diff --git a/org.eclipse.jgit.test/tst/org/eclipse/jgit/api/ResetCommandTest.java b/org.eclipse.jgit.test/tst/org/eclipse/jgit/api/ResetCommandTest.java
index 40d8458ef..725ebc0d2 100644
--- a/org.eclipse.jgit.test/tst/org/eclipse/jgit/api/ResetCommandTest.java
+++ b/org.eclipse.jgit.test/tst/org/eclipse/jgit/api/ResetCommandTest.java
@@ -156,6 +156,34 @@ public class ResetCommandTest extends RepositoryTestCase {
 		assertEquals(prevHead, db.readOrigHead());
 	}
 
+	@Test
+	public void testHardResetWithConflicts_DoOverWriteUntrackedFile()
+			throws JGitInternalException,
+			AmbiguousObjectException, IOException, GitAPIException {
+		setupRepository();
+		git.rm().setCached(true).addFilepattern("a.txt").call();
+		assertTrue(new File(db.getWorkTree(), "a.txt").exists());
+		git.reset().setMode(ResetType.HARD).setRef(Constants.HEAD)
+				.call();
+		assertTrue(new File(db.getWorkTree(), "a.txt").exists());
+		assertEquals("content", read(new File(db.getWorkTree(), "a.txt")));
+	}
+
+	@Test
+	public void testHardResetWithConflicts_DoDeleteFileFolderConflicts()
+			throws JGitInternalException,
+			AmbiguousObjectException, IOException, GitAPIException {
+		setupRepository();
+		writeTrashFile("d/c.txt", "x");
+		git.add().addFilepattern("d/c.txt").call();
+		FileUtils.delete(new File(db.getWorkTree(), "d"), FileUtils.RECURSIVE);
+		writeTrashFile("d", "y");
+
+		git.reset().setMode(ResetType.HARD).setRef(Constants.HEAD)
+				.call();
+		assertFalse(new File(db.getWorkTree(), "d").exists());
+	}
+
 	@Test
 	public void testResetToNonexistingHEAD() throws JGitInternalException,
 			AmbiguousObjectException, IOException, GitAPIException {
diff --git a/org.eclipse.jgit/src/org/eclipse/jgit/dircache/DirCacheCheckout.java b/org.eclipse.jgit/src/org/eclipse/jgit/dircache/DirCacheCheckout.java
index fc4cc9093..12ceb74ab 100644
--- a/org.eclipse.jgit/src/org/eclipse/jgit/dircache/DirCacheCheckout.java
+++ b/org.eclipse.jgit/src/org/eclipse/jgit/dircache/DirCacheCheckout.java
@@ -354,8 +354,16 @@ public class DirCacheCheckout {
 				// The index entry is missing
 				if (f != null && !FileMode.TREE.equals(f.getEntryFileMode())
 						&& !f.isEntryIgnored()) {
-					// don't overwrite an untracked and not ignored file
-					conflicts.add(walk.getPathString());
+					if (failOnConflict) {
+						// don't overwrite an untracked and not ignored file
+						conflicts.add(walk.getPathString());
+					} else {
+						// failOnConflict is false. Putting something to conflicts
+						// would mean we delete it. Instead we want the mergeCommit
+						// content to be checked out.
+						update(m.getEntryPathString(), m.getEntryObjectId(),
+								m.getEntryFileMode());
+					}
 				} else
 					update(m.getEntryPathString(), m.getEntryObjectId(),
 						m.getEntryFileMode());
@@ -390,6 +398,9 @@ public class DirCacheCheckout {
 			if (f != null) {
 				// There is a file/folder for that path in the working tree
 				if (walk.isDirectoryFileConflict()) {
+					// We put it in conflicts. Even if failOnConflict is false
+					// this would cause the path to be deleted. Thats exactly what
+					// we want in this situation
 					conflicts.add(walk.getPathString());
 				} else {
 					// No file/folder conflict exists. All entries are files or