Index: linux-2.6/fs/dcache.c
===================================================================
--- linux-2.6.orig/fs/dcache.c
+++ linux-2.6/fs/dcache.c
@@ -799,6 +799,7 @@ void d_instantiate(struct dentry *entry,
 	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);
 }
@@ -850,6 +851,7 @@ struct dentry *d_instantiate_unique(stru
 	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;
@@ -980,6 +982,7 @@ struct dentry *d_splice_alias(struct ino
 		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);
@@ -989,6 +992,7 @@ struct dentry *d_splice_alias(struct ino
 			/* 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);
Index: linux-2.6/fs/inotify.c
===================================================================
--- linux-2.6.orig/fs/inotify.c
+++ linux-2.6/fs/inotify.c
@@ -381,6 +381,41 @@ static int find_inode(const char __user 
 }
 
 /*
+ * 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);
+}
+
+static void set_dentry_child_flags(struct inode *inode, int new_watch)
+{
+	struct dentry *alias;
+
+	if (inotify_inode_watched(inode))
+		return;
+
+	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) {
+			spin_lock(&child->d_lock);
+			if (new_watch) {
+				BUG_ON(child->d_flags & DCACHE_INOTIFY_PARENT_WATCHED);
+				child->d_flags |= DCACHE_INOTIFY_PARENT_WATCHED;
+			} else {
+				BUG_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.
  *
  * Callers must hold dev->sem.  Calls inotify_dev_get_wd() so may sleep.
@@ -406,6 +441,8 @@ static struct inotify_watch *create_watc
 		return ERR_PTR(ret);
 	}
 
+	set_dentry_child_flags(inode, 1);
+
 	dev->last_wd = watch->wd;
 	watch->mask = mask;
 	atomic_set(&watch->count, 0);
@@ -462,6 +499,8 @@ static void remove_watch_no_event(struct
 	atomic_dec(&inotify_watches);
 	idr_remove(&dev->idr, watch->wd);
 	put_inotify_watch(watch);
+
+	set_dentry_child_flags(watch->inode, 0);
 }
 
 /*
@@ -481,16 +520,18 @@ static void remove_watch(struct inotify_
 	remove_watch_no_event(watch, dev);
 }
 
-/*
- * 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)
+/* Kernel API */
+
+void inotify_d_instantiate(struct dentry *entry, struct inode *inode)
 {
-	return !list_empty(&inode->inotify_watches);
-}
+	struct dentry *parent;
 
-/* Kernel API */
+	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);
+}
 
 /**
  * inotify_inode_queue_event - queue an event to all watches on this inode
@@ -538,7 +579,7 @@ void inotify_dentry_parent_queue_event(s
 	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);
Index: linux-2.6/include/linux/dcache.h
===================================================================
--- linux-2.6.orig/include/linux/dcache.h
+++ linux-2.6/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;
 
 /**
Index: linux-2.6/include/linux/fsnotify.h
===================================================================
--- linux-2.6.orig/include/linux/fsnotify.h
+++ linux-2.6/include/linux/fsnotify.h
@@ -16,6 +16,12 @@
 #include <linux/dnotify.h>
 #include <linux/inotify.h>
 
+static inline void fsnotify_d_instantiate(struct dentry *entry,
+						struct inode *inode)
+{
+	inotify_d_instantiate(entry, inode);
+}
+
 /*
  * fsnotify_move - file old_name at old_dir was moved to new_name at new_dir
  */
Index: linux-2.6/include/linux/inotify.h
===================================================================
--- linux-2.6.orig/include/linux/inotify.h
+++ linux-2.6/include/linux/inotify.h
@@ -71,6 +71,7 @@ struct inotify_event {
 
 #ifdef CONFIG_INOTIFY
 
+extern void inotify_d_instantiate(struct dentry *, struct inode *);
 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 +82,10 @@ extern u32 inotify_get_cookie(void);
 
 #else
 
+static inline void inotify_d_instantiate(struct dentry *, struct inode *)
+{
+}
+
 static inline void inotify_inode_queue_event(struct inode *inode,
 					     __u32 mask, __u32 cookie,
 					     const char *filename)