diff --git a/.isort.cfg b/.isort.cfg
index 428419bc1..3f3b28ad5 100644
--- a/.isort.cfg
+++ b/.isort.cfg
@@ -1,3 +1,4 @@
 [settings]
 profile=hug
 src_paths=isort,test
+skip=tests/example_crlf_file.py
diff --git a/CHANGELOG.md b/CHANGELOG.md
index 0e1096e81..1e23349f5 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -14,6 +14,7 @@ NOTE: isort follows the [semver](https://semver.org/) versioning standard.
   - Implemented #941: Added an additional `multi_line_output` mode for more compact formatting (Thanks @sztamas!)
   - `# isort: split` can now be used at the end of an import line.
   - Fixed #1339: Extra indent is not preserved when isort:skip is used in nested imports.
+  - Fixed #1348: `--diff` works incorrectly with files that have CRLF line endings.
 
 ### 5.1.4 July 19, 2020
   - Fixed issue #1333: Use of wrap_length raises an exception about it not being lower or equal to line_length.
diff --git a/isort/api.py b/isort/api.py
index edebf529d..3e484a519 100644
--- a/isort/api.py
+++ b/isort/api.py
@@ -335,17 +335,22 @@ def sort_file(
                     if changed:
                         if show_diff or ask_to_apply:
                             source_file.stream.seek(0)
-                            show_unified_diff(
-                                file_input=source_file.stream.read(),
-                                file_output=tmp_file.read_text(encoding=source_file.encoding),
-                                file_path=file_path or source_file.path,
-                                output=None if show_diff is True else cast(TextIO, show_diff),
-                            )
-                            if show_diff or (
-                                ask_to_apply
-                                and not ask_whether_to_apply_changes_to_file(str(source_file.path))
-                            ):
-                                return
+                            with tmp_file.open(
+                                encoding=source_file.encoding, newline=""
+                            ) as tmp_out:
+                                show_unified_diff(
+                                    file_input=source_file.stream.read(),
+                                    file_output=tmp_out.read(),
+                                    file_path=file_path or source_file.path,
+                                    output=None if show_diff is True else cast(TextIO, show_diff),
+                                )
+                                if show_diff or (
+                                    ask_to_apply
+                                    and not ask_whether_to_apply_changes_to_file(
+                                        str(source_file.path)
+                                    )
+                                ):
+                                    return
                         source_file.stream.close()
                         tmp_file.replace(source_file.path)
                         if not config.quiet:
diff --git a/isort/format.py b/isort/format.py
index 15ad6233a..cdcc5a00b 100644
--- a/isort/format.py
+++ b/isort/format.py
@@ -43,7 +43,6 @@ def show_unified_diff(
     file_mtime = str(
         datetime.now() if file_path is None else datetime.fromtimestamp(file_path.stat().st_mtime)
     )
-
     unified_diff_lines = unified_diff(
         file_input.splitlines(keepends=True),
         file_output.splitlines(keepends=True),
diff --git a/tests/example_crlf_file.py b/tests/example_crlf_file.py
new file mode 100644
index 000000000..78db95188
--- /dev/null
+++ b/tests/example_crlf_file.py
@@ -0,0 +1,10 @@
+import b
+import a
+
+
+def func():
+    x = 1
+    y = 2
+    z = 3
+    c = 4
+    return x + y + z + c
diff --git a/tests/test_regressions.py b/tests/test_regressions.py
index b62173883..5d1d0413a 100644
--- a/tests/test_regressions.py
+++ b/tests/test_regressions.py
@@ -1,4 +1,6 @@
 """A growing set of tests designed to ensure isort doesn't have regressions in new versions"""
+from io import StringIO
+
 import isort
 
 
@@ -478,3 +480,15 @@ def import_test():
     """,
         show_diff=True,
     )
+
+
+def test_windows_diff_too_large_misrepresentative_issue_1348(test_path):
+    """Ensure isort handles windows files correctly when it come to producing a diff with --diff.
+    See: https://github.com/timothycrosley/isort/issues/1348
+    """
+    diff_output = StringIO()
+    isort.file(test_path / "example_crlf_file.py", show_diff=diff_output)
+    diff_output.seek(0)
+    assert diff_output.read().endswith(
+        "-1,5 +1,5 @@\n+import a\r\n import b\r\n" "-import a\r\n \r\n \r\n def func():\r\n"
+    )