diff --git a/platform/diff-impl/src/com/intellij/diff/actions/CompareFilesAction.java b/platform/diff-impl/src/com/intellij/diff/actions/CompareFilesAction.java
index e0d802ccf0d8..39f47ddda532 100644
--- a/platform/diff-impl/src/com/intellij/diff/actions/CompareFilesAction.java
+++ b/platform/diff-impl/src/com/intellij/diff/actions/CompareFilesAction.java
@@ -83,16 +83,20 @@ public class CompareFilesAction extends BaseShowDiffAction {
     }
 
     if (files.length == 1) {
-      return files[0].isValid();
+      return isValidAndLocal(files[0]);
     }
     else if (files.length == 2) {
-      return files[0].isValid() && files[1].isValid();
+      return isValidAndLocal(files[0]) && isValidAndLocal(files[1]);
     }
     else {
       return false;
     }
   }
 
+  private static boolean isValidAndLocal(VirtualFile file) {
+    return file.isValid() && file.isInLocalFileSystem();
+  }
+
   @Nullable
   @Override
   protected DiffRequest getDiffRequest(@NotNull AnActionEvent e) {