diff --git a/mercurial/subrepo.py b/mercurial/subrepo.py
--- a/mercurial/subrepo.py
+++ b/mercurial/subrepo.py
@@ -5,7 +5,7 @@
 # This software may be used and distributed according to the terms of the
 # GNU General Public License version 2 or any later version.
 
-import errno, os, re, xml.dom.minidom, shutil
+import errno, os, re, xml.dom.minidom, shutil, urlparse, posixpath
 from i18n import _
 import config, util, node, error
 hg = None
@@ -135,8 +135,12 @@ def _abssource(repo, push=False):
         if '://' in parent:
             if parent[-1] == '/':
                 parent = parent[:-1]
-            return parent + '/' + source
-        return os.path.join(parent, repo._subsource)
+            r = urlparse.urlparse(parent + '/' + source)
+            r = urlparse.urlunparse((r[0], r[1],
+                                     posixpath.normpath(r.path),
+                                     r[3], r[4], r[5]))
+            return r
+        return posixpath.normpath(os.path.join(parent, repo._subsource))
     if push and repo.ui.config('paths', 'default-push'):
         return repo.ui.config('paths', 'default-push', repo.root)
     return repo.ui.config('paths', 'default', repo.root)
diff --git a/tests/test-subrepo-relative-path b/tests/test-subrepo-relative-path
new file mode 100755
--- /dev/null
+++ b/tests/test-subrepo-relative-path
@@ -0,0 +1,40 @@
+#!/bin/sh
+
+echo % Preparing the subrepository 'sub'
+hg init sub
+echo sub > sub/sub
+hg add -R sub
+hg commit -R sub -m "sub import"
+
+echo % Preparing the 'main' repo which depends on the subrepo 'sub'
+hg init main
+echo main > main/main
+echo "sub = ../sub" > main/.hgsub
+hg clone sub main/sub | sed 's/ .*sub/ ...sub/g'
+hg add -R main
+hg commit -R main -m "main import"
+
+echo % Cleaning both repositories, just as a clone -U
+hg up -C -R sub null
+hg up -C -R main null
+rm -rf main/sub
+
+echo % Serving them both using hgweb
+printf '[paths]\n/main = main\nsub = sub\n' > webdir.conf
+hg serve --webdir-conf webdir.conf -a localhost -p $HGPORT \
+   -A /dev/null -E /dev/null --pid-file hg.pid -d
+cat hg.pid >> $DAEMON_PIDS
+
+echo % Clone main from hgweb
+hg clone "http://localhost:$HGPORT/main" cloned | sed 's/ .*sub/ ...sub/g' 
+
+echo % Checking cloned repo ids
+hg id -R cloned
+hg id -R cloned/sub
+
+echo % subrepo debug for 'main' clone
+hg debugsub -R cloned
+
+"$TESTDIR/killdaemons.py"
+
+exit 0
diff --git a/tests/test-subrepo-relative-path.out b/tests/test-subrepo-relative-path.out
new file mode 100644
--- /dev/null
+++ b/tests/test-subrepo-relative-path.out
@@ -0,0 +1,33 @@
+% Preparing the subrepository sub
+adding sub/sub
+% Preparing the main repo which depends on the subrepo sub
+updating to branch default
+1 files updated, 0 files merged, 0 files removed, 0 files unresolved
+adding main/.hgsub
+adding main/main
+committing subrepository sub
+% Cleaning both repositories, just as a clone -U
+0 files updated, 0 files merged, 1 files removed, 0 files unresolved
+0 files updated, 0 files merged, 3 files removed, 0 files unresolved
+% Serving them both using hgweb
+% Clone main from hgweb
+requesting all changes
+adding changesets
+adding manifests
+adding file changes
+added 1 changesets with 3 changes to 3 files
+updating to branch default
+pulling ...sub
+requesting all changes
+adding changesets
+adding manifests
+adding file changes
+added 1 changesets with 1 changes to 1 files
+3 files updated, 0 files merged, 0 files removed, 0 files unresolved
+% Checking cloned repo ids
+fdfeeb3e979e tip
+863c1745b441 tip
+% subrepo debug for main clone
+path sub
+ source   ../sub
+ revision 863c1745b441bd97a8c4a096e87793073f4fb215
diff --git a/tests/test-subrepo.out b/tests/test-subrepo.out
--- a/tests/test-subrepo.out
+++ b/tests/test-subrepo.out
@@ -275,7 +275,7 @@ 2 files updated, 0 files merged, 0 files
 [paths]
 default = $HGTMP/test-subrepo/sub/mercurial/nested_absolute
 [paths]
-default = $HGTMP/test-subrepo/sub/mercurial/main/../nested_relative
+default = $HGTMP/test-subrepo/sub/mercurial/nested_relative
 % issue 1977
 adding a
 adding .hgsub