diff -r 3e3f2201bbdf -r 1779dde4c9ef mercurial/hg.py
--- a/mercurial/hg.py	Sat Oct 01 14:18:58 2016 +0100
+++ b/mercurial/hg.py	Sun Oct 02 22:34:40 2016 -0700
@@ -195,7 +195,7 @@
         return ''
     return os.path.basename(os.path.normpath(path))
 
-def share(ui, source, dest=None, update=True, bookmarks=True):
+def share(ui, source, dest=None, update=True, bookmarks=True, defaultpath=None):
     '''create a shared repository'''
 
     if not islocal(source):
@@ -240,10 +240,10 @@
     destvfs.write('sharedpath', sharedpath)
 
     r = repository(ui, destwvfs.base)
-    postshare(srcrepo, r, bookmarks=bookmarks)
+    postshare(srcrepo, r, bookmarks=bookmarks, defaultpath=defaultpath)
     _postshareupdate(r, update, checkout=checkout)
 
-def postshare(sourcerepo, destrepo, bookmarks=True):
+def postshare(sourcerepo, destrepo, bookmarks=True, defaultpath=None):
     """Called after a new shared repo is created.
 
     The new repo only has a requirements file and pointer to the source.
@@ -252,7 +252,7 @@
     Extensions can wrap this function and write additional entries to
     destrepo/.hg/shared to indicate additional pieces of data to be shared.
     """
-    default = sourcerepo.ui.config('paths', 'default')
+    default = defaultpath or sourcerepo.ui.config('paths', 'default')
     if default:
         fp = destrepo.vfs("hgrc", "w", text=True)
         fp.write("[paths]\n")
@@ -374,8 +374,15 @@
             clone(ui, peeropts, source, dest=sharepath, pull=True,
                   rev=rev, update=False, stream=stream)
 
+    # Resolve the value to put in [paths] section for the source.
+    if islocal(source):
+        defaultpath = os.path.abspath(util.urllocalpath(source))
+    else:
+        defaultpath = source
+
     sharerepo = repository(ui, path=sharepath)
-    share(ui, sharerepo, dest=dest, update=False, bookmarks=False)
+    share(ui, sharerepo, dest=dest, update=False, bookmarks=False,
+          defaultpath=defaultpath)
 
     # We need to perform a pull against the dest repo to fetch bookmarks
     # and other non-store data that isn't shared by default. In the case of