diff --git a/combine-diff.c b/combine-diff.c
index b82f46cc60..1a6f9d1df5 100644
--- a/combine-diff.c
+++ b/combine-diff.c
@@ -164,20 +164,22 @@ static void consume_line(void *state_, char *line, unsigned long len)
 				      &state->nb, &state->nn))
 			return;
 		state->lno = state->nb;
-		if (!state->nb)
-			/* @@ -1,2 +0,0 @@ to remove the
-			 * first two lines...
-			 */
-			state->nb = 1;
-		if (state->nn == 0)
+		if (state->nn == 0) {
 			/* @@ -X,Y +N,0 @@ removed Y lines
 			 * that would have come *after* line N
 			 * in the result.  Our lost buckets hang
 			 * to the line after the removed lines,
+			 *
+			 * Note that this is correct even when N == 0,
+			 * in which case the hunk removes the first
+			 * line in the file.
 			 */
 			state->lost_bucket = &state->sline[state->nb];
-		else
+			if (!state->nb)
+				state->nb = 1;
+		} else {
 			state->lost_bucket = &state->sline[state->nb-1];
+		}
 		if (!state->sline[state->nb-1].p_lno)
 			state->sline[state->nb-1].p_lno =
 				xcalloc(state->num_parent,
diff --git a/t/t4038-diff-combined.sh b/t/t4038-diff-combined.sh
new file mode 100755
index 0000000000..2cf7e01ac2
--- /dev/null
+++ b/t/t4038-diff-combined.sh
@@ -0,0 +1,84 @@
+#!/bin/sh
+
+test_description='combined diff'
+
+. ./test-lib.sh
+
+setup_helper () {
+	one=$1 branch=$2 side=$3 &&
+
+	git branch $side $branch &&
+	for l in $one two three fyra
+	do
+		echo $l
+	done >file &&
+	git add file &&
+	test_tick &&
+	git commit -m $branch &&
+	git checkout $side &&
+	for l in $one two three quatro
+	do
+		echo $l
+	done >file &&
+	git add file &&
+	test_tick &&
+	git commit -m $side &&
+	test_must_fail git merge $branch &&
+	for l in $one three four
+	do
+		echo $l
+	done >file &&
+	git add file &&
+	test_tick &&
+	git commit -m "merge $branch into $side"
+}
+
+verify_helper () {
+	it=$1 &&
+
+	# Ignore lines that were removed only from the other parent
+	sed -e '
+		1,/^@@@/d
+		/^ -/d
+		s/^\(.\)./\1/
+	' "$it" >"$it.actual.1" &&
+	sed -e '
+		1,/^@@@/d
+		/^- /d
+		s/^.\(.\)/\1/
+	' "$it" >"$it.actual.2" &&
+
+	git diff "$it^" "$it" -- | sed -e '1,/^@@/d' >"$it.expect.1" &&
+	test_cmp "$it.expect.1" "$it.actual.1" &&
+
+	git diff "$it^2" "$it" -- | sed -e '1,/^@@/d' >"$it.expect.2" &&
+	test_cmp "$it.expect.2" "$it.actual.2"
+}
+
+test_expect_success setup '
+	>file &&
+	git add file &&
+	test_tick &&
+	git commit -m initial &&
+
+	git branch withone &&
+	git branch sansone &&
+
+	git checkout withone &&
+	setup_helper one withone sidewithone &&
+
+	git checkout sansone &&
+	setup_helper "" sansone sidesansone
+'
+
+test_expect_success 'check combined output (1)' '
+	git show sidewithone -- >sidewithone &&
+	verify_helper sidewithone
+'
+
+test_expect_failure 'check combined output (2)' '
+	git show sidesansone -- >sidesansone &&
+	verify_helper sidesansone
+'
+
+test_done