diff --git a/platform/lang-impl/src/com/intellij/codeInsight/folding/impl/DocumentFoldingInfo.java b/platform/lang-impl/src/com/intellij/codeInsight/folding/impl/DocumentFoldingInfo.java
index 2f91efed0e73..0acf48f30609 100644
--- a/platform/lang-impl/src/com/intellij/codeInsight/folding/impl/DocumentFoldingInfo.java
+++ b/platform/lang-impl/src/com/intellij/codeInsight/folding/impl/DocumentFoldingInfo.java
@@ -33,6 +33,7 @@ import com.intellij.openapi.fileEditor.impl.text.CodeFoldingState;
 import com.intellij.openapi.project.DumbService;
 import com.intellij.openapi.project.Project;
 import com.intellij.openapi.util.*;
+import com.intellij.openapi.util.text.StringUtil;
 import com.intellij.openapi.vfs.VirtualFile;
 import com.intellij.psi.*;
 import com.intellij.util.containers.ContainerUtil;
@@ -67,7 +68,8 @@ class DocumentFoldingInfo implements JDOMExternalizable, CodeFoldingState {
   @NonNls private static final String EXPANDED_ATT = "expanded";
   @NonNls private static final String MARKER_TAG = "marker";
   @NonNls private static final String DATE_ATT = "date";
-  @NonNls private static final String PLACEHOLDER_ATT = "placeholder";
+  @NonNls private static final String PLACEHOLDER_OLD_ATT = "placeholder";
+  @NonNls private static final String PLACEHOLDER_ATT = "ph";
 
   DocumentFoldingInfo(@NotNull Project project, @NotNull Document document) {
     myProject = project;
@@ -274,7 +276,7 @@ class DocumentFoldingInfo implements JDOMExternalizable, CodeFoldingState {
       String signature = Integer.valueOf(marker.getStartOffset()) + ":" + Integer.valueOf(marker.getEndOffset());
       e.setAttribute(SIGNATURE_ATT, signature);
       String placeHolderText = fi == null ? DEFAULT_PLACEHOLDER : fi.placeHolder;
-      e.setAttribute(PLACEHOLDER_ATT, placeHolderText);
+      e.setAttribute(PLACEHOLDER_ATT, StringUtil.escapeIllegalXmlChars(placeHolderText));
       element.addContent(e);
     }
   }
@@ -331,7 +333,8 @@ class DocumentFoldingInfo implements JDOMExternalizable, CodeFoldingState {
               if (start < 0 || end >= document.getTextLength() || start > end) continue;
               RangeMarker marker = document.createRangeMarker(start, end);
               myRangeMarkers.add(marker);
-              String placeHolderText = e.getAttributeValue(PLACEHOLDER_ATT);
+              String placeHolderText = StringUtil.unescapeIllegalXmlChars(e.getAttributeValue(PLACEHOLDER_ATT));
+              if (placeHolderText == null) e.getAttributeValue(PLACEHOLDER_OLD_ATT);
               if (placeHolderText == null) placeHolderText = DEFAULT_PLACEHOLDER;
               FoldingInfo fi = new FoldingInfo(placeHolderText, expanded);
               marker.putUserData(FOLDING_INFO_KEY, fi);
diff --git a/platform/util/src/com/intellij/openapi/util/text/StringUtil.java b/platform/util/src/com/intellij/openapi/util/text/StringUtil.java
index d7c129700dc5..b6f5ab65a0e3 100644
--- a/platform/util/src/com/intellij/openapi/util/text/StringUtil.java
+++ b/platform/util/src/com/intellij/openapi/util/text/StringUtil.java
@@ -24,6 +24,7 @@ import com.intellij.util.containers.ContainerUtil;
 import com.intellij.util.text.CharArrayUtil;
 import com.intellij.util.text.CharSequenceSubSequence;
 import com.intellij.util.text.StringFactory;
+import org.jdom.Verifier;
 import org.jetbrains.annotations.Contract;
 import org.jetbrains.annotations.NonNls;
 import org.jetbrains.annotations.NotNull;
@@ -2194,6 +2195,64 @@ public class StringUtil extends StringUtilRt {
     }
   }
 
