diff --git a/src/vs/platform/userDataSync/common/globalStateMerge.ts b/src/vs/platform/userDataSync/common/globalStateMerge.ts
index 1954386aa007e9254cfea85bca89b17e20af5b01..5948457d8d1323c282180ca20491b9a784077bcd 100644
--- a/src/vs/platform/userDataSync/common/globalStateMerge.ts
+++ b/src/vs/platform/userDataSync/common/globalStateMerge.ts
@@ -34,32 +34,44 @@ export function merge(localStorage: IStringDictionary<IStorageValue>, remoteStor
 
 	// Added in remote
 	for (const key of values(baseToRemote.added)) {
-		const { version } = remoteStorage[key];
+		const remoteValue = remoteStorage[key];
 		const storageKey = storageKeys.filter(storageKey => storageKey.key === key)[0];
 		if (!storageKey) {
 			logService.info(`GlobalState: Skipped updating ${key} in storage. It is not registered to sync.`);
 			continue;
 		}
-		if (storageKey.version !== version) {
-			logService.info(`GlobalState: Skipped updating ${key} in storage. Local version '${storageKey.version}' and remote version '${version} are not same.`);
+		if (storageKey.version !== remoteValue.version) {
+			logService.info(`GlobalState: Skipped updating ${key} in storage. Local version '${storageKey.version}' and remote version '${remoteValue.version} are not same.`);
 			continue;
 		}
-		local.added[key] = remoteStorage[key];
+		const localValue = localStorage[key];
+		if (localValue && localValue.value === remoteValue.value) {
+			continue;
+		}
+		if (baseToLocal.added.has(key)) {
+			local.updated[key] = remoteValue;
+		} else {
+			local.added[key] = remoteValue;
+		}
 	}
 
 	// Updated in Remote
 	for (const key of values(baseToRemote.updated)) {
-		const { version } = remoteStorage[key];
+		const remoteValue = remoteStorage[key];
 		const storageKey = storageKeys.filter(storageKey => storageKey.key === key)[0];
 		if (!storageKey) {
 			logService.info(`GlobalState: Skipped updating ${key} in storage. It is not registered to sync.`);
 			continue;
 		}
-		if (storageKey.version !== version) {
-			logService.info(`GlobalState: Skipped updating ${key} in storage. Local version '${storageKey.version}' and remote version '${version} are not same.`);
+		if (storageKey.version !== remoteValue.version) {
+			logService.info(`GlobalState: Skipped updating ${key} in storage. Local version '${storageKey.version}' and remote version '${remoteValue.version} are not same.`);
+			continue;
+		}
+		const localValue = localStorage[key];
+		if (localValue && localValue.value === remoteValue.value) {
 			continue;
 		}
-		local.updated[key] = remoteStorage[key];
+		local.updated[key] = remoteValue;
 	}
 
