diff --git a/changelog.d/fixes/zed-hosted-stream-error-boundary.md b/changelog.d/fixes/zed-hosted-stream-error-boundary.md
new file mode 100644
index 0000000000..e15742f092
--- /dev/null
+++ b/changelog.d/fixes/zed-hosted-stream-error-boundary.md
@@ -0,0 +1 @@
+- **fix(providers):** Zed Hosted streaming failures now trigger fallback before content and end partial streams with a sanitized structured error instead of fake assistant text and a normal-success stop.
diff --git a/open-sse/executors/zed-hosted.ts b/open-sse/executors/zed-hosted.ts
index ef1ae4ade6..ba66706f10 100644
--- a/open-sse/executors/zed-hosted.ts
+++ b/open-sse/executors/zed-hosted.ts
@@ -44,6 +44,8 @@ import {
   zedLlmFetch,
   type ZedCredentials,
 } from "../shared/zedAuth.ts";
+import { buildErrorBody } from "../utils/error.ts";
+import { hasUsefulStreamContent } from "../utils/streamReadiness.ts";
 import { resolveSuppressThinkClose, THINKING_MARKER_HEADER } from "../utils/thinkCloseMarker.ts";
 
 // Wire values for the `provider` field of POST /completions. These are NOT
@@ -122,37 +124,72 @@ function convertProviderEvent(
   return event;
 }
 
-function createErrorChunk(model: string, message: string): Record<string, unknown> {
-  return {
-    id: `chatcmpl-zed-error-${Date.now()}`,
-    object: "chat.completion.chunk",
-    created: Math.floor(Date.now() / 1000),
-    model,
-    choices: [{ index: 0, delta: { content: `[Zed error] ${message}` }, finish_reason: "stop" }],
-  };
+const MAX_ZED_FAILURE_MESSAGE_LENGTH = 512;
+const MAX_PENDING_ZED_OUTPUT_LENGTH = 64 * 1024;
+const ZED_STREAM_FAILURE_PUBLIC_MESSAGE = "Zed upstream stream failed";
+
+function boundedFailureText(value: unknown): string | null {
+  if (typeof value !== "string" && typeof value !== "number") return null;
+  const text = String(value).trim();
+  return text ? text.slice(0, MAX_ZED_FAILURE_MESSAGE_LENGTH) : null;
+}
+
+function extractZedFailureMessage(failed: Record<string, unknown>): string {
+  const nestedError =
+    failed.error && typeof failed.error === "object" && !Array.isArray(failed.error)
+      ? (failed.error as Record<string, unknown>)
+      : null;
+  const candidates = [
+    failed.message,
+    nestedError?.message,
+    typeof failed.error === "object" ? undefined : failed.error,
+    failed.code,
+    nestedError?.code,
+  ];
+  for (const candidate of candidates) {
+    const text = boundedFailureText(candidate);
+    if (text) return text;
+  }
+  return "request failed";
+}
+
+function createErrorChunk(message: string): ReturnType<typeof buildErrorBody> {
+  return buildErrorBody(502, `Zed stream failed: ${message}`, undefined, {
+    type: "upstream_error",
+    code: "ZED_STREAM_FAILED",
+  });
 }
 
 /**
- * The single controller capability these SSE helpers use. They only ever enqueue —
- * never `close()`, never read `desiredSize` — so typing them by that one method lets
- * the same code serve both stream kinds. The wider
+ * The controller capabilities these SSE helpers use. Normal frames only enqueue;
+ * terminal failures also terminate so they do not depend on the upstream socket
+ * eventually reaching EOF. Narrow controller types keep the helpers honest. The wider
  * `ReadableStreamDefaultController` annotation rejected every call site, because the
  * helpers are driven from a TransformStream and `TransformStreamDefaultController`
  * has no `close()`.
  */
 type SseEnqueueTarget = Pick<ReadableStreamDefaultController<Uint8Array>, "enqueue">;
+type SseProcessTarget = Pick<TransformStreamDefaultController<Uint8Array>, "enqueue" | "terminate">;
+
+function serializeSseObject(chunk: unknown): string {
+  if (!chunk) return "";
+  let serialized = "";
+  const items = Array.isArray(chunk) ? chunk : [chunk];
+  for (const item of items) {
+    if (!item) continue;
+    serialized += `data: ${JSON.stringify(item)}\n\n`;
+  }
+  return serialized;
+}
 
 function enqueueSseObject(
   controller: SseEnqueueTarget,
   encoder: TextEncoder,
   chunk: unknown
 ): void {
-  if (!chunk) return;
-  const items = Array.isArray(chunk) ? chunk : [chunk];
-  for (const item of items) {
-    if (!item) continue;
-    controller.enqueue(encoder.encode(`data: ${JSON.stringify(item)}\n\n`));
-  }
+  const serialized = serializeSseObject(chunk);
+  if (!serialized) return;
+  controller.enqueue(encoder.encode(serialized));
 }
 
