diff --git a/src/terminal/terminal/terminal_handlers.h b/src/terminal/terminal/terminal_handlers.h
index cc976862..0a8fdcef 100644
--- a/src/terminal/terminal/terminal_handlers.h
+++ b/src/terminal/terminal/terminal_handlers.h
@@ -138,6 +138,18 @@ int guac_terminal_open_pipe_stream(guac_terminal* term, unsigned char c);
  */
 int guac_terminal_close_pipe_stream(guac_terminal* term, unsigned char c);
 
+/**
+ * Parses the remainder of xterm's OSC sequence for redefining the terminal
+ * emulator's palette.
+ *
+ * @param term
+ *     The terminal that received the given character of data.
+ *
+ * @param c
+ *     The character that was received by the given terminal.
+ */
+int guac_terminal_xterm_palette(guac_terminal* term, unsigned char c);
+
 /**
  * Handles the remaining characters of an Operating System Code (OSC) sequence,
  * typically initiated with "ESC ]".
diff --git a/src/terminal/terminal_handlers.c b/src/terminal/terminal_handlers.c
index defca4b4..8e83fb11 100644
--- a/src/terminal/terminal_handlers.c
+++ b/src/terminal/terminal_handlers.c
@@ -1156,6 +1156,19 @@ int guac_terminal_close_pipe_stream(guac_terminal* term, unsigned char c) {
 
 }
 
+int guac_terminal_xterm_palette(guac_terminal* term, unsigned char c) {
+
+    /* NOTE: Currently unimplemented. Attempts to set the 256-color palette
+     * are ignored. */
+
+    /* Stop on ECMA-48 ST (String Terminator */
+    if (c == 0x9C || c == 0x5C || c == 0x07)
+        term->char_handler = guac_terminal_echo;
+
+    return 0;
+
+}
+
 int guac_terminal_osc(guac_terminal* term, unsigned char c) {
 
     static int operation = 0;
@@ -1183,6 +1196,10 @@ int guac_terminal_osc(guac_terminal* term, unsigned char c) {
         else if (operation == 482203)
             term->char_handler = guac_terminal_close_pipe_stream;
 
+        /* xterm 256-color palette redefinition */
+        else if (operation == 4)
+            term->char_handler = guac_terminal_xterm_palette;
+
         /* Reset parameter for next OSC */
         operation = 0;