--- a/hgext/largefiles/overrides.py	Mon Apr 07 15:37:27 2014 -0500
+++ b/hgext/largefiles/overrides.py	Mon Apr 07 23:10:20 2014 +0200
@@ -420,16 +420,18 @@
     if not lfutil.isstandin(orig):
         return origfn(repo, mynode, orig, fcd, fco, fca)
 
-    if not fco.cmp(fcd): # files identical?
-        return None
-
-    if repo.ui.promptchoice(
-        _('largefile %s has a merge conflict\nancestor was %s\n'
-          'keep (l)ocal %s or\ntake (o)ther %s?'
-          '$$ &Local $$ &Other') %
-          (lfutil.splitstandin(orig),
-           fca.data().strip(), fcd.data().strip(), fco.data().strip()),
-        0) == 1:
+    ahash = fca.data().strip().lower()
+    dhash = fcd.data().strip().lower()
+    ohash = fco.data().strip().lower()
+    if (ohash != ahash and
+        ohash != dhash and
+        (dhash == ahash or
+         repo.ui.promptchoice(
+             _('largefile %s has a merge conflict\nancestor was %s\n'
+               'keep (l)ocal %s or\ntake (o)ther %s?'
+               '$$ &Local $$ &Other') %
+               (lfutil.splitstandin(orig), ahash, dhash, ohash),
+             0) == 1)):
         repo.wwrite(fcd.path(), fco.data(), fco.flags())
     return 0
 

--- a/tests/test-largefiles.t	Mon Apr 07 15:37:27 2014 -0500
+++ b/tests/test-largefiles.t	Mon Apr 07 23:10:20 2014 +0200
@@ -2226,6 +2226,79 @@
   0 largefiles updated, 0 removed
   $ cd ..
 
+
+Merge conflicts:
+
+  $ hg init merge
+  $ cd merge
+  $ echo 0 > f-different
+  $ echo 0 > f-same
+  $ echo 0 > f-unchanged-1
+  $ echo 0 > f-unchanged-2
+  $ hg add --large *
+  $ hg ci -m0
+  Invoking status precommit hook
+  A f-different
+  A f-same
+  A f-unchanged-1
+  A f-unchanged-2
+  $ echo tmp1 > f-unchanged-1
+  $ echo tmp1 > f-unchanged-2
+  $ echo tmp1 > f-same
+  $ hg ci -m1
+  Invoking status precommit hook
+  M f-same
+  M f-unchanged-1
+  M f-unchanged-2
+  $ echo 2 > f-different
+  $ echo 0 > f-unchanged-1
+  $ echo 1 > f-unchanged-2
+  $ echo 1 > f-same
+  $ hg ci -m2
+  Invoking status precommit hook
+  M f-different
+  M f-same
+  M f-unchanged-1
+  M f-unchanged-2
+  $ hg up -qr0
+  $ echo tmp2 > f-unchanged-1
+  $ echo tmp2 > f-unchanged-2
+  $ echo tmp2 > f-same
+  $ hg ci -m3
+  Invoking status precommit hook
+  M f-same
+  M f-unchanged-1
+  M f-unchanged-2
+  created new head
+  $ echo 1 > f-different
+  $ echo 1 > f-unchanged-1
+  $ echo 0 > f-unchanged-2
+  $ echo 1 > f-same
+  $ hg ci -m4
+  Invoking status precommit hook
+  M f-different
+  M f-same
+  M f-unchanged-1
+  M f-unchanged-2
+  $ hg merge
+  largefile f-different has a merge conflict
+  ancestor was 09d2af8dd22201dd8d48e5dcfcaed281ff9422c7
+  keep (l)ocal e5fa44f2b31c1fb553b6021e7360d07d5d91ff5e or
+  take (o)ther 7448d8798a4380162d4b56f9b452e2f6f9e24e7a? l
+  0 files updated, 4 files merged, 0 files removed, 0 files unresolved
+  (branch merge, don't forget to commit)
+  getting changed largefiles
+  1 largefiles updated, 0 removed
+  $ cat f-different
+  1
+  $ cat f-same
+  1
+  $ cat f-unchanged-1
+  1
+  $ cat f-unchanged-2
+  1
+  $ cd ..
+
 Check whether "largefiles" feature is supported only in repositories
 enabling largefiles extension.