diff --git a/src/merge/mod.rs b/src/merge/mod.rs
new file mode 100644
index 0000000..30fabe1
--- /dev/null
+++ b/src/merge/mod.rs
@@ -0,0 +1,331 @@
+use crate::cli::MergeStrategy;
+use anyhow::{Context, Result};
+use dialoguer::{Select, Editor};
+use std::fs;
+use std::path::{Path, PathBuf};
+use std::io::{self, Write, Read};
+
+#[derive(Debug, Clone)]
+pub struct Conflict {
+    pub path: PathBuf,
+    pub base_content: Option<String>,
+    pub local_content: Option<String>,
+    pub remote_content: Option<String>,
+}
+
+#[derive(Debug, Clone)]
+pub enum MergeResult {
+    Success,
+    Conflict(Vec<Conflict>),
+    AutoMerged,
+}
+
+pub struct Merger {
+    conflicts: Vec<Conflict>,
+}
+
+impl Merger {
+    pub fn new() -> Self {
+        Self {
+            conflicts: Vec::new(),
+        }
+    }
+
+    pub fn diff(&self, local: &PathBuf, remote: &PathBuf) -> Result<Vec<String>> {
+        let local_content = self.read_file(local)?;
+        let remote_content = self.read_file(remote)?;
+
+        self.compute_diff(&local_content, &remote_content)
+    }
+
+    pub fn three_way_merge(
+        &mut self,
+        base: &PathBuf,
+        local: &PathBuf,
+        remote: &PathBuf,
+        output: &PathBuf,
+        strategy: Option<MergeStrategy>,
+    ) -> Result<MergeResult> {
+        let base_content = if base.exists() { Some(self.read_file(base)?) } else { None };
+        let local_content = self.read_file(local)?;
+        let remote_content = self.read_file(remote)?;
+
+        let conflicts = self.find_conflicts(&base_content, &local_content, &remote_content);
+
+        if !conflicts.is_empty() {
+            self.conflicts = conflicts;
+
+            match strategy {
+                Some(MergeStrategy::Ours) => {
+                    fs::write(output, local_content)?;
+                    Ok(MergeResult::Conflict(self.conflicts.clone()))
+                }
+                Some(MergeStrategy::Theirs) => {
+                    fs::write(output, remote_content)?;
+                    Ok(MergeResult::Conflict(self.conflicts.clone()))
+                }
+                Some(MergeStrategy::Ask) => {
+                    self.resolve_conflicts_interactively(output, &local_content, &remote_content)
+                }
+                Some(MergeStrategy::Diff3) | None => {
+                    self.three_way_merge_content(base_content, local_content, remote_content, output)
+                }
+            }
+        } else {
+            self.auto_merge(base_content, local_content, remote_content, output)
+        }
+    }
+
+    fn three_way_merge_content(
+        &mut self,
+        base_content: Option<String>,
+        local_content: String,
+        remote_content: String,
+        output: &PathBuf,
+    ) -> Result<MergeResult> {
+        let mut lines: Vec<String> = Vec::new();
+
+        let base_lines = base_content.as_ref()
+            .map(|s| s.lines().map(String::from).collect::<Vec<_>>())
+            .unwrap_or_default();
+        let local_lines: Vec<&str> = local_content.lines().collect();
+        let remote_lines: Vec<&str> = remote_content.lines().collect();
+
+        let base_len = base_lines.len();
+        let local_len = local_lines.len();
+        let remote_len = remote_lines.len();
+
+        let mut i = 0;
+        let mut j = 0;
+        let mut k = 0;
+
+        while i < base_len || j < local_len || k < remote_len {
+            let base_line = base_lines.get(i).map(String::as_str);
+            let local_line = local_lines.get(j).copied();
+            let remote_line = remote_lines.get(k).copied();
+
+            if local_line == remote_line {
+                if let Some(line) = local_line {
+                    lines.push(line.to_string());
+                }
+                i += 1;
+                j += 1;
+                k += 1;
+            } else if base_line == local_line {
+                if let Some(line) = remote_line {
+                    lines.push(format!("+ {}", line));
+                }
+                i += 1;
+                k += 1;
+            } else if base_line == remote_line {
+                if let Some(line) = local_line {
+                    lines.push(format!("+ {}", line));
+                }
+                i += 1;
+                j += 1;
+            } else {
+                if let Some(line) = local_line {
+                    lines.push(format!("+ {}", line));
+                }
+                if let Some(line) = remote_line {
+                    lines.push(format!("+ {}", line));
+                }
+                self.conflicts.push(Conflict {
+                    path: output.clone(),
+                    base_content: base_line.map(String::from),
+                    local_content: local_line.map(String::from),
+                    remote_content: remote_line.map(String::from),
+                });
+                i += 1;
+                j += 1;
+                k += 1;
+            }
+        }
+
+        fs::write(output, lines.join("\n"))?;
+
+        if self.conflicts.is_empty() {
+            Ok(MergeResult::AutoMerged)
+        } else {
+            Ok(MergeResult::Conflict(self.conflicts.clone()))
+        }
+    }
+
+    fn auto_merge(
+        &mut self,
+        base_content: Option<String>,
+        local_content: String,
+        remote_content: String,
+        output: &PathBuf,
+    ) -> Result<MergeResult> {
+        let base_lines = base_content.as_ref()
