diff --git a/autoload/gitgutter/diff_highlight.vim b/autoload/gitgutter/diff_highlight.vim
index e097704..3031582 100644
--- a/autoload/gitgutter/diff_highlight.vim
+++ b/autoload/gitgutter/diff_highlight.vim
@@ -1,7 +1,12 @@
-" Calculates the changed portions of lines.  Based closely on diff-highlight
-" (included with git) - please note its caveats.
+" Calculates the changed portions of lines.
 "
-" https://github.com/git/git/blob/master/contrib/diff-highlight/DiffHighlight.pm
+" Based on:
+"
+" - diff-highlight (included with git)
+"   https://github.com/git/git/blob/master/contrib/diff-highlight/DiffHighlight.pm
+"
+" - Diff Strategies, Neil Fraser
+"   https://neil.fraser.name/writing/diff/
 
 
 " Returns a list of intra-line changed regions.
@@ -40,10 +45,49 @@ function! gitgutter#diff_highlight#process(hunk_body)
     let prefix = s:common_prefix(rline, aline)
     let [rsuffix, asuffix] = s:common_suffix(rline, aline, prefix+1)
 
+    let rtext = rline[prefix+1:rsuffix-1]
+    let atext = aline[prefix+1:asuffix-1]
+
+    " singular insertion
+    if empty(rtext)
+      if len(atext) != len(aline)  " not whole line
+        call add(regions, [i+1+removed, '+', prefix+1+1, asuffix+1-1])
+      endif
+      continue
+    endif
+
+    " singular deletion
+    if empty(atext)
+      if len(rtext) != len(rline)  " not whole line
+        call add(regions, [i+1, '-', prefix+1+1, rsuffix+1-1])
+      endif
+      continue
+    endif
+
+    " two insertions
+    let j = stridx(atext, rtext)
+    if j != -1
+      call add(regions, [i+1+removed, '+', prefix+1+1, prefix+j+1])
+      call add(regions, [i+1+removed, '+', prefix+1+1+j+len(rtext), asuffix+1-1])
+      continue
+    endif
+
+    " two deletions
+    let j = stridx(rtext, atext)
+    if j != -1
+      call add(regions, [i+1, '-', prefix+1+1, prefix+j+1])
+      call add(regions, [i+1, '-', prefix+1+1+j+len(atext), rsuffix+1-1])
+      continue
+    endif
+
+    " fall back to highlighting entire changed area
+
+    " if a change (but not the whole line)
     if (prefix != 0 || rsuffix != len(rline)) && prefix+1 < rsuffix
       call add(regions, [i+1, '-', prefix+1+1, rsuffix+1-1])
     endif
 
+    " if a change (but not the whole line)
     if (prefix != 0 || asuffix != len(aline)) && prefix+1 < asuffix
       call add(regions, [i+1+removed, '+', prefix+1+1, asuffix+1-1])
     endif
diff --git a/test/test_gitgutter.vim b/test/test_gitgutter.vim
index 103a007..c3c1d02 100644
--- a/test/test_gitgutter.vim
+++ b/test/test_gitgutter.vim
@@ -953,18 +953,18 @@ function Test_diff_highlight()
   call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
 
   " change in middle
-  let hunk = ['-foo bar baz', '+foo (bar) baz']
-  let expected = [[1, '-', 6, 8], [2, '+', 6, 10]]
+  let hunk = ['-foo bar baz', '+foo zip baz']
+  let expected = [[1, '-', 6, 8], [2, '+', 6, 8]]
   call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
 
   " change at start
-  let hunk = ['-foo bar baz', '+(foo) bar baz']
-  let expected = [[1, '-', 2, 4], [2, '+', 2, 6]]
+  let hunk = ['-foo bar baz', '+zip bar baz']
+  let expected = [[1, '-', 2, 4], [2, '+', 2, 4]]
   call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
 
   " change at end
-  let hunk = ['-foo bar baz', '+foo bar (baz)']
-  let expected = [[1, '-', 10, 12], [2, '+', 10, 14]]
+  let hunk = ['-foo bar baz', '+foo bar zip']
+  let expected = [[1, '-', 10, 12], [2, '+', 10, 12]]
   call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
 
   " removed in middle
@@ -976,4 +976,39 @@ function Test_diff_highlight()
   let hunk = ['-foo baz', '+foo bar baz']
   let expected = [[2, '+', 8, 11]]
   call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
+
+  " two insertions at start
+  let hunk = ['-foo bar baz', '+(foo) bar baz']
+  let expected = [[2, '+', 2, 2], [2, '+', 6, 6]]
+  call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
+
+  " two insertions in middle
+  let hunk = ['-foo bar baz', '+foo (bar) baz']
+  let expected = [[2, '+', 6, 6], [2, '+', 10, 10]]
+  call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
+
+  " two insertions at end
+  let hunk = ['-foo bar baz', '+foo bar (baz)']
+  let expected = [[2, '+', 10, 10], [2, '+', 14, 14]]
+  call assert_equal(expected, gitgutter#diff_highlight#process(hunk))
+
+  " singular insertion
+  let hunk = ['-The cat in the hat.', '+The furry cat in the hat.']
+  call assert_equal([[2, '+', 6, 11]], gitgutter#diff_highlight#process(hunk))
+
+  " singular deletion
+  let hunk = ['-The cat in the hat.', '+The cat.']
+  call assert_equal([[1, '-', 9, 19]], gitgutter#diff_highlight#process(hunk))
+
+  " two insertions
+  let hunk = ['-The cat in the hat.', '+The furry cat in the teal hat.']
+  call assert_equal([[2, '+', 6, 11], [2, '+', 22, 26]], gitgutter#diff_highlight#process(hunk))
+
+  " two deletions
+  let hunk = ['-The furry cat in the teal hat.', '+The cat in the hat.']
+  call assert_equal([[1, '-', 6, 11], [1, '-', 22, 26]], gitgutter#diff_highlight#process(hunk))
+
+  " two edits
+  let hunk = ['-The cat in the hat.', '+The ox in the box.']
+  call assert_equal([[1, '-', 6, 8], [1, '-', 17, 19], [2, '+', 6, 7], [2, '+', 16, 18]], gitgutter#diff_highlight#process(hunk))
 endfunction