diff --git a/spec/app/buffer-spec.coffee b/spec/app/buffer-spec.coffee
index 4fbdab261..ec9de0b84 100644
--- a/spec/app/buffer-spec.coffee
+++ b/spec/app/buffer-spec.coffee
@@ -77,7 +77,7 @@ describe 'Buffer', ->
       waitsFor "buffer path change", ->
         eventHandler.callCount > 0
 
-  describe "when the buffer's file is modified (via another process)", ->
+  describe "when the buffer's on-disk contents change (via another process writing to its file)", ->
     path = null
     beforeEach ->
       path = "/tmp/tmp.txt"
@@ -98,8 +98,8 @@ describe 'Buffer', ->
       runs ->
         expect(changeHandler).not.toHaveBeenCalled()
 
-    describe "when the buffer is unmodified", ->
-      it "triggers 'change' event and buffer remains unmodified", ->
+    describe "when the buffer's memory contents are the same as the *previous* disk contents", ->
+      it "changes the memory contents of the buffer to match the new disk contents and triggers a 'change' event", ->
         changeHandler = jasmine.createSpy('changeHandler')
         buffer.on 'change', changeHandler
         fs.write(path, "second")
@@ -116,8 +116,8 @@ describe 'Buffer', ->
           expect(event.newText).toBe "second"
           expect(buffer.isModified()).toBeFalsy()
 
-    describe "when the buffer is modified", ->
-      it "sets modifiedOnDisk to be true", ->
+    describe "when the buffer's memory contents differ from the *previous* disk contents", ->
+      it "leaves the buffer in a modified state (does not update its memory contents)", ->
         fileChangeHandler = jasmine.createSpy('fileChange')
         buffer.file.on 'contents-change', fileChangeHandler
 
@@ -129,7 +129,7 @@ describe 'Buffer', ->
           fileChangeHandler.callCount > 0
 
         runs ->
-          expect(buffer.isModifiedOnDisk()).toBeTruthy()
+          expect(buffer.isModified()).toBeTruthy()
 
   describe "when the buffer's file is deleted (via another process)", ->
     it "no longer has a path", ->
@@ -342,14 +342,13 @@ describe 'Buffer', ->
         expect(-> buffer.save()).toThrow()
 
   describe "reload()", ->
-    it "loads text from disk are sets @modified and @modifiedOnDisk to false", ->
-      buffer.modified = true
-      buffer.modifiedOnDisk = true
+    it "reloads current text from disk and clears any conflicts", ->
       buffer.setText("abc")
+      buffer.conflict = true
 
       buffer.reload()
-      expect(buffer.modifed).toBeFalsy()
-      expect(buffer.modifiedOnDisk).toBeFalsy()
+      expect(buffer.isModified()).toBeFalsy()
+      expect(buffer.isInConflict()).toBeFalsy()
       expect(buffer.getText()).toBe(fileContents)
 
   describe ".saveAs(path)", ->
diff --git a/spec/app/editor-spec.coffee b/spec/app/editor-spec.coffee
index c544a5b01..7caf1fb69 100644
--- a/spec/app/editor-spec.coffee
+++ b/spec/app/editor-spec.coffee
@@ -155,6 +155,7 @@ describe "Editor", ->
     it "closes active edit session and loads next edit session", ->
       editor.edit(rootView.project.buildEditSessionForPath())
       editSession = editor.activeEditSession
+      spyOn(editSession.buffer, 'isModified').andReturn false
       spyOn(editSession, 'destroy').andCallThrough()
       spyOn(editor, "remove").andCallThrough()
       editor.trigger "core:close"
diff --git a/src/app/buffer.coffee b/src/app/buffer.coffee
index 8aed86145..fb51399e4 100644
--- a/src/app/buffer.coffee
+++ b/src/app/buffer.coffee
@@ -8,14 +8,15 @@ UndoManager = require 'undo-manager'
 BufferChangeOperation = require 'buffer-change-operation'
 Anchor = require 'anchor'
 AnchorRange = require 'anchor-range'
+{hex_md5}  = require 'md5'
 
