diff --git a/extensions/zalouser/src/text-styles.test.ts b/extensions/zalouser/src/text-styles.test.ts
index c8f5f50bd3d..b764a88ae2c 100644
--- a/extensions/zalouser/src/text-styles.test.ts
+++ b/extensions/zalouser/src/text-styles.test.ts
@@ -97,6 +97,13 @@ describe("parseZalouserTextStyles", () => {
     });
   });
 
+  it("treats spaced nested blockquotes as deeper quoted lines", () => {
+    expect(parseZalouserTextStyles("> > quoted")).toEqual({
+      text: "quoted",
+      styles: [{ start: 0, len: 6, st: TextStyle.Indent, indentSize: 2 }],
+    });
+  });
+
   it("treats indented quoted fences as literal code blocks", () => {
     expect(parseZalouserTextStyles("  > ```\n  > *cmd*\n  > ```")).toEqual({
       text: "*cmd*",
@@ -104,6 +111,13 @@ describe("parseZalouserTextStyles", () => {
     });
   });
 
+  it("treats spaced nested quoted fences as literal code blocks", () => {
+    expect(parseZalouserTextStyles("> > ```\n> > code\n> > ```")).toEqual({
+      text: "code",
+      styles: [],
+    });
+  });
+
   it("preserves inner quote markers inside quoted fenced code blocks", () => {
     expect(parseZalouserTextStyles("> ```\n>> prompt\n> ```")).toEqual({
       text: "> prompt",
@@ -111,6 +125,17 @@ describe("parseZalouserTextStyles", () => {
     });
   });
 
+  it("keeps quote indentation on heading lines", () => {
+    expect(parseZalouserTextStyles("> # Title")).toEqual({
+      text: "Title",
+      styles: [
+        { start: 0, len: 5, st: TextStyle.Bold },
+        { start: 0, len: 5, st: TextStyle.Big },
+        { start: 0, len: 5, st: TextStyle.Indent, indentSize: 1 },
+      ],
+    });
+  });
+
   it("keeps unmatched fences literal", () => {
     expect(parseZalouserTextStyles("```python")).toEqual({
       text: "```python",
@@ -150,4 +175,11 @@ describe("parseZalouserTextStyles", () => {
       styles: [],
     });
   });
+
+  it("keeps indented code blocks literal", () => {
+    expect(parseZalouserTextStyles("    *cmd*")).toEqual({
+      text: "\u00A0\u00A0\u00A0\u00A0*cmd*",
+      styles: [],
+    });
+  });
 });
diff --git a/extensions/zalouser/src/text-styles.ts b/extensions/zalouser/src/text-styles.ts
index 91d93b2e6f8..d51c915d816 100644
--- a/extensions/zalouser/src/text-styles.ts
+++ b/extensions/zalouser/src/text-styles.ts
@@ -143,14 +143,33 @@ export function parseZalouserTextStyles(input: string): { text: string; styles:
       continue;
     }
 
+    const outputLineIndex = processedLines.length;
+    if (isIndentedCodeBlockLine(line)) {
+      if (baseIndent > 0) {
+        lineStyles.push({
+          lineIndex: outputLineIndex,
+          style: TextStyle.Indent,
+          indentSize: baseIndent,
+        });
+      }
+      processedLines.push(escapeLiteralText(normalizeCodeBlockLeadingWhitespace(line), escapeMap));
+      continue;
+    }
+
     const headingMatch = line.match(/^(#{1,4})\s(.*)$/);
     if (headingMatch) {
-      const outputLineIndex = processedLines.length;
       const depth = headingMatch[1].length;
       lineStyles.push({ lineIndex: outputLineIndex, style: TextStyle.Bold });
       if (depth === 1) {
         lineStyles.push({ lineIndex: outputLineIndex, style: TextStyle.Big });
       }
+      if (baseIndent > 0) {
+        lineStyles.push({
+          lineIndex: outputLineIndex,
+          style: TextStyle.Indent,
+          indentSize: baseIndent,
+        });
+      }
       processedLines.push(headingMatch[2]);
       continue;
     }
@@ -163,7 +182,6 @@ export function parseZalouserTextStyles(input: string): { text: string; styles:
       content = indentMatch[2];
     }
     const totalIndent = Math.min(5, baseIndent + indentLevel);
-    const outputLineIndex = processedLines.length;
 
     if (/^[-*+]\s\[[ xX]\]\s/.test(content)) {
       if (totalIndent > 0) {
@@ -331,18 +349,27 @@ function stripQuotePrefix(
   line: string,
   maxDepth = Number.POSITIVE_INFINITY,
 ): { text: string; indent: number } {
-  const match = line.match(/^([ ]{0,3})(>+)( ?)(.*)$/);
-  if (!match) {
+  let cursor = 0;
+  while (cursor < line.length && cursor < 3 && line[cursor] === " ") {
+    cursor += 1;
+  }
+
+  let removedDepth = 0;
+  let consumedCursor = cursor;
+  while (removedDepth < maxDepth && consumedCursor < line.length && line[consumedCursor] === ">") {
+    removedDepth += 1;
+    consumedCursor += 1;
+    if (line[consumedCursor] === " ") {
+      consumedCursor += 1;
+    }
+  }
+
+  if (removedDepth === 0) {
     return { text: line, indent: 0 };
   }
 
-  const removedDepth = Math.min(match[2].length, maxDepth);
-  const remainingMarkers = match[2].slice(removedDepth);
-  const remainingText =
-    remainingMarkers.length > 0 ? `${remainingMarkers}${match[3]}${match[4]}` : match[4];
-
   return {
-    text: remainingText,
+    text: line.slice(consumedCursor),
     indent: Math.min(5, removedDepth),
   };
 }
@@ -468,6 +495,10 @@ function normalizeCodeBlockLeadingWhitespace(line: string): string {
   );
 }
 
+function isIndentedCodeBlockLine(line: string): boolean {
+  return /^(?: {4,}|\t)/.test(line);
+}
+
 function stripCodeFenceIndent(line: string, indent: number): string {
   let consumed = 0;
   let cursor = 0;