diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts
index 27e8d6c4d8c..8ac69aa9cf5 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts
@@ -454,10 +454,6 @@ export class AcceptChanges extends AbstractInlineChatAction {
 			keybinding: [{
 				weight: KeybindingWeight.WorkbenchContrib + 10,
 				primary: KeyMod.CtrlCmd | KeyCode.Enter,
-			}, {
-				primary: KeyCode.Escape,
-				weight: KeybindingWeight.WorkbenchContrib,
-				when: CTX_INLINE_CHAT_USER_DID_EDIT
 			}],
 			menu: {
 				when: ContextKeyExpr.and(CTX_INLINE_CHAT_RESPONSE_TYPES.notEqualsTo(InlineChatResponseTypes.OnlyMessages)),
@@ -480,7 +476,7 @@ export class CancelSessionAction extends AbstractInlineChatAction {
 			id: 'inlineChat.cancel',
 			title: localize('cancel', 'Cancel'),
 			icon: Codicon.clearAll,
-			precondition: CTX_INLINE_CHAT_VISIBLE,
+			precondition: ContextKeyExpr.and(CTX_INLINE_CHAT_VISIBLE, CTX_INLINE_CHAT_EDIT_MODE.isEqualTo(EditMode.Preview)),
 			keybinding: {
 				weight: KeybindingWeight.EditorContrib - 1,
 				primary: KeyCode.Escape
@@ -510,7 +506,8 @@ export class CloseAction extends AbstractInlineChatAction {
 			precondition: CTX_INLINE_CHAT_VISIBLE,
 			keybinding: {
 				weight: KeybindingWeight.EditorContrib - 1,
-				primary: KeyCode.Escape
+				primary: KeyCode.Escape,
+				when: CTX_INLINE_CHAT_USER_DID_EDIT.negate()
 			},
 			menu: {
 				id: MENU_INLINE_CHAT_WIDGET,
@@ -521,7 +518,7 @@ export class CloseAction extends AbstractInlineChatAction {
 	}
 
 	async runInlineChatCommand(_accessor: ServicesAccessor, ctrl: InlineChatController, _editor: ICodeEditor, ..._args: any[]): Promise<void> {
-		ctrl.finishExistingSession();
+		ctrl.cancelSession();
 	}
 }
 
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatContentWidget.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatContentWidget.ts
index 3ca83516139..b56b83cb2f2 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatContentWidget.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatContentWidget.ts
@@ -124,7 +124,7 @@ export class InlineChatContentWidget implements IContentWidget {
 		}
 		return {
 			position: this._position,
-			preference: [ContentWidgetPositionPreference.ABOVE, ContentWidgetPositionPreference.BELOW]
+			preference: [ContentWidgetPositionPreference.BELOW]
 		};
 	}
 
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts
index 74efad97f48..76dec4be363 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts
@@ -934,7 +934,13 @@ export class InlineChatController implements IEditorContribution {
 			this._zone.value.updatePositionAndHeight(widgetPosition);
 
 		} else if (initialRender) {
-			widgetPosition = this._editor.getSelection().getStartPosition();
+			const selection = this._editor.getSelection();
+			widgetPosition = selection.getEndPosition();
+			if (Range.spansMultipleLines(selection) && widgetPosition.column === 1) {
+				// selection ends on "nothing" -> move up to match the
+				// rendered/visible part of the selection
+				widgetPosition = this._editor.getModel().validatePosition(widgetPosition.delta(-1, Number.MAX_SAFE_INTEGER));
+			}
 			this._input.value.show(widgetPosition);
 
 		} else {