diff --git a/css/xterm.css b/css/xterm.css
index 5a6e088a..e9a1e3ad 100644
--- a/css/xterm.css
+++ b/css/xterm.css
@@ -91,8 +91,6 @@
 }
 
 .xterm .xterm-viewport {
-    /* On OS X this is required in order for the scroll bar to appear fully opaque */
-    background-color: #000;
     overflow-y: scroll;
     cursor: default;
     position: absolute;
@@ -102,6 +100,11 @@
     bottom: 0;
 }
 
+.xterm:not(.allow-transparency) .xterm-viewport {
+    /* On OS X this is required in order for the scroll bar to appear fully opaque */
+    background-color: #000;
+}
+
 .xterm .xterm-screen {
     position: relative;
 }
diff --git a/demo/client/client.ts b/demo/client/client.ts
index c2134773..6a0cdead 100644
--- a/demo/client/client.ts
+++ b/demo/client/client.ts
@@ -277,7 +277,7 @@ function createTerminal(): Terminal {
       buildNumber: 22621
     } : undefined,
     fontFamily: '"Fira Code", monospace, "Powerline Extra Symbols"',
-    theme: xtermjsTheme
+    theme: { ...xtermjsTheme }
   } as ITerminalOptions);
 
   // Load addons
@@ -419,8 +419,11 @@ function runFakeTerminal(): void {
 }
 
 function updateTerminalContainerBackground(): void {
-  const bg = term.options.theme?.background ?? '#000000';
-  terminalContainer.style.backgroundColor = bg;
+  if (term.options.allowTransparency) {
+    terminalContainer.style.background = 'repeating-conic-gradient(#000000 0% 25%, #101010 0% 50%) 50% / 20px 20px';
+  } else {
+    terminalContainer.style.background = term.options.theme?.background ?? '#000000';
+  }
 }
 
 function initAddons(term: Terminal): void {
diff --git a/demo/client/components/window/optionsWindow.ts b/demo/client/components/window/optionsWindow.ts
index 0fbcf339..c2f810b8 100644
--- a/demo/client/components/window/optionsWindow.ts
+++ b/demo/client/components/window/optionsWindow.ts
@@ -8,7 +8,7 @@ import type { Terminal, ITheme } from '@xterm/xterm';
 import type { IControlWindow } from '../controlBar';
 import type { AddonCollection } from 'types';
 
-const xtermjsTheme: ITheme = {
+const xtermjsTheme: ITheme = Object.freeze({
   foreground: '#F8F8F8',
   background: '#2D2E2C',
   selectionBackground: '#5DA5D533',
@@ -29,7 +29,52 @@ const xtermjsTheme: ITheme = {
   brightCyan: '#72F0FF',
   white: '#F8F8F8',
   brightWhite: '#FFFFFF'
-};
+});
+const sapphireTheme: ITheme = Object.freeze({
+  background: '#1c2431',
+  foreground: '#cccccc',
+  selectionBackground: '#399ef440',
+  black: '#666666',
+  blue: '#399ef4',
+  brightBlack: '#666666',
+  brightBlue: '#399ef4',
+  brightCyan: '#21c5c7',
+  brightGreen: '#4eb071',
+  brightMagenta: '#b168df',
+  brightRed: '#da6771',
+  brightWhite: '#efefef',
+  brightYellow: '#fff099',
+  cyan: '#21c5c7',
+  green: '#4eb071',
+  magenta: '#b168df',
+  red: '#da6771',
+  white: '#efefef',
+  yellow: '#fff099'
+});
+const lightTheme: ITheme = Object.freeze({
+  background: '#ffffff',
+  foreground: '#333333',
+  cursor: '#333333',
+  cursorAccent: '#ffffff',
+  selectionBackground: '#add6ff',
+  overviewRulerBorder: '#aaaaaa',
+  black: '#000000',
+  blue: '#0451a5',
+  brightBlack: '#666666',
+  brightBlue: '#0451a5',
+  brightCyan: '#0598bc',
+  brightGreen: '#14ce14',
+  brightMagenta: '#bc05bc',
+  brightRed: '#cd3131',
+  brightWhite: '#a5a5a5',
+  brightYellow: '#b5ba00',
+  cyan: '#0598bc',
+  green: '#00bc00',
+  magenta: '#bc05bc',
+  red: '#cd3131',
+  white: '#555555',
+  yellow: '#949800'
+});
 
