diff --git a/web/src/components/editor/EditorPanel.tsx b/web/src/components/editor/EditorPanel.tsx
new file mode 100644
index 0000000..8e5adaa
--- /dev/null
+++ b/web/src/components/editor/EditorPanel.tsx
@@ -0,0 +1,39 @@
+import Editor, { type OnValidate } from "@monaco-editor/react";
+import { useState } from "react";
+
+import type { MockFileNode } from "@/pages/workspace/mock-data";
+
+interface EditorPanelProps {
+  file?: MockFileNode;
+}
+
+export function EditorPanel({ file }: EditorPanelProps) {
+  const [, setMarkers] = useState<Parameters<OnValidate>[0]>([]);
+
+  if (!file || file.kind !== "file") {
+    return (
+      <section className="flex h-full w-full items-center justify-center bg-background text-sm text-muted-foreground">
+        <div className="text-center">
+          <p>No file selected</p>
+        </div>
+      </section>
+    );
+  }
+
+  return (
+    <section className="h-full w-full overflow-hidden bg-background">
+      <Editor
+        key={file.path}
+        theme="vs-dark"
+        language={file.language ?? "typescript"}
+        value={file.content ?? ""}
+        onValidate={setMarkers}
+        options={{
+          automaticLayout: true,
+          minimap: { enabled: false },
+          readOnly: false,
+        }}
+      />
+    </section>
+  );
+}
diff --git a/web/src/components/layout/WorkspaceShell.tsx b/web/src/components/layout/WorkspaceShell.tsx
index 4dc3b91..a8b698c 100644
--- a/web/src/components/layout/WorkspaceShell.tsx
+++ b/web/src/components/layout/WorkspaceShell.tsx
@@ -3,6 +3,8 @@ import { PanelLeftClose, PanelLeftOpen, Terminal } from "lucide-react";
 
 import { Button } from "@/components/ui/button";
 import { Separator } from "@/components/ui/separator";
+import { EditorPanel } from "@/components/editor/EditorPanel";
+import { TerminalPanel } from "@/components/terminal/TerminalPanel";
 import { FileExplorerPanel } from "@/components/workspace/FileExplorerPanel";
 import { StatusBar } from "@/components/workspace/StatusBar";
 import { useWorkspaceUiStore } from "@/lib/store/workspace-ui-store";
@@ -69,24 +71,9 @@ export function WorkspaceShell({ files }: WorkspaceShellProps) {
           {/* Main content area */}
           <Panel>
             <PanelGroup direction="vertical">
-              {/* Editor placeholder */}
+              {/* Editor */}
               <Panel>
-                <div className="flex h-full w-full items-center justify-center border-r border-border text-sm text-muted-foreground">
-                  <div className="text-center">
-                    <p className="mb-2">Editor placeholder</p>
-                    <div className="space-y-1 text-xs">
-                      <p>
-                        Active file:{" "}
-                        <code className="text-foreground">{activeFilePath}</code>
-                      </p>
-                      <p className="text-muted-foreground">
-                        {activeFile
-                          ? `${activeFile.name} | ${activeFile.language ?? "plain text"} | ${activeFile.kind}`
-                          : "No matching mock file"}
-                      </p>
-                    </div>
-                  </div>
-                </div>
+                <EditorPanel file={activeFile} />
               </Panel>
 
               {/* Terminal panel */}
@@ -94,9 +81,7 @@ export function WorkspaceShell({ files }: WorkspaceShellProps) {
                 <>
                   <PanelResizeHandle className="h-1 bg-border transition-colors hover:bg-accent" />
                   <Panel defaultSize={30} minSize={10} maxSize={70}>
-                    <div className="flex h-full w-full items-center justify-center border-r border-border text-sm text-muted-foreground">
-                      Terminal placeholder
-                    </div>
+                    <TerminalPanel />
                   </Panel>
                 </>
               )}
diff --git a/web/src/components/terminal/TerminalPanel.tsx b/web/src/components/terminal/TerminalPanel.tsx
new file mode 100644
index 0000000..77c269b
--- /dev/null
+++ b/web/src/components/terminal/TerminalPanel.tsx
@@ -0,0 +1,71 @@
+import { FitAddon } from "@xterm/addon-fit";
+import { Terminal } from "@xterm/xterm";
+import { useEffect, useRef, useState } from "react";
+
+export function TerminalPanel() {
+  const containerRef = useRef<HTMLDivElement>(null);
+  const [failed, setFailed] = useState(false);
+
+  useEffect(() => {
+    const container = containerRef.current;
+    if (!container) return;
+
+    let terminal: Terminal | undefined;
+    let fitAddon: FitAddon | undefined;
+
+    try {
+      terminal = new Terminal({
+        cursorBlink: true,
+        convertEol: true,
+        fontFamily:
+          'Menlo, Monaco, Consolas, "Liberation Mono", "Courier New", monospace',
+        fontSize: 12,
+        theme: {
+          background: "#171717",
+          foreground: "#e5e5e5",
+        },
+      });
+      fitAddon = new FitAddon();
+      terminal.loadAddon(fitAddon);
+      terminal.open(container);
+      terminal.writeln("codespace terminal");
+      terminal.writeln("Mock session initialized. No process is attached.");
+      terminal.writeln("");
+      terminal.writeln("$ pnpm test");
+      terminal.writeln("mock: 3 files checked, 0 failures");
+      terminal.write("$ ");
+      fitAddon.fit();
+    } catch {
+      setFailed(true);
+      terminal?.dispose();
+      fitAddon?.dispose();
+      return;
+    }
+
+    const handleResize = () => {
+      fitAddon?.fit();
+    };
+
+    window.addEventListener("resize", handleResize);
+
+    return () => {
+      window.removeEventListener("resize", handleResize);
+      terminal?.dispose();
+      fitAddon?.dispose();
+    };
+  }, []);
+
+  if (failed) {
+    return (
+      <section className="flex h-full w-full items-center justify-center bg-background text-sm text-muted-foreground">
+        Terminal failed to initialize
+      </section>
+    );
+  }
+
+  return (
+    <section className="h-full w-full overflow-hidden bg-[#171717] p-2">
+      <div ref={containerRef} className="h-full w-full" />
+    </section>
+  );
+}
diff --git a/web/src/styles/index.css b/web/src/styles/index.css
index 855a920..fe6f1fd 100644
--- a/web/src/styles/index.css
+++ b/web/src/styles/index.css
@@ -1,5 +1,6 @@
 @import "tailwindcss";
 @import "tw-animate-css";
+@import "@xterm/xterm/css/xterm.css";
 
 @custom-variant dark (&:is(.dark *));