Index: subversion/tests/clients/cmdline/update_tests.py
===================================================================
--- subversion/tests/clients/cmdline/update_tests.py	(revision 6948)
+++ subversion/tests/clients/cmdline/update_tests.py	(working copy)
@@ -1253,8 +1253,41 @@
                                         None, None,
                                         None, None, None, None, 0,
                                         wc_dir)
+
+#-----------------------------------------------------------------------
+# Test to make sure Issue #854 won't return
+# Revert inside an svn added empty directory and then update at the
+# directory below
+
+def revert_newly_added_dir(sbox):
+  "revert inside a newly added dir"
+
+  sbox.build()
+
+  wc_dir = sbox.wc_dir
+
+  origin_dir = os.getcwd()
+
+  os.chdir(wc_dir)
+
+  os.mkdir("foo")
+
+  svntest.main.run_svn(None, 'add', "foo")
+
+  os.chdir("foo")
   
+  svntest.main.run_svn(None, 'revert', ".")
+  
+  os.chdir("..")
 
+  out, err = svntest.main.run_svn(None, 'update')
+  if err:
+    os.chdir(origin_dir)
+    raise svntest.Failure
+
+  os.chdir(origin_dir)
+
+
 ########################################################################
 # Run the tests
 
@@ -1280,6 +1313,7 @@
               non_recursive_update,
               checkout_empty_dir,
               update_to_deletion,
+              revert_newly_added_dir,
              ]
 
 if __name__ == '__main__':