diff --git a/Android.mk b/Android.mk
index 2591267..bf24879 100644
--- a/Android.mk
+++ b/Android.mk
@@ -39,11 +39,13 @@
     bspatch.cc \
     extents.cc \
     extents_file.cc \
-    file.cc
+    file.cc \
+    memory_file.cc
 
 # Unit test files.
 bsdiff_common_unittests := \
     bsdiff_unittest.cc \
+    bspatch_unittest.cc \
     extents_file_unittest.cc \
     extents_unittest.cc \
     test_utils.cc
diff --git a/Makefile b/Makefile
index d887364..fbfe56a 100644
--- a/Makefile
+++ b/Makefile
@@ -34,11 +34,13 @@
   bspatch.o \
   extents.o \
   extents_file.o \
-  file.o
+  file.o \
+  memory_file.o
 
-UNITTEST_LIBS = -lgmock -lgtest
+UNITTEST_LIBS = -lgmock -lgtest -lpthread
 UNITTEST_OBJS = \
   bsdiff_unittest.o \
+  bspatch_unittest.o \
   extents_file_unittest.o \
   extents_unittest.o \
   test_utils.o \
@@ -63,6 +65,7 @@
 bspatch.o: bspatch.cc bspatch.h extents.h extents_file.h file_interface.h \
  file.h
 bspatch_main.o: bspatch_main.cc bspatch.h
+bspatch_unittest.o: bspatch_unittest.cc bspatch.h test_utils.h
 extents.o: extents.cc extents.h extents_file.h file_interface.h
 extents_file.o: extents_file.cc extents_file.h file_interface.h
 extents_file_unittest.o: extents_file_unittest.cc extents_file.h \
@@ -70,6 +73,7 @@
 extents_unittest.o: extents_unittest.cc extents.h extents_file.h \
  file_interface.h
 file.o: file.cc file.h file_interface.h
+memory_file.o: memory_file.cc memory_file.h file_interface.h
 testrunner.o: testrunner.cc
 test_utils.o: test_utils.cc test_utils.h
 
diff --git a/bspatch.cc b/bspatch.cc
index aa484cd..aae6118 100644
--- a/bspatch.cc
+++ b/bspatch.cc
@@ -32,21 +32,25 @@
 
 #include <bzlib.h>
 #include <err.h>
+#include <errno.h>
 #include <fcntl.h>
 #include <inttypes.h>
 #include <stdlib.h>
 #include <string.h>
 #include <unistd.h>
+#include <sys/stat.h>
 #include <sys/types.h>
 
 #include <algorithm>
 #include <memory>
 #include <limits>
+#include <vector>
 
 #include "extents.h"
 #include "extents_file.h"
 #include "file.h"
 #include "file_interface.h"
+#include "memory_file.h"
 
 namespace {
 
@@ -75,22 +79,84 @@
   return y;
 }
 
+bool ReadBZ2(BZFILE* pfbz2, uint8_t* data, size_t size) {
+  int bz2err;
+  size_t lenread = BZ2_bzRead(&bz2err, pfbz2, data, size);
+  if (lenread < size || (bz2err != BZ_OK && bz2err != BZ_STREAM_END))
+    return false;
+  return true;
+}
+
+bool ReadBZ2AndWriteAll(const std::unique_ptr<bsdiff::FileInterface>& file,
+                        BZFILE* pfbz2,
+                        size_t size,
+                        uint8_t* buf,
+                        size_t buf_size) {
+  while (size > 0) {
+    size_t bytes_to_read = std::min(size, buf_size);
+    if (!ReadBZ2(pfbz2, buf, bytes_to_read))
+      return false;
+    if (!WriteAll(file, buf, bytes_to_read))
+      return false;
+    size -= bytes_to_read;
+  }
+  return true;
+}
+
 }  // namespace
 
