feat(terminal)!: cursor shape and blink (#31562)

When a terminal application running inside the terminal emulator sets
the cursor shape or blink status of the cursor, update the cursor in the
parent terminal to match.

This removes the "virtual cursor" that has been in use by the terminal
emulator since the beginning. The original rationale for using the
virtual cursor was to avoid having to support additional UI methods to
change the cursor color for other (non-TUI) UIs, instead relying on the
TermCursor and TermCursorNC highlight groups.

The TermCursor highlight group is now used in the default 'guicursor'
value, which has a new entry for Terminal mode. However, the
TermCursorNC highlight group is no longer supported: since terminal
windows now use the real cursor, when the window is not focused there is
no cursor displayed in the window at all, so there is nothing to
highlight. Users can still use the StatusLineTermNC highlight group to
differentiate non-focused terminal windows.

BREAKING CHANGE: The TermCursorNC highlight group is no longer supported.

43 files changed, 901 insertions, 539 deletions

diff --git a/runtime/doc/deprecated.txt b/runtime/doc/deprecated.txt
index ab9c0b2ce8..592b6389c4 100644
--- a/runtime/doc/deprecated.txt
+++ b/runtime/doc/deprecated.txt
@@ -38,6 +38,10 @@ DIAGNOSTICS
 - The "cursor_position" parameter of |vim.diagnostic.JumpOpts| is renamed to
   "pos"
 
+HIGHLIGHTS
+• *TermCursorNC*	As of Nvim 0.11, unfocused |terminal| windows no
+			longer have any cursor.
+
 TREESITTER
 • *TSNode:child_containing_descendant()*	Use
   |TSNode:child_with_descendant()| instead; it is identical except that it can
diff --git a/runtime/doc/news.txt b/runtime/doc/news.txt
index 5e70d75cfd..ad0835e80f 100644
--- a/runtime/doc/news.txt
+++ b/runtime/doc/news.txt
@@ -87,6 +87,11 @@ EVENTS
 • |vim.ui_attach()| callbacks for |ui-messages| `msg_show` events are executed in
   |api-fast| context.
 
+HIGHLIGHTS
+
+• |TermCursorNC| is removed and no longer supported. Unfocused terminals no
+  longer have a cursor.
+
 LSP
 
 • Improved rendering of LSP hover docs. |K-lsp-default|
@@ -281,6 +286,12 @@ TERMINAL
   'scrollback' are not reflown.
 • The |terminal| now supports OSC 8 escape sequences and will display
   hyperlinks in supporting host terminals.
+• The |terminal| now uses the actual cursor, rather than a "virtual" cursor.
+  This means that escape codes sent by applications running in a terminal
+  buffer can change the cursor shape and visibility. However, it also
+  means that the |TermCursorNC| highlight group is no longer supported: an
+  unfocused terminal window will have no cursor at all (so there is nothing to
+  highlight).
 
 TREESITTER
 
diff --git a/runtime/doc/options.txt b/runtime/doc/options.txt
index 84f0bfe141..c2ed19f34f 100644
--- a/runtime/doc/options.txt
+++ b/runtime/doc/options.txt
@@ -2977,7 +2977,7 @@ A jump table for the options with a short description can be found at |Q_op|.
 	An |OptionSet| autocmd can be used to set it up to match automatically.
 
