diff -uNrp terminator-0.95/terminatorlib/preferences.glade terminator-0.95.new/terminatorlib/preferences.glade
--- terminator-0.95/terminatorlib/preferences.glade	2010-08-24 16:43:46.000000000 -0400
+++ terminator-0.95.new/terminatorlib/preferences.glade	2011-04-16 13:39:54.592611861 -0400
@@ -1094,6 +1094,21 @@
                                       </packing>
                                     </child>
                                     <child>
+                                      <object class="GtkCheckButton" id="cursor_colored">
+                                        <property name="label" translatable="yes">Custom cursor color</property>
+                                        <property name="visible">True</property>
+                                        <property name="can_focus">True</property>
+                                        <property name="receives_default">False</property>
+                                        <property name="draw_indicator">True</property>
+                                        <signal name="toggled" handler="on_cursor_colored_toggled"/>
+                                      </object>
+                                      <packing>
+                                        <property name="expand">False</property>
+                                        <property name="fill">False</property>
+                                        <property name="position">1</property>
+                                      </packing>
+                                    </child>
+                                    <child>
                                       <object class="GtkCheckButton" id="cursor_blink">
                                         <property name="label" translatable="yes">Cursor blink</property>
                                         <property name="visible">True</property>
diff -uNrp terminator-0.95/terminatorlib/prefseditor.py terminator-0.95.new/terminatorlib/prefseditor.py
--- terminator-0.95/terminatorlib/prefseditor.py	2011-04-16 13:43:12.154983345 -0400
+++ terminator-0.95.new/terminatorlib/prefseditor.py	2011-04-16 13:40:45.139613605 -0400
@@ -352,6 +352,9 @@ class PrefsEditor:
         # Cursor colour
         widget = guiget('cursor_color')
         widget.set_color(gtk.gdk.Color(self.config['cursor_color']))
+        # Cursor color enabled
+        widget = guiget('cursor_colored')
+        widget.set_active(self.config['cursor_colored'])
 
         ## Command tab
         # Login shell
@@ -575,6 +578,11 @@ class PrefsEditor:
         self.config['cursor_blink'] = widget.get_active()
         self.config.save()
 
+    def on_cursor_colored_toggled(self, widget):
+        """Cursor colored setting changed"""
+        self.config['cursor_colored'] = widget.get_active()
+        self.config.save()
+
     def on_icon_bell_checkbutton_toggled(self, widget):
         """Icon bell setting changed"""
         self.config['icon_bell'] = widget.get_active()
diff -uNrp terminator-0.95/terminatorlib/terminal.py terminator-0.95.new/terminatorlib/terminal.py
--- terminator-0.95/terminatorlib/terminal.py	2011-04-16 13:43:12.163733356 -0400
+++ terminator-0.95.new/terminatorlib/terminal.py	2011-04-16 13:41:16.354614651 -0400
@@ -602,7 +602,7 @@ for %s (%s)' % (name, urlplugin.__class_
             if color:
                 palette.append(gtk.gdk.color_parse(color))
         self.vte.set_colors(fgcolor, bgcolor, palette)
-        if self.config['cursor_color'] != '':
+        if self.config['cursor_colored'] == True and self.config['cursor_color'] != '':
             self.vte.set_color_cursor(gtk.gdk.color_parse(
                                         self.config['cursor_color']))
         if hasattr(self.vte, 'set_cursor_shape'):
diff -uNrp terminator-0.95/terminatorlib/config.py terminator-0.95.new/terminatorlib/config.py
--- terminator-0.95/terminatorlib/config.py     2011-04-16 14:48:22.573607952 -0400
+++ terminator-0.95.new/terminatorlib/config.py 2011-04-14 08:39:45.156740799 -0400
@@ -169,6 +169,7 @@ DEFAULTS = {
                 'cursor_blink'          : True,
                 'cursor_shape'          : 'block',
                 'cursor_color'          : '#aaaaaa',
+                'cursor_colored'        : True,
                 'emulation'             : 'xterm',
                 'font'                  : 'Mono 10',
                 'foreground_color'      : '#aaaaaa',