26 files changed, 5019 insertions, 297 deletions

diff --git a/src/nvim/CMakeLists.txt b/src/nvim/CMakeLists.txt
index 29a4e1e163..a2c4e677d4 100644
--- a/src/nvim/CMakeLists.txt
+++ b/src/nvim/CMakeLists.txt
@@ -79,6 +79,8 @@ file(MAKE_DIRECTORY ${LINT_SUPPRESSES_ROOT}/src)
 
 file(GLOB NVIM_SOURCES *.c)
 file(GLOB NVIM_HEADERS *.h)
+file(GLOB XDIFF_SOURCES xdiff/*.c)
+file(GLOB XDIFF_HEADERS xdiff/*.h)
 
 foreach(subdir
         os
@@ -148,12 +150,13 @@ set(CONV_SOURCES
   syntax.c
   tag.c
   window.c)
-
 foreach(sfile ${CONV_SOURCES})
   if(NOT EXISTS "${CMAKE_CURRENT_LIST_DIR}/${sfile}")
     message(FATAL_ERROR "${sfile} doesn't exist (it was added to CONV_SOURCES)")
   endif()
 endforeach()
+# xdiff: inlined external project, we don't maintain it. #9306
+list(APPEND CONV_SOURCES ${XDIFF_SOURCES})
 
 if(NOT MSVC)
   set_source_files_properties(
@@ -404,7 +407,8 @@ if(POLICY CMP0069)
 endif()
 
 add_executable(nvim ${NVIM_GENERATED_FOR_SOURCES} ${NVIM_GENERATED_FOR_HEADERS}
-  ${NVIM_GENERATED_SOURCES} ${NVIM_SOURCES} ${NVIM_HEADERS})
+  ${NVIM_GENERATED_SOURCES} ${NVIM_SOURCES} ${NVIM_HEADERS}
+  ${XDIFF_SOURCES} ${XDIFF_HEADERS})
 target_link_libraries(nvim ${NVIM_EXEC_LINK_LIBRARIES})
 install_helper(TARGETS nvim)
 
@@ -490,6 +494,7 @@ add_library(
   EXCLUDE_FROM_ALL
   ${NVIM_SOURCES} ${NVIM_GENERATED_SOURCES}
   ${NVIM_HEADERS} ${NVIM_GENERATED_FOR_SOURCES} ${NVIM_GENERATED_FOR_HEADERS}
+  ${XDIFF_SOURCES} ${XDIFF_HEADERS}
 )
 set_property(TARGET libnvim APPEND PROPERTY
              INCLUDE_DIRECTORIES ${LUA_PREFERRED_INCLUDE_DIRS})
@@ -514,6 +519,7 @@ else()
     EXCLUDE_FROM_ALL
     ${NVIM_SOURCES} ${NVIM_GENERATED_SOURCES}
     ${NVIM_HEADERS} ${NVIM_GENERATED_FOR_SOURCES} ${NVIM_GENERATED_FOR_HEADERS}
+    ${XDIFF_SOURCES} ${XDIFF_HEADERS}
     ${UNIT_TEST_FIXTURES}
   )
   target_link_libraries(nvim-test ${NVIM_TEST_LINK_LIBRARIES})
diff --git a/src/nvim/auevents.lua b/src/nvim/auevents.lua
index a6290aaac1..ab92e84799 100644
--- a/src/nvim/auevents.lua
+++ b/src/nvim/auevents.lua
@@ -33,6 +33,7 @@ return {
     'CursorHoldI',            -- idem, in Insert mode
     'CursorMoved',            -- cursor was moved
     'CursorMovedI',           -- cursor was moved in Insert mode
+    'DiffUpdated',            -- diffs have been updated
     'DirChanged',             -- directory changed
     'EncodingChanged',        -- after changing the 'encoding' option
     'ExitPre',                -- before exiting
diff --git a/src/nvim/buffer_defs.h b/src/nvim/buffer_defs.h
index e86eaf010f..d270714611 100644
--- a/src/nvim/buffer_defs.h
+++ b/src/nvim/buffer_defs.h
@@ -58,10 +58,10 @@ typedef struct {
  * functions that set or reset the flags.
  *
  * VALID_BOTLINE    VALID_BOTLINE_AP
- *     on		on		w_botline valid
- *     off		on		w_botline approximated
- *     off		off		w_botline not valid
- *     on		off		not possible
+ *     on       on      w_botline valid
+ *     off      on      w_botline approximated
+ *     off      off     w_botline not valid
+ *     on       off     not possible
  */
 #define VALID_WROW      0x01    /* w_wrow (window row) is valid */
 #define VALID_WCOL      0x02    /* w_wcol (window col) is valid */
@@ -159,7 +159,7 @@ typedef struct {
   int wo_arab;
 # define w_p_arab w_onebuf_opt.wo_arab  /* 'arabic' */
   int wo_bri;
-# define w_p_bri w_onebuf_opt.wo_bri	/* 'breakindent' */
+# define w_p_bri w_onebuf_opt.wo_bri    // 'breakindent'
   char_u *wo_briopt;
 # define w_p_briopt w_onebuf_opt.wo_briopt /* 'breakindentopt' */
   int wo_diff;
@@ -412,13 +412,13 @@ typedef struct {
    * syntax state too often.
    * b_sst_array[] is allocated to hold the state for all displayed lines,
    * and states for 1 out of about 20 other lines.
-   * b_sst_array	pointer to an array of synstate_T
-   * b_sst_len	number of entries in b_sst_array[]
-   * b_sst_first	pointer to first used entry in b_sst_array[] or NULL
-   * b_sst_firstfree	pointer to first free entry in b_sst_array[] or NULL
-   * b_sst_freecount	number of free entries in b_sst_array[]
-   * b_sst_check_lnum	entries after this lnum need to be checked for
-   *			validity (MAXLNUM means no check needed)
+   * b_sst_array        pointer to an array of synstate_T
+   * b_sst_len          number of entries in b_sst_array[]
+   * b_sst_first        pointer to first used entry in b_sst_array[] or NULL
+   * b_sst_firstfree    pointer to first free entry in b_sst_array[] or NULL
+   * b_sst_freecount    number of free entries in b_sst_array[]
+   * b_sst_check_lnum   entries after this lnum need to be checked for
+   *                    validity (MAXLNUM means no check needed)
    */
   synstate_T  *b_sst_array;
   int b_sst_len;
@@ -475,15 +475,15 @@ struct file_buffer {
   int b_locked;                 // Buffer is being closed or referenced, don't
                                 // let autocommands wipe it out.
 
