diff --git a/crates/agent/src/edit_agent.rs b/crates/agent/src/edit_agent.rs
index 0c234b8cb152e46ad3be29f21639e5a20a1ffb86..13d6fb978fa4f83cf47137098a5ac54093bb1288 100644
--- a/crates/agent/src/edit_agent.rs
+++ b/crates/agent/src/edit_agent.rs
@@ -2,7 +2,7 @@ mod create_file_parser;
 mod edit_parser;
 #[cfg(test)]
 mod evals;
-mod streaming_fuzzy_matcher;
+pub mod streaming_fuzzy_matcher;
 
 use crate::{Template, Templates};
 use action_log::ActionLog;
diff --git a/crates/agent/src/thread.rs b/crates/agent/src/thread.rs
index d58e3cb0c4a14489b8e6f5321e4c7a5178ebe766..02fa67ef86828938c39250dca86c9eac621c77fb 100644
--- a/crates/agent/src/thread.rs
+++ b/crates/agent/src/thread.rs
@@ -2,13 +2,13 @@ use crate::{
     ContextServerRegistry, CopyPathTool, CreateDirectoryTool, DbLanguageModel, DbThread,
     DeletePathTool, DiagnosticsTool, EditFileTool, FetchTool, FindPathTool, GrepTool,
     ListDirectoryTool, MovePathTool, NowTool, OpenTool, ProjectSnapshot, ReadFileTool,
-    RestoreFileFromDiskTool, SaveFileTool, SubagentTool, SystemPromptTemplate, Template, Templates,
-    TerminalTool, ThinkingTool, ToolPermissionDecision, WebSearchTool,
-    decide_permission_from_settings,
+    RestoreFileFromDiskTool, SaveFileTool, StreamingEditFileTool, SubagentTool,
+    SystemPromptTemplate, Template, Templates, TerminalTool, ThinkingTool, ToolPermissionDecision,
+    WebSearchTool, decide_permission_from_settings,
 };
 use acp_thread::{MentionUri, UserMessageId};
 use action_log::ActionLog;
-use feature_flags::{FeatureFlagAppExt as _, SubagentsFeatureFlag};
+use feature_flags::{AgentV2FeatureFlag, FeatureFlagAppExt as _, SubagentsFeatureFlag};
 
 use agent_client_protocol as acp;
 use agent_settings::{
@@ -1189,6 +1189,12 @@ impl Thread {
         ));
         self.add_tool(DiagnosticsTool::new(self.project.clone()));
         self.add_tool(EditFileTool::new(
+            self.project.clone(),
+            cx.weak_entity(),
+            language_registry.clone(),
+            Templates::new(),
+        ));
+        self.add_tool(StreamingEditFileTool::new(
             self.project.clone(),
             cx.weak_entity(),
             language_registry,
@@ -2310,14 +2316,31 @@ impl Thread {
             }
         }
 
+        let use_streaming_edit_tool =
+            cx.has_flag::<AgentV2FeatureFlag>() && model.supports_streaming_tools();
+
         let mut tools = self
             .tools
             .iter()
             .filter_map(|(tool_name, tool)| {
+                // For streaming_edit_file, check profile against "edit_file" since that's what users configure
+                let profile_tool_name = if tool_name == "streaming_edit_file" {
+                    "edit_file"
+                } else {
+                    tool_name.as_ref()
+                };
+
                 if tool.supports_provider(&model.provider_id())
-                    && profile.is_tool_enabled(tool_name)
+                    && profile.is_tool_enabled(profile_tool_name)
                 {
-                    Some((truncate(tool_name), tool.clone()))
+                    match (tool_name.as_ref(), use_streaming_edit_tool) {
+                        ("streaming_edit_file", true) => {
+                            // Expose streaming tool as "edit_file"
+                            Some((SharedString::from("edit_file"), tool.clone()))
+                        }
+                        ("edit_file", true) => None,
+                        _ => Some((truncate(tool_name), tool.clone())),
+                    }
                 } else {
                     None
                 }
diff --git a/crates/agent/src/tools.rs b/crates/agent/src/tools.rs
index 78128554d3f86439b934ceee662362fba19bb6e9..29c4bfe6673b34f655282d8fc86c49d27fabca06 100644
--- a/crates/agent/src/tools.rs
+++ b/crates/agent/src/tools.rs
@@ -14,6 +14,7 @@ mod open_tool;
 mod read_file_tool;
 mod restore_file_from_disk_tool;
 mod save_file_tool;
+mod streaming_edit_file_tool;
 mod subagent_tool;
 mod terminal_tool;
 mod thinking_tool;
@@ -40,6 +41,7 @@ pub use open_tool::*;
 pub use read_file_tool::*;
 pub use restore_file_from_disk_tool::*;
 pub use save_file_tool::*;
+pub use streaming_edit_file_tool::*;
 pub use subagent_tool::*;
 pub use terminal_tool::*;
 pub use thinking_tool::*;
diff --git a/crates/agent/src/tools/streaming_edit_file_tool.rs b/crates/agent/src/tools/streaming_edit_file_tool.rs
new file mode 100644
index 0000000000000000000000000000000000000000..b84ab4ec0e44a7f57264d7783d14bc3b39f9be04
