diff --git a/hgext/inotify/server.py b/hgext/inotify/server.py
--- a/hgext/inotify/server.py
+++ b/hgext/inotify/server.py
@@ -849,9 +849,14 @@ def start(ui, dirstate, root, opts):
             finally:
                 self.master.shutdown()
 
-    runargs = None
     if 'inserve' not in sys.argv:
         runargs = [sys.argv[0], 'inserve', '-R', root]
+    else:
+        runargs = sys.argv[:]
+
+    pidfile = ui.config('inotify', 'pidfile')
+    if opts['daemon'] and pidfile is not None and 'pid-file' not in runargs:
+        runargs.append("--pid-file=%s" % pidfile)
 
     service = service()
     logfile = ui.config('inotify', 'log')
diff --git a/tests/test-inotify b/tests/test-inotify
--- a/tests/test-inotify
+++ b/tests/test-inotify
@@ -20,7 +20,11 @@ echo "inotify=" >> $HGRCPATH
 cd repo2
 echo b >> a
 # check that daemon started automatically works correctly
-hg status
+# and make sure that inotify.pidfile works
+hg --config "inotify.pidfile=../hg2.pid" status
+
+# make sure that pidfile worked. Output should be silent.
+kill `cat ../hg2.pid`
 
 cd ../repo1
 echo % inserve
diff --git a/tests/test-inotify-dirty-dirstate b/tests/test-inotify-dirty-dirstate
--- a/tests/test-inotify-dirty-dirstate
+++ b/tests/test-inotify-dirty-dirstate
@@ -20,10 +20,10 @@ hg ci -m foo
 
 cd ..
 
-hg --config "extensions.inotify=!" clone test test2
+hg --config "inotify.pidfile=../hg2.pid" clone test test2
+cat ../hg2.pid >> "$DAEMON_PIDS"
+
 cd test2
-hg inserve -d --pid-file=../hg2.pid
-cat ../hg2.pid >> "$DAEMON_PIDS"
 echo bar > bar
 hg add
 hg ci -m bar