diff --git a/packages/zowe-explorer/.vscodeignore b/packages/zowe-explorer/.vscodeignore
index 931447bc41..0a539b22c5 100644
--- a/packages/zowe-explorer/.vscodeignore
+++ b/packages/zowe-explorer/.vscodeignore
@@ -8,7 +8,7 @@
 !resources/**/*.png
 !resources/**/*.svg
 !prebuilds/**
-!webviews/*/dist/
+!src/webviews/dist/**
 
 !CHANGELOG.md
 !LICENSE
diff --git a/packages/zowe-explorer/CHANGELOG.md b/packages/zowe-explorer/CHANGELOG.md
index 3c76988b82..b4815bcd01 100644
--- a/packages/zowe-explorer/CHANGELOG.md
+++ b/packages/zowe-explorer/CHANGELOG.md
@@ -14,6 +14,7 @@ All notable changes to the "vscode-extension-for-zowe" extension will be documen
 ### Bug fixes
 
 - Fixed submitting local JCL using command pallet option `Zowe Explorer: Submit JCL` by adding a check for chosen profile returned to continue the action. [#1625](https://github.com/zowe/vscode-extension-for-zowe/issues/1625)
+- Fixed conflict resolution being skipped if local and remote file have different contents but are the same size. [#2496](https://github.com/zowe/vscode-extension-for-zowe/issues/2496)
 
 ## `2.11.0`
 
diff --git a/packages/zowe-explorer/__mocks__/mockCreators/shared.ts b/packages/zowe-explorer/__mocks__/mockCreators/shared.ts
index 63bb7cd047..07d17faaf5 100644
--- a/packages/zowe-explorer/__mocks__/mockCreators/shared.ts
+++ b/packages/zowe-explorer/__mocks__/mockCreators/shared.ts
@@ -293,12 +293,12 @@ export function createTextDocument(name: string, sessionNode?: ZoweDatasetNode |
         isDirty: null,
         isClosed: null,
         save: null,
-        eol: null,
+        eol: 1,
         lineCount: null,
         lineAt: null,
         offsetAt: null,
-        positionAt: null,
-        getText: jest.fn(),
+        positionAt: jest.fn(),
+        getText: jest.fn().mockReturnValue(""),
         getWordRangeAtPosition: null,
         validateRange: null,
         validatePosition: null,
diff --git a/packages/zowe-explorer/__tests__/__unit__/dataset/actions.unit.test.ts b/packages/zowe-explorer/__tests__/__unit__/dataset/actions.unit.test.ts
index 09c1e79759..93aeba652e 100644
--- a/packages/zowe-explorer/__tests__/__unit__/dataset/actions.unit.test.ts
+++ b/packages/zowe-explorer/__tests__/__unit__/dataset/actions.unit.test.ts
@@ -1454,6 +1454,74 @@ describe("Dataset Actions Unit Tests - Function saveFile", () => {
         logSpy.mockClear();
         commandSpy.mockClear();
     });
+
+    it("Checking common dataset saving failed due to conflict with server version when file size has not changed", async () => {
+        globals.defineGlobals("");
+        createGlobalMocks();
+        const blockMocks = createBlockMocks();
+        const node = new ZoweDatasetNode(
+            "HLQ.TEST.AFILE",
+            vscode.TreeItemCollapsibleState.None,
+            blockMocks.datasetSessionNode,
+            null,
+            undefined,
+            undefined,
+            blockMocks.imperativeProfile
+        );
+        blockMocks.datasetSessionNode.children.push(node);
+
+        mocked(sharedUtils.concatChildNodes).mockReturnValueOnce([node]);
+        blockMocks.testDatasetTree.getChildren.mockReturnValueOnce([blockMocks.datasetSessionNode]);
+        mocked(zowe.List.dataSet).mockResolvedValue({
+            success: true,
+            commandResponse: "",
+            apiResponse: {
+                items: [{ dsname: "HLQ.TEST.AFILE" }],
+            },
+        });
+        mocked(zowe.Upload.pathToDataSet).mockResolvedValueOnce({
+            success: false,
+            commandResponse: "Rest API failure with HTTP(S) status 412",
+            apiResponse: [],
+        });
+
+        mocked(vscode.window.withProgress).mockImplementation((progLocation, callback) => {
+            return callback();
+        });
+        const profile = blockMocks.imperativeProfile;
+        profile.profile.encoding = 1047;
+        blockMocks.profileInstance.loadNamedProfile.mockReturnValueOnce(blockMocks.imperativeProfile);
+        mocked(Profiles.getInstance).mockReturnValue(blockMocks.profileInstance);
+        Object.defineProperty(wsUtils, "markDocumentUnsaved", {
+            value: jest.fn(),
+            configurable: true,
+        });
+        Object.defineProperty(context, "isTypeUssTreeNode", {
+            value: jest.fn().mockReturnValueOnce(false),
+            configurable: true,
+        });
+        Object.defineProperty(ZoweExplorerApiRegister.getMvsApi, "getContents", {
+            value: jest.fn(),
+            configurable: true,
+        });
+
+        const testDocument = createTextDocument("HLQ.TEST.AFILE", blockMocks.datasetSessionNode);
+        (testDocument as any).fileName = path.join(globals.DS_DIR, testDocument.fileName);
+        const logSpy = jest.spyOn(ZoweLogger, "warn");
+        const commandSpy = jest.spyOn(vscode.commands, "executeCommand");
+        const applyEditSpy = jest.spyOn(vscode.workspace, "applyEdit");
+        jest.spyOn(fs, "statSync").mockReturnValueOnce({ size: 0 } as any);
+
+        await dsActions.saveFile(testDocument, blockMocks.testDatasetTree);
+
+        expect(logSpy).toBeCalledWith("Remote file has changed. Presenting with way to resolve file.");
+        expect(mocked(sharedUtils.concatChildNodes)).toBeCalled();
+        expect(commandSpy).toBeCalledWith("workbench.files.action.compareWithSaved");
+        expect(applyEditSpy).toHaveBeenCalledTimes(2);
+        logSpy.mockClear();
+        commandSpy.mockClear();
+        applyEditSpy.mockClear();
+    });
 });
 
