diff --git a/assets/settings/default.json b/assets/settings/default.json
index 924b97008482e7f739b642b1730beaa9a60e6e22..203c90f8ff46410366fee07bde8c0e04cec4a290 100644
--- a/assets/settings/default.json
+++ b/assets/settings/default.json
@@ -857,7 +857,11 @@
     // its response, or needs user input.
 
     // Default: false
-    "play_sound_when_agent_done": false
+    "play_sound_when_agent_done": false,
+    /// Whether to have edit cards in the agent panel expanded, showing a preview of the full diff.
+    ///
+    /// Default: true
+    "expand_edit_card": true
   },
   // The settings for slash commands.
   "slash_commands": {
diff --git a/crates/agent_settings/src/agent_settings.rs b/crates/agent_settings/src/agent_settings.rs
index f3087765de072f2043fb7f87fd8369a2eab39d25..30cd2552efb1db06d3d990913a743429f4a95864 100644
--- a/crates/agent_settings/src/agent_settings.rs
+++ b/crates/agent_settings/src/agent_settings.rs
@@ -67,6 +67,7 @@ pub struct AgentSettings {
     pub model_parameters: Vec<LanguageModelParameters>,
     pub preferred_completion_mode: CompletionMode,
     pub enable_feedback: bool,
+    pub expand_edit_card: bool,
 }
 
 impl AgentSettings {
@@ -291,6 +292,10 @@ pub struct AgentSettingsContent {
     ///
     /// Default: true
     enable_feedback: Option<bool>,
+    /// Whether to have edit cards in the agent panel expanded, showing a preview of the full diff.
+    ///
+    /// Default: true
+    expand_edit_card: Option<bool>,
 }
 
 #[derive(Clone, Copy, Debug, Serialize, Deserialize, JsonSchema, PartialEq, Default)]
@@ -441,6 +446,7 @@ impl Settings for AgentSettings {
                 value.preferred_completion_mode,
             );
             merge(&mut settings.enable_feedback, value.enable_feedback);
+            merge(&mut settings.expand_edit_card, value.expand_edit_card);
 
             settings
                 .model_parameters
diff --git a/crates/assistant_tools/src/edit_file_tool.rs b/crates/assistant_tools/src/edit_file_tool.rs
index 8c7728b4b72c9aa52c717e58fbdd63591dd88f0f..baf62c11f26cbefd0fcaecc6c99b0ebb71e42c93 100644
--- a/crates/assistant_tools/src/edit_file_tool.rs
+++ b/crates/assistant_tools/src/edit_file_tool.rs
@@ -4,6 +4,7 @@ use crate::{
     schema::json_schema_for,
     ui::{COLLAPSED_LINES, ToolOutputPreview},
 };
+use agent_settings;
 use anyhow::{Context as _, Result, anyhow};
 use assistant_tool::{
     ActionLog, AnyToolCard, Tool, ToolCard, ToolResult, ToolResultContent, ToolResultOutput,
@@ -14,7 +15,7 @@ use editor::{Editor, EditorMode, MinimapVisibility, MultiBuffer, PathKey};
 use futures::StreamExt;
 use gpui::{
     Animation, AnimationExt, AnyWindowHandle, App, AppContext, AsyncApp, Entity, Task,
-    TextStyleRefinement, WeakEntity, pulsating_between, px,
+    TextStyleRefinement, Transformation, WeakEntity, percentage, pulsating_between, px,
 };
 use indoc::formatdoc;
 use language::{
@@ -515,7 +516,9 @@ pub struct EditFileToolCard {
 
 impl EditFileToolCard {
     pub fn new(path: PathBuf, project: Entity<Project>, window: &mut Window, cx: &mut App) -> Self {
+        let expand_edit_card = agent_settings::AgentSettings::get_global(cx).expand_edit_card;
         let multibuffer = cx.new(|_| MultiBuffer::without_headers(Capability::ReadOnly));
+
         let editor = cx.new(|cx| {
             let mut editor = Editor::new(
                 EditorMode::Full {
@@ -556,7 +559,7 @@ impl EditFileToolCard {
             diff_task: None,
             preview_expanded: true,
             error_expanded: None,
-            full_height_expanded: true,
+            full_height_expanded: expand_edit_card,
             total_lines: None,
         }
     }
@@ -755,6 +758,13 @@ impl ToolCard for EditFileToolCard {
             _ => None,
         };
 
+        let running_or_pending = match status {
+            ToolUseStatus::Running | ToolUseStatus::Pending => Some(()),
+            _ => None,
+        };
+
+        let should_show_loading = running_or_pending.is_some() && !self.full_height_expanded;
+
         let path_label_button = h_flex()
             .id(("edit-tool-path-label-button", self.editor.entity_id()))
             .w_full()
@@ -863,6 +873,18 @@ impl ToolCard for EditFileToolCard {
                 header.bg(codeblock_header_bg)
             })
             .child(path_label_button)
+            .when(should_show_loading, |header| {
+                header.pr_1p5().child(
+                    Icon::new(IconName::ArrowCircle)
+                        .size(IconSize::XSmall)
+                        .color(Color::Info)
+                        .with_animation(
+                            "arrow-circle",
+                            Animation::new(Duration::from_secs(2)).repeat(),
+                            |icon, delta| icon.transform(Transformation::rotate(percentage(delta))),
+                        ),
+                )
+            })
             .when_some(error_message, |header, error_message| {
                 header.child(
                     h_flex()
diff --git a/docs/src/ai/configuration.md b/docs/src/ai/configuration.md
index 5c49cde598a71a3592bf96c2660dc4b31dfa8c30..e65433afe5420aa4dc2abf18d87cb7a3b991e0c6 100644
--- a/docs/src/ai/configuration.md
+++ b/docs/src/ai/configuration.md
@@ -646,3 +646,19 @@ You can choose between `thread` (the default) and `text_thread`:
   }
 }
 ```
+
+### Edit Card
+
+Use the `expand_edit_card` setting to control whether edit cards show the full diff in the Agent Panel.
+It is set to `true` by default, but if set to false, the card's height is capped to a certain number of lines, requiring a click to be expanded.
+
+```json
+{
+  "agent": {
+    "expand_edit_card": "false"
+  }
+}
+```
+
+This setting is currently only available in Preview.
+It should be up in Stable by the next release.