diff --git a/Cargo.lock b/Cargo.lock
index 8f629dc55..861370f19 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -2760,6 +2760,7 @@ dependencies = [
  "dirs",
  "ecow",
  "env_proxy",
+ "filetime",
  "flate2",
  "inferno",
  "memmap2",
diff --git a/crates/typst-cli/Cargo.toml b/crates/typst-cli/Cargo.toml
index 0da03afcf..5fcb27978 100644
--- a/crates/typst-cli/Cargo.toml
+++ b/crates/typst-cli/Cargo.toml
@@ -29,6 +29,7 @@ comemo = "0.3"
 ecow = "0.1.1"
 dirs = "5"
 flate2 = "1"
+filetime = "0.2"
 inferno = "0.11.15"
 memmap2 = "0.7"
 notify = "6"
diff --git a/crates/typst-cli/src/compile.rs b/crates/typst-cli/src/compile.rs
index 49a6b6eb3..2962355ec 100644
--- a/crates/typst-cli/src/compile.rs
+++ b/crates/typst-cli/src/compile.rs
@@ -75,8 +75,7 @@ pub fn compile_once(
         Status::Compiling.print(command).unwrap();
     }
 
-    // Reset everything and ensure that the main file is present.
-    world.reset();
+    // Ensure that the main file is present.
     world.source(world.main()).map_err(|err| err.to_string())?;
 
     let mut tracer = Tracer::new();
diff --git a/crates/typst-cli/src/watch.rs b/crates/typst-cli/src/watch.rs
index f53cb5fd8..412c20620 100644
--- a/crates/typst-cli/src/watch.rs
+++ b/crates/typst-cli/src/watch.rs
@@ -70,6 +70,9 @@ pub fn watch(mut command: CompileCommand) -> StrResult<()> {
                 .map(ToOwned::to_owned)
                 .collect();
 
+            // Reset all dependencies.
+            world.reset();
+
             // Recompile.
             compile_once(&mut world, &mut command, true)?;
             comemo::evict(10);
diff --git a/crates/typst-cli/src/world.rs b/crates/typst-cli/src/world.rs
index cfbe37910..bd9ef414b 100644
--- a/crates/typst-cli/src/world.rs
+++ b/crates/typst-cli/src/world.rs
@@ -1,4 +1,4 @@
-use std::cell::{OnceCell, RefCell, RefMut};
+use std::cell::{Cell, OnceCell, RefCell, RefMut};
 use std::collections::HashMap;
 use std::fs;
 use std::hash::Hash;
@@ -6,6 +6,7 @@ use std::path::{Path, PathBuf};
 
 use chrono::{DateTime, Datelike, Local};
 use comemo::Prehashed;
+use filetime::FileTime;
 use same_file::Handle;
 use siphasher::sip128::{Hasher128, SipHasher13};
 use typst::diag::{FileError, FileResult, StrResult};
@@ -37,7 +38,7 @@ pub struct SystemWorld {
     /// be used in conjunction with `paths`.
     hashes: RefCell<HashMap<FileId, FileResult<PathHash>>>,
     /// Maps canonical path hashes to source files and buffers.
-    paths: RefCell<HashMap<PathHash, PathSlot>>,
+    slots: RefCell<HashMap<PathHash, PathSlot>>,
     /// The current datetime if requested. This is stored here to ensure it is
     /// always the same within one compilation. Reset between compilations.
     now: OnceCell<DateTime<Local>>,
@@ -78,7 +79,7 @@ impl SystemWorld {
             book: Prehashed::new(searcher.book),
             fonts: searcher.fonts,
             hashes: RefCell::default(),
-            paths: RefCell::default(),
+            slots: RefCell::default(),
             now: OnceCell::new(),
         })
     }
@@ -100,13 +101,19 @@ impl SystemWorld {
 
     /// Return all paths the last compilation depended on.
     pub fn dependencies(&mut self) -> impl Iterator<Item = &Path> {
-        self.paths.get_mut().values().map(|slot| slot.system_path.as_path())
+        self.slots
+            .get_mut()
+            .values()
+            .filter(|slot| slot.accessed())
+            .map(|slot| slot.path.as_path())
     }
 
     /// Reset the compilation state in preparation of a new compilation.
     pub fn reset(&mut self) {
         self.hashes.borrow_mut().clear();
-        self.paths.borrow_mut().clear();
+        for slot in self.slots.borrow_mut().values_mut() {
+            slot.reset();
+        }
         self.now.take();
     }
 