--- /dev/null
+++ b/crates/agent/src/tools/streaming_edit_file_tool.rs
@@ -0,0 +1,926 @@
+use crate::{
+    AgentTool, Templates, Thread, ToolCallEventStream, ToolPermissionDecision,
+    decide_permission_from_settings, edit_agent::streaming_fuzzy_matcher::StreamingFuzzyMatcher,
+};
+use acp_thread::Diff;
+use agent_client_protocol::{self as acp, ToolCallLocation, ToolCallUpdateFields};
+use anyhow::{Context as _, Result, anyhow};
+use gpui::{App, AppContext, AsyncApp, Entity, Task, WeakEntity};
+use language::{Anchor, LanguageRegistry, ToPoint};
+use language_model::LanguageModelToolResultContent;
+use paths;
+use project::{Project, ProjectPath};
+use schemars::JsonSchema;
+use serde::{Deserialize, Serialize};
+use settings::Settings;
+use std::ffi::OsStr;
+use std::ops::Range;
+use std::path::{Path, PathBuf};
+use std::sync::Arc;
+use text::BufferSnapshot;
+use ui::SharedString;
+use util::rel_path::RelPath;
+
+const DEFAULT_UI_TEXT: &str = "Editing file";
+
+/// This is a tool for creating a new file or editing an existing file. For moving or renaming files, you should generally use the `terminal` tool with the 'mv' command instead.
+///
+/// Before using this tool:
+///
+/// 1. Use the `read_file` tool to understand the file's contents and context
+///
+/// 2. Verify the directory path is correct (only applicable when creating new files):
+///    - Use the `list_directory` tool to verify the parent directory exists and is the correct location
+#[derive(Clone, Debug, Serialize, Deserialize, JsonSchema)]
+pub struct StreamingEditFileToolInput {
+    /// A one-line, user-friendly markdown description of the edit. This will be shown in the UI.
+    ///
+    /// Be terse, but also descriptive in what you want to achieve with this edit. Avoid generic instructions.
+    ///
+    /// NEVER mention the file path in this description.
+    ///
+    /// <example>Fix API endpoint URLs</example>
+    /// <example>Update copyright year in `page_footer`</example>
+    ///
+    /// Make sure to include this field before all the others in the input object so that we can display it immediately.
+    pub display_description: String,
+
+    /// The full path of the file to create or modify in the project.
+    ///
+    /// WARNING: When specifying which file path need changing, you MUST start each path with one of the project's root directories.
+    ///
+    /// The following examples assume we have two root directories in the project:
+    /// - /a/b/backend
+    /// - /c/d/frontend
+    ///
+    /// <example>
+    /// `backend/src/main.rs`
+    ///
+    /// Notice how the file path starts with `backend`. Without that, the path would be ambiguous and the call would fail!
+    /// </example>
+    ///
+    /// <example>
+    /// `frontend/db.js`
+    /// </example>
+    pub path: PathBuf,
+
+    /// The mode of operation on the file. Possible values:
+    /// - 'create': Create a new file if it doesn't exist. Requires 'content' field.
+    /// - 'overwrite': Replace the entire contents of an existing file. Requires 'content' field.
+    /// - 'edit': Make granular edits to an existing file. Requires 'edits' field.
+    ///
+    /// When a file already exists or you just created it, prefer editing it as opposed to recreating it from scratch.
+    pub mode: StreamingEditFileMode,
+
+    /// The complete content for the new file (required for 'create' and 'overwrite' modes).
+    /// This field should contain the entire file content.
+    #[serde(default, skip_serializing_if = "Option::is_none")]
+    pub content: Option<String>,
+
+    /// List of edit operations to apply sequentially (required for 'edit' mode).
+    /// Each edit finds `old_text` in the file and replaces it with `new_text`.
+    #[serde(default, skip_serializing_if = "Option::is_none")]
+    pub edits: Option<Vec<EditOperation>>,
+}
+
+#[derive(Clone, Debug, Serialize, Deserialize, JsonSchema)]
+#[serde(rename_all = "snake_case")]
+pub enum StreamingEditFileMode {
+    /// Create a new file if it doesn't exist
+    Create,
+    /// Replace the entire contents of an existing file
+    Overwrite,
+    /// Make granular edits to an existing file
+    Edit,
+}
+
+/// A single edit operation that replaces old text with new text
+#[derive(Clone, Debug, Serialize, Deserialize, JsonSchema)]
+pub struct EditOperation {
+    /// The exact text to find in the file. This will be matched using fuzzy matching
+    /// to handle minor differences in whitespace or formatting.
