diff --git a/src/refdb_fs.c b/src/refdb_fs.c
index 85444b692..c0a32bae7 100644
--- a/src/refdb_fs.c
+++ b/src/refdb_fs.c
@@ -26,8 +26,15 @@ GIT__USE_STRMAP;
 #define MAX_NESTING_LEVEL		10
 
 enum {
-	GIT_PACKREF_HAS_PEEL = 1,
-	GIT_PACKREF_WAS_LOOSE = 2
+	PACKREF_HAS_PEEL = 1,
+	PACKREF_WAS_LOOSE = 2,
+	PACKREF_CANNOT_PEEL = 4
+};
+
+enum {
+	PEELING_NONE = 0,
+	PEELING_STANDARD,
+	PEELING_FULL
 };
 
 struct packref {
@@ -44,6 +51,7 @@ typedef struct refdb_fs_backend {
 	char *path;
 
 	git_refcache refcache;
+	int peeling_mode;
 } refdb_fs_backend;
 
 static int reference_read(
@@ -132,10 +140,6 @@ static int packed_parse_peel(
 	if (tag_ref == NULL)
 		goto corrupt;
 
-	/* Ensure reference is a tag */
-	if (git__prefixcmp(tag_ref->name, GIT_REFS_TAGS_DIR) != 0)
-		goto corrupt;
-
 	if (buffer + GIT_OID_HEXSZ > buffer_end)
 		goto corrupt;
 
@@ -154,6 +158,7 @@ static int packed_parse_peel(
 			goto corrupt;
 	}
 
+	tag_ref->flags |= PACKREF_HAS_PEEL;
 	*buffer_out = buffer;
 	return 0;
 
@@ -205,6 +210,30 @@ static int packed_load(refdb_fs_backend *backend)
 	buffer_start = (const char *)packfile.ptr;
 	buffer_end = (const char *)(buffer_start) + packfile.size;
 
+	backend->peeling_mode = PEELING_NONE;
+
+	if (buffer_start[0] == '#') {
+		static const char *traits_header = "# pack-refs with: "; 
+
+		if (git__prefixcmp(buffer_start, traits_header) == 0) {
+			char *traits = (char *)buffer_start + strlen(traits_header);
+			char *traits_end = strchr(traits, '\n');
+
+			if (traits_end == NULL)
+				goto parse_failed;
+
+			*traits_end = '\0';
+
+			if (strstr(traits, " fully-peeled ") != NULL) {
+				backend->peeling_mode = PEELING_FULL;
+			} else if (strstr(traits, " peeled ") != NULL) {
+				backend->peeling_mode = PEELING_STANDARD;
+			}
+
+			buffer_start = traits_end + 1;
+		}
+	}
+
 	while (buffer_start < buffer_end && buffer_start[0] == '#') {
 		buffer_start = strchr(buffer_start, '\n');
 		if (buffer_start == NULL)
@@ -223,6 +252,10 @@ static int packed_load(refdb_fs_backend *backend)
 		if (buffer_start[0] == '^') {
 			if (packed_parse_peel(ref, &buffer_start, buffer_end) < 0)
 				goto parse_failed;
+		} else if (backend->peeling_mode == PEELING_FULL ||
+                           (backend->peeling_mode == PEELING_STANDARD &&
+                            git__prefixcmp(ref->name, GIT_REFS_TAGS_DIR) == 0)) {
+			ref->flags |= PACKREF_CANNOT_PEEL;
 		}
 
 		git_strmap_insert(ref_cache->packfile, ref->name, ref, err);
@@ -295,7 +328,7 @@ static int loose_lookup_to_packfile(
 		return -1;
 	}
 
-	ref->flags = GIT_PACKREF_WAS_LOOSE;
+	ref->flags = PACKREF_WAS_LOOSE;
 
 	*ref_out = ref;
 	git_buf_free(&ref_file);
@@ -678,14 +711,7 @@ static int packed_find_peel(refdb_fs_backend *backend, struct packref *ref)
 {
 	git_object *object;
 
