diff --git a/packages/tauri/src/git/diff.rs b/packages/tauri/src/git/diff.rs
index b3d14fa23..fa42910f2 100644
--- a/packages/tauri/src/git/diff.rs
+++ b/packages/tauri/src/git/diff.rs
@@ -43,6 +43,7 @@ pub fn workdir(
         .include_untracked(true)
         .show_binary(true)
         .show_untracked_content(true)
+        .ignore_submodules(true)
         .context_lines(opts.context_lines);
 
     let diff = repository.diff_tree_to_workdir(Some(&tree), Some(&mut diff_opts))?;
@@ -60,6 +61,7 @@ pub fn trees(
         .recurse_untracked_dirs(true)
         .include_untracked(true)
         .show_binary(true)
+        .ignore_submodules(true)
         .show_untracked_content(true);
 
     let diff =
diff --git a/packages/tauri/src/git/repository.rs b/packages/tauri/src/git/repository.rs
index e59f5e908..64f82aa43 100644
--- a/packages/tauri/src/git/repository.rs
+++ b/packages/tauri/src/git/repository.rs
@@ -1,10 +1,12 @@
 use std::{path, str};
 
+use git2::Submodule;
+
 use crate::keys;
 
 use super::{
     AnnotatedCommit, Blob, Branch, BranchName, Commit, Config, Index, Oid, Reference, Remote,
-    Result, Signature, Tree, TreeBuilder,
+    Result, Signature, Tree, TreeBuilder, Url,
 };
 
 // wrapper around git2::Repository to get control over how it's used.
@@ -52,6 +54,12 @@ impl Repository {
         Ok(())
     }
 
+    pub fn add_submodule(&self, url: &Url, path: &path::Path) -> Result<Submodule<'_>> {
+        self.0
+            .submodule(&url.to_string(), path, false)
+            .map_err(Into::into)
+    }
+
     pub fn find_annotated_commit(&self, id: Oid) -> Result<AnnotatedCommit<'_>> {
         self.0
             .find_annotated_commit(id.into())
diff --git a/packages/tauri/src/virtual_branches/virtual.rs b/packages/tauri/src/virtual_branches/virtual.rs
index bcf9083f6..9f85fd9fc 100644
--- a/packages/tauri/src/virtual_branches/virtual.rs
+++ b/packages/tauri/src/virtual_branches/virtual.rs
@@ -1558,7 +1558,7 @@ fn get_applied_status(
         &default_target.sha,
         &diff::Options::default(),
     )
-    .context("failed to diff")?;
+    .context("failed to diff workdir")?;
 
     // sort by order, so that the default branch is first (left in the ui)
     virtual_branches.sort_by(|a, b| a.order.cmp(&b.order));
diff --git a/packages/tauri/tests/common.rs b/packages/tauri/tests/common.rs
index ff02f2c0a..6c64296a0 100644
--- a/packages/tauri/tests/common.rs
+++ b/packages/tauri/tests/common.rs
@@ -1,3 +1,5 @@
+use std::path;
+
 use gblib::git;
 
 pub fn temp_dir() -> std::path::PathBuf {
@@ -193,4 +195,21 @@ impl TestProject {
             .collect::<Result<Vec<_>, _>>()
             .expect("failed to read references")
     }
+
+    pub fn add_submodule(&self, url: &git::Url, path: &path::Path) {
+        let mut submodule = self.local_repository.add_submodule(url, path).unwrap();
+        let repo = submodule.open().unwrap();
+
+        // checkout submodule's master head
+        repo.find_remote("origin")
+            .unwrap()
+            .fetch(&["+refs/heads/*:refs/heads/*"], None, None)
+            .unwrap();
+        let reference = repo.find_reference("refs/heads/master").unwrap();
+        let reference_head = repo.find_commit(reference.target().unwrap()).unwrap();
+        repo.checkout_tree(reference_head.tree().unwrap().as_object(), None)
+            .unwrap();
+
+        submodule.add_finalize().unwrap();
+    }
 }
diff --git a/packages/tauri/tests/gb_repository/mod.rs b/packages/tauri/tests/gb_repository/mod.rs
index 3b9059f29..5ab4aacc2 100644
--- a/packages/tauri/tests/gb_repository/mod.rs
+++ b/packages/tauri/tests/gb_repository/mod.rs
@@ -1,4 +1,6 @@
-use gblib::{gb_repository, project_repository, projects};
+use std::path;
+
+use gblib::{gb_repository, git, project_repository, projects};
 
 use crate::{common::TestProject, paths};
 
@@ -120,4 +122,31 @@ mod flush {
 
         gb_repo.flush(&project_repository, None).unwrap();
     }
+
+    #[test]
+    fn handle_submodules() {
+        let test_project = TestProject::default();
+
+        let data_dir = paths::data_dir();
+        let projects = projects::Controller::from(&data_dir);
+
+        let project = projects
+            .add(test_project.path())
+            .expect("failed to add project");
+
+        let project_repository = project_repository::Repository::open(&project).unwrap();
+
+        let gb_repo =
+            gb_repository::Repository::open(&data_dir, &project_repository, None).unwrap();
+
+        let submodule_url: git::Url = TestProject::default()
+            .path()
+            .display()
+            .to_string()
+            .parse()
+            .unwrap();
+        test_project.add_submodule(&submodule_url, path::Path::new("submodule"));
+
+        gb_repo.flush(&project_repository, None).unwrap();
+    }
 }
diff --git a/packages/tauri/tests/virtual_branches/mod.rs b/packages/tauri/tests/virtual_branches/mod.rs
index 1d73dd4dc..1225a24d2 100644
--- a/packages/tauri/tests/virtual_branches/mod.rs
+++ b/packages/tauri/tests/virtual_branches/mod.rs
@@ -4,7 +4,7 @@
     clippy::rest_pat_in_fully_bound_structs
 )]
 
-use std::{fs, str::FromStr};
+use std::{fs, path, str::FromStr};
 
 use gblib::{
     error::Error,
@@ -2012,6 +2012,36 @@ mod amend {
 mod init {
     use super::*;
 
+    #[tokio::test]
+    async fn submodule() {
+        let Test {
+            repository,
+            project_id,
+            controller,
+            ..
+        } = Test::default();
+
+        let submodule_url: git::Url = TestProject::default()
+            .path()
+            .display()
+            .to_string()
+            .parse()
+            .unwrap();
+        repository.add_submodule(&submodule_url, path::Path::new("submodule"));
+
+        controller
+            .set_base_branch(
+                &project_id,
+                &git::RemoteBranchName::from_str("refs/remotes/origin/master").unwrap(),
+            )
+            .unwrap();
+
+        let branches = controller.list_virtual_branches(&project_id).await.unwrap();
+        assert_eq!(branches.len(), 1);
+        assert_eq!(branches[0].files.len(), 1);
+        assert_eq!(branches[0].files[0].hunks.len(), 1);
+    }
+
     #[tokio::test]
     async fn dirty() {
         let Test {