diff --git a/org.eclipse.jgit.test/tst/org/eclipse/jgit/diff/DiffEntryTest.java b/org.eclipse.jgit.test/tst/org/eclipse/jgit/diff/DiffEntryTest.java
index 73c230a..de76811 100644
--- a/org.eclipse.jgit.test/tst/org/eclipse/jgit/diff/DiffEntryTest.java
+++ b/org.eclipse.jgit.test/tst/org/eclipse/jgit/diff/DiffEntryTest.java
@@ -59,9 +59,12 @@
 import org.eclipse.jgit.dircache.DirCache;
 import org.eclipse.jgit.dircache.DirCacheEditor;
 import org.eclipse.jgit.dircache.DirCacheEditor.PathEdit;
+import org.eclipse.jgit.internal.storage.file.FileRepository;
 import org.eclipse.jgit.dircache.DirCacheEntry;
+import org.eclipse.jgit.junit.JGitTestUtil;
 import org.eclipse.jgit.junit.RepositoryTestCase;
 import org.eclipse.jgit.lib.FileMode;
+import org.eclipse.jgit.lib.Repository;
 import org.eclipse.jgit.revwalk.RevCommit;
 import org.eclipse.jgit.treewalk.EmptyTreeIterator;
 import org.eclipse.jgit.treewalk.FileTreeIterator;
@@ -417,4 +420,64 @@ public void apply(DirCacheEntry ent) {
 			assertEquals(FileMode.REGULAR_FILE, diff.getOldMode());
 		}
 	}
+
+	@Test
+	public void shouldReportSubmoduleReplacedByFileMove() throws Exception {
+		// Create a submodule
+		FileRepository submoduleStandalone = createWorkRepository();
+		JGitTestUtil.writeTrashFile(submoduleStandalone, "fileInSubmodule",
+				"submodule");
+		Git submoduleStandaloneGit = Git.wrap(submoduleStandalone);
+		submoduleStandaloneGit.add().addFilepattern("fileInSubmodule").call();
+		submoduleStandaloneGit.commit().setMessage("add file to submodule")
+				.call();
+
+		Repository submodule_db = Git.wrap(db).submoduleAdd()
+				.setPath("modules/submodule")
+				.setURI(submoduleStandalone.getDirectory().toURI().toString())
+				.call();
+		File submodule_trash = submodule_db.getWorkTree();
+		addRepoToClose(submodule_db);
+		writeTrashFile("fileInRoot", "root");
+		Git rootGit = Git.wrap(db);
+		rootGit.add().addFilepattern("fileInRoot").call();
+		rootGit.commit().setMessage("add submodule and root file").call();
+		// Dummy change on fileInRoot
+		writeTrashFile("fileInRoot", "changed");
+		rootGit.add().addFilepattern("fileInRoot").call();
+		RevCommit firstCommit = rootGit.commit().setMessage("change root file")
+				.call();
+		// Remove the submodule again and move fileInRoot into that subfolder
+		rootGit.rm().setCached(true).addFilepattern("modules/submodule").call();
+		recursiveDelete(submodule_trash);
+		JGitTestUtil.deleteTrashFile(db, "fileInRoot");
+		// Move the fileInRoot file
+		writeTrashFile("modules/submodule/fileInRoot", "changed");
+		rootGit.rm().addFilepattern("fileInRoot").addFilepattern("modules/")
+				.call();
+		rootGit.add().addFilepattern("modules/").call();
+		RevCommit secondCommit = rootGit.commit()
+				.setMessage("remove submodule and move root file")
+				.call();
+		// Diff should report submodule having been deleted and file moved
+		// (deleted and added)
+		try (TreeWalk walk = new TreeWalk(db)) {
+			walk.addTree(firstCommit.getTree());
+			walk.addTree(secondCommit.getTree());
+			walk.setRecursive(true);
+			List<DiffEntry> diffs = DiffEntry.scan(walk);
+			assertEquals(3, diffs.size());
+			DiffEntry e = diffs.get(0);
+			assertEquals(DiffEntry.ChangeType.DELETE, e.getChangeType());
+			assertEquals("fileInRoot", e.getOldPath());
+			e = diffs.get(1);
+			assertEquals(DiffEntry.ChangeType.DELETE, e.getChangeType());
+			assertEquals("modules/submodule", e.getOldPath());
+			assertEquals(FileMode.GITLINK, e.getOldMode());
+			e = diffs.get(2);
+			assertEquals(DiffEntry.ChangeType.ADD, e.getChangeType());
+			assertEquals("modules/submodule/fileInRoot", e.getNewPath());
+		}
+
+	}
 }
diff --git a/org.eclipse.jgit.test/tst/org/eclipse/jgit/lib/IndexDiffSubmoduleTest.java b/org.eclipse.jgit.test/tst/org/eclipse/jgit/lib/IndexDiffSubmoduleTest.java
index 93ada4f..fa7f5ab 100644
--- a/org.eclipse.jgit.test/tst/org/eclipse/jgit/lib/IndexDiffSubmoduleTest.java
+++ b/org.eclipse.jgit.test/tst/org/eclipse/jgit/lib/IndexDiffSubmoduleTest.java
@@ -43,12 +43,14 @@
 
