diff --git a/pungi/ostree.py b/pungi/ostree.py
index 846daeea..f36c794e 100644
--- a/pungi/ostree.py
+++ b/pungi/ostree.py
@@ -31,7 +31,7 @@ def make_log_file(log_dir, filename):
 def init_ostree_repo(repo, log_dir=None):
     """If the ostree repo does not exist, initialize it."""
     log_file = make_log_file(log_dir, 'init-ostree-repo')
-    if not os.path.isdir(repo):
+    if not os.path.isdir(repo) or not os.listdir(repo):
         ensure_dir(repo)
         shortcuts.run(['ostree', 'init', '--repo={}'.format(repo), '--mode=archive-z2'],
                       show_cmd=True, stdout=True, logfile=log_file)
diff --git a/pungi/phases/ostree.py b/pungi/phases/ostree.py
index 170d8011..53947ffa 100644
--- a/pungi/phases/ostree.py
+++ b/pungi/phases/ostree.py
@@ -55,6 +55,10 @@ class OSTreeThread(WorkerThread):
         self._clone_repo(repodir, config['config_url'], config.get('config_branch', 'master'))
         self._tweak_mirrorlist(repodir, source_repo)
 
+        # Ensure target directory exists, otherwise Koji task will fail to
+        # mount it.
+        util.makedirs(config['ostree_repo'])
+
         self._run_ostree_cmd(compose, variant, arch, config, repodir)
 
         self.pool.log_info('[DONE ] %s' % msg)
diff --git a/tests/test_ostree_phase.py b/tests/test_ostree_phase.py
index c8c29506..f5060042 100755
--- a/tests/test_ostree_phase.py
+++ b/tests/test_ostree_phase.py
@@ -74,6 +74,10 @@ class OSTreePhaseTest(helpers.PungiTestCase):
 
 class OSTreeThreadTest(helpers.PungiTestCase):
 
+    def setUp(self):
+        super(OSTreeThreadTest, self).setUp()
+        self.repo = os.path.join(self.topdir, 'place/for/atomic')
+
     def _dummy_config_repo(self, scm_dict, target, logger=None):
         helpers.touch(os.path.join(target, 'fedora-atomic-docker-host.json'))
         helpers.touch(os.path.join(target, 'fedora-rawhide.repo'),
@@ -101,7 +105,7 @@ class OSTreeThreadTest(helpers.PungiTestCase):
             'config_url': 'https://git.fedorahosted.org/git/fedora-atomic.git',
             'config_branch': 'f24',
             'treefile': 'fedora-atomic-docker-host.json',
-            'ostree_repo': '/other/place/for/atomic'
+            'ostree_repo': self.repo
         }
         koji = KojiWrapper.return_value
         koji.run_runroot_cmd.return_value = {
@@ -124,8 +128,8 @@ class OSTreeThreadTest(helpers.PungiTestCase):
                                      '--log-dir={}/logs/x86_64/ostree'.format(self.topdir),
                                      '--treefile={}/fedora-atomic-docker-host.json'.format(
                                          self.topdir + '/work/ostree/config_repo'),
-                                     '/other/place/for/atomic'],
-                                    channel=None, mounts=[self.topdir, '/other/place/for/atomic'],
+                                     self.repo],
+                                    channel=None, mounts=[self.topdir, self.repo],
                                     packages=['pungi', 'ostree', 'rpm-ostree'],
                                     task_id=True, use_shell=True)])
         self.assertEqual(koji.run_runroot_cmd.call_args_list,
@@ -141,6 +145,7 @@ class OSTreeThreadTest(helpers.PungiTestCase):
         with open(self.topdir + '/work/ostree/config_repo/fedora-23.repo') as f:
             self.assertIn('baseurl=http://example.com/Everything/x86_64/os'.format(self.topdir),
                           f.read())
+        self.assertTrue(os.path.isdir(self.repo))
 
     @mock.patch('pungi.wrappers.scm.get_dir_from_scm')
     @mock.patch('pungi.wrappers.kojiwrapper.KojiWrapper')
@@ -160,7 +165,7 @@ class OSTreeThreadTest(helpers.PungiTestCase):
             'config_url': 'https://git.fedorahosted.org/git/fedora-atomic.git',
             'config_branch': 'f24',
             'treefile': 'fedora-atomic-docker-host.json',
-            'ostree_repo': '/other/place/for/atomic'
+            'ostree_repo': self.repo,
         }
         koji = KojiWrapper.return_value
         koji.run_runroot_cmd.return_value = {
@@ -197,7 +202,7 @@ class OSTreeThreadTest(helpers.PungiTestCase):
             'config_url': 'https://git.fedorahosted.org/git/fedora-atomic.git',
             'config_branch': 'f24',
             'treefile': 'fedora-atomic-docker-host.json',
-            'ostree_repo': '/other/place/for/atomic'
+            'ostree_repo': self.repo,
         }
         koji = KojiWrapper.return_value
         koji.run_runroot_cmd.side_effect = helpers.boom
diff --git a/tests/test_ostree_script.py b/tests/test_ostree_script.py
index c9c6c35e..318565fa 100755
--- a/tests/test_ostree_script.py
+++ b/tests/test_ostree_script.py
@@ -36,6 +36,46 @@ class OstreeScriptTest(helpers.PungiTestCase):
                         self.topdir + '/fedora-atomic-docker-host.json'],
                        logfile=self.topdir + '/logs/Atomic/create-ostree-repo.log', show_cmd=True, stdout=True)])
 
+    @mock.patch('kobo.shortcuts.run')
+    def test_run_on_existing_empty_dir(self, run):
+        repo = os.path.join(self.topdir, 'atomic')
+
+        os.mkdir(repo)
+
+        ostree.main([
+            '--log-dir={}'.format(os.path.join(self.topdir, 'logs', 'Atomic')),
+            '--treefile={}/fedora-atomic-docker-host.json'.format(self.topdir),
+            repo,
+        ])
+
+        self.maxDiff = None
+        self.assertItemsEqual(
+            run.call_args_list,
+            [mock.call(['ostree', 'init', '--repo={}'.format(repo), '--mode=archive-z2'],
+                       logfile=self.topdir + '/logs/Atomic/init-ostree-repo.log', show_cmd=True, stdout=True),
+             mock.call(['rpm-ostree', 'compose', 'tree', '--repo={}'.format(repo),
+                        self.topdir + '/fedora-atomic-docker-host.json'],
+                       logfile=self.topdir + '/logs/Atomic/create-ostree-repo.log', show_cmd=True, stdout=True)])
+
+    @mock.patch('kobo.shortcuts.run')
+    def test_run_on_initialized_repo(self, run):
+        repo = os.path.join(self.topdir, 'atomic')
+
+        helpers.touch(os.path.join(repo, 'initialized'))
+
+        ostree.main([
+            '--log-dir={}'.format(os.path.join(self.topdir, 'logs', 'Atomic')),
+            '--treefile={}/fedora-atomic-docker-host.json'.format(self.topdir),
+            repo,
+        ])
+
+        self.maxDiff = None
+        self.assertItemsEqual(
+            run.call_args_list,
+            [mock.call(['rpm-ostree', 'compose', 'tree', '--repo={}'.format(repo),
+                        self.topdir + '/fedora-atomic-docker-host.json'],
+                       logfile=self.topdir + '/logs/Atomic/create-ostree-repo.log', show_cmd=True, stdout=True)])
+
 
 if __name__ == '__main__':
     unittest.main()