 module.exports =
 class Buffer
   @idCounter = 1
   undoManager: null
-  modified: null
-  contentOnDisk: null
-  modifiedOnDisk: null
+  diskContentSignature: null
+  memoryContentSignature: null
+  conflict: false
   lines: null
   file: null
   anchors: null
@@ -31,13 +32,19 @@ class Buffer
     if path
       throw "Path '#{path}' does not exist" unless fs.exists(path)
       @setPath(path)
-      @contentOnDisk = fs.read(@getPath())
-      @setText(@contentOnDisk)
+      @setText(fs.read(@getPath()))
+      @computeDiskContentSignature()
     else
       @setText('')
 
+    @computeMemoryContentSignature()
     @undoManager = new UndoManager(this)
-    @modified = false
+
+  computeDiskContentSignature: ->
+    @diskContentSignature = fs.md5ForPath(@getPath())
+
+  computeMemoryContentSignature: ->
+    @memoryContentSignature = hex_md5(@getText())
 
   destroy: ->
     throw new Error("Destroying buffer twice with path '#{@getPath()}'") if @destroyed
@@ -57,10 +64,12 @@ class Buffer
   subscribeToFile: ->
     @file.on "contents-change", =>
       if @isModified()
-        @modifiedOnDisk = true
+        @conflict = true
+        @computeDiskContentSignature()
+        @trigger "contents-change-on-disk"
       else
         @setText(fs.read(@file.getPath()))
-        @modified = false
+        @computeDiskContentSignature()
 
     @file.on "remove", =>
       @file = null
@@ -70,10 +79,7 @@ class Buffer
       @trigger "path-change", this
 
   reload: ->
-    @contentOnDisk = fs.read(@getPath())
-    @setText(@contentOnDisk)
-    @modified = false
-    @modifiedOnDisk = false
+    @setText(fs.read(@getPath()))
 
   getBaseName: ->
     @file?.getBaseName()
@@ -87,13 +93,7 @@ class Buffer
     @file?.off()
     @file = new File(path)
     @subscribeToFile()
-    @file.on "contents-change", =>
-      if @isModified()
-        @modifiedOnDisk = true
-        @trigger "contents-change-on-disk"
-      else
-        @setText(fs.read(@file.getPath()))
-        @modified = false
+
     @trigger "path-change", this
 
   getExtension: ->
@@ -209,7 +209,8 @@ class Buffer
 
   replaceLines: (startRow, endRow, newLines) ->
     @lines[startRow..endRow] = newLines
-    @modified = true
+    @computeMemoryContentSignature()
+    @conflict = false unless @isModified()
 
   pushOperation: (operation, editSession) ->
     if @undoManager
@@ -235,23 +236,14 @@ class Buffer
     @trigger 'before-save'
     fs.write path, @getText()
     @file?.updateMd5()
-    @modified = false
-    @modifiedOnDisk = false
     @setPath(path)
-    @contentOnDisk = @getText()
+    @computeDiskContentSignature()
     @trigger 'after-save'
 
-  isInConflict: ->
-    @isModified() and @isModifiedOnDisk()
-
-  isModifiedOnDisk: ->
-    @modifiedOnDisk
-
   isModified: ->
-    @modified
+    @memoryContentSignature != @diskContentSignature
 
-  contentDifferentOnDisk: ->
-    @contentOnDisk != @getText()
+  isInConflict: -> @conflict
 
   getAnchors: -> new Array(@anchors...)
 
diff --git a/src/app/status-bar.coffee b/src/app/status-bar.coffee
index 658ca7f0c..ed667a179 100644
--- a/src/app/status-bar.coffee
+++ b/src/app/status-bar.coffee
@@ -41,7 +41,7 @@ class StatusBar extends View
     @updateBufferModifiedText()
 
   updateBufferModifiedText: ->
-    if @buffer.isModified() and @buffer.contentDifferentOnDisk()
+    if @buffer.isModified()
       @bufferModified.text('*')
     else
       @bufferModified.text('')