diff --git a/src/apps/terminal/FindWindow.cpp b/src/apps/terminal/FindWindow.cpp
index 4bcd81cf2e..02bd9c0fea 100644
--- a/src/apps/terminal/FindWindow.cpp
+++ b/src/apps/terminal/FindWindow.cpp
@@ -98,8 +98,6 @@ FindWindow::FindWindow(BMessenger messenger, const BString& str,
 	fFindButton->MakeDefault(true);
 
 	AddShortcut((uint32)'W', B_COMMAND_KEY, new BMessage(MSG_FIND_HIDE));
-
-	Show();
 }
 
 
diff --git a/src/apps/terminal/TermWindow.cpp b/src/apps/terminal/TermWindow.cpp
index 67a884cb48..073a697279 100644
--- a/src/apps/terminal/TermWindow.cpp
+++ b/src/apps/terminal/TermWindow.cpp
@@ -39,6 +39,7 @@
 #include <Path.h>
 #include <PopUpMenu.h>
 #include <PrintJob.h>
+#include <Rect.h>
 #include <Roster.h>
 #include <Screen.h>
 #include <ScrollBar.h>
@@ -730,9 +731,32 @@ TermWindow::MessageReceived(BMessage *message)
 			break;
 
 		case MENU_FIND_STRING:
-			if (!fFindPanel) {
+			if (fFindPanel == NULL) {
 				fFindPanel = new FindWindow(this, fFindString, fFindSelection,
 					fMatchWord, fMatchCase, fForwardSearch);
+
+				// position the window under the mouse pointer
+				BPoint where;
+				uint32 buttons;
+				ChildAt(0)->GetMouse(&where, &buttons);
+				fFindPanel->MoveTo(ConvertToScreen(where));
+
+				// move window if outside of screen frame
+				BRect screenFrame = (BScreen(this)).Frame();
+				BRect frame = fFindPanel->Frame();
+				float extra = 30.0f;
+				if (frame.bottom + extra * 2 > screenFrame.bottom) {
+					fFindPanel->MoveBy(0,
+						screenFrame.bottom - frame.bottom - extra * 2);
+				} else if (frame.top - extra < screenFrame.top)
+					fFindPanel->MoveBy(0, screenFrame.top - frame.top + extra);
+
+				if (frame.right + extra > screenFrame.right) {
+					fFindPanel->MoveBy(screenFrame.right - frame.right
+						- extra, 0);
+				}
+
+				fFindPanel->Show();
 			} else
 				fFindPanel->Activate();
 			break;