diff --git a/apps/web/client/src/app/project/[id]/_components/canvas/overlay/elements/text.tsx b/apps/web/client/src/app/project/[id]/_components/canvas/overlay/elements/text.tsx
index 963ea6cecd..30066193b8 100644
--- a/apps/web/client/src/app/project/[id]/_components/canvas/overlay/elements/text.tsx
+++ b/apps/web/client/src/app/project/[id]/_components/canvas/overlay/elements/text.tsx
@@ -20,6 +20,44 @@ interface TextEditorProps {
     isDisabled?: boolean;
 }
 
+// Helper functions to convert between formats
+const contentHelpers = {
+    // Convert content with newlines to ProseMirror nodes
+    createNodesFromContent: (content: string) => {
+        if (!content) return [];
+        
+        const lines = content.split('\n');
+        const nodes = [];
+        
+        for (let i = 0; i < lines.length; i++) {
+            if (lines[i] || i === 0) {
+                nodes.push(schema.text(lines[i] || ''));
+            }
+            if (i < lines.length - 1) {
+                const hardBreakNode = schema.nodes.hard_break;
+                if (hardBreakNode) {
+                    nodes.push(hardBreakNode.create());
+                }
+            }
+        }
+        
+        return nodes;
+    },
+    
+    // Convert ProseMirror document to text with newlines
+    extractContentWithNewlines: (view: EditorView) => {
+        let content = '';
+        view.state.doc.descendants((node) => {
+            if (node.type.name === 'text' && node.text) {
+                content += node.text || '';
+            } else if (node.type.name === 'hard_break') {
+                content += '\n';
+            }
+        });
+        return content;
+    }
+};
+
 export const TextEditor: React.FC<TextEditorProps> = ({
     rect,
     content,
@@ -50,7 +88,8 @@ export const TextEditor: React.FC<TextEditorProps> = ({
                 const newState = view.state.apply(transaction);
                 view.updateState(newState);
                 if (onChange && transaction.docChanged) {
-                    onChange(view.state.doc.textContent);
+                    const textContent = contentHelpers.extractContentWithNewlines(view);
+                    onChange(textContent);
                 }
             },
             attributes: {
@@ -60,8 +99,9 @@ export const TextEditor: React.FC<TextEditorProps> = ({
 
         editorViewRef.current = view;
 
-        // Set initial content
-        const paragraph = schema.node('paragraph', null, content ? [schema.text(content)] : []);
+        // Set initial content with proper line break handling
+        const nodes = contentHelpers.createNodesFromContent(content);
+        const paragraph = schema.node('paragraph', null, nodes);
         const newDoc = schema.node('doc', null, [paragraph]);
         const tr = view.state.tr.replaceWith(0, view.state.doc.content.size, newDoc.content);
         view.dispatch(tr);
diff --git a/apps/web/client/src/components/store/editor/overlay/prosemirror/index.ts b/apps/web/client/src/components/store/editor/overlay/prosemirror/index.ts
index 2b13efc3c5..f1457d7087 100644
--- a/apps/web/client/src/components/store/editor/overlay/prosemirror/index.ts
+++ b/apps/web/client/src/components/store/editor/overlay/prosemirror/index.ts
@@ -3,7 +3,7 @@ import { baseKeymap } from 'prosemirror-commands';
 import { history, redo, undo } from 'prosemirror-history';
 import { keymap } from 'prosemirror-keymap';
 import { Schema } from 'prosemirror-model';
-import { Plugin } from 'prosemirror-state';
+import { Plugin, EditorState } from 'prosemirror-state';
 import { EditorView } from 'prosemirror-view';
 import { adaptValueToCanvas } from '../utils';
 
@@ -11,10 +11,16 @@ export const schema = new Schema({
     nodes: {
         doc: { content: 'paragraph+' },
         paragraph: {
-            content: 'text*',
+            content: '(text | hard_break)*',
             toDOM: () => ['p', { style: 'margin: 0; padding: 0;' }, 0],
         },
         text: { inline: true },
+        hard_break: {
+            inline: true,
+            group: 'inline',
+            selectable: false,
+            toDOM: () => ['br'],
+        },
     },
     marks: {
         style: {
@@ -34,15 +40,13 @@ export const schema = new Schema({
 
 export function applyStylesToEditor(editorView: EditorView, styles: Record<string, string>) {
     const { state, dispatch } = editorView;
-    const { tr } = state;
     const styleMark = state.schema.marks?.style;
     if (!styleMark) {
         console.error('No style mark found');
         return;
     }
-    tr.addMark(0, state.doc.content.size, styleMark.create({ style: styles }));
 
