diff --git a/mercurial/hg.py b/mercurial/hg.py
--- a/mercurial/hg.py
+++ b/mercurial/hg.py
@@ -1035,6 +1035,15 @@ class localrepository:
             if f in m2:
                 s = 0
 
+                # is the wfile new since m1, and match m2?
+                if n not in m1:
+                    t1 = self.wfile(f).read()
+                    t2 = self.file(f).revision(m2[f])
+                    if cmp(t1, t2) == 0:
+                        mark[f] = 1
+                        n = m2[f]
+                    del t1, t2
+
                 # are files different?
                 if n != m2[f]:
                     a = ma.get(f, nullid)
diff --git a/tests/test-merge1 b/tests/test-merge1
new file mode 100755
--- /dev/null
+++ b/tests/test-merge1
@@ -0,0 +1,85 @@
+#!/bin/sh -x
+
+cat <<'EOF' > merge
+#!/bin/sh
+echo merging for `basename $1`
+EOF
+chmod +x merge
+
+mkdir t
+cd t
+hg init
+echo This is file a1 > a
+hg add a
+hg commit -t "commit #0" -d "0 0" -u user
+echo This is file b1 > b
+hg add b
+hg commit -t "commit #1" -d "0 0" -u user
+
+hg update 0
+echo This is file c1 > c
+hg add c
+hg commit -t "commit #2" -d "0 0" -u user
+echo This is file b1 > b
+env HGMERGE=../merge hg update -m 1
+# no merges expected
+cd ..; /bin/rm -rf t
+
+mkdir t
+cd t
+hg init
+echo This is file a1 > a
+hg add a
+hg commit -t "commit #0" -d "0 0" -u user
+echo This is file b1 > b
+hg add b
+hg commit -t "commit #1" -d "0 0" -u user
+
+hg update 0
+echo This is file c1 > c
+hg add c
+hg commit -t "commit #2" -d "0 0" -u user
+echo This is file b2 > b
+env HGMERGE=../merge hg update -m 1
+# merge of b expected
+cd ..; /bin/rm -rf t
+
+mkdir t
+cd t
+hg init
+echo This is file a1 > a
+hg add a
+hg commit -t "commit #0" -d "0 0" -u user
+echo This is file b1 > b
+hg add b
+hg commit -t "commit #1" -d "0 0" -u user
+echo This is file b22 > b
+hg commit -t "commit #2" -d "0 0" -u user
+hg update 1
+echo This is file c1 > c
+hg add c
+hg commit -t "commit #3" -d "0 0" -u user
+echo This is file b22 > b
+env HGMERGE=../merge hg update -m 2
+# no merges expected
+cd ..; /bin/rm -rf t
+
+mkdir t
+cd t
+hg init
+echo This is file a1 > a
+hg add a
+hg commit -t "commit #0" -d "0 0" -u user
+echo This is file b1 > b
+hg add b
+hg commit -t "commit #1" -d "0 0" -u user
+echo This is file b22 > b
+hg commit -t "commit #2" -d "0 0" -u user
+hg update 1
+echo This is file c1 > c
+hg add c
+hg commit -t "commit #3" -d "0 0" -u user
+echo This is file b33 > b
+env HGMERGE=../merge hg update -m 2
+# merge of b expected
+cd ..; /bin/rm -rf t
diff --git a/tests/test-merge1.out b/tests/test-merge1.out
new file mode 100644
--- /dev/null
+++ b/tests/test-merge1.out
@@ -0,0 +1,78 @@
++ cat
++ chmod +x merge
++ mkdir t
++ cd t
++ hg init
++ echo This is file a1
++ hg add a
++ hg commit -t 'commit #0' -d '0 0' -u user
++ echo This is file b1
++ hg add b
++ hg commit -t 'commit #1' -d '0 0' -u user
++ hg update 0
++ echo This is file c1
++ hg add c
++ hg commit -t 'commit #2' -d '0 0' -u user
++ echo This is file b1
++ env HGMERGE=../merge hg update -m 1
++ cd ..
++ /bin/rm -rf t
++ mkdir t
++ cd t
++ hg init
++ echo This is file a1
++ hg add a
++ hg commit -t 'commit #0' -d '0 0' -u user
++ echo This is file b1
++ hg add b
++ hg commit -t 'commit #1' -d '0 0' -u user
++ hg update 0
++ echo This is file c1
++ hg add c
++ hg commit -t 'commit #2' -d '0 0' -u user
++ echo This is file b2
++ env HGMERGE=../merge hg update -m 1
+merging for b
+merging b
++ cd ..
++ /bin/rm -rf t
++ mkdir t
++ cd t
++ hg init
++ echo This is file a1
++ hg add a
++ hg commit -t 'commit #0' -d '0 0' -u user
++ echo This is file b1
++ hg add b
++ hg commit -t 'commit #1' -d '0 0' -u user
++ echo This is file b22
++ hg commit -t 'commit #2' -d '0 0' -u user
++ hg update 1
++ echo This is file c1
++ hg add c
++ hg commit -t 'commit #3' -d '0 0' -u user
++ echo This is file b22
++ env HGMERGE=../merge hg update -m 2
++ cd ..
++ /bin/rm -rf t
++ mkdir t
++ cd t
++ hg init
++ echo This is file a1
++ hg add a
++ hg commit -t 'commit #0' -d '0 0' -u user
++ echo This is file b1
++ hg add b
++ hg commit -t 'commit #1' -d '0 0' -u user
++ echo This is file b22
++ hg commit -t 'commit #2' -d '0 0' -u user
++ hg update 1
++ echo This is file c1
++ hg add c
++ hg commit -t 'commit #3' -d '0 0' -u user
++ echo This is file b33
++ env HGMERGE=../merge hg update -m 2
+merging for b
+merging b
++ cd ..
++ /bin/rm -rf t