diff --git a/src/sed/processor.rs b/src/sed/processor.rs
index a2d33e0..070c815 100644
--- a/src/sed/processor.rs
+++ b/src/sed/processor.rs
@@ -631,8 +631,12 @@ fn process_file(
                 'x' => {
                     // Exchange the contents of the pattern and hold spaces.
                     let (pat_content, pat_has_newline) = pattern.fields_mut()?;
+
+                    // Swap newline if hold space is logically non-empty.
+                    if !context.hold.content.is_empty() || context.hold.has_newline {
+                        std::mem::swap(pat_has_newline, &mut context.hold.has_newline);
+                    }
                     std::mem::swap(pat_content, &mut context.hold.content);
-                    std::mem::swap(pat_has_newline, &mut context.hold.has_newline);
                 }
                 'y' => {
                     let trans = extract_variant!(command, Transliteration);
diff --git a/tests/by-util/test_sed.rs b/tests/by-util/test_sed.rs
index 9091dc9..0d43957 100644
--- a/tests/by-util/test_sed.rs
+++ b/tests/by-util/test_sed.rs
@@ -1195,3 +1195,14 @@ fn test_print_command_adds_newline() {
         .succeeds()
         .stdout_is("foo\nfoo");
 }
+
+////////////////////////////////////////////////////////////
+// Test for issue #254: Missing newline in exchanged output with `2x`
+#[test]
+fn test_exchange_command_adds_newline() {
+    new_ucmd!()
+        .args(&["2x"])
+        .pipe_in("a\nb\nc\n")
+        .succeeds()
+        .stdout_is("a\n\nc\n");
+}