diff --git a/tests/run-tests.py b/tests/run-tests.py
--- a/tests/run-tests.py
+++ b/tests/run-tests.py
@@ -285,7 +285,7 @@ def parseargs(args, parser):
         options.pure = True
 
     if options.with_hg:
-        options.with_hg = os.path.expanduser(options.with_hg)
+        options.with_hg = os.path.realpath(os.path.expanduser(options.with_hg))
         if not (os.path.isfile(options.with_hg) and
                 os.access(options.with_hg, os.X_OK)):
             parser.error('--with-hg must specify an executable hg script')
diff --git a/tests/test-run-tests.t b/tests/test-run-tests.t
--- a/tests/test-run-tests.t
+++ b/tests/test-run-tests.t
@@ -21,6 +21,27 @@ Define a helper to avoid the install ste
   >     run-tests.py --with-hg=`which hg` "$@"
   > }
 
+error paths
+
+#if symlink
+  $ ln -s `which true` hg
+  $ run-tests.py --with-hg=./hg
+  warning: --with-hg should specify an hg script
+  
+  # Ran 0 tests, 0 skipped, 0 warned, 0 failed.
+  $ rm hg
+#endif
+
+#if execbit
+  $ touch hg
+  $ run-tests.py --with-hg=./hg
+  Usage: run-tests.py [options] [tests]
+  
+  run-tests.py: error: --with-hg must specify an executable hg script
+  [2]
+  $ rm hg
+#endif
+
 a succesful test
 =======================