diff --git a/mercurial/statichttprepo.py b/mercurial/statichttprepo.py
--- a/mercurial/statichttprepo.py
+++ b/mercurial/statichttprepo.py
@@ -9,14 +9,16 @@
 
 from i18n import _
 import changelog, filelog, httprangereader
-import repo, localrepo, manifest, os, urllib, urllib2, util
+import repo, localrepo, manifest, util
+import urllib, urllib2, errno
 
 class rangereader(httprangereader.httprangereader):
     def read(self, size=None):
         try:
             return httprangereader.httprangereader.read(self, size)
         except urllib2.HTTPError, inst:
-            raise IOError(None, inst)
+            num = inst.code == 404 and errno.ENOENT or None
+            raise IOError(num, inst)
         except urllib2.URLError, inst:
             raise IOError(None, inst.reason[1])
 
@@ -35,11 +37,17 @@ class statichttprepository(localrepo.loc
 
         self.path = path.rstrip('/') + "/.hg"
         self.opener = opener(self.path)
+
         # find requirements
         try:
             requirements = self.opener("requires").read().splitlines()
-        except IOError:
-            requirements = []
+        except IOError, inst:
+            if inst.errno == errno.ENOENT:
+                msg = _("'%s' does not appear to be an hg repository") % path
+                raise repo.RepoError(msg)
+            else:
+                requirements = []
+
         # check them
         for r in requirements:
             if r not in self.supported:
diff --git a/tests/test-static-http b/tests/test-static-http
--- a/tests/test-static-http
+++ b/tests/test-static-http
@@ -63,4 +63,19 @@ hg verify
 cat a
 hg paths | sed -e 's,:[0-9][0-9]*/,/,'
 
+echo '% test with empty repo (issue965)'
+cd ..
+hg init remotempty
+
+http_proxy= hg clone static-http://localhost:$HGPORT/remotempty local3 | sed -e 's,:[0-9][0-9]*/,/,'
+
+cd local3
+hg verify
+hg paths | sed -e 's,:[0-9][0-9]*/,/,'
+
+echo '% test with non-repo'
+cd ..
+mkdir notarepo
+http_proxy= hg clone static-http://localhost:$HGPORT/notarepo local3 2>&1 | sed -e 's,:[0-9][0-9]*/,/,'
+
 kill $!
diff --git a/tests/test-static-http.out b/tests/test-static-http.out
--- a/tests/test-static-http.out
+++ b/tests/test-static-http.out
@@ -42,3 +42,14 @@ checking files
 1 files, 1 changesets, 1 total revisions
 a
 default = static-http://localhost/
+% test with empty repo (issue965)
+no changes found
+0 files updated, 0 files merged, 0 files removed, 0 files unresolved
+checking changesets
+checking manifests
+crosschecking files in changesets and manifests
+checking files
+0 files, 0 changesets, 0 total revisions
+default = static-http://localhost/remotempty
+% test with non-repo
+abort: 'http://localhost/notarepo' does not appear to be an hg repository!