diff --git a/tests/test-chg.t b/tests/test-chg.t
--- a/tests/test-chg.t
+++ b/tests/test-chg.t
@@ -1,5 +1,7 @@
 #require chg
 
+  $ cp $HGRCPATH $HGRCPATH.orig
+
 init repo
 
   $ chg init foo
@@ -32,3 +34,73 @@ alias having an environment variable and
   P1
   $ A=2 chg printa
   P2
+
+  $ cp $HGRCPATH.orig $HGRCPATH
+  $ cd ..
+
+server lifecycle
+----------------
+
+chg server should be restarted on code change, and old server will shut down
+automatically. In this test, we use the following time parameters:
+
+ - "sleep 1" to make mtime different
+ - "sleep 2" to notice mtime change (polling interval is 1 sec)
+
+set up repository with an extension:
+
+  $ chg init extreload
+  $ cd extreload
+  $ touch dummyext.py
+  $ cat <<EOF >> .hg/hgrc
+  > [extensions]
+  > dummyext = dummyext.py
+  > EOF
+
+isolate socket directory for stable result:
+
+  $ OLDCHGSOCKNAME=$CHGSOCKNAME
+  $ mkdir chgsock
+  $ CHGSOCKNAME=`pwd`/chgsock/server
+
+warm up server:
+
+  $ CHGDEBUG= chg log 2>&1 | egrep 'instruction|start'
+  chg: debug: start cmdserver at $TESTTMP/extreload/chgsock/server
+
+new server should be started if extension modified:
+
+  $ sleep 1
+  $ touch dummyext.py
+  $ CHGDEBUG= chg log 2>&1 | egrep 'instruction|start'
+  chg: debug: instruction: unlink $TESTTMP/extreload/chgsock/server-* (glob)
+  chg: debug: instruction: reconnect
+  chg: debug: start cmdserver at $TESTTMP/extreload/chgsock/server
+
+old server will shut down, while new server should still be reachable:
+
+  $ sleep 2
+  $ CHGDEBUG= chg log 2>&1 | (egrep 'instruction|start' || true)
+
+socket file should never be unlinked by old server:
+(simulates unowned socket by updating mtime, which makes sure server exits
+at polling cycle)
+
+  $ ls chgsock/server-*
+  chgsock/server-* (glob)
+  $ touch chgsock/server-*
+  $ sleep 2
+  $ ls chgsock/server-*
+  chgsock/server-* (glob)
+
+since no server is reachable from socket file, new server should be started:
+(this test makes sure that old server shut down automatically)
+
+  $ CHGDEBUG= chg log 2>&1 | egrep 'instruction|start'
+  chg: debug: start cmdserver at $TESTTMP/extreload/chgsock/server
+
+shut down servers and restore environment:
+
+  $ rm -R chgsock
+  $ CHGSOCKNAME=$OLDCHGSOCKNAME
+  $ cd ..