diff --git a/src/main.c b/src/main.c
index ca8de17..3209183 100644
--- a/src/main.c
+++ b/src/main.c
@@ -416,13 +416,8 @@
     TIME_MSG("expanding arguments");
 
 #ifdef FEAT_DIFF
-    if (params.diff_mode)
-    {
-	if (params.window_count == -1)
-	    params.window_count = 0;	/* open up to 3 windows */
-	if (params.window_layout == 0)
-	    params.window_layout = WIN_VER;	/* use vertical split */
-    }
+    if (params.diff_mode && params.window_count == -1)
+	params.window_count = 0;	/* open up to 3 windows */
 #endif
 
     /* Don't redraw until much later. */
@@ -556,6 +551,17 @@
     }
 #endif
 
+#ifdef FEAT_DIFF
+    /* Decide about window layout for diff mode after reading vimrc. */
+    if (params.diff_mode && params.window_layout == 0)
+    {
+	if (diffopt_horizontal())
+	    params.window_layout = WIN_HOR;	/* use horizontal split */
+	else
+	    params.window_layout = WIN_VER;	/* use vertical split */
+    }
+#endif
+
     /*
      * Recovery mode without a file name: List swap files.
      * This uses the 'dir' option, therefore it must be after the
@@ -1357,7 +1363,7 @@
 	disallow_gui = TRUE;
 
     /* TODO: On MacOS X default to gui if argv[0] ends in:
-     *       /vim.app/Contents/MacOS/Vim */
+     *       /Vim.app/Contents/MacOS/Vim */
 #endif
 
 #ifdef FEAT_EVAL