diff --git a/open-sse/utils/stream.ts b/open-sse/utils/stream.ts
index 779b8285f7..2b16cfe64d 100644
--- a/open-sse/utils/stream.ts
+++ b/open-sse/utils/stream.ts
@@ -2778,7 +2778,7 @@ export function createSSETransformStreamWithLogger(
   body: unknown = null,
   onComplete: ((payload: StreamCompletePayload) => void) | null = null,
   apiKeyInfo: unknown = null,
-  onFailure: ((payload: StreamFailurePayload) => void | Promise<void>) | null = null,
+  onFailure: ((payload: StreamFailurePayload) => boolean | void | Promise<void>) | null = null,
   copilotCompatibleReasoning = false,
   suppressThinkClose = false,
   customToolNames: ReadonlySet<string> = new Set(),
@@ -2813,7 +2813,7 @@ export function createPassthroughStreamWithLogger(
   body: unknown = null,
   onComplete: ((payload: StreamCompletePayload) => void) | null = null,
   apiKeyInfo: unknown = null,
-  onFailure: ((payload: StreamFailurePayload) => void | Promise<void>) | null = null,
+  onFailure: ((payload: StreamFailurePayload) => boolean | void | Promise<void>) | null = null,
   clientResponseFormat: string | null = null,
   requestToolIdentityMap: Map<string, { namespace: string; name: string }> | null = null
 ) {
diff --git a/tests/unit/stream-failure-499-classification.test.ts b/tests/unit/stream-failure-499-classification.test.ts
index a0aebd1404..4c4e66906c 100644
--- a/tests/unit/stream-failure-499-classification.test.ts
+++ b/tests/unit/stream-failure-499-classification.test.ts
@@ -48,13 +48,14 @@ test("createStreamFailureFinalizers: caller classification survives into respons
     persistFailureUsage: () => {},
   });
 
-  handleStreamFailure({
+  const handled = handleStreamFailure({
     status: 502,
     message: "Upstream stream error",
     code: "stream_pipeline_error",
     type: "stream_error",
   });
 
+  assert.equal(handled, true, "the callback contract reports that the stream failure was handled");
   const body = captured as { error: { type?: string; code?: string } };
   assert.equal(body.error.type, "stream_error");
   assert.equal(body.error.code, "stream_pipeline_error");