 				*'guicursor'* *'gcr'* *E545* *E546* *E548* *E549*
-'guicursor' 'gcr'	string	(default "n-v-c-sm:block,i-ci-ve:ver25,r-cr-o:hor20")
+'guicursor' 'gcr'	string	(default "n-v-c-sm:block,i-ci-ve:ver25,r-cr-o:hor20,t:block-blinkon500-blinkoff500-TermCursor")
 			global
 	Configures the cursor style for each mode. Works in the GUI and many
 	terminals.  See |tui-cursor-shape|.
@@ -3005,6 +3005,7 @@ A jump table for the options with a short description can be found at |Q_op|.
 		ci	Command-line Insert mode
 		cr	Command-line Replace mode
 		sm	showmatch in Insert mode
+		t	Terminal mode
 		a	all modes
 	The argument-list is a dash separated list of these arguments:
 		hor{N}	horizontal bar, {N} percent of the character height
@@ -3021,7 +3022,8 @@ A jump table for the options with a short description can be found at |Q_op|.
 			cursor is not shown.  Times are in msec.  When one of
 			the numbers is zero, there is no blinking. E.g.: >vim
 				set guicursor=n:blinkon0
-<			- Default is "blinkon0" for each mode.
+<
+			Default is "blinkon0" for each mode.
 		{group-name}
 			Highlight group that decides the color and font of the
 			cursor.
diff --git a/runtime/doc/syntax.txt b/runtime/doc/syntax.txt
index c5d3422f62..df4d0f7260 100644
--- a/runtime/doc/syntax.txt
+++ b/runtime/doc/syntax.txt
@@ -5162,8 +5162,6 @@ EndOfBuffer	Filler lines (~) after the end of the buffer.
 		By default, this is highlighted like |hl-NonText|.
 							*hl-TermCursor*
 TermCursor	Cursor in a focused terminal.
-							*hl-TermCursorNC*
-TermCursorNC	Cursor in an unfocused terminal.
 							*hl-ErrorMsg*
 ErrorMsg	Error messages on the command line.
 							*hl-WinSeparator*
diff --git a/runtime/doc/terminal.txt b/runtime/doc/terminal.txt
index 5a1421f430..f9536c2f0c 100644
--- a/runtime/doc/terminal.txt
+++ b/runtime/doc/terminal.txt
@@ -101,7 +101,7 @@ Configuration					*terminal-config*
 
 Options:		'modified', 'scrollback'
 Events:			|TermOpen|, |TermEnter|, |TermLeave|, |TermClose|
-Highlight groups:	|hl-TermCursor|, |hl-TermCursorNC|
+Highlight groups:	|hl-TermCursor|
 
 Terminal sets local defaults for some options, which may differ from your
 global configuration.
diff --git a/runtime/doc/vim_diff.txt b/runtime/doc/vim_diff.txt
index bfef5d5d4a..c93d2b119e 100644
--- a/runtime/doc/vim_diff.txt
+++ b/runtime/doc/vim_diff.txt
@@ -325,7 +325,6 @@ Highlight groups:
 - |hl-MsgSeparator| highlights separator for scrolled messages
 - |hl-Substitute|
 - |hl-TermCursor|
-- |hl-TermCursorNC|
 - |hl-WinSeparator| highlights window separators
 - |hl-Whitespace| highlights 'listchars' whitespace
 - |hl-WinBar| highlights 'winbar'
diff --git a/runtime/lua/vim/_meta/options.lua b/runtime/lua/vim/_meta/options.lua
index 63bf0df5f6..e5cea884c5 100644
--- a/runtime/lua/vim/_meta/options.lua
+++ b/runtime/lua/vim/_meta/options.lua
@@ -2783,6 +2783,7 @@ vim.go.gp = vim.go.grepprg
 --- 	ci	Command-line Insert mode
 --- 	cr	Command-line Replace mode
 --- 	sm	showmatch in Insert mode
+--- 	t	Terminal mode
 --- 	a	all modes
 --- The argument-list is a dash separated list of these arguments:
 --- 	hor{N}	horizontal bar, {N} percent of the character height
@@ -2802,7 +2803,8 @@ vim.go.gp = vim.go.grepprg
 --- ```vim
 --- 			set guicursor=n:blinkon0
 --- ```
---- - Default is "blinkon0" for each mode.
+---
+--- 		Default is "blinkon0" for each mode.
 --- 	{group-name}
 --- 		Highlight group that decides the color and font of the
 --- 		cursor.
@@ -2848,7 +2850,7 @@ vim.go.gp = vim.go.grepprg
 ---
 ---
 --- @type string
-vim.o.guicursor = "n-v-c-sm:block,i-ci-ve:ver25,r-cr-o:hor20"
+vim.o.guicursor = "n-v-c-sm:block,i-ci-ve:ver25,r-cr-o:hor20,t:block-blinkon500-blinkoff500-TermCursor"
 vim.o.gcr = vim.o.guicursor
 vim.go.guicursor = vim.o.guicursor
 vim.go.gcr = vim.go.guicursor
diff --git a/runtime/syntax/vim.vim b/runtime/syntax/vim.vim
index 3ad04e2957..2a4bb2c8c9 100644
--- a/runtime/syntax/vim.vim
+++ b/runtime/syntax/vim.vim
@@ -63,7 +63,7 @@ syn keyword vimGroup contained	Comment Constant String Character Number Boolean
 syn keyword vimHLGroup contained ErrorMsg IncSearch ModeMsg NonText StatusLine StatusLineNC EndOfBuffer VertSplit DiffText PmenuSbar TabLineSel TabLineFill Cursor lCursor QuickFixLine CursorLineSign CursorLineFold CurSearch PmenuKind PmenuKindSel PmenuMatch PmenuMatchSel PmenuExtra PmenuExtraSel Normal Directory LineNr CursorLineNr MoreMsg Question Search SpellBad SpellCap SpellRare SpellLocal PmenuThumb Pmenu PmenuSel SpecialKey Title WarningMsg WildMenu Folded FoldColumn SignColumn Visual DiffAdd DiffChange DiffDelete TabLine CursorColumn CursorLine ColorColumn MatchParen StatusLineTerm StatusLineTermNC CursorIM LineNrAbove LineNrBelow
 syn match vimHLGroup contained "\<Conceal\>"
 syn keyword vimOnlyHLGroup contained	Menu Scrollbar ToolbarButton ToolbarLine Tooltip VisualNOS
-syn keyword nvimHLGroup contained	FloatBorder FloatFooter FloatTitle MsgSeparator NormalFloat NormalNC Substitute TermCursor TermCursorNC VisualNC Whitespace WinBar WinBarNC WinSeparator
+syn keyword nvimHLGroup contained	FloatBorder FloatFooter FloatTitle MsgSeparator NormalFloat NormalNC Substitute TermCursor VisualNC Whitespace WinBar WinBarNC WinSeparator
 "}}}2
 syn case match
 
diff --git a/src/nvim/cursor.c b/src/nvim/cursor.c
index 2b18c51571..a248a4133e 100644
--- a/src/nvim/cursor.c
+++ b/src/nvim/cursor.c
@@ -341,9 +341,11 @@ void check_cursor_col(win_T *win)
   } else if (win->w_cursor.col >= len) {
     // Allow cursor past end-of-line when:
     // - in Insert mode or restarting Insert mode
+    // - in Terminal mode
     // - in Visual mode and 'selection' isn't "old"
     // - 'virtualedit' is set
     if ((State & MODE_INSERT) || restart_edit
+        || (State & MODE_TERMINAL)
         || (VIsual_active && *p_sel != 'o')
         || (cur_ve_flags & kOptVeFlagOnemore)
         || virtual_active(win)) {
diff --git a/src/nvim/cursor_shape.c b/src/nvim/cursor_shape.c
index 1f11367618..a058394b9f 100644
--- a/src/nvim/cursor_shape.c
+++ b/src/nvim/cursor_shape.c
@@ -45,6 +45,7 @@ cursorentry_T shape_table[SHAPE_IDX_COUNT] = {
   { "more", 0, 0, 0,   0,   0,   0, 0, 0, "m", SHAPE_MOUSE },
   { "more_lastline", 0, 0, 0,   0,   0,   0, 0, 0, "ml", SHAPE_MOUSE },
   { "showmatch", 0, 0, 0, 100, 100, 100, 0, 0, "sm", SHAPE_CURSOR },
+  { "terminal", 0, 0, 0, 0, 0, 0, 0, 0, "t", SHAPE_CURSOR },
 };
 
 /// Converts cursor_shapes into an Array of Dictionaries
@@ -321,6 +322,8 @@ int cursor_get_mode_idx(void)
 {
   if (State == MODE_SHOWMATCH) {
     return SHAPE_IDX_SM;
+  } else if (State == MODE_TERMINAL) {
+    return SHAPE_IDX_TERM;
   } else if (State & VREPLACE_FLAG) {
     return SHAPE_IDX_R;
   } else if (State & REPLACE_FLAG) {
diff --git a/src/nvim/cursor_shape.h b/src/nvim/cursor_shape.h
index 21967a81f4..6d9e7de2e5 100644
--- a/src/nvim/cursor_shape.h
+++ b/src/nvim/cursor_shape.h
@@ -23,7 +23,8 @@ typedef enum {
   SHAPE_IDX_MORE   = 14,      ///< Hit-return or More
   SHAPE_IDX_MOREL  = 15,      ///< Hit-return or More in last line
   SHAPE_IDX_SM     = 16,      ///< showing matching paren
-  SHAPE_IDX_COUNT  = 17,
+  SHAPE_IDX_TERM   = 17,      ///< Terminal mode
+  SHAPE_IDX_COUNT  = 18,
 } ModeShape;
 
