diff --git a/presentation-compiler/src/main/dotty/tools/pc/PcInlineValueProvider.scala b/presentation-compiler/src/main/dotty/tools/pc/PcInlineValueProvider.scala
index eafac513c7e1..816a016fa027 100644
--- a/presentation-compiler/src/main/dotty/tools/pc/PcInlineValueProvider.scala
+++ b/presentation-compiler/src/main/dotty/tools/pc/PcInlineValueProvider.scala
@@ -133,11 +133,8 @@ final class PcInlineValueProvider(
     rhsLines match
       case h :: Nil => rhs
       case h :: t =>
-        val noPrefixH = h.stripPrefix(refIndent)
-        if noPrefixH.startsWith("{") then
-          noPrefixH ++ t.map(refIndent ++ _.stripPrefix(defIndent)).mkString("\n","\n", "")
-        else
-          (("  " ++ h) :: t).map(refIndent ++ _.stripPrefix(defIndent)).mkString("\n", "\n", "")
+        val header = if h.startsWith("{") then h else "\n" ++ refIndent ++ "  " ++ h
+        header ++ t.map(refIndent ++ _.stripPrefix(defIndent)).mkString("\n", "\n", "")
       case Nil => rhs
 
   private def definitionRequiresBrackets(tree: Tree)(using Context): Boolean =
@@ -232,7 +229,7 @@ final class PcInlineValueProvider(
       var idx = source.startOfLine(offset)
       val pad = new StringBuilder
       while (idx != offset && idx < source.content().length && source.content()(idx).isWhitespace) {
-        pad.append(if (idx < source.content().length && source.content()(idx) == '\t') '\t' else ' ')
+        pad.append(source.content()(idx))
         idx += 1
       }
       pad.result()
diff --git a/presentation-compiler/test/dotty/tools/pc/tests/edit/InlineValueSuite.scala b/presentation-compiler/test/dotty/tools/pc/tests/edit/InlineValueSuite.scala
index 541340bd3f38..e53b015d0d86 100644
--- a/presentation-compiler/test/dotty/tools/pc/tests/edit/InlineValueSuite.scala
+++ b/presentation-compiler/test/dotty/tools/pc/tests/edit/InlineValueSuite.scala
@@ -430,6 +430,25 @@ class InlineValueSuite extends BaseCodeActionSuite with CommonMtagsEnrichments:
     )
 
   @Test def `i7137a` =
+    checkEdit(
+      """|def foo = {
+         |  val newValue =
+         |    val x = true
+         |    x
+         |  def bar =
+         |    val xx =new<<V>>alue
+         |}
+         |""".stripMargin,
+      """|def foo = {
+         |  def bar =
+         |    val xx =
+         |      val x = true
+         |      x
+         |}
+         |""".stripMargin
+    )
+
+  @Test def `i7137b` =
       checkEdit(
         """|object O {
             |  def foo = {