diff --git a/mercurial/util_win32.py b/mercurial/util_win32.py
--- a/mercurial/util_win32.py
+++ b/mercurial/util_win32.py
@@ -201,21 +201,17 @@ def lookup_reg(key, valname=None, scope=
     except ImportError:
         return None
 
-    def query_val(scope, key, valname):
-        try:
-            keyhandle = OpenKey(scope, key)
-            return QueryValueEx(keyhandle, valname)[0]
-        except EnvironmentError:
-            return None
-
     if scope is None:
         scope = (HKEY_CURRENT_USER, HKEY_LOCAL_MACHINE)
     elif not isinstance(scope, (list, tuple)):
         scope = (scope,)
     for s in scope:
-        val = query_val(s, key, valname)
-        if val is not None:
-            return val
+        try:
+            val = QueryValueEx(OpenKey(scope, key), valname)[0]
+            # never let a Unicode string escape into the wild
+            return util.tolocal(val.encode('UTF-8'))
+        except EnvironmentError:
+            pass
 
 def system_rcpath_win32():
     '''return default os-specific hgrc search path'''