diff --git a/mercurial/templater.py b/mercurial/templater.py
--- a/mercurial/templater.py
+++ b/mercurial/templater.py
@@ -618,14 +618,13 @@ def _flatten(thing):
                     yield j
 
 def parsestring(s, quoted=True):
-    '''parse a string using simple c-like syntax.
-    string must be in quotes if quoted is True.'''
+    '''unwrap quotes if quoted is True'''
     if quoted:
         if len(s) < 2 or s[0] != s[-1]:
             raise SyntaxError(_('unmatched quotes'))
-        return s[1:-1].decode('string_escape')
+        return s[1:-1]
 
-    return s.decode('string_escape')
+    return s
 
 class engine(object):
     '''template expansion engine.
diff --git a/tests/test-command-template.t b/tests/test-command-template.t
--- a/tests/test-command-template.t
+++ b/tests/test-command-template.t
@@ -2250,6 +2250,29 @@ Test string escaping:
   <>\n<]>
   <>\n<
 
+  $ hg log -R latesttag -r 0 \
+  > --config ui.logtemplate='>\n<>\\n<{if(rev, "[>\n<>\\n<]")}>\n<>\\n<\n'
+  >
+  <>\n<[>
+  <>\n<]>
+  <>\n<
+
+  $ hg log -R latesttag -r 0 -T esc \
+  > --config templates.esc='>\n<>\\n<{if(rev, "[>\n<>\\n<]")}>\n<>\\n<\n'
+  >
+  <>\n<[>
+  <>\n<]>
+  <>\n<
+
+  $ cat <<'EOF' > esctmpl
+  > changeset = '>\n<>\\n<{if(rev, "[>\n<>\\n<]")}>\n<>\\n<\n'
+  > EOF
+  $ hg log -R latesttag -r 0 --style ./esctmpl
+  >
+  <>\n<[>
+  <>\n<]>
+  <>\n<
+
 "string-escape"-ed "\x5c\x786e" becomes r"\x6e" (once) or r"n" (twice)
 
   $ hg log -R a -r 0 --template '{if("1", "\x5c\x786e", "NG")}\n'