diff --git a/web/.storybook/preview.js b/web/.storybook/preview.js
index 0a96b8be94fb4..ac52fec0266f8 100644
--- a/web/.storybook/preview.js
+++ b/web/.storybook/preview.js
@@ -21,8 +21,11 @@ import { darkTheme, lightTheme } from './../packages/design/src/theme';
 import DefaultThemeProvider from '../packages/design/src/ThemeProvider';
 import Box from './../packages/design/src/Box';
 import '../packages/teleport/src/lib/polyfillRandomUuid';
-import { ThemeProvider as TeletermThemeProvider } from './../packages/teleterm/src/ui/ThemeProvider';
-import { theme as TeletermTheme } from './../packages/teleterm/src/ui/ThemeProvider/theme';
+import { StaticThemeProvider as TeletermThemeProvider } from './../packages/teleterm/src/ui/ThemeProvider';
+import {
+  darkTheme as teletermDarkTheme,
+  lightTheme as teletermLightTheme,
+} from './../packages/teleterm/src/ui/ThemeProvider/theme';
 import { handlersTeleport } from './../packages/teleport/src/mocks/handlers';
 
 // Checks we are running non-node environment (browser)
@@ -41,7 +44,10 @@ const ThemeDecorator = (storyFn, meta) => {
 
   if (meta.title.startsWith('Teleterm/')) {
     ThemeProvider = TeletermThemeProvider;
-    theme = TeletermTheme;
+    theme =
+      meta.globals.theme === 'Dark Theme'
+        ? teletermDarkTheme
+        : teletermLightTheme;
   } else {
     ThemeProvider = DefaultThemeProvider;
     theme = meta.globals.theme === 'Dark Theme' ? darkTheme : lightTheme;
diff --git a/web/packages/teleterm/src/main.ts b/web/packages/teleterm/src/main.ts
index 4687b03025a36..a57a9c1d49944 100644
--- a/web/packages/teleterm/src/main.ts
+++ b/web/packages/teleterm/src/main.ts
@@ -18,7 +18,7 @@ import { spawn } from 'child_process';
 
 import path from 'path';
 
-import { app, globalShortcut, shell } from 'electron';
+import { app, globalShortcut, shell, nativeTheme } from 'electron';
 
 import MainProcess from 'teleterm/mainProcess';
 import { getRuntimeSettings } from 'teleterm/mainProcess/runtimeSettings';
@@ -59,6 +59,8 @@ async function initializeApp(): Promise<void> {
     jsonSchemaFile: configJsonSchemaFileStorage,
     platform: settings.platform,
   });
+
+  nativeTheme.themeSource = configService.get('theme').value;
   const windowsManager = new WindowsManager(appStateFileStorage, settings);
 
   process.on('uncaughtException', (error, origin) => {
diff --git a/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts b/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts
index 318aec0ad0c0a..f15d25fc30cae 100644
--- a/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts
+++ b/web/packages/teleterm/src/mainProcess/fixtures/mocks.ts
@@ -68,6 +68,14 @@ export class MockMainProcessClient implements MainProcessClient {
   async openConfigFile() {
     return '';
   }
+
+  shouldUseDarkColors() {
+    return true;
+  }
+
+  subscribeToNativeThemeUpdate() {
+    return { cleanup: () => undefined };
+  }
 }
 
 export const makeRuntimeSettings = (
diff --git a/web/packages/teleterm/src/mainProcess/mainProcess.ts b/web/packages/teleterm/src/mainProcess/mainProcess.ts
index ed795bce04694..df922b2e717d0 100644
--- a/web/packages/teleterm/src/mainProcess/mainProcess.ts
+++ b/web/packages/teleterm/src/mainProcess/mainProcess.ts
@@ -26,6 +26,7 @@ import {
   ipcMain,
   Menu,
   MenuItemConstructorOptions,
+  nativeTheme,
   shell,
 } from 'electron';
 import { wait } from 'shared/utils/wait';
@@ -193,6 +194,10 @@ export default class MainProcess {
       event.returnValue = this.settings;
     });
 
