diff --git a/mercurial/subrepo.py b/mercurial/subrepo.py
--- a/mercurial/subrepo.py
+++ b/mercurial/subrepo.py
@@ -522,7 +522,7 @@ class hgsubrepo(abstractsubrepo):
         self._state = state
         r = ctx._repo
         root = r.wjoin(path)
-        create = not os.path.exists(os.path.join(root, '.hg'))
+        create = not r.wvfs.exists('%s/.hg' % path)
         self._repo = hg.repository(r.baseui, root, create=create)
         for s, k in [('ui', 'commitsubrepos')]:
             v = r.ui.config(s, k)