diff --git a/packages/host/tests/integration/components/room-message-test.gts b/packages/host/tests/integration/components/room-message-test.gts
index c7a698d196..922151a107 100644
--- a/packages/host/tests/integration/components/room-message-test.gts
+++ b/packages/host/tests/integration/components/room-message-test.gts
@@ -23,11 +23,12 @@ module('Integration | Component | RoomMessage', function (hooks) {
     isStreaming: boolean,
     timeAgoForCreated: number,
     timeAgoForUpdated: number,
+    messageContent: string,
   ) {
     let message = {
       author: { userId: '@aibot:localhost' },
-      message: 'Hello,',
-      formattedMessage: 'Hello, ',
+      message: messageContent,
+      formattedMessage: messageContent,
       created: new Date(new Date().getTime() - timeAgoForCreated * 60 * 1000),
       updated: new Date(new Date().getTime() - timeAgoForUpdated * 60 * 1000),
     };
@@ -67,7 +68,7 @@ module('Integration | Component | RoomMessage', function (hooks) {
   }
 
   test('it shows an error when AI bot message streaming timeouts', async function (assert) {
-    let testScenario = await setupTestScenario(true, 2, 1); // Streaming, created 2 mins ago, updated 1 min ago
+    let testScenario = await setupTestScenario(true, 2, 1, 'Hello,'); // Streaming, created 2 mins ago, updated 1 min ago
     await renderRoomMessageComponent(testScenario);
 
     await waitUntil(
@@ -85,7 +86,7 @@ module('Integration | Component | RoomMessage', function (hooks) {
   });
 
   test('it does not show an error when last streaming chunk is still within reasonable time limit', async function (assert) {
-    let testScenario = await setupTestScenario(true, 2, 0.5); // Streaming, created 2 mins ago, updated 30 seconds ago
+    let testScenario = await setupTestScenario(true, 2, 0.5, 'Hello,'); // Streaming, created 2 mins ago, updated 30 seconds ago
     await renderRoomMessageComponent(testScenario);
 
     assert
@@ -96,4 +97,30 @@ module('Integration | Component | RoomMessage', function (hooks) {
       .dom('[data-test-ai-message-content] span.streaming-text')
       .includesText('Hello,');
   });
+
+  test('it escapes html code that is in code tags', async function (assert) {
+    let testScenario = await setupTestScenario(
+      true,
+      0,
+      0,
+      `
+\`\`\`typescript
+<template>
+  <h1>Hello, world!</h1>
+</template>
+\`\`\`
+`,
+    );
+    await renderRoomMessageComponent(testScenario);
+
+    let content = document.querySelector(
+      '[data-test-ai-message-content]',
+    )?.innerHTML;
+    assert.ok(
+      content?.includes(`&lt;template&gt;
+  &lt;h1&gt;Hello, world!&lt;/h1&gt;
+&lt;/template&gt;`),
+      'rendered code snippet in a streaming message should contain escaped HTML template so that we see code, not rendered html',
+    );
+  });
 });
diff --git a/packages/runtime-common/marked-sync.ts b/packages/runtime-common/marked-sync.ts
index d672a09e81..1ae85cd661 100644
--- a/packages/runtime-common/marked-sync.ts
+++ b/packages/runtime-common/marked-sync.ts
@@ -22,7 +22,7 @@ export function markedSync(markdown: string) {
           // also note that since we are in common, we don't have ember-window-mock
           // available to us.
           globalThis.localStorage?.setItem(id, code);
-          return `<pre id="${id}" class="language-${language}" data-codeblock="${language}">${code}</pre></div>`;
+          return `<pre id="${id}" class="language-${language}" data-codeblock="${language}">${escapeHtmlInPreTags(code)}</pre></div>`;
         },
       },
     })
@@ -32,3 +32,11 @@ export function markedSync(markdown: string) {
 export function markdownToHtml(markdown: string | null | undefined): string {
   return markdown ? sanitizeHtml(markedSync(markdown)) : '';
 }
+
+function escapeHtmlInPreTags(html: string) {
+  // For example, html can be <pre><code><h1>Hello</h1></code></pre>
+  // We want to escape the <h1>Hello</h1> so that it is rendered as
+  // <pre><code>&lt;h1&gt;Hello&lt;/h1&gt;</code></pre>, otherwise the h1 will
+  // be rendered as a real header, not code (same applies for other html tags, such as <template>, <style>, ...)
+  return html.replace(/</g, '&lt;').replace(/>/g, '&gt;');
+}