diff --git a/src/vs/workbench/contrib/chat/browser/actions/chatCodeblockActions.ts b/src/vs/workbench/contrib/chat/browser/actions/chatCodeblockActions.ts
index 0a2ed0585ccaa..1463d518357d3 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/chatCodeblockActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/chatCodeblockActions.ts
@@ -59,7 +59,7 @@ export function isCodeBlockActionContext(thing: unknown): thing is ICodeBlockAct
 }
 
 export function isCodeCompareBlockActionContext(thing: unknown): thing is ICodeCompareBlockActionContext {
-	return typeof thing === 'object' && thing !== null && 'element' in thing;
+	return typeof thing === 'object' && thing !== null && 'element' in thing && 'diffEditor' in thing && 'toggleDiffViewMode' in thing;
 }
 
 function isResponseFiltered(context: ICodeBlockActionContext) {
@@ -635,11 +635,12 @@ export function registerChatCodeCompareBlockActions() {
 				f1: false,
 				category: CHAT_CATEGORY,
 				icon: Codicon.gitPullRequestGoToChanges,
-				precondition: ContextKeyExpr.and(EditorContextKeys.hasChanges, ChatContextKeys.editApplied.negate()),
+				precondition: ContextKeyExpr.and(EditorContextKeys.hasChanges, ChatContextKeys.editApplied.negate(), EditorContextKeys.readOnly.negate()),
 				menu: {
 					id: MenuId.ChatCompareBlock,
 					group: 'navigation',
-					order: 1,
+					order: 10,
+					when: EditorContextKeys.readOnly.negate(),
 				}
 			});
 		}
@@ -688,11 +689,12 @@ export function registerChatCodeCompareBlockActions() {
 				f1: false,
 				category: CHAT_CATEGORY,
 				icon: Codicon.trash,
-				precondition: ContextKeyExpr.and(EditorContextKeys.hasChanges, ChatContextKeys.editApplied.negate()),
+				precondition: ContextKeyExpr.and(EditorContextKeys.hasChanges, ChatContextKeys.editApplied.negate(), EditorContextKeys.readOnly.negate()),
 				menu: {
 					id: MenuId.ChatCompareBlock,
 					group: 'navigation',
-					order: 2,
+					order: 11,
+					when: EditorContextKeys.readOnly.negate(),
 				}
 			});
 		}
@@ -704,4 +706,59 @@ export function registerChatCodeCompareBlockActions() {
 			editor.discard(context.element, context.edit);
 		}
 	});
+
+	registerAction2(class ToggleDiffViewModeAction extends ChatCompareCodeBlockAction {
+		constructor() {
+			super({
+				id: 'workbench.action.chat.toggleCompareBlockDiffViewMode',
+				title: localize2('interactive.compare.toggleDiffViewMode', "Toggle Inline/Side-by-Side Diff"),
+				f1: false,
+				category: CHAT_CATEGORY,
+				icon: Codicon.diffSingle,
+				toggled: {
+					condition: EditorContextKeys.diffEditorInlineMode,
+					icon: Codicon.diff,
+				},
+				menu: {
+					id: MenuId.ChatCompareBlock,
+					group: 'navigation',
+					order: 1,
+				}
+			});
+		}
+
+		runWithContext(_accessor: ServicesAccessor, context: ICodeCompareBlockActionContext): void {
+			context.toggleDiffViewMode();
+		}
+	});
+
+	registerAction2(class OpenCompareBlockInDiffEditor extends ChatCompareCodeBlockAction {
+		constructor() {
+			super({
+				id: 'workbench.action.chat.openCompareBlockInDiffEditor',
+				title: localize2('interactive.compare.openInDiffEditor', "Open in Diff Editor"),
+				f1: false,
+				category: CHAT_CATEGORY,
+				icon: Codicon.goToFile,
+				menu: {
+					id: MenuId.ChatCompareBlock,
+					group: 'navigation',
+					order: 2,
+				}
+			});
+		}
+
+		async runWithContext(accessor: ServicesAccessor, context: ICodeCompareBlockActionContext): Promise<void> {
+			const editorService = accessor.get(IEditorService);
+			const model = context.diffEditor.getModel();
+			if (!model) {
+				return;
+			}
+
+			await editorService.openEditor({
+				original: { resource: model.original.uri },
+				modified: { resource: model.modified.uri },
+			});
+		}
+	});
 }
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/codeBlockPart.ts b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/codeBlockPart.ts
index a1bc014c7c0d4..bcaa53fee11d0 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/codeBlockPart.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/codeBlockPart.ts
@@ -72,6 +72,7 @@ import { ChatEditorOptions } from '../chatOptions.js';
 import { emptyProgressRunner, IEditorProgressService } from '../../../../../../platform/progress/common/progress.js';
 import { SuggestController } from '../../../../../../editor/contrib/suggest/browser/suggestController.js';
 import { SnippetController2 } from '../../../../../../editor/contrib/snippet/browser/snippetController2.js';
+import { EditorContextKeys } from '../../../../../../editor/common/editorContextKeys.js';
 
 const $ = dom.$;
 
