diff --git a/crates/ruff_db/src/diagnostic/mod.rs b/crates/ruff_db/src/diagnostic/mod.rs
index d810a2d431e83..f93aa608acc58 100644
--- a/crates/ruff_db/src/diagnostic/mod.rs
+++ b/crates/ruff_db/src/diagnostic/mod.rs
@@ -1382,6 +1382,18 @@ impl Display for SubDiagnosticSeverity {
     }
 }
 
+/// Controls whether colored diagnostic output includes hyperlinks.
+#[derive(Clone, Copy, Debug, Default, PartialEq, Eq)]
+pub enum HyperlinkMode {
+    /// Detect hyperlink support from the environment.
+    #[default]
+    Auto,
+    /// Always emit hyperlinks.
+    Always,
+    /// Never emit hyperlinks.
+    Never,
+}
+
 /// Configuration for rendering diagnostics.
 #[derive(Clone, Debug)]
 pub struct DisplayDiagnosticConfig {
@@ -1395,6 +1407,10 @@ pub struct DisplayDiagnosticConfig {
     ///
     /// Disabled by default.
     color: bool,
+    /// Whether to emit hyperlinks in colored diagnostic output.
+    ///
+    /// By default, hyperlink support is detected from the environment.
+    hyperlinks: HyperlinkMode,
     /// Whether to anonymize line numbers in full diagnostic output.
     ///
     /// Disabled by default.
@@ -1438,6 +1454,7 @@ impl DisplayDiagnosticConfig {
             program,
             format: DiagnosticFormat::default(),
             color: false,
+            hyperlinks: HyperlinkMode::Auto,
             anonymized_line_numbers: false,
             context: 2,
             merge_window: 2,
@@ -1460,6 +1477,14 @@ impl DisplayDiagnosticConfig {
         DisplayDiagnosticConfig { color: yes, ..self }
     }
 
+    /// Configures hyperlink rendering for colored diagnostic output.
+    pub fn hyperlinks(self, mode: HyperlinkMode) -> DisplayDiagnosticConfig {
+        DisplayDiagnosticConfig {
+            hyperlinks: mode,
+            ..self
+        }
+    }
+
     /// Whether to anonymize line numbers in full diagnostic output.
     pub fn anonymized_line_numbers(self, yes: bool) -> DisplayDiagnosticConfig {
         DisplayDiagnosticConfig {
diff --git a/crates/ruff_db/src/diagnostic/render/concise.rs b/crates/ruff_db/src/diagnostic/render/concise.rs
index 79a83952ef3aa..2fa922a90011c 100644
--- a/crates/ruff_db/src/diagnostic/render/concise.rs
+++ b/crates/ruff_db/src/diagnostic/render/concise.rs
@@ -21,7 +21,7 @@ impl<'a> ConciseRenderer<'a> {
         diagnostics: &[Diagnostic],
     ) -> std::fmt::Result {
         let stylesheet = if self.config.color {
-            DiagnosticStylesheet::styled()
+            DiagnosticStylesheet::styled().hyperlinks(self.config.hyperlinks)
         } else {
             DiagnosticStylesheet::plain()
         };
diff --git a/crates/ruff_db/src/diagnostic/render/full.rs b/crates/ruff_db/src/diagnostic/render/full.rs
index 9280a7ade7342..45406fe23196d 100644
--- a/crates/ruff_db/src/diagnostic/render/full.rs
+++ b/crates/ruff_db/src/diagnostic/render/full.rs
@@ -29,7 +29,7 @@ impl<'a> FullRenderer<'a> {
         diagnostics: &[Diagnostic],
     ) -> std::fmt::Result {
         let stylesheet = if self.config.color {
-            DiagnosticStylesheet::styled()
+            DiagnosticStylesheet::styled().hyperlinks(self.config.hyperlinks)
         } else {
             DiagnosticStylesheet::plain()
         };
diff --git a/crates/ruff_db/src/diagnostic/stylesheet.rs b/crates/ruff_db/src/diagnostic/stylesheet.rs
index c86ad430b6244..f0e13d0cd42ca 100644
--- a/crates/ruff_db/src/diagnostic/stylesheet.rs
+++ b/crates/ruff_db/src/diagnostic/stylesheet.rs
@@ -1,6 +1,8 @@
 use anstyle::{AnsiColor, Effects, Style};
 use std::fmt::Formatter;
 
