diff --git a/dir.c b/dir.c
index 026d8516a912af..37d3ba9aee3577 100644
--- a/dir.c
+++ b/dir.c
@@ -28,6 +28,7 @@
 #include "ewah/ewok.h"
 #include "fsmonitor-ll.h"
 #include "read-cache-ll.h"
+#include "trace.h"
 #include "setup.h"
 #include "sparse-index.h"
 #include "strbuf.h"
@@ -1098,6 +1099,12 @@ static void do_invalidate_gitignore(struct untracked_cache_dir *dir)
 {
 	int i;
 	dir->valid = 0;
+	/*
+	 * Clear the cached .gitignore content since the file may have
+	 * changed. It will be re-read from disk on the next access.
+	 */
+	FREE_AND_NULL(dir->exclude_content);
+	dir->exclude_content_len = 0;
 	for (size_t i = 0; i < dir->untracked_nr; i++)
 		free(dir->untracked[i]);
 	dir->untracked_nr = 0;
@@ -1127,6 +1134,8 @@ static void invalidate_directory(struct untracked_cache *uc,
 		uc->dir_invalidated++;
 
 	dir->valid = 0;
+	FREE_AND_NULL(dir->exclude_content);
+	dir->exclude_content_len = 0;
 	for (size_t i = 0; i < dir->untracked_nr; i++)
 		free(dir->untracked[i]);
 	dir->untracked_nr = 0;
@@ -1145,10 +1154,15 @@ static void invalidate_directory(struct untracked_cache *uc,
  * If "oid_stat" is not NULL, compute oid of the exclude file and fill
  * stat data from disk (only valid if add_patterns returns zero). If
  * oid_stat.valid is non-zero, "oid_stat" must contain good value as input.
+ *
+ * If "content_out" and "content_len_out" are not NULL, store a copy of
+ * the raw file content for later caching (e.g. in untracked_cache_dir).
+ * The caller is responsible for freeing *content_out.
  */
 static int add_patterns(const char *fname, const char *base, int baselen,
 			struct pattern_list *pl, struct index_state *istate,
-			unsigned flags, struct oid_stat *oid_stat)
+			unsigned flags, struct oid_stat *oid_stat,
+			char **content_out, size_t *content_len_out)
 {
 	struct stat st;
 	int r;
@@ -1218,6 +1232,16 @@ static int add_patterns(const char *fname, const char *base, int baselen,
 		return -1;
 	}
 
+	/*
+	 * If the caller wants to cache the raw content (for
+	 * fsmonitor-backed reuse), store a copy before parsing
+	 * modifies the buffer in-place.
+	 */
+	if (content_out && content_len_out) {
+		*content_out = xmemdupz(buf, size);
+		*content_len_out = size;
+	}
+
 	add_patterns_from_buffer(buf, size, base, baselen, pl);
 	free(buf);
 	return 0;
@@ -1258,7 +1282,8 @@ int add_patterns_from_file_to_list(const char *fname, const char *base,
 				   struct index_state *istate,
 				   unsigned flags)
 {
-	return add_patterns(fname, base, baselen, pl, istate, flags, NULL);
+	return add_patterns(fname, base, baselen, pl, istate, flags, NULL,
+			    NULL, NULL);
 }
 
 int add_patterns_from_blob_to_list(
@@ -1315,7 +1340,7 @@ static void add_patterns_from_file_1(struct dir_struct *dir, const char *fname,
 	if (!dir->untracked)
 		dir->internal.unmanaged_exclude_files++;
 	pl = add_pattern_list(dir, EXC_FILE, fname);
-	if (add_patterns(fname, "", 0, pl, NULL, 0, oid_stat) < 0)
+	if (add_patterns(fname, "", 0, pl, NULL, 0, oid_stat, NULL, NULL) < 0)
 		die(_("cannot use %s as an exclude file"), fname);
 }
 