 package org.eclipse.jgit.lib;
 
+import static org.junit.Assert.assertArrayEquals;
 import static org.junit.Assert.assertEquals;
 import static org.junit.Assert.assertFalse;
 import static org.junit.Assert.assertTrue;
 
 import java.io.File;
 import java.io.IOException;
+import java.util.Arrays;
 import java.util.Set;
 
 import org.eclipse.jgit.api.CloneCommand;
@@ -128,7 +130,8 @@ public void testCleanAfterClone(IgnoreSubmoduleMode mode) throws Exception {
 		IndexDiff indexDiff = new IndexDiff(db2, Constants.HEAD,
 				new FileTreeIterator(db2));
 		indexDiff.setIgnoreSubmoduleMode(mode);
-		assertFalse(indexDiff.diff());
+		boolean changed = indexDiff.diff();
+		assertFalse(changed);
 	}
 
 	@Theory
@@ -263,4 +266,33 @@ public void testDirtySubmoduleWorktreeUntracked(IgnoreSubmoduleMode mode)
 		assertDiff(indexDiff, mode, IgnoreSubmoduleMode.ALL,
 				IgnoreSubmoduleMode.DIRTY, IgnoreSubmoduleMode.UNTRACKED);
 	}
+
+	@Theory
+	public void testSubmoduleReplacedByMovedFile(IgnoreSubmoduleMode mode)
+			throws Exception {
+		Git git = Git.wrap(db);
+		git.rm().setCached(true).addFilepattern("modules/submodule").call();
+		recursiveDelete(submodule_trash);
+		JGitTestUtil.deleteTrashFile(db, "fileInRoot");
+		// Move the fileInRoot file
+		writeTrashFile("modules/submodule/fileInRoot", "root");
+		git.rm().addFilepattern("fileInRoot").addFilepattern("modules/").call();
+		git.add().addFilepattern("modules/").call();
+		IndexDiff indexDiff = new IndexDiff(db, Constants.HEAD,
+				new FileTreeIterator(db));
+		indexDiff.setIgnoreSubmoduleMode(mode);
+		assertTrue(indexDiff.diff());
+		String[] removed = indexDiff.getRemoved().toArray(new String[0]);
+		Arrays.sort(removed);
+		if (IgnoreSubmoduleMode.ALL.equals(mode)) {
+			assertArrayEquals(new String[] { "fileInRoot" }, removed);
+		} else {
+			assertArrayEquals(
+					new String[] { "fileInRoot", "modules/submodule" },
+					removed);
+		}
+		assertEquals("[modules/submodule/fileInRoot]",
+				indexDiff.getAdded().toString());
+	}
+
 }
diff --git a/org.eclipse.jgit.test/tst/org/eclipse/jgit/util/PathsTest.java b/org.eclipse.jgit.test/tst/org/eclipse/jgit/util/PathsTest.java
index f78cbe2..7542ec8 100644
--- a/org.eclipse.jgit.test/tst/org/eclipse/jgit/util/PathsTest.java
+++ b/org.eclipse.jgit.test/tst/org/eclipse/jgit/util/PathsTest.java
@@ -89,29 +89,14 @@ public void testPathCompare() {
 				a, 0, a.length, FileMode.TREE.getBits(),
 				b, 0, b.length, FileMode.TREE.getBits()));
 		assertEquals(0, compare(
-				a, 0, a.length, FileMode.TREE.getBits(),
-				b, 0, b.length, FileMode.GITLINK.getBits()));
-		assertEquals(0, compare(
-				a, 0, a.length, FileMode.GITLINK.getBits(),
-				b, 0, b.length, FileMode.GITLINK.getBits()));
-		assertEquals(0, compare(
-				a, 0, a.length, FileMode.GITLINK.getBits(),
-				b, 0, b.length, FileMode.TREE.getBits()));
-		assertEquals(0, compare(
 				a, 0, a.length, FileMode.REGULAR_FILE.getBits(),
 				b, 0, b.length, FileMode.REGULAR_FILE.getBits()));
 		assertEquals(-47, compare(
 				a, 0, a.length, FileMode.REGULAR_FILE.getBits(),
 				b, 0, b.length, FileMode.TREE.getBits()));
-		assertEquals(0, compare(
-				a, 0, a.length, FileMode.REGULAR_FILE.getBits(),
-				b, 0, b.length, FileMode.GITLINK.getBits()));
 		assertEquals(47, compare(
 				a, 0, a.length, FileMode.TREE.getBits(),
 				b, 0, b.length, FileMode.REGULAR_FILE.getBits()));
-		assertEquals(0, compare(
-				a, 0, a.length, FileMode.GITLINK.getBits(),
-				b, 0, b.length, FileMode.REGULAR_FILE.getBits()));
 