+            .map(|s| s.lines().map(String::from).collect::<Vec<_>>())
+            .unwrap_or_default();
+
+        let merged = self.merge_lines(&base_lines, &local_content, &remote_content);
+
+        fs::write(output, merged)?;
+
+        Ok(MergeResult::AutoMerged)
+    }
+
+    fn merge_lines(&self, base: &[String], local: &str, remote: &str) -> String {
+        let mut result = String::new();
+
+        let base_lines: Vec<&str> = base.iter().map(|s| s.as_str()).collect();
+        let local_lines: Vec<&str> = local.lines().collect();
+        let remote_lines: Vec<&str> = remote.lines().collect();
+
+        let mut local_set: std::collections::HashSet<&str> = local_lines.iter().copied().collect();
+        let mut remote_set: std::collections::HashSet<&str> = remote_lines.iter().copied().collect();
+
+        for line in &local_set {
+            if !remote_set.contains(line) && !base_lines.contains(line) {
+                result.push_str(line);
+                result.push('\n');
+            }
+        }
+
+        for line in &remote_set {
+            if !local_set.contains(line) && !base_lines.contains(line) {
+                result.push_str(line);
+                result.push('\n');
+            }
+        }
+
+        result
+    }
+
+    fn find_conflicts(
+        &mut self,
+        base: &Option<String>,
+        local: &String,
+        remote: &String,
+    ) -> Vec<Conflict> {
+        let mut conflicts = Vec::new();
+
+        if base.is_none() {
+            return conflicts;
+        }
+
+        let base_lines: Vec<&str> = base.as_ref().unwrap().lines().collect();
+        let local_lines: Vec<&str> = local.lines().collect();
+        let remote_lines: Vec<&str> = remote.lines().collect();
+
+        for i in 0..std::cmp::min(std::cmp::min(base_lines.len(), local_lines.len()), remote_lines.len()) {
+            if base_lines[i] != local_lines[i] && base_lines[i] != remote_lines[i] && local_lines[i] != remote_lines[i] {
+                conflicts.push(Conflict {
+                    path: PathBuf::from("conflict"),
+                    base_content: Some(base_lines[i].to_string()),
+                    local_content: Some(local_lines[i].to_string()),
+                    remote_content: Some(remote_lines[i].to_string()),
+                });
+            }
+        }
+
+        conflicts
+    }
+
+    fn resolve_conflicts_interactively(
+        &mut self,
+        output: &PathBuf,
+        local_content: &String,
+        remote_content: &String,
+    ) -> Result<MergeResult> {
+        let conflict_text = format!(
+            "<<<<<<< LOCAL\n{}\n=======\n{}\n>>>>>>> REMOTE\n",
+            local_content, remote_content
+        );
+
+        println!("\nConflict detected in {:?}", output);
+
+        let options = &[
+            "Keep local version",
+            "Keep remote version",
+            "Edit merge manually",
+            "Abort merge",
+        ];
+
+        let selection = Select::new()
+            .with_prompt("How would you like to resolve this conflict?")
+            .items(options)
+            .default(0)
+            .interact()?;
+
+        match selection {
+            0 => {
+                fs::write(output, local_content)?;
+            }
+            1 => {
+                fs::write(output, remote_content)?;
+            }
+            2 => {
+                if Editor::new()
+                    .edit(&conflict_text)
+                    .unwrap_or(Some(conflict_text.clone()))
+                    .map(|content| fs::write(output, &content))
+                    .is_err()
+                {
+                    fs::write(output, &conflict_text)?;
+                }
+            }
+            3 => {
+                anyhow::bail!("Merge aborted by user");
+            }
+            _ => {
+                fs::write(output, &conflict_text)?;
+            }
+        }
+
+        if self.conflicts.is_empty() {
+            Ok(MergeResult::Success)
+        } else {
+            Ok(MergeResult::Conflict(self.conflicts.clone()))
+        }
+    }
+
+    fn compute_diff(&self, a: &str, b: &str) -> Result<Vec<String>> {
+        let mut diff = Vec::new();
+
+        let a_lines: Vec<&str> = a.lines().collect();
+        let b_lines: Vec<&str> = b.lines().collect();
+
+        let mut i = 0;
+        let mut j = 0;
+
+        while i < a_lines.len() || j < b_lines.len() {
+            if i >= a_lines.len() {
+                diff.push(format!("+ {}", b_lines[j]));
+                j += 1;
+            } else if j >= b_lines.len() {
+                diff.push(format!("- {}", a_lines[i]));
+                i += 1;
+            } else if a_lines[i] == b_lines[j] {
+                diff.push(format!("  {}", a_lines[i]));
+                i += 1;
+                j += 1;
+            } else {
+                diff.push(format!("- {}", a_lines[i]));
+                diff.push(format!("+ {}", b_lines[j]));
+                i += 1;
+                j += 1;
+            }
+        }
+
+        Ok(diff)
+    }
+
+    fn read_file(&self, path: &PathBuf) -> Result<String> {
+        let mut file = fs::File::open(path)
+            .with_context(|| format!("Failed to open {:?}", path))?;
+        let mut content = String::new();
+        file.read_to_string(&mut content)?;
+        Ok(content)
+    }
+}
+
+impl Default for Merger {
+    fn default() -> Self {
+        Self::new()
+    }
+}