diff --git a/Gemfile b/Gemfile
index 6d3a176f..252454fa 100644
--- a/Gemfile
+++ b/Gemfile
@@ -3,6 +3,8 @@ source 'https://rubygems.org'
 # Specify your gem's dependencies in coderay.gemspec
 gemspec
 
+gem 'paint', '~> 0.8.4'
+
 # Add dependencies to develop your gem here.
 # Include everything needed to run rake, tests, features, etc.
 group :development do
diff --git a/bin/coderay b/bin/coderay
index 130a50ba..2aebfea4 100755
--- a/bin/coderay
+++ b/bin/coderay
@@ -127,7 +127,7 @@ when 'highlight', nil
     if output_file
       output_format ||= CodeRay::FileType[output_file] || :plain
     else
-      output_format ||= :terminal
+      output_format ||= :terminal_256
     end
     
     output_format = :page if output_format.to_s == 'html'
diff --git a/lib/coderay/encoders/terminal_256.rb b/lib/coderay/encoders/terminal_256.rb
new file mode 100644
index 00000000..ea041bf4
--- /dev/null
+++ b/lib/coderay/encoders/terminal_256.rb
@@ -0,0 +1,174 @@
+module CodeRay
+  module Encoders
+    
+    require 'paint'
+    
+    # Outputs code highlighted for a color terminal.
+    # 
+    # Note: This encoder is in beta. It currently doesn't use the Styles.
+    # 
+    # Alias: +term+
+    # 
+    # == Authors & License
+    # 
+    # By Rob Aldred (http://robaldred.co.uk)
+    # 
+    # Based on idea by Nathan Weizenbaum (http://nex-3.com)
+    # 
+    # MIT License (http://www.opensource.org/licenses/mit-license.php)
+    class Terminal256 < Encoder
+      
+      register_for :terminal_256
+      
+      TOKEN_COLORS = {
+        :annotation => '35',
+        :attribute_name => '33',
+        :attribute_value => '31',
+        :binary => '1;35',
+        :char => {
+          :self => '36', :delimiter => '1;34'
+        },
+        :class => '1;35',
+        :class_variable => '36',
+        :color => '32',
+        :comment => '37',
+        :complex => '1;34',
+        :constant => ['1;34', '4'],
+        :decoration => '35',
+        :definition => '1;32',
+        :directive => ['32', '4'],
+        :doc => '46',
+        :doctype => '1;30',
+        :doc_string => ['31', '4'],
+        :entity => '33',
+        :error => ['1;33', '41'],
+        :exception => '1;31',
+        :float => '1;35',
+        :function => '1;34',
+        :global_variable => '42',
+        :hex => '1;36',
+        :include => '33',
+        :integer => '1;34',
+        :key => '35',
+        :label => '1;15',
+        :local_variable => '33',
+        :octal => '1;35',
+        :operator_name => '1;29',
+        :predefined_constant => '1;36',
+        :predefined_type => '1;30',
+        :predefined => ['4', '1;34'],
+        :preprocessor => '36',
+        :pseudo_class => '1;34',
+        :regexp => {
+          :self => '31',
+          :content => '31',
+          :delimiter => '1;29',
+          :modifier => '35',
+          :function => '1;29'
+        },
+        :reserved => '1;31',
+        :shell => {
+          :self => '42',
+          :content => '1;29',
+          :delimiter => '37',
+        },
+        :string => {
+          :self => '32',
+          :modifier => '1;32',
+          :escape => '1;36',
+          :delimiter => '1;32',
+        },
+        :symbol => '1;32',
+        :tag => '1;34',
+        :type => '1;34',
+        :value => '36',
+        :variable => '1;34',
+        
+        :insert => '42',
+        :delete => '41',
+        :change => '44',
+        :head => '45'
+      }
+      TOKEN_COLORS[:keyword] = TOKEN_COLORS[:reserved]
+      TOKEN_COLORS[:method] = TOKEN_COLORS[:function]
+      TOKEN_COLORS[:imaginary] = TOKEN_COLORS[:complex]
+      TOKEN_COLORS[:begin_group] = TOKEN_COLORS[:end_group] =
+        TOKEN_COLORS[:escape] = TOKEN_COLORS[:delimiter]
+      
+    protected
+      
+      def setup(options)
+        super
+        @opened = []
+        @subcolors = nil
+      end
+      
+    public
+      
+      def text_token text, kind
+        if color = (@subcolors || TOKEN_COLORS)[kind]
+          if Hash === color
+            if color[:self]
+              color = color[:self]
+            else
+              @out << text
+              return
+            end
+          end
+          
+          @out << Paint.color(color)
+          @out << text.gsub("\n", Paint::NOTHING + "\n" + Paint.color(color))
+          @out << Paint::NOTHING
+          @out << Paint.color(@subcolors[:self]) if @subcolors && @subcolors[:self]
+        else
+          @out << text
+        end
+      end
+      
+      def begin_group kind
+        @opened << kind
+        @out << open_token(kind)
+      end
+      alias begin_line begin_group
+      
+      def end_group kind
+        if @opened.empty?
+          # nothing to close
+        else
+          @opened.pop
+          @out << Paint::NOTHING
+          @out << open_token(@opened.last)
+        end
+      end
+      
+      def end_line kind
+        if @opened.empty?
+          # nothing to close
+        else
+          @opened.pop
+          # whole lines to be highlighted,
+          # eg. added/modified/deleted lines in a diff
+          @out << "\t" * 100 + Paint::NOTHING
+          @out << open_token(@opened.last)
+        end
+      end
+      
+    private
+      
+      def open_token kind
+        if color = TOKEN_COLORS[kind]
+          if Hash === color
+            @subcolors = color
+            Paint.color(color[:self]) if color[:self]
+          else
+            @subcolors = {}
+            Paint.color(color)
+          end
+        else
+          @subcolors = nil
+          ''
+        end
+      end
+    end
+  end
+end
\ No newline at end of file