diff --git a/addons/xterm-addon-canvas/src/TextRenderLayer.ts b/addons/xterm-addon-canvas/src/TextRenderLayer.ts
index d44e4b81..625bcce9 100644
--- a/addons/xterm-addon-canvas/src/TextRenderLayer.ts
+++ b/addons/xterm-addon-canvas/src/TextRenderLayer.ts
@@ -14,6 +14,7 @@ import { CellData } from 'common/buffer/CellData';
 import { IOptionsService, IBufferService, IDecorationService } from 'common/services/Services';
 import { ICharacterJoinerService } from 'browser/services/Services';
 import { JoinedCellData } from 'browser/services/CharacterJoinerService';
+import { color, css } from 'common/Color';
 
 /**
  * This CharData looks like a null character, which will forc a clear and render
@@ -177,6 +178,12 @@ export class TextRenderLayer extends BaseRenderLayer {
         nextFillStyle = this._colors.ansi[cell.getBgColor()].css;
       }
 
+      // Apply dim to the background, this is relatively slow as the CSS is re-parsed but dim is
+      // rarely used
+      if (nextFillStyle && cell.isDim()) {
+        nextFillStyle = color.multiplyOpacity(css.toColor(nextFillStyle), 0.5).css;
+      }
+
       // Get any decoration foreground/background overrides, this must be fetched before the early
       // exist but applied after inverse
       let isTop = false;
diff --git a/addons/xterm-addon-canvas/src/atlas/DynamicCharAtlas.ts b/addons/xterm-addon-canvas/src/atlas/DynamicCharAtlas.ts
index f5fc2c99..3098538d 100644
--- a/addons/xterm-addon-canvas/src/atlas/DynamicCharAtlas.ts
+++ b/addons/xterm-addon-canvas/src/atlas/DynamicCharAtlas.ts
@@ -225,13 +225,18 @@ export class DynamicCharAtlas extends BaseCharAtlas {
       // around the anti-aliased edges of the glyph, and it would look too dark.
       return TRANSPARENT_COLOR;
     }
+    let result: IColor;
     if (glyph.bg === INVERTED_DEFAULT_COLOR) {
-      return this._config.colors.foreground;
+      result = this._config.colors.foreground;
+    } else if (glyph.bg < 256) {
+      result = this._getColorFromAnsiIndex(glyph.bg);
+    } else {
+      result = this._config.colors.background;
     }
-    if (glyph.bg < 256) {
-      return this._getColorFromAnsiIndex(glyph.bg);
+    if (glyph.dim) {
+      result = color.blend(this._config.colors.background, color.multiplyOpacity(result, 0.5));
     }
-    return this._config.colors.background;
+    return result;
   }
 
   private _getForegroundColor(glyph: IGlyphIdentifier): IColor {
@@ -274,6 +279,7 @@ export class DynamicCharAtlas extends BaseCharAtlas {
     if (glyph.dim) {
       this._tmpCtx.globalAlpha = DIM_OPACITY;
     }
+
     // Draw the character
     this._tmpCtx.fillText(glyph.chars, 0, this._config.scaledCharHeight);
 
diff --git a/addons/xterm-addon-ligatures/README.md b/addons/xterm-addon-ligatures/README.md
index 8f869d73..fad2a7ef 100644
--- a/addons/xterm-addon-ligatures/README.md
+++ b/addons/xterm-addon-ligatures/README.md
@@ -33,15 +33,16 @@ This package locates the font file on disk for the font currently in use by the
 
 Since this package depends on being able to find and resolve a system font from disk, it has to have system access that isn't available in the web browser. As a result, this package is mainly useful in environments that combine browser and Node.js runtimes (such as [Electron]).
 
