diff --git a/package.json b/package.json
index 7f23223fd..19362bb62 100644
--- a/package.json
+++ b/package.json
@@ -311,6 +311,11 @@
       {
         "title": "Swift",
         "properties": {
+          "swift.inlayHints.enabled": {
+            "type": "boolean",
+            "default": false,
+            "markdownDescription": "Display inlay hints. Inlay hints are variable annotations indicating their inferred type."
+          },
           "swift.path": {
             "type": "string",
             "default": "",
@@ -683,9 +688,9 @@
           },
           "sourcekit-lsp.inlayHints.enabled": {
             "type": "boolean",
-            "default": true,
+            "default": false,
             "markdownDescription": "Display Inlay Hints. Inlay Hints are variable annotations indicating their inferred type. They are only available if you are using Swift 5.6 or later.",
-            "markdownDeprecationMessage": "**Deprecated**: Please use `#editor.inlayHints.enabled#` instead."
+            "markdownDeprecationMessage": "**Deprecated**: Please use `#swift.inlayHints.enabled#` instead."
           },
           "sourcekit-lsp.support-c-cpp": {
             "type": "string",
diff --git a/src/commands.ts b/src/commands.ts
index 9bd986ef6..8ce0bdf3c 100644
--- a/src/commands.ts
+++ b/src/commands.ts
@@ -46,6 +46,7 @@ import { runTask } from "./commands/runTask";
 import { TestKind } from "./TestExplorer/TestKind";
 import { pickProcess } from "./commands/pickProcess";
 import { openDocumentation } from "./commands/openDocumentation";
+import { toggleInlayHints } from "./commands/toggleInlayHints";
 
 /**
  * References:
@@ -217,6 +218,7 @@ export function register(ctx: WorkspaceContext): vscode.Disposable[] {
             vscode.commands.executeCommand("vscode.open", vscode.Uri.file(packagePath));
         }),
         vscode.commands.registerCommand("swift.openDocumentation", () => openDocumentation()),
+        vscode.commands.registerCommand("swift.toggleInlayHints", () => toggleInlayHints()),
     ];
 }
 
diff --git a/src/commands/toggleInlayHints.ts b/src/commands/toggleInlayHints.ts
new file mode 100644
index 000000000..ea966f874
--- /dev/null
+++ b/src/commands/toggleInlayHints.ts
@@ -0,0 +1,35 @@
+//===----------------------------------------------------------------------===//
+//
+// This source file is part of the VS Code Swift open source project
+//
+// Copyright (c) 2025 the VS Code Swift project authors
+// Licensed under Apache License v2.0
+//
+// See LICENSE.txt for license information
+// See CONTRIBUTORS.txt for the list of VS Code Swift project authors
+//
+// SPDX-License-Identifier: Apache-2.0
+//
+//===----------------------------------------------------------------------===//
+
+import * as vscode from "vscode";
+import configuration from "../configuration";
+
+/**
+ * Configures editor.inlayHints.enabled settings based on swift.inlayHints.enabled settings
+ */
+export async function toggleInlayHints() {
+    let settingValue = undefined;
+
+    if (!configuration.inlayHintsEnabled) {
+        settingValue = "off";
+    }
+
+    const config = vscode.workspace.getConfiguration("", { languageId: "swift" });
+    await config.update(
+        "editor.inlayHints.enabled",
+        settingValue,
+        vscode.ConfigurationTarget.Workspace,
+        true
+    );
+}
diff --git a/src/configuration.ts b/src/configuration.ts
index a3aa1596d..8244074a6 100644
--- a/src/configuration.ts
+++ b/src/configuration.ts
@@ -17,6 +17,7 @@ import * as os from "os";
 import * as path from "path";
 import { showReloadExtensionNotification } from "./ui/ReloadExtension";
 import { WorkspaceContext } from "./WorkspaceContext";
+import { toggleInlayHints } from "./commands/toggleInlayHints";
 
 export type DebugAdapters = "auto" | "lldb-dap" | "CodeLLDB";
 export type SetupCodeLLDBOptions =
@@ -410,6 +411,10 @@ const configuration = {
     get diagnostics(): boolean {
         return vscode.workspace.getConfiguration("swift").get<boolean>("diagnostics", false);
     },
+    /** enable inlay hints from SourceKit LSP by setting editor.inlayHints.enabled */
+    get inlayHintsEnabled(): boolean {
+        return vscode.workspace.getConfiguration("swift.inlayHints").get<boolean>("enabled", false);
+    },
     /**
      *  Test coverage settings
      */
@@ -535,6 +540,8 @@ export function handleConfigurationChangeEvent(
             showReloadExtensionNotification(
                 "Changing environment variables requires the project be reloaded."
             );
+        } else if (event.affectsConfiguration("swift.inlayHints.enabled")) {
+            toggleInlayHints();
         }
     };
 }
diff --git a/src/extension.ts b/src/extension.ts
index ac7391f6b..13011c56b 100644
--- a/src/extension.ts
+++ b/src/extension.ts
@@ -36,6 +36,7 @@ import { checkAndWarnAboutWindowsSymlinks } from "./ui/win32";
 import { SwiftEnvironmentVariablesManager, SwiftTerminalProfileProvider } from "./terminal";
 import { resolveFolderDependencies } from "./commands/dependencies/resolve";
 import { SelectedXcodeWatcher } from "./toolchain/SelectedXcodeWatcher";
+import { toggleInlayHints } from "./commands/toggleInlayHints";
 import configuration, { handleConfigurationChangeEvent } from "./configuration";
 import contextKeys from "./contextKeys";
 
@@ -140,6 +141,9 @@ export async function activate(context: vscode.ExtensionContext): Promise<Api> {
         // Mark the extension as activated.
         contextKeys.isActivated = true;
 
+        // toggle inlay hints based on swift.inlayHints.enabled settings
+        toggleInlayHints();
+
         return {
             workspaceContext,
             outputChannel,