diff --git a/lua/nvim-tree/explorer/watch.lua b/lua/nvim-tree/explorer/watch.lua
index dad1738c4f5..cbebe3b144b 100644
--- a/lua/nvim-tree/explorer/watch.lua
+++ b/lua/nvim-tree/explorer/watch.lua
@@ -8,7 +8,17 @@ local M = {
 }
 
 local function is_git(path)
-  return vim.fn.fnamemodify(path, ":t") == ".git"
+  -- If $GIT_DIR is set, consider its value to be equivalent to '.git'.
+  -- Expand $GIT_DIR (and `path`) to a full path (see :help filename-modifiers), since
+  -- it's possible to set it to a relative path. We want to make our best
+  -- effort to expand that to a valid absolute path.
+  if vim.fn.fnamemodify(path, ":p") == vim.fn.fnamemodify(vim.env.GIT_DIR, ":p") then
+    return true
+  elseif vim.fn.fnamemodify(path, ":t") == ".git" then
+    return true
+  else
+    return false
+  end
 end
 
 local IGNORED_PATHS = {
diff --git a/lua/nvim-tree/git/init.lua b/lua/nvim-tree/git/init.lua
index 2714e39ee57..4a7277798b5 100644
--- a/lua/nvim-tree/git/init.lua
+++ b/lua/nvim-tree/git/init.lua
@@ -186,7 +186,8 @@ function M.load_project_status(cwd)
       end)
     end
 
-    watcher = Watcher:new(utils.path_join { project_root, ".git" }, WATCHED_FILES, callback, {
+    local git_dir = vim.env.GIT_DIR or utils.path_join { project_root, ".git" }
+    watcher = Watcher:new(git_dir, WATCHED_FILES, callback, {
       project_root = project_root,
     })
   end