diff --git a/src/nvim/decoration.c b/src/nvim/decoration.c
index 265bc11661..0181cc8983 100644
--- a/src/nvim/decoration.c
+++ b/src/nvim/decoration.c
@@ -348,18 +348,12 @@ next_mark:
     if (active && item.decor.spell != kNone) {
       spell = item.decor.spell;
     }
-    if (item.start_row == state->row && decor_virt_pos(&item.decor)
-        && item.draw_col != INT_MIN) {
-      if (item.start_col <= col) {
-        if (item.decor.virt_text_pos == kVTOverlay && item.draw_col == -1) {
-          item.draw_col = (item.decor.virt_text_hide && hidden) ? INT_MIN : win_col;
-        } else if (item.draw_col == -3) {
-          item.draw_col = -1;
-        }
-      } else if (wp->w_p_wrap
-                 && (item.decor.virt_text_pos == kVTRightAlign
-                     || item.decor.virt_text_pos == kVTWinCol)) {
-        item.draw_col = -3;
+    if (item.start_row == state->row && item.start_col <= col
+        && decor_virt_pos(&item.decor) && item.draw_col == -1) {
+      if (item.decor.virt_text_pos == kVTOverlay) {
+        item.draw_col = (item.decor.virt_text_hide && hidden) ? INT_MIN : win_col;
+      } else if (win_col < 0 && item.decor.virt_text_pos != kVTInline) {
+        item.draw_col = win_col;
       }
     }
     if (keep) {
diff --git a/src/nvim/decoration.h b/src/nvim/decoration.h
index 3d16aa803e..dfd26294f3 100644
--- a/src/nvim/decoration.h
+++ b/src/nvim/decoration.h
@@ -84,7 +84,8 @@ typedef struct {
   bool virt_text_owned;
   /// Screen column to draw the virtual text.
   /// When -1, the virtual text may be drawn after deciding where.
-  /// When -3, the virtual text should be drawn on a later screen line.
+  /// When -2, the virtual text should be drawn at the start of the screen line.
+  /// When -3, the virtual text should be drawn on the next screen line.
   /// When INT_MIN, the virtual text should no longer be drawn.
   int draw_col;
   uint64_t ns_id;
diff --git a/src/nvim/drawline.c b/src/nvim/drawline.c
index d0e31b41c3..b22699231d 100644
--- a/src/nvim/drawline.c
+++ b/src/nvim/drawline.c
@@ -282,6 +282,10 @@ static void draw_virt_text(win_T *wp, buf_T *buf, int col_off, int *end_col, int
       } else if (item->decor.virt_text_pos == kVTWinCol) {
         item->draw_col = MAX(item->decor.col + col_off, 0);
       }
+    } else if (item->draw_col == -2) {
+      item->draw_col = col_off;
+    } else if (item->draw_col == -3) {
+      item->draw_col = item->decor.virt_text_pos == kVTOverlay ? -2 : -1;
     }
     if (item->draw_col < 0) {
       continue;
@@ -3080,10 +3084,16 @@ int win_line(win_T *wp, linenr_T lnum, int startrow, int endrow, bool number_onl
 
     if (has_decor && (wp->w_p_rl ? (wlv.col < 0) : (wlv.col >= grid->cols))) {
       // At the end of screen line: might need to peek for decorations just after
-      // this position. Without wrapping, we might need to display win_col overlays
-      // from the entire text line.
-      colnr_T nextpos = wp->w_p_wrap ? (colnr_T)(ptr - line) : (colnr_T)strlen(line);
-      decor_redraw_col(wp, nextpos, wlv.off, true, &decor_state);
+      // this position.
+      if (wp->w_p_wrap) {
+        // FIXME: virt_text_hide doesn't work for overlay virt_text at the next char
+        // as it's not easy to check if the next char is inside Visual selection.
+        decor_redraw_col(wp, (int)(ptr - line), -3, false, &decor_state);
+      } else {
+        // Without wrapping, we might need to display right_align and win_col
+        // virt_text for the entire text line.
+        decor_redraw_col(wp, MAXCOL, -1, true, &decor_state);
+      }
     }
 
     // At end of screen line and there is more to come: Display the line
diff --git a/test/functional/ui/decorations_spec.lua b/test/functional/ui/decorations_spec.lua
index 4262f7ce77..8a94eaef1b 100644
--- a/test/functional/ui/decorations_spec.lua
+++ b/test/functional/ui/decorations_spec.lua
@@ -859,6 +859,43 @@ describe('extmark decorations', function()
     ]]}
   end)
 
