diff --git a/doc/hgrc.5.txt b/doc/hgrc.5.txt
--- a/doc/hgrc.5.txt
+++ b/doc/hgrc.5.txt
@@ -50,6 +50,8 @@ installed.
     particular repository.  This file is not version-controlled, and
     will not get transferred during a "clone" operation.  Options in
     this file override options in all other configuration files.
+    On Unix, this file is only read if it belongs to a trusted user
+    or to a trusted group.
 
 SYNTAX
 ------
@@ -349,6 +351,16 @@ server::
     6Mbps), uncompressed streaming is slower, because of the extra
     data transfer overhead.  Default is False.
 
+trusted::
+  Mercurial will only read the .hg/hgrc file from a repository if
+  it belongs to a trusted user or to a trusted group. This section
+  specifies what users and groups are trusted. To trust everybody,
+  list a user or a group with name "*".
+  users;;
+    Comma-separated list of trusted users.
+  groups;;
+    Comma-separated list of trusted groups.
+
 ui::
   User interface controls.
   debug;;
diff --git a/mercurial/ui.py b/mercurial/ui.py
--- a/mercurial/ui.py
+++ b/mercurial/ui.py
@@ -19,6 +19,8 @@ class ui(object):
             # this is the parent of all ui children
             self.parentui = None
             self.readhooks = list(readhooks)
+            self.trusted_users = {}
+            self.trusted_groups = {}
             self.cdata = ConfigParser.SafeConfigParser()
             self.readconfig(util.rcpath())
 
@@ -37,6 +39,8 @@ class ui(object):
             # parentui may point to an ui object which is already a child
             self.parentui = parentui.parentui or parentui
             self.readhooks = list(parentui.readhooks or readhooks)
+            self.trusted_users = parentui.trusted_users.copy()
+            self.trusted_groups = parentui.trusted_groups.copy()
             parent_cdata = self.parentui.cdata
             self.cdata = ConfigParser.SafeConfigParser(parent_cdata.defaults())
             # make interpolation work
@@ -72,7 +76,22 @@ class ui(object):
             fn = [fn]
         for f in fn:
             try:
-                self.cdata.read(f)
+                fp = open(f)
+            except IOError:
+                continue
+            if ((self.trusted_users or self.trusted_groups) and
+                '*' not in self.trusted_users and
+                '*' not in self.trusted_groups):
+                st = util.fstat(fp)
+                user = util.username(st.st_uid)
+                group = util.groupname(st.st_gid)
+                if (user not in self.trusted_users and
+                    group not in self.trusted_groups):
+                    self.warn(_('not reading file %s from untrusted '
+                                'user %s, group %s\n') % (f, user, group))
+                    continue
+            try:
+                self.cdata.readfp(fp, f)
             except ConfigParser.ParsingError, inst:
                 raise util.Abort(_("Failed to parse %s\n%s") % (f, inst))
         # translate paths relative to root (or home) into absolute paths
@@ -81,6 +100,13 @@ class ui(object):
         for name, path in self.configitems("paths"):
             if path and "://" not in path and not os.path.isabs(path):
                 self.cdata.set("paths", name, os.path.join(root, path))
+        user = util.username()
+        if user is not None:
+            self.trusted_users[user] = 1
+            for user in self.configlist('trusted', 'users'):
+                self.trusted_users[user] = 1
+            for group in self.configlist('trusted', 'groups'):
+                self.trusted_groups[group] = 1
         for hook in self.readhooks:
             hook(self)
 
diff --git a/mercurial/util.py b/mercurial/util.py
--- a/mercurial/util.py
+++ b/mercurial/util.py
@@ -15,7 +15,7 @@ platform-specific details from the core.
 from i18n import gettext as _
 from demandload import *
 demandload(globals(), "cStringIO errno getpass popen2 re shutil sys tempfile")
-demandload(globals(), "os threading time")
+demandload(globals(), "os threading time pwd grp")
 
 # used by parsedate
 defaultdateformats = ('%Y-%m-%d %H:%M:%S', '%Y-%m-%d %H:%M',
@@ -509,6 +509,38 @@ def getuser():
     raise Abort(_('user name not available - set USERNAME '
                   'environment variable'))
 