-	if (ref->flags & GIT_PACKREF_HAS_PEEL)
-		return 0;
-
-	/*
-	 * Only applies to tags, i.e. references
-	 * in the /refs/tags folder
-	 */
-	if (git__prefixcmp(ref->name, GIT_REFS_TAGS_DIR) != 0)
+	if (ref->flags & PACKREF_HAS_PEEL || ref->flags & PACKREF_CANNOT_PEEL)
 		return 0;
 
 	/*
@@ -706,7 +732,7 @@ static int packed_find_peel(refdb_fs_backend *backend, struct packref *ref)
 		 * Find the object pointed at by this tag
 		 */
 		git_oid_cpy(&ref->peel, git_tag_target_id(tag));
-		ref->flags |= GIT_PACKREF_HAS_PEEL;
+		ref->flags |= PACKREF_HAS_PEEL;
 
 		/*
 		 * The reference has now cached the resolved OID, and is
@@ -739,7 +765,7 @@ static int packed_write_ref(struct packref *ref, git_filebuf *file)
 	 * This obviously only applies to tags.
 	 * The required peels have already been loaded into `ref->peel_target`.
 	 */
-	if (ref->flags & GIT_PACKREF_HAS_PEEL) {
+	if (ref->flags & PACKREF_HAS_PEEL) {
 		char peel[GIT_OID_HEXSZ + 1];
 		git_oid_fmt(peel, &ref->peel);
 		peel[GIT_OID_HEXSZ] = 0;
@@ -776,7 +802,7 @@ static int packed_remove_loose(
 	for (i = 0; i < packing_list->length; ++i) {
 		struct packref *ref = git_vector_get(packing_list, i);
 
-		if ((ref->flags & GIT_PACKREF_WAS_LOOSE) == 0)
+		if ((ref->flags & PACKREF_WAS_LOOSE) == 0)
 			continue;
 
 		if (git_buf_joinpath(&full_path, backend->path, ref->name) < 0)
diff --git a/src/refs.h b/src/refs.h
index 908e86f29..f487ee3fc 100644
--- a/src/refs.h
+++ b/src/refs.h
@@ -26,7 +26,7 @@
 
 #define GIT_SYMREF "ref: "
 #define GIT_PACKEDREFS_FILE "packed-refs"
-#define GIT_PACKEDREFS_HEADER "# pack-refs with: peeled "
+#define GIT_PACKEDREFS_HEADER "# pack-refs with: peeled fully-peeled "
 #define GIT_PACKEDREFS_FILE_MODE 0666
 
 #define GIT_HEAD_FILE "HEAD"
diff --git a/tests-clar/refs/peel.c b/tests-clar/refs/peel.c
index 34bd02ce0..f2fb6e259 100644
--- a/tests-clar/refs/peel.c
+++ b/tests-clar/refs/peel.c
@@ -1,19 +1,24 @@
 #include "clar_libgit2.h"
 
 static git_repository *g_repo;
+static git_repository *g_peel_repo;
 
 void test_refs_peel__initialize(void)
 {
 	cl_git_pass(git_repository_open(&g_repo, cl_fixture("testrepo.git")));
+	cl_git_pass(git_repository_open(&g_peel_repo, cl_fixture("peeled.git")));
 }
 
 void test_refs_peel__cleanup(void)
 {
 	git_repository_free(g_repo);
 	g_repo = NULL;
+	git_repository_free(g_peel_repo);
+	g_peel_repo = NULL;
 }
 
-static void assert_peel(
+static void assert_peel_generic(
+	git_repository *repo,
 	const char *ref_name,
 	git_otype requested_type,
 	const char* expected_sha,
@@ -23,7 +28,7 @@ static void assert_peel(
 	git_reference *ref;
 	git_object *peeled;
 
-	cl_git_pass(git_reference_lookup(&ref, g_repo, ref_name));
+	cl_git_pass(git_reference_lookup(&ref, repo, ref_name));
 	
 	cl_git_pass(git_reference_peel(&peeled, ref, requested_type));
 