 export class OptionsWindow extends BaseWindow implements IControlWindow {
   public readonly id = 'options';
@@ -136,6 +181,10 @@ export class OptionsWindow extends BaseWindow implements IControlWindow {
       addDomListener(input, 'change', () => {
         console.log('change', o, input.checked);
         this._terminal.options[o] = input.checked;
+        if (o ==='allowTransparency') {
+          this._terminal.options.theme = this._getTheme();
+          this._handlers.updateTerminalContainerBackground();
+        }
       });
     });
     numberOptions.forEach(o => {
@@ -171,63 +220,7 @@ export class OptionsWindow extends BaseWindow implements IControlWindow {
             this._handlers.updateTerminalSize();
           }
         } else if (o === 'theme') {
-          switch (input.value) {
-            case 'default':
-              value = undefined;
-              break;
-            case 'xtermjs':
-              value = xtermjsTheme;
-              break;
-            case 'sapphire':
-              value = {
-                background: '#1c2431',
-                foreground: '#cccccc',
-                selectionBackground: '#399ef440',
-                black: '#666666',
-                blue: '#399ef4',
-                brightBlack: '#666666',
-                brightBlue: '#399ef4',
-                brightCyan: '#21c5c7',
-                brightGreen: '#4eb071',
-                brightMagenta: '#b168df',
-                brightRed: '#da6771',
-                brightWhite: '#efefef',
-                brightYellow: '#fff099',
-                cyan: '#21c5c7',
-                green: '#4eb071',
-                magenta: '#b168df',
-                red: '#da6771',
-                white: '#efefef',
-                yellow: '#fff099'
-              };
-              break;
-            case 'light':
-              value = {
-                background: '#ffffff',
-                foreground: '#333333',
-                cursor: '#333333',
-                cursorAccent: '#ffffff',
-                selectionBackground: '#add6ff',
-                overviewRulerBorder: '#aaaaaa',
-                black: '#000000',
-                blue: '#0451a5',
-                brightBlack: '#666666',
-                brightBlue: '#0451a5',
-                brightCyan: '#0598bc',
-                brightGreen: '#14ce14',
-                brightMagenta: '#bc05bc',
-                brightRed: '#cd3131',
-                brightWhite: '#a5a5a5',
-                brightYellow: '#b5ba00',
-                cyan: '#0598bc',
-                green: '#00bc00',
-                magenta: '#bc05bc',
-                red: '#cd3131',
-                white: '#555555',
-                yellow: '#949800'
-              };
-              break;
-          }
+          value = this._getTheme();
         }
         this._terminal.options[o] = value;
         if (o === 'theme') {
@@ -244,4 +237,27 @@ export class OptionsWindow extends BaseWindow implements IControlWindow {
   public set autoResize(value: boolean) {
     this._autoResize = value;
   }
+
+  private _getTheme() {
+    const input = document.querySelector<HTMLInputElement>('#opt-theme');
+    let theme: ITheme;
+    switch (input.value) {
+      case 'default':
+        theme = undefined;
+        break;
+      case 'xtermjs':
+        theme = { ...xtermjsTheme };
+        break;
+      case 'sapphire':
+        theme = { ...sapphireTheme };
+        break;
+      case 'light':
+        theme = { ...lightTheme };
+        break;
+    }
+    if (this._terminal.options.allowTransparency) {
+      theme.background = 'transparent';
+    }
+    return theme;
+  }
 }
diff --git a/src/browser/CoreBrowserTerminal.ts b/src/browser/CoreBrowserTerminal.ts
index c4e83389..d2407062 100644
--- a/src/browser/CoreBrowserTerminal.ts
+++ b/src/browser/CoreBrowserTerminal.ts
@@ -436,6 +436,8 @@ export class CoreBrowserTerminal extends CoreTerminal implements ITerminal {
     this.element.dir = 'ltr';   // xterm.css assumes LTR
     this.element.classList.add('terminal');
     this.element.classList.add('xterm');
+    this.element.classList.toggle('allow-transparency', this.options.allowTransparency);
+    this._register(this.optionsService.onSpecificOptionChange('allowTransparency', value => this.element!.classList.toggle('allow-transparency', value)));
     parent.appendChild(this.element);
 
     // Performance: Use a document fragment to build the terminal
diff --git a/src/browser/Viewport.ts b/src/browser/Viewport.ts
index 1a9f2225..ad523049 100644
--- a/src/browser/Viewport.ts
+++ b/src/browser/Viewport.ts
@@ -71,6 +71,7 @@ export class Viewport extends Disposable {
 
     this._scrollableElement.setScrollDimensions({ height: 0, scrollHeight: 0 });
     this._register(Event.runAndSubscribe(themeService.onChangeColors, () => {
+      element.style.backgroundColor = themeService.colors.background.css;
       this._scrollableElement.getDomNode().style.backgroundColor = themeService.colors.background.css;
     }));
     element.appendChild(this._scrollableElement.getDomNode());
diff --git a/src/common/Color.test.ts b/src/common/Color.test.ts
index b1683711..dbe759b4 100644
--- a/src/common/Color.test.ts
+++ b/src/common/Color.test.ts
@@ -303,6 +303,9 @@ describe('Color', () => {
         assert.deepEqual(css.toColor('rgba(0, 0, 80, 0.5)'), { css: '#00005080', rgba: 0x00005080 });
         assert.deepEqual(css.toColor('rgba(255, 255, 255, 1)'), { css: '#ffffffff', rgba: 0xffffffff });
       });
+      it('should convert "transparent" to an IColor', () => {
+        assert.deepEqual(css.toColor('transparent'), { css: 'transparent', rgba: 0x00000000 });
+      });
     });
   });
 
diff --git a/src/common/Color.ts b/src/common/Color.ts
index b7b3ff47..b3d13fc9 100644
--- a/src/common/Color.ts
+++ b/src/common/Color.ts
@@ -184,6 +184,14 @@ export namespace css {
       return channels.toColor($r, $g, $b, $a);
     }
 
+    // Handle the "transparent" keyword
+    if (css === 'transparent') {
+      return {
+        css: 'transparent',
+        rgba: 0x00000000
+      };
+    }
+
     // Validate the context is available for canvas-based color parsing
     if (!$ctx || !$litmusColor) {
       throw new Error('css.toColor: Unsupported css format');