+  it('overlay virtual text works with wrapped lines #25158', function()
+    screen:try_resize(50, 6)
+    insert(('ab'):rep(100))
+    for i = 0, 9 do
+      meths.buf_set_extmark(0, ns, 0, 42 + i, { virt_text={{tostring(i), 'ErrorMsg'}}, virt_text_pos='overlay'})
+      meths.buf_set_extmark(0, ns, 0, 91 + i, { virt_text={{tostring(i), 'ErrorMsg'}}, virt_text_pos='overlay', virt_text_hide = true})
+    end
+    screen:expect{grid=[[
+      ababababababababababababababababababababab{4:01234567}|
+      {4:89}abababababababababababababababababababa{4:012345678}|
+      {4:9}babababababababababababababababababababababababab|
+      ababababababababababababababababababababababababa^b|
+      {1:~                                                 }|
+                                                        |
+    ]]}
+
+    command('set number')
+    screen:expect{grid=[[
+      {2:  1 }ababababababababababababababababababababab{4:0123}|
+      {2:    }{4:456789}abababababababababababababababababababa{4:0}|
+      {2:    }{4:123456789}babababababababababababababababababab|
+      {2:    }ababababababababababababababababababababababab|
+      {2:    }abababababababa^b                              |
+                                                        |
+    ]]}
+
+    command('set cpoptions+=n')
+    screen:expect{grid=[[
+      {2:  1 }ababababababababababababababababababababab{4:0123}|
+      {4:456789}abababababababababababababababababababa{4:01234}|
+      {4:56789}babababababababababababababababababababababab|
+      ababababababababababababababababababababababababab|
+      aba^b                                              |
+                                                        |
+    ]]}
+  end)
+
   it('virt_text_hide hides overlay virtual text when extmark is off-screen', function()
     screen:try_resize(50, 3)
     command('set nowrap')
@@ -1028,12 +1065,12 @@ describe('extmark decorations', function()
   it('can have virtual text of right_align and fixed win_col position', function()
     insert(example_text)
     feed 'gg'
-    meths.buf_set_extmark(0, ns, 1, 0, { virt_text={{'Very', 'ErrorMsg'}},   virt_text_win_col=31, hl_mode='blend'})
+    meths.buf_set_extmark(0, ns, 1, 0, { virt_text={{'Very', 'ErrorMsg'}}, virt_text_win_col=31, hl_mode='blend'})
     meths.buf_set_extmark(0, ns, 1, 0, { virt_text={{'VERY', 'ErrorMsg'}}, virt_text_pos='right_align', hl_mode='blend'})
-    meths.buf_set_extmark(0, ns, 2, 10, { virt_text={{'Much', 'ErrorMsg'}},   virt_text_win_col=31, hl_mode='blend'})
+    meths.buf_set_extmark(0, ns, 2, 10, { virt_text={{'Much', 'ErrorMsg'}}, virt_text_win_col=31, hl_mode='blend'})
     meths.buf_set_extmark(0, ns, 2, 10, { virt_text={{'MUCH', 'ErrorMsg'}}, virt_text_pos='right_align', hl_mode='blend'})
-    meths.buf_set_extmark(0, ns, 3, 15, { virt_text={{'Error', 'ErrorMsg'}}, virt_text_win_col=31, hl_mode='blend'})
-    meths.buf_set_extmark(0, ns, 3, 15, { virt_text={{'ERROR', 'ErrorMsg'}}, virt_text_pos='right_align', hl_mode='blend'})
+    meths.buf_set_extmark(0, ns, 3, 14, { virt_text={{'Error', 'ErrorMsg'}}, virt_text_win_col=31, hl_mode='blend'})
+    meths.buf_set_extmark(0, ns, 3, 14, { virt_text={{'ERROR', 'ErrorMsg'}}, virt_text_pos='right_align', hl_mode='blend'})
     meths.buf_set_extmark(0, ns, 7, 21, { virt_text={{'-', 'NonText'}}, virt_text_win_col=4, hl_mode='blend'})
     meths.buf_set_extmark(0, ns, 7, 21, { virt_text={{'-', 'NonText'}}, virt_text_pos='right_align', hl_mode='blend'})
     -- empty virt_text should not change anything
@@ -1191,40 +1228,40 @@ describe('extmark decorations', function()
                                                         |
     ]]}
 