 		assertEquals(0, compareSameName(
 				a, 0, a.length,
@@ -119,9 +104,6 @@ public void testPathCompare() {
 		assertEquals(0, compareSameName(
 				a, 0, a.length,
 				b, 0, b.length, FileMode.REGULAR_FILE.getBits()));
-		assertEquals(0, compareSameName(
-				a, 0, a.length,
-				b, 0, b.length, FileMode.GITLINK.getBits()));
 
 		a = Constants.encode("a.c");
 		b = Constants.encode("a");
diff --git a/org.eclipse.jgit/src/org/eclipse/jgit/lib/IndexDiff.java b/org.eclipse.jgit/src/org/eclipse/jgit/lib/IndexDiff.java
index 94b9ddc..f37c310 100644
--- a/org.eclipse.jgit/src/org/eclipse/jgit/lib/IndexDiff.java
+++ b/org.eclipse.jgit/src/org/eclipse/jgit/lib/IndexDiff.java
@@ -47,7 +47,11 @@
 
 package org.eclipse.jgit.lib;
 
+import java.io.File;
 import java.io.IOException;
+import java.nio.file.DirectoryIteratorException;
+import java.nio.file.DirectoryStream;
+import java.nio.file.Files;
 import java.text.MessageFormat;
 import java.util.ArrayList;
 import java.util.Collection;
@@ -261,6 +265,8 @@ public TreeFilter clone() {
 
 	private Set<String> missing = new HashSet<>();
 
+	private Set<String> missingSubmodules = new HashSet<>();
+
 	private Set<String> modified = new HashSet<>();
 