-    // Apply container styles
+    const tr = state.tr.addMark(0, state.doc.content.size, styleMark.create({ style: styles }));
     const fontSize = adaptValueToCanvas(parseFloat(styles.fontSize ?? ''));
     const lineHeight = adaptValueToCanvas(parseFloat(styles.lineHeight ?? ''));
 
@@ -63,31 +67,37 @@ export function applyStylesToEditor(editorView: EditorView, styles: Record<strin
         backgroundColor: styles.backgroundColor,
         wordBreak: 'break-word',
         overflow: 'visible',
+        height: '100%',
     });
-    editorView.dom.style.height = '100%';
     dispatch(tr);
 }
 
-// Export common plugins configuration
+const createLineBreakHandler = () => (state: EditorState, dispatch?: (tr: any) => void) => {
+    if (dispatch) {
+        const hardBreakNode = state.schema.nodes.hard_break;
+        if (hardBreakNode) {
+            dispatch(state.tr.replaceSelectionWith(hardBreakNode.create()));
+        }
+    }
+    return true;
+};
+
+const createEnterHandler = (onExit: () => void) => (state: EditorState) => {
+    onExit();
+    return true;
+};
+
 export const createEditorPlugins = (onEscape?: () => void, onEnter?: () => void): Plugin[] => [
     history(),
     keymap({
         'Mod-z': undo,
         'Mod-shift-z': redo,
         Escape: () => {
-            if (onEscape) {
-                onEscape();
-                return true;
-            }
-            return false;
-        },
-        Enter: () => {
-            if (onEnter) {
-                onEnter();
-                return true;
-            }
-            return false;
+            onEscape?.();
+            return !!onEscape;
         },
+        Enter: onEnter ? createEnterHandler(onEnter) : () => false,
+        'Shift-Enter': createLineBreakHandler(),
     }),
     keymap(baseKeymap),
-];
+];
\ No newline at end of file
diff --git a/apps/web/client/src/components/store/editor/text/index.ts b/apps/web/client/src/components/store/editor/text/index.ts
index a05ae9d740..e99e467c02 100644
--- a/apps/web/client/src/components/store/editor/text/index.ts
+++ b/apps/web/client/src/components/store/editor/text/index.ts
@@ -160,7 +160,6 @@ export class TextEditingManager {
                 originalContent: this.originalContent ?? '',
                 newContent,
             });
-
             const adjustedRect = adaptRectToCanvas(domEl.rect, frameView);
             this.editorEngine.overlay.state.updateTextEditor(adjustedRect);
             await this.editorEngine.overlay.refresh();
diff --git a/apps/web/preload/dist/index.js b/apps/web/preload/dist/index.js
index 2309b4184e..09e68fcc64 100644
--- a/apps/web/preload/dist/index.js
+++ b/apps/web/preload/dist/index.js
@@ -12889,16 +12889,19 @@ function startEditingText(domId) {
   }
   const childNodes = Array.from(el.childNodes).filter((node) => node.nodeType !== Node.COMMENT_NODE);
   let targetEl = null;
+  const hasOnlyTextAndBreaks = childNodes.every((node) => node.nodeType === Node.TEXT_NODE || node.nodeType === Node.ELEMENT_NODE && node.tagName.toLowerCase() === "br");
   if (childNodes.length === 0) {
     targetEl = el;
-  } else if (childNodes.length === 1 && el.childNodes[0]?.nodeType === Node.TEXT_NODE) {
+  } else if (childNodes.length === 1 && childNodes[0]?.nodeType === Node.TEXT_NODE) {
+    targetEl = el;
+  } else if (hasOnlyTextAndBreaks) {
     targetEl = el;
   }
   if (!targetEl) {
     console.warn("Start editing text failed. No target element found for selector:", domId);
     return null;
   }
-  const originalContent = el.textContent || "";
+  const originalContent = extractTextContent(el);
   prepareElementForEditing(targetEl);
   return { originalContent };
 }
@@ -12920,7 +12923,7 @@ function stopEditingText(domId) {
   }
   cleanUpElementAfterEditing(el);
   publishEditText(getDomElement(el, true));
-  return { newContent: el.textContent || "", domEl: getDomElement(el, true) };
+  return { newContent: extractTextContent(el), domEl: getDomElement(el, true) };
 }
 function prepareElementForEditing(el) {
   el.setAttribute("data-onlook-editing-text" /* DATA_ONLOOK_EDITING_TEXT */, "true");
@@ -12933,7 +12936,17 @@ function removeEditingAttributes(el) {
   el.removeAttribute("data-onlook-editing-text" /* DATA_ONLOOK_EDITING_TEXT */);
 }
 function updateTextContent(el, content) {
-  el.textContent = content;
+  const htmlContent = content.replace(/\n/g, "<br>");
+  el.innerHTML = htmlContent;
+}
+function extractTextContent(el) {
+  let content = el.innerHTML;
+  content = content.replace(/<br\s*\/?>/gi, `
+`);
+  content = content.replace(/<[^>]*>/g, "");
+  const textArea = document.createElement("textarea");
+  textArea.innerHTML = content;
+  return textArea.value;
 }
 function isChildTextEditable(oid) {
   return true;
@@ -17359,5 +17372,5 @@ export {
   penpalParent
 };
 
