diff -r 989467e8e3a9 -r 47e6d5d5913a mercurial/util.py
--- a/mercurial/util.py	Sun Feb 17 21:34:28 2008 +0100
+++ b/mercurial/util.py	Tue Aug 28 18:00:07 2007 +0200
@@ -1704,11 +1704,9 @@
             raise err
 
     for root, dirs, files in os.walk(path, onerror=errhandler):
-        for d in dirs:
-            if d == '.hg':
-                yield root
-                dirs[:] = []
-                break
+        if '.hg' in dirs:
+            dirs[:] = [] # don't descend further
+            yield root # found a repository
 
 _rcpath = None