@@ -1770,11 +1795,68 @@ static void prep_exclude(struct dir_struct *dir,
 			strbuf_addbuf(&sb, &dir->internal.basebuf);
 			strbuf_addstr(&sb, dir->exclude_per_dir);
 			pl->src = strbuf_detach(&sb, NULL);
-			add_patterns(pl->src, pl->src, stk->baselen, pl, istate,
-				     PATTERN_NOFOLLOW,
-				     untracked ? &oid_stat : NULL);
+
+			/*
+			 * When fsmonitor is active and this directory is
+			 * unchanged, check for cached .gitignore content
+			 * from a previous load. This avoids re-reading the
+			 * file from disk when we're building the exclude
+			 * stack for an invalidated child directory.
+			 */
+			if (dir->untracked &&
+			    dir->untracked->use_fsmonitor &&
+			    untracked && untracked->valid &&
+			    untracked->exclude_content) {
+				char *buf_copy;
+				/*
+				 * add_patterns_from_buffer() modifies the
+				 * buffer in-place, so we must duplicate it.
+				 */
+				buf_copy = xmemdupz(untracked->exclude_content,
+						    untracked->exclude_content_len);
+				add_patterns_from_buffer(buf_copy,
+							 untracked->exclude_content_len,
+							 pl->src, stk->baselen, pl);
+				free(buf_copy);
+				/*
+				 * Trust the cached OID since fsmonitor
+				 * guarantees the file hasn't changed.
+				 */
+				oidcpy(&oid_stat.oid, &untracked->exclude_oid);
+				dir->untracked->gitignore_cached++;
+				trace_printf_key(&trace_fsmonitor,
+						 "prep_exclude: used cached "
+						 ".gitignore for '%s'",
+						 pl->src);
+			} else {
+				/*
+				 * Read the .gitignore from disk. If the
+				 * untracked cache is active, also cache the
+				 * content for potential reuse when fsmonitor
+				 * confirms the file hasn't changed.
+				 */
+				char *cached_content = NULL;
+				size_t cached_len = 0;
+				add_patterns(pl->src, pl->src, stk->baselen,
+					     pl, istate, PATTERN_NOFOLLOW,
+					     untracked ? &oid_stat : NULL,
+					     untracked ? &cached_content : NULL,
+					     untracked ? &cached_len : NULL);
+				if (untracked && cached_content) {
+					free(untracked->exclude_content);
+					untracked->exclude_content = cached_content;
+					untracked->exclude_content_len = cached_len;
+				}
+			}
 		}
 		/*
+		 * With the fsmonitor optimization in valid_cached_dir(), the
+		 * NEEDSWORK below is partially addressed: when the cache is
+		 * fully valid (confirmed by fsmonitor), prep_exclude() is not
+		 * called at all from valid_cached_dir(). It is only called
+		 * here when building the exclude stack for an invalidated
+		 * child directory, where the patterns ARE needed.
+		 *
 		 * NEEDSWORK: when untracked cache is enabled, prep_exclude()
 		 * will first be called in valid_cached_dir() then maybe many
 		 * times more in last_matching_pattern(). When the cache is
@@ -2550,6 +2632,34 @@ static int valid_cached_dir(struct dir_struct *dir,
 	if (untracked->check_only != !!check_only)
 		return 0;
 
