diff --git a/mercurial/subrepo.py b/mercurial/subrepo.py
--- a/mercurial/subrepo.py
+++ b/mercurial/subrepo.py
@@ -314,8 +314,12 @@ def _abssource(repo, push=False, abort=T
     if abort:
         raise util.Abort(_("default path for subrepository not found"))
 
-def _sanitize(ui, path):
+def _sanitize(ui, path, ignore):
     for dirname, dirs, names in os.walk(path):
+        for i, d in enumerate(dirs):
+            if d.lower() == ignore:
+                del dirs[i]
+                break
         if os.path.basename(dirname).lower() != '.hg':
             continue
         for f in names:
@@ -1050,7 +1054,7 @@ class svnsubrepo(abstractsubrepo):
         # update to a directory which has since been deleted and recreated.
         args.append('%s@%s' % (state[0], state[1]))
         status, err = self._svncommand(args, failok=True)
-        _sanitize(self._ui, self._ctx._repo.wjoin(self._path))
+        _sanitize(self._ui, self._ctx._repo.wjoin(self._path), '.svn')
         if not re.search('Checked out revision [0-9]+.', status):
             if ('is already a working copy for a different URL' in err
                 and (self._wcchanged()[:2] == (False, False))):
@@ -1343,7 +1347,7 @@ class gitsubrepo(abstractsubrepo):
                 self._gitcommand(['reset', 'HEAD'])
                 cmd.append('-f')
             self._gitcommand(cmd + args)
-            _sanitize(self._ui, self._abspath)
+            _sanitize(self._ui, self._abspath, '.git')
 
         def rawcheckout():
             # no branch to checkout, check it out with no branch
@@ -1392,7 +1396,7 @@ class gitsubrepo(abstractsubrepo):
             if tracking[remote] != self._gitcurrentbranch():
                 checkout([tracking[remote]])
             self._gitcommand(['merge', '--ff', remote])
-            _sanitize(self._ui, self._abspath)
+            _sanitize(self._ui, self._abspath, '.git')
         else:
             # a real merge would be required, just checkout the revision
             rawcheckout()
@@ -1428,7 +1432,7 @@ class gitsubrepo(abstractsubrepo):
                 self.get(state) # fast forward merge
             elif base != self._state[1]:
                 self._gitcommand(['merge', '--no-commit', revision])
-            _sanitize(self._ui, self._abspath)
+            _sanitize(self._ui, self._abspath, '.git')
 
         if self.dirty():
             if self._gitstate() != revision:
diff --git a/tests/test-subrepo-git.t b/tests/test-subrepo-git.t
--- a/tests/test-subrepo-git.t
+++ b/tests/test-subrepo-git.t
@@ -658,4 +658,13 @@ additional test for "git merge --ff" rou
   $ cat s/sub/.hg/hgrc
   cat: s/sub/.hg/hgrc: No such file or directory
   [1]
+
+Test that sanitizing is omitted in meta data area:
+
+  $ mkdir s/.git/.hg
+  $ echo '.hg/hgrc in git metadata area' > s/.git/.hg/hgrc
+  $ hg update -q -C af6d2edbb0d3
+  checking out detached HEAD in subrepo s
+  check out a git branch if you intend to make changes
+
   $ cd ..
diff --git a/tests/test-subrepo-svn.t b/tests/test-subrepo-svn.t
--- a/tests/test-subrepo-svn.t
+++ b/tests/test-subrepo-svn.t
@@ -676,4 +676,10 @@ Test sanitizing ".hg/hgrc" in subrepo
   cat: s/sub/.hg/hgrc: No such file or directory
   [1]
 
+Test that sanitizing is omitted in meta data area:
+
+  $ mkdir s/.svn/.hg
+  $ echo '.hg/hgrc in svn metadata area' > s/.svn/.hg/hgrc
+  $ hg update -q -C '.^1'
+
   $ cd ../..