diff --git a/mercurial/dirstate.py b/mercurial/dirstate.py
--- a/mercurial/dirstate.py
+++ b/mercurial/dirstate.py
@@ -564,30 +564,46 @@ class dirstate(object):
         if merged and (clean_p1 or clean_p2):
             msg = b'`merged` argument incompatible with `clean_p1`/`clean_p2`'
             raise error.ProgrammingError(msg)
-        if not (p1_tracked or p2_tracked or wc_tracked):
-            self._drop(filename)
-        elif merged:
-            assert wc_tracked
-            assert self.in_merge  # we are never in the "normallookup" case
-            self.otherparent(filename)
-        elif not (p1_tracked or p2_tracked) and wc_tracked:
-            self._addpath(filename, added=True, possibly_dirty=possibly_dirty)
-            self._map.copymap.pop(filename, None)
-        elif (p1_tracked or p2_tracked) and not wc_tracked:
-            self._remove(filename)
-        elif clean_p2 and wc_tracked:
-            assert p2_tracked
-            self.otherparent(filename)
-        elif not p1_tracked and p2_tracked and wc_tracked:
-            self._addpath(filename, from_p2=True, possibly_dirty=possibly_dirty)
-            self._map.copymap.pop(filename, None)
-        elif possibly_dirty:
-            self._addpath(filename, possibly_dirty=possibly_dirty)
-        elif wc_tracked:
-            self.normal(filename, parentfiledata=parentfiledata)
-        # XXX We need something for file that are dirty after an update
-        else:
-            assert False, 'unreachable'
+
+        # note: I do not think we need to double check name clash here since we
+        # are in a update/merge case that should already have taken care of
+        # this. The test agrees
+
+        self._dirty = True
+        self._updatedfiles.add(filename)
+
+        need_parent_file_data = (
+            not (possibly_dirty or clean_p2 or merged)
+            and wc_tracked
+            and p1_tracked
+        )
+
+        # this mean we are doing call for file we do not really care about the
+        # data (eg: added or removed), however this should be a minor overhead
+        # compared to the overall update process calling this.
+        if need_parent_file_data:
+            if parentfiledata is None:
+                parentfiledata = self._get_filedata(filename)
+            mtime = parentfiledata[2]
+
+            if mtime > self._lastnormaltime:
+                # Remember the most recent modification timeslot for
+                # status(), to make sure we won't miss future
+                # size-preserving file content modifications that happen
+                # within the same timeslot.
+                self._lastnormaltime = mtime
+
+        self._map.reset_state(
+            filename,
+            wc_tracked,
+            p1_tracked,
+            p2_tracked=p2_tracked,
+            merged=merged,
+            clean_p1=clean_p1,
+            clean_p2=clean_p2,
+            possibly_dirty=possibly_dirty,
+            parentfiledata=parentfiledata,
+        )
 
     def _addpath(
         self,
diff --git a/mercurial/dirstatemap.py b/mercurial/dirstatemap.py
--- a/mercurial/dirstatemap.py
+++ b/mercurial/dirstatemap.py
@@ -219,6 +219,83 @@ class dirstatemap(object):
         if e.dm_otherparent:
             self.otherparentset.add(f)
 
