diff --git a/packages/source-control-github/src/server/gitHubChangeRequestTemplate.test.ts b/packages/source-control-github/src/server/gitHubChangeRequestTemplate.test.ts
index 58b094063ecba..29bf922020d0d 100644
--- a/packages/source-control-github/src/server/gitHubChangeRequestTemplate.test.ts
+++ b/packages/source-control-github/src/server/gitHubChangeRequestTemplate.test.ts
@@ -227,3 +227,41 @@ it.effect("bounds template reads and marks truncated content", () =>
     }),
   ),
 );
+
+it.effect.each([
+  ".github/pull_request_template.txt",
+  "PULL_REQUEST_TEMPLATE.TXT",
+  "docs/PuLl_ReQuEsT_TeMpLaTe.Md",
+  ".github/PULL_REQUEST_TEMPLATE/template.TxT",
+])("reads committed text and mixed-case template $0 from a subdirectory", (relativePath) =>
+  runWithTempDirectory((cwd) =>
+    Effect.gen(function* () {
+      const path = yield* Path.Path;
+      yield* runGit(cwd, ["config", "grep.patternType", "fixed"]);
+      yield* runGit(cwd, ["config", "color.grep", "always"]);
+      yield* writeTemplate(cwd, relativePath, "committed template");
+      yield* writeTemplate(cwd, "nested/README.md", "project");
+      for (let index = 0; index < 600; index += 1) {
+        yield* writeTemplate(cwd, `docs/${index}-${"a".repeat(180)}.md`, "guide");
+      }
+      yield* commitTemplates(cwd);
+      yield* writeTemplate(cwd, relativePath, "uncommitted template");
+
+      assert.strictEqual(
+        Option.getOrUndefined(yield* detectTemplate(path.join(cwd, "nested"))),
+        "committed template",
+      );
+    }),
+  ),
+);
+
+it.effect("does not guess between Markdown and text directory templates", () =>
+  runWithTempDirectory((cwd) =>
+    Effect.gen(function* () {
+      yield* writeTemplate(cwd, ".github/PULL_REQUEST_TEMPLATE/a.md", "markdown");
+      yield* writeTemplate(cwd, ".github/PULL_REQUEST_TEMPLATE/b.TXT", "text");
+      yield* commitTemplates(cwd);
+      assert.isTrue(Option.isNone(yield* detectTemplate(cwd)));
+    }),
+  ),
+);
diff --git a/packages/source-control-github/src/server/gitHubChangeRequestTemplate.ts b/packages/source-control-github/src/server/gitHubChangeRequestTemplate.ts
index c6af80389d1f7..9edbccdd504dc 100644
--- a/packages/source-control-github/src/server/gitHubChangeRequestTemplate.ts
+++ b/packages/source-control-github/src/server/gitHubChangeRequestTemplate.ts
@@ -11,10 +11,16 @@ const TRUNCATION_MARKER = "[truncated]";
 const TEMPLATE_PATHS = [
   ".github/pull_request_template.md",
   ".github/PULL_REQUEST_TEMPLATE.md",
+  ".github/pull_request_template.txt",
+  ".github/PULL_REQUEST_TEMPLATE.txt",
   "pull_request_template.md",
   "PULL_REQUEST_TEMPLATE.md",
+  "pull_request_template.txt",
+  "PULL_REQUEST_TEMPLATE.txt",
   "docs/pull_request_template.md",
   "docs/PULL_REQUEST_TEMPLATE.md",
+  "docs/pull_request_template.txt",
+  "docs/PULL_REQUEST_TEMPLATE.txt",
 ] as const;
 
 const TEMPLATE_DIRECTORIES = [
@@ -23,8 +29,6 @@ const TEMPLATE_DIRECTORIES = [
   "docs/PULL_REQUEST_TEMPLATE",
 ] as const;
 
-const TREE_PATHS = [...TEMPLATE_PATHS, ...TEMPLATE_DIRECTORIES] as const;
-
 type ExecuteGit = SourceControlHost.SourceControlHost["Service"]["git"]["execute"];
 
 interface TemplateTreeEntry {
@@ -105,7 +109,7 @@ const readTemplateDirectory = Effect.fn("gitHubChangeRequestTemplate.readTemplat
         return false;
       }
       const relativePath = entry.path.slice(prefix.length);
-      return !relativePath.includes("/") && relativePath.toLowerCase().endsWith(".md");
+      return !relativePath.includes("/") && /\.(?:md|txt)$/i.test(relativePath);
     });
 
     const templates: string[] = [];
@@ -132,10 +136,50 @@ export const detect = Effect.fn("gitHubChangeRequestTemplate.detect")(function*
 ) {
   return yield* Effect.gen(function* () {
     // Read committed regular blobs; worktree paths can become symlinks between validation and open.
+    // ls-tree does not support case-insensitive pathspecs; grep discovers only matching names.
+    const paths = yield* executeGit({
+      operation: "gitHubChangeRequestTemplate.findTemplatePaths",
+      cwd,
+      args: [
+        "grep",
+        "-G",
+        "--no-color",
+        "-l",
+        "-z",
+        "--full-name",
+        "--no-recurse-submodules",
+        "-e",
+        "^",
+        treeish,
+        "--",
+        ...TEMPLATE_PATHS.map((path) => `:(top,icase,literal)${path}`),
+      ],
+      maxOutputBytes: TREE_LIST_MAX_BYTES,
+    }).pipe(
+      Effect.map((result) =>
+        result.stdoutTruncated
+          ? []
+          : result.stdout
+              .split("\0")
+              .filter((path) => path.startsWith(`${treeish}:`))
+              .map((path) => path.slice(treeish.length + 1)),
+      ),
+      // grep exits with status 1 when no nonempty templates match.
+      Effect.orElseSucceed(() => []),
+    );
     const result = yield* executeGit({
       operation: "gitHubChangeRequestTemplate.listTemplates",
       cwd,
-      args: ["ls-tree", "-r", "-z", "--full-tree", treeish, "--", ...TREE_PATHS],
+      args: [
+        "ls-tree",
+        "-r",
+        "-z",
+        "--full-tree",
+        treeish,
+        "--",
+        ...new Set([...TEMPLATE_PATHS, ...paths]),
+        ...TEMPLATE_DIRECTORIES,
+      ],
       maxOutputBytes: TREE_LIST_MAX_BYTES,
       appendTruncationMarker: true,
     });
@@ -144,12 +188,20 @@ export const detect = Effect.fn("gitHubChangeRequestTemplate.detect")(function*
     }
 
     const entries = parseTemplateTreeEntries(result.stdout);
-    const entriesByPath = new Map(entries.map((entry) => [entry.path, entry]));
-    for (const templatePath of TEMPLATE_PATHS) {
-      const entry = entriesByPath.get(templatePath);
-      if (!entry) {
-        continue;
-      }
+    const candidates = [".github/", "", "docs/"].flatMap((location) => {
+      const paths = TEMPLATE_PATHS.filter(
+        (path) => path.slice(0, path.lastIndexOf("/") + 1) === location,
+      );
+      return [
+        ...paths.flatMap((path) => entries.filter((entry) => entry.path === path)),
+        ...entries.filter(
+          (entry) =>
+            !paths.some((path) => path === entry.path) &&
+            paths.some((path) => path.toLowerCase() === entry.path.toLowerCase()),
+        ),
+      ];
+    });
+    for (const entry of candidates) {
       const template = yield* readTemplateBlob({ cwd, executeGit, entry });
       if (Option.isSome(template)) {
         return template;