diff --git a/mercurial/dirstate.py b/mercurial/dirstate.py
--- a/mercurial/dirstate.py
+++ b/mercurial/dirstate.py
@@ -14,6 +14,12 @@ import cStringIO
 
 _format = ">cllll"
 propertycache = util.propertycache
+filecache = scmutil.filecache
+
+class repocache(filecache):
+    """filecache for files in .hg/"""
+    def join(self, obj, fname):
+        return obj._opener.join(fname)
 
 def _finddirs(path):
     pos = path.rfind('/')
@@ -78,7 +84,7 @@ class dirstate(object):
         f['.'] = '.' # prevents useless util.fspath() invocation
         return f
 
-    @propertycache
+    @repocache('branch')
     def _branch(self):
         try:
             return self._opener.read("branch").strip() or "default"
diff --git a/tests/test-commandserver.py b/tests/test-commandserver.py
--- a/tests/test-commandserver.py
+++ b/tests/test-commandserver.py
@@ -212,6 +212,13 @@ def rollback(server):
     runcommand(server, ['rollback'])
     runcommand(server, ['phase', '-r', '.'])
 
+def branch(server):
+    readchannel(server)
+    runcommand(server, ['branch'])
+    os.system('hg branch foo')
+    runcommand(server, ['branch'])
+    os.system('hg branch default')
+
 if __name__ == '__main__':
     os.system('hg init')
 
@@ -232,3 +239,4 @@ if __name__ == '__main__':
     check(tagscache)
     check(setphase)
     check(rollback)
+    check(branch)
diff --git a/tests/test-commandserver.py.out b/tests/test-commandserver.py.out
--- a/tests/test-commandserver.py.out
+++ b/tests/test-commandserver.py.out
@@ -145,3 +145,14 @@ repository tip rolled back to revision 3
 working directory now based on revision 3
  runcommand phase -r .
 3: public
+
+testing branch:
+
+ runcommand branch
+default
+marked working directory as branch foo
+(branches are permanent and global, did you want a bookmark?)
+ runcommand branch
+foo
+marked working directory as branch default
+(branches are permanent and global, did you want a bookmark?)