 type ZedLine = { done?: true; status?: unknown; event?: unknown } | null;
@@ -226,16 +263,47 @@ function wrapZedCompletionStream(
   }
   let buffer = "";
   let done = false;
+  let providerOutputForwarded = false;
+  let pendingProviderOutput = "";
+  let pendingFailure: (Error & { statusCode: number }) | null = null;
+
+  const forwardProviderOutput = (controller: SseEnqueueTarget, chunk: unknown) => {
+    const serialized = serializeSseObject(chunk);
+    if (!serialized) return;
+    if (providerOutputForwarded) {
+      controller.enqueue(encoder.encode(serialized));
+      return;
+    }
+
+    // A role/bootstrap-only chunk makes ensureStreamReadiness release the response before any
+    // model output exists. If the next chunk is status.failed, downstream read-ahead can discard
+    // the first real content while propagating the error. Hold structural frames until the first
+    // substantive text/reasoning/tool delta, then release them atomically with that output.
+    const outputWithBootstrap = pendingProviderOutput + serialized;
+    if (!hasUsefulStreamContent(outputWithBootstrap)) {
+      pendingProviderOutput =
+        outputWithBootstrap.length <= MAX_PENDING_ZED_OUTPUT_LENGTH
+          ? outputWithBootstrap
+          : serialized.length <= MAX_PENDING_ZED_OUTPUT_LENGTH
+            ? serialized
+            : "";
+      return;
+    }
+    controller.enqueue(encoder.encode(outputWithBootstrap));
+    pendingProviderOutput = "";
+    providerOutputForwarded = true;
+  };
 
   const finish = (controller: SseEnqueueTarget) => {
     if (done) return;
     const finalChunk = convertProviderEvent(provider, null, state);
-    enqueueSseObject(controller, encoder, finalChunk);
-    controller.enqueue(encoder.encode("data: [DONE]\n\n"));
+    const finalOutput = `${pendingProviderOutput}${serializeSseObject(finalChunk)}data: [DONE]\n\n`;
+    pendingProviderOutput = "";
+    controller.enqueue(encoder.encode(finalOutput));
     done = true;
   };
 
-  const processLine = (line: string, controller: SseEnqueueTarget) => {
+  const processLine = (line: string, controller: SseProcessTarget) => {
     if (done) return;
     const payload = unwrapZedLine(line);
     if (!payload) return;
@@ -246,17 +314,29 @@ function wrapZedCompletionStream(
     if (payload.status) {
       const status = normalizeStatus(payload.status);
       if (status?.type === "failed" || status?.failed) {
-        const failed = (status.failed as Record<string, unknown>) || status;
-        const message = String(failed.message || failed.error || failed.code || "request failed");
-        enqueueSseObject(controller, encoder, createErrorChunk(model, message));
-        finish(controller);
+        const failed =
+          status.failed && typeof status.failed === "object" && !Array.isArray(status.failed)
+            ? (status.failed as Record<string, unknown>)
+            : status;
+        if (providerOutputForwarded) {
+          pendingFailure = Object.assign(new Error(ZED_STREAM_FAILURE_PUBLIC_MESSAGE), {
+            statusCode: 502,
+          });
+          done = true;
+          controller.terminate();
+          return;
+        }
+        pendingProviderOutput = "";
+        enqueueSseObject(controller, encoder, createErrorChunk(extractZedFailureMessage(failed)));
+        done = true;
+        controller.terminate();
       } else if (status?.type === "stream_ended" || status === ("stream_ended" as unknown)) {
         finish(controller);
       }
       return;
     }
     const converted = convertProviderEvent(provider, payload.event, state);
-    enqueueSseObject(controller, encoder, converted);
+    forwardProviderOutput(controller, converted);
   };
 
   const transformed = response.body.pipeThrough(
@@ -281,7 +361,47 @@ function wrapZedCompletionStream(
     })
   );
 