+    def reset_state(
+        self,
+        filename,
+        wc_tracked,
+        p1_tracked,
+        p2_tracked=False,
+        merged=False,
+        clean_p1=False,
+        clean_p2=False,
+        possibly_dirty=False,
+        parentfiledata=None,
+    ):
+        """Set a entry to a given state, diregarding all previous state
+
+        This is to be used by the part of the dirstate API dedicated to
+        adjusting the dirstate after a update/merge.
+
+        note: calling this might result to no entry existing at all if the
+        dirstate map does not see any point at having one for this file
+        anymore.
+        """
+        if merged and (clean_p1 or clean_p2):
+            msg = b'`merged` argument incompatible with `clean_p1`/`clean_p2`'
+            raise error.ProgrammingError(msg)
+        # copy information are now outdated
+        # (maybe new information should be in directly passed to this function)
+        self.copymap.pop(filename, None)
+
+        if not (p1_tracked or p2_tracked or wc_tracked):
+            self.dropfile(filename)
+        elif merged:
+            # XXX might be merged and removed ?
+            entry = self.get(filename)
+            if entry is not None and entry.tracked:
+                # XXX mostly replicate dirstate.other parent.  We should get
+                # the higher layer to pass us more reliable data where `merged`
+                # actually mean merged. Dropping the else clause will show
+                # failure in `test-graft.t`
+                self.addfile(filename, merged=True)
+            else:
+                self.addfile(filename, from_p2=True)
+        elif not (p1_tracked or p2_tracked) and wc_tracked:
+            self.addfile(filename, added=True, possibly_dirty=possibly_dirty)
+        elif (p1_tracked or p2_tracked) and not wc_tracked:
+            # XXX might be merged and removed ?
+            old_entry = self._map.get(filename)
+            self._dirs_decr(filename, old_entry=old_entry, remove_variant=True)
+            self._map[filename] = DirstateItem(b'r', 0, 0, 0)
+            self.nonnormalset.add(filename)
+        elif clean_p2 and wc_tracked:
+            if p1_tracked or self.get(filename) is not None:
+                # XXX the `self.get` call is catching some case in
+                # `test-merge-remove.t` where the file is tracked in p1, the
+                # p1_tracked argument is False.
+                #
+                # In addition, this seems to be a case where the file is marked
+                # as merged without actually being the result of a merge
+                # action. So thing are not ideal here.
+                self.addfile(filename, merged=True)
+            else:
+                self.addfile(filename, from_p2=True)
+        elif not p1_tracked and p2_tracked and wc_tracked:
+            self.addfile(filename, from_p2=True, possibly_dirty=possibly_dirty)
+        elif possibly_dirty:
+            self.addfile(filename, possibly_dirty=possibly_dirty)
+        elif wc_tracked:
+            # this is a "normal" file
+            if parentfiledata is None:
+                msg = b'failed to pass parentfiledata for a normal file: %s'
+                msg %= filename
+                raise error.ProgrammingError(msg)
+            mode, size, mtime = parentfiledata
+            self.addfile(filename, mode=mode, size=size, mtime=mtime)
+            self.nonnormalset.discard(filename)
+        else:
+            assert False, 'unreachable'
+
     def removefile(self, f, in_merge=False):
         """
         Mark a file as removed in the dirstate.
@@ -499,6 +576,87 @@ if rustmod is not None:
                 possibly_dirty,
             )
 
+        def reset_state(
+            self,
+            filename,
+            wc_tracked,
+            p1_tracked,
+            p2_tracked=False,
+            merged=False,
+            clean_p1=False,
+            clean_p2=False,
+            possibly_dirty=False,
+            parentfiledata=None,
+        ):
+            """Set a entry to a given state, disregarding all previous state
+
+            This is to be used by the part of the dirstate API dedicated to
+            adjusting the dirstate after a update/merge.
+
+            note: calling this might result to no entry existing at all if the
+            dirstate map does not see any point at having one for this file
+            anymore.
+            """
+            if merged and (clean_p1 or clean_p2):
+                msg = (
+                    b'`merged` argument incompatible with `clean_p1`/`clean_p2`'
+                )
+                raise error.ProgrammingError(msg)
+            # copy information are now outdated
+            # (maybe new information should be in directly passed to this function)
+            self.copymap.pop(filename, None)
+
+            if not (p1_tracked or p2_tracked or wc_tracked):
+                self.dropfile(filename)
+            elif merged:
+                # XXX might be merged and removed ?
+                entry = self.get(filename)
+                if entry is not None and entry.tracked:
+                    # XXX mostly replicate dirstate.other parent.  We should get
+                    # the higher layer to pass us more reliable data where `merged`
+                    # actually mean merged. Dropping the else clause will show
+                    # failure in `test-graft.t`
+                    self.addfile(filename, merged=True)
+                else:
+                    self.addfile(filename, from_p2=True)
+            elif not (p1_tracked or p2_tracked) and wc_tracked:
+                self.addfile(
+                    filename, added=True, possibly_dirty=possibly_dirty
+                )
+            elif (p1_tracked or p2_tracked) and not wc_tracked:
+                # XXX might be merged and removed ?
+                self[filename] = DirstateItem(b'r', 0, 0, 0)
+                self.nonnormalset.add(filename)
+            elif clean_p2 and wc_tracked:
+                if p1_tracked or self.get(filename) is not None:
+                    # XXX the `self.get` call is catching some case in
+                    # `test-merge-remove.t` where the file is tracked in p1, the
+                    # p1_tracked argument is False.
+                    #
+                    # In addition, this seems to be a case where the file is marked
+                    # as merged without actually being the result of a merge
+                    # action. So thing are not ideal here.
+                    self.addfile(filename, merged=True)
+                else:
+                    self.addfile(filename, from_p2=True)
+            elif not p1_tracked and p2_tracked and wc_tracked:
+                self.addfile(
+                    filename, from_p2=True, possibly_dirty=possibly_dirty
+                )
+            elif possibly_dirty:
+                self.addfile(filename, possibly_dirty=possibly_dirty)
+            elif wc_tracked:
+                # this is a "normal" file
+                if parentfiledata is None:
+                    msg = b'failed to pass parentfiledata for a normal file: %s'
+                    msg %= filename
+                    raise error.ProgrammingError(msg)
+                mode, size, mtime = parentfiledata
+                self.addfile(filename, mode=mode, size=size, mtime=mtime)
+                self.nonnormalset.discard(filename)
+            else:
+                assert False, 'unreachable'
+
         def removefile(self, *args, **kwargs):
             return self._rustmap.removefile(*args, **kwargs)
 
