diff --git a/doc/hg.1.txt b/doc/hg.1.txt
--- a/doc/hg.1.txt
+++ b/doc/hg.1.txt
@@ -82,9 +82,8 @@ cat <file> [revision]::
 clone [-U] <source> [dest]::
     Create a copy of an existing repository in a new directory.
 
-    If the destination directory is specified but doesn't exist, it is
-    created. If no destination directory is specified, it defaults to the
-    current directory.
+    If no destination directory name is specified, it defaults to the
+    basename of the source.
 
     The source is added to the new repository's .hg/hgrc file to be used in
     future pulls.
diff --git a/mercurial/commands.py b/mercurial/commands.py
--- a/mercurial/commands.py
+++ b/mercurial/commands.py
@@ -272,10 +272,12 @@ def clone(ui, source, dest = None, **opt
     success = created = False
 
     if dest is None:
-        dest = os.getcwd()
-    elif not os.path.exists(dest):
-        os.mkdir(dest)
-        created = True
+        dest = os.path.basename(source)
+        if dest == source:
+            ui.warn('abort: source and destination are the same\n')
+            sys.exit(1)
+
+    os.mkdir(dest)
 
     try:
         dest = os.path.realpath(dest)