@@ -185,15 +192,8 @@ impl SystemWorld {
             })
             .clone()?;
 
-        Ok(RefMut::map(self.paths.borrow_mut(), |paths| {
-            paths.entry(hash).or_insert_with(|| PathSlot {
-                id,
-                // This will only trigger if the `or_insert_with` above also
-                // triggered.
-                system_path,
-                source: OnceCell::new(),
-                buffer: OnceCell::new(),
-            })
+        Ok(RefMut::map(self.slots.borrow_mut(), |paths| {
+            paths.entry(hash).or_insert_with(|| PathSlot::new(id, system_path))
         }))
     }
 }
@@ -205,28 +205,110 @@ struct PathSlot {
     /// The slot's canonical file id.
     id: FileId,
     /// The slot's path on the system.
-    system_path: PathBuf,
-    /// The lazily loaded source file for a path hash.
-    source: OnceCell<FileResult<Source>>,
-    /// The lazily loaded buffer for a path hash.
-    buffer: OnceCell<FileResult<Bytes>>,
+    path: PathBuf,
+    /// The lazily loaded and incrementally updated source file.
+    source: SlotCell<Source>,
+    /// The lazily loaded raw byte buffer.
+    file: SlotCell<Bytes>,
 }
 
 impl PathSlot {
-    fn source(&self) -> FileResult<Source> {
-        self.source
-            .get_or_init(|| {
-                let buf = read(&self.system_path)?;
-                let text = decode_utf8(buf)?;
-                Ok(Source::new(self.id, text))
-            })
-            .clone()
+    /// Create a new path slot.
+    fn new(id: FileId, path: PathBuf) -> Self {
+        Self {
+            id,
+            path,
+            file: SlotCell::new(),
+            source: SlotCell::new(),
+        }
     }
 
+    /// Whether the file was accessed in the ongoing compilation.
+    fn accessed(&self) -> bool {
+        self.source.accessed() || self.file.accessed()
+    }
+
+    /// Marks the file as not yet accessed in preparation of the next
+    /// compilation.
+    fn reset(&self) {
+        self.source.reset();
+        self.file.reset();
+    }
+
+    /// Retrieve the source for this file.
+    fn source(&self) -> FileResult<Source> {
+        self.source.get_or_init(&self.path, |data, prev| {
+            let text = decode_utf8(&data)?;
+            if let Some(mut prev) = prev {
+                prev.replace(text);
+                Ok(prev)
+            } else {
+                Ok(Source::new(self.id, text.into()))
+            }
+        })
+    }
+
+    /// Retrieve the file's bytes.
     fn file(&self) -> FileResult<Bytes> {
-        self.buffer
-            .get_or_init(|| read(&self.system_path).map(Bytes::from))
-            .clone()
+        self.file.get_or_init(&self.path, |data, _| Ok(data.into()))
+    }
+}
+
+/// Lazily processes data for a file.
+struct SlotCell<T> {
+    data: RefCell<Option<FileResult<T>>>,
+    refreshed: Cell<FileTime>,
+    accessed: Cell<bool>,
+}
+
+impl<T: Clone> SlotCell<T> {
+    /// Creates a new, empty cell.
+    fn new() -> Self {
+        Self {
+            data: RefCell::new(None),
+            refreshed: Cell::new(FileTime::zero()),
+            accessed: Cell::new(false),
+        }
+    }
+
+    /// Whether the cell was accessed in the ongoing compilation.
+    fn accessed(&self) -> bool {
+        self.accessed.get()
+    }
+
+    /// Marks the cell as not yet accessed in preparation of the next
+    /// compilation.
+    fn reset(&self) {
+        self.accessed.set(false);
+    }
+
+    /// Gets the contents of the cell or initialize them.
+    fn get_or_init(
+        &self,
+        path: &Path,
+        f: impl FnOnce(Vec<u8>, Option<T>) -> FileResult<T>,
+    ) -> FileResult<T> {
+        let mut borrow = self.data.borrow_mut();
+        if let Some(data) = &*borrow {
+            if self.accessed.replace(true) || self.current(path) {
+                return data.clone();
+            }
+        }
+
+        self.accessed.set(true);
+        self.refreshed.set(FileTime::now());
+        let prev = borrow.take().and_then(Result::ok);
+        let value = read(path).and_then(|data| f(data, prev));
+        *borrow = Some(value.clone());
+        value
+    }
+
+    /// Whether the cell contents are still up to date with the file system.
+    fn current(&self, path: &Path) -> bool {
+        fs::metadata(path).map_or(false, |meta| {
+            let modified = FileTime::from_last_modification_time(&meta);
+            modified < self.refreshed.get()
+        })
     }
 }
 
