diff --git a/Lib/_pyrepl/readline.py b/Lib/_pyrepl/readline.py
index 23b8fa6b9c7625..b8c16748307449 100644
--- a/Lib/_pyrepl/readline.py
+++ b/Lib/_pyrepl/readline.py
@@ -256,20 +256,52 @@ def _should_auto_indent(buffer: list[str], pos: int) -> bool:
     # check if last character before "pos" is a colon, ignoring
     # whitespaces and comments.
     last_char = None
-    while pos > 0:
-        pos -= 1
-        if last_char is None:
-            if buffer[pos] not in " \t\n#":  # ignore whitespaces and comments
-                last_char = buffer[pos]
-        else:
-            # even if we found a non-whitespace character before
-            # original pos, we keep going back until newline is reached
-            # to make sure we ignore comments
-            if buffer[pos] == "\n":
-                break
-            if buffer[pos] == "#":
-                last_char = None
-    return last_char == ":"
+    # A stack to keep track of string delimiters. Push a quote when entering a
+    # string, pop it when the string ends. If the stack is empty, we're not
+    # inside a string. When see a '#', it's a comment start if we're not inside
+    # a string; otherwise, it's just a '#' character within a string.
+    str_delims: list[str] = []
+    in_comment = False
+    char_line_indent_start = None
+    char_line_indent = 0
+    lastchar_line_indent = 0
+    cursor_line_indent = 0
+
+    i = -1
+    while i < pos - 1:
+        i += 1
+        char = buffer[i]
+
+        # update last_char
+        if char == "#":
+            if str_delims:
+                last_char = char # '#' inside a string is just a character
+            else:
+                in_comment = True
+        elif char == "\n":
+            # newline ends a comment
+            in_comment = False
+            if i < pos - 1 and buffer[i + 1] in " \t":
+                char_line_indent_start = i + 1
+            else:
+                char_line_indent_start = None # clear last line's line_indent_start
+                char_line_indent = 0
+        elif char not in " \t":
+            if char_line_indent_start is not None:
+                char_line_indent = i - char_line_indent_start
+            if not in_comment and not str_delims:
+                # update last_char with non-whitespace chars outside comments and strings
+                last_char = char
+                lastchar_line_indent = char_line_indent
+
+        # update stack
+        if char in "\"'" and (i == 0 or buffer[i - 1] != "\\"):
+            if str_delims and str_delims[-1] == char:
+                str_delims.pop()
+            else:
+                str_delims.append(char)
+    cursor_line_indent = char_line_indent
+    return last_char == ":" and cursor_line_indent <= lastchar_line_indent
 
 
 class maybe_accept(commands.Command):
diff --git a/Lib/test/test_pyrepl/test_pyrepl.py b/Lib/test/test_pyrepl/test_pyrepl.py
index e298b2add52c3e..2a135aa08f5f43 100644
--- a/Lib/test/test_pyrepl/test_pyrepl.py
+++ b/Lib/test/test_pyrepl/test_pyrepl.py
@@ -593,6 +593,46 @@ def test_auto_indent_with_comment(self):
         output = multiline_input(reader)
         self.assertEqual(output, output_code)
 
+        # fmt: off
+        events = code_to_events(
+            "def f():\n"
+                "# foo\n"
+                "pass\n\n"
+        )
+
+        output_code = (
+            "def f():\n"
+            "    # foo\n"
+            "    pass\n"
+            "    "
+        )
+        # fmt: on
+
+        reader = self.prepare_reader(events)
+        output = multiline_input(reader)
+        self.assertEqual(output, output_code)
+
+        # fmt: off
+        events = itertools.chain(
+            code_to_events("def f():\n"),
+            [
+                Event(evt="key", data="backspace", raw=b"\x08"),
+            ],
+            code_to_events("# foo\npass\n\n")
+        )
+
+        output_code = (
+            "def f():\n"
+            "# foo\n"
+            "    pass\n"
+            "    "
+        )
+        # fmt: on
+
+        reader = self.prepare_reader(events)
+        output = multiline_input(reader)
+        self.assertEqual(output, output_code)
+
     def test_auto_indent_with_multicomment(self):
         # fmt: off
         events = code_to_events(
@@ -626,6 +666,63 @@ def test_auto_indent_ignore_comments(self):
         output = multiline_input(reader)
         self.assertEqual(output, output_code)
 
+    def test_dont_indent_hashtag(self):
+        # fmt: off
+        events = code_to_events(
+            "if ' ' == '#':\n"
+                "pass\n\n"
+        )
+
+        output_code = (
+            "if ' ' == '#':\n"
+            "    pass\n"
+            "    "
+        )
+        # fmt: on
+
+        reader = self.prepare_reader(events)
+        output = multiline_input(reader)
+        self.assertEqual(output, output_code)
+
+    def test_dont_indent_in_multiline_string(self):
+        # fmt: off
+        events = code_to_events(
+            "s = '''\n"
+            "Note:\n"
+            "'''\n\n"
+        )
+
+        output_code = (
+            "s = '''\n"
+            "Note:\n"
+            "'''"
+        )
+        # fmt: on
+
+        reader = self.prepare_reader(events)
+        output = multiline_input(reader)
+        self.assertEqual(output, output_code)
+
+    def test_dont_indent_already_indented(self):
+        # fmt: off
+        events = code_to_events(
+            "def f():\n"
+            "# foo\n"
+            "pass\n\n"
+        )
+
+        output_code = (
+            "def f():\n"
+            "    # foo\n"
+            "    pass\n"
+            "    "
+        )
+        # fmt: on
+
+        reader = self.prepare_reader(events)
+        output = multiline_input(reader)
+        self.assertEqual(output, output_code)
+
 
 class TestPyReplOutput(ScreenEqualMixin, TestCase):
     def prepare_reader(self, events):
diff --git a/Misc/NEWS.d/next/Library/2025-10-28-23-14-16.gh-issue-133710.BzRnmu.rst b/Misc/NEWS.d/next/Library/2025-10-28-23-14-16.gh-issue-133710.BzRnmu.rst
new file mode 100644
index 00000000000000..fd2bb3f0d98df6
--- /dev/null
+++ b/Misc/NEWS.d/next/Library/2025-10-28-23-14-16.gh-issue-133710.BzRnmu.rst
@@ -0,0 +1 @@
+Enhance auto-indent in :mod:`!_pyrepl`.