diff --git a/extensions/copilot/src/hooks-bridge.test.ts b/extensions/copilot/src/hooks-bridge.test.ts
index 8729a20174b..8d3b6a273c4 100755
--- a/extensions/copilot/src/hooks-bridge.test.ts
+++ b/extensions/copilot/src/hooks-bridge.test.ts
@@ -5,6 +5,7 @@ describe("createHooksBridge", () => {
   const hookBase = {
     sessionId: "runtime-session",
     timestamp: new Date(0),
+    cwd: "/",
     workingDirectory: "/",
   };
 
@@ -40,6 +41,7 @@ describe("createHooksBridge", () => {
     const hooks = createHooksBridge({ onPreToolUse })!;
     const input = {
       ...hookBase,
+      cwd: "/tmp",
       workingDirectory: "/tmp",
       toolName: "bash",
       toolArgs: { cmd: "ls" },
diff --git a/src/agents/embedded-agent-helpers.isbillingerrormessage.test.ts b/src/agents/embedded-agent-helpers.isbillingerrormessage.test.ts
index 693f5e12331..9dc65d4033b 100644
--- a/src/agents/embedded-agent-helpers.isbillingerrormessage.test.ts
+++ b/src/agents/embedded-agent-helpers.isbillingerrormessage.test.ts
@@ -1563,6 +1563,25 @@ describe("classifyProviderRuntimeFailureKind", () => {
     ).toBe("replay_invalid");
   });
 
+  it("classifies expired Anthropic thinking signatures as replay invalid", () => {
+    expect(
+      classifyProviderRuntimeFailureKind(
+        '{"type":"error","error":{"type":"invalid_request_error","message":"messages.1.content.440: Invalid `signature` in `thinking` block"}}',
+      ),
+    ).toBe("replay_invalid");
+    expect(
+      classifyProviderRuntimeFailureKind(
+        "ValidationException: invalid signature on thinking block",
+      ),
+    ).toBe("replay_invalid");
+    expect(
+      classifyProviderRuntimeFailureKind(
+        "ValidationException: signature present in thinking block",
+      ),
+    ).not.toBe("replay_invalid");
+    expect(classifyProviderRuntimeFailureKind("Invalid signature")).not.toBe("replay_invalid");
+  });
+
   it("splits ambiguous provider runtime failures instead of collapsing to unknown", () => {
     expect(classifyProviderRuntimeFailureKind({})).toBe("empty_response");
     expect(classifyProviderRuntimeFailureKind("Unknown error (no error details in response)")).toBe(
diff --git a/src/agents/embedded-agent-helpers/errors.ts b/src/agents/embedded-agent-helpers/errors.ts
index 43166614022..8abb332c559 100644
--- a/src/agents/embedded-agent-helpers/errors.ts
+++ b/src/agents/embedded-agent-helpers/errors.ts
@@ -356,6 +356,8 @@ const INTERRUPTED_NETWORK_ERROR_RE =
   /\beconnrefused\b|\beconnreset\b|\beconnaborted\b|\benetreset\b|\behostunreach\b|\behostdown\b|\benetunreach\b|\bepipe\b|\bsocket hang up\b|\bconnection refused\b|\bconnection reset\b|\bconnection aborted\b|\bnetwork is unreachable\b|\bhost is unreachable\b|\bfetch failed\b|\bconnection error\b|\bnetwork request failed\b/i;
 const REPLAY_INVALID_RE =
   /\bprevious_response_id\b.*\b(?:invalid|unknown|not found|does not exist|expired|mismatch)\b|\btool_(?:use|call)\.(?:input|arguments)\b.*\b(?:missing|required)\b|\bincorrect role information\b|\broles must alternate\b|\binput item id does not belong to this connection\b/i;
+const THINKING_SIGNATURE_ERROR_RE =
+  /\b(?:invalid|expired)\b.*\bsignature\b|\bsignature\b.*\b(?:invalid|expired)\b/i;
 const SANDBOX_BLOCKED_RE =
   /\bapproval is required\b|\bapproval timed out\b|\bapproval was denied\b|\bblocked by sandbox\b|\bsandbox\b.*\b(?:blocked|denied|forbidden|disabled|not allowed)\b|\bexec denied\s*\(/i;
 const NO_BODY_HTTP_WRAPPER_RE =
@@ -471,7 +473,11 @@ function isDnsTransportErrorMessage(raw: string): boolean {
 }
 
