diff --git a/src/python/package.py b/src/python/package.py
index f89eb4122..2e6ad559a 100644
--- a/src/python/package.py
+++ b/src/python/package.py
@@ -32,6 +32,9 @@ def add_python_lib(tf, lib_dir, lib, mtime):
 
         relpath = os.path.relpath(root, lib)
 
+        if '.hg' in relpath.split('/'):
+            continue
+
         if relpath=='.':
             arcroot = lib_dir
         else: