diff --git a/t/t7527-builtin-fsmonitor.sh b/t/t7527-builtin-fsmonitor.sh
index 409cd0cd12..774da5ac60 100755
--- a/t/t7527-builtin-fsmonitor.sh
+++ b/t/t7527-builtin-fsmonitor.sh
@@ -10,9 +10,58 @@ then
 	test_done
 fi
 
+# Verify that the filesystem delivers events to the daemon.
+# On some configurations (e.g., overlayfs with older kernels),
+# inotify watches succeed but events are never delivered.  The
+# cookie wait will time out and the daemon logs a trace message.
+#
+# Use "timeout" (if available) to guard each step against hangs.
+maybe_timeout () {
+	if type timeout >/dev/null 2>&1
+	then
+		timeout "$@"
+	else
+		shift
+		"$@"
+	fi
+}
+verify_fsmonitor_works () {
+	git init test_fsmonitor_smoke || return 1
+
+	GIT_TRACE_FSMONITOR="$PWD/smoke.trace" &&
+	export GIT_TRACE_FSMONITOR &&
+	maybe_timeout 30 \
+		git -C test_fsmonitor_smoke fsmonitor--daemon start \
+			--start-timeout=10
+	ret=$?
+	unset GIT_TRACE_FSMONITOR
+	if test $ret -ne 0
+	then
+		rm -rf test_fsmonitor_smoke smoke.trace
+		return 1
+	fi
+
+	maybe_timeout 10 \
+		test-tool -C test_fsmonitor_smoke fsmonitor-client query \
+			--token 0 >/dev/null 2>&1
+	maybe_timeout 5 \
+		git -C test_fsmonitor_smoke fsmonitor--daemon stop 2>/dev/null
+	! grep -q "cookie_wait timed out" "$PWD/smoke.trace" 2>/dev/null
+	ret=$?
+	rm -rf test_fsmonitor_smoke smoke.trace
+	return $ret
+}
+
+if ! verify_fsmonitor_works
+then
+	skip_all="filesystem does not deliver fsmonitor events (container/overlayfs?)"
+	test_done
+fi
+
 stop_daemon_delete_repo () {
 	r=$1 &&
-	test_might_fail git -C $r fsmonitor--daemon stop &&
+	test_might_fail maybe_timeout 30 \
+		git -C $r fsmonitor--daemon stop 2>/dev/null
 	rm -rf $1
 }
 
@@ -67,7 +116,7 @@ start_daemon () {
 			export GIT_TEST_FSMONITOR_TOKEN
 		fi &&
 
-		git $r fsmonitor--daemon start &&
+		git $r fsmonitor--daemon start --start-timeout=10 &&
 		git $r fsmonitor--daemon status
 	)
 }
@@ -520,6 +569,28 @@ test_expect_success 'directory changes to a file' '
 	grep "^event: dir1$" .git/trace
 '
 
+test_expect_success 'rapid nested directory creation' '
+	test_when_finished "git fsmonitor--daemon stop; rm -rf rapid" &&
+
+	start_daemon --tf "$PWD/.git/trace" &&
+
+	# Rapidly create nested directories to exercise race conditions
+	# where directory watches may be added concurrently during
+	# event processing and recursive scanning.
+	for i in $(test_seq 1 20)
+	do
+		mkdir -p "rapid/nested/dir$i/subdir/deep" || return 1
+	done &&
+
+	# Give the daemon time to process all events
+	sleep 1 &&
+
+	test-tool fsmonitor-client query --token 0 &&
+
+	# Verify daemon is still running (did not crash)
+	git fsmonitor--daemon status
+'
+
 # The next few test cases exercise the token-resync code.  When filesystem
 # drops events (because of filesystem velocity or because the daemon isn't
 # polling fast enough), we need to discard the cached data (relative to the
@@ -910,7 +981,10 @@ test_expect_success "submodule absorbgitdirs implicitly starts daemon" '
 start_git_in_background () {
 	git "$@" &
 	git_pid=$!
-	git_pgid=$(ps -o pgid= -p $git_pid)
+	git_pgid=$(ps -o pgid= -p $git_pid 2>/dev/null ||
+		awk '{print $5}' /proc/$git_pid/stat 2>/dev/null) &&
+	git_pgid="${git_pgid## }" &&
+	git_pgid="${git_pgid%% }"
 	nr_tries_left=10
 	while true
 	do
@@ -921,15 +995,16 @@ start_git_in_background () {
 		fi
 		sleep 1
 		nr_tries_left=$(($nr_tries_left - 1))
-	done >/dev/null 2>&1 &
+	done >/dev/null 2>&1 3>&- 4>&- 5>&- 6>&- 7>&- &
 	watchdog_pid=$!
 	wait $git_pid
 }
 
 stop_git () {
-	while kill -0 -- -$git_pgid
+	test -n "$git_pgid" || return 0
+	while kill -0 -- -$git_pgid 2>/dev/null
 	do
-		kill -- -$git_pgid
+		kill -- -$git_pgid 2>/dev/null
 		sleep 1
 	done
 }
@@ -944,7 +1019,7 @@ stop_watchdog () {
 
 test_expect_success !MINGW "submodule implicitly starts daemon by pull" '
 	test_atexit "stop_watchdog" &&
-	test_when_finished "stop_git; rm -rf cloned super sub" &&
+	test_when_finished "set +m; stop_git; rm -rf cloned super sub" &&
 
 	create_super super &&
 	create_sub sub &&