diff --git a/lib/irb/color.rb b/lib/irb/color.rb
index d2b9674a7..d325c8ded 100644
--- a/lib/irb/color.rb
+++ b/lib/irb/color.rb
@@ -155,27 +155,29 @@ def scan(code, allow_last_error:)
         pos = [1, 0]
 
         verbose, $VERBOSE = $VERBOSE, nil
-        lexer = Ripper::Lexer.new(code)
-        if lexer.respond_to?(:scan) # Ruby 2.7+
-          lexer.scan.each do |elem|
-            str = elem.tok
-            next if allow_last_error and /meets end of file|unexpected end-of-input/ =~ elem.message
-            next if ([elem.pos[0], elem.pos[1] + str.bytesize] <=> pos) <= 0
-
-            str.each_line do |line|
-              if line.end_with?("\n")
-                pos[0] += 1
-                pos[1] = 0
-              else
-                pos[1] += line.bytesize
+        RubyLex.compile_with_errors_suppressed(code) do |inner_code|
+          lexer = Ripper::Lexer.new(inner_code)
+          if lexer.respond_to?(:scan) # Ruby 2.7+
+            lexer.scan.each do |elem|
+              str = elem.tok
+              next if allow_last_error and /meets end of file|unexpected end-of-input/ =~ elem.message
+              next if ([elem.pos[0], elem.pos[1] + str.bytesize] <=> pos) <= 0
+
+              str.each_line do |line|
+                if line.end_with?("\n")
+                  pos[0] += 1
+                  pos[1] = 0
+                else
+                  pos[1] += line.bytesize
+                end
               end
-            end
 
-            yield(elem.event, str, elem.state)
-          end
-        else
-          lexer.parse.each do |elem|
-            yield(elem.event, elem.tok, elem.state)
+              yield(elem.event, str, elem.state)
+            end
+          else
+            lexer.parse.each do |elem|
+              yield(elem.event, elem.tok, elem.state)
+            end
           end
         end
         $VERBOSE = verbose
diff --git a/lib/irb/ruby-lex.rb b/lib/irb/ruby-lex.rb
index 0c71d5ec0..02bc54880 100644
--- a/lib/irb/ruby-lex.rb
+++ b/lib/irb/ruby-lex.rb
@@ -30,6 +30,19 @@ def initialize
     @prompt = nil
   end
 
+  def self.compile_with_errors_suppressed(code)
+    begin
+      result = yield code
+    rescue ArgumentError => e
+      magic_comment_regexp = /\A(?<shebang>#.*\n)?#\s*(?:encoding|coding)\s*:.*(?<nl>\n)?/
+      if e.message.match?(/unknown encoding name/) && code.match?(magic_comment_regexp)
+        code = code.gsub(magic_comment_regexp, "\\k<shebang>#\\k<nl>")
+        retry
+      end
+    end
+    result
+  end
+
   # io functions
   def set_input(io, p = nil, &block)
     @io = io
@@ -76,7 +89,10 @@ def set_prompt(p = nil, &block)
 
   def ripper_lex_without_warning(code)
     verbose, $VERBOSE = $VERBOSE, nil
-    tokens = Ripper.lex(code)
+    tokens = nil
+    self.class.compile_with_errors_suppressed(code) do |inner_code|
+      tokens = Ripper.lex(inner_code)
+    end
     $VERBOSE = verbose
     tokens
   end
@@ -210,7 +226,9 @@ def check_code_block(code)
       when 'jruby'
         JRuby.compile_ir(code)
       else
-        RubyVM::InstructionSequence.compile(code)
+        self.class.compile_with_errors_suppressed(code) do |inner_code|
+          RubyVM::InstructionSequence.compile(inner_code)
+        end
       end
     rescue EncodingError
       # This is for a hash with invalid encoding symbol, {"\xAE": 1}
diff --git a/test/irb/test_ruby_lex.rb b/test/irb/test_ruby_lex.rb
index dd5a1f7ca..bc5b4feaf 100644
--- a/test/irb/test_ruby_lex.rb
+++ b/test/irb/test_ruby_lex.rb
@@ -126,5 +126,31 @@ def test_a_closed_brace_and_not_closed_brace_in_a_line
         assert_indenting(lines, row.new_line_spaces, true)
       end
     end
+
+    def test_incomplete_coding_magic_comment
+      input_with_correct_indents = [
+        Row.new(%q(#coding:u), nil, 0),
+      ]
+
+      lines = []
+      input_with_correct_indents.each do |row|
+        lines << row.content
+        assert_indenting(lines, row.current_line_spaces, false)
+        assert_indenting(lines, row.new_line_spaces, true)
+      end
+    end
+
+    def test_incomplete_encoding_magic_comment
+      input_with_correct_indents = [
+        Row.new(%q(#encoding:u), nil, 0),
+      ]
+
+      lines = []
+      input_with_correct_indents.each do |row|
+        lines << row.content
+        assert_indenting(lines, row.current_line_spaces, false)
+        assert_indenting(lines, row.new_line_spaces, true)
+      end
+    end
   end
 end