diff --git a/cli/src/components/thinking.tsx b/cli/src/components/thinking.tsx
index 87731d48d..bc1ab10e0 100644
--- a/cli/src/components/thinking.tsx
+++ b/cli/src/components/thinking.tsx
@@ -39,7 +39,7 @@ export const Thinking = memo(
     }
 
     const width = Math.max(10, availableWidth ?? contentMaxWidth)
-    // Normalize content to single line for consistent preview
+    // Normalize content to single line for consistent preview (but preserve in expanded mode)
     const normalizedContent = content.replace(/\n+/g, ' ').trim()
     // Account for "..." prefix (3 chars) when calculating line widths
     const effectiveWidth = width - 3
@@ -48,6 +48,8 @@ export const Thinking = memo(
       effectiveWidth,
       PREVIEW_LINE_COUNT,
     )
+    // In expanded mode, preserve original line breaks for proper markdown rendering
+    const expandedContent = content.replace(/\n\n+/g, '\n\n').trim()
 
     const showFull = thinkingCollapseState === 'expanded'
     const showPreview = thinkingCollapseState === 'preview' && lines.length > 0
@@ -94,7 +96,7 @@ export const Thinking = memo(
               }}
               attributes={TextAttributes.ITALIC}
             >
-              {content}
+              {expandedContent}
             </text>
           </box>
         )}