diff --git a/js/test.ts b/js/test.ts
index ad75f3fc..6bc6ab05 100644
--- a/js/test.ts
+++ b/js/test.ts
@@ -724,7 +724,7 @@ Deno.test({
         );
       },
       Error,
-      "The module's source code could not be parsed",
+      "at file:///a/test.js:",
     );
   },
 });
diff --git a/src/graph.rs b/src/graph.rs
index 6c957fb5..5cdb442a 100644
--- a/src/graph.rs
+++ b/src/graph.rs
@@ -562,14 +562,132 @@ impl std::error::Error for ModuleErrorKind {
   }
 }
 
+/// Cleans up SWC token descriptions in error messages.
+/// e.g. `'string literal ("./foo.js", "./foo.js")'` -> `"./foo.js"`
+fn clean_parse_message(message: &str) -> String {
+  // Replace `'string literal ("{value}", "{value}")'` with `"{value}"`
+  let mut result = message.to_string();
+  while let Some(start) = result.find("'string literal (\"") {
+    let after = &result[start + 18..]; // skip `'string literal ("`
+    if let Some(quote_end) = after.find('"') {
+      let value = &after[..quote_end];
+      // Find the closing `)'`
+      if let Some(end) = result[start..].find(")'") {
+        let full_end = start + end + 2;
+        result =
+          format!("{}\"{}\"{}", &result[..start], value, &result[full_end..]);
+        continue;
+      }
+    }
+    break;
+  }
+  result
+}
+
+/// Reformats a parse diagnostic message into a nicer format with
+/// line numbers and carets, with the location shown after the snippet.
+///
+/// Input format (from ParseDiagnostic::Display):
+///   `{message} at {specifier}:{line}:{col}\n\n  {source_line}\n  {underline}`
+///
+/// Output format:
+///   `{message}\n  |\nN | {source_line}\n  | {carets}\n    at {location}`
+fn format_parse_diagnostic(
+  f: &mut fmt::Formatter<'_>,
+  diagnostic: &str,
+) -> fmt::Result {
+  // Try to parse the diagnostic format: "{message} at {location}\n\n  {snippet}"
+  if let Some(at_pos) = diagnostic.find(" at ") {
+    let raw_message = &diagnostic[..at_pos];
+    let message = clean_parse_message(raw_message);
+
+    // Find the end of the location line (first newline after " at ")
+    let after_at = &diagnostic[at_pos + 4..];
+    let (location, rest) = if let Some(newline_pos) = after_at.find('\n') {
+      (&after_at[..newline_pos], &after_at[newline_pos..])
+    } else {
+      (after_at, "")
+    };
+
+    // Parse location to extract line number
+    // Location format: {specifier}:{line}:{col}
+    let line_num = location
+      .rsplit(':')
+      .nth(1)
+      .and_then(|s| s.parse::<usize>().ok());
+
+    write!(f, "{message}")?;
+
+    if !rest.is_empty() {
+      // The rest contains the source snippet, indented with "  "
+      // Reformat with line numbers
+      let lines: Vec<&str> = rest.lines().collect();
+
+      // Find source line and underline (skip empty lines)
+      let mut source_line = None;
+      let mut underline = None;
+      for line in &lines {
+        let trimmed = line.trim();
+        if trimmed.is_empty() {
+          continue;
+        }
+        if source_line.is_none() {
+          source_line = Some(trimmed);
+        } else if underline.is_none() {
+          underline = Some(trimmed);
+        }
+      }
+
+      if let (Some(src), Some(ul)) = (source_line, underline) {
+        writeln!(f)?;
+        if let Some(num) = line_num {
+          let num_str = num.to_string();
+          let padding = " ".repeat(num_str.len());
+          writeln!(f, "{padding} |")?;
+          writeln!(f, "{num_str} | {src}")?;
+          // Calculate indent: align the underline under the source
+          let src_start = source_line
+            .and_then(|s| {
+              lines