+	/*
+	 * When fsmonitor is active and confirms this directory is
+	 * unchanged, we can trust the cached exclude_oid without
+	 * re-reading and re-hashing the .gitignore file from disk.
+	 * The fsmonitor guarantees that if anything in this directory
+	 * changed (including the .gitignore file), the directory would
+	 * have been invalidated via untracked_cache_invalidate_trimmed_path().
+	 *
+	 * This avoids the expensive prep_exclude() call which would
+	 * open, read, and hash every .gitignore file along the path,
+	 * only to confirm the OID hasn't changed. For repositories
+	 * with many .gitignore files, this is a significant performance
+	 * improvement.
+	 *
+	 * The exclude patterns will still be loaded lazily by
+	 * prep_exclude() if they are actually needed later (e.g. when
+	 * last_matching_pattern() is called for files in invalidated
+	 * child directories).
+	 */
+	if (dir->untracked->use_fsmonitor && untracked->valid) {
+		dir->untracked->gitignore_skipped++;
+		trace_printf_key(&trace_fsmonitor,
+				 "valid_cached_dir: skip prep_exclude for "
+				 "fsmonitor-valid dir '%s'",
+				 path->buf);
+		return 1;
+	}
+
 	/*
 	 * prep_exclude will be called eventually on this directory,
 	 * but it's called much later in last_matching_pattern(). We
@@ -3130,6 +3240,12 @@ static void emit_traversal_statistics(struct dir_struct *dir,
 			   dir->untracked->dir_invalidated);
 	trace2_data_intmax("read_directory", repo,
 			   "opendir", dir->untracked->dir_opened);
+	trace2_data_intmax("read_directory", repo,
+			   "gitignore-skipped",
+			   dir->untracked->gitignore_skipped);
+	trace2_data_intmax("read_directory", repo,
+			   "gitignore-cached",
+			   dir->untracked->gitignore_cached);
 }
 
 int read_directory(struct dir_struct *dir, struct index_state *istate,
@@ -3732,6 +3848,7 @@ static void free_untracked(struct untracked_cache_dir *ucd)
 		free(ucd->untracked[i]);
 	free(ucd->untracked);
 	free(ucd->dirs);
+	free(ucd->exclude_content);
 	free(ucd);
 }
 
diff --git a/dir.h b/dir.h
index 20d4a078d61ef8..6cd33383fde5ce 100644
--- a/dir.h
+++ b/dir.h
@@ -184,6 +184,14 @@ struct untracked_cache_dir {
 	unsigned int recurse : 1;
 	/* null object ID means this directory does not have .gitignore */
 	struct object_id exclude_oid;
+	/*
+	 * In-memory cache of .gitignore file content for fsmonitor
+	 * optimization. When fsmonitor confirms a directory is unchanged,
+	 * we can reuse this cached content instead of re-reading from disk.
+	 * This field is NOT serialized to the index extension.
+	 */
+	char *exclude_content;
+	size_t exclude_content_len;
 	char name[FLEX_ARRAY];
 };
 
@@ -204,8 +212,17 @@ struct untracked_cache {
 	int gitignore_invalidated;
 	int dir_invalidated;
 	int dir_opened;
+	int gitignore_skipped;   /* prep_exclude() skipped via fsmonitor */
+	int gitignore_cached;    /* prep_exclude() used cached content */
 	/* fsmonitor invalidation data */
 	unsigned int use_fsmonitor : 1;
+	/*
+	 * Set during refresh_fsmonitor() if any .gitignore file was
+	 * reported as changed. This enables targeted invalidation:
+	 * when no .gitignore files changed, all cached exclude results
+	 * can be fully trusted without re-reading any .gitignore files.
+	 */
+	unsigned int gitignore_changed : 1;
 };
 
 /**
diff --git a/fsmonitor.c b/fsmonitor.c
index d07dc18967ae33..aa3ecbe93f95b5 100644
--- a/fsmonitor.c
+++ b/fsmonitor.c
@@ -442,6 +442,25 @@ static void fsmonitor_refresh_callback(struct index_state *istate, char *name)
 			 "fsmonitor_refresh_callback '%s' (pos %d)",
 			 name, pos);
 
+	/*
+	 * Detect changes to .gitignore files so we can set the
+	 * gitignore_changed flag on the untracked cache. This allows
+	 * valid_cached_dir() to know whether any ignore rules may
+	 * have changed, enabling more aggressive caching when no
+	 * .gitignore files were modified.
+	 */
+	if (istate->untracked && istate->untracked->exclude_per_dir) {
+		const char *base = strrchr(name, '/');
+		const char *filename = base ? base + 1 : name;
+		if (!strcmp(filename, istate->untracked->exclude_per_dir)) {
+			istate->untracked->gitignore_changed = 1;
+			trace_printf_key(&trace_fsmonitor,
+					 "fsmonitor_refresh_callback: "
+					 ".gitignore changed '%s'",
+					 name);
+		}
+	}
+
 	if (name[len - 1] == '/')
 		nr_in_cone = handle_path_with_trailing_slash(istate, name, pos);
 	else
@@ -657,6 +676,14 @@ void refresh_fsmonitor(struct index_state *istate)
 	 */
 	trace2_region_enter("fsmonitor", "apply_results", istate->repo);
 