@@ -548,6 +549,7 @@ export interface ICodeCompareBlockActionContext {
 	readonly element: IChatResponseViewModel;
 	readonly diffEditor: IDiffEditor;
 	readonly edit: IChatTextEditGroup;
+	toggleDiffViewMode(): void;
 }
 
 export interface ICodeCompareBlockDiffData {
@@ -585,6 +587,8 @@ export class CodeCompareBlockPart extends Disposable {
 	private currentScrollWidth = 0;
 	private currentHorizontalPadding = 0;
 
+	private lastLayoutWidth: number | undefined;
+
 	constructor(
 		private readonly options: ChatEditorOptions,
 		readonly menuId: MenuId,
@@ -755,11 +759,10 @@ export class CodeCompareBlockPart extends Disposable {
 
 	private _configureForScreenReader(): void {
 		const toolbarElt = this.toolbar.getElement();
+		// Always show toolbar, but add aria-label for screen readers
+		toolbarElt.style.display = 'block';
 		if (this.accessibilityService.isScreenReaderOptimized()) {
-			toolbarElt.style.display = 'block';
 			toolbarElt.ariaLabel = localize('chat.codeBlock.toolbar', 'Code block toolbar');
-		} else {
-			toolbarElt.style.display = '';
 		}
 	}
 
@@ -777,7 +780,13 @@ export class CodeCompareBlockPart extends Disposable {
 		};
 	}
 
-	layout(width: number): void {
+	layout(width = this.lastLayoutWidth): void {
+		if (width === undefined) {
+			return; // not yet in DOM
+		}
+
+		this.lastLayoutWidth = width;
+
 		const editorBorder = 2;
 
 		const toolbar = dom.getTotalHeight(this.editorHeader);
@@ -900,6 +909,18 @@ export class CodeCompareBlockPart extends Disposable {
 			edit: data.edit,
 			element: data.element,
 			diffEditor: this.diffEditor,
+			toggleDiffViewMode: () => {
+				const isCurrentlyInline = !!this.diffEditor.getModifiedEditor().contextKeyService.getContextKeyValue(EditorContextKeys.diffEditorInlineMode.key);
+				const renderSideBySide = isCurrentlyInline;
+				this.diffEditor.updateOptions({
+					renderSideBySide,
+					// Make it not-compact in side by side mode, otherwise we may not actually
+					// show it side-by-side if it's a simple diff https://github.com/microsoft/vscode/blob/0632563332c7c08656fb47c97bc4328d62ee1d80/src/vs/editor/browser/widget/diffEditor/diffEditorOptions.ts#L35-L39
+					compactMode: !renderSideBySide,
+					useInlineViewWhenSpaceIsLimited: false,
+				});
+				this.layout();
+			},
 		} satisfies ICodeCompareBlockActionContext;
 	}
 }
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/codeBlockPart.css b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/codeBlockPart.css
index 00d5fc2d1bc11..9a70eec7939b9 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/codeBlockPart.css
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/codeBlockPart.css
@@ -156,16 +156,50 @@
 	color: var(--vscode-textLink-foreground);
 }
 
-.interactive-result-code-block.compare .interactive-result-header {
-	display: flex;
-	justify-content: space-between;
-	align-items: center;
-	padding: 0 3px;
-	box-sizing: border-box;
-	border-bottom: solid 1px var(--vscode-chat-requestBorder);
-}
-
-.interactive-result-code-block.compare.no-diff .interactive-result-header,
-.interactive-result-code-block.compare.no-diff .interactive-result-editor {
-	display: none;
+.interactive-result-code-block.compare {
+	& .interactive-result-header {
+		display: flex;
+		justify-content: space-between;
+		align-items: center;
+		padding: 0 3px;
+		box-sizing: border-box;
+		border-bottom: solid 1px var(--vscode-chat-requestBorder);
+
+		& .monaco-icon-label {
+			flex: 1;
+			min-width: 0;
+
+			& > .monaco-icon-label-container {
+				display: flex;
+				align-items: baseline;
+
+				& > .monaco-icon-name-container {
+					flex-shrink: 0;
+
+					& > .label-name {
+						white-space: nowrap;
+					}
+				}
+
+				& > .monaco-icon-description-container {
+					min-width: 0;
+					flex: 1;
+
+					& > .label-description {
+						white-space: nowrap;
+						overflow: hidden;
+						text-overflow: ellipsis;
+						display: block;
+					}
+				}
+			}
+		}
+	}
+
+	&.no-diff {
+		& .interactive-result-header,
+		& .interactive-result-editor {
+			display: none;
+		}
+	}
 }