 namespace bsdiff {
 
+bool WriteAll(const std::unique_ptr<FileInterface>& file,
+              const uint8_t* data,
+              size_t size) {
+  size_t offset = 0, written;
+  while (offset < size) {
+    if (!file->Write(data + offset, size - offset, &written))
+      return false;
+    offset += written;
+  }
+  return true;
+}
+
+bool IsOverlapping(const char* old_filename,
+                   const char* new_filename,
+                   const std::vector<ex_t>& old_extents,
+                   const std::vector<ex_t>& new_extents) {
+  struct stat old_stat, new_stat;
+  if (stat(new_filename, &new_stat) == -1) {
+    if (errno == ENOENT)
+      return false;
+    err(1, "Error stat the new filename %s", new_filename);
+  }
+  if (stat(old_filename, &old_stat) == -1)
+    err(1, "Error stat the old filename %s", old_filename);
+
+  if (old_stat.st_dev != new_stat.st_dev || old_stat.st_ino != new_stat.st_ino)
+    return false;
+
+  if (old_extents.empty() && new_extents.empty())
+    return true;
+
+  for (ex_t old_ex : old_extents)
+    for (ex_t new_ex : new_extents)
+      if (static_cast<uint64_t>(old_ex.off) < new_ex.off + new_ex.len &&
+          static_cast<uint64_t>(new_ex.off) < old_ex.off + old_ex.len)
+        return true;
+
+  return false;
+}
+
 int bspatch(
     const char* old_filename, const char* new_filename,
     const char* patch_filename,
     const char* old_extents, const char* new_extents) {
   FILE* f, *cpf, *dpf, *epf;
   BZFILE* cpfbz2, *dpfbz2, *epfbz2;
-  int cbz2err, dbz2err, ebz2err;
+  int bz2err;
   ssize_t bzctrllen, bzdatalen;
   u_char header[32], buf[8];
-  u_char* new_buf;
   off_t ctrl[3];
-  off_t lenread;
 
   int using_extents = (old_extents != NULL || new_extents != NULL);
 
@@ -137,29 +203,29 @@
     err(1, "fopen(%s)", patch_filename);
   if (fseek(cpf, 32, SEEK_SET))
     err(1, "fseeko(%s, %lld)", patch_filename, (long long)32);
-  if ((cpfbz2 = BZ2_bzReadOpen(&cbz2err, cpf, 0, 0, NULL, 0)) == NULL)
-    errx(1, "BZ2_bzReadOpen, bz2err = %d", cbz2err);
+  if ((cpfbz2 = BZ2_bzReadOpen(&bz2err, cpf, 0, 0, NULL, 0)) == NULL)
+    errx(1, "BZ2_bzReadOpen, bz2err = %d", bz2err);
   if ((dpf = fopen(patch_filename, "r")) == NULL)
     err(1, "fopen(%s)", patch_filename);
   if (fseek(dpf, 32 + bzctrllen, SEEK_SET))
     err(1, "fseeko(%s, %lld)", patch_filename, (long long)(32 + bzctrllen));
-  if ((dpfbz2 = BZ2_bzReadOpen(&dbz2err, dpf, 0, 0, NULL, 0)) == NULL)
-    errx(1, "BZ2_bzReadOpen, bz2err = %d", dbz2err);
+  if ((dpfbz2 = BZ2_bzReadOpen(&bz2err, dpf, 0, 0, NULL, 0)) == NULL)
+    errx(1, "BZ2_bzReadOpen, bz2err = %d", bz2err);
   if ((epf = fopen(patch_filename, "r")) == NULL)
     err(1, "fopen(%s)", patch_filename);
   if (fseek(epf, 32 + bzctrllen + bzdatalen, SEEK_SET))
     err(1, "fseeko(%s, %lld)", patch_filename,
         (long long)(32 + bzctrllen + bzdatalen));
-  if ((epfbz2 = BZ2_bzReadOpen(&ebz2err, epf, 0, 0, NULL, 0)) == NULL)
-    errx(1, "BZ2_bzReadOpen, bz2err = %d", ebz2err);
+  if ((epfbz2 = BZ2_bzReadOpen(&bz2err, epf, 0, 0, NULL, 0)) == NULL)
+    errx(1, "BZ2_bzReadOpen, bz2err = %d", bz2err);
 
   // Open input file for reading.
   std::unique_ptr<FileInterface> old_file = File::FOpen(old_filename, O_RDONLY);
   if (!old_file)
     err(1, "Error opening the old filename");
 
+  std::vector<ex_t> parsed_old_extents;
   if (using_extents) {
-    std::vector<ex_t> parsed_old_extents;
     if (!ParseExtentStr(old_extents, &parsed_old_extents))
       errx(1, "Error parsing the old extents");
     old_file.reset(new ExtentsFile(std::move(old_file), parsed_old_extents));
@@ -169,22 +235,38 @@
     err(1, "cannot obtain the size of %s", old_filename);
   uint64_t old_file_pos = 0;
 
