diff --git a/mercurial/thirdparty/xdiff/xprepare.c b/mercurial/thirdparty/xdiff/xprepare.c
--- a/mercurial/thirdparty/xdiff/xprepare.c
+++ b/mercurial/thirdparty/xdiff/xprepare.c
@@ -157,13 +157,11 @@
 
 static int xdl_prepare_ctx(unsigned int pass, mmfile_t *mf, long narec, xpparam_t const *xpp,
 			   xdlclassifier_t *cf, xdfile_t *xdf) {
-	unsigned int hbits;
-	long nrec, hsize, bsize;
+	long nrec, bsize;
 	unsigned long hav;
 	char const *blk, *cur, *top, *prev;
 	xrecord_t *crec;
 	xrecord_t **recs, **rrecs;
-	xrecord_t **rhash;
 	unsigned long *ha;
 	char *rchg;
 	long *rindex;
@@ -171,7 +169,6 @@
 	ha = NULL;
 	rindex = NULL;
 	rchg = NULL;
-	rhash = NULL;
 	recs = NULL;
 
 	if (xdl_cha_init(&xdf->rcha, sizeof(xrecord_t), narec / 4 + 1) < 0)
@@ -179,14 +176,6 @@
 	if (!(recs = (xrecord_t **) xdl_malloc(narec * sizeof(xrecord_t *))))
 		goto abort;
 
-	{
-		hbits = xdl_hashbits((unsigned int) narec);
-		hsize = 1 << hbits;
-		if (!(rhash = (xrecord_t **) xdl_malloc(hsize * sizeof(xrecord_t *))))
-			goto abort;
-		memset(rhash, 0, hsize * sizeof(xrecord_t *));
-	}
-
 	nrec = 0;
 	if ((cur = blk = xdl_mmfile_first(mf, &bsize)) != NULL) {
 		for (top = blk + bsize; cur < top; ) {
@@ -204,9 +193,6 @@
 			crec->size = (long) (cur - prev);
 			crec->ha = hav;
 			recs[nrec++] = crec;
-
-			if (xdl_classify_record(pass, cf, rhash, hbits, crec) < 0)
-				goto abort;
 		}
 	}
 
@@ -221,8 +207,6 @@
 
 	xdf->nrec = nrec;
 	xdf->recs = recs;
-	xdf->hbits = hbits;
-	xdf->rhash = rhash;
 	xdf->rchg = rchg + 1;
 	xdf->rindex = rindex;
 	xdf->nreff = 0;
@@ -230,18 +214,53 @@
 	xdf->dstart = 0;
 	xdf->dend = nrec - 1;
 
+	/* use xdl_prepare_hashtable to set them */
+	xdf->hbits = 0;
+	xdf->rhash = NULL;
+
 	return 0;
 
 abort:
 	xdl_free(ha);
 	xdl_free(rindex);
 	xdl_free(rchg);
-	xdl_free(rhash);
 	xdl_free(recs);
 	xdl_cha_free(&xdf->rcha);
 	return -1;
 }
 
+/*
+ * Adjust hash values for records (lines) in a file so the hash values become
+ * unique. This makes future calculation faster - they can just compare "ha"
+ * instead of comparing line content.
+ */
+static int xdl_prepare_hashtable(unsigned int pass, mmfile_t *mf,
+		xpparam_t const *xpp, xdlclassifier_t *cf, xdfile_t *xdf) {
+	xrecord_t **rhash = NULL;
+	long nrec = xdf->nrec;
+	unsigned int hbits;
+	long hsize;
+	long i;
+
+	hbits = xdl_hashbits((unsigned int) nrec);
+	hsize = 1 << hbits;
+	if (!(rhash = (xrecord_t **) xdl_malloc(hsize * sizeof(xrecord_t *))))
+		goto abort;
+	memset(rhash, 0, hsize * sizeof(xrecord_t *));
+
+	for (i = 0; i < nrec; ++i) {
+		if (xdl_classify_record(pass, cf, rhash, hbits, xdf->recs[i]) < 0)
+			goto abort;
+	}
+
+	xdf->hbits = hbits;
+	xdf->rhash = rhash;
+
+	return 0;
+abort:
+	xdl_free(rhash);
+	return -1;
+}
 
 static void xdl_free_ctx(xdfile_t *xdf) {
 
@@ -288,6 +307,19 @@
 		return -1;
 	}
 
+	if (xdl_prepare_hashtable(1, mf1, xpp, &cf, &xe->xdf1) < 0) {
+		xdl_free_ctx(&xe->xdf1);
+		xdl_free_ctx(&xe->xdf2);
+		xdl_free_classifier(&cf);
+		return -1;
+	}
+	if (xdl_prepare_hashtable(2, mf2, xpp, &cf, &xe->xdf2) < 0) {
+		xdl_free_ctx(&xe->xdf1);
+		xdl_free_ctx(&xe->xdf2);
+		xdl_free_classifier(&cf);
+		return -1;
+	}
+
 	if (xdl_cleanup_records(&cf, &xe->xdf1, &xe->xdf2) < 0) {
 		xdl_free_ctx(&xe->xdf2);
 		xdl_free_ctx(&xe->xdf1);