+    ipcMain.on('main-process-should-use-dark-colors', event => {
+      event.returnValue = nativeTheme.shouldUseDarkColors;
+    });
+
     ipcMain.handle('main-process-get-resolved-child-process-addresses', () => {
       return this.resolvedChildProcessAddresses;
     });
diff --git a/web/packages/teleterm/src/mainProcess/mainProcessClient.ts b/web/packages/teleterm/src/mainProcess/mainProcessClient.ts
index 6bb35619a05c6..1bb317f1cf880 100644
--- a/web/packages/teleterm/src/mainProcess/mainProcessClient.ts
+++ b/web/packages/teleterm/src/mainProcess/mainProcessClient.ts
@@ -53,8 +53,20 @@ export default function createMainProcessClient(): MainProcessClient {
     removeTshSymlinkMacOs() {
       return ipcRenderer.invoke('main-process-remove-tsh-symlink-macos');
     },
-    openConfigFile(): Promise<string> {
+    openConfigFile() {
       return ipcRenderer.invoke('main-process-open-config-file');
     },
+    shouldUseDarkColors() {
+      return ipcRenderer.sendSync('main-process-should-use-dark-colors');
+    },
+    subscribeToNativeThemeUpdate: listener => {
+      const onThemeChange = (_, value: { shouldUseDarkColors: boolean }) =>
+        listener(value);
+      const channel = 'main-process-native-theme-update';
+      ipcRenderer.addListener(channel, onThemeChange);
+      return {
+        cleanup: () => ipcRenderer.removeListener(channel, onThemeChange),
+      };
+    },
   };
 }
diff --git a/web/packages/teleterm/src/mainProcess/types.ts b/web/packages/teleterm/src/mainProcess/types.ts
index 28798a576207b..62e8d51288ada 100644
--- a/web/packages/teleterm/src/mainProcess/types.ts
+++ b/web/packages/teleterm/src/mainProcess/types.ts
@@ -75,6 +75,13 @@ export type MainProcessClient = {
 
   /** Opens config file and returns a path to it. */
   openConfigFile(): Promise<string>;
+  shouldUseDarkColors(): boolean;
+  /** Subscribes to updates of the native theme. Returns a cleanup function. */
+  subscribeToNativeThemeUpdate: (
+    listener: (value: { shouldUseDarkColors: boolean }) => void
+  ) => {
+    cleanup: () => void;
+  };
 };
 
 export type ChildProcessAddresses = {
diff --git a/web/packages/teleterm/src/mainProcess/windowsManager.ts b/web/packages/teleterm/src/mainProcess/windowsManager.ts
index 934a0530c001f..bc3de2c3f207b 100644
--- a/web/packages/teleterm/src/mainProcess/windowsManager.ts
+++ b/web/packages/teleterm/src/mainProcess/windowsManager.ts
@@ -16,11 +16,18 @@
 
 import path from 'path';
 
-import { app, BrowserWindow, Menu, Rectangle, screen } from 'electron';
+import {
+  app,
+  BrowserWindow,
+  Menu,
+  Rectangle,
+  screen,
+  nativeTheme,
+} from 'electron';
 
 import { FileStorage } from 'teleterm/services/fileStorage';
 import { RuntimeSettings } from 'teleterm/mainProcess/types';
-import theme from 'teleterm/ui/ThemeProvider/theme';
+import { darkTheme, lightTheme } from 'teleterm/ui/ThemeProvider/theme';
 
 type WindowState = Rectangle;
 
@@ -47,13 +54,16 @@ export class WindowsManager {
   }
 
   createWindow(): void {
+    const activeTheme = nativeTheme.shouldUseDarkColors
+      ? darkTheme
+      : lightTheme;
     const windowState = this.getWindowState();
     const window = new BrowserWindow({
       x: windowState.x,
       y: windowState.y,
       width: windowState.width,
       height: windowState.height,
-      backgroundColor: theme.colors.levels.sunken,
+      backgroundColor: activeTheme.colors.levels.sunken,
       minWidth: 400,
       minHeight: 300,
       show: false,
@@ -88,6 +98,12 @@ export class WindowsManager {
       this.popupUniversalContextMenu(window, props);
     });
 
+    nativeTheme.on('updated', () => {
+      window.webContents.send('main-process-native-theme-update', {
+        shouldUseDarkColors: nativeTheme.shouldUseDarkColors,
+      });
+    });
+
     window.webContents.session.setPermissionRequestHandler(
       (webContents, permission, callback) => {
         // deny all permissions requests, we currently do not require any
diff --git a/web/packages/teleterm/src/services/config/appConfigSchema.ts b/web/packages/teleterm/src/services/config/appConfigSchema.ts
index 62d17451d2d38..2b6e0cc435c68 100644
--- a/web/packages/teleterm/src/services/config/appConfigSchema.ts
+++ b/web/packages/teleterm/src/services/config/appConfigSchema.ts
@@ -106,6 +106,10 @@ export const createAppConfigSchema = (platform: Platform) => {
       .max(256)
       .default(15)
       .describe('Font size for the terminal.'),
+    theme: z
+      .enum(['light', 'dark', 'system'])
+      .default('system')
+      .describe('Color theme for the app.'),
   });
 };
 