-  if ((new_buf = static_cast<u_char*>(malloc(newsize + 1))) == NULL)
-    err(1, NULL);
+  // Open output file for writing.
+  std::unique_ptr<FileInterface> new_file =
+      File::FOpen(new_filename, O_CREAT | O_WRONLY);
+  if (!new_file)
+    err(1, "Error opening the new filename %s", new_filename);
+
+  std::vector<ex_t> parsed_new_extents;
+  if (using_extents) {
+    if (!ParseExtentStr(new_extents, &parsed_new_extents))
+      errx(1, "Error parsing the new extents");
+    new_file.reset(new ExtentsFile(std::move(new_file), parsed_new_extents));
+  }
+
+  if (IsOverlapping(old_filename, new_filename, parsed_old_extents,
+                    parsed_new_extents)) {
+    // New and old file is overlapping, we can not stream output to new file,
+    // cache it in the memory and write to the file at the end.
+    new_file.reset(new MemoryFile(std::move(new_file), newsize));
+  }
 
   // The oldpos can be negative, but the new pos is only incremented linearly.
   int64_t oldpos = 0;
   uint64_t newpos = 0;
-  std::vector<u_char> old_buf(1024 * 1024);
+  std::vector<uint8_t> old_buf(1024 * 1024), new_buf(1024 * 1024);
   while (newpos < newsize) {
-    int64_t i, j;
+    int64_t i;
     // Read control data.
     for (i = 0; i <= 2; i++) {
-      lenread = BZ2_bzRead(&cbz2err, cpfbz2, buf, 8);
-      if ((lenread < 8) || ((cbz2err != BZ_OK) && (cbz2err != BZ_STREAM_END)))
+      if (!ReadBZ2(cpfbz2, buf, 8))
         errx(1, "Corrupt patch\n");
       ctrl[i] = ParseInt64(buf);
-    };
+    }
 
     // Sanity-check.
     if (ctrl[0] < 0 || ctrl[1] < 0)
@@ -194,37 +276,40 @@
     if (newpos + ctrl[0] > newsize)
       errx(1, "Corrupt patch\n");
 
-    // Read diff string.
-    lenread = BZ2_bzRead(&dbz2err, dpfbz2, new_buf + newpos, ctrl[0]);
-    if ((lenread < ctrl[0]) ||
-        ((dbz2err != BZ_OK) && (dbz2err != BZ_STREAM_END)))
-      errx(1, "Corrupt patch\n");
-
     // Add old data to diff string. It is enough to fseek once, at
     // the beginning of the sequence, to avoid unnecessary overhead.
-    j = newpos;
     if ((i = oldpos) < 0) {
-      j -= i;
+      // Write diff block directly to new file without adding old data,
+      // because we will skip part where |oldpos| < 0.
+      if (!ReadBZ2AndWriteAll(new_file, dpfbz2, -i, new_buf.data(),
+                              new_buf.size()))
+        errx(1, "Error during ReadBZ2AndWriteAll()");
+
       i = 0;
     }
+
     // We just checked that |i| is not negative.
     if (static_cast<uint64_t>(i) != old_file_pos && !old_file->Seek(i))
       err(1, "error seeking input file to offset %" PRId64, i);
     if ((old_file_pos = oldpos + ctrl[0]) > oldsize)
       old_file_pos = oldsize;
 
-    uint64_t chunk_size = old_file_pos - i;
+    size_t chunk_size = old_file_pos - i;
     while (chunk_size > 0) {
       size_t read_bytes;
-      size_t bytes_to_read =
-          std::min(chunk_size, static_cast<uint64_t>(old_buf.size()));
+      size_t bytes_to_read = std::min(chunk_size, old_buf.size());
       if (!old_file->Read(old_buf.data(), bytes_to_read, &read_bytes))
         err(1, "error reading from input file");
       if (!read_bytes)
         errx(1, "EOF reached while reading from input file");
+      // Read same amount of bytes from diff block
+      if (!ReadBZ2(dpfbz2, new_buf.data(), read_bytes))
+        errx(1, "Corrupt patch\n");
       // new_buf already has data from diff block, adds old data to it.
       for (size_t k = 0; k < read_bytes; k++)
-        new_buf[j++] += old_buf[k];
+        new_buf[k] += old_buf[k];
+      if (!WriteAll(new_file, new_buf.data(), read_bytes))
+        err(1, "Error writing new file.");
       chunk_size -= read_bytes;
     }
 
@@ -232,58 +317,41 @@
     newpos += ctrl[0];
     oldpos += ctrl[0];
 
+    if (oldpos > static_cast<int64_t>(oldsize)) {
+      // Write diff block directly to new file without adding old data,
+      // because we skipped part where |oldpos| > oldsize.
+      if (!ReadBZ2AndWriteAll(new_file, dpfbz2, oldpos - oldsize,
+                              new_buf.data(), new_buf.size()))
+        errx(1, "Error during ReadBZ2AndWriteAll()");
+    }
+
     // Sanity-check.
     if (newpos + ctrl[1] > newsize)
       errx(1, "Corrupt patch\n");
 