 describe("Dataset Actions Unit Tests - Function showAttributes", () => {
diff --git a/packages/zowe-explorer/src/shared/utils.ts b/packages/zowe-explorer/src/shared/utils.ts
index 98b6a293ad..354c9a6732 100644
--- a/packages/zowe-explorer/src/shared/utils.ts
+++ b/packages/zowe-explorer/src/shared/utils.ts
@@ -11,6 +11,7 @@
 
 // Generic utility functions related to all node types. See ./src/utils.ts for other utility functions.
 
+import * as fs from "fs";
 import * as vscode from "vscode";
 import * as path from "path";
 import * as globals from "../globals";
@@ -383,8 +384,27 @@ export async function compareFileContent(
             responseTimeout: prof.profile?.responseTimeout,
         });
     }
+
+    // If local and remote file size are the same, then VS Code won't detect
+    // there is a conflict and remote changes may get overwritten. To work
+    // around this limitation of VS Code, when the sizes are identical we
+    // temporarily add a trailing newline byte to the local copy which forces
+    // the file size to be different. This is a terrible hack but it works.
+    // See https://github.com/microsoft/vscode/issues/119002
+    const oldSize = doc.getText().length;
+    const newSize = fs.statSync(doc.fileName).size;
+    if (newSize === oldSize) {
+        const edits = new vscode.WorkspaceEdit();
+        edits.insert(doc.uri, doc.positionAt(oldSize), doc.eol.toString());
+        await vscode.workspace.applyEdit(edits);
+    }
     ZoweLogger.warn(localize("saveFile.etagMismatch.log.warning", "Remote file has changed. Presenting with way to resolve file."));
-    vscode.commands.executeCommand("workbench.files.action.compareWithSaved");
+    await vscode.commands.executeCommand("workbench.files.action.compareWithSaved");
+    if (newSize === oldSize) {
+        const edits2 = new vscode.WorkspaceEdit();
+        edits2.delete(doc.uri, new vscode.Range(doc.positionAt(oldSize), doc.positionAt(oldSize + doc.eol.toString().length)));
+        await vscode.workspace.applyEdit(edits2);
+    }
     // re-assign etag, so that it can be used with subsequent requests
     const downloadEtag = downloadResponse?.apiResponse?.etag;
     if (node && downloadEtag !== node.getEtag()) {