diff --git a/source/git/source.go b/source/git/source.go
index a1671796ecb4..7afb4980c92f 100644
--- a/source/git/source.go
+++ b/source/git/source.go
@@ -567,6 +567,7 @@ func (gs *gitSourceHandler) Snapshot(ctx context.Context, g session.Group) (out
 		}
 	}
 
+	cd := checkoutDir
 	if gs.src.KeepGitDir && subdir == "." {
 		checkoutDirGit := filepath.Join(checkoutDir, ".git")
 		if err := os.MkdirAll(checkoutDir, 0711); err != nil {
@@ -624,7 +625,6 @@ func (gs *gitSourceHandler) Snapshot(ctx context.Context, g session.Group) (out
 		}
 		gitDir = checkoutDirGit
 	} else {
-		cd := checkoutDir
 		if subdir != "." {
 			cd, err = os.MkdirTemp(cd, "checkout")
 			if err != nil {
@@ -636,41 +636,42 @@ func (gs *gitSourceHandler) Snapshot(ctx context.Context, g session.Group) (out
 		if err != nil {
 			return nil, errors.Wrapf(err, "failed to checkout remote %s", urlutil.RedactCredentials(gs.src.Remote))
 		}
-		if subdir != "." {
-			d, err := os.Open(filepath.Join(cd, subdir))
-			if err != nil {
-				return nil, errors.Wrapf(err, "failed to open subdir %v", subdir)
-			}
-			defer func() {
-				if d != nil {
-					d.Close()
-				}
-			}()
-			names, err := d.Readdirnames(0)
-			if err != nil {
-				return nil, err
-			}
-			for _, n := range names {
-				if err := os.Rename(filepath.Join(cd, subdir, n), filepath.Join(checkoutDir, n)); err != nil {
-					return nil, err
-				}
-			}
-			if err := d.Close(); err != nil {
-				return nil, err
-			}
-			d = nil // reset defer
-			if err := os.RemoveAll(cd); err != nil {
-				return nil, err
-			}
-		}
 	}
 
-	git = git.New(gitutil.WithWorkTree(checkoutDir), gitutil.WithGitDir(gitDir))
+	git = git.New(gitutil.WithWorkTree(cd), gitutil.WithGitDir(gitDir))
 	_, err = git.Run(ctx, "submodule", "update", "--init", "--recursive", "--depth=1")
 	if err != nil {
 		return nil, errors.Wrapf(err, "failed to update submodules for %s", urlutil.RedactCredentials(gs.src.Remote))
 	}
 
+	if subdir != "." {
+		d, err := os.Open(filepath.Join(cd, subdir))
+		if err != nil {
+			return nil, errors.Wrapf(err, "failed to open subdir %v", subdir)
+		}
+		defer func() {
+			if d != nil {
+				d.Close()
+			}
+		}()
+		names, err := d.Readdirnames(0)
+		if err != nil {
+			return nil, err
+		}
+		for _, n := range names {
+			if err := os.Rename(filepath.Join(cd, subdir, n), filepath.Join(checkoutDir, n)); err != nil {
+				return nil, err
+			}
+		}
+		if err := d.Close(); err != nil {
+			return nil, err
+		}
+		d = nil // reset defer
+		if err := os.RemoveAll(cd); err != nil {
+			return nil, err
+		}
+	}
+
 	if idmap := mount.IdentityMapping(); idmap != nil {
 		uid, gid := idmap.RootPair()
 		err := filepath.WalkDir(gitDir, func(p string, _ os.DirEntry, _ error) error {
diff --git a/source/git/source_test.go b/source/git/source_test.go
index 9e9f568f15dd..20a6a1af5fb6 100644
--- a/source/git/source_test.go
+++ b/source/git/source_test.go
@@ -733,6 +733,57 @@ func TestCredentialRedaction(t *testing.T) {
 	require.NotContains(t, err.Error(), "keepthissecret")
 }
 
+func TestSubmoduleSubdir(t *testing.T) {
+	testSubmoduleSubdir(t, false)
+}
+
+func TestSubmoduleSubdirKeepGitDir(t *testing.T) {
+	testSubmoduleSubdir(t, true)
+}
+
+func testSubmoduleSubdir(t *testing.T, keepGitDir bool) {
+	if runtime.GOOS == "windows" {
+		t.Skip("Depends on unimplemented containerd bind-mount support on Windows")
+	}
+	t.Parallel()
+	ctx := namespaces.WithNamespace(context.Background(), "buildkit-test")
+	ctx = logProgressStreams(ctx, t)
+
+	gs := setupGitSource(t, t.TempDir())
+
+	repo := setupGitRepo(t)
+
+	id := &GitIdentifier{Remote: repo.mainURL, KeepGitDir: keepGitDir, Ref: "feature", Subdir: "sub"}
+
+	g, err := gs.Resolve(ctx, id, nil, nil)
+	require.NoError(t, err)
+
+	key1, pin1, _, done, err := g.CacheKey(ctx, nil, 0)
+	require.NoError(t, err)
+	require.True(t, done)
+
+	expLen := 44
+	require.GreaterOrEqual(t, len(key1), expLen)
+	require.Equal(t, 40, len(pin1))
+
+	ref1, err := g.Snapshot(ctx, nil)
+	require.NoError(t, err)
+	defer ref1.Release(context.TODO())
+
+	mount, err := ref1.Mount(ctx, true, nil)
+	require.NoError(t, err)
+
+	lm := snapshot.LocalMounter(mount)
+	dir, err := lm.Mount()
+	require.NoError(t, err)
+	defer lm.Unmount()
+
+	dt, err := os.ReadFile(filepath.Join(dir, "subfile"))
+	require.NoError(t, err)
+
+	require.Equal(t, "subcontents\n", string(dt))
+}
+
 func TestSubdir(t *testing.T) {
 	testSubdir(t, false)
 }