diff --git a/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/Terminal.tsx b/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/Terminal.tsx
index 29353a7bf7a02..cfcecd04f1674 100644
--- a/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/Terminal.tsx
+++ b/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/Terminal.tsx
@@ -15,7 +15,7 @@ limitations under the License.
 */
 
 import React, { useEffect, useRef, useState } from 'react';
-import styled from 'styled-components';
+import styled, { useTheme } from 'styled-components';
 import { Box, Flex } from 'design';
 import { debounce } from 'shared/utils/highbar';
 import {
@@ -54,6 +54,7 @@ export function Terminal(props: TerminalProps) {
   const [startPtyProcessAttempt, setStartPtyProcessAttempt] = useState<
     Attempt<void>
   >(makeEmptyAttempt());
+  const theme = useTheme();
 
   useEffect(() => {
     const removeOnStartErrorListener = props.ptyProcess.onStartError(
@@ -69,6 +70,7 @@ export function Terminal(props: TerminalProps) {
     const ctrl = new XTermCtrl(props.ptyProcess, {
       el: refElement.current,
       fontSize: props.fontSize,
+      theme: theme.colors.terminal,
     });
 
     // Start the PTY process.
@@ -103,6 +105,12 @@ export function Terminal(props: TerminalProps) {
     refCtrl.current.requestResize();
   }, [props.visible]);
 
+  useEffect(() => {
+    if (refCtrl.current) {
+      refCtrl.current.term.options.theme = theme.colors.terminal;
+    }
+  }, [theme]);
+
   return (
     <Flex
       flexDirection="column"
diff --git a/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/ctrl.ts b/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/ctrl.ts
index c93053aaef25a..b3213c9e97c62 100644
--- a/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/ctrl.ts
+++ b/web/packages/teleterm/src/ui/DocumentTerminal/Terminal/ctrl.ts
@@ -15,19 +15,19 @@ limitations under the License.
 */
 
 import 'xterm/css/xterm.css';
-import { IDisposable, Terminal } from 'xterm';
+import { IDisposable, ITheme, Terminal } from 'xterm';
 import { FitAddon } from 'xterm-addon-fit';
 import { debounce } from 'shared/utils/highbar';
 
 import { IPtyProcess } from 'teleterm/sharedProcess/ptyHost';
 import Logger from 'teleterm/logger';
-import theme from 'teleterm/ui/ThemeProvider/theme';
 
 const WINDOW_RESIZE_DEBOUNCE_DELAY = 200;
 
 type Options = {
   el: HTMLElement;
   fontSize: number;
+  theme: ITheme;
 };
 
 export default class TtyTerminal {
@@ -62,29 +62,7 @@ export default class TtyTerminal {
       fontSize: this.options.fontSize,
       scrollback: 5000,
       minimumContrastRatio: 4.5, // minimum for WCAG AA compliance
-      theme: {
-        foreground: theme.colors.terminal.foreground,
-        background: theme.colors.terminal.background,
-        selectionBackground: theme.colors.terminal.selectionBackground,
-        cursor: theme.colors.terminal.cursor,
-        cursorAccent: theme.colors.terminal.cursorAccent,
-        red: theme.colors.terminal.red,
-        green: theme.colors.terminal.green,
-        yellow: theme.colors.terminal.yellow,
-        blue: theme.colors.terminal.blue,
-        magenta: theme.colors.terminal.magenta,
-        cyan: theme.colors.terminal.cyan,
-        brightWhite: theme.colors.terminal.brightWhite,
-        white: theme.colors.terminal.white,
-        brightBlack: theme.colors.terminal.brightBlack,
-        black: theme.colors.terminal.black,
-        brightRed: theme.colors.terminal.brightRed,
-        brightGreen: theme.colors.terminal.brightGreen,
-        brightYellow: theme.colors.terminal.brightYellow,
-        brightBlue: theme.colors.terminal.brightBlue,
-        brightMagenta: theme.colors.terminal.brightMagenta,
-        brightCyan: theme.colors.terminal.brightCyan,
-      },
+      theme: this.options.theme,
       windowOptions: {
         setWinSizeChars: true,
       },
diff --git a/web/packages/teleterm/src/ui/ThemeProvider/ThemeProvider.tsx b/web/packages/teleterm/src/ui/ThemeProvider/ThemeProvider.tsx
index 568f1b2b91cae..3b54b2318d86e 100644
--- a/web/packages/teleterm/src/ui/ThemeProvider/ThemeProvider.tsx
+++ b/web/packages/teleterm/src/ui/ThemeProvider/ThemeProvider.tsx
@@ -14,22 +14,62 @@ See the License for the specific language governing permissions and
 limitations under the License.
 */
 
