diff --git a/mercurial/hg.py b/mercurial/hg.py
--- a/mercurial/hg.py
+++ b/mercurial/hg.py
@@ -105,14 +105,14 @@ def clone(ui, source, dest=None, pull=Fa
     destination is local repository
     """
 
-    origsource = source
-    source, rev, checkout = parseurl(ui.expandpath(source), rev)
-
     if isinstance(source, str):
+        origsource = ui.expandpath(source)
+        source, rev, checkout = parseurl(origsource, rev)
         src_repo = repository(ui, source)
     else:
         src_repo = source
-        source = src_repo.url()
+        origsource = source = src_repo.url()
+        checkout = None
 
     if dest is None:
         dest = defaultdest(source)
diff --git a/tests/test-clone b/tests/test-clone
--- a/tests/test-clone
+++ b/tests/test-clone
@@ -32,4 +32,8 @@ cd ../..
 hg clone file://a e
 grep 'file:' e/.hg/hgrc
 
+# check that path aliases are expanded
+hg clone -q -U --config 'paths.foobar=a#0' foobar f
+hg -R f showconfig paths.default | sed -e 's,.*/,,'
+
 exit 0
diff --git a/tests/test-clone.out b/tests/test-clone.out
--- a/tests/test-clone.out
+++ b/tests/test-clone.out
@@ -15,3 +15,4 @@ destination directory: a
 1 files updated, 0 files merged, 0 files removed, 0 files unresolved
 a
 1 files updated, 0 files merged, 0 files removed, 0 files unresolved
+a#0