@@ -748,3 +906,7 @@ if rustmod is not None:
             for name in self._rustmap.tracked_dirs():
                 f[normcase(name)] = name
             return f
+
+        def __setitem__(self, key, value):
+            assert isinstance(value, DirstateItem)
+            self._rustmap.set_v1(key, value)
diff --git a/rust/hg-core/src/dirstate/dirstate_map.rs b/rust/hg-core/src/dirstate/dirstate_map.rs
--- a/rust/hg-core/src/dirstate/dirstate_map.rs
+++ b/rust/hg-core/src/dirstate/dirstate_map.rs
@@ -64,6 +64,10 @@ impl DirstateMap {
         self.other_parent_set = None;
     }
 
+    pub fn set_v1_inner(&mut self, filename: &HgPath, entry: DirstateEntry) {
+        self.state_map.insert(filename.to_owned(), entry);
+    }
+
     /// Add a tracked file to the dirstate
     pub fn add_file(
         &mut self,
@@ -245,10 +249,19 @@ impl DirstateMap {
         }
     }
 
-    pub fn non_normal_entries_remove(&mut self, key: impl AsRef<HgPath>) {
+    pub fn non_normal_entries_remove(
+        &mut self,
+        key: impl AsRef<HgPath>,
+    ) -> bool {
         self.get_non_normal_other_parent_entries()
             .0
-            .remove(key.as_ref());
+            .remove(key.as_ref())
+    }
+
+    pub fn non_normal_entries_add(&mut self, key: impl AsRef<HgPath>) {
+        self.get_non_normal_other_parent_entries()
+            .0
+            .insert(key.as_ref().into());
     }
 
     pub fn non_normal_entries_union(
diff --git a/rust/hg-core/src/dirstate_tree/dirstate_map.rs b/rust/hg-core/src/dirstate_tree/dirstate_map.rs
--- a/rust/hg-core/src/dirstate_tree/dirstate_map.rs
+++ b/rust/hg-core/src/dirstate_tree/dirstate_map.rs
@@ -757,6 +757,16 @@ impl<'on_disk> super::dispatch::Dirstate
         self.nodes_with_copy_source_count = 0;
     }
 
+    fn set_v1(&mut self, filename: &HgPath, entry: DirstateEntry) {
+        let node =
+            self.get_or_insert(&filename).expect("no parse error in v1");
+        node.data = NodeData::Entry(entry);
+        node.children = ChildNodes::default();
+        node.copy_source = None;
+        node.descendants_with_entry_count = 0;
+        node.tracked_descendants_count = 0;
+    }
+
     fn add_file(
         &mut self,
         filename: &HgPath,
@@ -982,7 +992,16 @@ impl<'on_disk> super::dispatch::Dirstate
         })
     }
 