+    pub old_text: String,
+    /// The text to replace it with
+    pub new_text: String,
+}
+
+#[derive(Clone, Debug, Serialize, Deserialize, JsonSchema)]
+struct StreamingEditFileToolPartialInput {
+    #[serde(default)]
+    path: String,
+    #[serde(default)]
+    display_description: String,
+}
+
+#[derive(Debug, Serialize, Deserialize)]
+pub struct StreamingEditFileToolOutput {
+    #[serde(alias = "original_path")]
+    input_path: PathBuf,
+    new_text: String,
+    old_text: Arc<String>,
+    #[serde(default)]
+    diff: String,
+}
+
+impl From<StreamingEditFileToolOutput> for LanguageModelToolResultContent {
+    fn from(output: StreamingEditFileToolOutput) -> Self {
+        if output.diff.is_empty() {
+            "No edits were made.".into()
+        } else {
+            format!(
+                "Edited {}:\n\n```diff\n{}\n```",
+                output.input_path.display(),
+                output.diff
+            )
+            .into()
+        }
+    }
+}
+
+pub struct StreamingEditFileTool {
+    thread: WeakEntity<Thread>,
+    language_registry: Arc<LanguageRegistry>,
+    project: Entity<Project>,
+    #[allow(dead_code)]
+    templates: Arc<Templates>,
+}
+
+impl StreamingEditFileTool {
+    pub fn new(
+        project: Entity<Project>,
+        thread: WeakEntity<Thread>,
+        language_registry: Arc<LanguageRegistry>,
+        templates: Arc<Templates>,
+    ) -> Self {
+        Self {
+            project,
+            thread,
+            language_registry,
+            templates,
+        }
+    }
+
+    fn authorize(
+        &self,
+        input: &StreamingEditFileToolInput,
+        event_stream: &ToolCallEventStream,
+        cx: &mut App,
+    ) -> Task<Result<()>> {
+        let path_str = input.path.to_string_lossy();
+        let settings = agent_settings::AgentSettings::get_global(cx);
+        let decision = decide_permission_from_settings(Self::name(), &path_str, settings);
+
+        match decision {
+            ToolPermissionDecision::Allow => return Task::ready(Ok(())),
+            ToolPermissionDecision::Deny(reason) => {
+                return Task::ready(Err(anyhow!("{}", reason)));
+            }
+            ToolPermissionDecision::Confirm => {}
+        }
+
+        let local_settings_folder = paths::local_settings_folder_name();
+        let path = Path::new(&input.path);
+        if path.components().any(|component| {
+            component.as_os_str() == <_ as AsRef<OsStr>>::as_ref(&local_settings_folder)
+        }) {
+            let context = crate::ToolPermissionContext {
+                tool_name: "edit_file".to_string(),
+                input_value: path_str.to_string(),
+            };
+            return event_stream.authorize(
+                format!("{} (local settings)", input.display_description),
+                context,
+                cx,
+            );
+        }
+
+        if let Ok(canonical_path) = std::fs::canonicalize(&input.path)
+            && canonical_path.starts_with(paths::config_dir())
+        {
+            let context = crate::ToolPermissionContext {
+                tool_name: "edit_file".to_string(),
+                input_value: path_str.to_string(),
+            };
+            return event_stream.authorize(
+                format!("{} (global settings)", input.display_description),
+                context,
+                cx,
+            );
+        }
+
+        let Ok(project_path) = self.thread.read_with(cx, |thread, cx| {
+            thread.project().read(cx).find_project_path(&input.path, cx)
+        }) else {
+            return Task::ready(Err(anyhow!("thread was dropped")));
+        };
+
+        if project_path.is_some() {
+            Task::ready(Ok(()))
+        } else {
+            let context = crate::ToolPermissionContext {
+                tool_name: "edit_file".to_string(),
+                input_value: path_str.to_string(),
+            };
+            event_stream.authorize(&input.display_description, context, cx)
+        }
+    }
+}
+
+impl AgentTool for StreamingEditFileTool {
+    type Input = StreamingEditFileToolInput;
+    type Output = StreamingEditFileToolOutput;
+
+    fn name() -> &'static str {
+        "streaming_edit_file"
+    }
+
+    fn kind() -> acp::ToolKind {
+        acp::ToolKind::Edit
+    }
+
+    fn initial_title(
+        &self,
+        input: Result<Self::Input, serde_json::Value>,
+        cx: &mut App,
+    ) -> SharedString {
+        match input {
+            Ok(input) => self
+                .project
+                .read(cx)
+                .find_project_path(&input.path, cx)
+                .and_then(|project_path| {
+                    self.project
+                        .read(cx)
+                        .short_full_path_for_project_path(&project_path, cx)
+                })
+                .unwrap_or(input.path.to_string_lossy().into_owned())
+                .into(),
+            Err(raw_input) => {
+                if let Some(input) =