-//# debugId=063B7F3A5134580A64756E2164756E21
+//# debugId=1F8F09CA958308FB64756E2164756E21
 //# sourceMappingURL=index.js.map
diff --git a/apps/web/preload/script/api/elements/text.ts b/apps/web/preload/script/api/elements/text.ts
index bc79e8f9c3..592aa8490f 100644
--- a/apps/web/preload/script/api/elements/text.ts
+++ b/apps/web/preload/script/api/elements/text.ts
@@ -25,16 +25,27 @@ export function startEditingText(domId: string): EditTextResult | null {
     );
 
     let targetEl: HTMLElement | null = null;
+    // Check for element type
+    const hasOnlyTextAndBreaks = childNodes.every(node => 
+        node.nodeType === Node.TEXT_NODE || 
+        (node.nodeType === Node.ELEMENT_NODE && (node as Element).tagName.toLowerCase() === 'br')
+    );
+
     if (childNodes.length === 0) {
         targetEl = el as HTMLElement;
-    } else if (childNodes.length === 1 && el.childNodes[0]?.nodeType === Node.TEXT_NODE) {
+    } else if (childNodes.length === 1 && childNodes[0]?.nodeType === Node.TEXT_NODE) {
+        targetEl = el as HTMLElement;
+    } else if (hasOnlyTextAndBreaks) {
+        // Handle elements with text and <br> tags
         targetEl = el as HTMLElement;
     }
+
     if (!targetEl) {
         console.warn('Start editing text failed. No target element found for selector:', domId);
         return null;
     }
-    const originalContent = el.textContent || '';
+    
+    const originalContent = extractTextContent(el);
     prepareElementForEditing(targetEl);
 
     return { originalContent };
@@ -59,7 +70,7 @@ export function stopEditingText(domId: string): { newContent: string; domEl: Dom
     }
     cleanUpElementAfterEditing(el);
     publishEditText(getDomElement(el, true));
-    return { newContent: el.textContent || '', domEl: getDomElement(el, true) };
+    return { newContent: extractTextContent(el), domEl: getDomElement(el, true) };
 }
 
 function prepareElementForEditing(el: HTMLElement) {
@@ -76,7 +87,18 @@ function removeEditingAttributes(el: HTMLElement) {
 }
 
 function updateTextContent(el: HTMLElement, content: string): void {
-    el.textContent = content;
+    // Convert newlines to <br> tags in the DOM
+    const htmlContent = content.replace(/\n/g, '<br>');
+    el.innerHTML = htmlContent;
+}
+
+function extractTextContent(el: HTMLElement): string {
+    let content = el.innerHTML;
+    content = content.replace(/<br\s*\/?>/gi, '\n');
+    content = content.replace(/<[^>]*>/g, '');
+    const textArea = document.createElement('textarea');
+    textArea.innerHTML = content;
+    return textArea.value;
 }
 
 export function isChildTextEditable(oid: string): boolean | null {
diff --git a/packages/parser/src/code-edit/text.ts b/packages/parser/src/code-edit/text.ts
index 12e048749d..5c374e528f 100644
--- a/packages/parser/src/code-edit/text.ts
+++ b/packages/parser/src/code-edit/text.ts
@@ -1,10 +1,32 @@
 import { type t as T, types as t } from '../packages';
 
 export function updateNodeTextContent(node: T.JSXElement, textContent: string): void {
-    const textNode = node.children.find((child) => t.isJSXText(child)) as T.JSXText | undefined;
-    if (textNode) {
-        textNode.value = textContent;
-    } else {
-        node.children.unshift(t.jsxText(textContent));
+    // Split the text content by newlines
+    const parts = textContent.split('\n');
+
+    // If there's only one part (no newlines), handle as before
+    if (parts.length === 1) {
+        const textNode = node.children.find((child) => t.isJSXText(child)) as T.JSXText | undefined;
+        if (textNode) {
+            textNode.value = textContent;
+        } else {
+            node.children.unshift(t.jsxText(textContent));
+        }
+        return;
     }
+
+    // Clear existing children
+    node.children = [];
+
+    // Add each part with a <br/> in between
+    parts.forEach((part, index) => {
+        if (part) {
+            node.children.push(t.jsxText(part));
+        }
+        if (index < parts.length - 1) {
+            node.children.push(
+                t.jsxElement(t.jsxOpeningElement(t.jsxIdentifier('br'), [], true), null, [], true),
+            );
+        }
+    });
 }