diff --git a/src/Cake.Issues.GitRepository.Tests/GitRepositoryIssuesProviderTests.cs b/src/Cake.Issues.GitRepository.Tests/GitRepositoryIssuesProviderTests.cs
new file mode 100644
index 000000000..d86e4562a
--- /dev/null
+++ b/src/Cake.Issues.GitRepository.Tests/GitRepositoryIssuesProviderTests.cs
@@ -0,0 +1,114 @@
+namespace Cake.Issues.GitRepository.Tests;
+
+public sealed class GitRepositoryIssuesProviderTests
+{
+    public sealed class TheSparseCheckoutFiltering
+    {
+        [Fact]
+        public void Should_Filter_Out_Skip_Worktree_Files()
+        {
+            // Given - Simulate git ls-files -t -z output with sparse checkout
+            var gitOutput = new[]
+            {
+                "H file1.txt",
+                "S file2.txt", // Skip-worktree file (should be filtered out)
+                "H subdir/file3.txt",
+                "S subdir/file4.txt", // Skip-worktree file (should be filtered out)
+                ""
+            };
+
+            // When - Apply the same filtering logic as GetAllFilesFromRepository
+            var result = gitOutput
+                .Where(x => !string.IsNullOrEmpty(x))
+                .Where(x => !x.StartsWith("S ")) // Exclude skip-worktree files (sparse checkout)
+                .Select(x => x.Length > 2 ? x[2..] : x) // Remove status prefix (e.g., "H ")
+                .ToList();
+
+            // Then - Only non-skip-worktree files should remain
+            result.Count.ShouldBe(2);
+            result.ShouldContain("file1.txt");
+            result.ShouldContain("subdir/file3.txt");
+            result.ShouldNotContain("file2.txt");
+            result.ShouldNotContain("subdir/file4.txt");
+        }
+
+        [Fact]
+        public void Should_Handle_Empty_Output()
+        {
+            // Given - Empty git output
+            var gitOutput = new[] { "" };
+
+            // When - Apply the same filtering logic as GetAllFilesFromRepository
+            var result = gitOutput
+                .Where(x => !string.IsNullOrEmpty(x))
+                .Where(x => !x.StartsWith("S "))
+                .Select(x => x.Length > 2 ? x[2..] : x)
+                .ToList();
+
+            // Then - Result should be empty
+            result.ShouldNotBeNull().Count.ShouldBe(0);
+        }
+
+        [Fact]
+        public void Should_Handle_Various_Git_Status_Codes()
+        {
+            // Given - Various git status codes
+            var gitOutput = new[]
+            {
+                "H cached_file.txt",        // Cached (should be included)
+                "S skip_worktree.txt",      // Skip-worktree (should be excluded)
+                "M modified_file.txt",       // Modified (should be included)
+                "R renamed_file.txt",        // Renamed (should be included)
+                "C copied_file.txt",         // Copied (should be included)
+                "K to_be_killed.txt",        // To be killed (should be included)
+                ""
+            };
+
+            // When - Apply the filtering logic
+            var result = gitOutput
+                .Where(x => !string.IsNullOrEmpty(x))
+                .Where(x => !x.StartsWith("S "))
+                .Select(x => x.Length > 2 ? x[2..] : x)
+                .ToList();
+
+            // Then - Only skip-worktree files should be filtered out
+            result.Count.ShouldBe(5);
+            result.ShouldContain("cached_file.txt");
+            result.ShouldContain("modified_file.txt");
+            result.ShouldContain("renamed_file.txt");
+            result.ShouldContain("copied_file.txt");
+            result.ShouldContain("to_be_killed.txt");
+            result.ShouldNotContain("skip_worktree.txt");
+        }
+
+        [Fact]
+        public void Should_Handle_Edge_Cases_In_Status_Parsing()
+        {
+            // Given - Edge cases that might occur
+            var gitOutput = new[]
+            {
+                "H normal_file.txt",
+                "S",                        // Just "S" without filename (malformed)
+                "Sfile_without_space.txt",  // "S" without space (should not be filtered)
+                "H ",                       // Just status with space but no filename
+                "X unknown_status.txt",     // Unknown status (should be included)
+                ""
+            };
+
+            // When - Apply the filtering logic
+            var result = gitOutput
+                .Where(x => !string.IsNullOrEmpty(x))
+                .Where(x => !x.StartsWith("S "))
+                .Select(x => x.Length > 2 ? x[2..] : x)
+                .ToList();
+
+            // Then
+            result.Count.ShouldBe(5);
+            result.ShouldContain("normal_file.txt");
+            result.ShouldContain("S"); // Just "S" - malformed but not filtered
+            result.ShouldContain("ile_without_space.txt"); // "Sfile_without_space.txt" with first 2 chars removed
+            result.ShouldContain("H "); // "H " - length is 2, so not transformed
+            result.ShouldContain("unknown_status.txt");
+        }
+    }
+}
\ No newline at end of file
diff --git a/src/Cake.Issues.GitRepository/GitRepositoryIssuesProvider.cs b/src/Cake.Issues.GitRepository/GitRepositoryIssuesProvider.cs
index ab716e57d..2b4306bbb 100644
--- a/src/Cake.Issues.GitRepository/GitRepositoryIssuesProvider.cs
+++ b/src/Cake.Issues.GitRepository/GitRepositoryIssuesProvider.cs
@@ -182,7 +182,7 @@ private List<string> GetAllFilesFromRepository()
         };
 
         settings.Arguments.Clear();
-        settings.Arguments.Add("ls-files -z");
+        settings.Arguments.Add("ls-files -t -z");
         var output =
             this.runner.RunCommand(settings)
             ?? throw new Exception("Error reading files from repository");
@@ -192,6 +192,8 @@ private List<string> GetAllFilesFromRepository()
                     output)
                 .Split('\0')
                 .Where(x => !string.IsNullOrEmpty(x))
+                .Where(x => !x.StartsWith("S ", StringComparison.Ordinal)) // Exclude skip-worktree files (sparse checkout)
+                .Select(x => x.Length > 2 ? x[2..] : x) // Remove status prefix (e.g., "H ")
                 .ToList();
         this.Log.Verbose("Found {0} file(s)", result.Count);