diff --git a/tests/unit/test_merger_repo.py b/tests/unit/test_merger_repo.py
index e4cc34e5a2..d73def8123 100644
--- a/tests/unit/test_merger_repo.py
+++ b/tests/unit/test_merger_repo.py
@@ -312,7 +312,7 @@ class TestMergerRepo(ZuulTestCase):
                          'none@example.org', 'User Name', '0', '0')
         self.waitUntilSettled()
 
-        # Break the gitmodules
+        # Break the gitmodules with uncommited changes
         path = work_repo.local_path
         with open(os.path.join(path, '.gitmodules'), 'w') as f:
             f.write('[submodule "libfoo"]\n'
@@ -320,7 +320,21 @@ class TestMergerRepo(ZuulTestCase):
                     '---\n'
                     'url = git://example.com/git/lib.git')
 
-        # And now reset the repo again. This should not crash
+        # And now reset the repo. This should not crash
+        work_repo.reset()
+
+        # Break the gitmodules with a commit
+        path = work_repo.local_path
+        with open(os.path.join(path, '.gitmodules'), 'w') as f:
+            f.write('[submodule "libfoo"]\n'
+                    'path = include/foo\n'
+                    '---\n'
+                    'url = git://example.com/git/lib.git')
+        git_repo = work_repo._createRepoObject(work_repo.local_path,
+                                               work_repo.env)
+        git_repo.git.add('.gitmodules')
+        git_repo.index.commit("Broken gitmodule")
+        # And now reset the repo. This should not crash
         work_repo.reset()
 
     def test_files_changes(self):
diff --git a/zuul/merger/merger.py b/zuul/merger/merger.py
index ffddb2ac24..f7017f9851 100644
--- a/zuul/merger/merger.py
+++ b/zuul/merger/merger.py
@@ -273,11 +273,26 @@ class Repo(object):
                 if attempt < self.retry_attempts:
                     if 'fatal: bad config' in e.stderr.lower():
                         # This error can be introduced by a merge conflict
+                        # or someone committing faulty configuration
                         # in the .gitmodules which was left by the last
                         # merge operation. In this case reset and clean
                         # the repo and try again immediately.
-                        reset_repo_to_head(repo)
-                        repo.git.clean('-x', '-f', '-d')
+                        reset_ref = 'HEAD'
+                        try:
+                            if not repo.is_dirty():
+                                reset_ref = "{}^".format(repo.git.log(
+                                    '--diff-filter=A',
+                                    '-n', '1',
+                                    '--pretty=format:%H',
+                                    '--', '.gitmodules'))
+                            repo.head.reset(reset_ref, working_tree=True)
+                            repo.git.clean('-x', '-f', '-d')
+                        except Exception:
+                            # If we get here there probably isn't
+                            # a valid commit we can easily find so
+                            # delete the repo to make sure it doesn't
+                            # get stuck in a broken state.
+                            shutil.rmtree(self.local_path)
                     elif 'fatal: not a git repository' in e.stderr.lower():
                         # If we get here the git.Repo object was happy with its
                         # lightweight way of checking if this is a valid git