+	/*
+	 * Reset the gitignore_changed flag before processing results.
+	 * It will be set by fsmonitor_refresh_callback() if any
+	 * .gitignore file appears in the changed path list.
+	 */
+	if (istate->untracked)
+		istate->untracked->gitignore_changed = 0;
+
 	if (query_success && !is_trivial) {
 		/*
 		 * Mark all pathnames returned by the monitor as dirty.
@@ -713,8 +740,10 @@ void refresh_fsmonitor(struct index_state *istate)
 		if (is_cache_changed)
 			istate->cache_changed |= FSMONITOR_CHANGED;
 
-		if (istate->untracked)
+		if (istate->untracked) {
 			istate->untracked->use_fsmonitor = 0;
+			istate->untracked->gitignore_changed = 1;
+		}
 	}
 	trace2_region_leave("fsmonitor", "apply_results", istate->repo);
 
diff --git a/t/t7519-status-fsmonitor.sh b/t/t7519-status-fsmonitor.sh
index 7ee69ecdd4aa2c..4eda8099c0e7d3 100755
--- a/t/t7519-status-fsmonitor.sh
+++ b/t/t7519-status-fsmonitor.sh
@@ -477,4 +477,156 @@ test_expect_success 'status succeeds with sparse index' '
 	)
 '
 
