diff --git a/mercurial/archival.py b/mercurial/archival.py
--- a/mercurial/archival.py
+++ b/mercurial/archival.py
@@ -205,7 +205,7 @@ archivers = {
     }
 
 def archive(repo, dest, node, kind, decode=True, matchfn=None,
-            prefix=None, mtime=None):
+            prefix=None, mtime=None, subrepos=False):
     '''create archive of repo as it was at node.
 
     dest can be name of directory, name of archive file, or file
@@ -263,4 +263,10 @@ def archive(repo, dest, node, kind, deco
     for f in ctx:
         ff = ctx.flags(f)
         write(f, 'x' in ff and 0755 or 0644, 'l' in ff, ctx[f].data)
+
+    if subrepos:
+        for subpath in ctx.substate:
+            sub = ctx.sub(subpath)
+            sub.archive(archiver, prefix)
+
     archiver.done()
diff --git a/mercurial/commands.py b/mercurial/commands.py
--- a/mercurial/commands.py
+++ b/mercurial/commands.py
@@ -199,7 +199,7 @@ def archive(ui, repo, dest, **opts):
     prefix = cmdutil.make_filename(repo, prefix, node)
     matchfn = cmdutil.match(repo, [], opts)
     archival.archive(repo, dest, node, kind, not opts.get('no_decode'),
-                     matchfn, prefix)
+                     matchfn, prefix, subrepos=opts.get('subrepos'))
 
 def backout(ui, repo, node=None, rev=None, **opts):
     '''reverse effect of earlier changeset
@@ -3963,7 +3963,7 @@ table = {
            _('revision to distribute'), _('REV')),
           ('t', 'type', '',
            _('type of distribution to create'), _('TYPE')),
-         ] + walkopts,
+         ] + subrepoopts + walkopts,
          _('[OPTION]... DEST')),
     "backout":
         (backout,
diff --git a/mercurial/subrepo.py b/mercurial/subrepo.py
--- a/mercurial/subrepo.py
+++ b/mercurial/subrepo.py
@@ -282,6 +282,15 @@ class abstractsubrepo(object):
         """return file flags"""
         return ''
 
+    def archive(self, archiver, prefix):
+        for name in self.files():
+            flags = self.fileflags(name)
+            mode = 'x' in flags and 0755 or 0644
+            symlink = 'l' in flags
+            archiver.addfile(os.path.join(prefix, self._path, name),
+                             mode, symlink, self.filedata(name))
+
+
 class hgsubrepo(abstractsubrepo):
     def __init__(self, ctx, path, state):
         self._path = path
@@ -341,6 +350,15 @@ class hgsubrepo(abstractsubrepo):
             self._repo.ui.warn(_("warning: %s in %s\n")
                                % (inst, relpath(self)))
 
+    def archive(self, archiver, prefix):
+        abstractsubrepo.archive(self, archiver, prefix)
+
+        rev = self._state[1]
+        ctx = self._repo[rev]
+        for subpath in ctx.substate:
+            s = subrepo(ctx, subpath)
+            s.archive(archiver, os.path.join(prefix, self._path))
+
     def dirty(self):
         r = self._state[1]
         if r == '':
diff --git a/tests/test-subrepo-recursion.t b/tests/test-subrepo-recursion.t
--- a/tests/test-subrepo-recursion.t
+++ b/tests/test-subrepo-recursion.t
@@ -227,6 +227,40 @@ Status between revisions:
    z1
   +z2
 
+Test archiving to a directory tree:
+
+  $ hg archive --subrepos ../archive
+  $ find ../archive
+  ../archive
+  ../archive/foo
+  ../archive/foo/bar
+  ../archive/foo/bar/z.txt
+  ../archive/foo/.hgsubstate
+  ../archive/foo/.hgsub
+  ../archive/foo/y.txt
+  ../archive/x.txt
+  ../archive/.hgsubstate
+  ../archive/.hgsub
+  ../archive/.hg_archival.txt
+
+Test archiving to zip file:
+
+  $ hg archive --subrepos ../archive.zip
+  $ unzip -l ../archive.zip
+  Archive:  ../archive.zip
+    Length      Date    Time    Name
+  ---------  ---------- -----   ----
+        147  1980-01-01 00:00   archive/.hg_archival.txt
+         10  1980-01-01 00:00   archive/.hgsub
+         45  1980-01-01 00:00   archive/.hgsubstate
+          3  1980-01-01 00:00   archive/x.txt
+          9  1980-01-01 00:00   archive/foo/y.txt
+         10  1980-01-01 00:00   archive/foo/.hgsub
+         45  1980-01-01 00:00   archive/foo/.hgsubstate
+          9  1980-01-01 00:00   archive/foo/bar/z.txt
+  ---------                     -------
+        278                     8 files
+
 Clone and test outgoing:
 
   $ cd ..