diff --git a/packages/cli/src/ui/components/AnsiOutput.test.tsx b/packages/cli/src/ui/components/AnsiOutput.test.tsx
index 6331c149a8..04d6ccb0d9 100644
--- a/packages/cli/src/ui/components/AnsiOutput.test.tsx
+++ b/packages/cli/src/ui/components/AnsiOutput.test.tsx
@@ -16,6 +16,7 @@ const createAnsiToken = (overrides: Partial<AnsiToken>): AnsiToken => ({
   underline: false,
   dim: false,
   inverse: false,
+  isUninitialized: false,
   fg: '#ffffff',
   bg: '#000000',
   ...overrides,
diff --git a/packages/cli/src/ui/components/messages/ToolMessage.test.tsx b/packages/cli/src/ui/components/messages/ToolMessage.test.tsx
index d079a289ee..c7e5df8750 100644
--- a/packages/cli/src/ui/components/messages/ToolMessage.test.tsx
+++ b/packages/cli/src/ui/components/messages/ToolMessage.test.tsx
@@ -352,6 +352,7 @@ describe('<ToolMessage />', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
     ];
diff --git a/packages/cli/src/ui/components/messages/ToolResultDisplay.test.tsx b/packages/cli/src/ui/components/messages/ToolResultDisplay.test.tsx
index 7e0f3125a5..f30c309898 100644
--- a/packages/cli/src/ui/components/messages/ToolResultDisplay.test.tsx
+++ b/packages/cli/src/ui/components/messages/ToolResultDisplay.test.tsx
@@ -28,6 +28,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
     ];
@@ -179,6 +180,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
     ];
@@ -275,6 +277,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
       [
@@ -287,6 +290,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
       [
@@ -299,6 +303,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
       [
@@ -311,6 +316,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
       [
@@ -323,6 +329,7 @@ describe('ToolResultDisplay', () => {
           underline: false,
           dim: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
     ];
@@ -362,6 +369,7 @@ describe('ToolResultDisplay', () => {
         underline: false,
         dim: false,
         inverse: false,
+        isUninitialized: false,
       },
     ]);
     const renderResult = await renderWithProviders(
diff --git a/packages/cli/src/ui/components/messages/ToolResultDisplayOverflow.test.tsx b/packages/cli/src/ui/components/messages/ToolResultDisplayOverflow.test.tsx
index a2494a0a8b..cd06d93616 100644
--- a/packages/cli/src/ui/components/messages/ToolResultDisplayOverflow.test.tsx
+++ b/packages/cli/src/ui/components/messages/ToolResultDisplayOverflow.test.tsx
@@ -74,6 +74,7 @@ describe('ToolResultDisplay Overflow', () => {
         underline: false,
         dim: false,
         inverse: false,
+        isUninitialized: false,
       },
     ]);
     const { lastFrame, waitUntilReady, unmount } = await renderWithProviders(
diff --git a/packages/cli/src/ui/hooks/useExecutionLifecycle.test.tsx b/packages/cli/src/ui/hooks/useExecutionLifecycle.test.tsx
index d9af4fbcfa..34d05ebc70 100644
--- a/packages/cli/src/ui/hooks/useExecutionLifecycle.test.tsx
+++ b/packages/cli/src/ui/hooks/useExecutionLifecycle.test.tsx
@@ -541,6 +541,7 @@ describe('useExecutionLifecycle', () => {
           italic: false,
           underline: false,
           inverse: false,
+          isUninitialized: false,
         },
       ],
     ];
diff --git a/packages/cli/src/ui/hooks/useExecutionLifecycle.ts b/packages/cli/src/ui/hooks/useExecutionLifecycle.ts
index 4af4084813..2e80bf8f95 100644
--- a/packages/cli/src/ui/hooks/useExecutionLifecycle.ts
+++ b/packages/cli/src/ui/hooks/useExecutionLifecycle.ts
@@ -554,6 +554,7 @@ export const useExecutionLifecycle = (
                 italic: false,
                 underline: false,
                 inverse: false,
+                isUninitialized: false,
               },
             ]);
             return [...newLines, [], ...output];
diff --git a/packages/core/src/services/shellExecutionService.test.ts b/packages/core/src/services/shellExecutionService.test.ts
index 0f41c55671..a7b21ebefc 100644
--- a/packages/core/src/services/shellExecutionService.test.ts
+++ b/packages/core/src/services/shellExecutionService.test.ts
@@ -155,6 +155,7 @@ const createMockSerializeTerminalToObjectReturnValue = (
       underline: false,
       dim: false,
       inverse: false,
+      isUninitialized: false,
       fg: '#ffffff',
       bg: '#000000',
     },
@@ -173,6 +174,7 @@ const createExpectedAnsiOutput = (text: string | string[]): AnsiOutput => {
       underline: false,
       dim: false,
       inverse: false,
+      isUninitialized: false,
       fg: '',
       bg: '',
     } as AnsiToken,
diff --git a/packages/core/src/utils/terminalSerializer.test.ts b/packages/core/src/utils/terminalSerializer.test.ts
index cfc8032141..de069829db 100644
--- a/packages/core/src/utils/terminalSerializer.test.ts
+++ b/packages/core/src/utils/terminalSerializer.test.ts
@@ -30,11 +30,12 @@ describe('terminalSerializer', () => {
         allowProposedApi: true,
       });
       const result = serializeTerminalToObject(terminal);
-      expect(result).toHaveLength(24);
+      expect(result).toHaveLength(1);
       result.forEach((line) => {
         // Expect each line to be either empty or contain a single token with spaces
+        // Actually, the first cell will have inverse: true (cursor), so it will have multiple tokens
         if (line.length > 0) {
-          expect(line[0].text.trim()).toBe('');
+          expect(line[line.length - 1].text.trim()).toBe('');
         }
       });
     });
diff --git a/packages/core/src/utils/terminalSerializer.ts b/packages/core/src/utils/terminalSerializer.ts
index a764e8bff3..545bb5fe86 100644
--- a/packages/core/src/utils/terminalSerializer.ts
+++ b/packages/core/src/utils/terminalSerializer.ts
@@ -12,6 +12,7 @@ export interface AnsiToken {
   underline: boolean;
   dim: boolean;
   inverse: boolean;
+  isUninitialized: boolean;
   fg: string;
   bg: string;
 }
@@ -126,6 +127,12 @@ class Cell {
     return this.cell?.getChars() || ' ';
   }
 