-    command 'set cpoptions-=n nonumber nowrap'
+    command 'set cpoptions-=n nowrap'
     screen:expect{grid=[[
-      for _,item in ipairs(items) do                    |
-          local text, hl_id_cell, cou{4:Very} unpack(ite{4:VERY}|
-          if                                            |
-      hl_id_cell ~= nil then         {4:Much}           {4:MUCH}|
-              --^ -- -- -- -- -- -- --{4:Error}- -- -- h{4:ERROR}|
-          end                                           |
-          for _ = 1, (count or 1) do                    |
-              local cell = line[colpos]                 |
-          {1:-}   cell.text = text                         {1:-}|
-              cell.hl_id = hl_id                        |
-              colpos = colpos+1                         |
-          end                                           |
-      end                                               |
+      {2:  1 }for _,item in ipairs(items) do                |
+      {2:  2 }    local text, hl_id_cell, cou{4:Very} unpack{4:VERY}|
+      {2:  3 }    if                                        |
+      {2:  4 }hl_id_cell ~= nil then         {4:Much}       {4:MUCH}|
+      {2:  5 }        --^ -- -- -- -- -- -- --{4:Error}- -- {4:ERROR}|
+      {2:  6 }    end                                       |
+      {2:  7 }    for _ = 1, (count or 1) do                |
+      {2:  8 }        local cell = line[colpos]             |
+      {2:  9 }    {1:-}   cell.text = text                     {1:-}|
+      {2: 10 }        cell.hl_id = hl_id                    |
+      {2: 11 }        colpos = colpos+1                     |
+      {2: 12 }    end                                       |
+      {2: 13 }end                                           |
       {1:~                                                 }|
                                                         |
     ]]}
 
-    feed '8zl'
+    feed '12zl'
     screen:expect{grid=[[
-      em in ipairs(items) do                            |
-      l text, hl_id_cell, count = unp{4:Very}item)      {4:VERY}|
-                                                        |
-      ll ~= nil then                 {4:Much}           {4:MUCH}|
-      --^ -- -- -- -- -- -- -- -- -- -{4:Error}hl_id = h{4:ERROR}|
-                                                        |
-      _ = 1, (count or 1) do                            |
-      local cell = line[colpos]                         |
-      cell{1:-}text = text                                 {1:-}|
-      cell.hl_id = hl_id                                |
-      colpos = colpos+1                                 |
-                                                        |
-                                                        |
+      {2:  1 }n ipairs(items) do                            |
+      {2:  2 }xt, hl_id_cell, count = unpack({4:Very})      {4:VERY}|
+      {2:  3 }                                              |
+      {2:  4 }= nil then                     {4:Much}       {4:MUCH}|
+      {2:  5 }^- -- -- -- -- -- -- -- -- -- --{4:Error}d = h{4:ERROR}|
+      {2:  6 }                                              |
+      {2:  7 }1, (count or 1) do                            |
+      {2:  8 }l cell = line[colpos]                         |
+      {2:  9 }.tex{1:-} = text                                 {1:-}|
+      {2: 10 }.hl_id = hl_id                                |
+      {2: 11 }os = colpos+1                                 |
+      {2: 12 }                                              |
+      {2: 13 }                                              |
       {1:~                                                 }|
                                                         |
     ]]}
@@ -1243,7 +1280,7 @@ describe('extmark decorations', function()
     -- 1. With 'wrap' it is never shown.
     -- 2. With 'nowrap' it is shown only if the extmark is hidden before leftcol.
     meths.buf_set_extmark(0, ns, 0, 0, { virt_text = {{'AA', 'Underlined'}}, hl_mode = 'combine', virt_text_pos = 'overlay' })
-    meths.buf_set_extmark(0, ns, 0, 1, { virt_text = {{'BB', 'Underlined'}}, hl_mode = 'combine', virt_text_win_col = 10 })
+    meths.buf_set_extmark(0, ns, 0, 5, { virt_text = {{'BB', 'Underlined'}}, hl_mode = 'combine', virt_text_win_col = 10 })
     meths.buf_set_extmark(0, ns, 0, 2, { virt_text = {{'CC', 'Underlined'}}, hl_mode = 'combine', virt_text_pos = 'right_align' })
     screen:expect{grid=[[
       {29:AA}{33:-  2 lin}{29:BB}{33:: 11111·····························}{29:CC}|