+                    serde_json::from_value::<StreamingEditFileToolPartialInput>(raw_input).ok()
+                {
+                    let path = input.path.trim();
+                    if !path.is_empty() {
+                        return self
+                            .project
+                            .read(cx)
+                            .find_project_path(&input.path, cx)
+                            .and_then(|project_path| {
+                                self.project
+                                    .read(cx)
+                                    .short_full_path_for_project_path(&project_path, cx)
+                            })
+                            .unwrap_or(input.path)
+                            .into();
+                    }
+
+                    let description = input.display_description.trim();
+                    if !description.is_empty() {
+                        return description.to_string().into();
+                    }
+                }
+
+                DEFAULT_UI_TEXT.into()
+            }
+        }
+    }
+
+    fn run(
+        self: Arc<Self>,
+        input: Self::Input,
+        event_stream: ToolCallEventStream,
+        cx: &mut App,
+    ) -> Task<Result<Self::Output>> {
+        let Ok(project) = self
+            .thread
+            .read_with(cx, |thread, _cx| thread.project().clone())
+        else {
+            return Task::ready(Err(anyhow!("thread was dropped")));
+        };
+
+        let project_path = match resolve_path(&input, project.clone(), cx) {
+            Ok(path) => path,
+            Err(err) => return Task::ready(Err(anyhow!(err))),
+        };
+
+        let abs_path = project.read(cx).absolute_path(&project_path, cx);
+        if let Some(abs_path) = abs_path.clone() {
+            event_stream.update_fields(
+                ToolCallUpdateFields::new().locations(vec![acp::ToolCallLocation::new(abs_path)]),
+            );
+        }
+
+        let authorize = self.authorize(&input, &event_stream, cx);
+
+        cx.spawn(async move |cx: &mut AsyncApp| {
+            authorize.await?;
+
+            let buffer = project
+                .update(cx, |project, cx| {
+                    project.open_buffer(project_path.clone(), cx)
+                })
+                .await?;
+
+            if let Some(abs_path) = abs_path.as_ref() {
+                let (last_read_mtime, current_mtime, is_dirty, has_save_tool, has_restore_tool) =
+                    self.thread.update(cx, |thread, cx| {
+                        let last_read = thread.file_read_times.get(abs_path).copied();
+                        let current = buffer
+                            .read(cx)
+                            .file()
+                            .and_then(|file| file.disk_state().mtime());
+                        let dirty = buffer.read(cx).is_dirty();
+                        let has_save = thread.has_tool("save_file");
+                        let has_restore = thread.has_tool("restore_file_from_disk");
+                        (last_read, current, dirty, has_save, has_restore)
+                    })?;
+
+                if is_dirty {
+                    let message = match (has_save_tool, has_restore_tool) {
+                        (true, true) => {
+                            "This file has unsaved changes. Ask the user whether they want to keep or discard those changes. \
+                             If they want to keep them, ask for confirmation then use the save_file tool to save the file, then retry this edit. \
+                             If they want to discard them, ask for confirmation then use the restore_file_from_disk tool to restore the on-disk contents, then retry this edit."
+                        }
+                        (true, false) => {
+                            "This file has unsaved changes. Ask the user whether they want to keep or discard those changes. \
+                             If they want to keep them, ask for confirmation then use the save_file tool to save the file, then retry this edit. \
+                             If they want to discard them, ask the user to manually revert the file, then inform you when it's ok to proceed."
+                        }
+                        (false, true) => {
+                            "This file has unsaved changes. Ask the user whether they want to keep or discard those changes. \
+                             If they want to keep them, ask the user to manually save the file, then inform you when it's ok to proceed. \
+                             If they want to discard them, ask for confirmation then use the restore_file_from_disk tool to restore the on-disk contents, then retry this edit."
+                        }
+                        (false, false) => {
+                            "This file has unsaved changes. Ask the user whether they want to keep or discard those changes, \
+                             then ask them to save or revert the file manually and inform you when it's ok to proceed."
