diff --git a/src/vs/workbench/browser/layout.ts b/src/vs/workbench/browser/layout.ts
index e8d196a218b12..ac32addcfeed8 100644
--- a/src/vs/workbench/browser/layout.ts
+++ b/src/vs/workbench/browser/layout.ts
@@ -44,6 +44,7 @@ import { LineNumbersType } from 'vs/editor/common/config/editorOptions';
 import { ActivitybarPart } from 'vs/workbench/browser/parts/activitybar/activitybarPart';
 import { URI } from 'vs/base/common/uri';
 import { IViewDescriptorService, ViewContainerLocation } from 'vs/workbench/common/views';
+import { DiffEditorInput } from 'vs/workbench/common/editor/diffEditorInput';
 
 export enum Settings {
 	ACTIVITYBAR_VISIBLE = 'workbench.activityBar.visible',
@@ -398,6 +399,8 @@ export abstract class Layout extends Disposable implements IWorkbenchLayoutServi
 		const newMenubarVisibility = getMenuBarVisibility(this.configurationService, this.environmentService);
 		this.setMenubarVisibility(newMenubarVisibility, !!skipLayout);
 
+		// Centered Layout
+		this.centerEditorLayout(this.state.editor.centered, skipLayout);
 	}
 
 	private setSideBarPosition(position: Position): void {
@@ -1208,9 +1211,18 @@ export abstract class Layout extends Disposable implements IWorkbenchLayoutServi
 
 		let smartActive = active;
 		const activeEditor = this.editorService.activeEditor;
-		if (this.configurationService.getValue('workbench.editor.centeredLayoutAutoResize')
-			&& (this.editorGroupService.groups.length > 1 || (activeEditor && activeEditor instanceof SideBySideEditorInput))) {
-			smartActive = false; // Respect the auto resize setting - do not go into centered layout if there is more than 1 group.
+
+		const isSideBySideLayout = activeEditor
+			&& activeEditor instanceof SideBySideEditorInput
+			// DiffEditorInput inherits from SideBySideEditorInput but can still be functionally an inline editor.
+			&& (!(activeEditor instanceof DiffEditorInput) || this.configurationService.getValue('diffEditor.renderSideBySide'));
+
+		const isCenteredLayoutAutoResizing = this.configurationService.getValue('workbench.editor.centeredLayoutAutoResize');
+		if (
+			isCenteredLayoutAutoResizing
+			&& (this.editorGroupService.groups.length > 1 || isSideBySideLayout)
+		) {
+			smartActive = false;
 		}
 
 		// Enter Centered Editor Layout