diff --git a/docs/components/content/examples/ChipExampleContentSlot.vue b/docs/components/content/examples/ChipExampleContentSlot.vue
new file mode 100644
index 0000000000..7ebcb94b0b
--- /dev/null
+++ b/docs/components/content/examples/ChipExampleContentSlot.vue
@@ -0,0 +1,19 @@
+<template>
+  <UChip size="md" position="bottom-right" inset :ui="{ base: '-mx-2 rounded-none ring-0', background: '' }">
+    <UAvatar
+      src="https://avatars.githubusercontent.com/u/739984?v=4"
+      alt="Avatar"
+      size="lg"
+    />
+
+    <template #content>
+      <UAvatar
+        src="https://avatars.githubusercontent.com/in/80442?v=4"
+        alt="Avatar"
+        size="xs"
+        :ui="{ rounded: 'rounded-md' }"
+        class="shadow-md"
+      />
+    </template>
+  </UChip>
+</template>
diff --git a/docs/components/content/examples/ChipExampleShow.vue b/docs/components/content/examples/ChipExampleShow.vue
new file mode 100644
index 0000000000..e1712d6578
--- /dev/null
+++ b/docs/components/content/examples/ChipExampleShow.vue
@@ -0,0 +1,19 @@
+<script setup>
+const items = [{
+  name: 'messages',
+  icon: 'i-heroicons-chat-bubble-oval-left',
+  count: 3
+}, {
+  name: 'notifications',
+  icon: 'i-heroicons-bell',
+  count: 0
+}]
+</script>
+
+<template>
+  <div class="flex gap-3">
+    <UChip v-for="{ name, icon, count } in items" :key="name" :show="count > 0">
+      <UButton :icon="icon" color="gray" />
+    </UChip>
+  </div>
+</template>
diff --git a/docs/content/2.elements/12.chip.md b/docs/content/2.elements/12.chip.md
new file mode 100644
index 0000000000..cb40612459
--- /dev/null
+++ b/docs/content/2.elements/12.chip.md
@@ -0,0 +1,134 @@
+---
+description: Display a chip indicator on any component.
+navigation:
+  badge: New
+links:
+  - label: GitHub
+    icon: i-simple-icons-github
+    to: https://github.com/nuxt/ui/blob/dev/src/runtime/components/elements/Chip.vue
+---
+
+## Usage
+
+Wrap any component with the `Chip` component to display a chip indicator.
+
+::component-card
+---
+code: >-
+
+  <UButton icon="i-heroicons-inbox" color="gray" />
+---
+
+#default
+:u-button{icon="i-heroicons-inbox" color="gray"}
+::
+
+### Size
+
+Use the `size` prop to change the size of the chip.
+
+::component-card
+---
+props:
+  size: '2xl'
+code: >-
+
+    <UButton icon="i-heroicons-inbox" color="gray" />
+---
+
+#default
+:u-button{icon="i-heroicons-inbox" color="gray"}
+::
+
+### Color
+
+Use the `color` prop to change the color of the chip.
+
+::component-card
+---
+props:
+  color: 'red'
+code: >-
+
+    <UButton icon="i-heroicons-inbox" color="gray" />
+---
+
+#default
+:u-button{icon="i-heroicons-inbox" color="gray"}
+::
+
+### Position
+
+Use the `position` prop to change the position of the chip.
+
+::component-card
+---
+props:
+  position: 'bottom-right'
+code: >-
+
+    <UButton icon="i-heroicons-inbox" color="gray" />
+---
+
+#default
+:u-button{icon="i-heroicons-inbox" color="gray"}
+::
+
+### Text
+
+Use the `text` prop to display text in the chip.
+
+::component-card
+---
+props:
+  text: '3'
+  size: '2xl'
+excludedProps:
+  - size
+code: >-
+
+    <UButton icon="i-heroicons-inbox" color="gray" />
+---
+
+#default
+:u-button{icon="i-heroicons-inbox" color="gray"}
+::
+
+### Show
+
+Use the `show` prop to conditionally display the chip.