 function isReplayInvalidErrorMessage(raw: string): boolean {
-  return REPLAY_INVALID_RE.test(raw);
+  return REPLAY_INVALID_RE.test(raw) || isThinkingSignatureReplayInvalidErrorMessage(raw);
+}
+
+function isThinkingSignatureReplayInvalidErrorMessage(raw: string): boolean {
+  return /\bthinking\b/i.test(raw) && THINKING_SIGNATURE_ERROR_RE.test(raw);
 }
 
 function isSandboxBlockedErrorMessage(raw: string): boolean {
diff --git a/src/agents/embedded-agent-runner/model.ts b/src/agents/embedded-agent-runner/model.ts
index 3ffb7c4d0f0..099feba57ac 100644
--- a/src/agents/embedded-agent-runner/model.ts
+++ b/src/agents/embedded-agent-runner/model.ts
@@ -77,6 +77,7 @@ type ProviderRuntimeHooks = {
 type StaticCatalogFallbackModel = Model & {
   compat?: ModelCompatConfig;
   contextTokens?: number;
+  params?: Record<string, unknown>;
   mediaInput?: ModelMediaInputConfig;
 };
 
@@ -1025,7 +1026,7 @@ function resolveConfiguredFallbackModel(params: {
     provider,
     modelId,
     providerParams: providerConfig?.params,
-    configuredParams: configuredModel?.params,
+    configuredParams: metadataModel?.params,
   });
   const fallbackTransport = resolveProviderTransport({
     provider,
diff --git a/src/agents/embedded-agent-runner/thinking.test.ts b/src/agents/embedded-agent-runner/thinking.test.ts
index 941dcb2cad2..441f6e56617 100644
--- a/src/agents/embedded-agent-runner/thinking.test.ts
+++ b/src/agents/embedded-agent-runner/thinking.test.ts
@@ -482,6 +482,37 @@ describe("wrapAnthropicStreamWithRecovery", () => {
   const anthropicThinkingError = new Error(
     "thinking or redacted_thinking blocks in the latest assistant message cannot be modified",
   );
+  const terminalThinkingSignatureError =
+    "ValidationException: invalid signature on thinking block in message history";
+
+  function createTestAssistantMessage(
+    overrides: Partial<AssistantMessage> & Pick<AssistantMessage, "content" | "stopReason">,
+  ): AssistantMessage {
+    return castAgentMessage({
+      role: "assistant",
+      api: "anthropic-messages",
+      provider: "anthropic",
+      model: "claude-sonnet-4-6",
+      usage: {
+        input: 0,
+        output: 0,
+        cacheRead: 0,
+        cacheWrite: 0,
+        totalTokens: 0,
+        cost: { input: 0, output: 0, cacheRead: 0, cacheWrite: 0, total: 0 },
+      },
+      timestamp: 0,
+      ...overrides,
+    }) as AssistantMessage;
+  }
+
+  function createTestStreamErrorMessage(errorMessage: string): AssistantMessage {
+    return createTestAssistantMessage({
+      content: [{ type: "text", text: "stream failed" }],
+      stopReason: "error",
+      errorMessage,
+    });
+  }
 
   it("retries once with omitted-reasoning text when the request is rejected before streaming", async () => {
     let callCount = 0;
@@ -584,6 +615,131 @@ describe("wrapAnthropicStreamWithRecovery", () => {
     expect(callCount).toBe(2);
   });
 
