diff --git a/crates/editor/src/editor.rs b/crates/editor/src/editor.rs
index 0a5649bdb24bf141da369e7481d3a0b9d7ec5bdb..8eb18f6c3bfa0f21f756243c0e5b1c6984de6253 100644
--- a/crates/editor/src/editor.rs
+++ b/crates/editor/src/editor.rs
@@ -4864,7 +4864,7 @@ impl Editor {
 
             let text = match &self.active_inline_completion.as_ref()?.completion {
                 InlineCompletion::Edit(edits) => {
-                    inline_completion_edit_text(&editor_snapshot, edits, cx)
+                    inline_completion_edit_text(&editor_snapshot, edits, true, cx)
                 }
                 InlineCompletion::Move(target) => {
                     let target_point =
@@ -14630,6 +14630,7 @@ pub fn diagnostic_block_renderer(
 fn inline_completion_edit_text(
     editor_snapshot: &EditorSnapshot,
     edits: &Vec<(Range<Anchor>, String)>,
+    include_deletions: bool,
     cx: &WindowContext,
 ) -> InlineCompletionText {
     let edit_start = edits
@@ -14653,12 +14654,24 @@ fn inline_completion_edit_text(
         offset = old_offset_range.end;
 
         let start = text.len();
-        text.push_str(new_text);
+        let color = if include_deletions && new_text.is_empty() {
+            text.extend(
+                editor_snapshot
+                    .buffer_snapshot
+                    .chunks(old_offset_range.start..offset, false)
+                    .map(|chunk| chunk.text),
+            );
+            cx.theme().status().deleted_background
+        } else {
+            text.push_str(new_text);
+            cx.theme().status().created_background
+        };
         let end = text.len();
+
         highlights.push((
             start..end,
             HighlightStyle {
-                background_color: Some(cx.theme().status().created_background),
+                background_color: Some(color),
                 ..Default::default()
             },
         ));
diff --git a/crates/editor/src/editor_tests.rs b/crates/editor/src/editor_tests.rs
index 47bee57b58fa7c1faecd076dd9879a4d2e6301f5..4882d8c217dfd17853a06232f5a64ec526b6a022 100644
--- a/crates/editor/src/editor_tests.rs
+++ b/crates/editor/src/editor_tests.rs
@@ -14367,7 +14367,7 @@ async fn test_multi_buffer_with_single_excerpt_folding(cx: &mut gpui::TestAppCon
 fn test_inline_completion_text(cx: &mut TestAppContext) {
     init_test(cx, |_| {});
 
-    // Test case 1: Simple insertion
+    // Simple insertion
     {
         let window = cx.add_window(|cx| {
             let buffer = MultiBuffer::build_simple("Hello, world!", cx);
@@ -14383,7 +14383,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
                 let edits = vec![(edit_range, " beautiful".to_string())];
 
                 let InlineCompletionText::Edit { text, highlights } =
-                    inline_completion_edit_text(&snapshot, &edits, cx)
+                    inline_completion_edit_text(&snapshot, &edits, false, cx)
                 else {
                     panic!("Failed to generate inline completion text");
                 };
@@ -14399,7 +14399,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
             .unwrap();
     }
 
-    // Test case 2: Replacement
+    // Replacement
     {
         let window = cx.add_window(|cx| {
             let buffer = MultiBuffer::build_simple("This is a test.", cx);
@@ -14417,7 +14417,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
                 )];
 
                 let InlineCompletionText::Edit { text, highlights } =
-                    inline_completion_edit_text(&snapshot, &edits, cx)
+                    inline_completion_edit_text(&snapshot, &edits, false, cx)
                 else {
                     panic!("Failed to generate inline completion text");
                 };
@@ -14433,7 +14433,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
             .unwrap();
     }
 
-    // Test case 3: Multiple edits
+    // Multiple edits
     {
         let window = cx.add_window(|cx| {
             let buffer = MultiBuffer::build_simple("Hello, world!", cx);
@@ -14458,7 +14458,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
                 ];
 
                 let InlineCompletionText::Edit { text, highlights } =
-                    inline_completion_edit_text(&snapshot, &edits, cx)
+                    inline_completion_edit_text(&snapshot, &edits, false, cx)
                 else {
                     panic!("Failed to generate inline completion text");
                 };
@@ -14479,7 +14479,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
             .unwrap();
     }
 
