diff --git a/AUTHORS b/AUTHORS
index 0560caf72..398db4b7b 100644
--- a/AUTHORS
+++ b/AUTHORS
@@ -311,6 +311,7 @@ Omar Kohl
 Omer Hadari
 Ondřej Súkup
 Oscar Benjamin
+Pandula Gajadeera
 Parth Patel
 Patrick Hayes
 Patrick Lannigan
diff --git a/changelog/11666.improvement.rst b/changelog/11666.improvement.rst
new file mode 100644
index 000000000..9cb3a3b7f
--- /dev/null
+++ b/changelog/11666.improvement.rst
@@ -0,0 +1,5 @@
+Improved the terminal writer to be able to use Terminal256Formatter and TerminalTrueColorFormatter.
+
+These are newer versions of TerminalFormmater from the pygments library that is currently in use.
+
+These style of these formatters are set by the users through the environmental variable PYTEST_THEME.
diff --git a/src/_pytest/_io/terminalwriter.py b/src/_pytest/_io/terminalwriter.py
index 5bcd05927..f21a38059 100644
--- a/src/_pytest/_io/terminalwriter.py
+++ b/src/_pytest/_io/terminalwriter.py
@@ -218,13 +218,28 @@ class TerminalWriter:
             return source
         else:
             try:
+                # Import new more rich color formatters from the pygments library
+                from pygments.formatters.terminal256 import Terminal256Formatter
+                from pygments.formatters.terminal256 import TerminalTrueColorFormatter
+
+                # Use terminal formatters depending on user environment variables
+                if os.environ.get("COLORTERM", "") in ("truecolor", "24bit"):
+                    # Style determined by user set environment variable, if none then use default style
+                    terminal_formatter = TerminalTrueColorFormatter(
+                        style=os.getenv("PYTEST_THEME", "default")
+                    )
+                elif "256" in os.environ.get("TERM", ""):
+                    terminal_formatter = Terminal256Formatter(
+                        style=os.getenv("PYTEST_THEME", "default")
+                    )
+                else:
+                    terminal_formatter = TerminalFormatter(
+                        bg=os.getenv("PYTEST_THEME_MODE", "dark"),
+                        style=os.getenv("PYTEST_THEME"),
+                    )
                 highlighted: str = highlight(
                     source,
                     Lexer(),
-                    TerminalFormatter(
-                        bg=os.getenv("PYTEST_THEME_MODE", "dark"),
-                        style=os.getenv("PYTEST_THEME"),
-                    ),
                 )
                 # pygments terminal formatter may add a newline when there wasn't one.
                 # We don't want this, remove.