+                        }
+                    };
+                    anyhow::bail!("{}", message);
+                }
+
+                if let (Some(last_read), Some(current)) = (last_read_mtime, current_mtime) {
+                    if current != last_read {
+                        anyhow::bail!(
+                            "The file {} has been modified since you last read it. \
+                             Please read the file again to get the current state before editing it.",
+                            input.path.display()
+                        );
+                    }
+                }
+            }
+
+            let diff = cx.new(|cx| Diff::new(buffer.clone(), cx));
+            event_stream.update_diff(diff.clone());
+            let _finalize_diff = util::defer({
+                let diff = diff.downgrade();
+                let mut cx = cx.clone();
+                move || {
+                    diff.update(&mut cx, |diff, cx| diff.finalize(cx)).ok();
+                }
+            });
+
+            let old_snapshot = buffer.read_with(cx, |buffer, _cx| buffer.snapshot());
+            let old_text = cx
+                .background_spawn({
+                    let old_snapshot = old_snapshot.clone();
+                    async move { Arc::new(old_snapshot.text()) }
+                })
+                .await;
+
+            match input.mode {
+                StreamingEditFileMode::Create | StreamingEditFileMode::Overwrite => {
+                    let content = input.content.ok_or_else(|| {
+                        anyhow!("'content' field is required for create and overwrite modes")
+                    })?;
+                    buffer.update(cx, |buffer, cx| {
+                        buffer.edit([(0..buffer.len(), content.as_str())], None, cx);
+                    });
+                }
+                StreamingEditFileMode::Edit => {
+                    let edits = input.edits.ok_or_else(|| {
+                        anyhow!("'edits' field is required for edit mode")
+                    })?;
+                    apply_edits(&buffer, &edits, &diff, &event_stream, &abs_path, cx)?;
+                }
+            }
+
+            let action_log = self.thread.read_with(cx, |thread, _cx| thread.action_log().clone())?;
+
+            action_log.update(cx, |log, cx| {
+                log.buffer_edited(buffer.clone(), cx);
+            });
+
+            project
+                .update(cx, |project, cx| project.save_buffer(buffer.clone(), cx))
+                .await?;
+
+            action_log.update(cx, |log, cx| {
+                log.buffer_edited(buffer.clone(), cx);
+            });
+
+            if let Some(abs_path) = abs_path.as_ref() {
+                if let Some(new_mtime) = buffer.read_with(cx, |buffer, _| {
+                    buffer.file().and_then(|file| file.disk_state().mtime())
+                }) {
+                    self.thread.update(cx, |thread, _| {
+                        thread.file_read_times.insert(abs_path.to_path_buf(), new_mtime);
+                    })?;
+                }
+            }
+
+            let new_snapshot = buffer.read_with(cx, |buffer, _cx| buffer.snapshot());
+            let (new_text, unified_diff) = cx
+                .background_spawn({
+                    let new_snapshot = new_snapshot.clone();
+                    let old_text = old_text.clone();
+                    async move {
+                        let new_text = new_snapshot.text();
+                        let diff = language::unified_diff(&old_text, &new_text);
+                        (new_text, diff)
+                    }
+                })
+                .await;
+
+            let output = StreamingEditFileToolOutput {
+                input_path: input.path,
+                new_text,
+                old_text,
+                diff: unified_diff,
+            };
+
+            Ok(output)
+        })
+    }
+
+    fn replay(
+        &self,
+        _input: Self::Input,
+        output: Self::Output,
+        event_stream: ToolCallEventStream,
+        cx: &mut App,
+    ) -> Result<()> {
+        event_stream.update_diff(cx.new(|cx| {
+            Diff::finalized(
+                output.input_path.to_string_lossy().into_owned(),
+                Some(output.old_text.to_string()),
+                output.new_text,
+                self.language_registry.clone(),
+                cx,
+            )
+        }));
+        Ok(())
+    }
+}
+
+fn apply_edits(
+    buffer: &Entity<language::Buffer>,
+    edits: &[EditOperation],
+    diff: &Entity<Diff>,
+    event_stream: &ToolCallEventStream,
+    abs_path: &Option<PathBuf>,
+    cx: &mut AsyncApp,
+) -> Result<()> {
+    let mut emitted_location = false;
+    let mut failed_edits = Vec::new();
+    let mut ambiguous_edits = Vec::new();
+
+    for (index, edit) in edits.iter().enumerate() {
+        let snapshot = buffer.read_with(cx, |buffer, _cx| buffer.snapshot());
+        let result = apply_single_edit(buffer, &snapshot, edit, diff, cx);
+
+        match result {
+            Ok(Some(range)) => {
+                if !emitted_location {
+                    let line = buffer.update(cx, |buffer, _cx| {