 typedef enum {
diff --git a/src/nvim/highlight.h b/src/nvim/highlight.h
index 1be70100de..a89d778474 100644
--- a/src/nvim/highlight.h
+++ b/src/nvim/highlight.h
@@ -15,7 +15,6 @@ EXTERN const char *hlf_names[] INIT( = {
   [HLF_8] = "SpecialKey",
   [HLF_EOB] = "EndOfBuffer",
   [HLF_TERM] = "TermCursor",
-  [HLF_TERMNC] = "TermCursorNC",
   [HLF_AT] = "NonText",
   [HLF_D] = "Directory",
   [HLF_E] = "ErrorMsg",
diff --git a/src/nvim/highlight_defs.h b/src/nvim/highlight_defs.h
index a3c4062714..cbbc28311f 100644
--- a/src/nvim/highlight_defs.h
+++ b/src/nvim/highlight_defs.h
@@ -63,7 +63,6 @@ typedef enum {
                   ///< displayed different from what it is
   HLF_EOB,        ///< after the last line in the buffer
   HLF_TERM,       ///< terminal cursor focused
-  HLF_TERMNC,     ///< terminal cursor unfocused
   HLF_AT,         ///< @ characters at end of screen, characters that don't really exist in the text
   HLF_D,          ///< directories in CTRL-D listing
   HLF_E,          ///< error messages
diff --git a/src/nvim/highlight_group.c b/src/nvim/highlight_group.c
index cc1b833c3c..f1f5f47630 100644
--- a/src/nvim/highlight_group.c
+++ b/src/nvim/highlight_group.c
@@ -178,7 +178,6 @@ static const char *highlight_init_both[] = {
   "default link StatusLineTermNC StatusLineNC",
   "default link TabLine          StatusLineNC",
   "default link TabLineFill      TabLine",
-  "default link TermCursorNC     NONE",
   "default link VertSplit        WinSeparator",
   "default link VisualNOS        Visual",
   "default link Whitespace       NonText",
diff --git a/src/nvim/option_vars.h b/src/nvim/option_vars.h
index 97455380cc..f4d0a9a4b0 100644
--- a/src/nvim/option_vars.h
+++ b/src/nvim/option_vars.h
@@ -12,7 +12,7 @@
 // option_vars.h: definition of global variables for settable options
 
