diff --git a/Annex/CatFile.hs b/Annex/CatFile.hs
index ffac4fccd8..ab7cb2aefc 100644
--- a/Annex/CatFile.hs
+++ b/Annex/CatFile.hs
@@ -9,8 +9,9 @@ module Annex.CatFile (
 	catFile,
 	catObject,
 	catObjectDetails,
+	catFileHandle,
 	catKey,
-	catFileHandle
+	catKeyFile,
 ) where
 
 import qualified Data.ByteString.Lazy as L
@@ -46,4 +47,16 @@ catFileHandle = maybe startup return =<< Annex.getState Annex.catfilehandle
 
 {- From the Sha or Ref of a symlink back to the key. -}
 catKey :: Ref -> Annex (Maybe Key)
-catKey ref = fileKey . takeFileName . encodeW8 . L.unpack  <$> catObject ref
+catKey ref = do
+	l <- encodeW8 . L.unpack  <$> catObject ref
+	return $ if isLinkToAnnex l
+		then fileKey $ takeFileName l
+		else Nothing
+
+{- From a file in git back to the key.
+ -
+ - Prefixing the file with ./ makes this work even if in a subdirectory
+ - of a repo.
+ -}
+catKeyFile :: FilePath -> Annex (Maybe Key)
+catKeyFile f = catKey $ Ref $ ":./" ++ f
diff --git a/Assistant/Threads/Watcher.hs b/Assistant/Threads/Watcher.hs
index 1c5d7206ba..18470bb8b2 100644
--- a/Assistant/Threads/Watcher.hs
+++ b/Assistant/Threads/Watcher.hs
@@ -138,7 +138,7 @@ onAdd file filestatus
  - really been modified. -}
 onAddDirect :: Handler
 onAddDirect file fs = do
-	v <- liftAnnex $ catKey (Ref $ ':':file)
+	v <- liftAnnex $ catKeyFile file
 	case (v, fs) of
 		(Just key, Just filestatus) ->
 			ifM (liftAnnex $ changedFileStatus key filestatus)
diff --git a/Backend.hs b/Backend.hs
index 9c08e14375..d5007f0f97 100644
--- a/Backend.hs
+++ b/Backend.hs
@@ -20,9 +20,11 @@ import System.Posix.Files
 import Common.Annex
 import qualified Annex
 import Annex.CheckAttr
+import Annex.CatFile
 import Types.Key
 import Types.KeySource
 import qualified Types.Backend as B
+import Config
 
 -- When adding a new backend, import it here and add it to the list.
 import qualified Backend.SHA
@@ -73,21 +75,32 @@ genKey' (b:bs) source = do
 		| otherwise = c
 
 {- Looks up the key and backend corresponding to an annexed file,
- - by examining what the file symlinks to. -}
+ - by examining what the file symlinks to.
+ -
+ - In direct mode, there is often no symlink on disk, in which case
+ - the symlink is looked up in git instead. However, a real symlink
+ - on disk still takes precedence over what was committed to git in direct
+ - mode.
+ -}
 lookupFile :: FilePath -> Annex (Maybe (Key, Backend))
 lookupFile file = do
 	tl <- liftIO $ tryIO $ readSymbolicLink file
 	case tl of
-		Left _ -> return Nothing
-		Right l -> makekey l
+		Right l
+			| isLinkToAnnex l -> makekey l
+			| otherwise -> return Nothing
+		Left _ -> ifM isDirect
+			( maybe (return Nothing) makeret =<< catKeyFile file
+			, return Nothing
+			)
   where
-	makekey l = maybe (return Nothing) (makeret l) (fileKey $ takeFileName l)
-	makeret l k = let bname = keyBackendName k in
+	makekey l = maybe (return Nothing) makeret (fileKey $ takeFileName l)
+	makeret k = let bname = keyBackendName k in
 		case maybeLookupBackendName bname of
 			Just backend -> do
 				return $ Just (k, backend)
 			Nothing -> do
-				when (isLinkToAnnex l) $ warning $
+				warning $
 					"skipping " ++ file ++
 					" (unknown backend " ++ bname ++ ")"
 				return Nothing
diff --git a/debian/changelog b/debian/changelog
index f98d335b73..7a14f44939 100644
--- a/debian/changelog
+++ b/debian/changelog
@@ -1,7 +1,8 @@
-git-annex (3.20130103) UNRELEASED; urgency=low
+git-annex (3.20130105) UNRELEASED; urgency=low
 
   * webapp: Add UI to stop and restart assistant.
   * committer: Fix a file handle leak.
+  * assistant: Make expensive transfer scan work fully in direct mode.
 
  -- Joey Hess <joeyh@debian.org>  Thu, 03 Jan 2013 14:58:45 -0400
 
diff --git a/git-annex.cabal b/git-annex.cabal
index f63e66195c..24971e1f78 100644
--- a/git-annex.cabal
+++ b/git-annex.cabal
@@ -1,5 +1,5 @@
 Name: git-annex
-Version: 3.20130105
+Version: 3.20130103
 Cabal-Version: >= 1.8
 License: GPL
 Maintainer: Joey Hess <joey@kitenet.net>