diff --git a/src/vs/editor/common/model/editableTextModel.ts b/src/vs/editor/common/model/editableTextModel.ts
index 630ccd9b553a6cebd7e2a4da81b9a3407310fade..b326a78140c5170bead4628db9c529a7d81348b4 100644
--- a/src/vs/editor/common/model/editableTextModel.ts
+++ b/src/vs/editor/common/model/editableTextModel.ts
@@ -97,46 +97,69 @@ export class EditableTextModel extends TextModelWithDecorations implements edito
 					};
 				});
 
-				for (let i = 0, len = this._trimAutoWhitespaceLines.length; i < len; i++) {
-					let trimLineNumber = this._trimAutoWhitespaceLines[i];
-					let maxLineColumn = this.getLineMaxColumn(trimLineNumber);
-
-					let allowTrimLine = true;
+				// Sometimes, auto-formatters change ranges automatically which can cause undesired auto whitespace trimming near the cursor
+				// We'll use the following heuristic: if the edits occur near the cursor, then it's ok to trim auto whitespace
+				let editsAreNearCursors = true;
+				for (let i = 0, len = beforeCursorState.length; i < len; i++) {
+					let sel = beforeCursorState[i];
+					let foundEditNearSel = false;
 					for (let j = 0, lenJ = incomingEdits.length; j < lenJ; j++) {
 						let editRange = incomingEdits[j].range;
-						let editText = incomingEdits[j].text;
-
-						if (trimLineNumber < editRange.startLineNumber || trimLineNumber > editRange.endLineNumber) {
-							// `trimLine` is completely outside this edit
-							continue;
+						let selIsAbove = editRange.startLineNumber > sel.endLineNumber;
+						let selIsBelow = sel.startLineNumber > editRange.endLineNumber;
+						if (!selIsAbove && !selIsBelow) {
+							foundEditNearSel = true;
+							break;
 						}
+					}
+					if (!foundEditNearSel) {
+						editsAreNearCursors = false;
+						break;
+					}
+				}
 
-						// At this point:
-						//   editRange.startLineNumber <= trimLine <= editRange.endLineNumber
-
-						if (
-							trimLineNumber === editRange.startLineNumber && editRange.startColumn === maxLineColumn
-							&& editRange.isEmpty() && editText && editText.length > 0 && editText.charAt(0) === '\n'
-						) {
-							// This edit inserts a new line (and maybe other text) after `trimLine`
-							continue;
+				if (editsAreNearCursors) {
+					for (let i = 0, len = this._trimAutoWhitespaceLines.length; i < len; i++) {
+						let trimLineNumber = this._trimAutoWhitespaceLines[i];
+						let maxLineColumn = this.getLineMaxColumn(trimLineNumber);
+
+						let allowTrimLine = true;
+						for (let j = 0, lenJ = incomingEdits.length; j < lenJ; j++) {
+							let editRange = incomingEdits[j].range;
+							let editText = incomingEdits[j].text;
+
+							if (trimLineNumber < editRange.startLineNumber || trimLineNumber > editRange.endLineNumber) {
+								// `trimLine` is completely outside this edit
+								continue;
+							}
+
+							// At this point:
+							//   editRange.startLineNumber <= trimLine <= editRange.endLineNumber
+
+							if (
+								trimLineNumber === editRange.startLineNumber && editRange.startColumn === maxLineColumn
+								&& editRange.isEmpty() && editText && editText.length > 0 && editText.charAt(0) === '\n'
+							) {
+								// This edit inserts a new line (and maybe other text) after `trimLine`
+								continue;
+							}
+
+							// Looks like we can't trim this line as it would interfere with an incoming edit
+							allowTrimLine = false;
+							break;
 						}
 
-						// Looks like we can't trim this line as it would interfere with an incoming edit
-						allowTrimLine = false;
-						break;
-					}
+						if (allowTrimLine) {
+							editOperations.push({
+								identifier: null,
+								range: new Range(trimLineNumber, 1, trimLineNumber, maxLineColumn),
+								text: null,
+								forceMoveMarkers: false,
+								isAutoWhitespaceEdit: false
+							});
+						}
 