+### Fallback Ligatures
+
+When ligatures cannot be fetched from the environment, a set of "fallback" ligatures is used to get the most common ligatures working. These fallback ligatures can be customized with options passed to `LigatureAddon.constructor`.
+
 ### Fonts
 
 This package makes use of the following fonts for testing:
 
- * [Fira Code][Fira Code] - [Licensed under the OFL][Fira Code License] by Nikita
-   Prokopov, Mozilla Foundation with reserved names Fira Code, Fira Mono, and
-   Fira Sans
- * [Iosevka] - [Licensed under the OFL][Iosevka License] by Belleve Invis with
-   reserved name Iosevka
+* [Fira Code][Fira Code] - [Licensed under the OFL][Fira Code License] by Nikita Prokopov, Mozilla Foundation with reserved names Fira Code, Fira Mono, and Fira Sans
+* [Iosevka] - [Licensed under the OFL][Iosevka License] by Belleve Invis with reserved name Iosevka
 
 [xterm.js]: https://github.com/xtermjs/xterm.js
 [Electron]: https://electronjs.org/
diff --git a/addons/xterm-addon-ligatures/src/LigaturesAddon.ts b/addons/xterm-addon-ligatures/src/LigaturesAddon.ts
index c19bf2f8..c4586b38 100644
--- a/addons/xterm-addon-ligatures/src/LigaturesAddon.ts
+++ b/addons/xterm-addon-ligatures/src/LigaturesAddon.ts
@@ -5,6 +5,7 @@
 
 import { Terminal } from 'xterm';
 import { enableLigatures } from '.';
+import { ILigatureOptions } from './Types';
 
 export interface ITerminalAddon {
   activate(terminal: Terminal): void;
@@ -12,12 +13,31 @@ export interface ITerminalAddon {
 }
 
 export class LigaturesAddon implements ITerminalAddon {
-  constructor() {}
+  private readonly _fallbackLigatures: string[];
 
-  public activate(terminal: Terminal): void {
-    enableLigatures(terminal);
+  private _terminal: Terminal | undefined;
+  private _characterJoinerId: number | undefined;
+
+  constructor(options?: Partial<ILigatureOptions>) {
+    this._fallbackLigatures = (options?.fallbackLigatures || [
+      '<--', '<---', '<<-', '<-', '->', '->>', '-->', '--->',
+      '<==', '<===', '<<=', '<=', '=>', '=>>', '==>', '===>', '>=', '>>=',
+      '<->', '<-->', '<--->', '<---->', '<=>', '<==>', '<===>', '<====>', '-------->',
+      '<~~', '<~', '~>', '~~>', '::', ':::', '==', '!=', '===', '!==',
+      ':=', ':-', ':+', '<*', '<*>', '*>', '<|', '<|>', '|>', '+:', '-:', '=:', ':>',
+      '++', '+++', '<!--', '<!---', '<***>'
+    ]).sort((a, b) => b.length - a.length);
   }
 
-  public dispose(): void {}
-}
+  public activate(terminal: Terminal): void {
+    this._terminal = terminal;
+    this._characterJoinerId = enableLigatures(terminal, this._fallbackLigatures);
+  }
 
+  public dispose(): void {
+    if (this._characterJoinerId !== undefined) {
+      this._terminal?.deregisterCharacterJoiner(this._characterJoinerId);
+      this._characterJoinerId = undefined;
+    }
+  }
+}
diff --git a/addons/xterm-addon-ligatures/src/Types.d.ts b/addons/xterm-addon-ligatures/src/Types.d.ts
new file mode 100644
index 00000000..09ad68c7
--- /dev/null
+++ b/addons/xterm-addon-ligatures/src/Types.d.ts
@@ -0,0 +1,8 @@
+/**
+ * Copyright (c) 2022 The xterm.js authors. All rights reserved.
+ * @license MIT
+ */
+
+export interface ILigatureOptions {
+  fallbackLigatures: string[];
+}
diff --git a/addons/xterm-addon-ligatures/src/index.test.ts b/addons/xterm-addon-ligatures/src/index.test.ts
index f9f10d0b..0cfe2462 100644
--- a/addons/xterm-addon-ligatures/src/index.test.ts
+++ b/addons/xterm-addon-ligatures/src/index.test.ts
@@ -144,7 +144,6 @@ describe('xterm-addon-ligatures', () => {
     assert.deepEqual(term.joiner!(input), []);
     await delay(500);
     assert.isTrue(onRefresh.notCalled);
-    assert.throws(() => term.joiner!(input));
   });
 
