diff -r 2cf1e5207fdf -r 2912b06905dc mercurial/util.py
--- a/mercurial/util.py	Wed Feb 22 10:14:18 2017 -0800
+++ b/mercurial/util.py	Mon Feb 20 18:40:42 2017 +0530
@@ -955,10 +955,7 @@
     # executable version (py2exe) doesn't support __file__
     datapath = os.path.dirname(pycompat.sysexecutable)
 else:
-    datapath = os.path.dirname(__file__)
-
-if not isinstance(datapath, bytes):
-    datapath = pycompat.fsencode(datapath)
+    datapath = os.path.dirname(pycompat.fsencode(__file__))
 
 i18n.setdatapath(datapath)
 
@@ -980,8 +977,9 @@
                 _sethgexecutable(encoding.environ['EXECUTABLEPATH'])
             else:
                 _sethgexecutable(pycompat.sysexecutable)
-        elif os.path.basename(getattr(mainmod, '__file__', '')) == 'hg':
-            _sethgexecutable(mainmod.__file__)
+        elif (os.path.basename(
+            pycompat.fsencode(getattr(mainmod, '__file__', ''))) == 'hg'):
+            _sethgexecutable(pycompat.fsencode(mainmod.__file__))
         else:
             exe = findexe('hg') or os.path.basename(sys.argv[0])
             _sethgexecutable(exe)