diff --git a/mercurial/store.py b/mercurial/store.py
--- a/mercurial/store.py
+++ b/mercurial/store.py
@@ -8,6 +8,7 @@
 from __future__ import absolute_import
 
 import errno
+import functools
 import hashlib
 import os
 import stat
@@ -463,7 +464,21 @@
             # skip nonexistent file
             self.entries = set()
             return
-        self.entries = set(decodedir(fp.read()).splitlines())
+
+        self.entries = set()
+        chunksize = (10 ** 6) # 1 MB
+        chunk = b''
+        for c in iter(functools.partial(fp.read, chunksize), b''):
+            chunk += c
+            try:
+                p = chunk.rindex(b'\n')
+                self.entries |= set(decodedir(chunk[:p + 1]).splitlines())
+                chunk = chunk[p + 1:]
+            except ValueError:
+                # substring '\n' not found, maybe the entry is bigger than the
+                # chunksize, so let's keep iterating
+                pass
+
         self._checkentries(fp)
         fp.close()