Code change:
/** * Inline hints */ <del> export const editorInlayHintForeground = registerColor('editorInlayHint.foreground', { dark: badgeForeground, light: badgeForeground, hcDark: Color.black, hcLight: badgeForeground }, nls.localize('editorInlayHintForeground', 'Foreground color of inline hints')); export const editorInlayHintBackground = registerColor('editorInlayHint.background', { dark: transparent(badgeBackground, .8), light: transparent(badgeBackground, .6), hcDark: '#f38518', hcLight: badgeBackground }, nls.localize('editorInlayHintBackground', 'Background color of inline hints')); </del> <ins> export const editorInlayHintForeground = registerColor('editorInlayHint.foreground', { dark: foreground, light: foreground, hcDark: Color.black, hcLight: badgeForeground }, nls.localize('editorInlayHintForeground', 'Foreground color of inline hints')); export const editorInlayHintBackground = registerColor('editorInlayHint.background', { dark: transparent(badgeBackground, .25), light: transparent(badgeBackground, .3), hcDark: '#f38518', hcLight: badgeBackground }, nls.localize('editorInlayHintBackground', 'Background color of inline hints')); </ins> export const editorInlayHintTypeForeground = registerColor('editorInlayHint.typeForeground', { dark: editorInlayHintForeground, light: editorInlayHintForeground, hcDark: editorInlayHintForeground, hcLight: editorInlayHintForeground }, nls.localize('editorInlayHintForegroundTypes', 'Foreground color of inline hints for types')); export const editorInlayHintTypeBackground = registerColor('editorInlayHint.typeBackground', { dark: editorInlayHintBackground, light: editorInlayHintBackground, hcDark: editorInlayHintBackground, hcLight: editorInlayHintBackground }, nls.localize('editorInlayHintBackgroundTypes', 'Background color of inline hints for types')); export const editorInlayHintParameterForeground = registerColor('editorInlayHint.parameterForeground', { dark: editorInlayHintForeground, light: editorInlayHintForeground, hcDark: editorInlayHintForeground, hcLight: editorInlayHintForeground }, nls.localize('editorInlayHintForegroundParameter', 'Foreground color of inline hints for parameters'));

Related discussion:
text: I heavily use and love inlay hints but find their current styling too prominent for "hints" and think it harms readability and other editor features that use highlighting of words such as "highlight occurrences." Try finding highlighted occurrence of : Current: <img width="1779" alt="Screenshot 2023-06-29 at 11 51 00" src=""With less prominent hints: <img width="1779" alt="Screenshot 2023-06-29 at 11 47 31" src=""I think in the latter screenshot, inlay hints are less prominent but still as useful, as they are literally "hints" and don't need to be so prominent. If not as default, having a setting to tweak the background & color of hints would be great.
I think I've read a similar issue recently (should have the inlay-hint label).
Can be configured via and leaving it up to to tweak this further.
Updatde the default light/dark themes in to make these more subtle. Still want to keep the backgrounds since these could otherwise be confused with the ghost text in Copilot, comments in some themes, etc. <img width="422" alt="CleanShot 2023-06-29 at 11 23 35 src=""<img width="430" alt="CleanShot 2023-06-29 at 11 22 43 src=""