+
+:component-example{component="chip-example-show"}
+
+### Inset
+
+Use the `inset` prop to display the chip inside the component. This is useful when dealing with rounded components.
+
+::component-card
+---
+props:
+  inset: true
+code: >-
+
+  <UAvatar src="https://avatars.githubusercontent.com/u/739984?v=4" alt="Avatar" />
+---
+
+#default
+:u-avatar{src="https://avatars.githubusercontent.com/u/739984?v=4" alt="Avatar"}
+::
+
+## Slots
+
+### `content`
+
+Use the `#content` slot to fully customize the chip.
+
+:component-example{component="chip-example-content-slot"}
+
+## Props
+
+:component-props
+
+## Config
+
+:component-preset
diff --git a/src/colors.ts b/src/colors.ts
index 2e853d5615..b866d24ba8 100644
--- a/src/colors.ts
+++ b/src/colors.ts
@@ -198,6 +198,12 @@ const safelistByComponent = {
     variants: ['dark']
   }, {
     pattern: new RegExp(`text-(${colorsAsRegex})-500`)
+  }],
+  chip: (colorsAsRegex) => [{
+    pattern: new RegExp(`bg-(${colorsAsRegex})-400`),
+    variants: ['dark']
+  }, {
+    pattern: new RegExp(`bg-(${colorsAsRegex})-500`)
   }]
 }
 
diff --git a/src/runtime/components/elements/Chip.vue b/src/runtime/components/elements/Chip.vue
new file mode 100644
index 0000000000..3b10d4048a
--- /dev/null
+++ b/src/runtime/components/elements/Chip.vue
@@ -0,0 +1,92 @@
+<template>
+  <div :class="ui.wrapper" v-bind="attrs">
+    <slot />
+
+    <span v-if="show" :class="chipClass">
+      <slot name="content">
+        {{ text }}
+      </slot>
+    </span>
+  </div>
+</template>
+
+<script lang="ts">
+import { defineComponent, computed, toRef } from 'vue'
+import type { PropType } from 'vue'
+import { twJoin } from 'tailwind-merge'
+import { useUI } from '../../composables/useUI'
+import { mergeConfig } from '../../utils'
+import type { ChipSize, ChipColor, ChipPosition, Strategy } from '../../types'
+// @ts-expect-error
+import appConfig from '#build/app.config'
+import { chip } from '#ui/ui.config'
+
+const config = mergeConfig<typeof chip>(appConfig.ui.strategy, appConfig.ui.chip, chip)
+
+export default defineComponent({
+  inheritAttrs: false,
+  props: {
+    size: {
+      type: String as PropType<ChipSize>,
+      default: () => config.default.size,
+      validator (value: string) {
+        return Object.keys(config.size).includes(value)
+      }
+    },
+    color: {
+      type: String as PropType<ChipColor>,
+      default: () => config.default.color,
+      validator (value: string) {
+        return ['gray', ...appConfig.ui.colors].includes(value)
+      }
+    },
+    position: {
+      type: String as PropType<ChipPosition>,
+      default: () => config.default.position,
+      validator (value: string) {
+        return Object.keys(config.position).includes(value)
+      }
+    },
+    text: {
+      type: [String, Number],
+      default: null
+    },
+    inset: {
+      type: Boolean,
+      default: () => config.default.inset
+    },
+    show: {
+      type: Boolean,
+      default: true
+    },
+    class: {
+      type: [String, Object, Array] as PropType<any>,
+      default: undefined
+    },
+    ui: {
+      type: Object as PropType<Partial<typeof config & { strategy?: Strategy }>>,
