diff --git a/mercurial/commands.py b/mercurial/commands.py
--- a/mercurial/commands.py
+++ b/mercurial/commands.py
@@ -924,6 +924,7 @@ def branch(ui, repo, label=None, **opts)
                                        ' exists'),
                                      # i18n: "it" refers to an existing branch
                                      hint=_("use 'hg update' to switch to it"))
+            scmutil.checknewlabel(None, label, 'branch')
             repo.dirstate.setbranch(label)
             ui.status(_('marked working directory as branch %s\n') % label)
             ui.status(_('(branches are permanent and global, '
diff --git a/mercurial/dirstate.py b/mercurial/dirstate.py
--- a/mercurial/dirstate.py
+++ b/mercurial/dirstate.py
@@ -261,7 +261,6 @@ class dirstate(object):
 
     def setbranch(self, branch):
         # no repo object here, just check for reserved names
-        scmutil.checknewlabel(None, branch, 'branch')
         self._branch = encoding.fromlocal(branch)
         f = self._opener('branch', 'w', atomictemp=True)
         try:
diff --git a/tests/bundles/test-invalid-branch-name.hg b/tests/bundles/test-invalid-branch-name.hg
new file mode 100644
index 0000000000000000000000000000000000000000..9023822853403dda519ea06dbe38fe81f9984b38
GIT binary patch
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diff --git a/tests/test-branches.t b/tests/test-branches.t
--- a/tests/test-branches.t
+++ b/tests/test-branches.t
@@ -68,6 +68,23 @@ invalid characters
   abort: '\n' cannot be used in a name
   [255]
 
+verify update will accept invalid legacy branch names
+
+  $ hg init test-invalid-branch-name
+  $ cd test-invalid-branch-name
+  $ hg pull -u "$TESTDIR"/bundles/test-invalid-branch-name.hg
+  pulling from *test-invalid-branch-name.hg (glob)
+  requesting all changes
+  adding changesets
+  adding manifests
+  adding file changes
+  added 3 changesets with 3 changes to 2 files
+  1 files updated, 0 files merged, 0 files removed, 0 files unresolved
+
+  $ hg update '"colon:test"'
+  1 files updated, 0 files merged, 0 files removed, 0 files unresolved
+  $ cd ..
+
   $ echo 'd' >d
   $ hg add d
   $ hg branch 'a branch name much longer than the default justification used by branches'