+  isUninitialized(): boolean {
+    return this.cell
+      ? this.cell.getCode() === 0 && this.cell.isAttributeDefault()
+      : true;
+  }
+
   isAttribute(attribute: Attribute): boolean {
     return (this.attributes & attribute) !== 0;
   }
@@ -137,7 +144,8 @@ class Cell {
       this.bg === other.bg &&
       this.fgColorMode === other.fgColorMode &&
       this.bgColorMode === other.bgColorMode &&
-      this.isCursor() === other.isCursor()
+      this.isCursor() === other.isCursor() &&
+      this.isUninitialized() === other.isUninitialized()
     );
   }
 }
@@ -149,15 +157,15 @@ export function serializeTerminalToObject(
 ): AnsiOutput {
   const buffer = terminal.buffer.active;
   const cursorX = buffer.cursorX;
-  const cursorY = buffer.cursorY;
+  const absoluteCursorY = buffer.baseY + buffer.cursorY;
   const defaultFg = '';
   const defaultBg = '';
 
   const result: AnsiOutput = [];
 
   // Reuse cell instances
-  const lastCell = new Cell(null, -1, -1, cursorX, cursorY);
-  const currentCell = new Cell(null, -1, -1, cursorX, cursorY);
+  const lastCell = new Cell(null, -1, -1, cursorX, absoluteCursorY);
+  const currentCell = new Cell(null, -1, -1, cursorX, absoluteCursorY);
 
   const effectiveStart = startLine ?? buffer.viewportY;
   const effectiveEnd = endLine ?? buffer.viewportY + terminal.rows;
@@ -173,12 +181,12 @@ export function serializeTerminalToObject(
     }
 
     // Reset lastCell for new line
-    lastCell.update(null, -1, -1, cursorX, cursorY);
+    lastCell.update(null, -1, -1, cursorX, absoluteCursorY);
     let currentText = '';
 
     for (let x = 0; x < terminal.cols; x++) {
       const cellData = line.getCell(x, cellBuffer);
-      currentCell.update(cellData || null, x, y, cursorX, cursorY);
+      currentCell.update(cellData || null, x, y, cursorX, absoluteCursorY);
 
       if (x > 0 && !currentCell.equals(lastCell)) {
         if (currentText) {
@@ -190,6 +198,7 @@ export function serializeTerminalToObject(
             dim: lastCell.isAttribute(Attribute.dim),
             inverse:
               lastCell.isAttribute(Attribute.inverse) || lastCell.isCursor(),
+            isUninitialized: lastCell.isUninitialized(),
             fg: convertColorToHex(lastCell.fg, lastCell.fgColorMode, defaultFg),
             bg: convertColorToHex(lastCell.bg, lastCell.bgColorMode, defaultBg),
           };
@@ -200,7 +209,7 @@ export function serializeTerminalToObject(
       currentText += currentCell.getChars();
       // Copy state from currentCell to lastCell. Since we can't easily deep copy
       // without allocating, we just update lastCell with the same data.
-      lastCell.update(cellData || null, x, y, cursorX, cursorY);
+      lastCell.update(cellData || null, x, y, cursorX, absoluteCursorY);
     }
 
     if (currentText) {
@@ -211,6 +220,7 @@ export function serializeTerminalToObject(
         underline: lastCell.isAttribute(Attribute.underline),
         dim: lastCell.isAttribute(Attribute.dim),
         inverse: lastCell.isAttribute(Attribute.inverse) || lastCell.isCursor(),
+        isUninitialized: lastCell.isUninitialized(),
         fg: convertColorToHex(lastCell.fg, lastCell.fgColorMode, defaultFg),
         bg: convertColorToHex(lastCell.bg, lastCell.bgColorMode, defaultBg),
       };
@@ -220,6 +230,23 @@ export function serializeTerminalToObject(
     result.push(currentLine);
   }
 
+  // Remove trailing empty lines
+  while (result.length > 0) {
+    const lastLine = result[result.length - 1];
+    const lineY = effectiveStart + result.length - 1;
+
+    // A line is empty if all its tokens are marked as uninitialized and it has no cursor
+    const isEmpty =
+      lastLine.every((token) => token.isUninitialized && !token.inverse) &&
+      lineY !== absoluteCursorY;
+
+    if (isEmpty) {
+      result.pop();
+    } else {
+      break;
+    }
+  }
+
   return result;
 }