+                .iter()
+                .find(|l| l.trim() == s)
+                .map(|l| l.len() - l.trim_start().len())
+            })
+            .unwrap_or(2);
+          let ul_start = underline
+            .and_then(|u| {
+              lines
+                .iter()
+                .find(|l| l.trim() == u)
+                .map(|l| l.len() - l.trim_start().len())
+            })
+            .unwrap_or(2);
+          let offset = ul_start.saturating_sub(src_start);
+          writeln!(f, "{padding} | {}{}", " ".repeat(offset), ul)?;
+        } else {
+          writeln!(f)?;
+          writeln!(f, "  {src}")?;
+          writeln!(f, "  {ul}")?;
+        }
+      }
+    }
+
+    write!(f, "    at {location}")?;
+
+    Ok(())
+  } else {
+    // Fallback: just write the diagnostic as-is
+    write!(f, "{}", diagnostic)
+  }
+}
+
 impl fmt::Display for ModuleErrorKind {
   fn fmt(&self, f: &mut fmt::Formatter<'_>) -> fmt::Result {
     match self {
       Self::Load { err, .. } => err.fmt(f),
-      Self::Parse { diagnostic, .. } => write!(
-        f,
-        "The module's source code could not be parsed: {diagnostic}"
-      ),
+      Self::Parse { diagnostic, .. } => {
+        format_parse_diagnostic(f, &diagnostic.to_string())
+      }
       Self::WasmParse { specifier, err, .. } => write!(
         f,
         "The Wasm module could not be parsed: {err}\n  Specifier: {specifier}"
diff --git a/tests/specs/ecosystem/mrii/rocket_io/0_1_3.test b/tests/specs/ecosystem/mrii/rocket_io/0_1_3.test
index 67df08ff..2dea8726 100644
--- a/tests/specs/ecosystem/mrii/rocket_io/0_1_3.test
+++ b/tests/specs/ecosystem/mrii/rocket_io/0_1_3.test
@@ -77,10 +77,10 @@ error: Error: [ERR_PACKAGE_PATH_NOT_EXPORTED] Package subpath './build/esm/socke
     at ext:deno_cli_tsc/97_ts_host.js:749:49
     at spanned (ext:deno_cli_tsc/97_ts_host.js:16:12)
     at Object.host.<computed> [as resolveModuleNameLiterals] (ext:deno_cli_tsc/97_ts_host.js:749:14)
-    at resolveModuleNamesWorker (ext:deno_cli_tsc/00_typescript.js:127677:20)
-    at resolveNamesReusingOldState (ext:deno_cli_tsc/00_typescript.js:127813:14)
-    at resolveModuleNamesReusingOldState (ext:deno_cli_tsc/00_typescript.js:127769:12)
-    at processImportedModules (ext:deno_cli_tsc/00_typescript.js:129227:118)
-    at findSourceFileWorker (ext:deno_cli_tsc/00_typescript.js:129034:7)
-    at findSourceFile (ext:deno_cli_tsc/00_typescript.js:128886:20)
+    at resolveModuleNamesWorker (ext:deno_cli_tsc/00_typescript.js:127688:20)
+    at resolveNamesReusingOldState (ext:deno_cli_tsc/00_typescript.js:127824:14)
+    at resolveModuleNamesReusingOldState (ext:deno_cli_tsc/00_typescript.js:127780:12)
+    at processImportedModules (ext:deno_cli_tsc/00_typescript.js:129238:118)
+    at findSourceFileWorker (ext:deno_cli_tsc/00_typescript.js:129045:7)
+    at findSourceFile (ext:deno_cli_tsc/00_typescript.js:128897:20)
 
diff --git a/tests/specs/graph/cjs/file_export.txt b/tests/specs/graph/cjs/file_export.txt
index 39fef25f..1e1407fb 100644
--- a/tests/specs/graph/cjs/file_export.txt
+++ b/tests/specs/graph/cjs/file_export.txt
@@ -12,7 +12,7 @@ export class Test {}
   "modules": [
     {
       "specifier": "file:///file.cjs",
-      "error": "The module's source code could not be parsed: 'import', and 'export' cannot be used outside of module code at file:///file.cjs:1:1\n\n  export class Test {}\n  ~~~~~~"
+      "error": "'import', and 'export' cannot be used outside of module code\n  |\n1 | export class Test {}\n  | ~~~~~~\n    at file:///file.cjs:1:1"
     },
     {
       "kind": "esm",