diff --git a/extensions/git/src/iterators.ts b/extensions/git/src/iterators.ts
new file mode 100644
index 0000000000000000000000000000000000000000..3b0f741f31012fc296504558058bbfd30caca2cf
--- /dev/null
+++ b/extensions/git/src/iterators.ts
@@ -0,0 +1,57 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+'use strict';
+
+function* filter<T>(it: IterableIterator<T>, condition: (t: T, i: number) => boolean): IterableIterator<T> {
+	let i = 0;
+	for (let t of it) {
+		if (condition(t, i++)) {
+			yield t;
+		}
+	}
+}
+
+function* map<T, R>(it: IterableIterator<T>, fn: (t: T, i: number) => R): IterableIterator<R> {
+	let i = 0;
+	for (let t of it) {
+		yield fn(t, i++);
+	}
+}
+
+export interface FunctionalIterator<T> extends Iterable<T> {
+	filter(condition: (t: T, i: number) => boolean): FunctionalIterator<T>;
+	map<R>(fn: (t: T, i: number) => R): FunctionalIterator<R>;
+	toArray(): T[];
+}
+
+class FunctionalIteratorImpl<T> implements FunctionalIterator<T> {
+
+	constructor(private iterator: IterableIterator<T>) { }
+
+	filter(condition: (t: T, i: number) => boolean): FunctionalIterator<T> {
+		return new FunctionalIteratorImpl(filter(this.iterator, condition));
+	}
+
+	map<R>(fn: (t: T, i: number) => R): FunctionalIterator<R> {
+		return new FunctionalIteratorImpl(map<T, R>(this.iterator, fn));
+	}
+
+	toArray(): T[] {
+		return Array.from(this.iterator);
+	}
+
+	[Symbol.iterator](): IterableIterator<T> {
+		return this.iterator;
+	}
+}
+
+export function iterate<T>(obj: T[] | IterableIterator<T>): FunctionalIterator<T> {
+	if (Array.isArray(obj)) {
+		return new FunctionalIteratorImpl(obj[Symbol.iterator]());
+	}
+
+	return new FunctionalIteratorImpl(obj);
+}
\ No newline at end of file
diff --git a/extensions/git/src/main.ts b/extensions/git/src/main.ts
index 83fa024be5ee12d49dbaf421b09df4247aa2a03b..1df0364a6ad5dc6d3ef2e293606e2f6af106b5e6 100644
--- a/extensions/git/src/main.ts
+++ b/extensions/git/src/main.ts
@@ -14,6 +14,7 @@ import { CheckoutStatusBar, SyncStatusBar } from './statusbar';
 import { filterEvent, anyEvent } from './util';
 import { GitContentProvider } from './contentProvider';
 import { AutoFetcher } from './autofetch';
+import { MergeDecorator } from './merge';
 import * as nls from 'vscode-nls';
 
 const localize = nls.config()();
@@ -46,6 +47,7 @@ async function init(disposables: Disposable[]): Promise<void> {
 	const checkoutStatusBar = new CheckoutStatusBar(model);
 	const syncStatusBar = new SyncStatusBar(model);
 	const autoFetcher = new AutoFetcher(model);
+	const mergeDecorator = new MergeDecorator(model);
 
 	disposables.push(
 		commandCenter,
@@ -55,7 +57,8 @@ async function init(disposables: Disposable[]): Promise<void> {
 		fsWatcher,
 		checkoutStatusBar,
 		syncStatusBar,
-		autoFetcher
+		autoFetcher,
+		mergeDecorator
 	);
 }
 
diff --git a/extensions/git/src/merge.ts b/extensions/git/src/merge.ts
new file mode 100644
index 0000000000000000000000000000000000000000..1ac237c37483907455cc466d63023e2e8fad92dd
--- /dev/null
+++ b/extensions/git/src/merge.ts
@@ -0,0 +1,96 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+'use strict';
+
+import { window, workspace, Disposable, TextEditor, TextDocument, Range } from 'vscode';
+import { Model, Status } from './model';
+import { filterEvent } from './util';
+import { debounce } from './decorators';
+import { iterate } from './iterators';
+
+function* lines(document: TextDocument): IterableIterator<string> {
+	for (let i = 0; i < document.lineCount; i++) {
+		yield document.lineAt(i).text;
+	}
+}
+
+const pattern = /^<<<<<<<|^=======|^>>>>>>>/;
+
+function decorate(document: TextDocument): Range[] {
+	return iterate(lines(document))
+		.map((line, i) => pattern.test(line) ? i : null)
+		.filter(i => i !== null)
+		.map((i: number) => new Range(i, 1, i, 1))
+		.toArray();
+}
+
+class TextEditorMergeDecorator {
+
+	private static DecorationType = window.createTextEditorDecorationType({
+		backgroundColor: 'rgba(255, 139, 0, 0.3)',
+		isWholeLine: true,
+		dark: {
+			backgroundColor: 'rgba(235, 59, 0, 0.3)'
+		}
+	});
+
+	private uri: string;
+	private disposables: Disposable[] = [];
+
+	constructor(
+		private model: Model,
+		private editor: TextEditor
+	) {
+		this.uri = this.editor.document.uri.toString();
+
+		const onDidChange = filterEvent(workspace.onDidChangeTextDocument, e => e.document && e.document.uri.toString() === this.uri);
+		onDidChange(this.redecorate, this, this.disposables);
+		model.onDidChange(this.redecorate, this, this.disposables);
+
+		this.redecorate();
+	}
+
+	@debounce(300)
+	private redecorate(): void {
+		let decorations: Range[] = [];
+
+		if (window.visibleTextEditors.every(e => e !== this.editor)) {
+			this.dispose();
+			return;
+		}
+
+		if (this.model.mergeGroup.resources.some(r => r.type === Status.BOTH_MODIFIED && r.uri.toString() === this.uri)) {
+			decorations = decorate(this.editor.document);
+		}
+
+		this.editor.setDecorations(TextEditorMergeDecorator.DecorationType, decorations);
+	}
+
+	dispose(): void {
+		this.disposables.forEach(d => d.dispose());
+	}
+}
+
+export class MergeDecorator {
+
+	private textEditorDecorators: TextEditorMergeDecorator[] = [];
+	private disposables: Disposable[] = [];
+
+	constructor(private model: Model) {
+		window.onDidChangeVisibleTextEditors(this.onDidChangeVisibleTextEditors, this, this.disposables);
+		this.onDidChangeVisibleTextEditors(window.visibleTextEditors);
+	}
+
+	private onDidChangeVisibleTextEditors(editors: TextEditor[]): void {
+		this.textEditorDecorators.forEach(d => d.dispose());
+		this.textEditorDecorators = editors.map(e => new TextEditorMergeDecorator(this.model, e));
+	}
+
+	dispose(): void {
+		this.textEditorDecorators.forEach(d => d.dispose());
+		this.disposables.forEach(d => d.dispose());
+	}
+}