diff --git a/mercurial/commands.py b/mercurial/commands.py
--- a/mercurial/commands.py
+++ b/mercurial/commands.py
@@ -2535,6 +2535,8 @@
     diff = opts.get('all') or opts.get('diff')
     if diff and opts.get('all_files'):
         raise error.Abort(_('--diff and --all-files are mutually exclusive'))
+    if opts.get('all_files') and not opts.get('rev'):
+        opts['rev'] = ['wdir()']
 
     reflags = re.M
     if opts.get('ignore_case'):
diff --git a/tests/test-grep.t b/tests/test-grep.t
--- a/tests/test-grep.t
+++ b/tests/test-grep.t
@@ -412,6 +412,18 @@
   $ hg grep -r "." "unmod" --all-files
   um:1:unmod
 
+With --all-files, the working directory is searched by default
+
+  $ echo modified >> new
+  $ hg grep --all-files mod
+  new:2147483647:modified
+  um:2147483647:unmod
+
+ which can be overridden by -rREV
+
+  $ hg grep --all-files -r. mod
+  um:1:unmod
+
 --diff --all-files makes no sense since --diff is the option to grep history
 
   $ hg grep --diff --all-files um