   it('returns nothing if the font is not present on the system', async () => {
@@ -176,7 +175,6 @@ describe('xterm-addon-ligatures', () => {
     assert.deepEqual(term.joiner!(input), []);
     await delay(500);
     assert.isTrue(onRefresh.notCalled);
-    assert.throws(() => term.joiner!(input));
   });
 
   it('ensures no empty errors are thrown', async () => {
@@ -185,7 +183,6 @@ describe('xterm-addon-ligatures', () => {
     assert.deepEqual(term.joiner!(input), []);
     await delay(500);
     assert.isTrue(onRefresh.notCalled);
-    assert.throws(() => term.joiner!(input), 'Failure while loading font');
     (fontLigatures.loadFile as sinon.SinonStub).restore();
   });
 });
diff --git a/addons/xterm-addon-ligatures/src/index.ts b/addons/xterm-addon-ligatures/src/index.ts
index 058d9454..82589e36 100644
--- a/addons/xterm-addon-ligatures/src/index.ts
+++ b/addons/xterm-addon-ligatures/src/index.ts
@@ -26,13 +26,13 @@ const CACHE_SIZE = 100000;
  * start to render them.
  * @param term Terminal instance from xterm.js
  */
-export function enableLigatures(term: Terminal): void {
+export function enableLigatures(term: Terminal, fallbackLigatures: string[] = []): number {
   let currentFontName: string | undefined = undefined;
   let font: Font | undefined = undefined;
   let loadingState: LoadingState = LoadingState.UNLOADED;
   let loadError: any | undefined = undefined;
 
-  term.registerCharacterJoiner((text: string): [number, number][] => {
+  return term.registerCharacterJoiner((text: string): [number, number][] => {
     // If the font hasn't been loaded yet, load it and return an empty result
     const termFont = term.options.fontFamily;
     if (
@@ -63,6 +63,9 @@ export function enableLigatures(term: Terminal): void {
           // sure our font is still vaild.
           if (currentCallFontName === term.options.fontFamily) {
             loadingState = LoadingState.FAILED;
+            if (term.options.logLevel === 'debug') {
+              console.debug(loadError, new Error('Failure while loading font'));
+            }
             font = undefined;
             loadError = e;
           }
@@ -76,10 +79,21 @@ export function enableLigatures(term: Terminal): void {
         range => [range[0], range[1]]
       );
     }
-    if (loadingState === LoadingState.FAILED) {
-      throw loadError || new Error('Failure while loading font');
-    }
 
-    return [];
+    return getFallbackRanges(text, fallbackLigatures);
   });
 }
+
+function getFallbackRanges(text: string, fallbackLigatures: string[]): [number, number][] {
+  const ranges: [number, number][] = [];
+  for (let i = 0; i < text.length; i++) {
+    for (let j = 0; j < fallbackLigatures.length; j++) {
+      if (text.startsWith(fallbackLigatures[j], i)) {
+        ranges.push([i, i + fallbackLigatures[j].length]);
+        i += fallbackLigatures[j].length - 1;
+        break;
+      }
+    }
+  }
+  return ranges;
+}
diff --git a/addons/xterm-addon-ligatures/typings/xterm-addon-ligatures.d.ts b/addons/xterm-addon-ligatures/typings/xterm-addon-ligatures.d.ts
index 7c3edb03..4d8fbdf0 100644
--- a/addons/xterm-addon-ligatures/typings/xterm-addon-ligatures.d.ts
+++ b/addons/xterm-addon-ligatures/typings/xterm-addon-ligatures.d.ts
@@ -17,11 +17,14 @@ declare module 'xterm-addon-ligatures' {
   export class LigaturesAddon implements ITerminalAddon {
     /**
      * Creates a new ligatures addon.
+     *
+     * @param options Options for the ligatures addon.
      */
-    constructor();
+    constructor(options?: Partial<ILigatureOptions>);
 
