diff --git a/usr.bin/diff3/diff3.c b/usr.bin/diff3/diff3.c
--- a/usr.bin/diff3/diff3.c
+++ b/usr.bin/diff3/diff3.c
@@ -335,7 +335,8 @@
 				change(2, &d2->old, false);
 			} else if (Aflag || mflag) {
 				// XXX-THJ: What does it mean for the second file to differ?
-				j = edit(d2, dup, j, DIFF_TYPE2);
+				if (eflag == EFLAG_UNMERGED)
+					j = edit(d2, dup, j, DIFF_TYPE2);
 			}
 			d2++;
 			continue;
@@ -861,7 +862,7 @@
 			eflag = EFLAG_UNMERGED;
 			break;
 		case 'E':
-			eflag = EFLAG_UNMERGED;
+			eflag = EFLAG_OVERLAP;
 			oflag = 1;
 			break;
 		case 'i':
@@ -907,7 +908,8 @@
 	argv += optind;
 
 	if (Aflag) {
-		eflag = EFLAG_UNMERGED;
+		if (eflag == EFLAG_NONE)
+			eflag = EFLAG_UNMERGED;
 		oflag = 1;
 	}
 
diff --git a/usr.bin/diff3/tests/Makefile b/usr.bin/diff3/tests/Makefile
--- a/usr.bin/diff3/tests/Makefile
+++ b/usr.bin/diff3/tests/Makefile
@@ -23,5 +23,7 @@
 	long-ed.out \
 	long-A.out \
 	long-merge.out \
+	fbsdid1.txt \
+	fbsdid2.txt
 
 .include <bsd.test.mk>
diff --git a/usr.bin/diff3/tests/diff3_test.sh b/usr.bin/diff3/tests/diff3_test.sh
--- a/usr.bin/diff3/tests/diff3_test.sh
+++ b/usr.bin/diff3/tests/diff3_test.sh
@@ -4,6 +4,7 @@
 atf_test_case diff3_ed
 atf_test_case diff3_A
 atf_test_case diff3_merge
+atf_test_case diff3_E_merge
 
 diff3_body()
 {
@@ -66,6 +67,36 @@
 		diff3 -m -L long-m.txt -L long-o.txt -L long-y.txt $(atf_get_srcdir)/long-m.txt $(atf_get_srcdir)/long-o.txt $(atf_get_srcdir)/long-y.txt
 }
 
+diff3_E_merge_body()
+{
+
+expected="<<<<<<< 2
+# \$FreeBSD: head/local 12000 jhb \$
+=======
+# \$FreeBSD: head/local 12345 jhb \$
+>>>>>>> 3
+# \$FreeBSD: head/local 12345 jhb \$
+
+this is a file
+
+these are some local mods to the file
+"
+	# first test the regular test
+	cp $(atf_get_srcdir)/fbsdid2.txt out.txt
+	atf_check -s exit:1 -o inline:"${expected}" \
+		diff3 -m -L 1 -L 2 -L 3 out.txt $(atf_get_srcdir)/fbsdid1.txt $(atf_get_srcdir)/fbsdid2.txt
+
+merged="# \$FreeBSD: head/local 12345 jhb \$
+
+this is a file
+
+these are some local mods to the file
+"
+	atf_check -s exit:0 -o inline:"${merged}" \
+		diff3 -E -m out.txt $(atf_get_srcdir)/fbsdid1.txt $(atf_get_srcdir)/fbsdid2.txt
+}
+
+
 atf_init_test_cases()
 {
 	atf_add_test_case diff3
@@ -73,4 +104,5 @@
 	atf_add_test_case diff3_ed
 	atf_add_test_case diff3_A
 	atf_add_test_case diff3_merge
+	atf_add_test_case diff3_E_merge
 }
diff --git a/usr.bin/diff3/tests/fbsdid1.txt b/usr.bin/diff3/tests/fbsdid1.txt
new file mode 100644
--- /dev/null
+++ b/usr.bin/diff3/tests/fbsdid1.txt
@@ -0,0 +1,5 @@
+# $FreeBSD: head/local 12000 jhb $
+
+this is a file
+
+these are some local mods to the file
diff --git a/usr.bin/diff3/tests/fbsdid2.txt b/usr.bin/diff3/tests/fbsdid2.txt
new file mode 100644
--- /dev/null
+++ b/usr.bin/diff3/tests/fbsdid2.txt
@@ -0,0 +1,5 @@
+# $FreeBSD: head/local 12345 jhb $
+
+this is a file
+
+these are some local mods to the file