diff --git a/crates/g3-cli/src/lib.rs b/crates/g3-cli/src/lib.rs
index de921d0..2591ff9 100644
--- a/crates/g3-cli/src/lib.rs
+++ b/crates/g3-cli/src/lib.rs
@@ -194,9 +194,9 @@ async fn run_interactive_retro(config: Config, show_prompt: bool, show_code: boo
     let mut agent = Agent::new(config, ui_writer).await?;
 
     // Display initial system messages
-    tui.output("SYSTEM: G3 AI CODING AGENT ONLINE");
-    tui.output("SYSTEM: READY FOR INPUT");
-    tui.output("");
+    tui.output("SYSTEM: AGENT ONLINE\n\n");
+    tui.output("SYSTEM: READY FOR INPUT\n\n");
+    tui.output("\n\n");
 
     // Display provider and model information
     match agent.get_provider_info() {
diff --git a/crates/g3-cli/src/retro_tui.rs b/crates/g3-cli/src/retro_tui.rs
index d0d7058..be19cc0 100644
--- a/crates/g3-cli/src/retro_tui.rs
+++ b/crates/g3-cli/src/retro_tui.rs
@@ -73,6 +73,8 @@ struct TerminalState {
     status_blink: bool,
     /// Last status blink time
     last_status_blink: Instant,
+    /// Whether we're in processing mode (for cursor display)
+    is_processing: bool,
     /// Should exit
     should_exit: bool,
 }
@@ -99,6 +101,7 @@ impl TerminalState {
             provider_info: ("UNKNOWN".to_string(), "UNKNOWN".to_string()),
             status_blink: true,
             last_status_blink: Instant::now(),
+            is_processing: false,
             should_exit: false,
         }
     }
@@ -192,6 +195,13 @@ impl TerminalState {
     fn add_output(&mut self, text: &str) {
         let mut lines = text.lines();
 
+        // Remove any existing cursor from the last line before adding new content
+        if let Some(last) = self.output_history.last_mut() {
+            if last.ends_with('█') {
+                last.pop();
+            }
+        }
+
         // Handle the first line specially
         if let Some(first_line) = lines.next() {
             if let Some(last) = self.output_history.last_mut() {
@@ -208,6 +218,14 @@ impl TerminalState {
             self.output_history.push(line.to_string());
         }
 
+        // Always add cursor at the end if we're in PROCESSING mode
+        if self.is_processing {
+            if let Some(last) = self.output_history.last_mut() {
+                // Add a solid cursor at the end of the last line
+                last.push('█');
+            }
+        }
+
         // Update scroll state
         // Auto-scroll to bottom only if user hasn't manually scrolled
         if !self.manual_scroll {
@@ -284,8 +302,21 @@ impl RetroTui {
                         TuiMessage::SystemStatus(status) => {
                             let was_processing = state.status_line == "PROCESSING";
                             state.status_line = status;
-                            if was_processing && state.status_line == "READY" {
+                            state.is_processing = state.status_line == "PROCESSING";
+                            
+                            // Remove cursor when exiting PROCESSING mode
+                            if was_processing && !state.is_processing {
+                                if let Some(last) = state.output_history.last_mut() {
+                                    if last.ends_with('█') {
+                                        last.pop();
+                                    }
+                                }
                                 state.manual_scroll = false; // Reset manual scroll
+                            } else if !was_processing && state.is_processing {
+                                // Add cursor when entering PROCESSING mode
+                                if let Some(last) = state.output_history.last_mut() {
+                                    last.push('█');
+                                }
                             }
                         }
                         TuiMessage::ContextUpdate {