-					if (allowTrimLine) {
-						editOperations.push({
-							identifier: null,
-							range: new Range(trimLineNumber, 1, trimLineNumber, maxLineColumn),
-							text: null,
-							forceMoveMarkers: false,
-							isAutoWhitespaceEdit: false
-						});
 					}
-
 				}
 
 				this._trimAutoWhitespaceLines = null;
diff --git a/src/vs/editor/test/common/controller/cursor.test.ts b/src/vs/editor/test/common/controller/cursor.test.ts
index dc710cbf8007f4e142183a48505f71b64e3298e4..190224e638d6d604afdae988aa322cfcc434f312 100644
--- a/src/vs/editor/test/common/controller/cursor.test.ts
+++ b/src/vs/editor/test/common/controller/cursor.test.ts
@@ -10,7 +10,11 @@ import {EditOperation} from 'vs/editor/common/core/editOperation';
 import {Position} from 'vs/editor/common/core/position';
 import {Range} from 'vs/editor/common/core/range';
 import {Selection} from 'vs/editor/common/core/selection';
-import {EndOfLinePreference, EventType, Handler, IPosition, ISelection, IEditorOptions, DefaultEndOfLine, ITextModelCreationOptions} from 'vs/editor/common/editorCommon';
+import {
+	EndOfLinePreference, EventType, Handler, IPosition, ISelection, IEditorOptions,
+	DefaultEndOfLine, ITextModelCreationOptions, ICommand,
+	ITokenizedModel, IEditOperationBuilder, ICursorStateComputerData
+} from 'vs/editor/common/editorCommon';
 import {Model} from 'vs/editor/common/model/model';
 import {IMode, IRichEditSupport, IndentAction} from 'vs/editor/common/modes';
 import {RichEditSupport} from 'vs/editor/common/modes/supports/richEditSupport';
@@ -2184,6 +2188,49 @@ suite('Editor Controller - Cursor Configuration', () => {
 		});
 	});
 
+	test('issue #6862: Editor removes auto inserted indentation when formatting on type', () => {
+		usingCursor({
+			text: [
+				'function foo (params: string) {}'
+			],
+			modelOpts: {
+				insertSpaces: true,
+				tabSize: 4,
+				detectIndentation: false,
+				defaultEOL: DefaultEndOfLine.LF,
+				trimAutoWhitespace: true
+			},
+			mode: new OnEnterMode(IndentAction.IndentOutdent),
+		}, (model, cursor) => {
+
+			moveTo(cursor, 1, 32);
+			cursorCommand(cursor, H.Type, { text: '\n' }, 'keyboard');
+			assert.equal(model.getLineContent(1), 'function foo (params: string) {');
+			assert.equal(model.getLineContent(2), '    ');
+			assert.equal(model.getLineContent(3), '}');
+
+			class TestCommand implements ICommand {
+
+				private _selectionId: string = null;
+
+				public getEditOperations(model: ITokenizedModel, builder: IEditOperationBuilder): void {
+					builder.addEditOperation(new Range(1, 13, 1, 14), '');
+					this._selectionId = builder.trackSelection(cursor.getSelection());
+				}
+
+				public computeCursorState(model: ITokenizedModel, helper: ICursorStateComputerData): Selection {
+					return helper.getTrackedSelection(this._selectionId);
+				}
+
+			}
+
+			cursor.trigger('autoFormat', Handler.ExecuteCommand, new TestCommand());
+			assert.equal(model.getLineContent(1), 'function foo(params: string) {');
+			assert.equal(model.getLineContent(2), '    ');
+			assert.equal(model.getLineContent(3), '}');
+		});
+	});
+
 	test('removeAutoWhitespace on: removes only whitespace the cursor added 2', () => {
 		usingCursor({
 			text: [