diff --git a/fs/dcache.c b/fs/dcache.c
index 139e5fd22fa68751a3f06aa8931ef03f4f8d0ba5..0f7ec12d65ffb3b69edc37c1ea9855d1a8afee9e 100644
--- a/fs/dcache.c
+++ b/fs/dcache.c
@@ -802,6 +802,7 @@ void d_instantiate(struct dentry *entry, struct inode * inode)
 	if (inode)
 		list_add(&entry->d_alias, &inode->i_dentry);
 	entry->d_inode = inode;
+	fsnotify_d_instantiate(entry, inode);
 	spin_unlock(&dcache_lock);
 	security_d_instantiate(entry, inode);
 }
@@ -853,6 +854,7 @@ struct dentry *d_instantiate_unique(struct dentry *entry, struct inode *inode)
 	list_add(&entry->d_alias, &inode->i_dentry);
 do_negative:
 	entry->d_inode = inode;
+	fsnotify_d_instantiate(entry, inode);
 	spin_unlock(&dcache_lock);
 	security_d_instantiate(entry, inode);
 	return NULL;
@@ -983,6 +985,7 @@ struct dentry *d_splice_alias(struct inode *inode, struct dentry *dentry)
 		new = __d_find_alias(inode, 1);
 		if (new) {
 			BUG_ON(!(new->d_flags & DCACHE_DISCONNECTED));
+			fsnotify_d_instantiate(new, inode);
 			spin_unlock(&dcache_lock);
 			security_d_instantiate(new, inode);
 			d_rehash(dentry);
@@ -992,6 +995,7 @@ struct dentry *d_splice_alias(struct inode *inode, struct dentry *dentry)
 			/* d_instantiate takes dcache_lock, so we do it by hand */
 			list_add(&dentry->d_alias, &inode->i_dentry);
 			dentry->d_inode = inode;
+			fsnotify_d_instantiate(dentry, inode);
 			spin_unlock(&dcache_lock);
 			security_d_instantiate(dentry, inode);
 			d_rehash(dentry);
@@ -1176,6 +1180,9 @@ void d_delete(struct dentry * dentry)
 	spin_lock(&dentry->d_lock);
 	isdir = S_ISDIR(dentry->d_inode->i_mode);
 	if (atomic_read(&dentry->d_count) == 1) {
+		/* remove this and other inotify debug checks after 2.6.18 */
+		dentry->d_flags &= ~DCACHE_INOTIFY_PARENT_WATCHED;
+
 		dentry_iput(dentry);
 		fsnotify_nameremove(dentry, isdir);
 		return;
@@ -1342,6 +1349,7 @@ void d_move(struct dentry * dentry, struct dentry * target)
 
 	list_add(&dentry->d_u.d_child, &dentry->d_parent->d_subdirs);
 	spin_unlock(&target->d_lock);
+	fsnotify_d_move(dentry);
 	spin_unlock(&dentry->d_lock);
 	write_sequnlock(&rename_lock);
 	spin_unlock(&dcache_lock);
diff --git a/fs/inotify.c b/fs/inotify.c
index 0ee39ef591c6dac600a4cb07d2741be546becc38..a61e93e1785331eb87847df058b7b1b504459250 100644
--- a/fs/inotify.c
+++ b/fs/inotify.c
@@ -38,7 +38,6 @@
 #include <asm/ioctls.h>
 
 static atomic_t inotify_cookie;
-static atomic_t inotify_watches;
 
 static kmem_cache_t *watch_cachep;
 static kmem_cache_t *event_cachep;
@@ -380,6 +379,48 @@ static int find_inode(const char __user *dirname, struct nameidata *nd,
 	return error;
 }
 
