diff --git a/dvc/dependency/repo.py b/dvc/dependency/repo.py
index 8566c080b..3ae2a77df 100644
--- a/dvc/dependency/repo.py
+++ b/dvc/dependency/repo.py
@@ -64,7 +64,7 @@ class RepoDependency(LocalDependency):
 
                 # We are polluting our repo cache with some dir listing here
                 if tree.isdir(path):
-                    return self.repo.cache.local.get_hash(path, tree)
+                    return self.repo.cache.local.get_hash(path, tree=tree)
                 return tree.get_file_hash(path)
 
     def status(self):
diff --git a/tests/func/test_update.py b/tests/func/test_update.py
index b1898c458..12d0c9d61 100644
--- a/tests/func/test_update.py
+++ b/tests/func/test_update.py
@@ -10,26 +10,69 @@ def test_update_import(tmp_dir, dvc, erepo_dir, cached):
     gen = erepo_dir.dvc_gen if cached else erepo_dir.scm_gen
 
     with erepo_dir.branch("branch", new=True), erepo_dir.chdir():
-        gen("version", "branch", "add version file")
+        gen(
+            {
+                "version": "branch",
+                "dir": {"version": "branch", "subdir": {"file": "file"}},
+            },
+            commit="add version file",
+        )
         old_rev = erepo_dir.scm.get_rev()
 
     stage = dvc.imp(os.fspath(erepo_dir), "version", "version", rev="branch")
+    dir_stage = dvc.imp(os.fspath(erepo_dir), "dir", "dir", rev="branch")
+    assert dvc.status() == {}
 
     assert (tmp_dir / "version").read_text() == "branch"
+    assert (tmp_dir / "dir").read_text() == {
+        "version": "branch",
+        "subdir": {"file": "file"},
+    }
     assert stage.deps[0].def_repo["rev_lock"] == old_rev
+    assert dir_stage.deps[0].def_repo["rev_lock"] == old_rev
 
     # Update version file
     with erepo_dir.branch("branch", new=False), erepo_dir.chdir():
-        gen("version", "updated", "update version content")
+        gen(
+            {
+                "version": "updated",
+                "dir": {"version": "updated", "subdir": {"file": "file"}},
+            },
+            commit="update version content",
+        )
         new_rev = erepo_dir.scm.get_rev()
 
     assert old_rev != new_rev
 
-    dvc.update([stage.path])
+    assert dvc.status() == {
+        "dir.dvc": [
+            {
+                "changed deps": {
+                    f"dir ({os.fspath(erepo_dir)})": "update available"
+                }
+            }
+        ],
+        "version.dvc": [
+            {
+                "changed deps": {
+                    f"version ({os.fspath(erepo_dir)})": "update available"
+                }
+            }
+        ],
+    }
+
+    (stage,) = dvc.update(stage.path)
+    (dir_stage,) = dvc.update(dir_stage.path)
+    assert dvc.status() == {}
+
     assert (tmp_dir / "version").read_text() == "updated"
+    assert (tmp_dir / "dir").read_text() == {
+        "version": "updated",
+        "subdir": {"file": "file"},
+    }
 
-    stage = Dvcfile(dvc, stage.path).stage
     assert stage.deps[0].def_repo["rev_lock"] == new_rev
+    assert dir_stage.deps[0].def_repo["rev_lock"] == new_rev
 
 
 def test_update_import_after_remote_updates_to_dvc(tmp_dir, dvc, erepo_dir):