-import React from 'react';
+import React, { useEffect, useState } from 'react';
 import {
   ThemeProvider as StyledThemeProvider,
   StyleSheetManager,
 } from 'styled-components';
 
+import { useAppContext } from 'teleterm/ui/appContextProvider';
+
 import { GlobalStyle } from './globals';
-import theme from './theme';
-
-export const ThemeProvider: React.FC = props => (
-  <StyledThemeProvider theme={theme}>
-    <StyleSheetManager disableVendorPrefixes>
-      <React.Fragment>
-        <GlobalStyle />
-        {props.children}
-      </React.Fragment>
-    </StyleSheetManager>
-  </StyledThemeProvider>
-);
+import { darkTheme, lightTheme } from './theme';
+
+export const ThemeProvider = (props: React.PropsWithChildren<unknown>) => {
+  // Listening to Electron's nativeTheme.on('updated') is a workaround.
+  // The renderer should be able to get the current theme via "prefers-color-scheme" media query.
+  // Unfortunately, it does not work correctly on Ubuntu where the query from above always returns the old value
+  // (for example, when the app was launched in a dark mode, it always returns 'dark'
+  // ignoring that the system theme is now 'light').
+  // Related Electron issue: https://github.com/electron/electron/issues/21427#issuecomment-589796481,
+  // Related Chromium issue: https://bugs.chromium.org/p/chromium/issues/detail?id=998903
+  //
+  // Additional issue is that nativeTheme does not return correct values at all on Fedora:
+  // https://github.com/electron/electron/issues/33635#issuecomment-1502215450
+  const ctx = useAppContext();
+  const [activeTheme, setActiveTheme] = useState(() =>
+    ctx.mainProcessClient.shouldUseDarkColors() ? darkTheme : lightTheme
+  );
+
+  useEffect(() => {
+    const { cleanup } = ctx.mainProcessClient.subscribeToNativeThemeUpdate(
+      ({ shouldUseDarkColors }) => {
+        setActiveTheme(shouldUseDarkColors ? darkTheme : lightTheme);
+      }
+    );
+
+    return cleanup;
+  }, [ctx.mainProcessClient]);
+
+  return (
+    <StaticThemeProvider theme={activeTheme}>
+      {props.children}
+    </StaticThemeProvider>
+  );
+};
+
+/** Uses a theme from a prop. Useful in storybook. */
+export const StaticThemeProvider = (
+  props: React.PropsWithChildren<{ theme?: unknown }>
+) => {
+  return (
+    <StyledThemeProvider theme={props.theme}>
+      <StyleSheetManager disableVendorPrefixes>
+        <React.Fragment>
+          <GlobalStyle />
+          {props.children}
+        </React.Fragment>
+      </StyleSheetManager>
+    </StyledThemeProvider>
+  );
+};
diff --git a/web/packages/teleterm/src/ui/ThemeProvider/index.ts b/web/packages/teleterm/src/ui/ThemeProvider/index.ts
index 8820126cfdff8..186c255fc6085 100644
--- a/web/packages/teleterm/src/ui/ThemeProvider/index.ts
+++ b/web/packages/teleterm/src/ui/ThemeProvider/index.ts
@@ -14,4 +14,4 @@ See the License for the specific language governing permissions and
 limitations under the License.
 */
 
-export { ThemeProvider } from './ThemeProvider';
+export * from './ThemeProvider';
diff --git a/web/packages/teleterm/src/ui/ThemeProvider/theme.ts b/web/packages/teleterm/src/ui/ThemeProvider/theme.ts
index 682ca96a998f2..9e038f24af032 100644
--- a/web/packages/teleterm/src/ui/ThemeProvider/theme.ts
+++ b/web/packages/teleterm/src/ui/ThemeProvider/theme.ts
@@ -23,7 +23,7 @@ import { lighten } from 'design/theme/utils/colorManipulator';
 
 const sansSerif = 'system-ui';
 
-const darkTheme = {
+export const darkTheme = {
   ...designDarkTheme,
   colors: {
     ...designDarkTheme.colors,
@@ -43,8 +43,7 @@ const darkTheme = {
   },
 };
 
-// eslint-disable-next-line @typescript-eslint/no-unused-vars
-const lightTheme = {
+export const lightTheme = {
   ...designLightTheme,
   font: sansSerif,
   fonts: {
@@ -52,5 +51,3 @@ const lightTheme = {
     mono: fonts.mono,
   },
 };
-
-export default darkTheme;