+test_expect_success UNTRACKED_CACHE 'fsmonitor skips .gitignore reading for valid dirs' '
+	test_create_repo skip-gitignore &&
+	(
+		cd skip-gitignore &&
+
+		# Create a directory structure with multiple .gitignore files
+		mkdir -p dir1 dir2 dir3 &&
+		: >tracked &&
+		: >dir1/tracked &&
+		: >dir2/tracked &&
+		: >dir3/tracked &&
+		echo "*.log" >.gitignore &&
+		echo "*.tmp" >dir1/.gitignore &&
+		echo "*.bak" >dir2/.gitignore &&
+		echo "*.old" >dir3/.gitignore &&
+		test-tool chmtime =-60 tracked dir1/tracked dir2/tracked dir3/tracked &&
+		test-tool chmtime =-60 .gitignore dir1/.gitignore dir2/.gitignore dir3/.gitignore &&
+		test-tool chmtime =-60 dir1 dir2 dir3 . &&
+		git add tracked dir1/tracked dir2/tracked dir3/tracked &&
+		git add .gitignore dir1/.gitignore dir2/.gitignore dir3/.gitignore &&
+		git commit -m "initial" &&
+
+		# Install a no-change fsmonitor hook
+		test_hook --setup --clobber fsmonitor-test <<-\EOF &&
+		printf "last_update_token\0"
+		EOF
+		git config core.fsmonitor .git/hooks/fsmonitor-test &&
+		git update-index --untracked-cache &&
+		git update-index --fsmonitor &&
+
+		# First status populates the cache
+		git status &&
+
+		# Second status should use the cache
+		GIT_TRACE2_PERF="$TRASH_DIRECTORY/trace-skip" \
+		git status &&
+
+		# Verify the optimization is working: gitignore-skipped should be
+		# non-zero (directories whose prep_exclude was skipped thanks to
+		# fsmonitor confirming they are unchanged)
+		grep "gitignore-skipped" "$TRASH_DIRECTORY/trace-skip" >../trace-skip-lines &&
+		# Check that the value after the colon is > 0
+		grep "gitignore-skipped:[1-9]" ../trace-skip-lines
+	)
+'
+
+test_expect_success UNTRACKED_CACHE 'fsmonitor correctly invalidates on .gitignore change' '
+	test_create_repo gitignore-invalidate &&
+	(
+		cd gitignore-invalidate &&
+
+		# Set up repo with .gitignore
+		mkdir -p dir1 &&
+		: >tracked &&
+		: >dir1/tracked &&
+		echo "*.log" >.gitignore &&
+		test-tool chmtime =-60 tracked dir1/tracked .gitignore &&
+		test-tool chmtime =-60 dir1 . &&
+		git add tracked dir1/tracked .gitignore &&
+		git commit -m "initial" &&
+
+		# Install fsmonitor hook that reports no changes initially
+		test_hook --setup --clobber fsmonitor-test <<-\EOF &&
+		printf "last_update_token\0"
+		EOF
+		git config core.fsmonitor .git/hooks/fsmonitor-test &&
+		git update-index --untracked-cache &&
+		git update-index --fsmonitor &&
+
+		# Populate the cache
+		git status &&
+		git status &&
+
+		# Create test files - one should be ignored, one should not
+		: >dir1/test.log &&
+		: >dir1/test.txt &&
+
+		# Now install a hook that reports the .gitignore changed
+		# plus the new files
+		test_hook --clobber fsmonitor-test <<-\EOF &&
+		printf "last_update_token\0"
+		printf ".gitignore\0"
+		printf "dir1/test.log\0"
+		printf "dir1/test.txt\0"
+		printf "dir1\0"
+		EOF
+
+		# Status should correctly apply ignore rules even though
+		# the cache was invalidated
+		git status --porcelain >../actual-invalidate &&
+		echo "?? dir1/test.txt" >../expect-invalidate &&
+		test_cmp ../expect-invalidate ../actual-invalidate
+	)
+'
+
+test_expect_success UNTRACKED_CACHE 'fsmonitor status correct with many .gitignore files' '
+	test_create_repo many-gitignores &&
+	(
+		cd many-gitignores &&
+
+		# Create a deeper directory tree with .gitignore at each level
+		mkdir -p a/b/c/d &&
+		: >tracked &&
+		: >a/tracked &&
+		: >a/b/tracked &&
+		: >a/b/c/tracked &&
+		: >a/b/c/d/tracked &&
+		echo "*.root-ignored" >.gitignore &&
+		echo "*.a-ignored" >a/.gitignore &&
+		echo "*.b-ignored" >a/b/.gitignore &&
+		echo "*.c-ignored" >a/b/c/.gitignore &&
+		echo "*.d-ignored" >a/b/c/d/.gitignore &&
+		git add -A &&
+		git commit -m "initial" &&
+
+		# Install no-change fsmonitor hook
+		test_hook --setup --clobber fsmonitor-test <<-\EOF &&
+		printf "last_update_token\0"
+		EOF
+		git config core.fsmonitor .git/hooks/fsmonitor-test &&
+		git update-index --untracked-cache &&
+		git update-index --fsmonitor &&
+
+		# Populate and warm the cache
+		git status &&
+		git status &&
+
+		# Add files at the deepest level - some ignored, some not
+		: >a/b/c/d/file.root-ignored &&
+		: >a/b/c/d/file.d-ignored &&
+		: >a/b/c/d/file.txt &&
+		: >a/b/c/d/file.a-ignored &&
+
+		# Report only the deepest dir as changed
+		test_hook --clobber fsmonitor-test <<-\EOF &&
+		printf "last_update_token\0"
+		printf "a/b/c/d/file.root-ignored\0"
+		printf "a/b/c/d/file.d-ignored\0"
+		printf "a/b/c/d/file.txt\0"
+		printf "a/b/c/d/file.a-ignored\0"
+		printf "a/b/c/d\0"
+		EOF
+
+		# Status should correctly evaluate all parent .gitignore
+		# rules and only show the non-ignored file.
+		# Ignore rules cascade: root, a/, a/b/, a/b/c/, a/b/c/d/
+		git status --porcelain >../actual-many &&
+		echo "?? a/b/c/d/file.txt" >../expect-many &&
+		test_cmp ../expect-many ../actual-many
+	)
+'
+
 test_done