-  /*
-   * b_ffname has the full path of the file (NULL for no name).
-   * b_sfname is the name as the user typed it (or NULL).
-   * b_fname is the same as b_sfname, unless ":cd" has been done,
-   *		then it is the same as b_ffname (NULL for no name).
-   */
-  char_u      *b_ffname;        /* full path file name */
-  char_u      *b_sfname;        /* short file name */
-  char_u      *b_fname;         /* current file name */
+  //
+  // b_ffname   has the full path of the file (NULL for no name).
+  // b_sfname   is the name as the user typed it (or NULL).
+  // b_fname    is the same as b_sfname, unless ":cd" has been done,
+  //            then it is the same as b_ffname (NULL for no name).
+  //
+  char_u      *b_ffname;        // full path file name
+  char_u      *b_sfname;        // short file name
+  char_u      *b_fname;         // current file name
 
   bool file_id_valid;
   FileID file_id;
@@ -587,12 +587,12 @@ struct file_buffer {
 
   bool b_scanned;               /* ^N/^P have scanned this buffer */
 
-  /* flags for use of ":lmap" and IM control */
-  long b_p_iminsert;            /* input mode for insert */
-  long b_p_imsearch;            /* input mode for search */
-#define B_IMODE_USE_INSERT -1   /*	Use b_p_iminsert value for search */
-#define B_IMODE_NONE 0          /*	Input via none */
-#define B_IMODE_LMAP 1          /*	Input via langmap */
+  // flags for use of ":lmap" and IM control
+  long b_p_iminsert;            // input mode for insert
+  long b_p_imsearch;            // input mode for search
+#define B_IMODE_USE_INSERT -1   //  Use b_p_iminsert value for search
+#define B_IMODE_NONE 0          //  Input via none
+#define B_IMODE_LMAP 1          //  Input via langmap
 # define B_IMODE_LAST 1
 
   short b_kmap_state;           /* using "lmap" mappings */
@@ -760,7 +760,7 @@ struct file_buffer {
   /* Two special kinds of buffers:
    * help buffer  - used for help files, won't use a swap file.
    * spell buffer - used for spell info, never displayed and doesn't have a
-   *		      file name.
+   *                file name.
    */
   bool b_help;                  /* TRUE for help file buffer (when set b_p_bt
                                    is "help") */
@@ -787,6 +787,8 @@ struct file_buffer {
   // array of channelids which have asked to receive updates for this
   // buffer.
   kvec_t(uint64_t) update_channels;
+
+  int b_diff_failed;    // internal diff failed for this buffer
 };
 
