diff --git a/master_changes.md b/master_changes.md
index 4d94b28225e..42ab9d90f6d 100644
--- a/master_changes.md
+++ b/master_changes.md
@@ -69,6 +69,7 @@ users)
 
 ## Repository
   * No longer call tar tool to create archives, use tar library instead [#6945 @kit-ty-kate]
+  * [BUG] Do not fail on directories named `opam` when scanning the `packages` directory of a repository during `opam repo add` or `opam init` (worked on subsequent `opam update`) [#6941 @kit-ty-kate @rjbou]
 
 ## Lock
   * [BUG] Fix `undefined variable` error when a lock file filter contains an undefined variables: fail gracefully with strict mode, continue and default the variable to false on normal mode [#6947 @rjbou - fix #6946]
@@ -185,6 +186,7 @@ users)
   * Fix some forgotten sed in `extrasource` and `update` tests in #6734 [#6970 @rjbou]
   * Add a test for `opam config subst` [#6936 @NathanReb]
   * Add a lock test for undefined variables in a lock file [#6947 @rjbou - fix #6946]
+  * Add a test showing the behaviour of `opam repo add` and `opam update` when faced with a repository containing an `opam` directory [#6995 @kit-ty-kate]
 
 ### Engine
   * Add `http-server` to launch a minimal http server [#6939 @rjbou]
diff --git a/src/state/opamRepositoryState.ml b/src/state/opamRepositoryState.ml
index fcd813a4e63..80166a6555a 100644
--- a/src/state/opamRepositoryState.ml
+++ b/src/state/opamRepositoryState.ml
@@ -129,8 +129,11 @@ let load_opams_from_dir repo_name repo_root =
   (* FIXME: why is this different from OpamPackage.list ? *)
   let rec aux r dir =
     if OpamFilename.exists_dir dir then
-      let fnames = Sys.readdir (OpamFilename.Dir.to_string dir) in
-      if Array.exists (fun f -> String.equal f OpamPathName.opam_f) fnames then
+      let dir_str = OpamFilename.Dir.to_string dir in
+      let fnames = Sys.readdir dir_str in
+      let ( / ) = Filename.concat in
+      if Array.exists (fun f -> String.equal f OpamPathName.opam_f &&
+                                not (Sys.is_directory (dir_str / f))) fnames then
         match read_package_opam ~repo_name ~repo_root dir with
         | Some (nv, opam) -> OpamPackage.Map.add nv opam r
         | None -> r
diff --git a/tests/reftests/repository.test b/tests/reftests/repository.test
index 23a7c206499..2f38a4d0ea5 100644
--- a/tests/reftests/repository.test
+++ b/tests/reftests/repository.test
@@ -967,3 +967,45 @@ Now run 'opam upgrade' to apply any package updates.
 +++ test-git.new/packages/test/test.4/opam
 @@ -0,0 +1,1 @@
 +opam-version: "2.0"
+### :: Test the scan of directories named 'opam'
+### opam switch create opam-dir --empty
+### <OPAM-DIR/repo>
+opam-version: "2.0"
+### <OPAM-DIR/packages/opam/opam.1/opam>
+opam-version: "2.0"
+build: ["echo" "init"]
+### opam repo add --this-switch opam-dir OPAM-DIR
+[opam-dir] Initialised
+### opam install --verbose opam | sed-cmd echo
+The following actions will be performed:
+=== install 1 package
+  - install opam 1
+
+<><> Processing actions <><><><><><><><><><><><><><><><><><><><><><><><><><><><>
+Processing  2/3: [opam: echo init]
++ echo "init" (CWD=${BASEDIR}/OPAM/opam-dir/.opam-switch/build/opam.1)
+- init
+-> compiled  opam.1
+-> installed opam.1
+Done.
+### <OPAM-DIR/packages/opam/opam.1/opam>
+opam-version: "2.0"
+build: ["echo" "update"]
+### opam update opam-dir
+
+<><> Updating package repositories ><><><><><><><><><><><><><><><><><><><><><><>
+[opam-dir] synchronised from file://${BASEDIR}/OPAM-DIR
+Now run 'opam upgrade' to apply any package updates.
+### opam reinstall --yes --verbose opam | sed-cmd echo
+The following actions will be performed:
+=== recompile 1 package
+  - recompile opam 1
+
+<><> Processing actions <><><><><><><><><><><><><><><><><><><><><><><><><><><><>
+Processing  2/4: [opam: echo update]
++ echo "update" (CWD=${BASEDIR}/OPAM/opam-dir/.opam-switch/build/opam.1)
+- update
+-> compiled  opam.1
+-> removed   opam.1
+-> installed opam.1
+Done.