diff --git a/src/languages/transactsql/transactsql.formatter.ts b/src/languages/transactsql/transactsql.formatter.ts
index 01f6806cc7..12c0b3f027 100644
--- a/src/languages/transactsql/transactsql.formatter.ts
+++ b/src/languages/transactsql/transactsql.formatter.ts
@@ -20,6 +20,7 @@ const reservedClauses = expandPhrases([
   'FETCH {FIRST | NEXT}',
   'FOR {BROWSE | XML | JSON}',
   'OPTION',
+  'OUTPUT',
   // Data manipulation
   // - insert:
   'INSERT [INTO]',
diff --git a/test/transactsql.test.ts b/test/transactsql.test.ts
index f3041c23fe..8a65456026 100644
--- a/test/transactsql.test.ts
+++ b/test/transactsql.test.ts
@@ -220,7 +220,35 @@ describe('TransactSqlFormatter', () => {
   it('supports special $ACTION keyword', () => {
     expect(format(`MERGE INTO tbl OUTPUT $action AS act;`)).toBe(dedent`
       MERGE INTO
-        tbl OUTPUT $action AS act;
+        tbl
+      OUTPUT
+        $action AS act;
+    `);
+  });
+
+  // Issue #888
+  it('formats OUTPUT clause on a separate line', () => {
+    expect(
+      format(
+        `UPDATE tbl SET a = 1 OUTPUT inserted.id, deleted.a INTO @log WHERE b = 2; DELETE FROM tbl OUTPUT deleted.id WHERE b = 3;`
+      )
+    ).toBe(dedent`
+      UPDATE tbl
+      SET
+        a = 1
+      OUTPUT
+        inserted.id,
+        deleted.a
+      INTO
+        @log
+      WHERE
+        b = 2;
+
+      DELETE FROM tbl
+      OUTPUT
+        deleted.id
+      WHERE
+        b = 3;
     `);
   });