diff --git a/packages/cli/src/ui/components/AnsiOutput.tsx b/packages/cli/src/ui/components/AnsiOutput.tsx
index 8b54eb6453..d31ae62b28 100644
--- a/packages/cli/src/ui/components/AnsiOutput.tsx
+++ b/packages/cli/src/ui/components/AnsiOutput.tsx
@@ -34,8 +34,9 @@ export const AnsiOutputText: React.FC<AnsiOutputProps> = ({
             ? line.map((token: AnsiToken, tokenIndex: number) => (
                 <Text
                   key={tokenIndex}
-                  color={token.inverse ? token.bg : token.fg}
-                  backgroundColor={token.inverse ? token.fg : token.bg}
+                  color={token.fg}
+                  backgroundColor={token.bg}
+                  inverse={token.inverse}
                   dimColor={token.dim}
                   bold={token.bold}
                   italic={token.italic}
diff --git a/packages/core/src/services/shellExecutionService.test.ts b/packages/core/src/services/shellExecutionService.test.ts
index 1532e86325..4ee16dbf60 100644
--- a/packages/core/src/services/shellExecutionService.test.ts
+++ b/packages/core/src/services/shellExecutionService.test.ts
@@ -72,6 +72,28 @@ const shellExecutionConfig = {
   disableDynamicLineTrimming: true,
 };
 
+const createMockSerializeTerminalToObjectReturnValue = (
+  text: string | string[],
+): AnsiOutput => {
+  const lines = Array.isArray(text) ? text : text.split('\n');
+  const expected: AnsiOutput = Array.from(
+    { length: shellExecutionConfig.terminalHeight },
+    (_, i) => [
+      {
+        text: (lines[i] || '').trim(),
+        bold: false,
+        italic: false,
+        underline: false,
+        dim: false,
+        inverse: false,
+        fg: '#ffffff',
+        bg: '#000000',
+      },
+    ],
+  );
+  return expected;
+};
+
 const createExpectedAnsiOutput = (text: string | string[]): AnsiOutput => {
   const lines = Array.isArray(text) ? text : text.split('\n');
   const expected: AnsiOutput = Array.from(
@@ -114,7 +136,7 @@ describe('ShellExecutionService', () => {
 
   beforeEach(() => {
     vi.clearAllMocks();
-
+    mockSerializeTerminalToObject.mockReturnValue([]);
     mockIsBinary.mockReturnValue(false);
     mockPlatform.mockReturnValue('linux');
     mockGetPty.mockResolvedValue({
@@ -179,6 +201,9 @@ describe('ShellExecutionService', () => {
 
   describe('Successful Execution', () => {
     it('should execute a command and capture output', async () => {
+      mockSerializeTerminalToObject.mockReturnValue(
+        createMockSerializeTerminalToObjectReturnValue('file1.txt'),
+      );
       const { result, handle } = await simulateExecution('ls -l', (pty) => {
         pty.onData.mock.calls[0][0]('file1.txt\n');
         pty.onExit.mock.calls[0][0]({ exitCode: 0, signal: null });
@@ -205,7 +230,10 @@ describe('ShellExecutionService', () => {
       });
     });
 
-    it('should strip ANSI codes from output', async () => {
+    it('should strip ANSI color codes from output', async () => {
+      mockSerializeTerminalToObject.mockReturnValue(
+        createMockSerializeTerminalToObjectReturnValue('aredword'),
+      );
       const { result } = await simulateExecution('ls --color=auto', (pty) => {
         pty.onData.mock.calls[0][0]('a\u001b[31mred\u001b[0mword');
         pty.onExit.mock.calls[0][0]({ exitCode: 0, signal: null });
@@ -231,6 +259,9 @@ describe('ShellExecutionService', () => {
     });
 
     it('should handle commands with no output', async () => {
+      mockSerializeTerminalToObject.mockReturnValue(
+        createMockSerializeTerminalToObjectReturnValue(''),
+      );
       await simulateExecution('touch file', (pty) => {
         pty.onExit.mock.calls[0][0]({ exitCode: 0, signal: null });
       });
@@ -604,6 +635,9 @@ describe('ShellExecutionService', () => {
     });
 
