diff --git a/platform/diff-impl/src/com/intellij/diff/contents/FileAwareDocumentContent.java b/platform/diff-impl/src/com/intellij/diff/contents/FileAwareDocumentContent.java
index 6e78ea920ee0..e4c6d6ca83c2 100644
--- a/platform/diff-impl/src/com/intellij/diff/contents/FileAwareDocumentContent.java
+++ b/platform/diff-impl/src/com/intellij/diff/contents/FileAwareDocumentContent.java
@@ -1,5 +1,7 @@
 package com.intellij.diff.contents;
 
+import com.intellij.diff.tools.util.DiffNotifications;
+import com.intellij.diff.util.DiffUserDataKeys;
 import com.intellij.openapi.editor.Document;
 import com.intellij.openapi.editor.EditorFactory;
 import com.intellij.openapi.fileEditor.OpenFileDescriptor;
@@ -11,11 +13,16 @@ import com.intellij.openapi.util.text.StringUtil;
 import com.intellij.openapi.vcs.FilePath;
 import com.intellij.openapi.vfs.CharsetToolkit;
 import com.intellij.openapi.vfs.VirtualFile;
+import com.intellij.ui.LightColors;
 import com.intellij.util.LineSeparator;
 import org.jetbrains.annotations.NotNull;
 import org.jetbrains.annotations.Nullable;
 
+import javax.swing.*;
+import java.nio.charset.CharacterCodingException;
 import java.nio.charset.Charset;
+import java.util.Collections;
+import java.util.List;
 
 public class FileAwareDocumentContent extends DocumentContentImpl {
   @Nullable private final Project myProject;
@@ -63,6 +70,8 @@ public class FileAwareDocumentContent extends DocumentContentImpl {
     private VirtualFile myHighlightFile;
     private LineSeparator mySeparator;
     private Charset myCharset;
+    private Charset mySuggestedCharset;
+    private boolean myMalformedContent;
 
     public Builder(@Nullable Project project) {
       myProject = project;
@@ -76,7 +85,7 @@ public class FileAwareDocumentContent extends DocumentContentImpl {
     private Builder init(@NotNull FilePath path) {
       myHighlightFile = path.getVirtualFile();
       myFileType = path.getFileType();
-      myCharset = path.getCharset(myProject);
+      mySuggestedCharset = path.getCharset(myProject);
       return this;
     }
 
@@ -84,7 +93,7 @@ public class FileAwareDocumentContent extends DocumentContentImpl {
     private Builder init(@NotNull VirtualFile highlightFile) {
       myHighlightFile = highlightFile;
       myFileType = highlightFile.getFileType();
-      myCharset = highlightFile.getCharset();
+      mySuggestedCharset = highlightFile.getCharset();
       return this;
     }
 
@@ -98,14 +107,37 @@ public class FileAwareDocumentContent extends DocumentContentImpl {
 
     @NotNull
     private Builder create(@NotNull byte[] content) {
-      assert myCharset != null;
-      return create(CharsetToolkit.decodeString(content, myCharset));
+      assert mySuggestedCharset != null;
+
+      myCharset = mySuggestedCharset;
+      try {
+        String text = CharsetToolkit.tryDecodeString(content, mySuggestedCharset);
+        return create(text);
+      }
+      catch (CharacterCodingException e) {
+        String text = CharsetToolkit.decodeString(content, mySuggestedCharset);
+        myMalformedContent = true;
+        return create(text);
+      }
+    }
+
+    @Nullable
+    private List<JComponent> createNotifications() {
+      if (!myMalformedContent) return null;
+      assert mySuggestedCharset != null;
+
+      String text = "Content was decoded with errors (using " + "'" + mySuggestedCharset.name() + "' charset)";
+      JComponent notification = DiffNotifications.createNotification(text, LightColors.RED);
+      return Collections.singletonList(notification);
     }
 
     @NotNull
     public FileAwareDocumentContent build() {
       if (FileTypes.UNKNOWN.equals(myFileType)) myFileType = PlainTextFileType.INSTANCE;
-      return new FileAwareDocumentContent(myProject, myDocument, myFileType, myHighlightFile, mySeparator, myCharset);
+      FileAwareDocumentContent content
+        = new FileAwareDocumentContent(myProject, myDocument, myFileType, myHighlightFile, mySeparator, myCharset);
+      content.putUserData(DiffUserDataKeys.NOTIFICATIONS, createNotifications());
+      return content;
     }
   }
 }
diff --git a/platform/diff-impl/src/com/intellij/diff/util/DiffUtil.java b/platform/diff-impl/src/com/intellij/diff/util/DiffUtil.java
index f820be1b3a09..29edb502c696 100644
--- a/platform/diff-impl/src/com/intellij/diff/util/DiffUtil.java
+++ b/platform/diff-impl/src/com/intellij/diff/util/DiffUtil.java
@@ -350,6 +350,7 @@ public class DiffUtil {
 