+                        range.start.to_point(&buffer.snapshot()).row
+                    });
+                    if let Some(abs_path) = abs_path.clone() {
+                        event_stream.update_fields(
+                            ToolCallUpdateFields::new()
+                                .locations(vec![ToolCallLocation::new(abs_path).line(Some(line))]),
+                        );
+                    }
+                    emitted_location = true;
+                }
+            }
+            Ok(None) => {
+                failed_edits.push(index);
+            }
+            Err(ranges) => {
+                ambiguous_edits.push((index, ranges));
+            }
+        }
+    }
+
+    if !failed_edits.is_empty() {
+        let indices = failed_edits
+            .iter()
+            .map(|i| i.to_string())
+            .collect::<Vec<_>>()
+            .join(", ");
+        anyhow::bail!(
+            "Could not find matching text for edit(s) at index(es): {}. \
+             The old_text did not match any content in the file. \
+             Please read the file again to get the current content.",
+            indices
+        );
+    }
+
+    if !ambiguous_edits.is_empty() {
+        let details: Vec<String> = ambiguous_edits
+            .iter()
+            .map(|(index, ranges)| {
+                let lines = ranges
+                    .iter()
+                    .map(|r| r.start.to_string())
+                    .collect::<Vec<_>>()
+                    .join(", ");
+                format!("edit {}: matches at lines {}", index, lines)
+            })
+            .collect();
+        anyhow::bail!(
+            "Some edits matched multiple locations in the file:\n{}. \
+             Please provide more context in old_text to uniquely identify the location.",
+            details.join("\n")
+        );
+    }
+
+    Ok(())
+}
+
+fn apply_single_edit(
+    buffer: &Entity<language::Buffer>,
+    snapshot: &BufferSnapshot,
+    edit: &EditOperation,
+    diff: &Entity<Diff>,
+    cx: &mut AsyncApp,
+) -> std::result::Result<Option<Range<Anchor>>, Vec<Range<usize>>> {
+    let mut matcher = StreamingFuzzyMatcher::new(snapshot.clone());
+    matcher.push(&edit.old_text, None);
+    let matches = matcher.finish();
+
+    if matches.is_empty() {
+        return Ok(None);
+    }
+
+    if matches.len() > 1 {
+        return Err(matches);
+    }
+
+    let match_range = matches.into_iter().next().expect("checked len above");
+
+    let start_anchor = buffer.read_with(cx, |buffer, _cx| buffer.anchor_before(match_range.start));
+    let end_anchor = buffer.read_with(cx, |buffer, _cx| buffer.anchor_after(match_range.end));
+
+    diff.update(cx, |card, cx| {
+        card.reveal_range(start_anchor..end_anchor, cx)
+    });
+
+    buffer.update(cx, |buffer, cx| {
+        buffer.edit([(match_range.clone(), edit.new_text.as_str())], None, cx);
+    });
+
+    let new_end = buffer.read_with(cx, |buffer, _cx| {
+        buffer.anchor_after(match_range.start + edit.new_text.len())
+    });
+
+    Ok(Some(start_anchor..new_end))
+}
+
+fn resolve_path(
+    input: &StreamingEditFileToolInput,
+    project: Entity<Project>,
+    cx: &mut App,
+) -> Result<ProjectPath> {
+    let project = project.read(cx);
+
+    match input.mode {
+        StreamingEditFileMode::Edit | StreamingEditFileMode::Overwrite => {
+            let path = project
+                .find_project_path(&input.path, cx)
+                .context("Can't edit file: path not found")?;
+
+            let entry = project
+                .entry_for_path(&path, cx)
+                .context("Can't edit file: path not found")?;
+
+            anyhow::ensure!(entry.is_file(), "Can't edit file: path is a directory");
+            Ok(path)
+        }
+
+        StreamingEditFileMode::Create => {
+            if let Some(path) = project.find_project_path(&input.path, cx) {
+                anyhow::ensure!(
+                    project.entry_for_path(&path, cx).is_none(),
+                    "Can't create file: file already exists"
+                );
+            }
+
+            let parent_path = input
+                .path
+                .parent()
+                .context("Can't create file: incorrect path")?;
+
+            let parent_project_path = project.find_project_path(&parent_path, cx);
+
+            let parent_entry = parent_project_path
+                .as_ref()
+                .and_then(|path| project.entry_for_path(path, cx))
+                .context("Can't create file: parent directory doesn't exist")?;
+
+            anyhow::ensure!(
+                parent_entry.is_dir(),
+                "Can't create file: parent is not a directory"
+            );
+
+            let file_name = input
+                .path
+                .file_name()
+                .and_then(|file_name| file_name.to_str())
+                .and_then(|file_name| RelPath::unix(file_name).ok())
+                .context("Can't create file: invalid filename")?;
+
+            let new_file_path = parent_project_path.map(|parent| ProjectPath {
+                path: parent.path.join(file_name),
+                ..parent
+            });
+