-    // Test case 4: Multiple lines with edits
+    // Multiple lines with edits
     {
         let window = cx.add_window(|cx| {
             let buffer =
@@ -14510,7 +14510,7 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
                 ];
 
                 let InlineCompletionText::Edit { text, highlights } =
-                    inline_completion_edit_text(&snapshot, &edits, cx)
+                    inline_completion_edit_text(&snapshot, &edits, false, cx)
                 else {
                     panic!("Failed to generate inline completion text");
                 };
@@ -14532,6 +14532,75 @@ fn test_inline_completion_text(cx: &mut TestAppContext) {
     }
 }
 
+#[gpui::test]
+fn test_inline_completion_text_with_deletions(cx: &mut TestAppContext) {
+    init_test(cx, |_| {});
+
+    // Deletion
+    {
+        let window = cx.add_window(|cx| {
+            let buffer = MultiBuffer::build_simple("Hello, world!", cx);
+            Editor::new(EditorMode::Full, buffer, None, true, cx)
+        });
+        let cx = &mut VisualTestContext::from_window(*window, cx);
+
+        window
+            .update(cx, |editor, cx| {
+                let snapshot = editor.snapshot(cx);
+                let edit_range = snapshot.buffer_snapshot.anchor_after(Point::new(0, 5))
+                    ..snapshot.buffer_snapshot.anchor_before(Point::new(0, 11));
+                let edits = vec![(edit_range, "".to_string())];
+
+                let InlineCompletionText::Edit { text, highlights } =
+                    inline_completion_edit_text(&snapshot, &edits, true, cx)
+                else {
+                    panic!("Failed to generate inline completion text");
+                };
+
+                assert_eq!(text, "Hello, world!");
+                assert_eq!(highlights.len(), 1);
+                assert_eq!(highlights[0].0, 5..11);
+                assert_eq!(
+                    highlights[0].1.background_color,
+                    Some(cx.theme().status().deleted_background)
+                );
+            })
+            .unwrap();
+    }
+
+    // Insertion
+    {
+        let window = cx.add_window(|cx| {
+            let buffer = MultiBuffer::build_simple("Hello, world!", cx);
+            Editor::new(EditorMode::Full, buffer, None, true, cx)
+        });
+        let cx = &mut VisualTestContext::from_window(*window, cx);
+
+        window
+            .update(cx, |editor, cx| {
+                let snapshot = editor.snapshot(cx);
+                let edit_range = snapshot.buffer_snapshot.anchor_after(Point::new(0, 6))
+                    ..snapshot.buffer_snapshot.anchor_before(Point::new(0, 6));
+                let edits = vec![(edit_range, " digital".to_string())];
+
+                let InlineCompletionText::Edit { text, highlights } =
+                    inline_completion_edit_text(&snapshot, &edits, true, cx)
+                else {
+                    panic!("Failed to generate inline completion text");
+                };
+
+                assert_eq!(text, "Hello, digital world!");
+                assert_eq!(highlights.len(), 1);
+                assert_eq!(highlights[0].0, 6..14);
+                assert_eq!(
+                    highlights[0].1.background_color,
+                    Some(cx.theme().status().created_background)
+                );
+            })
+            .unwrap();
+    }
+}
+
 fn empty_range(row: usize, column: usize) -> Range<DisplayPoint> {
     let point = DisplayPoint::new(DisplayRow(row as u32), column as u32);
     point..point
diff --git a/crates/editor/src/element.rs b/crates/editor/src/element.rs
index 1daaacbcb389fb25d48d79ec3e570a2a673e1c4b..343102b99edf2a361e9a2286f1088072d2e04369 100644
--- a/crates/editor/src/element.rs
+++ b/crates/editor/src/element.rs
@@ -3221,7 +3221,7 @@ impl EditorElement {
                 }
 
                 let crate::InlineCompletionText::Edit { text, highlights } =
-                    crate::inline_completion_edit_text(editor_snapshot, edits, cx)
+                    crate::inline_completion_edit_text(editor_snapshot, edits, false, cx)
                 else {
                     return None;
                 };