-    fn non_normal_entries_remove(&mut self, _key: &HgPath) {
+    fn non_normal_entries_remove(&mut self, key: &HgPath) -> bool {
+        // Do nothing, this `DirstateMap` does not have a separate "non normal
+        // entries" set that need to be kept up to date.
+        if let Ok(Some(v)) = self.get(key) {
+            return v.is_non_normal();
+        }
+        false
+    }
+
+    fn non_normal_entries_add(&mut self, _key: &HgPath) {
         // Do nothing, this `DirstateMap` does not have a separate "non normal
         // entries" set that need to be kept up to date
     }
diff --git a/rust/hg-core/src/dirstate_tree/dispatch.rs b/rust/hg-core/src/dirstate_tree/dispatch.rs
--- a/rust/hg-core/src/dirstate_tree/dispatch.rs
+++ b/rust/hg-core/src/dirstate_tree/dispatch.rs
@@ -37,6 +37,8 @@ pub trait DirstateMapMethods {
     /// Remove information about all files in this map
     fn clear(&mut self);
 
+    fn set_v1(&mut self, filename: &HgPath, entry: DirstateEntry);
+
     /// Add or change the information associated to a given file.
     ///
     /// `old_state` is the state in the entry that `get` would have returned
@@ -95,7 +97,13 @@ pub trait DirstateMapMethods {
     /// Mark the given path as "normal" file. This is only relevant in the flat
     /// dirstate map where there is a separate `HashSet` that needs to be kept
     /// up to date.
-    fn non_normal_entries_remove(&mut self, key: &HgPath);
+    /// Returns whether the key was present in the set.
+    fn non_normal_entries_remove(&mut self, key: &HgPath) -> bool;
+
+    /// Mark the given path as "non-normal" file.
+    /// This is only relevant in the flat dirstate map where there is a
+    /// separate `HashSet` that needs to be kept up to date.
+    fn non_normal_entries_add(&mut self, key: &HgPath);
 
     /// Return an iterator of paths whose respective entry are either
     /// "non-normal" (see `non_normal_entries_contains`) or "from other
@@ -305,6 +313,14 @@ impl DirstateMapMethods for DirstateMap 
         self.clear()
     }
 
+    /// Used to set a value directory.
+    ///
+    /// XXX Is temporary during a refactor of V1 dirstate and will disappear
+    /// shortly.
+    fn set_v1(&mut self, filename: &HgPath, entry: DirstateEntry) {
+        self.set_v1_inner(&filename, entry)
+    }
+
     fn add_file(
         &mut self,
         filename: &HgPath,
@@ -346,10 +362,14 @@ impl DirstateMapMethods for DirstateMap 
         Ok(non_normal.contains(key))
     }
 
-    fn non_normal_entries_remove(&mut self, key: &HgPath) {
+    fn non_normal_entries_remove(&mut self, key: &HgPath) -> bool {
         self.non_normal_entries_remove(key)
     }
 
+    fn non_normal_entries_add(&mut self, key: &HgPath) {
+        self.non_normal_entries_add(key)
+    }
+
     fn non_normal_or_other_parent_paths(
         &mut self,
     ) -> Box<dyn Iterator<Item = Result<&HgPath, DirstateV2ParseError>> + '_>
diff --git a/rust/hg-cpython/src/dirstate/dirstate_map.rs b/rust/hg-cpython/src/dirstate/dirstate_map.rs
--- a/rust/hg-cpython/src/dirstate/dirstate_map.rs
+++ b/rust/hg-cpython/src/dirstate/dirstate_map.rs
@@ -117,6 +117,21 @@ py_class!(pub class DirstateMap |py| {
         }
     }
 
