diff --git a/hgext/keyword.py b/hgext/keyword.py
--- a/hgext/keyword.py
+++ b/hgext/keyword.py
@@ -103,7 +103,7 @@ nokwcommands = ('add addremove annotate 
 # hg commands that trigger expansion only when writing to working dir,
 # not when reading filelog, and unexpand when reading from working dir
 restricted = ('merge kwexpand kwshrink record qrecord resolve transplant'
-              ' unshelve rebase graft backout histedit')
+              ' unshelve rebase graft backout histedit fetch')
 
 # names of extensions using dorecord
 recordextensions = 'record'
diff --git a/tests/test-keyword.t b/tests/test-keyword.t
--- a/tests/test-keyword.t
+++ b/tests/test-keyword.t
@@ -1284,4 +1284,27 @@ Test restricted mode with histedit
   > pick 01a68de1003a 13 9foobranch
   > EOF
 
+Test restricted mode with fetch (with merge)
+
+  $ cat <<EOF >> $HGRCPATH
+  > [extensions]
+  > fetch =
+  > EOF
+
+  $ hg clone -q -r 9 . ../fetch-merge
+  $ cd ../fetch-merge
+  $ hg -R ../Test export 10 | hg import -q -
+  $ hg fetch -q -r 11
+  $ hg diff -r 9 a
+  diff -r 800511b3a22d a
+  --- a/a	Thu Jan 01 00:00:00 1970 +0000
+  +++ b/a	* (glob)
+  @@ -1,4 +1,6 @@
+  +foobranch
+   expand $Id$
+   do not process $Id:
+   xxx $
+   $Xinfo$
+  +xxxx
+
   $ cd ..