 #define HIGHLIGHT_INIT \
-  "8:SpecialKey,~:EndOfBuffer,z:TermCursor,Z:TermCursorNC,@:NonText,d:Directory,e:ErrorMsg," \
+  "8:SpecialKey,~:EndOfBuffer,z:TermCursor,@:NonText,d:Directory,e:ErrorMsg," \
   "i:IncSearch,l:Search,y:CurSearch,m:MoreMsg,M:ModeMsg,n:LineNr,a:LineNrAbove,b:LineNrBelow," \
   "N:CursorLineNr,G:CursorLineSign,O:CursorLineFold,r:Question,s:StatusLine,S:StatusLineNC," \
   "c:VertSplit,t:Title,v:Visual,V:VisualNOS,w:WarningMsg,W:WildMenu,f:Folded,F:FoldColumn," \
diff --git a/src/nvim/options.lua b/src/nvim/options.lua
index 6dc32658fe..3142c30080 100644
--- a/src/nvim/options.lua
+++ b/src/nvim/options.lua
@@ -3631,7 +3631,9 @@ return {
     {
       abbreviation = 'gcr',
       cb = 'did_set_guicursor',
-      defaults = { if_true = 'n-v-c-sm:block,i-ci-ve:ver25,r-cr-o:hor20' },
+      defaults = {
+        if_true = 'n-v-c-sm:block,i-ci-ve:ver25,r-cr-o:hor20,t:block-blinkon500-blinkoff500-TermCursor',
+      },
       deny_duplicates = true,
       desc = [=[
         Configures the cursor style for each mode. Works in the GUI and many
@@ -3660,6 +3662,7 @@ return {
         	ci	Command-line Insert mode
         	cr	Command-line Replace mode
         	sm	showmatch in Insert mode
+        	t	Terminal mode
         	a	all modes
         The argument-list is a dash separated list of these arguments:
         	hor{N}	horizontal bar, {N} percent of the character height
@@ -3676,7 +3679,8 @@ return {
         		cursor is not shown.  Times are in msec.  When one of
         		the numbers is zero, there is no blinking. E.g.: >vim
         			set guicursor=n:blinkon0
-        <			- Default is "blinkon0" for each mode.
+        <
+        		Default is "blinkon0" for each mode.
         	{group-name}
         		Highlight group that decides the color and font of the
         		cursor.
diff --git a/src/nvim/state.c b/src/nvim/state.c
index 32e2a8d652..c4041dda07 100644
--- a/src/nvim/state.c
+++ b/src/nvim/state.c
@@ -138,14 +138,20 @@ void state_handle_k_event(void)
 /// Return true if in the current mode we need to use virtual.
 bool virtual_active(win_T *wp)
 {
-  unsigned cur_ve_flags = get_ve_flags(wp);
-
   // While an operator is being executed we return "virtual_op", because
   // VIsual_active has already been reset, thus we can't check for "block"
   // being used.
   if (virtual_op != kNone) {
     return virtual_op;
   }
+
+  // In Terminal mode the cursor can be positioned anywhere by the application
+  if (State & MODE_TERMINAL) {
+    return true;
+  }
+
+  unsigned cur_ve_flags = get_ve_flags(wp);
+
   return cur_ve_flags == kOptVeFlagAll
          || ((cur_ve_flags & kOptVeFlagBlock) && VIsual_active && VIsual_mode == Ctrl_V)
          || ((cur_ve_flags & kOptVeFlagInsert) && (State & MODE_INSERT));
diff --git a/src/nvim/terminal.c b/src/nvim/terminal.c
index 6d4af0fc57..fa08f3d6ca 100644
--- a/src/nvim/terminal.c
+++ b/src/nvim/terminal.c
@@ -52,6 +52,7 @@
 #include "nvim/channel.h"
 #include "nvim/channel_defs.h"
 #include "nvim/cursor.h"
+#include "nvim/cursor_shape.h"
 #include "nvim/drawline.h"
 #include "nvim/drawscreen.h"
 #include "nvim/eval.h"
@@ -160,14 +161,18 @@ struct terminal {
   int invalid_start, invalid_end;   // invalid rows in libvterm screen
   struct {
     int row, col;
+    int shape;
     bool visible;
+    bool blink;
   } cursor;
-  bool pending_resize;              // pending width/height
 
-  bool color_set[16];
+  struct {
+    bool resize;          ///< pending width/height
+    bool cursor;          ///< pending cursor shape or blink change
+    StringBuilder *send;  ///< When there is a pending TermRequest autocommand, block and store input.
+  } pending;
 
-  // When there is a pending TermRequest autocommand, block and store input.
-  StringBuilder *pending_send;
+  bool color_set[16];
 
   char *selection_buffer;  /// libvterm selection buffer
   StringBuilder selection;  /// Growable array containing full selection data
@@ -207,24 +212,24 @@ static void emit_termrequest(void **argv)
   apply_autocmds_group(EVENT_TERMREQUEST, NULL, NULL, false, AUGROUP_ALL, buf, NULL, &data);
   xfree(payload);
 
-  StringBuilder *term_pending_send = term->pending_send;
-  term->pending_send = NULL;
+  StringBuilder *term_pending_send = term->pending.send;
+  term->pending.send = NULL;
   if (kv_size(*pending_send)) {
     terminal_send(term, pending_send->items, pending_send->size);
     kv_destroy(*pending_send);
   }
   if (term_pending_send != pending_send) {
-    term->pending_send = term_pending_send;
+    term->pending.send = term_pending_send;
   }
   xfree(pending_send);
 }
 
 static void schedule_termrequest(Terminal *term, char *payload, size_t payload_length)
 {
-  term->pending_send = xmalloc(sizeof(StringBuilder));
-  kv_init(*term->pending_send);
+  term->pending.send = xmalloc(sizeof(StringBuilder));
+  kv_init(*term->pending.send);
   multiqueue_put(main_loop.events, emit_termrequest, term, payload, (void *)payload_length,
-                 term->pending_send);
+                 term->pending.send);
 }
 