 /*
@@ -840,6 +842,7 @@ struct tabpage_S {
   diff_T          *tp_first_diff;
   buf_T           *(tp_diffbuf[DB_COUNT]);
   int tp_diff_invalid;              ///< list of diffs is outdated
+  int tp_diff_update;               ///< update diffs before redrawing
   frame_T         *(tp_snapshot[SNAP_COUNT]);    ///< window layout snapshots
   ScopeDictDictItem tp_winvar;      ///< Variable for "t:" Dictionary.
   dict_T          *tp_vars;         ///< Internal variables, local to tab page.
@@ -916,9 +919,9 @@ typedef struct {
 /// Same as lpos_T, but with additional field len.
 typedef struct
 {
-    linenr_T    lnum;	///< line number
-    colnr_T     col;	///< column number
-    int         len;	///< length: 0 - to the end of line
+    linenr_T    lnum;   ///< line number
+    colnr_T     col;    ///< column number
+    int         len;    ///< length: 0 - to the end of line
 } llpos_T;
 
 /// posmatch_T provides an array for storing match items for matchaddpos()
@@ -926,10 +929,10 @@ typedef struct
 typedef struct posmatch posmatch_T;
 struct posmatch
 {
-    llpos_T     pos[MAXPOSMATCH];	///< array of positions
-    int         cur;			///< internal position counter 
-    linenr_T    toplnum;		///< top buffer line
-    linenr_T    botlnum;		///< bottom buffer line
+    llpos_T     pos[MAXPOSMATCH];   ///< array of positions
+    int         cur;                ///< internal position counter
+    linenr_T    toplnum;            ///< top buffer line
+    linenr_T    botlnum;            ///< bottom buffer line
 };
 
 /*
@@ -1036,7 +1039,7 @@ struct window_S {
    * Recomputing is minimized by storing the result of computations.
    * Use functions in screen.c to check if they are valid and to update.
    * w_valid is a bitfield of flags, which indicate if specific values are
-   * valid or need to be recomputed.	
+   * valid or need to be recomputed.
    */
   int w_valid;
   pos_T w_valid_cursor;             /* last known position of w_cursor, used
diff --git a/src/nvim/diff.c b/src/nvim/diff.c
index 4bfe67c9d3..2e0b198c13 100644
--- a/src/nvim/diff.c
+++ b/src/nvim/diff.c
@@ -4,11 +4,17 @@
 /// @file diff.c
 ///
 /// Code for diff'ing two, three or four buffers.
+///
+/// There are three ways to diff:
+/// - Shell out to an external diff program, using files.
+/// - Use the compiled-in xdiff library.
+/// - Let 'diffexpr' do the work, using files.
 
 #include <inttypes.h>
 #include <stdbool.h>
 
 #include "nvim/vim.h"
+#include "xdiff/xdiff.h"
 #include "nvim/ascii.h"
 #include "nvim/diff.h"
 #include "nvim/buffer.h"
@@ -36,16 +42,24 @@
 #include "nvim/os/os.h"
 #include "nvim/os/shell.h"
 
-static int diff_busy = FALSE;    // ex_diffgetput() is busy
+static int diff_busy = false;         // using diff structs, don't change them
+static int diff_need_update = false;  // ex_diffupdate needs to be called
 