     /**
      * Activates the addon
+     *
      * @param terminal The terminal the addon is being loaded in.
      */
     public activate(terminal: Terminal): void;
@@ -31,4 +34,25 @@ declare module 'xterm-addon-ligatures' {
      */
     public dispose(): void;
   }
+
+  /**
+   * Options for the ligatures addon.
+   */
+  export interface ILigatureOptions {
+    /**
+     * Fallback ligatures to use when the font access API is either not supported by the browser or
+     * access is denied. The default set of ligatures is taken from Iosevka's default "calt"
+     * ligation set: https://typeof.net/Iosevka/
+     *
+     * ```
+     * <-- <--- <<- <- -> ->> --> --->
+     * <== <=== <<= <= => =>> ==> ===> >= >>=
+     * <-> <--> <---> <----> <=> <==> <===> <====> -------->
+     * <~~ <~ ~> ~~> :: ::: == != === !==
+     * := :- :+ <* <*> *> <| <|> |> +: -: =: :>
+     * ++ +++ <!-- <!--- <***>
+     * ```
+     */
+    fallbackLigatures: string[]
+  }
 }
diff --git a/addons/xterm-addon-webgl/src/RectangleRenderer.ts b/addons/xterm-addon-webgl/src/RectangleRenderer.ts
index 16b1b9c0..bc08ad4a 100644
--- a/addons/xterm-addon-webgl/src/RectangleRenderer.ts
+++ b/addons/xterm-addon-webgl/src/RectangleRenderer.ts
@@ -5,7 +5,7 @@
 
 import { createProgram, expandFloat32Array, PROJECTION_MATRIX, throwIfFalsy } from './WebglUtils';
 import { IRenderModel, IWebGLVertexArrayObject, IWebGL2RenderingContext } from './Types';
-import { Attributes, FgFlags } from 'common/buffer/Constants';
+import { Attributes, BgFlags, FgFlags } from 'common/buffer/Constants';
 import { Terminal } from 'xterm';
 import { IColor } from 'common/Types';
 import { IColorSet } from 'browser/Types';
@@ -244,8 +244,9 @@ export class RectangleRenderer extends Disposable {
     const r = ((rgba >> 24) & 0xFF) / 255;
     const g = ((rgba >> 16) & 0xFF) / 255;
     const b = ((rgba >> 8 ) & 0xFF) / 255;
+    const a =  bg & BgFlags.DIM ? 0.5 : 1;
 
-    this._addRectangle(vertices.attributes, offset, x1, y1, (endX - startX) * this._dimensions.scaledCellWidth, this._dimensions.scaledCellHeight, r, g, b, 1);
+    this._addRectangle(vertices.attributes, offset, x1, y1, (endX - startX) * this._dimensions.scaledCellWidth, this._dimensions.scaledCellHeight, r, g, b, a);
   }
 
   private _addRectangle(array: Float32Array, offset: number, x1: number, y1: number, width: number, height: number, r: number, g: number, b: number, a: number): void {
diff --git a/addons/xterm-addon-webgl/src/WebglRenderer.ts b/addons/xterm-addon-webgl/src/WebglRenderer.ts
index be7517a3..74594590 100644
--- a/addons/xterm-addon-webgl/src/WebglRenderer.ts
+++ b/addons/xterm-addon-webgl/src/WebglRenderer.ts
@@ -12,7 +12,7 @@ import { RectangleRenderer } from './RectangleRenderer';
 import { IWebGL2RenderingContext } from './Types';
 import { RenderModel, COMBINED_CHAR_BIT_MASK, RENDER_MODEL_BG_OFFSET, RENDER_MODEL_FG_OFFSET, RENDER_MODEL_INDICIES_PER_CELL } from './RenderModel';
 import { Disposable, toDisposable } from 'common/Lifecycle';
-import { Attributes, Content, FgFlags, NULL_CELL_CHAR, NULL_CELL_CODE } from 'common/buffer/Constants';
+import { Attributes, BgFlags, Content, FgFlags, NULL_CELL_CHAR, NULL_CELL_CODE } from 'common/buffer/Constants';
 import { Terminal, IEvent } from 'xterm';
 import { IRenderLayer } from './renderLayer/Types';
 import { IRenderDimensions, IRenderer, IRequestRedrawEvent } from 'browser/renderer/Types';
@@ -25,6 +25,7 @@ import { ICharacterJoinerService, ICoreBrowserService } from 'browser/services/S
 import { CharData, ICellData } from 'common/Types';
 import { AttributeData } from 'common/buffer/AttributeData';
 import { ICoreService, IDecorationService } from 'common/services/Services';
+import { color, rgba as rgbaNs } from 'common/Color';
 
