diff --git a/t/t4015-diff-whitespace.sh b/t/t4015-diff-whitespace.sh
new file mode 100755
index 0000000000000000000000000000000000000000..c945085245b4d41405f18b22c447c004c36cf132
--- /dev/null
+++ b/t/t4015-diff-whitespace.sh
@@ -0,0 +1,122 @@
+#!/bin/sh
+#
+# Copyright (c) 2006 Johannes E. Schindelin
+#
+
+test_description='Test special whitespace in diff engine.
+
+'
+. ./test-lib.sh
+. ../diff-lib.sh
+
+# Ray Lehtiniemi's example
+
+cat << EOF > x
+do {
+   nothing;
+} while (0);
+EOF
+
+git-update-index --add x
+
+cat << EOF > x
+do
+{
+   nothing;
+}
+while (0);
+EOF
+
+cat << EOF > expect
+diff --git a/x b/x
+index adf3937..6edc172 100644
+--- a/x
++++ b/x
+@@ -1,3 +1,5 @@
+-do {
++do
++{
+    nothing;
+-} while (0);
++}
++while (0);
+EOF
+
+git-diff > out
+test_expect_success "Ray's example without options" 'diff -u expect out'
+
+git-diff -w > out
+test_expect_success "Ray's example with -w" 'diff -u expect out'
+
+git-diff -b > out
+test_expect_success "Ray's example with -b" 'diff -u expect out'
+
+cat << EOF > x
+whitespace at beginning
+whitespace change
+whitespace in the middle
+whitespace at end
+unchanged line
+CR at end
+EOF
+
+git-update-index x
+
+cat << EOF > x
+	whitespace at beginning
+whitespace 	 change
+white space in the middle
+whitespace at end  
+unchanged line
+CR at end
+EOF
+
+cat << EOF > expect
+diff --git a/x b/x
+index d99af23..8b32fb5 100644
+--- a/x
++++ b/x
+@@ -1,6 +1,6 @@
+-whitespace at beginning
+-whitespace change
+-whitespace in the middle
+-whitespace at end
++	whitespace at beginning
++whitespace 	 change
++white space in the middle
++whitespace at end  
+ unchanged line
+-CR at end
++CR at end
+EOF
+git-diff > out
+test_expect_success 'another test, without options' 'diff -u expect out'
+
+cat << EOF > expect
+diff --git a/x b/x
+index d99af23..8b32fb5 100644
+EOF
+git-diff -w > out
+test_expect_success 'another test, with -w' 'diff -u expect out'
+
+cat << EOF > expect
+diff --git a/x b/x
+index d99af23..8b32fb5 100644
+--- a/x
++++ b/x
+@@ -1,6 +1,6 @@
+-whitespace at beginning
++	whitespace at beginning
+ whitespace change
+-whitespace in the middle
+-whitespace at end
++white space in the middle
++whitespace at end  
+ unchanged line
+-CR at end
++CR at end
+EOF
+git-diff -b > out
+test_expect_success 'another test, with -b' 'diff -u expect out'
+
+test_done
diff --git a/xdiff/xutils.c b/xdiff/xutils.c
index f7bdd395ad1f69067654a754b4d60fcc7c359275..9e4bb47ee97a0fca5120c41365a80531ddb849e4 100644
--- a/xdiff/xutils.c
+++ b/xdiff/xutils.c
@@ -191,36 +191,30 @@ int xdl_recmatch(const char *l1, long s1, const char *l2, long s2, long flags)
 	int i1, i2;
 
 	if (flags & XDF_IGNORE_WHITESPACE) {
-		for (i1 = i2 = 0; i1 < s1 && i2 < s2; i1++, i2++) {
+		for (i1 = i2 = 0; i1 < s1 && i2 < s2; ) {
 			if (isspace(l1[i1]))
 				while (isspace(l1[i1]) && i1 < s1)
 					i1++;
-			else if (isspace(l2[i2]))
+			if (isspace(l2[i2]))
 				while (isspace(l2[i2]) && i2 < s2)
 					i2++;
-			else if (l1[i1] != l2[i2])
-				return l2[i2] - l1[i1];
+			if (i1 < s1 && i2 < s2 && l1[i1++] != l2[i2++])
+				return 0;
 		}
-		if (i1 >= s1)
-			return 1;
-		else if (i2 >= s2)
-			return -1;
+		return (i1 >= s1 && i2 >= s2);
 	} else if (flags & XDF_IGNORE_WHITESPACE_CHANGE) {
-		for (i1 = i2 = 0; i1 < s1 && i2 < s2; i1++, i2++) {
+		for (i1 = i2 = 0; i1 < s1 && i2 < s2; ) {
 			if (isspace(l1[i1])) {
 				if (!isspace(l2[i2]))
-					return -1;
+					return 0;
 				while (isspace(l1[i1]) && i1 < s1)
 					i1++;
 				while (isspace(l2[i2]) && i2 < s2)
 					i2++;
-			} else if (l1[i1] != l2[i2])
-				return l2[i2] - l1[i1];
+			} else if (l1[i1++] != l2[i2++])
+				return 0;
 		}
-		if (i1 >= s1)
-			return 1;
-		else if (i2 >= s2)
-			return -1;
+		return (i1 >= s1 && i2 >= s2);
 	} else
 		return s1 == s2 && !memcmp(l1, l2, s1);
 
@@ -233,7 +227,8 @@ unsigned long xdl_hash_record(char const **data, char const *top, long flags) {
 
 	for (; ptr < top && *ptr != '\n'; ptr++) {
 		if (isspace(*ptr) && (flags & XDF_WHITESPACE_FLAGS)) {
-			while (ptr < top && isspace(*ptr) && ptr[1] != '\n')
+			while (ptr + 1 < top && isspace(ptr[1])
+					&& ptr[1] != '\n')
 				ptr++;
 			if (flags & XDF_IGNORE_WHITESPACE_CHANGE) {
 				ha += (ha << 5);