diff --git a/src/index.tsx b/src/index.tsx
index 547d98a..2f4248f 100644
--- a/src/index.tsx
+++ b/src/index.tsx
@@ -57,6 +57,8 @@ const Terminal = ({
   const [history, setHistory] = useState<string[]>([]);
 
   const [currentLineInput, setCurrentLineInput] = useState("");
+  const [tmpInputValue, setTmpInputValue] = useState("");
+
   const [cursorPos, setCursorPos] = useState(0);
 
   const scrollIntoViewRef = useRef<HTMLDivElement>(null);
@@ -91,9 +93,17 @@ const Terminal = ({
 
       // If we're not currently looking at history (oldIndex === -1) and user presses ArrowUp, jump to the last entry.
       if (oldIndex === -1 && direction === -1) {
+        setTmpInputValue(currentLineInput);
         return history.length - 1;
       }
 
+      // If we're at the most recent history entry and user presses ArrowDown, go back to the temporary input value.
+      if (oldIndex === history.length - 1 && direction === 1) {
+        setCurrentLineInput(tmpInputValue);
+        setTmpInputValue("");
+        return -1;
+      }
+
       // If oldIndex === -1 and direction === 1 (ArrowDown), keep -1 (nothing to go to).
       if (oldIndex === -1 && direction === 1) {
         return -1;
@@ -119,15 +129,19 @@ const Terminal = ({
       setCursorPos(0);
 
       // history update
-      setHistory((previousHistory) =>
-        currentLineInput.trim() === "" ||
-        previousHistory[previousHistory.length - 1] === currentLineInput.trim()
-          ? previousHistory
-          : [...previousHistory, currentLineInput],
-      );
-      setHistoryIndex(-1);
+      if (currentLineInput.trim() !== "") {
+        setHistory((previousHistory) =>
+          previousHistory[previousHistory.length - 1] ===
+            currentLineInput.trim()
+            ? previousHistory
+            : [...previousHistory, currentLineInput],
+        );
+      }
 
+      setHistoryIndex(-1);
       setCurrentLineInput("");
+      setTmpInputValue("");
+
       setTimeout(
         () =>
           scrollIntoViewRef?.current?.scrollIntoView({
diff --git a/tests/terminal.history.spec.tsx b/tests/terminal.history.spec.tsx
index d2bd5dc..c803f43 100644
--- a/tests/terminal.history.spec.tsx
+++ b/tests/terminal.history.spec.tsx
@@ -102,4 +102,32 @@ describe("Terminal history persistence", () => {
 
     expect(input).toHaveValue("first");
   });
+
+  test("preserves current input when navigating history and returning back down", () => {
+    localStorage.setItem("terminal-history", JSON.stringify(["old1", "old2"]));
+
+    render(<Terminal onInput={() => { }} />);
+    const input = screen.getByPlaceholderText("Terminal Hidden Input");
+
+    fireEvent.change(input, { target: { value: "new-typing" } });
+
+    fireEvent.keyDown(input, { key: "ArrowUp" });
+    expect(input).toHaveValue("old2");
+
+    fireEvent.keyDown(input, { key: "ArrowDown" });
+    expect(input).toHaveValue("new-typing");
+  });
+
+  test("does not clear input when ArrowDown is pressed while at latest history entry", () => {
+    localStorage.setItem("terminal-history", JSON.stringify(["cmdA", "cmdB"]));
+
+    render(<Terminal onInput={() => { }} />);
+    const input = screen.getByPlaceholderText("Terminal Hidden Input");
+
+    fireEvent.keyDown(input, { key: "ArrowUp" });
+    expect(input).toHaveValue("cmdB");
+
+    fireEvent.keyDown(input, { key: "ArrowDown" });
+    expect(input).toHaveValue("");
+  });
 });