, int write
 				     path);
 		free(target);
 		break;
+	case S_IFDIR:
+		return resolve_gitlink_ref(path, "HEAD", sha1);
 	default:
 		return error("%s: unsupported file type", path);
 	}