diff --git a/crates/fs-operation/src/lib.rs b/crates/fs-operation/src/lib.rs
index f63a1ce3..53999081 100644
--- a/crates/fs-operation/src/lib.rs
+++ b/crates/fs-operation/src/lib.rs
@@ -279,4 +279,58 @@ mod tests {
         assert_eq!(grep.matched_files, 2);
         assert!(!grep.output.contains("c.txt"));
     }
+
+    #[test]
+    fn grep_content_groups_lines_by_file_and_marks_matches() {
+        let temp = tempfile::tempdir().unwrap();
+        std::fs::write(
+            temp.path().join("first.txt"),
+            "before\nneedle one\nafter\nomitted one\nomitted two\nbefore distant\nneedle distant\nafter distant\n",
+        )
+        .unwrap();
+        std::fs::write(temp.path().join("second.txt"), "needle two\n").unwrap();
+        let root = temp.path().canonicalize().unwrap();
+        let readable = RootAccess(root.clone());
+
+        let grep = run_grep(
+            &root,
+            root.clone(),
+            GrepRequest {
+                pattern: "needle".to_string(),
+                path: FsPath::root(),
+                glob: Some("*.txt".to_string()),
+                output_mode: GrepOutputMode::Content,
+                case_insensitive: false,
+                before_context: 1,
+                after_context: 1,
+                multiline: false,
+                file_type: None,
+                limit: 20,
+                offset: 0,
+            },
+            &readable,
+        )
+        .unwrap();
+
+        assert_eq!(grep.match_count, 3);
+        assert_eq!(grep.matched_files, 2);
+        assert_eq!(
+            grep.output,
+            concat!(
+                "first.txt\n",
+                "   1 │ before\n",
+                " > 2 │ needle one\n",
+                "   3 │ after\n",
+                "   …\n",
+                "   6 │ before distant\n",
+                " > 7 │ needle distant\n",
+                "   8 │ after distant\n",
+                "\n",
+                "second.txt\n",
+                " > 1 │ needle two\n",
+            )
+        );
+        assert_eq!(grep.output.matches("first.txt").count(), 1);
+        assert_eq!(grep.output.matches("second.txt").count(), 1);
+    }
 }
diff --git a/crates/fs-operation/src/search.rs b/crates/fs-operation/src/search.rs
index 74a66d27..54420f6f 100644
--- a/crates/fs-operation/src/search.rs
+++ b/crates/fs-operation/src/search.rs
@@ -1,3 +1,5 @@
+use std::collections::BTreeMap;
+use std::fmt::Write as _;
 use std::path::{Path, PathBuf};
 
 use crate::FsAccessPolicy;
@@ -57,20 +59,11 @@ impl GrepReport {
                 }
             }
             GrepOutputMode::Content => {
-                for line in &self.lines {
-                    let separator = if line.is_match { ':' } else { '-' };
-                    let path = logical_display(root, &line.path);
-                    if self.show_line_numbers
-                        && let Some(number) = line.line_number
-                    {
-                        output.push_str(&format!(
-                            "{path}{separator}{number}{separator}{}\n",
-                            line.text
-                        ));
-                    } else {
-                        output.push_str(&format!("{path}{separator}{}\n", line.text));
-                    }
-                }
+                output.push_str(&render_content_lines(
+                    root,
+                    &self.lines,
+                    self.show_line_numbers,
+                ));
             }
         }
         GrepResult {
@@ -82,6 +75,48 @@ impl GrepReport {
     }
 }
 
+fn render_content_lines(root: &Path, lines: &[ContentLine], show_line_numbers: bool) -> String {
+    let mut grouped = BTreeMap::<&Path, Vec<&ContentLine>>::new();
+    for line in lines {
+        grouped.entry(&line.path).or_default().push(line);
+    }
+
+    let mut output = String::new();
+    for (file_index, (path, file_lines)) in grouped.into_iter().enumerate() {
+        if file_index > 0 {
+            output.push('\n');
+        }
+        let _ = writeln!(output, "{}", logical_display(root, path));
+
+        let number_width = file_lines
+            .iter()
+            .filter_map(|line| line.line_number)
+            .map(|number| number.to_string().len())
+            .max()
+            .unwrap_or(1);
+        let mut previous_line_end = None;
+        for line in file_lines {
+            if let (Some(previous_end), Some(number)) = (previous_line_end, line.line_number)
+                && number > previous_end
+            {
+                let _ = writeln!(output, "   …");
+            }
+
+            let marker = if line.is_match { '>' } else { ' ' };
+            if show_line_numbers && let Some(number) = line.line_number {
+                let _ = writeln!(output, " {marker} {number:>number_width$} │ {}", line.text);
+            } else {
+                let _ = writeln!(output, " {marker} │ {}", line.text);
+            }
+            previous_line_end = line
+                .line_number
+                .map(|number| number + line.text.split('\n').count() as u64);
+        }
+    }
+
+    output
+}
+
 fn logical_display(root: &Path, path: &Path) -> String {
     path.strip_prefix(root)
         .unwrap_or(path)
diff --git a/crates/tools/src/grep.rs b/crates/tools/src/grep.rs
index 598015b6..27c26ad0 100644
--- a/crates/tools/src/grep.rs
+++ b/crates/tools/src/grep.rs
@@ -129,7 +129,7 @@ pub fn grep_tool(session: WorkdirSessionHandle) -> ToolDefinition {
     Arc::new(move || {
         let schema = schemars::schema_for!(GrepParams);
         let meta = ToolMeta::new("Grep")
-            .description("Search Workdir file contents with a regex. Glob/Grep traversal executes inside the WorkdirSession provider. Results are bounded and Workdir-relative.")
+            .description("Search Workdir file contents with a regex. Content results group lines by file; `>` marks matching lines and unmarked lines are context. Glob/Grep traversal executes inside the WorkdirSession provider. Results are bounded and Workdir-relative.")
             .input_schema(serde_json::to_value(schema).expect("Grep schema serialization"));
         let tool: Arc<dyn Tool> = Arc::new(GrepTool {
             session: session.clone(),