 	// Removed in remote
@@ -99,7 +111,7 @@ export function merge(localStorage: IStringDictionary<IStorageValue>, remoteStor
 		}
 		const remoteValue = remote[key];
 		const storageKey = storageKeys.filter(storageKey => storageKey.key === key)[0];
-		if (storageKeys && storageKey.version < remoteValue.version) {
+		if (storageKey && storageKey.version < remoteValue.version) {
 			continue;
 		}
 		delete remote[key];
diff --git a/src/vs/platform/userDataSync/test/common/globalStateMerge.test.ts b/src/vs/platform/userDataSync/test/common/globalStateMerge.test.ts
new file mode 100644
index 0000000000000000000000000000000000000000..780a8750ee1d8fcc578ff914b91cc5f854a70737
--- /dev/null
+++ b/src/vs/platform/userDataSync/test/common/globalStateMerge.test.ts
@@ -0,0 +1,367 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import * as assert from 'assert';
+import { merge } from 'vs/platform/userDataSync/common/globalStateMerge';
+import { NullLogService } from 'vs/platform/log/common/log';
+
+suite('GlobalStateMerge', () => {
+
+	test('merge when local and remote are same with one value', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when local and remote are same with multiple entries', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when local and remote are same with multiple entries in different order', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when local and remote are same with different base content', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+		const base = { 'b': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a new entry is added to remote', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, { 'b': { version: 1, value: 'b' } });
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when multiple new entries are added to remote', async () => {
+		const local = {};
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } });
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when new entry is added to remote from base and local has not changed', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, local, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, { 'b': { version: 1, value: 'b' } });
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when an entry is removed from remote from base and local has not changed', async () => {
+		const local = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+		const remote = { 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, local, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, ['b']);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when all entries are removed from base and local has not changed', async () => {
+		const local = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+		const remote = {};
+
+		const actual = merge(local, remote, local, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, ['b', 'a']);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when an entry is updated in remote from base and local has not changed', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'a': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, local, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, { 'a': { version: 1, value: 'b' } });
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when remote has moved forwarded with multiple changes and local stays with base', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'a': { version: 1, value: 'd' }, 'c': { version: 1, value: 'c' } };
+
+		const actual = merge(local, remote, local, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, { 'c': { version: 1, value: 'c' } });
+		assert.deepEqual(actual.local.updated, { 'a': { version: 1, value: 'd' } });
+		assert.deepEqual(actual.local.removed, ['b']);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when new entries are added to local', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+	test('merge when multiple new entries are added to local from base and remote is not changed', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' }, 'c': { version: 1, value: 'c' } };
+		const remote = { 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, remote, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+	test('merge when an entry is removed from local from base and remote has not changed', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, remote, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+	test('merge when an entry is updated in local from base and remote has not changed', async () => {
+		const local = { 'a': { version: 1, value: 'b' } };
+		const remote = { 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, remote, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+	test('merge when local has moved forwarded with multiple changes and remote stays with base', async () => {
+		const local = { 'a': { version: 1, value: 'd' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'a': { version: 1, value: 'a' }, 'c': { version: 1, value: 'c' } };
+
+		const actual = merge(local, remote, remote, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+	test('merge when local and remote with one entry but different value', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'a': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, { 'a': { version: 1, value: 'b' } });
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when the entry is removed in remote but updated in local and a new entry is added in remote', async () => {
+		const base = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'd' } };
+		const remote = { 'a': { version: 1, value: 'a' }, 'c': { version: 1, value: 'c' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, { 'c': { version: 1, value: 'c' } });
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, ['b']);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge with single entry and local is empty', async () => {
+		const base = { 'a': { version: 1, value: 'a' } };
+		const local = {};
+		const remote = { 'a': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, { 'a': { version: 1, value: 'b' } });
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when local and remote has moved forwareded with conflicts', async () => {
+		const base = { 'a': { version: 1, value: 'a' } };
+		const local = { 'a': { version: 1, value: 'd' } };
+		const remote = { 'a': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }, { key: 'c', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, { 'a': { version: 1, value: 'b' } });
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a new entry is added to remote but not a registered key', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a new entry is added to remote but different version', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 2, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, null, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when an entry is updated to remote but not a registered key', async () => {
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'a': { version: 1, value: 'b' } };
+
+		const actual = merge(local, remote, local, [], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a new entry is updated to remote but different version', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const remote = { 'b': { version: 2, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, local, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a local value is update with lower version', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'c' } };
+		const remote = { 'b': { version: 2, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, remote, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a local value is update with higher version', async () => {
+		const local = { 'a': { version: 1, value: 'a' }, 'b': { version: 2, value: 'c' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, remote, [{ key: 'a', version: 1 }, { key: 'b', version: 2 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+	test('merge when a local value is removed but not registered', async () => {
+		const base = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 2, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a local value is removed with lower version', async () => {
+		const base = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 2, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }, { key: 'b', version: 1 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, null);
+	});
+
+	test('merge when a local value is removed with higher version', async () => {
+		const base = { 'a': { version: 1, value: 'a' }, 'b': { version: 1, value: 'b' } };
+		const local = { 'a': { version: 1, value: 'a' } };
+		const remote = { 'b': { version: 1, value: 'b' }, 'a': { version: 1, value: 'a' } };
+
+		const actual = merge(local, remote, base, [{ key: 'a', version: 1 }, { key: 'b', version: 2 }], new NullLogService());
+
+		assert.deepEqual(actual.local.added, {});
+		assert.deepEqual(actual.local.updated, {});
+		assert.deepEqual(actual.local.removed, []);
+		assert.deepEqual(actual.remote, local);
+	});
+
+});