diff --git a/hgext/phabricator.py b/hgext/phabricator.py
--- a/hgext/phabricator.py
+++ b/hgext/phabricator.py
@@ -41,6 +41,9 @@
 
     # API token. Get it from https://$HOST/conduit/login/
     example.phabtoken = cli-xxxxxxxxxxxxxxxxxxxxxxxxxxxx
+
+phabricator.url and callsign will fallback to values from repo's .arcconfig if
+available.
 """
 
 from __future__ import absolute_import
@@ -165,16 +168,18 @@
 ]
 
 
-@eh.wrapfunction(localrepo, "loadhgrc")
-def _loadhgrc(orig, ui, wdirvfs, hgvfs, requirements):
+def reposetup(ui, repo):
     """Load ``.arcconfig`` content into a ui instance on repository open.
     """
-    result = False
+    # Only check for .arcconfig on a localrepo.
+    if not hasattr(repo, 'wvfs'):
+        return
+
     arcconfig = {}
 
     try:
         # json.loads only accepts bytes from 3.6+
-        rawparams = encoding.unifromlocal(wdirvfs.read(b".arcconfig"))
+        rawparams = encoding.unifromlocal(repo.wvfs.read(b'.arcconfig'))
         # json.loads only returns unicode strings
         arcconfig = pycompat.rapply(
             lambda x: encoding.unitolocal(x)
@@ -182,25 +187,19 @@
             else x,
             pycompat.json_loads(rawparams),
         )
-
-        result = True
     except ValueError:
-        ui.warn(_(b"invalid JSON in %s\n") % wdirvfs.join(b".arcconfig"))
+        ui.warn(_(b"invalid JSON in %s\n") % repo.wvfs.join('.arcconfig'))
     except IOError:
         pass
 
     cfg = util.sortdict()
 
+    source = repo.wvfs.join(b".arcconfig")
     if b"repository.callsign" in arcconfig:
-        cfg[(b"phabricator", b"callsign")] = arcconfig[b"repository.callsign"]
+        ui.setconfig(b"phabricator", b"callsign", arcconfig[b"repository.callsign"], source=source)
 
     if b"phabricator.uri" in arcconfig:
-        cfg[(b"phabricator", b"url")] = arcconfig[b"phabricator.uri"]
-
-    if cfg:
-        ui.applyconfig(cfg, source=wdirvfs.join(b".arcconfig"))
-
-    return orig(ui, wdirvfs, hgvfs, requirements) or result  # Load .hg/hgrc
+        ui.setconfig(b"phabricator", b"url", arcconfig[b"phabricator.uri"], source=source)
 
 
 def vcrcommand(name, flags, spec, helpcategory=None, optionalrepo=False):
@@ -328,13 +327,18 @@
 def readurltoken(ui):
     """return conduit url, token and make sure they exist
 
-    Currently read from [auth] config section. In the future, it might
-    make sense to read from .arcconfig and .arcrc as well.
+    Read token from [auth] config section. Read url from [phabricator] config
+    section or repo's .arcconfig. In the future, it might make sense to read
+    tokens from ~/.arcrc as well.
     """
     url = ui.config(b'phabricator', b'url')
     if not url:
         raise error.Abort(
-            _(b'config %s.%s is required') % (b'phabricator', b'url')
+            _(
+                b'unable to read phabricator uri from from config %s.%s or %s '
+                b'file in repo'
+            )
+            % (b'phabricator', b'url', b'.arcconfig')
         )
 
     res = httpconnectionmod.readauthforuri(ui, url, util.url(url).user)