 // Flags obtained from the 'diffopt' option
-#define DIFF_FILLER     1        // display filler lines
-#define DIFF_ICASE      2        // ignore case
-#define DIFF_IWHITE     4        // ignore change in white space
-#define DIFF_HORIZONTAL 8        // horizontal splits
-#define DIFF_VERTICAL   16       // vertical splits
-#define DIFF_HIDDEN_OFF 32       // diffoff when hidden
-static int diff_flags = DIFF_FILLER;
+#define DIFF_FILLER     0x001   // display filler lines
+#define DIFF_IBLANK     0x002   // ignore empty lines
+#define DIFF_ICASE      0x004   // ignore case
+#define DIFF_IWHITE     0x008   // ignore change in white space
+#define DIFF_IWHITEALL  0x010   // ignore all white space changes
+#define DIFF_IWHITEEOL  0x020   // ignore change in white space at EOL
+#define DIFF_HORIZONTAL 0x040   // horizontal splits
+#define DIFF_VERTICAL   0x080   // vertical splits
+#define DIFF_HIDDEN_OFF 0x100   // diffoff when hidden
+#define DIFF_INTERNAL   0x200   // use internal xdiff algorithm
+#define ALL_WHITE_DIFF (DIFF_IWHITE | DIFF_IWHITEALL | DIFF_IWHITEEOL)
+static int diff_flags = DIFF_INTERNAL | DIFF_FILLER;
+
+static long diff_algorithm = 0;
 
 #define LBUFLEN 50               // length of line in diff file
 
@@ -53,6 +67,25 @@ static int diff_flags = DIFF_FILLER;
 // kNone when not checked yet
 static TriState diff_a_works = kNone;
 
+// used for diff input
+typedef struct {
+    char_u   *din_fname;   // used for external diff
+    mmfile_t  din_mmfile;  // used for internal diff
+} diffin_T;
+
+// used for diff result
+typedef struct {
+    char_u   *dout_fname;  // used for external diff
+    garray_T  dout_ga;     // used for internal diff
+} diffout_T;
+
+// two diff inputs and one result
+typedef struct {
+    diffin_T    dio_orig;      // original file input
+    diffin_T    dio_new;       // new file input
+    diffout_T   dio_diff;      // diff result
+    int         dio_internal;  // using internal diff
+} diffio_T;
 
 #ifdef INCLUDE_GENERATED_DECLARATIONS
 # include "diff.c.generated.h"
@@ -68,10 +101,10 @@ void diff_buf_delete(buf_T *buf)
 
     if (i != DB_COUNT) {
       tp->tp_diffbuf[i] = NULL;
-      tp->tp_diff_invalid = TRUE;
+      tp->tp_diff_invalid = true;
 
       if (tp == curtab) {
-        diff_redraw(TRUE);
+        diff_redraw(true);
       }
     }
   }
@@ -98,8 +131,8 @@ void diff_buf_adjust(win_T *win)
       int i = diff_buf_idx(win->w_buffer);
       if (i != DB_COUNT) {
         curtab->tp_diffbuf[i] = NULL;
-        curtab->tp_diff_invalid = TRUE;
-        diff_redraw(TRUE);
+        curtab->tp_diff_invalid = true;
+        diff_redraw(true);
       }
     }
   } else {
@@ -127,8 +160,8 @@ void diff_buf_add(buf_T *buf)
   for (i = 0; i < DB_COUNT; ++i) {
     if (curtab->tp_diffbuf[i] == NULL) {
       curtab->tp_diffbuf[i] = buf;
-      curtab->tp_diff_invalid = TRUE;
-      diff_redraw(TRUE);
+      curtab->tp_diff_invalid = true;
+      diff_redraw(true);
       return;
     }
   }
@@ -192,9 +225,9 @@ void diff_invalidate(buf_T *buf)
   FOR_ALL_TABS(tp) {
     int i = diff_buf_idx_tp(buf, tp);
     if (i != DB_COUNT) {
-      tp->tp_diff_invalid = TRUE;
+      tp->tp_diff_invalid = true;
       if (tp == curtab) {
-        diff_redraw(TRUE);
+        diff_redraw(true);
       }
     }
   }
@@ -234,6 +267,15 @@ void diff_mark_adjust(linenr_T line1, linenr_T line2, long amount,
 static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
                                 linenr_T line2, long amount, long amount_after)
 {
+  if (diff_internal()) {
+    // Will update diffs before redrawing.  Set _invalid to update the
+    // diffs themselves, set _update to also update folds properly just
+    // before redrawing.
+    // Do update marks here, it is needed for :%diffput.
+    tp->tp_diff_invalid = true;
+    tp->tp_diff_update = true;
+  }
+
   int inserted;
   int deleted;
   if (line2 == MAXLNUM) {
@@ -293,14 +335,14 @@ static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
 