+            new_file_path.context("Can't create file")
+        }
+    }
+}
+
+#[cfg(test)]
+mod tests {
+    use super::*;
+    use crate::{ContextServerRegistry, Templates};
+    use gpui::TestAppContext;
+    use language_model::fake_provider::FakeLanguageModel;
+    use prompt_store::ProjectContext;
+    use serde_json::json;
+    use settings::SettingsStore;
+    use util::path;
+
+    #[gpui::test]
+    async fn test_streaming_edit_create_file(cx: &mut TestAppContext) {
+        init_test(cx);
+
+        let fs = project::FakeFs::new(cx.executor());
+        fs.insert_tree("/root", json!({"dir": {}})).await;
+        let project = Project::test(fs.clone(), [path!("/root").as_ref()], cx).await;
+        let language_registry = project.read_with(cx, |project, _cx| project.languages().clone());
+        let context_server_registry =
+            cx.new(|cx| ContextServerRegistry::new(project.read(cx).context_server_store(), cx));
+        let model = Arc::new(FakeLanguageModel::default());
+        let thread = cx.new(|cx| {
+            crate::Thread::new(
+                project.clone(),
+                cx.new(|_cx| ProjectContext::default()),
+                context_server_registry,
+                Templates::new(),
+                Some(model),
+                cx,
+            )
+        });
+
+        let result = cx
+            .update(|cx| {
+                let input = StreamingEditFileToolInput {
+                    display_description: "Create new file".into(),
+                    path: "root/dir/new_file.txt".into(),
+                    mode: StreamingEditFileMode::Create,
+                    content: Some("Hello, World!".into()),
+                    edits: None,
+                };
+                Arc::new(StreamingEditFileTool::new(
+                    project.clone(),
+                    thread.downgrade(),
+                    language_registry,
+                    Templates::new(),
+                ))
+                .run(input, ToolCallEventStream::test().0, cx)
+            })
+            .await;
+
+        assert!(result.is_ok());
+        let output = result.unwrap();
+        assert_eq!(output.new_text, "Hello, World!");
+        assert!(!output.diff.is_empty());
+    }
+
+    #[gpui::test]
+    async fn test_streaming_edit_overwrite_file(cx: &mut TestAppContext) {
+        init_test(cx);
+
+        let fs = project::FakeFs::new(cx.executor());
+        fs.insert_tree("/root", json!({"file.txt": "old content"}))
+            .await;
+        let project = Project::test(fs.clone(), [path!("/root").as_ref()], cx).await;
+        let language_registry = project.read_with(cx, |project, _cx| project.languages().clone());
+        let context_server_registry =
+            cx.new(|cx| ContextServerRegistry::new(project.read(cx).context_server_store(), cx));
+        let model = Arc::new(FakeLanguageModel::default());
+        let thread = cx.new(|cx| {
+            crate::Thread::new(
+                project.clone(),
+                cx.new(|_cx| ProjectContext::default()),
+                context_server_registry,
+                Templates::new(),
+                Some(model),
+                cx,
+            )
+        });
+
+        let result = cx
+            .update(|cx| {
+                let input = StreamingEditFileToolInput {
+                    display_description: "Overwrite file".into(),
+                    path: "root/file.txt".into(),
+                    mode: StreamingEditFileMode::Overwrite,
+                    content: Some("new content".into()),
+                    edits: None,
+                };
+                Arc::new(StreamingEditFileTool::new(
+                    project.clone(),
+                    thread.downgrade(),
+                    language_registry,
+                    Templates::new(),
+                ))
+                .run(input, ToolCallEventStream::test().0, cx)
+            })
+            .await;
+
+        assert!(result.is_ok());
+        let output = result.unwrap();
+        assert_eq!(output.new_text, "new content");
+        assert_eq!(*output.old_text, "old content");
+    }
+
+    #[gpui::test]
+    async fn test_streaming_edit_granular_edits(cx: &mut TestAppContext) {
+        init_test(cx);
+
+        let fs = project::FakeFs::new(cx.executor());
+        fs.insert_tree(
+            "/root",
+            json!({
+                "file.txt": "line 1\nline 2\nline 3\n"
+            }),
+        )
+        .await;
+        let project = Project::test(fs.clone(), [path!("/root").as_ref()], cx).await;
+        let language_registry = project.read_with(cx, |project, _cx| project.languages().clone());
+        let context_server_registry =
+            cx.new(|cx| ContextServerRegistry::new(project.read(cx).context_server_store(), cx));
+        let model = Arc::new(FakeLanguageModel::default());
+        let thread = cx.new(|cx| {
+            crate::Thread::new(
+                project.clone(),
+                cx.new(|_cx| ProjectContext::default()),
+                context_server_registry,
+                Templates::new(),
+                Some(model),
+                cx,
+            )
+        });
+
