diff --git a/crates/typst/src/layout/inline/mod.rs b/crates/typst/src/layout/inline/mod.rs
index d79dcba49..9928cb822 100644
--- a/crates/typst/src/layout/inline/mod.rs
+++ b/crates/typst/src/layout/inline/mod.rs
@@ -73,7 +73,8 @@ pub(crate) fn layout_inline(
         let lines = linebreak(&engine, &p, region.x - p.hang);
 
         // Stack the lines into one frame per region.
-        finalize(&mut engine, &p, &lines, region, expand)
+        let shrink = ParElem::shrink_in(styles);
+        finalize(&mut engine, &p, &lines, region, expand, shrink)
     }
 
     let fragment = cached(
@@ -1191,6 +1192,7 @@ fn finalize(
     lines: &[Line],
     region: Size,
     expand: bool,
+    shrink: bool,
 ) -> SourceResult<Fragment> {
     // Determine the paragraph's width: Full width of the region if we
     // should expand or there's fractional spacing, fit-to-width otherwise.
@@ -1207,7 +1209,7 @@ fn finalize(
     // Stack the lines into one frame per region.
     let mut frames: Vec<Frame> = lines
         .iter()
-        .map(|line| commit(engine, p, line, width, region.y))
+        .map(|line| commit(engine, p, line, width, region.y, shrink))
         .collect::<SourceResult<_>>()?;
 
     // Prevent orphans.
@@ -1243,6 +1245,7 @@ fn commit(
     line: &Line,
     width: Abs,
     full: Abs,
+    shrink: bool,
 ) -> SourceResult<Frame> {
     let mut remaining = width - line.width - p.hang;
     let mut offset = Abs::zero();
@@ -1289,12 +1292,12 @@ fn commit(
     let mut justification_ratio = 0.0;
     let mut extra_justification = Abs::zero();
 
-    let shrink = line.shrinkability();
+    let shrinkability = line.shrinkability();
     let stretch = line.stretchability();
-    if remaining < Abs::zero() && shrink > Abs::zero() {
+    if remaining < Abs::zero() && shrinkability > Abs::zero() && shrink {
         // Attempt to reduce the length of the line, using shrinkability.
-        justification_ratio = (remaining / shrink).max(-1.0);
-        remaining = (remaining + shrink).min(Abs::zero());
+        justification_ratio = (remaining / shrinkability).max(-1.0);
+        remaining = (remaining + shrinkability).min(Abs::zero());
     } else if line.justify && fr.is_zero() {
         // Attempt to increase the length of the line, using stretchability.
         if stretch > Abs::zero() {
diff --git a/crates/typst/src/model/par.rs b/crates/typst/src/model/par.rs
index cc4a1fcb7..f8a833aca 100644
--- a/crates/typst/src/model/par.rs
+++ b/crates/typst/src/model/par.rs
@@ -96,6 +96,15 @@ pub struct ParElem {
     #[resolve]
     pub hanging_indent: Length,
 
+    /// Indicates wheter an overflowing line should be shrunk.
+    ///
+    /// This property is set to `false` on raw blocks, because shrinking a line
+    /// could visually break the indentation.
+    #[ghost]
+    #[internal]
+    #[default(true)]
+    pub shrink: bool,
+
     /// The contents of the paragraph.
     #[external]
     #[required]
diff --git a/crates/typst/src/text/raw.rs b/crates/typst/src/text/raw.rs
index 2d590d2a9..f0105363f 100644
--- a/crates/typst/src/text/raw.rs
+++ b/crates/typst/src/text/raw.rs
@@ -16,7 +16,7 @@ use crate::foundations::{
     PlainText, Show, ShowSet, Smart, StyleChain, Styles, Synthesize, Value,
 };
 use crate::layout::{BlockElem, Em, HAlignment};
-use crate::model::Figurable;
+use crate::model::{Figurable, ParElem};
 use crate::syntax::{split_newlines, LinkedNode, Span, Spanned};
 use crate::text::{
     FontFamily, FontList, Hyphenate, Lang, LinebreakElem, LocalName, Region,
@@ -440,13 +440,16 @@ impl Show for Packed<RawElem> {
 }
 
 impl ShowSet for Packed<RawElem> {
-    fn show_set(&self, _: StyleChain) -> Styles {
+    fn show_set(&self, styles: StyleChain) -> Styles {
         let mut out = Styles::new();
         out.set(TextElem::set_overhang(false));
         out.set(TextElem::set_hyphenate(Hyphenate(Smart::Custom(false))));
         out.set(TextElem::set_size(TextSize(Em::new(0.8).into())));
         out.set(TextElem::set_font(FontList(vec![FontFamily::new("DejaVu Sans Mono")])));
         out.set(SmartQuoteElem::set_enabled(false));
+        if self.block(styles) {
+            out.set(ParElem::set_shrink(false));
+        }
         out
     }
 }
diff --git a/tests/ref/layout/code-indent-shrink.png b/tests/ref/layout/code-indent-shrink.png
new file mode 100644
index 000000000..26f6ec404
Binary files /dev/null and b/tests/ref/layout/code-indent-shrink.png differ
diff --git a/tests/typ/layout/code-indent-shrink.typ b/tests/typ/layout/code-indent-shrink.typ
new file mode 100644
index 000000000..1527e061c
--- /dev/null
+++ b/tests/typ/layout/code-indent-shrink.typ
@@ -0,0 +1,28 @@
+// Spaces in raw blocks should not be shrunk
+// as it would mess up the indentation of code
+// https://github.com/typst/typst/issues/3191
+
+---
+#set par(justify: true)
+
+#show raw.where(block: true): block.with(
+  fill: luma(240),
+  inset: 10pt,
+)
+
+#block(
+  width: 60%,
+  ```py
+  for x in xs:
+      print("x=",x)
+  ```
+)
+
+---
+// In normal paragraphs, spaces should still be shrunk.
+// The first line here serves as a reference, while the second
+// uses non-breaking spaces to create an overflowing line
+// (which should shrink).
+~~~~No shrinking here
+
+~~~~The~spaces~on~this~line~shrink
\ No newline at end of file