diff --git a/README.md b/README.md
index 2e6951c961..ed4b5c39db 100644
--- a/README.md
+++ b/README.md
@@ -187,6 +187,13 @@ You can configure the plugin on three levels:
 1. **Project-level** On the project level you are able to configure your default account, default branch name and remote url replacements
 2. **Application-level** All other settings are stored here
 
+## System Properties
+
+### Autocomplete system properties
+In order to disable newly introduced features we are giving an option to disable them via system properties:
+
+1. **Disable formatting autocomplete elements** `cody.autocomplete.enableFormatting=false`
+
 ## Managing Custom Keymaps
 
 ![A screenshot of the JetBrains preferences panel inside the Keymap tab](docs/keymaps.png)
diff --git a/build.gradle.kts b/build.gradle.kts
index c315018d96..4b8c4b4531 100644
--- a/build.gradle.kts
+++ b/build.gradle.kts
@@ -334,6 +334,9 @@ tasks {
     systemProperty("cody-agent.trace-path", "$buildDir/sourcegraph/cody-agent-trace.json")
     systemProperty("cody-agent.directory", buildCodyDir.parent)
     systemProperty("sourcegraph.verbose-logging", "true")
+    systemProperty(
+        "cody.autocomplete.enableFormatting",
+        project.property("cody.autocomplete.enableFormatting") ?: "true")
   }
 
   runPluginVerifier {
diff --git a/gradle.properties b/gradle.properties
index c5eb38eaa0..f51180ad6b 100644
--- a/gradle.properties
+++ b/gradle.properties
@@ -23,4 +23,4 @@ gradleVersion=8.1.1
 # suppress inspection "UnusedProperty"
 kotlin.stdlib.default.dependency=false
 # See https://docs.gradle.org/current/userguide/build_cache.html#sec:build_cache_configure
-org.gradle.caching=true
+cody.autocomplete.enableFormatting=true
diff --git a/src/main/kotlin/com/sourcegraph/cody/autocomplete/CodyAutocompleteManager.kt b/src/main/kotlin/com/sourcegraph/cody/autocomplete/CodyAutocompleteManager.kt
index effed16c76..5bb502083a 100644
--- a/src/main/kotlin/com/sourcegraph/cody/autocomplete/CodyAutocompleteManager.kt
+++ b/src/main/kotlin/com/sourcegraph/cody/autocomplete/CodyAutocompleteManager.kt
@@ -42,6 +42,7 @@ import com.sourcegraph.utils.CodyEditorUtil.getTextRange
 import com.sourcegraph.utils.CodyEditorUtil.isCommandExcluded
 import com.sourcegraph.utils.CodyEditorUtil.isEditorValidForAutocomplete
 import com.sourcegraph.utils.CodyEditorUtil.isImplicitAutocompleteEnabledForEditor
+import com.sourcegraph.utils.CodyFormatter
 import difflib.Delta
 import difflib.DiffUtils
 import difflib.Patch
@@ -322,7 +323,7 @@ class CodyAutocompleteManager {
       clearAutocompleteSuggestions(editor)
       currentAutocompleteTelemetry?.markCompletionDisplayed()
 
-      displayAgentAutocomplete(editor, offset, items, inlayModel, triggerKind, lookupString)
+      displayAgentAutocomplete(editor, offset, items, inlayModel, triggerKind)
     }
   }
 
@@ -338,8 +339,22 @@ class CodyAutocompleteManager {
       items: List<InlineAutocompleteItem>,
       inlayModel: InlayModel,
       triggerKind: InlineCompletionTriggerKind,
-      lookupString: String?,
   ) {
+    val project = editor.project
+    if (project != null && System.getProperty("cody.autocomplete.enableFormatting") != "false") {
+      items.map { item ->
+        if (item.insertText.lines().size > 1) {
+          item.insertText =
+              item.insertText.lines()[0] +
+                  CodyFormatter.formatStringBasedOnDocument(
+                      item.insertText.lines().drop(1).joinToString(separator = "\n"),
+                      project,
+                      editor.document,
+                      offset)
+        }
+      }
+    }
+
     val defaultItem = items.firstOrNull() ?: return
     val range = getTextRange(editor.document, defaultItem.range)
     val originalText = editor.document.getText(range)
diff --git a/src/main/kotlin/com/sourcegraph/cody/autocomplete/action/CycleCodyAutocompleteActionHandler.kt b/src/main/kotlin/com/sourcegraph/cody/autocomplete/action/CycleCodyAutocompleteActionHandler.kt
index 15db842761..69cc24d3ae 100644
--- a/src/main/kotlin/com/sourcegraph/cody/autocomplete/action/CycleCodyAutocompleteActionHandler.kt
+++ b/src/main/kotlin/com/sourcegraph/cody/autocomplete/action/CycleCodyAutocompleteActionHandler.kt
@@ -44,12 +44,7 @@ class CycleCodyAutocompleteActionHandler(private val cycleDirection: CycleDirect
         CodyAutocompleteManager.instance.let {
           it.clearAutocompleteSuggestions(editor)
           it.displayAgentAutocomplete(
-              editor,
-              caret.offset,
-              newItems,
-              editor.inlayModel,
-              InlineCompletionTriggerKind.INVOKE,
-              null)
+              editor, caret.offset, newItems, editor.inlayModel, InlineCompletionTriggerKind.INVOKE)
         }
         autocompleteItemsCache[cacheKey] = newItems
       }
diff --git a/src/main/kotlin/com/sourcegraph/utils/CodyFormatter.kt b/src/main/kotlin/com/sourcegraph/utils/CodyFormatter.kt
new file mode 100644
index 0000000000..ae14202f85
--- /dev/null
+++ b/src/main/kotlin/com/sourcegraph/utils/CodyFormatter.kt
@@ -0,0 +1,47 @@
+package com.sourcegraph.utils
+
+import com.intellij.openapi.editor.Document
+import com.intellij.openapi.fileEditor.FileDocumentManager
+import com.intellij.openapi.project.Project
+import com.intellij.psi.PsiFileFactory
+import com.intellij.psi.codeStyle.CodeStyleManager
+import com.intellij.refactoring.suggested.endOffset
+
+class CodyFormatter {
+  companion object {
+    /**
+     * Formatting used to format inlay text inserted by Cody, based on the surrounding code style in
+     * the document.
+     */
+    fun formatStringBasedOnDocument(
+        originalText: String,
+        project: Project,
+        document: Document,
+        offset: Int
+    ): String {
+
+      val appendedString =
+          document.text.substring(0, offset) + originalText + document.text.substring(offset)
+
+      val file = FileDocumentManager.getInstance().getFile(document)!!
+      val psiFile =
+          PsiFileFactory.getInstance(project)
+              .createFileFromText("TEMP", file.fileType, appendedString)
+
+      val codeStyleManager = CodeStyleManager.getInstance(project)
+
+      var i = offset
+      var startRefactoringPosition = offset
+      while ((document.text.elementAt(i - 1) == ' ' ||
+          document.text.elementAt(i - 1) == '\n' ||
+          document.text.elementAt(i - 1) == '\t') && i > 0) {
+        startRefactoringPosition = i
+        i--
+      }
+      var endOffset = offset + psiFile.endOffset - document.textLength
+      codeStyleManager.reformatText(psiFile, startRefactoringPosition, endOffset)
+      endOffset = offset + psiFile.endOffset - document.textLength
+      return psiFile.text.substring(startRefactoringPosition, endOffset)
+    }
+  }
+}