-    // Read extra string.
-    lenread = BZ2_bzRead(&ebz2err, epfbz2, new_buf + newpos, ctrl[1]);
-    if ((lenread < ctrl[1]) ||
-        ((ebz2err != BZ_OK) && (ebz2err != BZ_STREAM_END)))
-      errx(1, "Corrupt patch\n");
+    // Read extra block.
+    if (!ReadBZ2AndWriteAll(new_file, epfbz2, ctrl[1], new_buf.data(),
+                            new_buf.size()))
+      errx(1, "Error during ReadBZ2AndWriteAll()");
 
     // Adjust pointers.
     newpos += ctrl[1];
     oldpos += ctrl[2];
-  };
+  }
 
   // Close input file.
   old_file->Close();
 
   // Clean up the bzip2 reads.
-  BZ2_bzReadClose(&cbz2err, cpfbz2);
-  BZ2_bzReadClose(&dbz2err, dpfbz2);
-  BZ2_bzReadClose(&ebz2err, epfbz2);
+  BZ2_bzReadClose(&bz2err, cpfbz2);
+  BZ2_bzReadClose(&bz2err, dpfbz2);
+  BZ2_bzReadClose(&bz2err, epfbz2);
   if (fclose(cpf) || fclose(dpf) || fclose(epf))
     err(1, "fclose(%s)", patch_filename);
 
-  // Write the new file.
-  std::unique_ptr<FileInterface> new_file =
-      File::FOpen(new_filename, O_CREAT | O_WRONLY);
-  if (!new_file)
-    err(1, "Error opening the new filename %s", new_filename);
-
-  if (using_extents) {
-    std::vector<ex_t> parsed_new_extents;
-    if (!ParseExtentStr(new_extents, &parsed_new_extents))
-      errx(1, "Error parsing the new extents");
-    new_file.reset(new ExtentsFile(std::move(new_file), parsed_new_extents));
-  }
-
-  u_char* temp_new_buf = new_buf;   // new_buf needed for free()
-  while (newsize > 0) {
-    size_t bytes_written;
-    if (!new_file->Write(temp_new_buf, newsize, &bytes_written))
-      err(1, "Error writing new file %s", new_filename);
-    newsize -= bytes_written;
-    temp_new_buf += bytes_written;
-  }
-
   if (!new_file->Close())
     err(1, "Error closing new file %s", new_filename);
 
-  free(new_buf);
-
   return 0;
 }
 
diff --git a/bspatch.h b/bspatch.h
index 269074e..3de2874 100644
--- a/bspatch.h
+++ b/bspatch.h
@@ -5,6 +5,11 @@
 #ifndef _BSDIFF_BSPATCH_H_
 #define _BSDIFF_BSPATCH_H_
 
+#include <memory>
+#include <vector>
+
+#include "extents_file.h"
+
 namespace bsdiff {
 
 int bspatch(const char* old_filename,
@@ -13,6 +18,15 @@
             const char* old_extents,
             const char* new_extents);
 
+bool WriteAll(const std::unique_ptr<FileInterface>& file,
+              const uint8_t* data,
+              size_t size);
+
+bool IsOverlapping(const char* old_filename,
+                   const char* new_filename,
+                   const std::vector<ex_t>& old_extents,
+                   const std::vector<ex_t>& new_extents);
+
 }  // namespace bsdiff
 