+use crate::diagnostic::HyperlinkMode;
+
 pub(super) const fn fmt_styled<'a, T>(
     content: T,
     style: anstyle::Style,
@@ -118,6 +120,15 @@ impl DiagnosticStylesheet {
         }
     }
 
+    pub(super) fn hyperlinks(mut self, mode: HyperlinkMode) -> Self {
+        match mode {
+            HyperlinkMode::Auto => {}
+            HyperlinkMode::Always => self.hyperlink = true,
+            HyperlinkMode::Never => self.hyperlink = false,
+        }
+        self
+    }
+
     pub fn plain() -> Self {
         Self {
             error: Style::new(),
diff --git a/crates/ty_server/src/capabilities.rs b/crates/ty_server/src/capabilities.rs
index 361e227924cde..5b0a838622457 100644
--- a/crates/ty_server/src/capabilities.rs
+++ b/crates/ty_server/src/capabilities.rs
@@ -258,7 +258,7 @@ impl ResolvedClientCapabilities {
         if client_capabilities
             .experimental
             .as_ref()
-            // Protocol: crates/ty_server/README.md#full-diagnostic-output
+            // Protocol: https://docs.astral.sh/ty/features/language-server/#full-diagnostic-output
             .and_then(|experimental| experimental.get("fullDiagnosticOutput"))
             .and_then(serde_json::Value::as_bool)
             .unwrap_or_default()
diff --git a/crates/ty_server/src/server/api/diagnostics.rs b/crates/ty_server/src/server/api/diagnostics.rs
index 2654109f6a343..6c1236b2c7c76 100644
--- a/crates/ty_server/src/server/api/diagnostics.rs
+++ b/crates/ty_server/src/server/api/diagnostics.rs
@@ -12,7 +12,9 @@ use ruff_text_size::Ranged;
 use rustc_hash::{FxHashMap, FxHashSet};
 use ty_ide::{Hint, hints};
 