     //
     // Check for these situations:
-    //	  1  2	3
-    //	  1  2	3
-    // line1     2	3  4  5
-    //	     2	3  4  5
-    //	     2	3  4  5
-    // line2     2	3  4  5
-    //		3     5  6
-    //		3     5  6
+    //    1  2  3
+    //    1  2  3
+    // line1     2  3  4  5
+    //       2  3  4  5
+    //       2  3  4  5
+    // line2     2  3  4  5
+    //      3     5  6
+    //      3     5  6
 
     // compute last line of this change
     last = dp->df_lnum[idx] + dp->df_count[idx] - 1;
@@ -316,7 +358,7 @@ static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
         }
         dp->df_lnum[idx] += amount_after;
       } else {
-        int check_unchanged = FALSE;
+        int check_unchanged = false;
 
         // 2. 3. 4. 5.: inserted/deleted lines touching this diff.
         if (deleted > 0) {
@@ -341,7 +383,7 @@ static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
               // 5. delete lines at or just before top of diff
               n = off;
               dp->df_count[idx] -= line2 - dp->df_lnum[idx] + 1;
-              check_unchanged = TRUE;
+              check_unchanged = true;
             }
             dp->df_lnum[idx] = line1;
           } else {
@@ -361,7 +403,7 @@ static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
               } else {
                 n = line2 - last;
               }
-              check_unchanged = TRUE;
+              check_unchanged = true;
             } else {
               // 3. delete lines inside the diff
               n = 0;
@@ -380,7 +422,7 @@ static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
           if (dp->df_lnum[idx] <= line1) {
             // inserted lines somewhere in this diff
             dp->df_count[idx] += inserted;
-            check_unchanged = TRUE;
+            check_unchanged = true;
           } else {
             // inserted lines somewhere above this diff
             dp->df_lnum[idx] += inserted;
@@ -447,12 +489,12 @@ static void diff_mark_adjust_tp(tabpage_T *tp, int idx, linenr_T line1,
   }
 
   if (tp == curtab) {
-    diff_redraw(TRUE);
+    diff_redraw(true);
 
     // Need to recompute the scroll binding, may remove or add filler
     // lines (e.g., when adding lines above w_topline). But it's slow when
     // making many changes, postpone until redrawing.
-    diff_need_scrollbind = TRUE;
+    diff_need_scrollbind = true;
   }
 }
 
@@ -519,7 +561,7 @@ static void diff_check_unchanged(tabpage_T *tp, diff_T *dp)
       }
       char_u *line_org = vim_strsave(ml_get_buf(tp->tp_diffbuf[i_org],
                                                 dp->df_lnum[i_org] + off_org,
-                                                FALSE));
+                                                false));
 
       int i_new;
       for (i_new = i_org + 1; i_new < DB_COUNT; ++i_new) {
@@ -538,7 +580,7 @@ static void diff_check_unchanged(tabpage_T *tp, diff_T *dp)
 
