--- a/mercurial/merge.py	Tue May 02 23:47:10 2017 -0700
+++ b/mercurial/merge.py	Wed May 03 10:43:59 2017 -0700
@@ -786,7 +786,7 @@
     return True
 
 def manifestmerge(repo, wctx, p2, pa, branchmerge, force, matcher,
-                  acceptremote, followcopies):
+                  acceptremote, followcopies, forcefulldiff=False):
     """
     Merge wctx and p2 with ancestor pa and generate merge action list
 
@@ -821,6 +821,26 @@
         if any(wctx.sub(s).dirty() for s in wctx.substate):
             m1['.hgsubstate'] = modifiednodeid
 
+    # Don't use m2-vs-ma optimization if:
+    # - ma is the same as m1 or m2, which we're just going to diff again later
+    # - The matcher is set already, so we can't override it
+    # - The caller specifically asks for a full diff, which is useful during bid
+    #   merge.
+    if (pa not in ([wctx, p2] + wctx.parents()) and
+        matcher is None and not forcefulldiff):
+        # Identify which files are relevant to the merge, so we can limit the
+        # total m1-vs-m2 diff to just those files. This has significant
+        # performance benefits in large repositories.
+        relevantfiles = set(ma.diff(m2).keys())
+
+        # For copied and moved files, we need to add the source file too.
+        for copykey, copyvalue in copy.iteritems():
+            if copyvalue in relevantfiles:
+                relevantfiles.add(copykey)
+        for movedirkey in movewithdir.iterkeys():
+            relevantfiles.add(movedirkey)
+        matcher = scmutil.matchfiles(repo, relevantfiles)
+
     diff = m1.diff(m2, match=matcher)
 
     if matcher is None:
@@ -974,7 +994,7 @@
             repo.ui.note(_('\ncalculating bids for ancestor %s\n') % ancestor)
             actions, diverge1, renamedelete1 = manifestmerge(
                 repo, wctx, mctx, ancestor, branchmerge, force, matcher,
-                acceptremote, followcopies)
+                acceptremote, followcopies, forcefulldiff=True)
             _checkunknownfiles(repo, wctx, mctx, force, actions, mergeforce)
 
             # Track the shortest set of warning on the theory that bid