diff --git a/mercurial/context.py b/mercurial/context.py
--- a/mercurial/context.py
+++ b/mercurial/context.py
@@ -1910,14 +1910,19 @@ class overlayworkingctx(committablectx):
         # in p1 (test that p1 doesn't any paths matching `path/*`).
         match = matchmod.match('/', '', [path + '/'], default=b'relpath')
         matches = self.p1().manifest().matches(match)
-        if len(matches) > 0:
-            if len(matches) == 1 and matches.keys()[0] == path:
+        mfiles = matches.keys()
+        if len(mfiles) > 0:
+            if len(mfiles) == 1 and mfiles[0] == path:
+                return
+            # omit the files which are deleted in current IMM wctx
+            mfiles = [m for m in mfiles if self._cache[m]['exists']]
+            if not mfiles:
                 return
             raise error.Abort("error: file '%s' cannot be written because "
                               " '%s/' is a folder in %s (containing %d "
                               "entries: %s)"
-                              % (path, path, self.p1(), len(matches),
-                                 ', '.join(matches.keys())))
+                              % (path, path, self.p1(), len(mfiles),
+                                 ', '.join(mfiles)))
 
     def write(self, path, data, flags='', **kwargs):
         if data is None:
diff --git a/tests/test-rebase-inmemory.t b/tests/test-rebase-inmemory.t
--- a/tests/test-rebase-inmemory.t
+++ b/tests/test-rebase-inmemory.t
@@ -218,8 +218,25 @@ Test reporting of path conflicts
   
   $ hg rebase -r . -d 5
   rebasing 7:855e9797387e "added a back!" (tip)
-  abort: error: file 'a' cannot be written because  'a/' is a folder in 9b94b9373deb (containing 1 entries: a/a)
-  [255]
+  saved backup bundle to $TESTTMP/repo1/repo2/.hg/strip-backup/855e9797387e-81ee4c5d-rebase.hg
+
+  $ hg tglog
+  @  7: bb3f02be2688 'added a back!'
+  |
+  | o  6: d14530e5e3e6 'added bar'
+  | |
+  o |  5: 9b94b9373deb 'added foo'
+  |/
+  o  4: c6ad37a4f250 'a/a'
+  |
+  | o  3: 844a7de3e617 'c'
+  | |
+  o |  2: 09c044d2cb43 'd'
+  | |
+  o |  1: fc055c3b4d33 'b'
+  |/
+  o  0: b173517d0057 'a'
+  
 
   $ cd ..