diff --git a/builtin/merge-file.c b/builtin/merge-file.c
index 131edc245f..ea8093f676 100644
--- a/builtin/merge-file.c
+++ b/builtin/merge-file.c
@@ -90,7 +90,8 @@ int cmd_merge_file(int argc, const char **argv, const char *prefix)
 
 	if (ret >= 0) {
 		const char *filename = argv[0];
-		FILE *f = to_stdout ? stdout : fopen(filename, "wb");
+		const char *fpath = prefix_filename(prefix, prefixlen, argv[0]);
+		FILE *f = to_stdout ? stdout : fopen(fpath, "wb");
 
 		if (!f)
 			ret = error("Could not open %s for writing", filename);
diff --git a/t/t6023-merge-file.sh b/t/t6023-merge-file.sh
index 3758961765..190ee903cf 100755
--- a/t/t6023-merge-file.sh
+++ b/t/t6023-merge-file.sh
@@ -69,7 +69,8 @@ test_expect_success 'works in subdirectory' '
 	cp new1.txt dir/a.txt &&
 	cp orig.txt dir/o.txt &&
 	cp new2.txt dir/b.txt &&
-	( cd dir && git merge-file a.txt o.txt b.txt )
+	( cd dir && git merge-file a.txt o.txt b.txt ) &&
+	test_path_is_missing a.txt
 '
 
 cp new1.txt test.txt