 	private Set<String> untracked = new HashSet<>();
@@ -501,9 +507,15 @@ public boolean diff(final ProgressMonitor monitor, int estWorkTreeSize,
 				if (dirCacheIterator != null) {
 					if (workingTreeIterator == null) {
 						// in index, not in workdir => missing
-						if (!isEntryGitLink(dirCacheIterator)
-								|| ignoreSubmoduleMode != IgnoreSubmoduleMode.ALL)
-							missing.add(treeWalk.getPathString());
+						boolean isGitLink = isEntryGitLink(dirCacheIterator);
+						if (!isGitLink
+								|| ignoreSubmoduleMode != IgnoreSubmoduleMode.ALL) {
+							String path = treeWalk.getPathString();
+							missing.add(path);
+							if (isGitLink) {
+								missingSubmodules.add(path);
+							}
+						}
 					} else {
 						if (workingTreeIterator.isModified(
 								dirCacheIterator.getDirCacheEntry(), true,
@@ -543,8 +555,8 @@ public boolean diff(final ProgressMonitor monitor, int estWorkTreeSize,
 							smw.getPath()), e);
 				}
 				try (Repository subRepo = smw.getRepository()) {
+					String subRepoPath = smw.getPath();
 					if (subRepo != null) {
-						String subRepoPath = smw.getPath();
 						ObjectId subHead = subRepo.resolve("HEAD"); //$NON-NLS-1$
 						if (subHead != null
 								&& !subHead.equals(smw.getObjectId())) {
@@ -573,6 +585,21 @@ public boolean diff(final ProgressMonitor monitor, int estWorkTreeSize,
 								recordFileMode(subRepoPath, FileMode.GITLINK);
 							}
 						}
+					} else if (missingSubmodules.remove(subRepoPath)) {
+						// If the directory is there and empty but the submodule
+						// repository in .git/modules doesn't exist yet it isn't
+						// "missing".
+						File gitDir = new File(
+								new File(repository.getDirectory(),
+										Constants.MODULES),
+								subRepoPath);
+						if (!gitDir.isDirectory()) {
+							File dir = SubmoduleWalk.getSubmoduleDirectory(
+									repository, subRepoPath);
+							if (dir.isDirectory() && !hasFiles(dir)) {
+								missing.remove(subRepoPath);
+							}
+						}
 					}
 				}
 			}
@@ -592,6 +619,15 @@ public boolean diff(final ProgressMonitor monitor, int estWorkTreeSize,
 			return true;
 	}
 
+	private boolean hasFiles(File directory) {
+		try (DirectoryStream<java.nio.file.Path> dir = Files
+				.newDirectoryStream(directory.toPath())) {
+			return dir.iterator().hasNext();
+		} catch (DirectoryIteratorException | IOException e) {
+			return false;
+		}
+	}
+
 	private void recordFileMode(String path, FileMode mode) {
 		Set<String> values = fileModes.get(mode);
 		if (path != null) {
diff --git a/org.eclipse.jgit/src/org/eclipse/jgit/util/Paths.java b/org.eclipse.jgit/src/org/eclipse/jgit/util/Paths.java
index be1b95e..6be7ddb 100644
--- a/org.eclipse.jgit/src/org/eclipse/jgit/util/Paths.java
+++ b/org.eclipse.jgit/src/org/eclipse/jgit/util/Paths.java
@@ -1,5 +1,5 @@
 /*
- * Copyright (C) 2016, 2018 Google Inc.
+ * Copyright (C) 2016, Google Inc.
  * and other copyright owners as documented in the project's IP log.
  *
  * This program and the accompanying materials are made available
@@ -43,7 +43,6 @@
 
 package org.eclipse.jgit.util;
 
-import static org.eclipse.jgit.lib.FileMode.TYPE_GITLINK;
 import static org.eclipse.jgit.lib.FileMode.TYPE_MASK;
 import static org.eclipse.jgit.lib.FileMode.TYPE_TREE;
 
@@ -107,7 +106,7 @@ public static int compare(byte[] aPath, int aPos, int aEnd, int aMode,
 				aPath, aPos, aEnd, aMode,
 				bPath, bPos, bEnd, bMode);
 		if (cmp == 0) {
-			cmp = modeCompare(aMode, bMode);
+			cmp = lastPathChar(aMode) - lastPathChar(bMode);
 		}
 		return cmp;
 	}
@@ -184,15 +183,6 @@ private static int lastPathChar(int mode) {
 		return 0;
 	}
 
-	private static int modeCompare(int aMode, int bMode) {
-		if ((aMode & TYPE_MASK) == TYPE_GITLINK
-				|| (bMode & TYPE_MASK) == TYPE_GITLINK) {
-			// Git links can be equal to files or folders
-			return 0;
-		}
-		return lastPathChar(aMode) - lastPathChar(bMode);
-	}
-
 	private Paths() {
 	}
 }