diff --git a/src/diff.c b/src/diff.c
index ceb73a6..9fb8726 100644
--- a/src/diff.c
+++ b/src/diff.c
@@ -777,9 +777,14 @@
 		int	orig_len;
 		char_u	cbuf[MB_MAXBYTES + 1];
 
-		// xdiff doesn't support ignoring case, fold-case the text.
-		c = PTR2CHAR(s);
-		c = MB_CASEFOLD(c);
+		if (*s == NL)
+		    c = NUL;
+		else
+		{
+		    // xdiff doesn't support ignoring case, fold-case the text.
+		    c = PTR2CHAR(s);
+		    c = MB_CASEFOLD(c);
+		}
 		orig_len = mb_ptr2len(s);
 		if (mb_char2bytes(c, cbuf) != orig_len)
 		    // TODO: handle byte length difference
@@ -791,7 +796,10 @@
 		len += orig_len;
 	    }
 	    else
-		ptr[len++] = *s++;
+	    {
+		ptr[len++] = *s == NL ? NUL : *s;
+		s++;
+	    }
 	}
 	ptr[len++] = NL;
     }
diff --git a/src/testdir/dumps/Test_diff_bin_01.dump b/src/testdir/dumps/Test_diff_bin_01.dump
new file mode 100644
index 0000000..a7d4cce
--- /dev/null
+++ b/src/testdir/dumps/Test_diff_bin_01.dump
@@ -0,0 +1,20 @@
+| +0#0000e05#a8a8a8255@1>A+2#0000000#ff404010| +0&#ffd7ff255@33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|a+2#0000000#ff404010| +0&#ffd7ff255@33
+| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255| @33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255|^+2#0000e05#ff404010|@| +0#0000000#ffd7ff255@31
+| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|E+2#0000000#ff404010| +0&#ffd7ff255@33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|e+2#0000000#ff404010| +0&#ffd7ff255@33
+| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33
+|~+0#4040ff13&| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|[+3#0000000&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1| |[+1&&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1
+| +0&&@74
diff --git a/src/testdir/dumps/Test_diff_bin_02.dump b/src/testdir/dumps/Test_diff_bin_02.dump
new file mode 100644
index 0000000..64ee1ac
--- /dev/null
+++ b/src/testdir/dumps/Test_diff_bin_02.dump
@@ -0,0 +1,20 @@
+| +0#0000e05#a8a8a8255@1>A+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|a+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255| @33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255|^+2#0000e05#ff404010|@| +0#0000000#ffd7ff255@31
+| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|E+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|e+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33
+|~+0#4040ff13&| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|[+3#0000000&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1| |[+1&&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1
+| +0&&@74
diff --git a/src/testdir/dumps/Test_diff_bin_03.dump b/src/testdir/dumps/Test_diff_bin_03.dump
new file mode 100644
index 0000000..a7d4cce
--- /dev/null
+++ b/src/testdir/dumps/Test_diff_bin_03.dump
@@ -0,0 +1,20 @@
+| +0#0000e05#a8a8a8255@1>A+2#0000000#ff404010| +0&#ffd7ff255@33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|a+2#0000000#ff404010| +0&#ffd7ff255@33
+| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255| @33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255|^+2#0000e05#ff404010|@| +0#0000000#ffd7ff255@31
+| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|E+2#0000000#ff404010| +0&#ffd7ff255@33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|e+2#0000000#ff404010| +0&#ffd7ff255@33
+| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33
+|~+0#4040ff13&| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|[+3#0000000&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1| |[+1&&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1
+| +0&&@74
diff --git a/src/testdir/dumps/Test_diff_bin_04.dump b/src/testdir/dumps/Test_diff_bin_04.dump
new file mode 100644
index 0000000..64ee1ac
--- /dev/null
+++ b/src/testdir/dumps/Test_diff_bin_04.dump
@@ -0,0 +1,20 @@
+| +0#0000e05#a8a8a8255@1>A+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|a+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|b+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255| @33||+1&#ffffff0| +0#0000e05#a8a8a8255@1|c+0#0000000#ffd7ff255|^+2#0000e05#ff404010|@| +0#0000000#ffd7ff255@31
+| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|d+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|E+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|e+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|f+0#0000000#ffffff0| @33
+| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33||+1&&| +0#0000e05#a8a8a8255@1|g+0#0000000#ffffff0| @33
+|~+0#4040ff13&| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|~| @35||+1#0000000&|~+0#4040ff13&| @35
+|[+3#0000000&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1| |[+1&&|N|o| |N|a|m|e|]| |[|+|]| @5|1|,|1| @11|A|l@1
+| +0&&@74
diff --git a/src/testdir/test_diffmode.vim b/src/testdir/test_diffmode.vim
index d4c44ce..e47928d 100644
--- a/src/testdir/test_diffmode.vim
+++ b/src/testdir/test_diffmode.vim
@@ -1417,4 +1417,41 @@
   %bw!
 endfunc
 
+func Test_diff_binary()
+  CheckScreendump
+
+  let content =<< trim END
+    call setline(1, ['a', 'b', "c\n", 'd', 'e', 'f', 'g'])
+    vnew
+    call setline(1, ['A', 'b', 'c', 'd', 'E', 'f', 'g'])
+    windo diffthis
+    wincmd p
+    norm! gg0
+    redraw!
+  END
+  call writefile(content, 'Xtest_diff_bin')
+  let buf = RunVimInTerminal('-S Xtest_diff_bin', {})
+
+  " Test using internal diff
+  call VerifyScreenDump(buf, 'Test_diff_bin_01', {})
+
+  " Test using internal diff and case folding
+  call term_sendkeys(buf, ":set diffopt+=icase\<cr>")
+  call term_sendkeys(buf, "\<C-l>")
+  call VerifyScreenDump(buf, 'Test_diff_bin_02', {})
+  " Test using external diff
+  call term_sendkeys(buf, ":set diffopt=filler\<cr>")
+  call term_sendkeys(buf, "\<C-l>")
+  call VerifyScreenDump(buf, 'Test_diff_bin_03', {})
+  " Test using external diff and case folding
+  call term_sendkeys(buf, ":set diffopt=filler,icase\<cr>")
+  call term_sendkeys(buf, "\<C-l>")
+  call VerifyScreenDump(buf, 'Test_diff_bin_04', {})
+
+  " clean up
+  call StopVimInTerminal(buf)
+  call delete('Xtest_diff_bin')
+  set diffopt&vim
+endfunc
+
 " vim: shiftwidth=2 sts=2 expandtab
diff --git a/src/version.c b/src/version.c
index 90bd422..60b1e5c 100644
--- a/src/version.c
+++ b/src/version.c
@@ -750,6 +750,8 @@
 static int included_patches[] =
 {   /* Add new patch number below this line */
 /**/
+    3925,
+/**/
     3924,
 /**/
     3923,