 static int parse_osc8(VTermStringFragment frag, int *attr)
@@ -363,7 +368,7 @@ void terminal_open(Terminal **termpp, buf_T *buf, TerminalOptions opts)
   // Create a new terminal instance and configure it
   Terminal *term = *termpp = xcalloc(1, sizeof(Terminal));
   term->opts = opts;
-  term->cursor.visible = true;
+
   // Associate the terminal instance with the new buffer
   term->buf_handle = buf->handle;
   buf->terminal = term;
@@ -387,6 +392,28 @@ void terminal_open(Terminal **termpp, buf_T *buf, TerminalOptions opts)
   vterm_state_set_selection_callbacks(state, &vterm_selection_callbacks, term,
                                       term->selection_buffer, SELECTIONBUF_SIZE);
 
+  VTermValue cursor_shape;
+  switch (shape_table[SHAPE_IDX_TERM].shape) {
+  case SHAPE_BLOCK:
+    cursor_shape.number = VTERM_PROP_CURSORSHAPE_BLOCK;
+    break;
+  case SHAPE_HOR:
+    cursor_shape.number = VTERM_PROP_CURSORSHAPE_UNDERLINE;
+    break;
+  case SHAPE_VER:
+    cursor_shape.number = VTERM_PROP_CURSORSHAPE_BAR_LEFT;
+    break;
+  }
+  vterm_state_set_termprop(state, VTERM_PROP_CURSORSHAPE, &cursor_shape);
+
+  VTermValue cursor_blink;
+  if (shape_table[SHAPE_IDX_TERM].blinkon != 0 && shape_table[SHAPE_IDX_TERM].blinkoff != 0) {
+    cursor_blink.boolean = true;
+  } else {
+    cursor_blink.boolean = false;
+  }
+  vterm_state_set_termprop(state, VTERM_PROP_CURSORBLINK, &cursor_blink);
+
   // force a initial refresh of the screen to ensure the buffer will always
   // have as many lines as screen rows when refresh_scrollback is called
   term->invalid_start = 0;
@@ -565,7 +592,7 @@ void terminal_check_size(Terminal *term)
 
   vterm_set_size(term->vt, height, width);
   vterm_screen_flush_damage(term->vts);
-  term->pending_resize = true;
+  term->pending.resize = true;
   invalidate_terminal(term, -1, -1);
 }
 
@@ -614,16 +641,28 @@ bool terminal_enter(void)
   curwin->w_p_so = 0;
   curwin->w_p_siso = 0;
 
+  // Save the existing cursor entry since it may be modified by the application
+  cursorentry_T save_cursorentry = shape_table[SHAPE_IDX_TERM];
+
+  // Update the cursor shape table and flush changes to the UI
+  s->term->pending.cursor = true;
+  refresh_cursor(s->term);
+
   adjust_topline(s->term, buf, 0);  // scroll to end
-  // erase the unfocused cursor
-  invalidate_terminal(s->term, s->term->cursor.row, s->term->cursor.row + 1);
   showmode();
   curwin->w_redr_status = true;  // For mode() in statusline. #8323
   redraw_custom_title_later();
-  ui_busy_start();
+  if (!s->term->cursor.visible) {
+    // Hide cursor if it should be hidden
+    ui_busy_start();
+  }
+  ui_cursor_shape();
   apply_autocmds(EVENT_TERMENTER, NULL, NULL, false, curbuf);
   may_trigger_modechanged();
 
+  // Tell the terminal it has focus
+  terminal_focus(s->term, true);
+
   s->state.execute = terminal_execute;
   s->state.check = terminal_check;
   state_enter(&s->state);
@@ -635,6 +674,9 @@ bool terminal_enter(void)
   RedrawingDisabled = s->save_rd;
   apply_autocmds(EVENT_TERMLEAVE, NULL, NULL, false, curbuf);
 
+  shape_table[SHAPE_IDX_TERM] = save_cursorentry;
+  ui_mode_info_set();
+
   if (save_curwin == curwin->handle) {  // Else: window was closed.
     curwin->w_p_cul = save_w_p_cul;
     if (save_w_p_culopt) {
@@ -649,8 +691,9 @@ bool terminal_enter(void)
     free_string_option(save_w_p_culopt);
   }
 
