diff --git a/hgext/largefiles/lfcommands.py b/hgext/largefiles/lfcommands.py
--- a/hgext/largefiles/lfcommands.py
+++ b/hgext/largefiles/lfcommands.py
@@ -509,12 +509,15 @@ def updatelfiles(ui, repo, filelist=None
 
             updated += update1
 
-            state = repo.dirstate[lfutil.standin(lfile)]
+            standin = lfutil.standin(lfile)
+            if standin in repo.dirstate:
+                stat = repo.dirstate._map[standin]
+                state, mtime = stat[0], stat[3]
+            else:
+                state, mtime = '?', -1
             if state == 'n':
-                # When rebasing, we need to synchronize the standin and the
-                # largefile, because otherwise the largefile will get reverted.
-                # But for commit's sake, we have to mark the file as unclean.
-                if getattr(repo, "_isrebasing", False):
+                if mtime < 0:
+                    # state 'n' doesn't ensure 'clean' in this case
                     lfdirstate.normallookup(lfile)
                 else:
                     lfdirstate.normal(lfile)
diff --git a/tests/test-largefiles-update.t b/tests/test-largefiles-update.t
new file mode 100644
--- /dev/null
+++ b/tests/test-largefiles-update.t
@@ -0,0 +1,53 @@
+This file focuses mainly on updating largefiles in the working
+directory (and ".hg/largefiles/dirstate")
+
+  $ cat >> $HGRCPATH <<EOF
+  > [ui]
+  > merge = internal:fail
+  > [extensions]
+  > largefiles =
+  > EOF
+
+  $ hg init repo
+  $ cd repo
+
+  $ echo large1 > large1
+  $ echo large2 > large2
+  $ hg add --large large1 large2
+  $ echo normal1 > normal1
+  $ hg add normal1
+  $ hg commit -m '#0'
+  $ echo 'large1 in #1' > large1
+  $ echo 'normal1 in #1' > normal1
+  $ hg commit -m '#1'
+  $ hg update -q -C 0
+  $ echo 'large2 in #2' > large2
+  $ hg commit -m '#2'
+  created new head
+
+Test that "hg merge" updates largefiles from "other" correctly
+
+(getting largefiles from "other" normally)
+
+  $ hg status -A large1
+  C large1
+  $ cat large1
+  large1
+  $ cat .hglf/large1
+  4669e532d5b2c093a78eca010077e708a071bb64
+  $ hg merge --config debug.dirstate.delaywrite=2
+  2 files updated, 0 files merged, 0 files removed, 0 files unresolved
+  (branch merge, don't forget to commit)
+  getting changed largefiles
+  1 largefiles updated, 0 removed
+  $ hg status -A large1
+  M large1
+  $ cat large1
+  large1 in #1
+  $ cat .hglf/large1
+  58e24f733a964da346e2407a2bee99d9001184f5
+  $ hg diff -c 1 --nodates .hglf/large1 | grep '^[+-][0-9a-z]'
+  -4669e532d5b2c093a78eca010077e708a071bb64
+  +58e24f733a964da346e2407a2bee99d9001184f5
+
+  $ cd ..