diff --git a/mercurial/hg.py b/mercurial/hg.py
--- a/mercurial/hg.py
+++ b/mercurial/hg.py
@@ -397,10 +397,8 @@ class dirstate:
                 if os.path.isdir(f):
                     for dir, subdirs, fl in os.walk(f):
                         d = dir[len(self.root) + 1:]
-                        if ".hg" in subdirs:
-                            subdirs.remove(".hg")
                         for sd in subdirs:
-                            if ignore(os.path.join(d, sd + '/')):
+                            if sd == ".hg" or ignore(os.path.join(d, sd +'/')):
                                 subdirs.remove(sd)
                         for fn in fl:
                             fn = util.pconvert(os.path.join(d, fn))