diff --git a/autoload/diff.vim b/autoload/diff.vim
index f5fbbe1..2367390 100644
--- a/autoload/diff.vim
+++ b/autoload/diff.vim
@@ -4,17 +4,25 @@ let s:hunk_re = '^@@ -\(\d\+\),\?\(\d*\) +\(\d\+\),\?\(\d*\) @@'
 
 
 function! diff#run_diff(realtime, use_external_grep)
+  let cmd = 'git ls-files --error-unmatch' . utility#discard_stdout_and_stderr() . ' ' . shellescape(utility#file()) . ' && '
+
   if a:realtime
     let blob_name = ':./' . fnamemodify(utility#file(),':t')
     let blob_file = tempname()
-    let cmd = 'git show ' . blob_name . ' > ' . blob_file . ' && diff -U0 ' . g:gitgutter_diff_args . ' ' . blob_file . ' - '
+    let cmd .= 'git show ' . blob_name . ' > ' . blob_file .
+          \ ' && diff -U0 ' . g:gitgutter_diff_args . ' ' . blob_file . ' - '
   else
-    let cmd = 'git diff --no-ext-diff --no-color -U0 ' . g:gitgutter_diff_args . ' ' . shellescape(utility#file())
+    let cmd .= 'git diff --no-ext-diff --no-color -U0 ' . g:gitgutter_diff_args . ' ' . shellescape(utility#file())
   endif
+
   if a:use_external_grep && s:grep_available
-    let cmd .= s:grep_command
+    " grep exits with 1 when no matches are found.  However we want to treat
+    " non-matches as non-erroneous behaviour; so we append ` || :`.
+    let cmd .= s:grep_command . ' || :'
   endif
+
   let cmd = utility#escape(cmd)
+
   if a:realtime
     if &fileformat ==# "dos"
       let eol = "\r\n"
@@ -28,6 +36,13 @@ function! diff#run_diff(realtime, use_external_grep)
   else
     let diff = system(utility#command_in_directory_of_file(cmd))
   endif
+
+  if v:shell_error
+    " A shell error indicates the file is not tracked by git (unless something
+    " bizarre is going on).
+    throw 'git-diff failed'
+  endif
+
   return diff
 endfunction
 
diff --git a/autoload/utility.vim b/autoload/utility.vim
index 2db11d9..5ce00f4 100644
--- a/autoload/utility.vim
+++ b/autoload/utility.vim
@@ -1,7 +1,7 @@
 let s:file = ''
 
 function! utility#is_active()
-  return g:gitgutter_enabled && utility#exists_file() && utility#is_tracked_by_git()
+  return g:gitgutter_enabled && utility#exists_file()
 endfunction
 
 function! utility#current_file()
@@ -64,12 +64,6 @@ function! utility#command_in_directory_of_file(cmd)
   return substitute(utility#cmd_in_dir, "'", '"', 'g')
 endfunction
 
-function! utility#is_tracked_by_git()
-  let cmd = utility#escape('git ls-files --error-unmatch' . utility#discard_stdout_and_stderr() . ' ' . shellescape(utility#file()))
-  call system(utility#command_in_directory_of_file(cmd))
-  return !v:shell_error
-endfunction
-
 function! utility#differences(hunks)
   return len(a:hunks) != 0
 endfunction
diff --git a/plugin/gitgutter.vim b/plugin/gitgutter.vim
index a3e1837..7daf185 100644
--- a/plugin/gitgutter.vim
+++ b/plugin/gitgutter.vim
@@ -55,26 +55,30 @@ command GitGutterAll call GitGutterAll()
 function! GitGutter(file, realtime)
   call utility#set_file(a:file)
   if utility#is_active()
-    if !a:realtime || utility#has_fresh_changes(a:file)
-      let diff           = diff#run_diff(a:realtime || utility#has_unsaved_changes(a:file), 1)
-      let s:hunks        = diff#parse_diff(diff)
-      let modified_lines = diff#process_hunks(s:hunks)
+    try
+      if !a:realtime || utility#has_fresh_changes(a:file)
+        let diff           = diff#run_diff(a:realtime || utility#has_unsaved_changes(a:file), 1)
+        let s:hunks        = diff#parse_diff(diff)
+        let modified_lines = diff#process_hunks(s:hunks)
 
-      if g:gitgutter_signs
-        if g:gitgutter_sign_column_always
-          call sign#add_dummy_sign()
-        else
-          if utility#differences(s:hunks)
-            call sign#add_dummy_sign()  " prevent flicker
+        if g:gitgutter_signs
+          if g:gitgutter_sign_column_always
+            call sign#add_dummy_sign()
           else
-            call sign#remove_dummy_sign()
+            if utility#differences(s:hunks)
+              call sign#add_dummy_sign()  " prevent flicker
+            else
+              call sign#remove_dummy_sign()
+            endif
           endif
+          call sign#update_signs(a:file, modified_lines)
         endif
-        call sign#update_signs(a:file, modified_lines)
-      endif
 
-      call utility#save_last_seen_change(a:file)
-    endif
+        call utility#save_last_seen_change(a:file)
+      endif
+    catch /git-diff failed/
+      call hunk#reset()
+    endtry
   else
     call hunk#reset()
   endif