diff --git a/doc/emacs/maintaining.texi b/doc/emacs/maintaining.texi
index b5c14cfa171..c0262d2894d 100644
--- a/doc/emacs/maintaining.texi
+++ b/doc/emacs/maintaining.texi
@@ -2322,7 +2322,9 @@ Using this variable you can add more ignore patterns to the project, to
 exclude more files from the project's file listing.  The value is a list
 of glob strings.  They can match both regular files and directories.  To
 anchor an entry to the project root, start it with @code{./}.  To match
-directories only, end it with @code{/}.
+directories only, end it with @code{/}.  When this variable has
+directory-local value, it will only be applied to the corresponding
+directory subtree.
 @end defopt
 
 @defopt project-vc-name
diff --git a/lisp/progmodes/project.el b/lisp/progmodes/project.el
index c0816620aab..9467e5d1356 100644
--- a/lisp/progmodes/project.el
+++ b/lisp/progmodes/project.el
@@ -466,7 +466,10 @@ the buffer's value of `default-directory'."
   :group 'project)
 
 (defcustom project-vc-ignores nil
-  "List of patterns to add to `project-ignores'."
+  "List of patterns to add to `project-ignores'.
+
+Only global or directory-local values are supported. And directory-local
+values will be applied to the corresponding directory subtrees."
   :type '(repeat string))
 ;; Change to `list-of-strings-p' when support for Emacs 28 is dropped.
 ;;;###autoload(put 'project-vc-ignores 'safe-local-variable (lambda (val) (and (listp val) (not (memq nil (mapcar #'stringp val))))))
@@ -688,12 +691,14 @@ See `project-vc-extra-root-markers' for the marker value format.")
 (cl-defmethod project-files ((project (head vc)) &optional dirs)
   (mapcan
    (lambda (dir)
-     (let ((ignores (project--value-in-dir 'project-vc-ignores (nth 2 project)))
+     (let ((ignores (project--value-in-dir 'project-vc-ignores dir))
            (backend (project-vc--backend project dir)))
        (if backend
            (vc-call-backend backend 'project-list-files dir ignores)
          (project--files-in-directory
-          dir (append ignores (project-ignores nil nil))))))
+          dir (append ignores (append
+                               (project-ignores nil nil)
+                               ignores))))))
    (or dirs
        (list (project-root project)))))
 
@@ -830,9 +835,9 @@ See `project-vc-extra-root-markers' for the marker value format.")
     (file-missing nil)))
 
 (cl-defmethod project-ignores ((project (head vc)) dir)
-  (let ((root (nth 2 project)))
-    (project--vc-ignores dir (project-vc--backend project dir)
-                         (project--value-in-dir 'project-vc-ignores root))))
+  (project--vc-ignores dir
+                       (project-vc--backend project dir)
+                       (project--value-in-dir 'project-vc-ignores dir)))
 
 (defun project--vc-ignores (dir backend extra-ignores)
   (append
@@ -890,7 +895,7 @@ DIRS must contain directory names."
 
 (defun project--value-in-dir (var dir)
   (with-temp-buffer
-    (setq default-directory dir)
+    (setq default-directory (file-name-as-directory dir))
     (let ((enable-local-variables :all))
       (hack-dir-local-variables))
     ;; Don't use `hack-local-variables-apply' to avoid setting modes.
diff --git a/test/lisp/progmodes/project-tests.el b/test/lisp/progmodes/project-tests.el
index e353eef728e..09045114dc2 100644
--- a/test/lisp/progmodes/project-tests.el
+++ b/test/lisp/progmodes/project-tests.el
@@ -162,7 +162,7 @@ When `project-ignores' includes a name matching project dir."
                    (mapcar #'file-name-nondirectory (project-files project))))))
 
 (ert-deftest project-vc-supports-files-in-subdirectory ()
-  "Check that it lists only files from subdirectory."
+  "Check that it lists only files from a repo's subdirectory."
   (skip-unless (eq (vc-responsible-backend default-directory) 'Git))
   (let* ((dir (ert-resource-directory))
          (_ (vc-file-clearprops dir))
@@ -170,7 +170,27 @@ When `project-ignores' includes a name matching project dir."
          (project (project-current nil dir)))
     (should-not (null project))
     (should (string-match-p "/test/lisp/progmodes/\\'" (project-root project)))
-    (should (equal '(".dir-locals.el" "etc" "foo")
+    (should (equal `(,@(when (version<= "2.13" (vc-git--program-version))
+                         (list ".dir-locals.el"))
+                     "foo")
+                   (mapcar #'file-name-nondirectory
+                           (project-files project
+                                          (list dir)))))))
+
+(ert-deftest project-vc-ignores-in-external-directory ()
+  "Check that it applies project-vc-ignores when DIR is external to root."
+  (skip-unless (eq (vc-responsible-backend default-directory) 'Git))
+  (let* ((dir (ert-resource-directory))
+         (_ (vc-file-clearprops dir))
+         ;; Do not detect VC backend.
+         (project-vc-backend-markers-alist nil)
+         (project-vc-extra-root-markers '("configure.ac"))
+         (project (project-current nil (expand-file-name "../autoconf-resources/" dir))))
+    (should-not (null project))
+    (should (string-match-p "/test/lisp/progmodes/autoconf-resources/\\'" (project-root project)))
+    (should (equal `(,@(when (version<= "2.13" (vc-git--program-version))
+                         (list ".dir-locals.el"))
+                     "foo")
                    (mapcar #'file-name-nondirectory
                            (project-files project
                                           (list dir)))))))