diff --git a/mercurial/commands.py b/mercurial/commands.py
--- a/mercurial/commands.py
+++ b/mercurial/commands.py
@@ -177,10 +177,8 @@ def backout(ui, repo, node=None, rev=Non
     changeset is a child of the backed out changeset.
 
     If you back out a changeset other than the tip, a new head is
-    created.  This head is the parent of the working directory.  If
-    you back out an old changeset, your working directory will appear
-    old after the backout.  You should merge the backout changeset
-    with another head.
+    created.  This head will be the new tip and you should merge this
+    backout changeset with another head (current one by default).
 
     The --merge option remembers the parent of the working directory
     before starting the backout, then merges the new head with that
@@ -243,9 +241,10 @@ def backout(ui, repo, node=None, rev=Non
     ui.status(_('changeset %s backs out changeset %s\n') %
               (nice(repo.changelog.tip()), nice(node)))
     if op1 != node:
+        hg.clean(repo, op1, show_stats=False)
         if opts['merge']:
-            ui.status(_('merging with changeset %s\n') % nice(op1))
-            hg.merge(repo, hex(op1))
+            ui.status(_('merging with changeset %s\n') % nice(repo.changelog.tip()))
+            hg.merge(repo, hex(repo.changelog.tip()))
         else:
             ui.status(_('the backout changeset is a new head - '
                         'do not forget to merge\n'))
diff --git a/tests/test-backout b/tests/test-backout
--- a/tests/test-backout
+++ b/tests/test-backout
@@ -59,9 +59,10 @@ hg init merge
 cd merge
 
 echo line 1 > a
+echo line 2 >> a
 hg commit -d '0 0' -A -m a
-
-echo line 2 >> a
+# remove line 1
+echo line 2 > a
 hg commit -d '1 0' -m b
 
 echo line 3 >> a
@@ -69,6 +70,7 @@ hg commit -d '2 0' -m c
 
 hg backout --merge -d '3 0' 1
 hg commit -d '4 0' -m d
+# check line 1 is back
 cat a
 
 echo '# backout should not back out subsequent changesets'
@@ -82,6 +84,8 @@ echo 1 > b
 hg commit -d '2 0' -A -m c
 hg backout -d '3 0' 1
 hg locate b
+hg update -C tip
+hg locate b
 
 cd ..
 hg init m
diff --git a/tests/test-backout.out b/tests/test-backout.out
--- a/tests/test-backout.out
+++ b/tests/test-backout.out
@@ -25,12 +25,14 @@ abort: cannot back out change on a diffe
 # backout with merge
 adding a
 reverting a
-changeset 3:3eb045e364a4 backs out changeset 1:314f55b1bf23
-merging with changeset 2:b66ea5b77abb
+changeset 3:26b8ccb9ad91 backs out changeset 1:5a50a024c182
+merging with changeset 3:26b8ccb9ad91
 merging a
 0 files updated, 1 files merged, 0 files removed, 0 files unresolved
 (branch merge, don't forget to commit)
 line 1
+line 2
+line 3
 # backout should not back out subsequent changesets
 adding a
 adding b
@@ -38,6 +40,8 @@ reverting a
 changeset 3:3202beb76721 backs out changeset 1:22bca4c721e5
 the backout changeset is a new head - do not forget to merge
 (use "backout --merge" if you want to auto-merge)
+b
+1 files updated, 0 files merged, 1 files removed, 0 files unresolved
 adding a
 adding b
 adding c
diff --git a/tests/test-parse-date.out b/tests/test-parse-date.out
--- a/tests/test-parse-date.out
+++ b/tests/test-parse-date.out
@@ -1,6 +1,6 @@
 reverting a
 changeset 3:107ce1ee2b43 backs out changeset 1:25a1420a55f8
-merging with changeset 2:e6c3abc120e7
+merging with changeset 3:107ce1ee2b43
 1 files updated, 0 files merged, 0 files removed, 0 files unresolved
 (branch merge, don't forget to commit)
 abort: invalid date: 'should fail'