-use ruff_db::diagnostic::{Annotation, DisplayDiagnosticConfig, Severity, SubDiagnostic};
+use ruff_db::diagnostic::{
+    Annotation, DisplayDiagnosticConfig, HyperlinkMode, Severity, SubDiagnostic,
+};
 use ruff_db::files::{File, FileRange};
 use ruff_db::source::source_text;
 use ruff_db::system::SystemPathBuf;
@@ -668,7 +670,14 @@ impl DiagnosticData {
                 rendered: diagnostic
                     .display(
                         &(db as &dyn ruff_db::Db),
-                        &DisplayDiagnosticConfig::new("ty").color(false),
+                        &DisplayDiagnosticConfig::new("ty")
+                            .color(true)
+                            // The styled renderer can enable OSC-8 hyperlinks based on the process
+                            // environment, even though this output is sent over LSP rather than to a
+                            // terminal. The ANSI parser used by ty-vscode does not strip OSC-8
+                            // sequences, so their escape codes would appear in the virtual diagnostic
+                            // document.
+                            .hyperlinks(HyperlinkMode::Never),
                     )
                     .to_string(),
                 diagnostic_id: diagnostic.id().to_string(),
diff --git a/crates/ty_server/tests/e2e/snapshots/e2e__publish_diagnostics__full_diagnostic_output.snap b/crates/ty_server/tests/e2e/snapshots/e2e__publish_diagnostics__full_diagnostic_output.snap
index 01097162951da..02d34942a05c6 100644
--- a/crates/ty_server/tests/e2e/snapshots/e2e__publish_diagnostics__full_diagnostic_output.snap
+++ b/crates/ty_server/tests/e2e/snapshots/e2e__publish_diagnostics__full_diagnostic_output.snap
@@ -69,7 +69,7 @@ PublishDiagnosticsParams {
             data: Some(
                 Object {
                     "diagnostic_id": String("invalid-return-type"),
-                    "rendered": String("error[invalid-return-type]: Return type does not match returned value\n --> src/foo.py:1:14\n  |\n1 | def foo() -> str:\n  |              --- Expected `str` because of return type\n2 |     return 42\n  |            ^^ expected `str`, found `Literal[42]`\n  |\n\n"),
+                    "rendered": String("\u{1b}[1m\u{1b}[91merror[invalid-return-type]\u{1b}[0m: \u{1b}[1mReturn type does not match returned value\u{1b}[0m\n \u{1b}[1m\u{1b}[94m-->\u{1b}[0m src/foo.py:1:14\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m\n\u{1b}[1m\u{1b}[94m1 |\u{1b}[0m def foo() -> str:\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m              \u{1b}[1m\u{1b}[33m---\u{1b}[0m \u{1b}[1m\u{1b}[33mExpected `str` because of return type\u{1b}[0m\n\u{1b}[1m\u{1b}[94m2 |\u{1b}[0m     return 42\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m            \u{1b}[1m\u{1b}[91m^^\u{1b}[0m \u{1b}[1m\u{1b}[91mexpected `str`, found `Literal[42]`\u{1b}[0m\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m\n\n"),
                 },
             ),
         },
diff --git a/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_after.snap b/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_after.snap
index a98b655898f18..ff9985b20df9b 100644
--- a/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_after.snap
+++ b/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_after.snap
@@ -61,7 +61,7 @@ RelatedFullDocumentDiagnosticReport(
                     data: Some(
                         Object {
                             "diagnostic_id": String("invalid-return-type"),
-                            "rendered": String("error[invalid-return-type]: Return type does not match returned value\n --> src/foo.py:1:14\n  |\n1 | def foo() -> str:\n  |              --- Expected `str` because of return type\n2 |     return 42  # after!\n  |            ^^ expected `str`, found `Literal[42]`\n  |\n\n"),
+                            "rendered": String("\u{1b}[1m\u{1b}[91merror[invalid-return-type]\u{1b}[0m: \u{1b}[1mReturn type does not match returned value\u{1b}[0m\n \u{1b}[1m\u{1b}[94m-->\u{1b}[0m src/foo.py:1:14\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m\n\u{1b}[1m\u{1b}[94m1 |\u{1b}[0m def foo() -> str:\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m              \u{1b}[1m\u{1b}[33m---\u{1b}[0m \u{1b}[1m\u{1b}[33mExpected `str` because of return type\u{1b}[0m\n\u{1b}[1m\u{1b}[94m2 |\u{1b}[0m     return 42  # after!\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m            \u{1b}[1m\u{1b}[91m^^\u{1b}[0m \u{1b}[1m\u{1b}[91mexpected `str`, found `Literal[42]`\u{1b}[0m\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m\n\n"),
                         },
                     ),
                 },
diff --git a/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_before.snap b/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_before.snap
index 13c1227d07fa1..81151c4ae34e1 100644
--- a/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_before.snap
+++ b/crates/ty_server/tests/e2e/snapshots/e2e__pull_diagnostics__document_diagnostic_caching_rendered_source_before.snap
@@ -61,7 +61,7 @@ RelatedFullDocumentDiagnosticReport(
                     data: Some(
                         Object {
                             "diagnostic_id": String("invalid-return-type"),
-                            "rendered": String("error[invalid-return-type]: Return type does not match returned value\n --> src/foo.py:1:14\n  |\n1 | def foo() -> str:\n  |              --- Expected `str` because of return type\n2 |     return 42  # before\n  |            ^^ expected `str`, found `Literal[42]`\n  |\n\n"),
+                            "rendered": String("\u{1b}[1m\u{1b}[91merror[invalid-return-type]\u{1b}[0m: \u{1b}[1mReturn type does not match returned value\u{1b}[0m\n \u{1b}[1m\u{1b}[94m-->\u{1b}[0m src/foo.py:1:14\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m\n\u{1b}[1m\u{1b}[94m1 |\u{1b}[0m def foo() -> str:\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m              \u{1b}[1m\u{1b}[33m---\u{1b}[0m \u{1b}[1m\u{1b}[33mExpected `str` because of return type\u{1b}[0m\n\u{1b}[1m\u{1b}[94m2 |\u{1b}[0m     return 42  # before\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m            \u{1b}[1m\u{1b}[91m^^\u{1b}[0m \u{1b}[1m\u{1b}[91mexpected `str`, found `Literal[42]`\u{1b}[0m\n  \u{1b}[1m\u{1b}[94m|\u{1b}[0m\n\n"),
                         },
                     ),
                 },