diff --git a/builtin/checkout.c b/builtin/checkout.c
index 1345e8574a79c8..67f03dea102b4d 100644
--- a/builtin/checkout.c
+++ b/builtin/checkout.c
@@ -31,6 +31,7 @@
 #include "revision.h"
 #include "sequencer.h"
 #include "setup.h"
+#include "sparse-index.h"
 #include "strvec.h"
 #include "submodule.h"
 #include "symlinks.h"
@@ -142,14 +143,56 @@ static int post_checkout_hook(struct commit *old_commit, struct commit *new_comm
 }
 
 static int update_some(const struct object_id *oid, struct strbuf *base,
-		       const char *pathname, unsigned mode, void *context UNUSED)
+		       const char *pathname, unsigned mode, void *context)
 {
 	int len;
 	struct cache_entry *ce;
 	int pos;
+	int overlay_mode = context ? *((int *)context) : 1;
 
-	if (S_ISDIR(mode))
+	if (S_ISDIR(mode)) {
+		/*
+		 * If this directory exists as a sparse directory entry in
+		 * the index, we can handle it at the tree level without
+		 * descending into individual files.
+		 */
+		if (the_repository->index->sparse_index) {
+			struct strbuf dirpath = STRBUF_INIT;
+
+			strbuf_addbuf(&dirpath, base);
+			strbuf_addstr(&dirpath, pathname);
+			strbuf_addch(&dirpath, '/');
+
+			pos = index_name_pos_sparse(the_repository->index,
+						    dirpath.buf, dirpath.len);
+			if (pos >= 0) {
+				struct cache_entry *old =
+					the_repository->index->cache[pos];
+				if (S_ISSPARSEDIR(old->ce_mode)) {
+					if (oideq(oid, &old->oid)) {
+						strbuf_release(&dirpath);
+						return 0;
+					}
+					if (!overlay_mode) {
+						/*
+						 * In non-overlay mode (e.g.,
+						 * restore --staged), we can
+						 * replace the sparse dir OID
+						 * directly since files not in
+						 * the source tree should be
+						 * removed anyway.
+						 */
+						oidcpy(&old->oid, oid);
+						old->ce_flags |= CE_UPDATE;
+						strbuf_release(&dirpath);
+						return 0;
+					}
+				}
+			}
+			strbuf_release(&dirpath);
+		}
 		return READ_TREE_RECURSIVE;
+	}
 
 	len = base->len + strlen(pathname);
 	ce = make_empty_cache_entry(the_repository->index, len);
@@ -165,7 +208,7 @@ static int update_some(const struct object_id *oid, struct strbuf *base,
 	 * entry in place. Whether it is UPTODATE or not, checkout_entry will
 	 * do the right thing.
 	 */
-	pos = index_name_pos(the_repository->index, ce->name, ce->ce_namelen);
+	pos = index_name_pos_sparse(the_repository->index, ce->name, ce->ce_namelen);
 	if (pos >= 0) {
 		struct cache_entry *old = the_repository->index->cache[pos];
 		if (ce->ce_mode == old->ce_mode &&
@@ -182,10 +225,11 @@ static int update_some(const struct object_id *oid, struct strbuf *base,
 	return 0;
 }
 
-static int read_tree_some(struct tree *tree, const struct pathspec *pathspec)
+static int read_tree_some(struct tree *tree, const struct pathspec *pathspec,
+			  int overlay_mode)
 {
 	read_tree(the_repository, tree,
-		  pathspec, update_some, NULL);
+		  pathspec, update_some, &overlay_mode);
 
 	/* update the index with the given tree's info
 	 * for all args, expanding wildcards, and exit
@@ -580,7 +624,8 @@ static int checkout_paths(const struct checkout_opts *opts,
 		return error(_("index file corrupt"));
 
 	if (opts->source_tree)
-		read_tree_some(opts->source_tree, &opts->pathspec);
+		read_tree_some(opts->source_tree, &opts->pathspec,
+			       opts->overlay_mode);
 	if (opts->merge)
 		unmerge_index(the_repository->index, &opts->pathspec, CE_MATCHED);
 
diff --git a/t/t1092-sparse-checkout-compatibility.sh b/t/t1092-sparse-checkout-compatibility.sh
index d98cb4ac113c67..8186da5c887c56 100755
--- a/t/t1092-sparse-checkout-compatibility.sh
+++ b/t/t1092-sparse-checkout-compatibility.sh
@@ -2573,4 +2573,54 @@ test_expect_success 'sparse-index is not expanded: merge-ours' '
 	ensure_not_expanded merge -s ours merge-right
 '
 
+test_expect_success 'restore --staged with sparse definition' '
+	init_repos &&
+
+	# Stage changes within the sparse definition
+	test_all_match git checkout -b restore-staged-1 base &&
+	test_all_match git reset --soft update-deep &&
+	test_all_match git restore --staged . &&
+	test_all_match git status --porcelain=v2 &&
+	test_all_match git diff --cached
+'
+
+test_expect_success 'restore --staged with outside sparse definition' '
+	init_repos &&
+
+	# Stage changes that include paths outside the sparse definition.
+	# Although the working tree differs between full and sparse checkouts
+	# after restore, the state of the index should be the same.
+	test_all_match git checkout -b restore-staged-2 base &&
+	test_all_match git reset --soft update-folder1 &&
+	test_sparse_match git restore --staged . &&
+	git -C full-checkout restore --staged . &&
+	test_all_match git ls-files -s -- folder1 &&
+	test_all_match git diff --cached -- folder1
+'
+
+test_expect_success 'restore --staged with wildcards' '
+	init_repos &&
+
+	test_all_match git checkout -b restore-staged-3 base &&
+	test_all_match git reset --soft update-deep &&
+	test_all_match git restore --staged "deep/*" &&
+	test_all_match git status --porcelain=v2 &&
+	test_all_match git diff --cached
+'
+
+test_expect_success 'sparse-index is not expanded: restore --staged' '
+	init_repos &&
+
+	git -C sparse-index checkout -b restore-staged-exp base &&
+	git -C sparse-index reset --soft update-folder1 &&
+	ensure_not_expanded restore --staged .
+'
+
+test_expect_success 'sparse-index is not expanded: restore --source --staged' '
+	init_repos &&
+
+	git -C sparse-index checkout -b restore-source-staged base &&
+	ensure_not_expanded restore --source update-folder1 --staged .
+'
+
 test_done