diff --git a/CHANGELOG.md b/CHANGELOG.md
index 6dd435c1c..9fe47899b 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -8,6 +8,10 @@ and R parsers.
 
 Improved handling of variable names `$foo` in shell scripts.
 
+### Diffing
+
+Improved subword highlighting for words with hyphens.
+
 ### Display
 
 Difftastic is now smarter about calculating the display width for
diff --git a/src/words.rs b/src/words.rs
index 6c1bea6f5..f108a6202 100644
--- a/src/words.rs
+++ b/src/words.rs
@@ -47,7 +47,7 @@ pub(crate) fn split_words_and_numbers(s: &str) -> Vec<&str> {
     for (idx, c) in s.char_indices() {
         match word_start {
             Some((start, start_c)) => {
-                if c.is_alphanumeric() || c == '_' {
+                if c.is_alphanumeric() || c == '-' || c == '_' {
                     // Word character, add to the current word if it's
                     // not a number.
                     if c.is_ascii_digit() == start_c.is_ascii_digit() {
@@ -93,6 +93,13 @@ mod tests {
         assert_eq!(res, vec!["example", ".", "com"])
     }
 
+    #[test]
+    fn test_split_words_hyphens() {
+        let s = "foo -bar-baz-";
+        let res = split_words(s);
+        assert_eq!(res, vec!["foo", " ", "-bar-baz-"])
+    }
+
     #[test]
     fn test_split_words_punctuation() {
         let s = "example..";
@@ -142,6 +149,13 @@ mod tests {
         assert_eq!(res, vec!["a", "123", "b"])
     }
 
+    #[test]
+    fn test_split_words_and_numbers_hyphens() {
+        let s = "a-b -c-";
+        let res = split_words_and_numbers(s);
+        assert_eq!(res, vec!["a-b", " ", "-c-"])
+    }
+
     #[test]
     fn test_split_words_and_numbers_spaces() {
         let s = "foo bar";