diff --git a/mercurial/cext/util.h b/mercurial/cext/util.h
--- a/mercurial/cext/util.h
+++ b/mercurial/cext/util.h
@@ -40,6 +40,8 @@
 static const int dirstate_flag_mode_exec_perm = 1 << 6;
 static const int dirstate_flag_mode_is_symlink = 1 << 7;
 static const int dirstate_flag_expected_state_is_modified = 1 << 8;
+static const int dirstate_flag_unrecorded_unknown = 1 << 9;
+static const int dirstate_flag_unrecorded_ignored = 1 << 10;
 
 extern PyTypeObject dirstateItemType;
 #define dirstate_tuple_check(op) (Py_TYPE(op) == &dirstateItemType)
diff --git a/mercurial/dirstateutils/v2.py b/mercurial/dirstateutils/v2.py
--- a/mercurial/dirstateutils/v2.py
+++ b/mercurial/dirstateutils/v2.py
@@ -81,6 +81,9 @@
     """parse <len> nodes from <data> starting at offset <start>
 
     This is used by parse_dirstate to recursively fill `map` and `copy_map`.
+
+    All directory specific information is ignored and do not need any
+    processing (HAS_DIRECTORY_MTIME, UNRECORDED_UNKNOWN, UNRECORDED_IGNORED)
     """
     for i in range(len):
         node_start = start + NODE_SIZE * i
diff --git a/mercurial/helptext/internals/dirstate-v2.txt b/mercurial/helptext/internals/dirstate-v2.txt
--- a/mercurial/helptext/internals/dirstate-v2.txt
+++ b/mercurial/helptext/internals/dirstate-v2.txt
@@ -384,6 +384,8 @@
     MODE_EXEC_PERM = 1 << 6
     MODE_IS_SYMLINK = 1 << 7
     EXPECTED_STATE_IS_MODIFIED = 1 << 8
+    UNRECORDED_UNKNOWN = 1 << 9
+    UNRECORDED_UNKNOWN = 1 << 10
 
   The meaning of each bit is described below.
 
@@ -530,3 +532,15 @@
     does not need to do the same again.
     It is valid to never set this bit,
     and consider expected metadata ambiguous if it is set.
+
+`UNRECORDED_UNKNOWN`
+    The node might have unknown children on disk that are not recorded as
+    children-nodes of this node. If this flag is set and the current operation
+    need to list the unknown files, the optimization from `HAS_DIRECTORY_MTIME`
+    cannot be used.
+
+`UNRECORDED_IGNORED`
+    The node might have ignored children on disk that are not recorded as
+    children-nodes of this node. If this flag is set and the current operation
+    need to list the ignored files, the optimization from `HAS_DIRECTORY_MTIME`
+    cannot be used.
diff --git a/mercurial/pure/parsers.py b/mercurial/pure/parsers.py
--- a/mercurial/pure/parsers.py
+++ b/mercurial/pure/parsers.py
@@ -54,6 +54,8 @@
 DIRSTATE_V2_MODE_EXEC_PERM = 1 << 6
 DIRSTATE_V2_MODE_IS_SYMLINK = 1 << 7
 DIRSTATE_V2_EXPECTED_STATE_IS_MODIFIED = 1 << 8
+DIRSTATE_V2_UNRECORDED_UNKNOWN = 1 << 9
+DIRSTATE_V2_UNRECORDED_IGNORED = 1 << 10
 
 
 @attr.s(slots=True, init=False)
@@ -340,6 +342,9 @@
                 flags |= DIRSTATE_V2_MODE_IS_SYMLINK
         if self._mtime is not None:
             flags |= DIRSTATE_V2_HAS_FILE_MTIME
+        # Note: we do not need to do anything regarding
+        # DIRSTATE_V2_UNRECORDED_UNKNOWN and DIRSTATE_V2_UNRECORDED_IGNORED
+        # since we never set _DIRSTATE_V2_HAS_DIRCTORY_MTIME
         return (flags, self._size or 0, self._mtime or 0)
 
     def v1_state(self):
diff --git a/rust/hg-core/src/dirstate_tree/on_disk.rs b/rust/hg-core/src/dirstate_tree/on_disk.rs
--- a/rust/hg-core/src/dirstate_tree/on_disk.rs
+++ b/rust/hg-core/src/dirstate_tree/on_disk.rs
@@ -111,6 +111,8 @@
         const MODE_EXEC_PERM = 1 << 6;
         const MODE_IS_SYMLINK = 1 << 7;
         const EXPECTED_STATE_IS_MODIFIED = 1 << 8;
+        const UNRECORDED_UNKNOWN = 1 << 9;
+        const UNRECORDED_IGNORED = 1 << 10;
     }
 }
 
@@ -322,7 +324,11 @@
     pub(super) fn cached_directory_mtime(
         &self,
     ) -> Result<Option<TruncatedTimestamp>, DirstateV2ParseError> {
-        if self.flags().contains(Flags::HAS_DIRECTORY_MTIME) {
+        // For now we do not have code to handle UNRECORDED_UNKNOWN, so we
+        // ignore the mtime if the flag is set.
+        if self.flags().contains(Flags::HAS_DIRECTORY_MTIME)
+            && !self.flags().contains(Flags::UNRECORDED_UNKNOWN)
+        {
             if self.flags().contains(Flags::HAS_FILE_MTIME) {
                 Err(DirstateV2ParseError)
             } else {
@@ -589,7 +595,14 @@
                             Node::from_dirstate_entry(entry)
                         }
                         dirstate_map::NodeData::CachedDirectory { mtime } => (
-                            Flags::HAS_DIRECTORY_MTIME,
+                            // we currently never record ignored files so we
+                            // blindly set UNRECORDED_IGNORED,. We don't need
+                            // to set
+                            // UNRECORDED_UNKNOWN since we currently never set
+                            // HAS_DIRECTORY_MTIME
+                            // if unknow files were present.
+                            Flags::HAS_DIRECTORY_MTIME
+                                | Flags::UNRECORDED_IGNORED,
                             0.into(),
                             (*mtime).into(),
                         ),