diff --git a/hgext/largefiles/lfcommands.py b/hgext/largefiles/lfcommands.py
--- a/hgext/largefiles/lfcommands.py
+++ b/hgext/largefiles/lfcommands.py
@@ -466,7 +466,7 @@ def _updatelfile(repo, lfdirstate, lfile
         # largefile is converted back to a normal file: the standin
         # disappears, but a new (normal) file appears as the lfile.
         if os.path.exists(abslfile) and lfile not in repo[None]:
-            os.unlink(abslfile)
+            util.unlinkpath(abslfile)
             ret = -1
     state = repo.dirstate[lfutil.standin(lfile)]
     if state == 'n':
diff --git a/tests/test-largefiles.t b/tests/test-largefiles.t
--- a/tests/test-largefiles.t
+++ b/tests/test-largefiles.t
@@ -546,6 +546,14 @@ Now "update check" is happy.
   getting changed largefiles
   1 largefiles updated, 0 removed
 
+Test removing empty largefiles directories on update
+  $ test -d sub2 && echo "sub2 exists"
+  sub2 exists
+  $ hg update -q null
+  $ test -d sub2 && echo "error: sub2 should not exist anymore"
+  [1]
+  $ hg update -q
+
 "revert" works on largefiles (and normal files too).
   $ echo hack3 >> normal3
   $ echo hack4 >> sub/normal4