+  /**
+   * Some characters are illegal in XML even as numerical character references. This method performs escaping of them
+   * in a custom format, which is supposed to be unescaped on retrieving from XML using {@link #unescapeIllegalXmlChars(String)}.
+   * Resulting text can be part of XML version 1.0 document.
+   *
+   * @see <a href="https://www.w3.org/International/questions/qa-controls">https://www.w3.org/International/questions/qa-controls</a>
+   * @see Verifier#isXMLCharacter(int)
+   */
+  public static String escapeIllegalXmlChars(@NotNull String text) {
+    StringBuilder b = null;
+    int lastPos = 0;
+    for (int i = 0; i < text.length(); i++) {
+      int c = text.codePointAt(i);
+      if (Character.isSupplementaryCodePoint(c)) {
+        //noinspection AssignmentToForLoopParameter
+        i++;
+      }
+      if (c == '#' || !Verifier.isXMLCharacter(c)) {
+        if (b == null) b = new StringBuilder(text.length() + 5); // assuming there's one 'large' char (e.g. 0xFFFF) to escape numerically
+        b.append(text, lastPos, i).append('#');
+        if (c != '#') b.append(Integer.toHexString(c));
+        b.append('#');
+        lastPos = i + 1;
+      }
+    }
+    return b == null ? text : b.append(text, lastPos, text.length()).toString();
+  }
+
+  /**
+   * @see #escapeIllegalXmlChars(String)
+   */
+  public static String unescapeIllegalXmlChars(@NotNull String text) {
+    StringBuilder b = null;
+    int lastPos = 0;
+    for (int i = 0; i < text.length(); i++) {
+      int c = text.charAt(i);
+      if (c == '#') {
+        int numberEnd = text.indexOf('#', i + 1);
+        if (numberEnd > 0) {
+          int charCode;
+          try {
+            charCode = numberEnd == (i + 1) ? '#' : Integer.parseInt(text.substring(i + 1, numberEnd), 16);
+          }
+          catch (NumberFormatException e) {
+            continue;
+          }
+          if (b == null) b = new StringBuilder(text.length());
+          b.append(text, lastPos, i);
+          b.append((char) charCode);
+          //noinspection AssignmentToForLoopParameter
+          i = numberEnd;
+          lastPos = i + 1;
+        }
+      }
+    }
+    return b == null ? text : b.append(text, lastPos, text.length()).toString();
+  }
+
   public static void quote(@NotNull final StringBuilder builder) {
     quote(builder, '\"');
   }
diff --git a/platform/util/testSrc/com/intellij/util/text/StringUtilTest.java b/platform/util/testSrc/com/intellij/util/text/StringUtilTest.java
index f8136aebdde0..0d37f66d1db2 100644
--- a/platform/util/testSrc/com/intellij/util/text/StringUtilTest.java
+++ b/platform/util/testSrc/com/intellij/util/text/StringUtilTest.java
@@ -19,6 +19,7 @@ import com.intellij.openapi.util.Comparing;
 import com.intellij.openapi.util.text.StringUtil;
 import com.intellij.util.LineSeparator;
 import com.intellij.xml.util.XmlStringUtil;
+import org.jdom.Verifier;
 import org.junit.Test;
 
 import java.nio.CharBuffer;
@@ -492,4 +493,13 @@ public class StringUtilTest {
     assertEquals(3, StringUtil.lastIndexOf("axaxa", 'x', 0, 5));
     assertEquals(2, StringUtil.lastIndexOf("abcd", 'c', -42, 99));  // #IDEA-144968
   }
+
+  @Test
+  public void testEscapingIllegalXmlChars() {
+    for (String s : new String[]{"ab\n\0\r\tde", "\\abc\1\2\3\uFFFFdef"}) {
+      String escapedText = StringUtil.escapeIllegalXmlChars(s);
+      assertNull(Verifier.checkCharacterData(escapedText));
+      assertEquals(s, StringUtil.unescapeIllegalXmlChars(escapedText));
+    }
+  }
 }