+/*
+ * inotify_inode_watched - returns nonzero if there are watches on this inode
+ * and zero otherwise.  We call this lockless, we do not care if we race.
+ */
+static inline int inotify_inode_watched(struct inode *inode)
+{
+	return !list_empty(&inode->inotify_watches);
+}
+
+/*
+ * Get child dentry flag into synch with parent inode.
+ * Flag should always be clear for negative dentrys.
+ */
+static void set_dentry_child_flags(struct inode *inode, int watched)
+{
+	struct dentry *alias;
+
+	spin_lock(&dcache_lock);
+	list_for_each_entry(alias, &inode->i_dentry, d_alias) {
+		struct dentry *child;
+
+		list_for_each_entry(child, &alias->d_subdirs, d_u.d_child) {
+			if (!child->d_inode) {
+				WARN_ON(child->d_flags & DCACHE_INOTIFY_PARENT_WATCHED);
+				continue;
+			}
+			spin_lock(&child->d_lock);
+			if (watched) {
+				WARN_ON(child->d_flags &
+						DCACHE_INOTIFY_PARENT_WATCHED);
+				child->d_flags |= DCACHE_INOTIFY_PARENT_WATCHED;
+			} else {
+				WARN_ON(!(child->d_flags &
+					DCACHE_INOTIFY_PARENT_WATCHED));
+				child->d_flags&=~DCACHE_INOTIFY_PARENT_WATCHED;
+			}
+			spin_unlock(&child->d_lock);
+		}
+	}
+	spin_unlock(&dcache_lock);
+}
+
 /*
  * create_watch - creates a watch on the given device.
  *
@@ -426,7 +467,6 @@ static struct inotify_watch *create_watch(struct inotify_device *dev,
 	get_inotify_watch(watch);
 
 	atomic_inc(&dev->user->inotify_watches);
-	atomic_inc(&inotify_watches);
 
 	return watch;
 }
@@ -458,8 +498,10 @@ static void remove_watch_no_event(struct inotify_watch *watch,
 	list_del(&watch->i_list);
 	list_del(&watch->d_list);
 
+	if (!inotify_inode_watched(watch->inode))
+		set_dentry_child_flags(watch->inode, 0);
+
 	atomic_dec(&dev->user->inotify_watches);
-	atomic_dec(&inotify_watches);
 	idr_remove(&dev->idr, watch->wd);
 	put_inotify_watch(watch);
 }
@@ -481,16 +523,39 @@ static void remove_watch(struct inotify_watch *watch,struct inotify_device *dev)
 	remove_watch_no_event(watch, dev);
 }
 
+/* Kernel API */
+
 /*
- * inotify_inode_watched - returns nonzero if there are watches on this inode
- * and zero otherwise.  We call this lockless, we do not care if we race.
+ * inotify_d_instantiate - instantiate dcache entry for inode
  */
-static inline int inotify_inode_watched(struct inode *inode)
+void inotify_d_instantiate(struct dentry *entry, struct inode *inode)
 {
-	return !list_empty(&inode->inotify_watches);
+	struct dentry *parent;
+
+	if (!inode)
+		return;
+
+	WARN_ON(entry->d_flags & DCACHE_INOTIFY_PARENT_WATCHED);
+	spin_lock(&entry->d_lock);
+	parent = entry->d_parent;
+	if (inotify_inode_watched(parent->d_inode))
+		entry->d_flags |= DCACHE_INOTIFY_PARENT_WATCHED;
+	spin_unlock(&entry->d_lock);
 }
 
-/* Kernel API */
+/*
+ * inotify_d_move - dcache entry has been moved
+ */
+void inotify_d_move(struct dentry *entry)
+{
+	struct dentry *parent;
+
+	parent = entry->d_parent;
+	if (inotify_inode_watched(parent->d_inode))
+		entry->d_flags |= DCACHE_INOTIFY_PARENT_WATCHED;
+	else
+		entry->d_flags &= ~DCACHE_INOTIFY_PARENT_WATCHED;
+}
 
 /**
  * inotify_inode_queue_event - queue an event to all watches on this inode
@@ -538,7 +603,7 @@ void inotify_dentry_parent_queue_event(struct dentry *dentry, u32 mask,
 	struct dentry *parent;
 	struct inode *inode;
 