 export class WebglRenderer extends Disposable implements IRenderer {
   private _renderLayers: IRenderLayer[];
diff --git a/addons/xterm-addon-webgl/src/atlas/WebglCharAtlas.ts b/addons/xterm-addon-webgl/src/atlas/WebglCharAtlas.ts
index 8c1e477c..f5b0dc1c 100644
--- a/addons/xterm-addon-webgl/src/atlas/WebglCharAtlas.ts
+++ b/addons/xterm-addon-webgl/src/atlas/WebglCharAtlas.ts
@@ -189,7 +189,7 @@ export class WebglCharAtlas implements IDisposable {
     return this._config.colors.ansi[idx];
   }
 
-  private _getBackgroundColor(bgColorMode: number, bgColor: number, inverse: boolean): IColor {
+  private _getBackgroundColor(bgColorMode: number, bgColor: number, inverse: boolean, dim: boolean): IColor {
     if (this._config.allowTransparency) {
       // The background color might have some transparency, so we need to render it as fully
       // transparent in the atlas. Otherwise we'd end up drawing the transparent background twice
@@ -197,50 +197,76 @@ export class WebglCharAtlas implements IDisposable {
       return TRANSPARENT_COLOR;
     }
 
+    let result: IColor;
     switch (bgColorMode) {
       case Attributes.CM_P16:
       case Attributes.CM_P256:
-        return this._getColorFromAnsiIndex(bgColor);
+        result = this._getColorFromAnsiIndex(bgColor);
+        break;
       case Attributes.CM_RGB:
         const arr = AttributeData.toColorRGB(bgColor);
         // TODO: This object creation is slow
-        return {
-          rgba: bgColor << 8,
-          css: `#${toPaddedHex(arr[0])}${toPaddedHex(arr[1])}${toPaddedHex(arr[2])}`
-        };
+        result = rgba.toColor(arr[0], arr[1], arr[2]);
+        break;
       case Attributes.CM_DEFAULT:
       default:
         if (inverse) {
-          return this._config.colors.foreground;
+          result = this._config.colors.foreground;
+        } else {
+          result = this._config.colors.background;
         }
-        return this._config.colors.background;
+        break;
     }
+
+    if (dim) {
+      // Blend here instead of using opacity because transparent colors mess with clipping the
+      // glyph's bounding box
+      result = color.blend(this._config.colors.background, color.multiplyOpacity(result, 0.5));
+    }
+
+    return result;
   }
 
-  private _getForegroundColor(bg: number, bgColorMode: number, bgColor: number, fg: number, fgColorMode: number, fgColor: number, inverse: boolean, bold: boolean, excludeFromContrastRatioDemands: boolean): IColor {
-    const minimumContrastColor = this._getMinimumContrastColor(bg, bgColorMode, bgColor, fg, fgColorMode, fgColor, inverse, bold, excludeFromContrastRatioDemands);
+  private _getForegroundColor(bg: number, bgColorMode: number, bgColor: number, fg: number, fgColorMode: number, fgColor: number, inverse: boolean, dim: boolean, bold: boolean, excludeFromContrastRatioDemands: boolean): IColor {
+    // TODO: Pass dim along to get min contrast?
+    const minimumContrastColor = this._getMinimumContrastColor(bg, bgColorMode, bgColor, fg, fgColorMode, fgColor, false, bold, excludeFromContrastRatioDemands);
     if (minimumContrastColor) {
       return minimumContrastColor;
     }
 
