diff --git a/builtin/reset.c b/builtin/reset.c
index 0ac0de7dc977a0..60517e7e1d64f4 100644
--- a/builtin/reset.c
+++ b/builtin/reset.c
@@ -148,7 +148,9 @@ static void update_index_from_diff(struct diff_queue_struct *q,
 		 * If the file 1) corresponds to an existing index entry with
 		 * skip-worktree set, or 2) does not exist in the index but is
 		 * outside the sparse checkout definition, add a skip-worktree bit
-		 * to the new index entry.
+		 * to the new index entry. Note that a sparse index will be expanded
+		 * if this entry is outside the sparse cone - this is necessary
+		 * to properly construct the reset sparse directory.
 		 */
 		pos = cache_name_pos(one->path, strlen(one->path));
 		if ((pos >= 0 && ce_skip_worktree(active_cache[pos])) ||
@@ -166,6 +168,73 @@ static void update_index_from_diff(struct diff_queue_struct *q,
 	}
 }
 
+static int pathspec_needs_expanded_index(const struct pathspec *pathspec)
+{
+	unsigned int i, pos;
+	int res = 0;
+	char *skip_worktree_seen = NULL;
+
+	/*
+	 * When using a magic pathspec, assume for the sake of simplicity that
+	 * the index needs to be expanded to match all matchable files.
+	 */
+	if (pathspec->magic)
+		return 1;
+
+	for (i = 0; i < pathspec->nr; i++) {
+		struct pathspec_item item = pathspec->items[i];
+
+		/*
+		 * If the pathspec item has a wildcard, the index should be expanded
+		 * if the pathspec has the possibility of matching a subset of entries inside
+		 * of a sparse directory (but not the entire directory).
+		 *
+		 * If the pathspec item is a literal path, the index only needs to be expanded
+		 * if a) the pathspec isn't in the sparse checkout cone (to make sure we don't
+		 * expand for in-cone files) and b) it doesn't match any sparse directories
+		 * (since we can reset whole sparse directories without expanding them).
+		 */
+		if (item.nowildcard_len < item.len) {
+			for (pos = 0; pos < active_nr; pos++) {
+				struct cache_entry *ce = active_cache[pos];
+
+				if (!S_ISSPARSEDIR(ce->ce_mode))
+					continue;
+
+				/*
+				 * If the pre-wildcard length is longer than the sparse
+				 * directory name and the sparse directory is the first
+				 * component of the pathspec, need to expand the index.
+				 */
+				if (item.nowildcard_len > ce_namelen(ce) &&
+				    !strncmp(item.original, ce->name, ce_namelen(ce))) {
+					res = 1;
+					break;
+				}
+
+				/*
+				 * If the pre-wildcard length is shorter than the sparse
+				 * directory and the pathspec does not match the whole
+				 * directory, need to expand the index.
+				 */
+				if (!strncmp(item.original, ce->name, item.nowildcard_len) &&
+				    wildmatch(item.original, ce->name, 0)) {
+					res = 1;
+					break;
+				}
+			}
+		} else if (!path_in_cone_mode_sparse_checkout(item.original, &the_index) &&
+			   !matches_skip_worktree(pathspec, i, &skip_worktree_seen))
+			res = 1;
+
+		if (res > 0)
+			break;
+	}
+
+	free(skip_worktree_seen);
+	return res;
+}
+
 static int read_from_tree(const struct pathspec *pathspec,
 			  struct object_id *tree_oid,
 			  int intent_to_add)
@@ -178,9 +247,14 @@ static int read_from_tree(const struct pathspec *pathspec,
 	opt.format_callback = update_index_from_diff;
 	opt.format_callback_data = &intent_to_add;
 	opt.flags.override_submodule_config = 1;
+	opt.flags.recursive = 1;
 	opt.repo = the_repository;
+	opt.change = diff_change;
+	opt.add_remove = diff_addremove;
+
+	if (pathspec->nr && the_index.sparse_index && pathspec_needs_expanded_index(pathspec))
+		ensure_full_index(&the_index);
 
-	ensure_full_index(&the_index);
 	if (do_diff_cache(tree_oid, &opt))
 		return 1;
 	diffcore_std(&opt);
diff --git a/t/t1092-sparse-checkout-compatibility.sh b/t/t1092-sparse-checkout-compatibility.sh
index 78476de18eae0a..f19c1b3e2eb978 100755
--- a/t/t1092-sparse-checkout-compatibility.sh
+++ b/t/t1092-sparse-checkout-compatibility.sh
@@ -778,11 +778,28 @@ test_expect_success 'sparse-index is not expanded' '
 		ensure_not_expanded reset --hard $ref || return 1
 	done &&
 
+	ensure_not_expanded reset --mixed base &&
 	ensure_not_expanded reset --hard update-deep &&
 	ensure_not_expanded reset --keep base &&
 	ensure_not_expanded reset --merge update-deep &&
 	ensure_not_expanded reset --hard &&
 
+	ensure_not_expanded reset base -- deep/a &&
+	ensure_not_expanded reset base -- nonexistent-file &&
+	ensure_not_expanded reset deepest -- deep &&
+
+	# Although folder1 is outside the sparse definition, it exists as a
+	# directory entry in the index, so the pathspec will not force the
+	# index to be expanded.
+	ensure_not_expanded reset deepest -- folder1 &&
+	ensure_not_expanded reset deepest -- folder1/ &&
+
+	# Wildcard identifies only in-cone files, no index expansion
+	ensure_not_expanded reset deepest -- deep/\* &&
+
+	# Wildcard identifies only full sparse directories, no index expansion
+	ensure_not_expanded reset deepest -- folder\* &&
+
 	ensure_not_expanded checkout -f update-deep &&
 	test_config -C sparse-index pull.twohead ort &&
 	(