+  it("retries pre-content terminal stream-error events with omitted-reasoning text", async () => {
+    let callCount = 0;
+    const contexts: Array<{ messages?: AgentMessage[] }> = [];
+    const finalMessage = createTestAssistantMessage({
+      content: [{ type: "text", text: "recovered" }],
+      stopReason: "stop",
+    });
+    const wrapped = wrapAnthropicStreamWithRecovery(
+      ((_model, context) => {
+        callCount += 1;
+        const attempt = callCount;
+        contexts.push(context as { messages?: AgentMessage[] });
+        const stream = createAssistantMessageEventStream();
+        queueMicrotask(() => {
+          if (attempt === 1) {
+            stream.push({
+              type: "error",
+              reason: "error",
+              error: createTestStreamErrorMessage(terminalThinkingSignatureError),
+            });
+          } else {
+            stream.push({ type: "done", reason: "stop", message: finalMessage });
+          }
+          stream.end();
+        });
+        return stream;
+      }) as Parameters<typeof wrapAnthropicStreamWithRecovery>[0],
+      { id: "test-session" },
+    );
+
+    const response = wrapped(
+      {} as never,
+      {
+        messages: castAgentMessages([
+          {
+            role: "assistant",
+            content: [{ type: "thinking", thinking: "secret", thinkingSignature: "sig" }],
+          },
+        ]),
+      } as never,
+      {} as never,
+    ) as { result: () => Promise<unknown> } & AsyncIterable<unknown>;
+    const events: unknown[] = [];
+    for await (const event of response) {
+      events.push(event);
+    }
+
+    expect(events).toEqual([{ type: "done", reason: "stop", message: finalMessage }]);
+    await expect(response.result()).resolves.toEqual(finalMessage);
+    expect(callCount).toBe(2);
+    const retryMessage = contexts[1]?.messages?.[0];
+    if (!retryMessage || retryMessage.role !== "assistant") {
+      throw new Error("Expected Anthropic recovery retry to start with an assistant message");
+    }
+    expect(retryMessage.content).toEqual([
+      { type: "text", text: OMITTED_ASSISTANT_REASONING_TEXT },
+    ]);
+  });
+
+  it("does not retry non-thinking terminal stream-error events", async () => {
+    let callCount = 0;
+    const errorMessage = createTestStreamErrorMessage("rate limit exceeded");
+    const wrapped = wrapAnthropicStreamWithRecovery(
+      (() => {
+        callCount += 1;
+        const stream = createAssistantMessageEventStream();
+        queueMicrotask(() => {
+          stream.push({ type: "error", reason: "error", error: errorMessage });
+          stream.end();
+        });
+        return stream;
+      }) as Parameters<typeof wrapAnthropicStreamWithRecovery>[0],
+      { id: "test-session" },
+    );
+
+    const response = wrapped({} as never, { messages: [] } as never, {} as never) as {
+      result: () => Promise<unknown>;
+    } & AsyncIterable<unknown>;
+    const events: unknown[] = [];
+    for await (const event of response) {
+      events.push(event);
+    }
+
+    expect(events).toEqual([{ type: "error", reason: "error", error: errorMessage }]);
+    await expect(response.result()).resolves.toEqual(errorMessage);
+    expect(callCount).toBe(1);
+  });
+
+  it("does not retry terminal stream-error events after output was yielded", async () => {
+    let callCount = 0;
+    const partialMessage = createTestAssistantMessage({
+      content: [{ type: "text", text: "" }],
+      stopReason: "stop",
+    });
+    const errorMessage = createTestStreamErrorMessage(terminalThinkingSignatureError);
+    const wrapped = wrapAnthropicStreamWithRecovery(
+      (() => {
+        callCount += 1;
+        const stream = createAssistantMessageEventStream();
+        queueMicrotask(() => {
+          stream.push({ type: "start", partial: partialMessage });
+          stream.push({ type: "error", reason: "error", error: errorMessage });
+          stream.end();
+        });
+        return stream;
+      }) as Parameters<typeof wrapAnthropicStreamWithRecovery>[0],
+      { id: "test-session" },
+    );
+
+    const response = wrapped({} as never, { messages: [] } as never, {} as never) as {
+      result: () => Promise<unknown>;
+    } & AsyncIterable<unknown>;
+    const events: unknown[] = [];
+    for await (const event of response) {
+      events.push(event);
+    }
+
+    expect(events).toEqual([
+      { type: "start", partial: partialMessage },
+      { type: "error", reason: "error", error: errorMessage },
+    ]);
+    await expect(response.result()).resolves.toEqual(errorMessage);
+    expect(callCount).toBe(1);
+  });
+
   it("does not retry when the stream fails after yielding a chunk", async () => {
     let callCount = 0;
     const wrapped = wrapAnthropicStreamWithRecovery(
diff --git a/src/agents/embedded-agent-runner/thinking.ts b/src/agents/embedded-agent-runner/thinking.ts
index 71f830d3562..361d14ac476 100644
--- a/src/agents/embedded-agent-runner/thinking.ts
+++ b/src/agents/embedded-agent-runner/thinking.ts
@@ -1,4 +1,5 @@
 import { formatErrorMessage } from "../../infra/errors.js";
+import type { AssistantMessageEvent } from "../../llm/types.js";
 import { createAssistantMessageEventStream } from "../../llm/utils/event-stream.js";
 import type { AgentMessage, StreamFn } from "../runtime/index.js";
 import { log } from "./logger.js";
@@ -427,7 +428,13 @@ function shouldRecoverAnthropicThinkingError(
   error: unknown,
   sessionMeta: RecoverySessionMeta,
 ): boolean {
-  const message = formatErrorMessage(error);
+  return shouldRecoverAnthropicThinkingErrorMessage(formatErrorMessage(error), sessionMeta);
+}
+
+function shouldRecoverAnthropicThinkingErrorMessage(
+  message: string,
+  sessionMeta: RecoverySessionMeta,
+): boolean {
   if (!THINKING_BLOCK_ERROR_PATTERN.test(message)) {
     return false;
   }
@@ -440,17 +447,66 @@ function shouldRecoverAnthropicThinkingError(
   return true;
 }
 