+    def set_v1(&self, path: PyObject, item: PyObject) -> PyResult<PyObject> {
+        let f = path.extract::<PyBytes>(py)?;
+        let filename = HgPath::new(f.data(py));
+        let state = item.getattr(py, "state")?.extract::<PyBytes>(py)?;
+        let state = state.data(py)[0];
+        let entry = DirstateEntry {
+            state: state.try_into().expect("state is always valid"),
+            mtime: item.getattr(py, "mtime")?.extract(py)?,
+            size: item.getattr(py, "size")?.extract(py)?,
+            mode: item.getattr(py, "mode")?.extract(py)?,
+        };
+        self.inner(py).borrow_mut().set_v1(filename, entry);
+        Ok(py.None())
+    }
+
     def addfile(
         &self,
         f: PyObject,
@@ -261,6 +276,22 @@ py_class!(pub class DirstateMap |py| {
 
     def non_normal_entries_remove(&self, key: PyObject) -> PyResult<PyObject> {
         let key = key.extract::<PyBytes>(py)?;
+        let key = key.data(py);
+        let was_present = self
+            .inner(py)
+            .borrow_mut()
+            .non_normal_entries_remove(HgPath::new(key));
+        if !was_present {
+            let msg = String::from_utf8_lossy(key);
+            Err(PyErr::new::<exc::KeyError, _>(py, msg))
+        } else {
+            Ok(py.None())
+        }
+    }
+
+    def non_normal_entries_discard(&self, key: PyObject) -> PyResult<PyObject>
+    {
+        let key = key.extract::<PyBytes>(py)?;
         self
             .inner(py)
             .borrow_mut()
@@ -268,6 +299,15 @@ py_class!(pub class DirstateMap |py| {
         Ok(py.None())
     }
 
+    def non_normal_entries_add(&self, key: PyObject) -> PyResult<PyObject> {
+        let key = key.extract::<PyBytes>(py)?;
+        self
+            .inner(py)
+            .borrow_mut()
+            .non_normal_entries_add(HgPath::new(key.data(py)));
+        Ok(py.None())
+    }
+
     def non_normal_or_other_parent_paths(&self) -> PyResult<PyList> {
         let mut inner = self.inner(py).borrow_mut();
 
diff --git a/rust/hg-cpython/src/dirstate/dispatch.rs b/rust/hg-cpython/src/dirstate/dispatch.rs
--- a/rust/hg-cpython/src/dirstate/dispatch.rs
+++ b/rust/hg-cpython/src/dirstate/dispatch.rs
@@ -20,6 +20,10 @@ impl DirstateMapMethods for OwningDirsta
         self.get_mut().clear()
     }
 
+    fn set_v1(&mut self, filename: &HgPath, entry: DirstateEntry) {
+        self.get_mut().set_v1(filename, entry)
+    }
+
     fn add_file(
         &mut self,
         filename: &HgPath,
@@ -66,10 +70,14 @@ impl DirstateMapMethods for OwningDirsta
         self.get_mut().non_normal_entries_contains(key)
     }
 
-    fn non_normal_entries_remove(&mut self, key: &HgPath) {
+    fn non_normal_entries_remove(&mut self, key: &HgPath) -> bool {
         self.get_mut().non_normal_entries_remove(key)
     }
 
+    fn non_normal_entries_add(&mut self, key: &HgPath) {
+        self.get_mut().non_normal_entries_add(key)
+    }
+
     fn non_normal_or_other_parent_paths(
         &mut self,
     ) -> Box<dyn Iterator<Item = Result<&HgPath, DirstateV2ParseError>> + '_>
diff --git a/rust/hg-cpython/src/dirstate/non_normal_entries.rs b/rust/hg-cpython/src/dirstate/non_normal_entries.rs
--- a/rust/hg-cpython/src/dirstate/non_normal_entries.rs
+++ b/rust/hg-cpython/src/dirstate/non_normal_entries.rs
@@ -26,6 +26,12 @@ py_class!(pub class NonNormalEntries |py
     def remove(&self, key: PyObject) -> PyResult<PyObject> {
         self.dmap(py).non_normal_entries_remove(py, key)
     }
+    def add(&self, key: PyObject) -> PyResult<PyObject> {
+        self.dmap(py).non_normal_entries_add(py, key)
+    }
+    def discard(&self, key: PyObject) -> PyResult<PyObject> {
+        self.dmap(py).non_normal_entries_discard(py, key)
+    }
     def __richcmp__(&self, other: PyObject, op: CompareOp) -> PyResult<bool> {
         match op {
             CompareOp::Eq => self.is_equal_to(py, other),