+    let result: IColor;
     switch (fgColorMode) {
       case Attributes.CM_P16:
       case Attributes.CM_P256:
         if (this._config.drawBoldTextInBrightColors && bold && fgColor < 8) {
           fgColor += 8;
         }
-        return this._getColorFromAnsiIndex(fgColor);
+        result = this._getColorFromAnsiIndex(fgColor);
+        break;
       case Attributes.CM_RGB:
         const arr = AttributeData.toColorRGB(fgColor);
-        return rgba.toColor(arr[0], arr[1], arr[2]);
+        result = rgba.toColor(arr[0], arr[1], arr[2]);
+        break;
       case Attributes.CM_DEFAULT:
       default:
         if (inverse) {
-          // Inverse should always been opaque, even when transparency is used
-          return color.opaque(this._config.colors.background);
+          result = this._config.colors.background;
+        } else {
+          result = this._config.colors.foreground;
         }
-        return this._config.colors.foreground;
     }
+
+    // Always use an opaque color regardless of allowTransparency
+    if (this._config.allowTransparency) {
+      result = color.opaque(result);
+    }
+
+    // Apply dim to the color, opacity is fine to use for the foreground color
+    if (dim) {
+      result = color.multiplyOpacity(result, 0.5);
+    }
+
+    return result;
   }
 
   private _resolveBackgroundRgba(bgColorMode: number, bgColor: number, inverse: boolean): number {
@@ -357,7 +383,7 @@ export class WebglCharAtlas implements IDisposable {
     }
 
     // draw the background
-    const backgroundColor = this._getBackgroundColor(bgColorMode, bgColor, inverse);
+    const backgroundColor = this._getBackgroundColor(bgColorMode, bgColor, inverse, dim);
     // Use a 'copy' composite operation to clear any existing glyph out of _tmpCtxWithAlpha, regardless of
     // transparency in backgroundColor
     this._tmpCtx.globalCompositeOperation = 'copy';
@@ -373,14 +399,9 @@ export class WebglCharAtlas implements IDisposable {
     this._tmpCtx.textBaseline = TEXT_BASELINE;
 
     const powerLineGlyph = chars.length === 1 && isPowerlineGlyph(chars.charCodeAt(0));
-    const foregroundColor = this._getForegroundColor(bg, bgColorMode, bgColor, fg, fgColorMode, fgColor, inverse, bold, excludeFromContrastRatioDemands(chars.charCodeAt(0)));
+    const foregroundColor = this._getForegroundColor(bg, bgColorMode, bgColor, fg, fgColorMode, fgColor, inverse, dim, bold, excludeFromContrastRatioDemands(chars.charCodeAt(0)));
     this._tmpCtx.fillStyle = foregroundColor.css;
 
-    // Apply alpha to dim the character
-    if (dim) {
-      this._tmpCtx.globalAlpha = DIM_OPACITY;
-    }
-
     // For powerline glyphs left/top padding is excluded (https://github.com/microsoft/vscode/issues/120129)
     const padding = powerLineGlyph ? 0 : TMP_CANVAS_GLYPH_PADDING;
 
diff --git a/src/browser/renderer/dom/DomRendererRowFactory.ts b/src/browser/renderer/dom/DomRendererRowFactory.ts
index 47f269ce..634ef47b 100644
--- a/src/browser/renderer/dom/DomRendererRowFactory.ts
+++ b/src/browser/renderer/dom/DomRendererRowFactory.ts
@@ -250,6 +250,13 @@ export class DomRendererRowFactory {
           }
       }
 
+      // If there is no background override by now it's the original color, so apply dim if needed
+      if (!bgOverride) {
+        if (cell.isDim()) {
+          bgOverride = color.multiplyOpacity(resolvedBg, 0.5);
+        }
+      }
+
       // Foreground
       switch (fgColorMode) {
         case Attributes.CM_P16:
diff --git a/src/common/Color.ts b/src/common/Color.ts
index f62dd6cb..a66e39c1 100644
--- a/src/common/Color.ts
+++ b/src/common/Color.ts
@@ -84,6 +84,11 @@ export namespace color {
     };
   }
 
+  export function multiplyOpacity(color: IColor, factor: number): IColor {
+    const a = color.rgba & 0xFF;
+    return opacity(color, (a * factor) / 0xFF);
+  }
+
   export function toColorRGB(color: IColor): IColorRGB {
     return [(color.rgba >> 24) & 0xFF, (color.rgba >> 16) & 0xFF, (color.rgba >> 8) & 0xFF];
   }