-	if (!atomic_read (&inotify_watches))
+	if (!(dentry->d_flags & DCACHE_INOTIFY_PARENT_WATCHED))
 		return;
 
 	spin_lock(&dentry->d_lock);
@@ -993,6 +1058,9 @@ asmlinkage long sys_inotify_add_watch(int fd, const char __user *path, u32 mask)
 		goto out;
 	}
 
+	if (!inotify_inode_watched(inode))
+		set_dentry_child_flags(inode, 1);
+
 	/* Add the watch to the device's and the inode's list */
 	list_add(&watch->d_list, &dev->watches);
 	list_add(&watch->i_list, &inode->inotify_watches);
@@ -1065,7 +1133,6 @@ static int __init inotify_setup(void)
 	inotify_max_user_watches = 8192;
 
 	atomic_set(&inotify_cookie, 0);
-	atomic_set(&inotify_watches, 0);
 
 	watch_cachep = kmem_cache_create("inotify_watch_cache",
 					 sizeof(struct inotify_watch),
diff --git a/include/linux/dcache.h b/include/linux/dcache.h
index 4361f3789975d366a39a762d688d02df9408eb82..d10bd30c337e2ca56da7a33cac3be9e83deab955 100644
--- a/include/linux/dcache.h
+++ b/include/linux/dcache.h
@@ -162,6 +162,8 @@ d_iput:		no		no		no       yes
 #define DCACHE_REFERENCED	0x0008  /* Recently used, don't discard. */
 #define DCACHE_UNHASHED		0x0010	
 
+#define DCACHE_INOTIFY_PARENT_WATCHED	0x0020 /* Parent inode is watched */
+
 extern spinlock_t dcache_lock;
 
 /**
diff --git a/include/linux/fsnotify.h b/include/linux/fsnotify.h
index 03b8e7932b830a3f1bfffcc531ec4ee9b1662b1e..f7e517c1f1bdb493d9e02c729afc6f6755d24252 100644
--- a/include/linux/fsnotify.h
+++ b/include/linux/fsnotify.h
@@ -16,6 +16,25 @@
 #include <linux/dnotify.h>
 #include <linux/inotify.h>
 
+/*
+ * fsnotify_d_instantiate - instantiate a dentry for inode
+ * Called with dcache_lock held.
+ */
+static inline void fsnotify_d_instantiate(struct dentry *entry,
+						struct inode *inode)
+{
+	inotify_d_instantiate(entry, inode);
+}
+
+/*
+ * fsnotify_d_move - entry has been moved
+ * Called with dcache_lock and entry->d_lock held.
+ */
+static inline void fsnotify_d_move(struct dentry *entry)
+{
+	inotify_d_move(entry);
+}
+
 /*
  * fsnotify_move - file old_name at old_dir was moved to new_name at new_dir
  */
diff --git a/include/linux/inotify.h b/include/linux/inotify.h
index 267c88b5f742592b69dabf70bfcdfb2c471ec706..09e00433c78e267b37b3f485c0d877de780a0674 100644
--- a/include/linux/inotify.h
+++ b/include/linux/inotify.h
@@ -71,6 +71,8 @@ struct inotify_event {
 
 #ifdef CONFIG_INOTIFY
 
+extern void inotify_d_instantiate(struct dentry *, struct inode *);
+extern void inotify_d_move(struct dentry *);
 extern void inotify_inode_queue_event(struct inode *, __u32, __u32,
 				      const char *);
 extern void inotify_dentry_parent_queue_event(struct dentry *, __u32, __u32,
@@ -81,6 +83,15 @@ extern u32 inotify_get_cookie(void);
 
 #else
 
+static inline void inotify_d_instantiate(struct dentry *dentry,
+					struct inode *inode)
+{
+}
+
+static inline void inotify_d_move(struct dentry *dentry)
+{
+}
+
 static inline void inotify_inode_queue_event(struct inode *inode,
 					     __u32 mask, __u32 cookie,
 					     const char *filename)