Steps to replicate the issue:

Enter the following wikitext

<div>LINE ONE

LINE TWO</div>

What happens?:

The two lines are shown on the same line, like this:

LINE ONE LINE TWO

What should have happened instead?:

The two lines should be in separate paragraphs, like this:

LINE ONE

LINE TWO

Other information:
Example on wiki: https://en.wikipedia.org/wiki/User:Beleg_T%C3%A2l/sandbox

The following wikitext is parsed as expected:

<div>
LINE ONE

LINE TWO
</div>

If three or more lines are involved, it is parsed as expected:

<div>LINE ONE

LINE TWO

LINE THREE</div>

The issue also occurs for other types of HTML tag:

<blockquote>LINE ONE

LINE TWO</blockquote>