diff --git a/mercurial/merge.py b/mercurial/merge.py
--- a/mercurial/merge.py
+++ b/mercurial/merge.py
@@ -1167,7 +1167,9 @@ def update(repo, node, branchmerge, forc
         wlock.release()
 
     if not partial:
-        repo.hook('update', parent1=xp1, parent2=xp2, error=stats[3])
+        def updatehook(parent1=xp1, parent2=xp2, error=stats[3]):
+            repo.hook('update', parent1=parent1, parent2=parent2, error=error)
+        repo._afterlock(updatehook)
     return stats
 
 def graft(repo, ctx, pctx, labels):
diff --git a/tests/test-hook.t b/tests/test-hook.t
--- a/tests/test-hook.t
+++ b/tests/test-hook.t
@@ -613,7 +613,9 @@ make sure --traceback works on hook impo
 
 Issue1827: Hooks Update & Commit not completely post operation
 
-commit and update hooks should run after command completion
+commit and update hooks should run after command completion.  The largefiles
+use demonstrates a recursive wlock, showing the hook doesn't run until the
+final release (and dirstate flush).
 
   $ echo '[hooks]' > .hg/hgrc
   $ echo 'commit = hg id' >> .hg/hgrc
@@ -621,7 +623,7 @@ commit and update hooks should run after
   $ echo bb > a
   $ hg ci -ma
   223eafe2750c tip
-  $ hg up 0
+  $ hg up 0 --config extensions.largefiles=
   cb9a9f314b8b
   1 files updated, 0 files merged, 0 files removed, 0 files unresolved