@@ -36,6 +41,16 @@ static void assert_peel(
 	git_reference_free(ref);
 }
 
+static void assert_peel(
+	const char *ref_name,
+	git_otype requested_type,
+	const char* expected_sha,
+	git_otype expected_type)
+{
+	assert_peel_generic(g_repo, ref_name, requested_type,
+			    expected_sha, expected_type);
+}
+
 static void assert_peel_error(int error, const char *ref_name, git_otype requested_type)
 {
 	git_reference *ref;
@@ -90,3 +105,15 @@ void test_refs_peel__can_peel_into_any_non_tag_object(void)
 	assert_peel("refs/tags/test", GIT_OBJ_ANY,
 		"e90810b8df3e80c413d903f631643c716887138d", GIT_OBJ_COMMIT);
 }
+
+void test_refs_peel__can_peel_fully_peeled_packed_refs(void)
+{
+	assert_peel_generic(g_peel_repo,
+			    "refs/tags/tag-inside-tags", GIT_OBJ_ANY,
+			    "0df1a5865c8abfc09f1f2182e6a31be550e99f07",
+			    GIT_OBJ_COMMIT);
+	assert_peel_generic(g_peel_repo,
+			    "refs/foo/tag-outside-tags", GIT_OBJ_ANY,
+			    "0df1a5865c8abfc09f1f2182e6a31be550e99f07",
+			    GIT_OBJ_COMMIT);
+}
diff --git a/tests-clar/resources/peeled.git/HEAD b/tests-clar/resources/peeled.git/HEAD
new file mode 100644
index 000000000..cb089cd89
--- /dev/null
+++ b/tests-clar/resources/peeled.git/HEAD
@@ -0,0 +1 @@
+ref: refs/heads/master
diff --git a/tests-clar/resources/peeled.git/config b/tests-clar/resources/peeled.git/config
new file mode 100644
index 000000000..88300524a
--- /dev/null
+++ b/tests-clar/resources/peeled.git/config
@@ -0,0 +1,8 @@
+[core]
+	repositoryformatversion = 0
+	filemode = true
+	bare = true
+[remote "origin"]
+	url = /home/peff/compile/libgit2/tests-clar/resources/peeled
+	fetch = +refs/*:refs/*
+	mirror = true
diff --git a/tests-clar/resources/peeled.git/objects/info/packs b/tests-clar/resources/peeled.git/objects/info/packs
new file mode 100644
index 000000000..0d88b32e5
--- /dev/null
+++ b/tests-clar/resources/peeled.git/objects/info/packs
@@ -0,0 +1,2 @@
+P pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.pack
+
diff --git a/tests-clar/resources/peeled.git/objects/pack/pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.idx b/tests-clar/resources/peeled.git/objects/pack/pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.idx
new file mode 100644
index 000000000..9b79e9b85
Binary files /dev/null and b/tests-clar/resources/peeled.git/objects/pack/pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.idx differ
diff --git a/tests-clar/resources/peeled.git/objects/pack/pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.pack b/tests-clar/resources/peeled.git/objects/pack/pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.pack
new file mode 100644
index 000000000..2459ca287
Binary files /dev/null and b/tests-clar/resources/peeled.git/objects/pack/pack-e84773eaf3fce1774755580e3dbb8d9f3a1adc45.pack differ
diff --git a/tests-clar/resources/peeled.git/packed-refs b/tests-clar/resources/peeled.git/packed-refs
new file mode 100644
index 000000000..ad053d550
--- /dev/null
+++ b/tests-clar/resources/peeled.git/packed-refs
@@ -0,0 +1,6 @@
+# pack-refs with: peeled fully-peeled 
+c2596aa0151888587ec5c0187f261e63412d9e11 refs/foo/tag-outside-tags
+^0df1a5865c8abfc09f1f2182e6a31be550e99f07
+0df1a5865c8abfc09f1f2182e6a31be550e99f07 refs/heads/master
+c2596aa0151888587ec5c0187f261e63412d9e11 refs/tags/tag-inside-tags
+^0df1a5865c8abfc09f1f2182e6a31be550e99f07
diff --git a/tests-clar/resources/peeled.git/refs/heads/master b/tests-clar/resources/peeled.git/refs/heads/master
new file mode 100644
index 000000000..76c15e203
--- /dev/null
+++ b/tests-clar/resources/peeled.git/refs/heads/master
@@ -0,0 +1 @@
+0df1a5865c8abfc09f1f2182e6a31be550e99f07