 #endif  // _BSDIFF_BSPATCH_H_
diff --git a/bspatch_unittest.cc b/bspatch_unittest.cc
new file mode 100644
index 0000000..04ec666
--- /dev/null
+++ b/bspatch_unittest.cc
@@ -0,0 +1,42 @@
+// Copyright 2016 The Chromium OS Authors. All rights reserved.
+// Use of this source code is governed by a BSD-style license that can be
+// found in the LICENSE file.
+
+#include "bspatch.h"
+
+#include <unistd.h>
+
+#include <gtest/gtest.h>
+
+#include "test_utils.h"
+
+namespace bsdiff {
+
+class BspatchTest : public testing::Test {
+ protected:
+  BspatchTest()
+      : old_file_("bsdiff_oldfile.XXXXXX"),
+        new_file_("bsdiff_newfile.XXXXXX") {}
+
+  test_utils::ScopedTempFile old_file_;
+  test_utils::ScopedTempFile new_file_;
+};
+
+TEST_F(BspatchTest, IsOverlapping) {
+  const char* old_filename = old_file_.c_str();
+  const char* new_filename = new_file_.c_str();
+  EXPECT_FALSE(IsOverlapping(old_filename, "does-not-exist", {}, {}));
+  EXPECT_FALSE(IsOverlapping(old_filename, new_filename, {}, {}));
+  EXPECT_EQ(0, unlink(new_filename));
+  EXPECT_EQ(0, symlink(old_filename, new_filename));
+  EXPECT_TRUE(IsOverlapping(old_filename, new_filename, {}, {}));
+  EXPECT_TRUE(IsOverlapping(old_filename, old_filename, {}, {}));
+  EXPECT_FALSE(IsOverlapping(old_filename, old_filename, {{0, 1}}, {{1, 1}}));
+  EXPECT_FALSE(IsOverlapping(old_filename, old_filename, {{2, 1}}, {{1, 1}}));
+  EXPECT_TRUE(IsOverlapping(old_filename, old_filename, {{0, 1}}, {{0, 1}}));
+  EXPECT_TRUE(IsOverlapping(old_filename, old_filename, {{0, 4}}, {{2, 1}}));
+  EXPECT_TRUE(IsOverlapping(old_filename, old_filename, {{1, 1}}, {{0, 2}}));
+  EXPECT_TRUE(IsOverlapping(old_filename, old_filename, {{3, 2}}, {{2, 2}}));
+}
+
+}  // namespace bsdiff
diff --git a/memory_file.cc b/memory_file.cc
new file mode 100644
index 0000000..996a10e
--- /dev/null
+++ b/memory_file.cc
@@ -0,0 +1,46 @@
+// Copyright 2016 The Chromium OS Authors. All rights reserved.
+// Use of this source code is governed by a BSD-style license that can be
+// found in the LICENSE file.
+
+#include "memory_file.h"
+
+#include "bspatch.h"
+
+namespace bsdiff {
+
+MemoryFile::MemoryFile(std::unique_ptr<FileInterface> file, size_t size)
+    : file_(std::move(file)) {
+  buffer_.reserve(size);
+}
+
+MemoryFile::~MemoryFile() {
+  Close();
+}
+
+bool MemoryFile::Read(void* buf, size_t count, size_t* bytes_read) {
+  return false;
+}
+
+bool MemoryFile::Write(const void* buf, size_t count, size_t* bytes_written) {
+  const uint8_t* data = static_cast<const uint8_t*>(buf);
+  buffer_.insert(buffer_.end(), data, data + count);
+  *bytes_written = count;
+  return true;
+}
+
+bool MemoryFile::Seek(off_t pos) {
+  return false;
+}
+
+bool MemoryFile::Close() {
+  if (!WriteAll(file_, buffer_.data(), buffer_.size()))
+    return false;
+  return file_->Close();
+}
+
+bool MemoryFile::GetSize(uint64_t* size) {
+  *size = buffer_.size();
+  return true;
+}
+
+}  // namespace bsdiff
diff --git a/memory_file.h b/memory_file.h
new file mode 100644
index 0000000..3e80b8a
--- /dev/null
+++ b/memory_file.h
@@ -0,0 +1,42 @@
+// Copyright 2016 The Chromium OS Authors. All rights reserved.
+// Use of this source code is governed by a BSD-style license that can be
+// found in the LICENSE file.
+
+#ifndef _BSDIFF_MEMORY_FILE_H_
+#define _BSDIFF_MEMORY_FILE_H_
+
+#include <memory>
+#include <vector>
+
+#include "file_interface.h"
+
+namespace bsdiff {
+
+class MemoryFile : public FileInterface {
+ public:
+  // Creates a MemoryFile based on the underlying |file| passed. The MemoryFile
+  // will cache all the write in memory and write it to to |file| when it's
+  // closed. MemoryFile does not support read and seek.
+  // |size| should be the estimated total file size, it is used to reserve
+  // buffer space.
+  MemoryFile(std::unique_ptr<FileInterface> file, size_t size);
+
+  ~MemoryFile() override;
+
+  // FileInterface overrides.
+  bool Read(void* buf, size_t count, size_t* bytes_read) override;
+  bool Write(const void* buf, size_t count, size_t* bytes_written) override;
+  bool Seek(off_t pos) override;
+  bool Close() override;
+  bool GetSize(uint64_t* size) override;
+
+ private:
+  // The underlying FileInterace instance.
+  std::unique_ptr<FileInterface> file_;
+
+  std::vector<uint8_t> buffer_;
+};
+
+}  // namespace bsdiff
+
+#endif  // _BSDIFF_MEMORY_FILE_H_