diff --git a/packages/vue-language-core/src/plugins/file-vue.ts b/packages/vue-language-core/src/plugins/file-vue.ts
index dc198c116a..e965af84bf 100644
--- a/packages/vue-language-core/src/plugins/file-vue.ts
+++ b/packages/vue-language-core/src/plugins/file-vue.ts
@@ -11,7 +11,48 @@ const plugin: VueLanguagePlugin = () => {
 
 				return parse(content, { sourceMap: false, ignoreEmpty: false });
 			}
-		}
+		},
+
+		updateSFC(sfc, change) {
+
+			// avoid broken @vue/compiler-sfc cache
+			if (!(sfc as any).__volar_clone) {
+				sfc = JSON.parse(JSON.stringify(sfc));
+				(sfc as any).__volar_clone = true;
+			}
+
+			const blocks = [
+				sfc.descriptor.template,
+				sfc.descriptor.script,
+				sfc.descriptor.scriptSetup,
+				...sfc.descriptor.styles,
+				...sfc.descriptor.customBlocks,
+			].filter((block): block is NonNullable<typeof block> => !!block);
+
+			const hitBlock = blocks.find(block => change.start >= block.loc.start.offset && change.end <= block.loc.end.offset);
+
+			if (!hitBlock) {
+				return;
+			}
+
+			hitBlock.content =
+				hitBlock.content.substring(0, change.start - hitBlock.loc.start.offset)
+				+ change.newText
+				+ hitBlock.content.substring(change.end - hitBlock.loc.start.offset);
+
+			const lengthDiff = change.newText.length - (change.end - change.start);
+
+			for (const block of blocks) {
+				if (block.loc.start.offset >= change.end) {
+					block.loc.start.offset += lengthDiff;
+				}
+				if (block.loc.end.offset >= change.end) {
+					block.loc.end.offset += lengthDiff;
+				}
+			}
+
+			return sfc;
+		},
 	};
-}
+};
 export = plugin;
diff --git a/packages/vue-language-core/src/sourceFile.ts b/packages/vue-language-core/src/sourceFile.ts
index d0e777f12f..4fedb6164c 100644
--- a/packages/vue-language-core/src/sourceFile.ts
+++ b/packages/vue-language-core/src/sourceFile.ts
@@ -17,6 +17,7 @@ export type VueLanguagePlugin = (ctx: {
 }) => {
 	order?: number;
 	parseSFC?(fileName: string, content: string): SFCParseResult | undefined;
+	updateSFC?(oldResult: SFCParseResult, textChange: { start: number, end: number, newText: string; }): SFCParseResult | undefined;
 	compileSFCTemplate?(lang: string, template: string, options?: CompilerDom.CompilerOptions): CompilerDom.CodegenResult | undefined;
 	getEmbeddedFileNames?(fileName: string, sfc: Sfc): string[];
 	resolveEmbeddedFile?(fileName: string, sfc: Sfc, embeddedFile: EmbeddedFile): void;
@@ -109,6 +110,13 @@ export function createSourceFile(
 		}) as unknown as Sfc['scriptSetupAst'],
 	}) as Sfc /* avoid Sfc unwrap in .d.ts by reactive */;
 
+	// cache
+	let parsedSfcCache: {
+		snapshot: ts.IScriptSnapshot,
+		sfc: SFCParseResult,
+		plugin: ReturnType<VueLanguagePlugin>,
+	} | undefined;
+
 	// use
 	const scriptAst = computed(() => {
 		if (sfc.script) {
@@ -121,9 +129,28 @@ export function createSourceFile(
 		}
 	});
 	const parsedSfc = computed(() => {
+
+		// incremental update
+		if (parsedSfcCache?.plugin.updateSFC) {
+			const change = snapshot.value.getChangeRange(parsedSfcCache.snapshot);
+			if (change) {
+				const newSfc = parsedSfcCache.plugin.updateSFC(parsedSfcCache.sfc, {
+					start: change.span.start,
+					end: change.span.start + change.span.length,
+					newText: snapshot.value.getText(change.span.start, change.span.start + change.newLength),
+				});
+				if (newSfc) {
+					parsedSfcCache.snapshot = snapshot.value;
+					parsedSfcCache.sfc = newSfc;
+					return newSfc;
+				}
+			}
+		}
+
 		for (const plugin of plugins) {
 			const sfc = plugin.parseSFC?.(fileName, fileContent.value);
 			if (sfc) {
+				parsedSfcCache = { snapshot: snapshot.value, sfc, plugin };
 				return sfc;
 			}
 		}
@@ -404,13 +431,8 @@ export function createSourceFile(
 			return;
 		}
 
-		const change = newScriptSnapshot.getChangeRange(snapshot.value);
 		snapshot.value = newScriptSnapshot;
 
-		if (change) {
-			// TODO
-		}
-
 		// TODO: wait for https://github.com/vuejs/core/pull/5912
 		if (parsedSfc.value) {
 			updateTemplate(parsedSfc.value.descriptor.template);
@@ -419,6 +441,13 @@ export function createSourceFile(
 			updateStyles(parsedSfc.value.descriptor.styles);
 			updateCustomBlocks(parsedSfc.value.descriptor.customBlocks);
 		}
+		else {
+			updateTemplate(null);
+			updateScript(null);
+			updateScriptSetup(null);
+			updateStyles([]);
+			updateCustomBlocks([]);
+		}
 
 		function updateTemplate(block: SFCTemplateBlock | null) {