+      default: undefined
+    }
+  },
+  setup (props) {
+    const { ui, attrs } = useUI('chip', toRef(props, 'ui'), config, toRef(props, 'class'))
+
+    const chipClass = computed(() => {
+      return twJoin(
+        ui.value.base,
+        ui.value.size[props.size],
+        ui.value.position[props.position],
+        props.inset ? null : ui.value.translate[props.position],
+        ui.value.background.replaceAll('{color}', props.color)
+      )
+    })
+
+    return {
+      // eslint-disable-next-line vue/no-dupe-keys
+      ui,
+      attrs,
+      chipClass
+    }
+  }
+})
+</script>
diff --git a/src/runtime/types/chip.d.ts b/src/runtime/types/chip.d.ts
new file mode 100644
index 0000000000..1f13938a11
--- /dev/null
+++ b/src/runtime/types/chip.d.ts
@@ -0,0 +1,11 @@
+import { chip } from '../ui.config'
+import colors from '#ui-colors'
+
+export type ChipSize = keyof typeof chip.size
+export type ChipColor = 'gray' | typeof colors[number]
+export type ChipPosition = keyof typeof chip.position
+
+export interface Chip {
+  color?: ChipColor
+  position?: ChipPosition
+}
diff --git a/src/runtime/types/index.d.ts b/src/runtime/types/index.d.ts
index e76895a79d..519d296317 100644
--- a/src/runtime/types/index.d.ts
+++ b/src/runtime/types/index.d.ts
@@ -4,6 +4,7 @@ export * from './avatar'
 export * from './badge'
 export * from './breadcrumb'
 export * from './button'
+export * from './chip'
 export * from './clipboard'
 export * from './command-palette'
 export * from './dropdown'
diff --git a/src/runtime/ui.config.ts b/src/runtime/ui.config.ts
index 1fac6cd84b..6073e747fa 100644
--- a/src/runtime/ui.config.ts
+++ b/src/runtime/ui.config.ts
@@ -257,6 +257,41 @@ export const buttonGroup = {
   shadow: 'shadow-sm'
 }
 
+export const chip = {
+  wrapper: 'relative inline-flex items-center justify-center flex-shrink-0',
+  base: 'absolute rounded-full ring-1 ring-white dark:ring-gray-900 flex items-center justify-center text-white dark:text-gray-900 font-medium whitespace-nowrap',
+  background: 'bg-{color}-500 dark:bg-{color}-400',
+  position: {
+    'top-right': 'top-0 right-0',
+    'bottom-right': 'bottom-0 right-0',
+    'top-left': 'top-0 left-0',
+    'bottom-left': 'bottom-0 left-0'
+  },
+  translate: {
+    'top-right': '-translate-y-1/2 translate-x-1/2 transform',
+    'bottom-right': 'translate-y-1/2 translate-x-1/2 transform',
+    'top-left': '-translate-y-1/2 -translate-x-1/2 transform',
+    'bottom-left': 'translate-y-1/2 -translate-x-1/2 transform'
+  },
+  size: {
+    '3xs': 'h-[4px] min-w-[4px] text-[4px] p-px',
+    '2xs': 'h-[5px] min-w-[5px] text-[5px] p-px',
+    xs: 'h-1.5 min-w-[0.375rem] text-[6px] p-px',
+    sm: 'h-2 min-w-[0.5rem] text-[7px] p-0.5',
+    md: 'h-2.5 min-w-[0.625rem] text-[8px] p-0.5',
+    lg: 'h-3 min-w-[0.75rem] text-[10px] p-0.5',
+    xl: 'h-3.5 min-w-[0.875rem] text-[11px] p-1',
+    '2xl': 'h-4 min-w-[1rem] text-[12px] p-1',
+    '3xl': 'h-5 min-w-[1.25rem] text-[14px] p-1'
+  },
+  default: {
+    size: 'sm',
+    color: 'primary',
+    position: 'top-right',
+    inset: false
+  }
+}
+
 export const dropdown = {
   wrapper: 'relative inline-flex text-left rtl:text-right',
   container: 'z-20 group',