diff --git a/cache.h b/cache.h
index 5e3fc72fd4..70ad174dd9 100644
--- a/cache.h
+++ b/cache.h
@@ -751,6 +751,7 @@ int is_directory(const char *);
 const char *real_path(const char *path);
 const char *real_path_if_valid(const char *path);
 const char *absolute_path(const char *path);
+const char *remove_leading_path(const char *in, const char *prefix);
 const char *relative_path(const char *in, const char *prefix, struct strbuf *sb);
 int normalize_path_copy_len(char *dst, const char *src, int *prefix_len);
 int normalize_path_copy(char *dst, const char *src);
diff --git a/path.c b/path.c
index 9fd28bcd08..24594c4112 100644
--- a/path.c
+++ b/path.c
@@ -434,6 +434,16 @@ int adjust_shared_perm(const char *path)
 	return 0;
 }
 
+static int have_same_root(const char *path1, const char *path2)
+{
+	int is_abs1, is_abs2;
+
+	is_abs1 = is_absolute_path(path1);
+	is_abs2 = is_absolute_path(path2);
+	return (is_abs1 && is_abs2 && tolower(path1[0]) == tolower(path2[0])) ||
+	       (!is_abs1 && !is_abs2);
+}
+
 /*
  * Give path as relative to prefix.
  *
@@ -454,6 +464,16 @@ const char *relative_path(const char *in, const char *prefix,
 	else if (!prefix_len)
 		return in;
 
+	if (have_same_root(in, prefix)) {
+		/* bypass dos_drive, for "c:" is identical to "C:" */
+		if (has_dos_drive_prefix(in)) {
+			i = 2;
+			j = 2;
+		}
+	} else {
+		return in;
+	}
+
 	while (i < prefix_len && j < in_len && prefix[i] == in[j]) {
 		if (is_dir_sep(prefix[i])) {
 			while (is_dir_sep(prefix[i]))
@@ -530,6 +550,51 @@ const char *relative_path(const char *in, const char *prefix,
 	return sb->buf;
 }
 
+/*
+ * A simpler implementation of relative_path
+ *
+ * Get relative path by removing "prefix" from "in". This function
+ * first appears in v1.5.6-1-g044bbbc, and makes git_dir shorter
+ * to increase performance when traversing the path to work_tree.
+ */
+const char *remove_leading_path(const char *in, const char *prefix)
+{
+	static char buf[PATH_MAX + 1];
+	int i = 0, j = 0;
+
+	if (!prefix || !prefix[0])
+		return in;
+	while (prefix[i]) {
+		if (is_dir_sep(prefix[i])) {
+			if (!is_dir_sep(in[j]))
+				return in;
+			while (is_dir_sep(prefix[i]))
+				i++;
+			while (is_dir_sep(in[j]))
+				j++;
+			continue;
+		} else if (in[j] != prefix[i]) {
+			return in;
+		}
+		i++;
+		j++;
+	}
+	if (
+	    /* "/foo" is a prefix of "/foo" */
+	    in[j] &&
+	    /* "/foo" is not a prefix of "/foobar" */
+	    !is_dir_sep(prefix[i-1]) && !is_dir_sep(in[j])
+	   )
+		return in;
+	while (is_dir_sep(in[j]))
+		j++;
+	if (!in[j])
+		strcpy(buf, ".");
+	else
+		strcpy(buf, in + j);
+	return buf;
+}
+
 /*
  * It is okay if dst == src, but they should not overlap otherwise.
  *
diff --git a/setup.c b/setup.c
index f08dd64976..dbf4138720 100644
--- a/setup.c
+++ b/setup.c
@@ -227,7 +227,6 @@ int is_inside_work_tree(void)
 
 void setup_work_tree(void)
 {
-	struct strbuf sb = STRBUF_INIT;
 	const char *work_tree, *git_dir;
 	static int initialized = 0;
 
@@ -247,10 +246,8 @@ void setup_work_tree(void)
 	if (getenv(GIT_WORK_TREE_ENVIRONMENT))
 		setenv(GIT_WORK_TREE_ENVIRONMENT, ".", 1);
 