     it('should call onOutputEvent with AnsiOutput when showColor is false', async () => {
+      mockSerializeTerminalToObject.mockReturnValue(
+        createMockSerializeTerminalToObjectReturnValue('aredword'),
+      );
       await simulateExecution(
         'ls --color=auto',
         (pty) => {
@@ -628,6 +662,13 @@ describe('ShellExecutionService', () => {
     });
 
     it('should handle multi-line output correctly when showColor is false', async () => {
+      mockSerializeTerminalToObject.mockReturnValue(
+        createMockSerializeTerminalToObjectReturnValue([
+          'line 1',
+          'line 2',
+          'line 3',
+        ]),
+      );
       await simulateExecution(
         'ls --color=auto',
         (pty) => {
@@ -733,7 +774,7 @@ describe('ShellExecutionService child_process fallback', () => {
       });
     });
 
-    it('should strip ANSI codes from output', async () => {
+    it('should strip ANSI color codes from output', async () => {
       const { result } = await simulateExecution('ls --color=auto', (cp) => {
         cp.stdout?.emit('data', Buffer.from('a\u001b[31mred\u001b[0mword'));
         cp.emit('exit', 0, null);
@@ -1072,6 +1113,7 @@ describe('ShellExecutionService execution method selection', () => {
   });
 
   it('should use node-pty when shouldUseNodePty is true and pty is available', async () => {
+    mockSerializeTerminalToObject.mockReturnValue([]);
     const abortController = new AbortController();
     const handle = await ShellExecutionService.execute(
       'test command',
diff --git a/packages/core/src/services/shellExecutionService.ts b/packages/core/src/services/shellExecutionService.ts
index df40c4b1a3..7705337a35 100644
--- a/packages/core/src/services/shellExecutionService.ts
+++ b/packages/core/src/services/shellExecutionService.ts
@@ -486,24 +486,14 @@ export class ShellExecutionService {
           if (shellExecutionConfig.showColor) {
             newOutput = serializeTerminalToObject(headlessTerminal);
           } else {
-            const lines: AnsiOutput = [];
-            for (let y = 0; y < headlessTerminal.rows; y++) {
-              const line = buffer.getLine(buffer.viewportY + y);
-              const lineContent = line ? line.translateToString(true) : '';
-              lines.push([
-                {
-                  text: lineContent,
-                  bold: false,
-                  italic: false,
-                  underline: false,
-                  dim: false,
-                  inverse: false,
-                  fg: '',
-                  bg: '',
-                },
-              ]);
-            }
-            newOutput = lines;
+            newOutput = (serializeTerminalToObject(headlessTerminal) || []).map(
+              (line) =>
+                line.map((token) => {
+                  token.fg = '';
+                  token.bg = '';
+                  return token;
+                }),
+            );
           }
 
           let lastNonEmptyLine = -1;
diff --git a/packages/core/src/utils/terminalSerializer.test.ts b/packages/core/src/utils/terminalSerializer.test.ts
index fd6241d04d..cfc8032141 100644
--- a/packages/core/src/utils/terminalSerializer.test.ts
+++ b/packages/core/src/utils/terminalSerializer.test.ts
@@ -171,6 +171,26 @@ describe('terminalSerializer', () => {
       expect(result[0][0].bg).toBe('#008000');
       expect(result[0][0].text).toBe('Styled text');
     });
+
+    it('should set inverse for the cursor position', async () => {
+      const terminal = new Terminal({
+        cols: 80,
+        rows: 24,
+        allowProposedApi: true,
+      });
+      await writeToTerminal(terminal, 'Cursor test');
+      // Move cursor to the start of the line (0,0) using ANSI escape code
+      await writeToTerminal(terminal, '\x1b[H');
+
+      const result = serializeTerminalToObject(terminal);
+      // The character at (0,0) should have inverse: true due to cursor
+      expect(result[0][0].text).toBe('C');
+      expect(result[0][0].inverse).toBe(true);
+
+      // The rest of the text should not have inverse: true (unless explicitly set)
+      expect(result[0][1].text.trim()).toBe('ursor test');
+      expect(result[0][1].inverse).toBe(false);
+    });
   });
   describe('convertColorToHex', () => {
     it('should convert RGB color to hex', () => {