diff --git a/changelog/64121.fixed.md b/changelog/64121.fixed.md
new file mode 100644
index 0000000000..e78bbd5b7f
--- /dev/null
+++ b/changelog/64121.fixed.md
@@ -0,0 +1 @@
+Ensure the right HOME environment value is set during Pygit2 remote initialization.
diff --git a/salt/utils/gitfs.py b/salt/utils/gitfs.py
index 58fa611db8..6f691f3869 100644
--- a/salt/utils/gitfs.py
+++ b/salt/utils/gitfs.py
@@ -1889,7 +1889,12 @@ def init_remote(self):
         """
         # https://github.com/libgit2/pygit2/issues/339
         # https://github.com/libgit2/libgit2/issues/2122
+        # https://github.com/saltstack/salt/issues/64121
         home = os.path.expanduser("~")
+        if "HOME" not in os.environ:
+            # Make sure $HOME env variable is set to prevent
+            # _pygit2.GitError: error loading known_hosts in some libgit2 versions.
+            os.environ["HOME"] = home
         pygit2.settings.search_path[pygit2.GIT_CONFIG_LEVEL_GLOBAL] = home
         new = False
         if not os.listdir(self._cachedir):
@@ -1994,10 +1999,6 @@ def _fetch(self):
             # pruning only available in pygit2 >= 0.26.2
             pass
         try:
-            # Make sure $HOME env variable is set to prevent
-            # _pygit2.GitError: error loading known_hosts in some libgit2 versions.
-            if "HOME" not in os.environ:
-                os.environ["HOME"] = salt.syspaths.HOME_DIR
             fetch_results = origin.fetch(**fetch_kwargs)
         except GitError as exc:  # pylint: disable=broad-except
             exc_str = get_error_message(exc).lower()
diff --git a/tests/pytests/unit/utils/test_gitfs.py b/tests/pytests/unit/utils/test_gitfs.py
index bd7d74cb2b..3c4a85a856 100644
--- a/tests/pytests/unit/utils/test_gitfs.py
+++ b/tests/pytests/unit/utils/test_gitfs.py
@@ -251,7 +251,6 @@ def test_checkout_pygit2_with_home_env_unset(_prepare_provider):
     with patched_environ(__cleanup__=["HOME"]):
         assert "HOME" not in os.environ
         provider.init_remote()
-        provider.fetch()
         assert "HOME" in os.environ