diff --git a/src/server/editorServices.ts b/src/server/editorServices.ts
index 7ab46fc689e..436b97821cc 100644
--- a/src/server/editorServices.ts
+++ b/src/server/editorServices.ts
@@ -1177,6 +1177,7 @@ namespace ts.server {
             TabSize: 4,
             NewLineCharacter: ts.sys ? ts.sys.newLine : '\n',
             ConvertTabsToSpaces: true,
+            IndentStyle: ts.IndentStyle.Smart,
             InsertSpaceAfterCommaDelimiter: true,
             InsertSpaceAfterSemicolonInForStatements: true,
             InsertSpaceBeforeAndAfterBinaryOperators: true,
@@ -1187,7 +1188,6 @@ namespace ts.server {
             PlaceOpenBraceOnNewLineForFunctions: false,
             PlaceOpenBraceOnNewLineForControlBlocks: false,
         }
-
     }
 
     export interface LineCollection {
diff --git a/src/server/session.ts b/src/server/session.ts
index da044e7b4c6..f3d3826409e 100644
--- a/src/server/session.ts
+++ b/src/server/session.ts
@@ -606,6 +606,7 @@ namespace ts.server {
                                 TabSize: formatOptions.TabSize,
                                 NewLineCharacter: "\n",
                                 ConvertTabsToSpaces: formatOptions.ConvertTabsToSpaces,
+                                IndentStyle: ts.IndentStyle.Smart,
                             };
                             var indentPosition =
                                 compilerService.languageService.getIndentationAtPosition(file, position, editorOptions);
diff --git a/src/services/formatting/smartIndenter.ts b/src/services/formatting/smartIndenter.ts
index 8355fac03f5..6daeca5eacc 100644
--- a/src/services/formatting/smartIndenter.ts
+++ b/src/services/formatting/smartIndenter.ts
@@ -13,6 +13,12 @@ namespace ts.formatting {
                 return 0; // past EOF
             }
 
+            // no indentation when the indent style is set to none,
+            // so we can return fast
+            if (options.IndentStyle === IndentStyle.None) {
+                return 0;
+            }
+
             let precedingToken = findPrecedingToken(position, sourceFile);
             if (!precedingToken) {
                 return 0;
@@ -32,6 +38,26 @@ namespace ts.formatting {
 
             let lineAtPosition = sourceFile.getLineAndCharacterOfPosition(position).line;
 
+            // indentation is first non-whitespace character in a previous line
+            // for block indentation, we should look for a line which contains something that's not
+            // whitespace.
+            if (options.IndentStyle === IndentStyle.Block) {
+
+                // move backwards untill we find a line with a non-whitespace character,
+                // then find the first non-whitespace character for that line.
+                let current = position;
+                while (current > 0){
+                    let char = sourceFile.text.charCodeAt(current);
+                    if (!isWhiteSpace(char) && !isLineBreak(char)) {
+                        break;
+                    }
+                    current--;
+                }
+
+                let lineStart = ts.getLineStartPositionForPosition(current, sourceFile);
+                return SmartIndenter.findFirstNonWhitespaceColumn(lineStart, current, sourceFile, options);
+            }
+
             if (precedingToken.kind === SyntaxKind.CommaToken && precedingToken.parent.kind !== SyntaxKind.BinaryExpression) {
                 // previous token is comma that separates items in list - find the previous item and try to derive indentation from it
                 let actualIndentation = getActualIndentationForListItemBeforeComma(precedingToken, sourceFile, options);
@@ -224,7 +250,7 @@ namespace ts.formatting {
         function getStartLineAndCharacterForNode(n: Node, sourceFile: SourceFile): LineAndCharacter {
             return sourceFile.getLineAndCharacterOfPosition(n.getStart(sourceFile));
         }
-        
+
         export function childStartsOnTheSameLineWithElseInIfStatement(parent: Node, child: TextRangeWithKind, childStartLine: number, sourceFile: SourceFile): boolean {
             if (parent.kind === SyntaxKind.IfStatement && (<IfStatement>parent).elseStatement === child) {
                 let elseKeyword = findChildOfKind(parent, SyntaxKind.ElseKeyword, sourceFile);
@@ -325,7 +351,7 @@ namespace ts.formatting {
             }
 
             return Value.Unknown;
-            
+
             function getStartingExpression(node: PropertyAccessExpression | CallExpression | ElementAccessExpression) {
                 while (true) {
                     switch (node.kind) {
diff --git a/src/services/services.ts b/src/services/services.ts
index 87cca1fe0f1..bc60f5f3eb8 100644
--- a/src/services/services.ts
+++ b/src/services/services.ts
@@ -1189,6 +1189,13 @@ namespace ts {
         TabSize: number;
         NewLineCharacter: string;
         ConvertTabsToSpaces: boolean;
+        IndentStyle: IndentStyle;
+    }
+
+    export enum IndentStyle {
+        None = 0,
+        Block = 1,
+        Smart = 2,
     }
 
     export interface FormatCodeOptions extends EditorOptions {