diff --git a/get-shit-done/bin/lib/core.cjs b/get-shit-done/bin/lib/core.cjs
index 3101f02e5..edcf95e3c 100644
--- a/get-shit-done/bin/lib/core.cjs
+++ b/get-shit-done/bin/lib/core.cjs
@@ -57,7 +57,18 @@ function findProjectRoot(startDir) {
   const resolved = path.resolve(startDir);
   const root = path.parse(resolved).root;
   const homedir = require('os').homedir();
-  const startHasGit = fs.existsSync(path.join(resolved, '.git'));
+
+  // Check if startDir or any of its ancestors (up to but not including a
+  // candidate project root) contains a .git directory. This handles both
+  // `backend/` (direct sub-repo) and `backend/src/modules/` (nested inside).
+  function isInsideGitRepo(candidateParent) {
+    let d = resolved;
+    while (d !== candidateParent && d !== root) {
+      if (fs.existsSync(path.join(d, '.git'))) return true;
+      d = path.dirname(d);
+    }
+    return false;
+  }
 
   let dir = resolved;
   while (dir !== root) {
@@ -82,15 +93,15 @@ function findProjectRoot(startDir) {
         }
 
         // Check legacy multiRepo flag
-        if (config.multiRepo === true && startHasGit) {
+        if (config.multiRepo === true && isInsideGitRepo(parent)) {
           return parent;
         }
       } catch {
         // config.json missing or malformed — fall back to .git heuristic
       }
 
-      // Heuristic: parent has .planning/ and startDir has its own .git
-      if (startHasGit) {
+      // Heuristic: parent has .planning/ and we're inside a git repo
+      if (isInsideGitRepo(parent)) {
         return parent;
       }
     }
diff --git a/get-shit-done/bin/lib/init.cjs b/get-shit-done/bin/lib/init.cjs
index b19d3d1d8..6083dd908 100644
--- a/get-shit-done/bin/lib/init.cjs
+++ b/get-shit-done/bin/lib/init.cjs
@@ -57,6 +57,7 @@ function cmdInitExecutePhase(cwd, phase, raw) {
 
     // Config flags
     commit_docs: config.commit_docs,
+    sub_repos: config.sub_repos,
     parallelization: config.parallelization,
     context_window: config.context_window,
     branching_strategy: config.branching_strategy,
diff --git a/get-shit-done/workflows/new-project.md b/get-shit-done/workflows/new-project.md
index b5cb42482..9f1bd89d2 100644
--- a/get-shit-done/workflows/new-project.md
+++ b/get-shit-done/workflows/new-project.md
@@ -535,12 +535,12 @@ node "$HOME/.claude/get-shit-done/bin/gsd-tools.cjs" commit "chore: add project
 Check for directories with their own `.git` folders (separate repos within the workspace):
 
 ```bash
-find . -maxdepth 2 -type d -name ".git" -not -path "./.git"
+find . -maxdepth 1 -type d -not -name ".*" -not -name "node_modules" -exec test -d "{}/.git" \; -print
 ```
 
 **If sub-repos found:**
 
-Strip the `/.git` suffix and `./` prefix to get directory names (e.g., `./backend/.git` → `backend`).
+Strip the `./` prefix to get directory names (e.g., `./backend` → `backend`).
 
 Use AskUserQuestion:
 - header: "Multi-Repo Workspace"
diff --git a/tests/core.test.cjs b/tests/core.test.cjs
index eca98f1f4..77fb46956 100644
--- a/tests/core.test.cjs
+++ b/tests/core.test.cjs
@@ -1167,6 +1167,53 @@ describe('findProjectRoot', () => {
     assert.strictEqual(findProjectRoot(backendDir), projectRoot);
   });
 
+  test('walks up from nested path inside sub-repo via .git heuristic', () => {
+    fs.mkdirSync(path.join(projectRoot, '.planning'), { recursive: true });
+
+    // Sub-repo with .git at its root
+    const backendDir = path.join(projectRoot, 'backend');
+    fs.mkdirSync(path.join(backendDir, '.git'), { recursive: true });
+
+    // Nested path deep inside the sub-repo
+    const nestedDir = path.join(backendDir, 'src', 'modules', 'auth');
+    fs.mkdirSync(nestedDir, { recursive: true });
+
+    // isInsideGitRepo walks up and finds backend/.git
+    assert.strictEqual(findProjectRoot(nestedDir), projectRoot);
+  });
+
+  test('walks up from nested path inside sub-repo via sub_repos config', () => {
+    fs.mkdirSync(path.join(projectRoot, '.planning'), { recursive: true });
+    fs.writeFileSync(
+      path.join(projectRoot, '.planning', 'config.json'),
+      JSON.stringify({ sub_repos: ['backend'] })
+    );
+
+    // Nested path deep inside the sub-repo
+    const nestedDir = path.join(projectRoot, 'backend', 'src', 'modules');
+    fs.mkdirSync(nestedDir, { recursive: true });
+
+    // With sub_repos config, it checks topSegment of relative path
+    assert.strictEqual(findProjectRoot(nestedDir), projectRoot);
+  });
+
+  test('walks up from nested path via legacy multiRepo flag', () => {
+    fs.mkdirSync(path.join(projectRoot, '.planning'), { recursive: true });
+    fs.writeFileSync(
+      path.join(projectRoot, '.planning', 'config.json'),
+      JSON.stringify({ multiRepo: true })
+    );
+
+    const backendDir = path.join(projectRoot, 'backend');
+    fs.mkdirSync(path.join(backendDir, '.git'), { recursive: true });
+
+    // Nested inside sub-repo — isInsideGitRepo walks up and finds backend/.git
+    const nestedDir = path.join(backendDir, 'src');
+    fs.mkdirSync(nestedDir, { recursive: true });
+
+    assert.strictEqual(findProjectRoot(nestedDir), projectRoot);
+  });
+
   test('does not walk up for dirs without .git when no sub_repos config', () => {
     fs.mkdirSync(path.join(projectRoot, '.planning'), { recursive: true });