diff --git a/lib/livebook/evaluator.ex b/lib/livebook/evaluator.ex
index fab800151..4ba065bc7 100644
--- a/lib/livebook/evaluator.ex
+++ b/lib/livebook/evaluator.ex
@@ -349,24 +349,18 @@ defmodule Livebook.Evaluator do
 
   defp eval(code, binding, env) do
     try do
-      quoted = Code.string_to_quoted!(code)
+      quoted = Code.string_to_quoted!(code, file: env.file)
       # TODO: Use Code.eval_quoted_with_env/3 on Elixir v1.14
       {result, binding, env} = :elixir.eval_quoted(quoted, binding, env)
 
       {:ok, result, binding, env}
     catch
       kind, error ->
-        {kind, error, stacktrace} = prepare_error(kind, error, __STACKTRACE__)
+        stacktrace = prune_stacktrace(__STACKTRACE__)
         {:error, kind, error, stacktrace}
     end
   end
 
-  defp prepare_error(kind, error, stacktrace) do
-    {error, stacktrace} = Exception.blame(kind, error, stacktrace)
-    stacktrace = prune_stacktrace(stacktrace)
-    {kind, error, stacktrace}
-  end
-
   # Adapted from https://github.com/elixir-lang/elixir/blob/1c1654c88adfdbef38ff07fc30f6fbd34a542c07/lib/iex/lib/iex/evaluator.ex#L355-L372
 
   @elixir_internals [:elixir, :elixir_expand, :elixir_compiler, :elixir_module] ++
diff --git a/lib/livebook/evaluator/default_formatter.ex b/lib/livebook/evaluator/default_formatter.ex
index dc7932ed0..8f9a9c022 100644
--- a/lib/livebook/evaluator/default_formatter.ex
+++ b/lib/livebook/evaluator/default_formatter.ex
@@ -26,7 +26,7 @@ defmodule Livebook.Evaluator.DefaultFormatter do
   end
 
   def format_response({:error, kind, error, stacktrace}) do
-    formatted = Exception.format(kind, error, stacktrace)
+    formatted = format_error(kind, error, stacktrace)
     {:error, formatted, error_type(error)}
   end
 
@@ -61,12 +61,7 @@ defmodule Livebook.Evaluator.DefaultFormatter do
     end
   end
 
-  defp format_error(kind, error, stacktrace) do
-    {error, stacktrace} = Exception.blame(kind, error, stacktrace)
-    Exception.format(kind, error, stacktrace)
-  end
-
-  defp inspect_opts(opts) do
+  defp inspect_opts(opts \\ []) do
     default_opts = [pretty: true, width: 100, syntax_colors: syntax_colors()]
     Keyword.merge(default_opts, opts)
   end
@@ -103,4 +98,47 @@ defmodule Livebook.Evaluator.DefaultFormatter do
       Exception.message(exception) =~
         "Mix.install/2 can only be called with the same dependencies"
   end
+
+  defp format_error(kind, error, stacktrace) do
+    {blamed, stacktrace} = Exception.blame(kind, error, stacktrace)
+
+    banner =
+      case blamed do
+        %FunctionClauseError{} ->
+          banner = Exception.format_banner(kind, error, stacktrace)
+          blame = FunctionClauseError.blame(blamed, &inspect(&1, inspect_opts()), &blame_match/1)
+          [error_color(banner), pad(blame)]
+
+        _ ->
+          banner = Exception.format_banner(kind, blamed, stacktrace)
+          error_color(banner)
+      end
+
+    message =
+      if stacktrace == [] do
+        banner
+      else
+        stacktrace = Exception.format_stacktrace(stacktrace)
+        [banner, "\n", error_color(stacktrace)]
+      end
+
+    IO.iodata_to_binary(message)
+  end
+
+  defp blame_match(%{match?: true, node: node}), do: Macro.to_string(node)
+
+  defp blame_match(%{match?: false, node: node}) do
+    node
+    |> Macro.to_string()
+    |> error_color()
+    |> IO.iodata_to_binary()
+  end
+
+  defp pad(string) do
+    "    " <> String.replace(string, "\n", "\n    ")
+  end
+
+  defp error_color(string) do
+    IO.ANSI.format([:red, string], true)
+  end
 end
diff --git a/lib/livebook_web/live/output.ex b/lib/livebook_web/live/output.ex
index 371bf1e74..31b1763bc 100644
--- a/lib/livebook_web/live/output.ex
+++ b/lib/livebook_web/live/output.ex
@@ -1,6 +1,8 @@
 defmodule LivebookWeb.Output do
   use Phoenix.Component
 
+  import LivebookWeb.Helpers
+
   alias LivebookWeb.Output
 
   @doc """
@@ -93,7 +95,7 @@ defmodule LivebookWeb.Output do
 
     ~H"""
     <div class="flex flex-col space-y-4">
-      <%= render_error_message_output(@formatted) %>
+      <%= render_error(@formatted) %>
       <%= if @is_standalone do %>
         <div>
           <button class="button-base button-gray" phx-click="restart_runtime">
@@ -112,7 +114,7 @@ defmodule LivebookWeb.Output do
   end
 
   defp render_output({:error, formatted, _type}, %{}) do
-    render_error_message_output(formatted)
+    render_error(formatted)
   end
 
   # TODO: remove on Livebook v0.7
@@ -123,24 +125,32 @@ defmodule LivebookWeb.Output do
               :table_dynamic,
               :frame_dynamic
             ] do
-    render_error_message_output("""
+    render_error_message("""
     Legacy output format: #{inspect(output)}. Please update Kino to
     the latest version.
     """)
   end
 
   defp render_output(output, %{}) do
-    render_error_message_output("""
+    render_error_message("""
     Unknown output format: #{inspect(output)}. If you're using Kino,
     you may want to update Kino and Livebook to the latest version.
     """)
   end
 
-  defp render_error_message_output(message) do
+  defp render_error(message) do
     assigns = %{message: message}
 
     ~H"""
-    <div class="overflow-auto whitespace-pre text-red-600 tiny-scrollbar"><%= @message %></div>
+    <div class="whitespace-pre-wrap font-editor text-gray-500"><%= ansi_string_to_html(@message) %></div>
+    """
+  end
+
+  defp render_error_message(message) do
+    assigns = %{message: message}
+
+    ~H"""
+    <div class="whitespace-pre-wrap font-editor text-red-600"><%= @message %></div>
     """
   end
 end
diff --git a/test/livebook/evaluator_test.exs b/test/livebook/evaluator_test.exs
index e2f035f96..d1219e709 100644
--- a/test/livebook/evaluator_test.exs
+++ b/test/livebook/evaluator_test.exs
@@ -94,8 +94,8 @@ defmodule Livebook.EvaluatorTest do
       Evaluator.evaluate_code(evaluator, self(), code, :code_1)
 
       assert_receive {:evaluation_response, :code_1,
-                      {:error, :error, %FunctionClauseError{},
-                       [{List, :first, _arity, _location}]}, metadata()}
+                      {:error, :error, :function_clause, [{List, :first, _arity, _location}]},
+                      metadata()}
     end
 
     test "in case of an error returns only the relevant part of stacktrace",