         if (diff_cmp(line_org, ml_get_buf(tp->tp_diffbuf[i_new],
                                           dp->df_lnum[i_new] + off_new,
-                                          FALSE)) != 0) {
+                                          false)) != 0) {
           break;
         }
       }
@@ -612,42 +654,243 @@ static void diff_redraw(int dofold)
       } else if ((n > 0) && (n > wp->w_topfill)) {
         wp->w_topfill = n;
       }
-      check_topfill(wp, FALSE);
+      check_topfill(wp, false);
+    }
+  }
+}
+
+static void clear_diffin(diffin_T *din)
+{
+  if (din->din_fname == NULL) {
+    xfree(din->din_mmfile.ptr);
+    din->din_mmfile.ptr = NULL;
+  } else {
+    os_remove((char *)din->din_fname);
+  }
+}
+
+static void clear_diffout(diffout_T *dout)
+{
+  if (dout->dout_fname == NULL) {
+    ga_clear_strings(&dout->dout_ga);
+  } else {
+    os_remove((char *)dout->dout_fname);
+  }
+}
+
+/// Write buffer "buf" to a memory buffer.
+///
+/// @param buf
+/// @param din
+///
+/// @return FAIL for failure.
+static int diff_write_buffer(buf_T *buf, diffin_T *din)
+{
+  linenr_T   lnum;
+  char_u    *s;
+  long       len = 0;
+  char_u    *ptr;
+
+  // xdiff requires one big block of memory with all the text.
+  for (lnum = 1; lnum <= buf->b_ml.ml_line_count; lnum++) {
+    len += (long)STRLEN(ml_get_buf(buf, lnum, false)) + 1;
+  }
+  ptr = xmalloc(len);
+  if (ptr == NULL) {
+    // Allocating memory failed.  This can happen, because we try to read
+    // the whole buffer text into memory.  Set the failed flag, the diff
+    // will be retried with external diff.  The flag is never reset.
+    buf->b_diff_failed = true;
+    if (p_verbose > 0) {
+      verbose_enter();
+      smsg(_("Not enough memory to use internal diff for buffer \"%s\""),
+           buf->b_fname);
+      verbose_leave();
+    }
+    return FAIL;
+  }
+  din->din_mmfile.ptr = (char *)ptr;
+  din->din_mmfile.size = len;
+
+  len = 0;
+  for (lnum = 1; lnum <= buf->b_ml.ml_line_count; lnum++) {
+    for (s = ml_get_buf(buf, lnum, false); *s != NUL; ) {
+      if (diff_flags & DIFF_ICASE) {
+        int c;
+
+        // xdiff doesn't support ignoring case, fold-case the text.
+        int     orig_len;
+        char_u  cbuf[MB_MAXBYTES + 1];
+
+        c = PTR2CHAR(s);
+        c = enc_utf8 ? utf_fold(c) : TOLOWER_LOC(c);
+        orig_len = MB_PTR2LEN(s);
+        if (utf_char2bytes(c, cbuf) != orig_len) {
+          // TODO(Bram): handle byte length difference
+          memmove(ptr + len, s, orig_len);
+        } else {
+          memmove(ptr + len, cbuf, orig_len);
+        }
+
+        s += orig_len;
+        len += orig_len;
+      } else {
+        ptr[len++] = *s++;
+      }
     }
+    ptr[len++] = NL;
   }
+  return OK;
 }
 
-/// Write buffer "buf" to file "name".
+/// Write buffer "buf" to file or memory buffer.
 ///
 /// Always use 'fileformat' set to "unix".
 ///
 /// @param buf
-/// @param fname
+/// @param din
 ///
 /// @return FAIL for failure
-static int diff_write(buf_T *buf, char_u *fname)
+static int diff_write(buf_T *buf, diffin_T *din)
 {
+  if (din->din_fname == NULL) {
+    return diff_write_buffer(buf, din);
+  }
+
+  // Always use 'fileformat' set to "unix".
   char_u *save_ff = buf->b_p_ff;
   buf->b_p_ff = vim_strsave((char_u *)FF_UNIX);
-  int r = buf_write(buf, fname, NULL, (linenr_T)1, buf->b_ml.ml_line_count,
-                    NULL, FALSE, FALSE, FALSE, TRUE);
+  int r = buf_write(buf, din->din_fname, NULL,
+                    (linenr_T)1, buf->b_ml.ml_line_count,
+                    NULL, false, false, false, true);
   free_string_option(buf->b_p_ff);
   buf->b_p_ff = save_ff;
   return r;
 }
 