@@ -255,12 +337,7 @@ fn read(path: &Path) -> FileResult<Vec<u8>> {
 }
 
 /// Decode UTF-8 with an optional BOM.
-fn decode_utf8(buf: Vec<u8>) -> FileResult<String> {
-    Ok(if buf.starts_with(b"\xef\xbb\xbf") {
-        // Remove UTF-8 BOM.
-        std::str::from_utf8(&buf[3..])?.into()
-    } else {
-        // Assume UTF-8.
-        String::from_utf8(buf)?
-    })
+fn decode_utf8(buf: &[u8]) -> FileResult<&str> {
+    // Remove UTF-8 BOM.
+    Ok(std::str::from_utf8(buf.strip_prefix(b"\xef\xbb\xbf").unwrap_or(buf))?)
 }
diff --git a/crates/typst-syntax/src/source.rs b/crates/typst-syntax/src/source.rs
index 56b271955..f3392889f 100644
--- a/crates/typst-syntax/src/source.rs
+++ b/crates/typst-syntax/src/source.rs
@@ -69,13 +69,47 @@ impl Source {
     }
 
     /// Fully replace the source text.
-    pub fn replace(&mut self, text: String) {
-        let inner = Arc::make_mut(&mut self.0);
-        inner.text = Prehashed::new(text);
-        inner.lines = lines(&inner.text);
-        let mut root = parse(&inner.text);
-        root.numberize(inner.id, Span::FULL).unwrap();
-        inner.root = Prehashed::new(root);
+    ///
+    /// This performs a naive (suffix/prefix-based) diff of the old and new text
+    /// to produce the smallest single edit that transforms old into new and
+    /// then calls [`edit`](Self::edit) with it.
+    ///
+    /// Returns the range in the new source that was ultimately reparsed.
+    pub fn replace(&mut self, new: &str) -> Range<usize> {
+        let old = self.text();
+
+        let mut prefix = old
+            .as_bytes()
+            .iter()
+            .zip(new.as_bytes())
+            .take_while(|(x, y)| x == y)
+            .count();
+
+        if prefix == old.len() && prefix == new.len() {
+            return 0..0;
+        }
+
+        while !old.is_char_boundary(prefix) || !new.is_char_boundary(prefix) {
+            prefix -= 1;
+        }
+
+        let mut suffix = old[prefix..]
+            .as_bytes()
+            .iter()
+            .zip(new[prefix..].as_bytes())
+            .rev()
+            .take_while(|(x, y)| x == y)
+            .count();
+
+        while !old.is_char_boundary(old.len() - suffix)
+            || !new.is_char_boundary(new.len() - suffix)
+        {
+            suffix += 1;
+        }
+
+        let replace = prefix..old.len() - suffix;
+        let with = &new[prefix..new.len() - suffix];
+        self.edit(replace, with)
     }
 
     /// Edit the source file by replacing the given range.
@@ -382,11 +416,21 @@ mod tests {
         // tested separately.
         #[track_caller]
         fn test(prev: &str, range: Range<usize>, with: &str, after: &str) {
-            let mut source = Source::detached(prev);
-            let result = Source::detached(after);
-            source.edit(range, with);
-            assert_eq!(source.text(), result.text());
-            assert_eq!(source.0.lines, result.0.lines);
+            let reference = Source::detached(after);
+
+            let mut edited = Source::detached(prev);
+            edited.edit(range.clone(), with);
+            assert_eq!(edited.text(), reference.text());
+            assert_eq!(edited.0.lines, reference.0.lines);
+
+            let mut replaced = Source::detached(prev);
+            replaced.replace(&{
+                let mut s = prev.to_string();
+                s.replace_range(range, with);
+                s
+            });
+            assert_eq!(replaced.text(), reference.text());
+            assert_eq!(replaced.0.lines, reference.0.lines);
         }
 
         // Test inserting at the beginning.