diff --git a/tests/run-tests.py b/tests/run-tests.py
--- a/tests/run-tests.py
+++ b/tests/run-tests.py
@@ -210,6 +210,22 @@
 # For Windows support
 wifexited = getattr(os, "WIFEXITED", lambda x: False)
 
+_unified_diff = difflib.unified_diff
+if PYTHON3:
+    import functools
+    _unified_diff = functools.partial(difflib.diff_bytes, difflib.unified_diff)
+
+try:
+    from mercurial import mdiff
+    # mdiff.new_diff may not be present if the mercurial version installed
+    # is not up to date hence this try block will throw exception AttributeError
+    # and if Mercurial itself is not installed in the system then it will throw
+    # an ImportError
+    _diff = mdiff.new_diff
+except (ImportError, AttributeError):
+    print("Falling back to unified_diff")
+    _diff = _unified_diff
+
 # Whether to use IPv6
 def checksocketfamily(name, port=20058):
     """return true if we can listen on localhost using family=name
@@ -598,15 +614,10 @@
             except OSError:
                 pass
 
-_unified_diff = difflib.unified_diff
-if PYTHON3:
-    import functools
-    _unified_diff = functools.partial(difflib.diff_bytes, difflib.unified_diff)
-
 def getdiff(expected, output, ref, err):
     servefail = False
     lines = []
-    for line in _unified_diff(expected, output, ref, err):
+    for line in _diff(expected, output, ref, err):
         if line.startswith(b'+++') or line.startswith(b'---'):
             line = line.replace(b'\\', b'/')
             if line.endswith(b' \n'):