+function isAssistantMessageErrorEvent(
+  event: unknown,
+): event is Extract<AssistantMessageEvent, { type: "error" }> {
+  return (
+    Boolean(event) && typeof event === "object" && (event as { type?: unknown }).type === "error"
+  );
+}
+
+function getAssistantMessageErrorText(
+  event: Extract<AssistantMessageEvent, { type: "error" }>,
+): string {
+  const errorMessage = (event.error as { errorMessage?: unknown }).errorMessage;
+  return typeof errorMessage === "string" ? errorMessage : "";
+}
+
+async function retryStreamWithoutThinking(
+  outer: ReturnType<typeof createAssistantMessageEventStream>,
+  retry: () => ReturnType<StreamFn>,
+): Promise<AssistantMessage> {
+  const retryStream = retry();
+  const resolvedRetry = retryStream instanceof Promise ? await retryStream : retryStream;
+  for await (const chunk of resolvedRetry as AsyncIterable<unknown>) {
+    outer.push(chunk as Parameters<typeof outer.push>[0]);
+  }
+  const result = await (resolvedRetry as { result?: () => Promise<AssistantMessage> }).result?.();
+  return result as AssistantMessage;
+}
+
 async function pumpStreamWithRecovery(
   outer: ReturnType<typeof createAssistantMessageEventStream>,
   stream: ReturnType<StreamFn>,
   sessionMeta: RecoverySessionMeta,
   retry: () => ReturnType<StreamFn>,
 ): Promise<AssistantMessage> {
-  let yieldedChunk = false;
+  let yieldedOutput = false;
   try {
     const resolved = stream instanceof Promise ? await stream : stream;
     for await (const chunk of resolved as AsyncIterable<unknown>) {
-      yieldedChunk = true;
+      if (isAssistantMessageErrorEvent(chunk)) {
+        if (
+          shouldRecoverAnthropicThinkingErrorMessage(
+            getAssistantMessageErrorText(chunk),
+            sessionMeta,
+          )
+        ) {
+          if (yieldedOutput) {
+            log.warn(
+              `[session-recovery] Anthropic thinking error occurred after streaming began; skipping retry to avoid duplicate chunks: sessionId=${sessionMeta.id}`,
+            );
+          } else {
+            sessionMeta.recoveredAnthropicThinking = true;
+            log.warn(
+              `[session-recovery] Anthropic thinking stream error; retrying once without thinking blocks: sessionId=${sessionMeta.id}`,
+            );
+            return retryStreamWithoutThinking(outer, retry);
+          }
+        }
+      } else {
+        yieldedOutput = true;
+      }
       outer.push(chunk as Parameters<typeof outer.push>[0]);
     }
     const result = await (resolved as { result?: () => Promise<AssistantMessage> }).result?.();
@@ -459,7 +515,7 @@ async function pumpStreamWithRecovery(
     if (!shouldRecoverAnthropicThinkingError(error, sessionMeta)) {
       throw error;
     }
-    if (yieldedChunk) {
+    if (yieldedOutput) {
       log.warn(
         `[session-recovery] Anthropic thinking error occurred after streaming began; skipping retry to avoid duplicate chunks: sessionId=${sessionMeta.id}`,
       );
@@ -469,13 +525,7 @@ async function pumpStreamWithRecovery(
     log.warn(
       `[session-recovery] Anthropic thinking error during stream; retrying once without thinking blocks: sessionId=${sessionMeta.id}`,
     );
-    const retryStream = retry();
-    const resolvedRetry = retryStream instanceof Promise ? await retryStream : retryStream;
-    for await (const chunk of resolvedRetry as AsyncIterable<unknown>) {
-      outer.push(chunk as Parameters<typeof outer.push>[0]);
-    }
-    const result = await (resolvedRetry as { result?: () => Promise<AssistantMessage> }).result?.();
-    return result as AssistantMessage;
+    return retryStreamWithoutThinking(outer, retry);
   }
 }