diff --git a/packages/language-service/src/template.ts b/packages/language-service/src/template.ts
index afd13214e1..e882b1ca81 100644
--- a/packages/language-service/src/template.ts
+++ b/packages/language-service/src/template.ts
@@ -98,7 +98,9 @@ export class InlineTemplate extends BaseTemplate {
       throw new Error(`Inline template and component class should belong to the same source file`);
     }
     this.fileName = sourceFile.fileName;
-    this.source = templateNode.text;
+    // node.text returns the TS internal representation of the normalized text,
+    // and all CR characters are stripped. node.getText() returns the raw text.
+    this.source = templateNode.getText().slice(1, -1);  // strip leading and trailing quotes
     this.span = {
       // TS string literal includes surrounding quotes in the start/end offsets.
       start: templateNode.getStart() + 1,
diff --git a/packages/language-service/test/diagnostics_spec.ts b/packages/language-service/test/diagnostics_spec.ts
index 531a55a7c6..7d721cdbd3 100644
--- a/packages/language-service/test/diagnostics_spec.ts
+++ b/packages/language-service/test/diagnostics_spec.ts
@@ -804,16 +804,15 @@ describe('diagnostics', () => {
     });
   });
 
-  it('should work correctly with CRLF endings', () => {
+  it('should work correctly with CRLF endings in external template', () => {
     // https://github.com/angular/vscode-ng-language-service/issues/235
     // In the example below, the string
     // `\r\n{{line0}}\r\n{{line1}}\r\n{{line2}}` is tokenized as a whole,
     // and then CRLF characters are converted to LF.
     // Source span information is lost in the process.
-    const fileName = '/app/test.ng';
-    const content =
-        mockHost.override(fileName, '\r\n<div>\r\n{{line0}}\r\n{{line1}}\r\n{{line2}}\r\n</div>');
-    const ngDiags = ngLS.getDiagnostics(fileName);
+    const content = mockHost.override(
+        TEST_TEMPLATE, '\r\n<div>\r\n{{line0}}\r\n{{line1}}\r\n{{line2}}\r\n</div>');
+    const ngDiags = ngLS.getDiagnostics(TEST_TEMPLATE);
     expect(ngDiags.length).toBe(3);
     for (let i = 0; i < 3; ++i) {
       const {messageText, start, length} = ngDiags[i];
@@ -828,6 +827,21 @@ describe('diagnostics', () => {
     }
   });
 
+  it('should work correctly with CRLF endings in inline template', () => {
+    const fileName = mockHost.addCode(
+        '\n@Component({template:`\r\n\r\n{{line}}`})export class ComponentCRLF {}');
+    const content = mockHost.readFile(fileName) !;
+    const ngDiags = ngLS.getDiagnostics(fileName);
+    expect(ngDiags.length).toBeGreaterThan(0);
+    const {messageText, start, length} = ngDiags[0];
+    expect(messageText)
+        .toBe(
+            `Identifier 'line' is not defined. ` +
+            `The component declaration, template variable declarations, and ` +
+            `element references do not contain such a member`);
+    expect(content.substring(start !, start ! + length !)).toBe('line');
+  });
+
   it('should not produce diagnostics for non-exported directives', () => {
     const fileName = '/app/test.component.ts';
     mockHost.addScript(fileName, `