   @NotNull
   public static List<JComponent> createSimpleTitles(@NotNull ContentDiffRequest request) {
+    List<DiffContent> contents = request.getContents();
     List<String> titles = request.getContentTitles();
 
     if (!ContainerUtil.exists(titles, Condition.NOT_NULL)) {
@@ -357,8 +358,10 @@ public class DiffUtil {
     }
 
     List<JComponent> components = new ArrayList<JComponent>(titles.size());
-    for (String title : titles) {
-      components.add(createTitle(StringUtil.notNullize(title)));
+    for (int i = 0; i < contents.size(); i++) {
+      JComponent title = createTitle(StringUtil.notNullize(titles.get(i)));
+      title = createTitleWithNotifications(title, contents.get(i));
+      components.add(title);
     }
 
     return components;
@@ -394,12 +397,26 @@ public class DiffUtil {
     }
 
     for (int i = 0; i < contents.size(); i++) {
-      result.add(createTitle(StringUtil.notNullize(titles.get(i)), contents.get(i), equalCharsets, equalSeparators, editors.get(i)));
+      JComponent title = createTitle(StringUtil.notNullize(titles.get(i)), contents.get(i), equalCharsets, equalSeparators, editors.get(i));
+      title = createTitleWithNotifications(title, contents.get(i));
+      result.add(title);
     }
 
     return result;
   }
 
+  @Nullable
+  private static JComponent createTitleWithNotifications(@Nullable JComponent title,
+                                                         @NotNull DiffContent content) {
+    List<JComponent> notifications = getCustomNotifications(content);
+    if (notifications.isEmpty()) return title;
+
+    List<JComponent> components = new ArrayList<JComponent>();
+    if (title != null) components.add(title);
+    components.addAll(notifications);
+    return createStackedComponents(components, TITLE_GAP);
+  }
+
   private static boolean isEqualElements(@NotNull List elements) {
     for (int i = 0; i < elements.size(); i++) {
       for (int j = i + 1; j < elements.size(); j++) {
@@ -1064,6 +1081,11 @@ public class DiffUtil {
     return ContainerUtil.concat(ContainerUtil.notNullize(contextComponents), ContainerUtil.notNullize(requestComponents));
   }
 
+  @NotNull
+  public static List<JComponent> getCustomNotifications(@NotNull DiffContent content) {
+    return ContainerUtil.notNullize(content.getUserData(DiffUserDataKeys.NOTIFICATIONS));
+  }
+
   //
   // DataProvider
   //
diff --git a/platform/util/src/com/intellij/openapi/vfs/CharsetToolkit.java b/platform/util/src/com/intellij/openapi/vfs/CharsetToolkit.java
index 25a44601e7e6..c6940f02df20 100644
--- a/platform/util/src/com/intellij/openapi/vfs/CharsetToolkit.java
+++ b/platform/util/src/com/intellij/openapi/vfs/CharsetToolkit.java
@@ -24,9 +24,7 @@ import org.jetbrains.annotations.Nullable;
 import java.io.*;
 import java.nio.ByteBuffer;
 import java.nio.CharBuffer;
-import java.nio.charset.Charset;
-import java.nio.charset.IllegalCharsetNameException;
-import java.nio.charset.UnsupportedCharsetException;
+import java.nio.charset.*;
 import java.util.Arrays;
 import java.util.Collection;
 import java.util.Map;
@@ -308,6 +306,16 @@ public class CharsetToolkit {
     return charBuffer.toString();
   }
 
+  @NotNull
+  public static String tryDecodeString(@NotNull byte[] bytes, @NotNull final Charset charset) throws CharacterCodingException {
+    int bomLength = CharsetToolkit.getBOMLength(bytes, charset);
+    ByteBuffer buffer = ByteBuffer.wrap(bytes, bomLength, bytes.length - bomLength);
+    CharsetDecoder decoder = charset.newDecoder()
+      .onMalformedInput(CodingErrorAction.REPORT)
+      .onUnmappableCharacter(CodingErrorAction.REPORT);
+    return decoder.decode(buffer).toString();
+  }
+
   public enum GuessedEncoding {
     SEVEN_BIT,     // ASCII
     VALID_UTF8,    // UTF-8