diff --git a/changelogs/unreleased/fix-gitaly-mr-creation-limits.yml b/changelogs/unreleased/fix-gitaly-mr-creation-limits.yml
new file mode 100644
index 00000000000..e903f2e5277
--- /dev/null
+++ b/changelogs/unreleased/fix-gitaly-mr-creation-limits.yml
@@ -0,0 +1,5 @@
+---
+title: Fix merge request diffs when created with gitaly_diff_between enabled
+merge_request:
+author:
+type: fixed
diff --git a/lib/gitlab/gitaly_client/commit_service.rb b/lib/gitlab/gitaly_client/commit_service.rb
index c9c414e5d33..d979ba0eb14 100644
--- a/lib/gitlab/gitaly_client/commit_service.rb
+++ b/lib/gitlab/gitaly_client/commit_service.rb
@@ -368,7 +368,7 @@ module Gitlab
       def call_commit_diff(request_params, options = {})
         request_params[:ignore_whitespace_change] = options.fetch(:ignore_whitespace_change, false)
         request_params[:enforce_limits] = options.fetch(:limits, true)
-        request_params[:collapse_diffs] = request_params[:enforce_limits] || !options.fetch(:expanded, true)
+        request_params[:collapse_diffs] = !options.fetch(:expanded, true)
         request_params.merge!(Gitlab::Git::DiffCollection.collection_limits(options).to_h)
 
         request = Gitaly::CommitDiffRequest.new(request_params)
diff --git a/spec/lib/gitlab/gitaly_client/commit_service_spec.rb b/spec/lib/gitlab/gitaly_client/commit_service_spec.rb
index 7951cbe7b1d..54f2ea33f90 100644
--- a/spec/lib/gitlab/gitaly_client/commit_service_spec.rb
+++ b/spec/lib/gitlab/gitaly_client/commit_service_spec.rb
@@ -17,7 +17,7 @@ describe Gitlab::GitalyClient::CommitService do
           repository: repository_message,
           left_commit_id: 'cfe32cf61b73a0d5e9f13e774abde7ff789b1660',
           right_commit_id: commit.id,
-          collapse_diffs: true,
+          collapse_diffs: false,
           enforce_limits: true,
           **Gitlab::Git::DiffCollection.collection_limits.to_h
         )
@@ -35,7 +35,7 @@ describe Gitlab::GitalyClient::CommitService do
           repository: repository_message,
           left_commit_id: Gitlab::Git::EMPTY_TREE_ID,
           right_commit_id: initial_commit.id,
-          collapse_diffs: true,
+          collapse_diffs: false,
           enforce_limits: true,
           **Gitlab::Git::DiffCollection.collection_limits.to_h
         )
diff --git a/spec/models/merge_request_diff_spec.rb b/spec/models/merge_request_diff_spec.rb
index 48c01fc4d4e..ccc3ff861c5 100644
--- a/spec/models/merge_request_diff_spec.rb
+++ b/spec/models/merge_request_diff_spec.rb
@@ -153,6 +153,13 @@ describe MergeRequestDiff do
       expect(mr_diff.empty?).to be_truthy
     end
 
+    it 'expands collapsed diffs before saving' do
+      mr_diff = create(:merge_request, source_branch: 'expand-collapse-lines', target_branch: 'master').merge_request_diff
+      diff_file = mr_diff.merge_request_diff_files.find_by(new_path: 'expand-collapse/file-5.txt')
+
+      expect(diff_file.diff).not_to be_empty
+    end
+
     it 'saves binary diffs correctly' do
       path = 'files/images/icn-time-tracking.pdf'
       mr_diff = create(:merge_request, source_branch: 'add-pdf-text-binary', target_branch: 'master').merge_request_diff