diff --git a/mercurial/diffhelpers.c b/mercurial/diffhelpers.c
--- a/mercurial/diffhelpers.c
+++ b/mercurial/diffhelpers.c
@@ -22,6 +22,9 @@ static void _fix_newline(PyObject *hunk,
 	PyObject *s = PyList_GET_ITEM(hunk, hunksz-1);
 	char *l = PyString_AS_STRING(s);
 	int sz = PyString_GET_SIZE(s);
+	if (sz > 1 && l[sz-2] == '\r')
+	        /* tolerate CRLF in last line */
+	        sz -= 1;
 	int alen = PyList_Size(a);
 	int blen = PyList_Size(b);
 	char c = l[0];
diff --git a/tests/test-mq-eol b/tests/test-mq-eol
--- a/tests/test-mq-eol
+++ b/tests/test-mq-eol
@@ -20,7 +20,7 @@ w(' c\r\n')
 w(' d\n')
 w('-e\n')
 w('\ No newline at end of file\n')
-w('+z\n')
+w('+z\r\n')
 w('\ No newline at end of file\r\n')
 EOF