+        let result = cx
+            .update(|cx| {
+                let input = StreamingEditFileToolInput {
+                    display_description: "Edit lines".into(),
+                    path: "root/file.txt".into(),
+                    mode: StreamingEditFileMode::Edit,
+                    content: None,
+                    edits: Some(vec![EditOperation {
+                        old_text: "line 2".into(),
+                        new_text: "modified line 2".into(),
+                    }]),
+                };
+                Arc::new(StreamingEditFileTool::new(
+                    project.clone(),
+                    thread.downgrade(),
+                    language_registry,
+                    Templates::new(),
+                ))
+                .run(input, ToolCallEventStream::test().0, cx)
+            })
+            .await;
+
+        assert!(result.is_ok());
+        let output = result.unwrap();
+        assert_eq!(output.new_text, "line 1\nmodified line 2\nline 3\n");
+    }
+
+    #[gpui::test]
+    async fn test_streaming_edit_nonexistent_file(cx: &mut TestAppContext) {
+        init_test(cx);
+
+        let fs = project::FakeFs::new(cx.executor());
+        fs.insert_tree("/root", json!({})).await;
+        let project = Project::test(fs.clone(), [path!("/root").as_ref()], cx).await;
+        let language_registry = project.read_with(cx, |project, _cx| project.languages().clone());
+        let context_server_registry =
+            cx.new(|cx| ContextServerRegistry::new(project.read(cx).context_server_store(), cx));
+        let model = Arc::new(FakeLanguageModel::default());
+        let thread = cx.new(|cx| {
+            crate::Thread::new(
+                project.clone(),
+                cx.new(|_cx| ProjectContext::default()),
+                context_server_registry,
+                Templates::new(),
+                Some(model),
+                cx,
+            )
+        });
+
+        let result = cx
+            .update(|cx| {
+                let input = StreamingEditFileToolInput {
+                    display_description: "Some edit".into(),
+                    path: "root/nonexistent_file.txt".into(),
+                    mode: StreamingEditFileMode::Edit,
+                    content: None,
+                    edits: Some(vec![EditOperation {
+                        old_text: "foo".into(),
+                        new_text: "bar".into(),
+                    }]),
+                };
+                Arc::new(StreamingEditFileTool::new(
+                    project,
+                    thread.downgrade(),
+                    language_registry,
+                    Templates::new(),
+                ))
+                .run(input, ToolCallEventStream::test().0, cx)
+            })
+            .await;
+
+        assert_eq!(
+            result.unwrap_err().to_string(),
+            "Can't edit file: path not found"
+        );
+    }
+
+    #[gpui::test]
+    async fn test_streaming_edit_failed_match(cx: &mut TestAppContext) {
+        init_test(cx);
+
+        let fs = project::FakeFs::new(cx.executor());
+        fs.insert_tree("/root", json!({"file.txt": "hello world"}))
+            .await;
+        let project = Project::test(fs.clone(), [path!("/root").as_ref()], cx).await;
+        let language_registry = project.read_with(cx, |project, _cx| project.languages().clone());
+        let context_server_registry =
+            cx.new(|cx| ContextServerRegistry::new(project.read(cx).context_server_store(), cx));
+        let model = Arc::new(FakeLanguageModel::default());
+        let thread = cx.new(|cx| {
+            crate::Thread::new(
+                project.clone(),
+                cx.new(|_cx| ProjectContext::default()),
+                context_server_registry,
+                Templates::new(),
+                Some(model),
+                cx,
+            )
+        });
+
+        let result = cx
+            .update(|cx| {
+                let input = StreamingEditFileToolInput {
+                    display_description: "Edit file".into(),
+                    path: "root/file.txt".into(),
+                    mode: StreamingEditFileMode::Edit,
+                    content: None,
+                    edits: Some(vec![EditOperation {
+                        old_text: "nonexistent text that is not in the file".into(),
+                        new_text: "replacement".into(),
+                    }]),
+                };
+                Arc::new(StreamingEditFileTool::new(
+                    project,
+                    thread.downgrade(),
+                    language_registry,
+                    Templates::new(),
+                ))
+                .run(input, ToolCallEventStream::test().0, cx)
+            })
+            .await;
+
+        assert!(result.is_err());
+        assert!(
+            result
+                .unwrap_err()
+                .to_string()
+                .contains("Could not find matching text")
+        );
+    }
+
+    fn init_test(cx: &mut TestAppContext) {
+        cx.update(|cx| {
+            let settings_store = SettingsStore::test(cx);
+            cx.set_global(settings_store);
+        });
+    }
+}