+///
+/// Update the diffs for all buffers involved.
+///
+/// @param dio
+/// @param idx_orig
+/// @param eap   can be NULL
+static void diff_try_update(diffio_T    *dio,
+                            int     idx_orig,
+                            exarg_T     *eap)
+{
+  buf_T *buf;
+  int    idx_new;
+
+  if (dio->dio_internal) {
+    ga_init(&dio->dio_diff.dout_ga, sizeof(char *), 1000);
+  } else {
+    // We need three temp file names.
+    dio->dio_orig.din_fname = vim_tempname();
+    dio->dio_new.din_fname = vim_tempname();
+    dio->dio_diff.dout_fname = vim_tempname();
+    if (dio->dio_orig.din_fname == NULL
+        || dio->dio_new.din_fname == NULL
+        || dio->dio_diff.dout_fname == NULL) {
+      goto theend;
+    }
+  }
+
+  // Check external diff is actually working.
+  if (!dio->dio_internal && check_external_diff(dio) == FAIL) {
+    goto theend;
+  }
+
+  // :diffupdate!
+  if (eap != NULL && eap->forceit) {
+    for (idx_new = idx_orig; idx_new < DB_COUNT; idx_new++) {
+      buf = curtab->tp_diffbuf[idx_new];
+      if (buf_valid(buf)) {
+        buf_check_timestamp(buf, false);
+      }
+    }
+  }
+
+  // Write the first buffer to a tempfile or mmfile_t.
+  buf = curtab->tp_diffbuf[idx_orig];
+  if (diff_write(buf, &dio->dio_orig) == FAIL) {
+    goto theend;
+  }
+
+  // Make a difference between the first buffer and every other.
+  for (idx_new = idx_orig + 1; idx_new < DB_COUNT; idx_new++) {
+    buf = curtab->tp_diffbuf[idx_new];
+    if (buf == NULL || buf->b_ml.ml_mfp == NULL) {
+      continue;  // skip buffer that isn't loaded
+    }
+
+    // Write the other buffer and diff with the first one.
+    if (diff_write(buf, &dio->dio_new) == FAIL) {
+      continue;
+    }
+    if (diff_file(dio) == FAIL) {
+      continue;
+    }
+
+    // Read the diff output and add each entry to the diff list.
+    diff_read(idx_orig, idx_new, &dio->dio_diff);
+
+    clear_diffin(&dio->dio_new);
+    clear_diffout(&dio->dio_diff);
+  }
+  clear_diffin(&dio->dio_orig);
+
+theend:
+  xfree(dio->dio_orig.din_fname);
+  xfree(dio->dio_new.din_fname);
+  xfree(dio->dio_diff.dout_fname);
+}
+
+///
+/// Return true if the options are set to use the internal diff library.
+/// Note that if the internal diff failed for one of the buffers, the external
+/// diff will be used anyway.
+///
+int diff_internal(void)
+{
+  return (diff_flags & DIFF_INTERNAL) != 0 && *p_dex == NUL;
+}
+
+///
+/// Return true if the internal diff failed for one of the diff buffers.
+///
+static int diff_internal_failed(void)
+{
+  int idx;
+
+  // Only need to do something when there is another buffer.
+  for (idx = 0; idx < DB_COUNT; idx++) {
+    if (curtab->tp_diffbuf[idx] != NULL
+        && curtab->tp_diffbuf[idx]->b_diff_failed) {
+      return true;
+    }
+  }
+  return false;
+}
+
 /// Completely update the diffs for the buffers involved.
 ///
-/// This uses the ordinary "diff" command.
-/// The buffers are written to a file, also for unmodified buffers (the file
-/// could have been produced by autocommands, e.g. the netrw plugin).
+/// When using the external "diff" command the buffers are written to a file,
+/// also for unmodified buffers (the file could have been produced by
+/// autocommands, e.g. the netrw plugin).
 ///
 /// @param eap can be NULL
 void ex_diffupdate(exarg_T *eap)
 {
+  if (diff_busy) {
+    diff_need_update = true;
+    return;
+  }
+
+  int had_diffs = curtab->tp_first_diff != NULL;
+
   // Delete all diffblocks.
   diff_clear(curtab);
-  curtab->tp_diff_invalid = FALSE;
+  curtab->tp_diff_invalid = false;
 
   // Use the first buffer as the original text.
   int idx_orig;
@@ -658,7 +901,7 @@ void ex_diffupdate(exarg_T *eap)
   }
 
   if (idx_orig == DB_COUNT) {
-    return;
+    goto theend;
   }
 
   // Only need to do something when there is another buffer.
@@ -670,49 +913,70 @@ void ex_diffupdate(exarg_T *eap)
   }
 
   if (idx_new == DB_COUNT) {
-    return;
+    goto theend;
   }
 
-  // We need three temp file names.
-  char *tmp_orig = (char *) vim_tempname();
-  char *tmp_new = (char *) vim_tempname();
-  char *tmp_diff = (char *) vim_tempname();
+  // Only use the internal method if it did not fail for one of the buffers.
+  diffio_T  diffio;
+  memset(&diffio, 0, sizeof(diffio));
+  diffio.dio_internal = diff_internal() && !diff_internal_failed();
 
-  if ((tmp_orig == NULL) || (tmp_new == NULL) || (tmp_diff == NULL)) {
-    goto theend;
+  diff_try_update(&diffio, idx_orig, eap);
+  if (diffio.dio_internal && diff_internal_failed()) {
+    // Internal diff failed, use external diff instead.
+    memset(&diffio, 0, sizeof(diffio));
+    diff_try_update(&diffio, idx_orig, eap);
+  }
+
+  // force updating cursor position on screen
+  curwin->w_valid_cursor.lnum = 0;
+
+theend:
+  // A redraw is needed if there were diffs and they were cleared, or there
+  // are diffs now, which means they got updated.
+  if (had_diffs || curtab->tp_first_diff != NULL) {
+    diff_redraw(true);
+    apply_autocmds(EVENT_DIFFUPDATED, NULL, NULL, false, curbuf);
   }
+}
 
