diff --git a/mercurial/filemerge.py b/mercurial/filemerge.py
--- a/mercurial/filemerge.py
+++ b/mercurial/filemerge.py
@@ -755,8 +755,7 @@
         # Remove the .orig to make syntax-highlighting more likely.
         if localoutputpath.endswith(b'.orig'):
             localoutputpath, ext = os.path.splitext(localoutputpath)
-        localdata = util.readfile(localpath)
-        files.append((b"local", localoutputpath, localdata))
+        files.append((b"local", localoutputpath, backup.data()))
 
     with _maketempfiles(files) as temppaths:
         basepath, otherpath = temppaths[:2]
diff --git a/tests/test-merge-tools.t b/tests/test-merge-tools.t
--- a/tests/test-merge-tools.t
+++ b/tests/test-merge-tools.t
@@ -1225,12 +1225,8 @@
   merging f
   revision 0
   space
-  <<<<<<< working copy: ef83787e2614 - test: revision 1 (known-bad-output !)
   revision 1
   space
-  ======= (known-bad-output !)
-  revision 4 (known-bad-output !)
-  >>>>>>> merge rev:    81448d39c9a0 - test: revision 4 (known-bad-output !)
   revision 4
   <<<<<<< working copy: ef83787e2614 - test: revision 1
   revision 1