-  // draw the unfocused cursor
-  invalidate_terminal(s->term, s->term->cursor.row, s->term->cursor.row + 1);
+  // Tell the terminal it lost focus
+  terminal_focus(s->term, false);
+
   if (curbuf->terminal == s->term && !s->close) {
     terminal_check_cursor();
   }
@@ -659,7 +702,11 @@ bool terminal_enter(void)
   } else {
     unshowmode(true);
   }
-  ui_busy_stop();
+  if (!s->term->cursor.visible) {
+    // If cursor was hidden, show it again
+    ui_busy_stop();
+  }
+  ui_cursor_shape();
   if (s->close) {
     bool wipe = s->term->buf_handle != 0;
     s->term->destroy = true;
@@ -810,6 +857,19 @@ static int terminal_execute(VimState *state, int key)
     return 0;
   }
   if (s->term != curbuf->terminal) {
+    // Active terminal buffer changed, flush terminal's cursor state to the UI
+    curbuf->terminal->pending.cursor = true;
+
+    if (!s->term->cursor.visible) {
+      // If cursor was hidden, show it again
+      ui_busy_stop();
+    }
+
+    if (!curbuf->terminal->cursor.visible) {
+      // Hide cursor if it should be hidden
+      ui_busy_start();
+    }
+
     invalidate_terminal(s->term, s->term->cursor.row, s->term->cursor.row + 1);
     invalidate_terminal(curbuf->terminal,
                         curbuf->terminal->cursor.row,
@@ -857,8 +917,8 @@ static void terminal_send(Terminal *term, const char *data, size_t size)
   if (term->closed) {
     return;
   }
-  if (term->pending_send) {
-    kv_concat_len(*term->pending_send, data, size);
+  if (term->pending.send) {
+    kv_concat_len(*term->pending.send, data, size);
     return;
   }
   term->opts.write_cb(data, size, term->opts.data);
@@ -1063,14 +1123,6 @@ void terminal_get_line_attributes(Terminal *term, win_T *wp, int linenr, int *te
       attr_id = hl_combine_attr(attr_id, cell.uri);
     }
 
-    if (term->cursor.visible && term->cursor.row == row
-        && term->cursor.col == col) {
-      attr_id = hl_combine_attr(attr_id,
-                                is_focused(term) && wp == curwin
-                                ? win_hl_attr(wp, HLF_TERM)
-                                : win_hl_attr(wp, HLF_TERMNC));
-    }
-
     term_attrs[col] = attr_id;
   }
 }
@@ -1085,6 +1137,17 @@ bool terminal_running(const Terminal *term)
   return !term->closed;
 }
 
+static void terminal_focus(const Terminal *term, bool focus)
+  FUNC_ATTR_NONNULL_ALL
+{
+  VTermState *state = vterm_obtain_state(term->vt);
+  if (focus) {
+    vterm_state_focus_in(state);
+  } else {
+    vterm_state_focus_out(state);
+  }
+}
+
 // }}}
 // libvterm callbacks {{{
 
@@ -1106,8 +1169,7 @@ static int term_movecursor(VTermPos new_pos, VTermPos old_pos, int visible, void
   Terminal *term = data;
   term->cursor.row = new_pos.row;
   term->cursor.col = new_pos.col;
-  invalidate_terminal(term, old_pos.row, old_pos.row + 1);
-  invalidate_terminal(term, new_pos.row, new_pos.row + 1);
+  invalidate_terminal(term, -1, -1);
   return 1;
 }
 
@@ -1135,8 +1197,17 @@ static int term_settermprop(VTermProp prop, VTermValue *val, void *data)
     break;
 
   case VTERM_PROP_CURSORVISIBLE:
+    if (is_focused(term)) {
+      if (!val->boolean && term->cursor.visible) {
+        // Hide the cursor
+        ui_busy_start();
+      } else if (val->boolean && !term->cursor.visible) {
+        // Unhide the cursor
+        ui_busy_stop();
+      }
+      invalidate_terminal(term, -1, -1);
+    }
     term->cursor.visible = val->boolean;
-    invalidate_terminal(term, term->cursor.row, term->cursor.row + 1);
     break;
 
   case VTERM_PROP_TITLE: {
@@ -1172,6 +1243,18 @@ static int term_settermprop(VTermProp prop, VTermValue *val, void *data)
     term->forward_mouse = (bool)val->number;
     break;
 
+  case VTERM_PROP_CURSORBLINK:
+    term->curs