This looks like what happens when you start typing a command and then hit cmd+;. The options in that mode are :
iTerm2: Highlights for New Users: Autocomplete
Any text that exists in a tab or its scrollback buffer can be autocompleted in that tab. To use autocomplete, type the beginning of a word and then press cmd-;. An autocomplete window opens showing the top 20 choices for words beginning what you have entered. The list can be filtered by typing a subsequence. The filter can be reset by pressing backspace. If you make a selection and press return, it will be entered for you. If you make a selection and press tab, your autocomplete will be extended with the selection.
To just get "out of this mode" – not making a selection – hit esc.
This then could therefore be for this special case a setting found 'automated' in Preferences>Profiles>Advanced>Triggers:
If that's the case, then clicking edit should open a sheet-pop-up where you see some entries, one of them providing this now unwanted feature.
In the lower left here is a plus and minus sig box. Select the unwanted trigger and delete it.
Alternatively, you might just create an entirely new profile (first picture with "Default" + "TUSTEP"), click the plus sign in the lower left, and compare settings with your former "Default"-profile (in case you have some more sophisticated settings).
The files at
might also be worth a look.
If there are external 'input manipulators' installed (text autocompleter, scripters, listeners to events) things get more complicated…