diff --git a/mercurial/mdiff.py b/mercurial/mdiff.py
--- a/mercurial/mdiff.py
+++ b/mercurial/mdiff.py
@@ -57,13 +57,13 @@ class diffopts(object):
 
 defaultopts = diffopts()
 
-def wsclean(opts, text):
+def wsclean(opts, text, blank=True):
     if opts.ignorews:
         text = re.sub('[ \t]+', '', text)
     elif opts.ignorewsamount:
         text = re.sub('[ \t]+', ' ', text)
         text = re.sub('[ \t]+\n', '\n', text)
-    if opts.ignoreblanklines:
+    if blank and opts.ignoreblanklines:
         text = re.sub('\n+', '', text)
     return text
 
@@ -183,6 +183,10 @@ def bunidiff(t1, t2, l1, l2, header1, he
     # below finds the spaces between those matching sequences and translates
     # them into diff output.
     #
+    if opts.ignorews or opts.ignorewsamount:
+        t1 = wsclean(opts, t1, False)
+        t2 = wsclean(opts, t2, False)
+
     diff = bdiff.blocks(t1, t2)
     hunk = None
     for i, s1 in enumerate(diff):
@@ -208,7 +212,7 @@ def bunidiff(t1, t2, l1, l2, header1, he
         if not old and not new:
             continue
 
-        if opts.ignorews or opts.ignorewsamount or opts.ignoreblanklines:
+        if opts.ignoreblanklines:
             if wsclean(opts, "".join(old)) == wsclean(opts, "".join(new)):
                 continue
 
diff --git a/tests/test-diff-ignore-whitespace.out b/tests/test-diff-ignore-whitespace.out
--- a/tests/test-diff-ignore-whitespace.out
+++ b/tests/test-diff-ignore-whitespace.out
@@ -181,11 +181,9 @@ diff -r 540c40a65b78 foo
 --- a/foo
 +++ b/foo
 @@ -1,2 +1,3 @@
--hello world
--goodbye world
-+hello  world
+ hello world
 + 	
-+goodbye world 
+ goodbye world
 hg diff -Bb
 >>> four diffs showing changed whitespace <<<
 hg diff
@@ -212,18 +210,16 @@ diff -r 540c40a65b78 foo
 +++ b/foo
 @@ -1,2 +1,2 @@
 -hello world
--goodbye world
 +helloworld
-+goodbye	world 
+ goodbye world
 hg diff -Bb
 diff -r 540c40a65b78 foo
 --- a/foo
 +++ b/foo
 @@ -1,2 +1,2 @@
 -hello world
--goodbye world
 +helloworld
-+goodbye	world 
+ goodbye world
 hg diff -w
 >>> five diffs showing changed whitespace <<<
 hg diff
@@ -256,34 +252,30 @@ diff -r 540c40a65b78 foo
 +++ b/foo
 @@ -1,2 +1,5 @@
 -hello world
--goodbye world
 +helloworld
 +
 +
 +
-+goodbye	world 
+ goodbye world
 hg diff -Bb
 diff -r 540c40a65b78 foo
 --- a/foo
 +++ b/foo
 @@ -1,2 +1,5 @@
 -hello world
--goodbye world
 +helloworld
 +
 +
 +
-+goodbye	world 
+ goodbye world
 hg diff -w
 diff -r 540c40a65b78 foo
 --- a/foo
 +++ b/foo
 @@ -1,2 +1,5 @@
--hello world
--goodbye world
-+helloworld
+ hello world
 +
 +
 +
-+goodbye	world 
+ goodbye world
 hg diff -wB
diff --git a/tests/test-mq-qdiff.out b/tests/test-mq-qdiff.out
--- a/tests/test-mq-qdiff.out
+++ b/tests/test-mq-qdiff.out
@@ -58,9 +58,8 @@ diff -r 35fb829491c1 lines
  2
  3
  4
--hello world
+ hello world
 -goodbye world
-+hello  world
 +     goodbye world
  7
  8