-  // Do a quick test if "diff" really works.  Otherwise it looks like there
-  // are no differences.  Can't use the return value, it's non-zero when
-  // there are differences.
+///
+/// Do a quick test if "diff" really works.  Otherwise it looks like there
+/// are no differences.  Can't use the return value, it's non-zero when
+/// there are differences.
+///
+static int check_external_diff(diffio_T *diffio)
+{
   // May try twice, first with "-a" and then without.
   int io_error = false;
   TriState ok = kFalse;
   for (;;) {
     ok = kFalse;
-    FILE *fd = mch_fopen(tmp_orig, "w");
+    FILE *fd = mch_fopen((char *)diffio->dio_orig.din_fname, "w");
 
     if (fd == NULL) {
-      io_error = TRUE;
+      io_error = true;
     } else {
       if (fwrite("line1\n", (size_t)6, (size_t)1, fd) != 1) {
-        io_error = TRUE;
+        io_error = true;
       }
       fclose(fd);
-      fd = mch_fopen(tmp_new, "w");
+      fd = mch_fopen((char *)diffio->dio_new.din_fname, "w");
 
       if (fd == NULL) {
-        io_error = TRUE;
+        io_error = true;
       } else {
         if (fwrite("line2\n", (size_t)6, (size_t)1, fd) != 1) {
-          io_error = TRUE;
+          io_error = true;
         }
         fclose(fd);
-        diff_file(tmp_orig, tmp_new, tmp_diff);
-        fd = mch_fopen(tmp_diff, "r");
+        fd = NULL;
+        if (diff_file(diffio) == OK) {
+          fd = mch_fopen((char *)diffio->dio_diff.dout_fname, "r");
+        }
 
         if (fd == NULL) {
-          io_error = TRUE;
+          io_error = true;
         } else {
           char_u linebuf[LBUFLEN];
 
@@ -728,10 +992,10 @@ void ex_diffupdate(exarg_T *eap)
           }
           fclose(fd);
         }
-        os_remove(tmp_diff);
-        os_remove(tmp_new);
+        os_remove((char *)diffio->dio_diff.dout_fname);
+        os_remove((char *)diffio->dio_new.din_fname);
       }
-      os_remove(tmp_orig);
+      os_remove((char *)diffio->dio_orig.din_fname);
     }
 
     // When using 'diffexpr' break here.
@@ -757,83 +1021,92 @@ void ex_diffupdate(exarg_T *eap)
     }
     EMSG(_("E97: Cannot create diffs"));
     diff_a_works = kNone;
-    goto theend;
-  }
-
-  // :diffupdate!
-  if ((eap != NULL) && eap->forceit) {
-    for (idx_new = idx_orig; idx_new < DB_COUNT; ++idx_new) {
-      buf_T *buf = curtab->tp_diffbuf[idx_new];
-      if (buf_valid(buf)) {
-        buf_check_timestamp(buf, FALSE);
-      }
-    }
+    return FAIL;
   }
+  return OK;
+}
 
-  // Write the first buffer to a tempfile.
-  buf_T *buf = curtab->tp_diffbuf[idx_orig];
-  if (diff_write(buf, (char_u *) tmp_orig) == FAIL) {
-    goto theend;
-  }
+///
+/// Invoke the xdiff function.
+///
+static int diff_file_internal(diffio_T *diffio)
+{
+  xpparam_t     param;
+  xdemitconf_t    emit_cfg;
+  xdemitcb_t        emit_cb;
 
-  // Make a difference between the first buffer and every other.
-  for (idx_new = idx_orig + 1; idx_new < DB_COUNT; ++idx_new) {
-    buf_T *buf = curtab->tp_diffbuf[idx_new];
-    if (buf == NULL || buf->b_ml.ml_mfp == NULL) {
-      continue;  // skip buffer that isn't loaded
-    }
+  memset(&param, 0, sizeof(param));
+  memset(&emit_cfg, 0, sizeof(emit_cfg));
+  memset(&emit_cb, 0, sizeof(emit_cb));
 
-    if (diff_write(buf, (char_u *) tmp_new) == FAIL) {
-      continue;
-    }
-