diff --git a/guix/store/deduplication.scm b/guix/store/deduplication.scm
index 4b4ac01f64..d3139eb904 100644
--- a/guix/store/deduplication.scm
+++ b/guix/store/deduplication.scm
@@ -85,7 +85,7 @@ LINK-PREFIX."
       (lambda ()
         (link target tempname)
         tempname)
-      (lambda (args)
+      (lambda args
         (if (= (system-error-errno args) EEXIST)
             (try (tempname-in link-prefix))
             (throw 'system-error args))))))
@@ -120,12 +120,15 @@ under STORE."
          (link-file       (string-append links-directory "/"
                                          (bytevector->base16-string hash))))
     (mkdir-p links-directory)
-    (if (file-is-directory? path)
+    (if (eq? 'directory (stat:type (lstat path)))
         ;; Can't hardlink directories, so hardlink their atoms.
         (for-each (lambda (file)
-                    (unless (member file '("." ".."))
-                      (deduplicate file (nar-sha256 file)
-                                   #:store store)))
+                    (unless (or (member file '("." ".."))
+                                (and (string=? path store)
+                                     (string=? file ".links")))
+                      (let ((file (string-append path "/" file)))
+                        (deduplicate file (nar-sha256 file)
+                                     #:store store))))
                   (scandir path))
         (if (file-exists? link-file)
             (false-if-system-error (EMLINK)
diff --git a/tests/store-deduplication.scm b/tests/store-deduplication.scm
index 04817a193a..2361723199 100644
--- a/tests/store-deduplication.scm
+++ b/tests/store-deduplication.scm
@@ -37,10 +37,12 @@
    (lambda (store)
      (let ((data      (string->utf8 "Hello, world!"))
            (identical (map (lambda (n)
-                             (string-append store "/" (number->string n)))
+                             (string-append store "/" (number->string n)
+                                            "/a/b/c"))
                            (iota 5)))
            (unique    (string-append store "/unique")))
        (for-each (lambda (file)
+                   (mkdir-p (dirname file))
                    (call-with-output-file file
                      (lambda (port)
                        (put-bytevector port data))))
@@ -49,10 +51,7 @@
          (lambda (port)
            (put-bytevector port (string->utf8 "This is unique."))))
 
-       (for-each (lambda (file)
-                   (deduplicate file (sha256 data) #:store store))
-                 identical)
-       (deduplicate unique (nar-sha256 unique) #:store store)
+       (deduplicate store (nar-sha256 store) #:store store)
 
        ;; (system (string-append "ls -lRia " store))
        (cons* (apply = (map (compose stat:ino stat) identical))