diff --git a/src/vs/editor/browser/gpu/css/decorationStyleCache.ts b/src/vs/editor/browser/gpu/css/decorationStyleCache.ts
index 5e023e8407843..879b72470f14b 100644
--- a/src/vs/editor/browser/gpu/css/decorationStyleCache.ts
+++ b/src/vs/editor/browser/gpu/css/decorationStyleCache.ts
@@ -12,6 +12,10 @@ export interface IDecorationStyleSet {
 	 * Whether the text should be rendered in bold.
 	 */
 	bold: boolean | undefined;
+	/**
+	 * A number between 0 and 1 representing the opacity of the text.
+	 */
+	opacity: number | undefined;
 }
 
 export interface IDecorationStyleCacheEntry extends IDecorationStyleSet {
@@ -27,8 +31,12 @@ export class DecorationStyleCache {
 
 	private readonly _cache = new Map<number, IDecorationStyleSet>();
 
-	getOrCreateEntry(color: number | undefined, bold: boolean | undefined): number {
-		if (color === undefined && bold === undefined) {
+	getOrCreateEntry(
+		color: number | undefined,
+		bold: boolean | undefined,
+		opacity: number | undefined
+	): number {
+		if (color === undefined && bold === undefined && opacity === undefined) {
 			return 0;
 		}
 		const id = this._nextId++;
@@ -36,6 +44,7 @@ export class DecorationStyleCache {
 			id,
 			color,
 			bold,
+			opacity,
 		};
 		this._cache.set(id, entry);
 		return id;
diff --git a/src/vs/editor/browser/gpu/fullFileRenderStrategy.ts b/src/vs/editor/browser/gpu/fullFileRenderStrategy.ts
index fa696796d1d4a..ccf57a7f4070e 100644
--- a/src/vs/editor/browser/gpu/fullFileRenderStrategy.ts
+++ b/src/vs/editor/browser/gpu/fullFileRenderStrategy.ts
@@ -258,6 +258,7 @@ export class FullFileRenderStrategy extends ViewEventHandler implements IGpuRend
 
 		let decorationStyleSetBold: boolean | undefined;
 		let decorationStyleSetColor: number | undefined;
+		let decorationStyleSetOpacity: number | undefined;
 
 		let lineData: ViewLineRenderingData;
 		let decoration: InlineDecoration;
@@ -363,6 +364,7 @@ export class FullFileRenderStrategy extends ViewEventHandler implements IGpuRend
 					chars = content.charAt(x);
 					decorationStyleSetColor = undefined;
 					decorationStyleSetBold = undefined;
+					decorationStyleSetOpacity = undefined;
 
 					// Apply supported inline decoration styles to the cell metadata
 					for (decoration of lineData.inlineDecorations) {
@@ -402,6 +404,11 @@ export class FullFileRenderStrategy extends ViewEventHandler implements IGpuRend
 										}
 										break;
 									}
+									case 'opacity': {
+										const parsedValue = parseCssOpacity(value);
+										decorationStyleSetOpacity = parsedValue;
+										break;
+									}
 									default: throw new BugIndicatingError('Unexpected inline decoration style');
 								}
 							}
@@ -419,7 +426,7 @@ export class FullFileRenderStrategy extends ViewEventHandler implements IGpuRend
 						continue;
 					}
 
-					const decorationStyleSetId = ViewGpuContext.decorationStyleCache.getOrCreateEntry(decorationStyleSetColor, decorationStyleSetBold);
+					const decorationStyleSetId = ViewGpuContext.decorationStyleCache.getOrCreateEntry(decorationStyleSetColor, decorationStyleSetBold, decorationStyleSetOpacity);
 					glyph = this._viewGpuContext.atlas.getGlyph(this._glyphRasterizer.value, chars, tokenMetadata, decorationStyleSetId);
 
 					// TODO: Support non-standard character widths
@@ -511,3 +518,13 @@ function parseCssFontWeight(value: string) {
 	}
 	return parseInt(value);
 }
+
+function parseCssOpacity(value: string): number {
+	if (value.endsWith('%')) {
+		return parseFloat(value.substring(0, value.length - 1)) / 100;
+	}
+	if (value.match(/^\d+(?:\.\d*)/)) {
+		return parseFloat(value);
+	}
+	return 1;
+}
diff --git a/src/vs/editor/browser/gpu/raster/glyphRasterizer.ts b/src/vs/editor/browser/gpu/raster/glyphRasterizer.ts
index 0375d305f1556..d7f39647d82ae 100644
--- a/src/vs/editor/browser/gpu/raster/glyphRasterizer.ts
+++ b/src/vs/editor/browser/gpu/raster/glyphRasterizer.ts
@@ -106,6 +106,8 @@ export class GlyphRasterizer extends Disposable implements IGlyphRasterizer {
 			this._canvas.height = canvasDim;
 		}
 
+		this._ctx.save();
+
 		const decorationStyleSet = ViewGpuContext.decorationStyleCache.getStyleSet(decorationStyleSetId);
 
 		// TODO: Support workbench.fontAliasing
@@ -139,7 +141,12 @@ export class GlyphRasterizer extends Disposable implements IGlyphRasterizer {
 		}
 		this._ctx.textBaseline = 'top';
 
+		if (decorationStyleSet?.opacity !== undefined) {
+			this._ctx.globalAlpha = decorationStyleSet.opacity;
+		}
+
 		this._ctx.fillText(chars, originX, originY);
+		this._ctx.restore();
 
 		const imageData = this._ctx.getImageData(0, 0, this._canvas.width, this._canvas.height);
 		this._findGlyphBoundingBox(imageData, this._workGlyph.boundingBox);
diff --git a/src/vs/editor/browser/gpu/viewGpuContext.ts b/src/vs/editor/browser/gpu/viewGpuContext.ts
index 7c0985a376b23..f33b9ee6fa11a 100644
--- a/src/vs/editor/browser/gpu/viewGpuContext.ts
+++ b/src/vs/editor/browser/gpu/viewGpuContext.ts
@@ -268,6 +268,7 @@ export class ViewGpuContext extends Disposable {
 const gpuSupportedDecorationCssRules = [
 	'color',
 	'font-weight',
+	'opacity',
 ];
 
 function supportsCssRule(rule: string, style: CSSStyleDeclaration) {