+def username(uid=None):
+    """Return the name of the user with the given uid.
+
+    If uid is None, return the name of the current user."""
+    try:
+        # force an ImportError if there's no module pwd
+        getpwuid = pwd.getpwuid
+        if uid is None:
+            uid = os.getuid()
+        try:
+            return getpwuid(uid)[0]
+        except KeyError:
+            return str(uid)
+    except ImportError:
+        return None
+
+def groupname(gid=None):
+    """Return the name of the group with the given gid.
+
+    If gid is None, return the name of the current group."""
+    try:
+        # force an ImportError if there's no module grp
+        getgrgid = grp.getgrgid
+        if gid is None:
+            gid = os.getgid()
+        try:
+            return getgrgid(gid)[0]
+        except KeyError:
+            return str(gid)
+    except ImportError:
+        return None
+
 # Platform specific variants
 if os.name == 'nt':
     demandload(globals(), "msvcrt")
diff --git a/tests/test-trusted.py b/tests/test-trusted.py
new file mode 100755
--- /dev/null
+++ b/tests/test-trusted.py
@@ -0,0 +1,112 @@
+#!/usr/bin/env python
+# Since it's not easy to write a test that portably deals
+# with files from different users/groups, we cheat a bit by
+# monkey-patching some functions in the util module
+
+import os
+from mercurial import ui, util
+
+hgrc = os.environ['HGRCPATH']
+
+def testui(user='foo', group='bar', tusers=(), tgroups=(),
+           cuser='foo', cgroup='bar'):
+    # user, group => owners of the file
+    # tusers, tgroups => trusted users/groups
+    # cuser, cgroup => user/group of the current process
+
+    # write a global hgrc with the list of trusted users/groups and
+    # some setting so that we can be sure it was read
+    f = open(hgrc, 'w')
+    f.write('[paths]\n')
+    f.write('global = /some/path\n\n')
+
+    if tusers or tgroups:
+        f.write('[trusted]\n')
+        if tusers:
+            f.write('users = %s\n' % ', '.join(tusers))
+        if tgroups:
+            f.write('groups = %s\n' % ', '.join(tgroups))
+    f.close()
+
+    # override the functions that give names to uids and gids
+    def username(uid=None):
+        if uid is None:
+            return cuser
+        return user
+    util.username = username
+
+    def groupname(gid=None):
+        if gid is None:
+            return 'bar'
+        return group
+    util.groupname = groupname
+
+    # try to read everything
+    #print '# File belongs to user %s, group %s' % (user, group)
+    #print '# trusted users = %s; trusted groups = %s' % (tusers, tgroups)
+    kind = ('different', 'same')
+    who = ('', 'user', 'group', 'user and the group')
+    trusted = who[(user in tusers) + 2*(group in tgroups)]
+    if trusted:
+        trusted = ', but we trust the ' + trusted
+    print '# %s user, %s group%s' % (kind[user == cuser], kind[group == cgroup],
+                                     trusted)
+
+    parentui = ui.ui()
+    u = ui.ui(parentui=parentui)
+    u.readconfig('.hg/hgrc')
+    for name, path in u.configitems('paths'):
+        print name, '=', path
+    print
+
+    return u
+
+os.mkdir('repo')
+os.chdir('repo')
+os.mkdir('.hg')
+f = open('.hg/hgrc', 'w')
+f.write('[paths]\n')
+f.write('local = /another/path\n\n')
+f.close()
+
+#print '# Everything is run by user foo, group bar\n'
+
+# same user, same group
+testui()
+# same user, different group
+testui(group='def')
+# different user, same group
+testui(user='abc')
+# ... but we trust the group
+testui(user='abc', tgroups=['bar'])
+# different user, different group
+testui(user='abc', group='def')
+# ... but we trust the user
+testui(user='abc', group='def', tusers=['abc'])
+# ... but we trust the group
+testui(user='abc', group='def', tgroups=['def'])
+# ... but we trust the user and the group
+testui(user='abc', group='def', tusers=['abc'], tgroups=['def'])
+# ... but we trust all users
+print '# we trust all users'
+testui(user='abc', group='def', tusers=['*'])
+# ... but we trust all groups
+print '# we trust all groups'
+testui(user='abc', group='def', tgroups=['*'])
+# ... but we trust the whole universe
+print '# we trust all users and groups'
+testui(user='abc', group='def', tusers=['*'], tgroups=['*'])
+# ... check that users and groups are in different namespaces
+print "# we don't get confused by users and groups with the same name"
+testui(user='abc', group='def', tusers=['def'], tgroups=['abc'])
+# ... lists of user names work
+print "# list of user names"
+testui(user='abc', group='def', tusers=['foo', 'xyz', 'abc', 'bleh'],
+       tgroups=['bar', 'baz', 'qux'])
+# ... lists of group names work
+print "# list of group names"
+testui(user='abc', group='def', tusers=['foo', 'xyz', 'bleh'],
+       tgroups=['bar', 'def', 'baz', 'qux'])
+
+print "# Can't figure out the name of the user running this process"
+testui(user='abc', group='def', cuser=None)
diff --git a/tests/test-trusted.py.out b/tests/test-trusted.py.out
new file mode 100644
--- /dev/null
+++ b/tests/test-trusted.py.out
@@ -0,0 +1,67 @@
+# same user, same group
+global = /some/path
+local = /another/path
+
+# same user, different group
+global = /some/path
+local = /another/path
+
+# different user, same group
+not reading file .hg/hgrc from untrusted user abc, group bar
+global = /some/path
+
+# different user, same group, but we trust the group
+global = /some/path
+local = /another/path
+
+# different user, different group
+not reading file .hg/hgrc from untrusted user abc, group def
+global = /some/path
+
+# different user, different group, but we trust the user
+global = /some/path
+local = /another/path
+
+# different user, different group, but we trust the group
+global = /some/path
+local = /another/path
+
+# different user, different group, but we trust the user and the group
+global = /some/path
+local = /another/path
+
+# we trust all users
+# different user, different group
+global = /some/path
+local = /another/path
+
+# we trust all groups
+# different user, different group
+global = /some/path
+local = /another/path
+
+# we trust all users and groups
+# different user, different group
+global = /some/path
+local = /another/path
+
+# we don't get confused by users and groups with the same name
+# different user, different group
+not reading file .hg/hgrc from untrusted user abc, group def
+global = /some/path
+
+# list of user names
+# different user, different group, but we trust the user
+global = /some/path
+local = /another/path
+
+# list of group names
+# different user, different group, but we trust the group
+global = /some/path
+local = /another/path
+
+# Can't figure out the name of the user running this process
+# different user, different group
+global = /some/path
+local = /another/path
+