-	set_git_dir(relative_path(git_dir, work_tree, &sb));
+	set_git_dir(remove_leading_path(git_dir, work_tree));
 	initialized = 1;
-
-	strbuf_release(&sb);
 }
 
 static int check_repository_format_gently(const char *gitdir, int *nongit_ok)
diff --git a/t/t0060-path-utils.sh b/t/t0060-path-utils.sh
index 2bd5e32745..07c10c8dca 100755
--- a/t/t0060-path-utils.sh
+++ b/t/t0060-path-utils.sh
@@ -190,33 +190,37 @@ test_expect_success SYMLINKS 'real path works on symlinks' '
 	test "$sym" = "$(test-path-utils real_path "$dir2/syml")"
 '
 
-relative_path /a/b/c/	/a/b/		c/
-relative_path /a/b/c/	/a/b		c/
-relative_path /a//b//c/	//a/b//		c/	POSIX
-relative_path /a/b	/a/b		./
-relative_path /a/b/	/a/b		./
-relative_path /a	/a/b		../
-relative_path /		/a/b/		../../
-relative_path /a/c	/a/b/		../c
-relative_path /a/c	/a/b		../c
-relative_path /x/y	/a/b/		../../x/y
-relative_path /a/b	"<empty>"	/a/b
-relative_path /a/b 	"<null>"	/a/b
-relative_path a/b/c/	a/b/		c/
-relative_path a/b/c/	a/b		c/
-relative_path a/b//c	a//b		c
-relative_path a/b/	a/b/		./
-relative_path a/b/	a/b		./
-relative_path a		a/b		../
-relative_path x/y	a/b		../../x/y
-relative_path a/c	a/b		../c
-relative_path a/b	"<empty>"	a/b
-relative_path a/b 	"<null>"	a/b
-relative_path "<empty>"	/a/b		./
-relative_path "<empty>"	"<empty>"	./
-relative_path "<empty>"	"<null>"	./
-relative_path "<null>"	"<empty>"	./
-relative_path "<null>"	"<null>"	./
-relative_path "<null>"	/a/b		./
+relative_path /foo/a/b/c/	/foo/a/b/	c/
+relative_path /foo/a/b/c/	/foo/a/b	c/
+relative_path /foo/a//b//c/	///foo/a/b//	c/		POSIX
+relative_path /foo/a/b		/foo/a/b	./
+relative_path /foo/a/b/		/foo/a/b	./
+relative_path /foo/a		/foo/a/b	../
+relative_path /			/foo/a/b/	../../../
+relative_path /foo/a/c		/foo/a/b/	../c
+relative_path /foo/a/c		/foo/a/b	../c
+relative_path /foo/x/y		/foo/a/b/	../../x/y
+relative_path /foo/a/b		"<empty>"	/foo/a/b
+relative_path /foo/a/b 		"<null>"	/foo/a/b
+relative_path foo/a/b/c/	foo/a/b/	c/
+relative_path foo/a/b/c/	foo/a/b		c/
+relative_path foo/a/b//c	foo/a//b	c
+relative_path foo/a/b/		foo/a/b/	./
+relative_path foo/a/b/		foo/a/b		./
+relative_path foo/a		foo/a/b		../
+relative_path foo/x/y		foo/a/b		../../x/y
+relative_path foo/a/c		foo/a/b		../c
+relative_path foo/a/b		/foo/x/y	foo/a/b
+relative_path /foo/a/b		foo/x/y		/foo/a/b
+relative_path d:/a/b		D:/a/c		../b		MINGW
+relative_path C:/a/b		D:/a/c		C:/a/b		MINGW
+relative_path foo/a/b		"<empty>"	foo/a/b
+relative_path foo/a/b 		"<null>"	foo/a/b
+relative_path "<empty>"		/foo/a/b	./
+relative_path "<empty>"		"<empty>"	./
+relative_path "<empty>"		"<null>"	./
+relative_path "<null>"		"<empty>"	./
+relative_path "<null>"		"<null>"	./
+relative_path "<null>"		/foo/a/b	./
 
 test_done