-  return new Response(transformed, {
+  // `TransformStreamDefaultController.error()` discards already-enqueued output. A failed
+  // status can share one upstream network chunk with the last content delta, so erroring the
+  // transform immediately would erase that partial answer. Drain the transformed chunks through
+  // a backpressure-aware reader first, then reject the next read with the fixed public error.
+  // The normal chat pipeline turns that rejection into its client-format terminal frame and
+  // records the 502 through the existing failure finalizers.
+  const transformedReader = transformed.getReader();
+  let guardedStreamCancelled = false;
+  const cancelTransformedReader = (reason: unknown) => {
+    if (guardedStreamCancelled) return;
+    guardedStreamCancelled = true;
+    // Client cancellation must settle independently of an upstream body whose cancel hook hangs.
+    // Request cancellation once, but do not await provider cleanup on the client-facing boundary.
+    void transformedReader.cancel(reason).catch(() => {
+      console.debug("[ZED] upstream stream cancellation rejected");
+    });
+  };
+  const guardedStream = new ReadableStream<Uint8Array>({
+    async pull(controller) {
+      try {
+        const next = await transformedReader.read();
+        if (guardedStreamCancelled) return;
+        if (!next.done) {
+          controller.enqueue(next.value);
+          return;
+        }
+        if (pendingFailure) {
+          controller.error(pendingFailure);
+          return;
+        }
+        controller.close();
+      } catch (error) {
+        if (!guardedStreamCancelled) controller.error(error);
+      }
+    },
+    cancel(reason) {
+      cancelTransformedReader(reason);
+    },
+  });
+
+  return new Response(guardedStream, {
     status: response.status,
     statusText: response.statusText,
     headers: {
diff --git a/tests/fixtures/zed-hosted-stream-error-boundary-child.ts b/tests/fixtures/zed-hosted-stream-error-boundary-child.ts
new file mode 100644
index 0000000000..c5c8f8352d
--- /dev/null
+++ b/tests/fixtures/zed-hosted-stream-error-boundary-child.ts
@@ -0,0 +1,341 @@
+import test from "node:test";
+import assert from "node:assert/strict";
+import fs from "node:fs";
+import os from "node:os";
+import path from "node:path";
+
+// This file is executed only by the process-isolated unit-test wrapper. State
+// mutations and repository imports must remain here, never in the parent test.
+const TEST_DATA_DIR = fs.mkdtempSync(path.join(os.tmpdir(), "omniroute-zed-stream-data-"));
+const TEST_PLUGINS_DIR = fs.mkdtempSync(path.join(os.tmpdir(), "omniroute-zed-stream-plugins-"));
+const originalDataDir = process.env.DATA_DIR;
+const originalPluginsDir = process.env.OMNIROUTE_PLUGINS_DIR;
+const originalFetch = globalThis.fetch;
+let networkCalls = 0;
+
+process.env.DATA_DIR = TEST_DATA_DIR;
+process.env.OMNIROUTE_PLUGINS_DIR = TEST_PLUGINS_DIR;
+globalThis.fetch = async () => {
+  networkCalls += 1;
+  throw new Error("Unexpected network access in Zed stream boundary test");
+};
+
+const core = await import("../../src/lib/db/core.ts");
+const loggerResource = await import("../../src/shared/utils/loggerResource.ts");
+const { __test__ } = await import("../../open-sse/executors/zed-hosted.ts");
+const { FORMATS } = await import("../../open-sse/translator/formats.ts");
+const { assembleStreamingPipeline } =
+  await import("../../open-sse/handlers/chatCore/streamingPipeline.ts");
+const { createPassthroughStreamWithLogger } = await import("../../open-sse/utils/stream.ts");
+const { createStreamFailureFinalizers } =
+  await import("../../open-sse/utils/streamFailureFinalization.ts");
+const { createStreamController } = await import("../../open-sse/utils/streamHandler.ts");
+const { ensureStreamReadiness } = await import("../../open-sse/utils/streamReadiness.ts");
+const { wrapZedCompletionStream } = __test__;
+
+type StreamCompletionEvent = Parameters<
+  Parameters<typeof createStreamFailureFinalizers>[0]["onStreamComplete"]
+>[0];
+
+const RAW_FAILURE = "Bearer TOP_SECRET /srv/omniroute/zed-handler.ts:42 api_key=zed-secret";
+const TEST_MODEL = "grok-test-zed-stream-boundary";
+const TEST_CONNECTION_ID = "zed-stream-boundary-partial-connection";
+
+function failedStatusLine(): string {
+  return JSON.stringify({ status: { failed: { message: RAW_FAILURE } } });
+}
+
+function nestedFailedStatusLine(): string {
+  return JSON.stringify({
+    status: {
+      type: "failed",
+      error: { message: `${RAW_FAILURE} ${"x".repeat(2_000)}` },
+    },
+  });
+}
+
+function wrapOpenNdjson(lines: unknown[]): Response {
+  const encoder = new TextEncoder();
+  const body = lines
+    .map((line) => (typeof line === "string" ? line : JSON.stringify(line)))
+    .join("\n");
+  const stream = new ReadableStream<Uint8Array>({
+    start(controller) {
+      controller.enqueue(encoder.encode(`${body}\n`));
+      // Keep the upstream open: status.failed must terminate the wrapped stream itself.
+    },
+    cancel() {},
+  });
+  return wrapZedCompletionStream(
+    new Response(stream, {
+      status: 200,
+      headers: { "Content-Type": "application/x-ndjson" },
+    }),
+    "x_ai",
+    TEST_MODEL
+  );
+}
+
+function wrapOpenFailedNdjson(): Response {
+  const encoder = new TextEncoder();
+  const body = new ReadableStream<Uint8Array>({
+    start(controller) {
+      controller.enqueue(encoder.encode(`${failedStatusLine()}\n`));
+      // Deliberately stay open: status.failed is terminal by itself and must not
+      // depend on the upstream socket eventually reaching EOF.
+    },
+    cancel() {},
+  });
+  return wrapZedCompletionStream(
+    new Response(body, {
+      status: 200,
+      headers: { "Content-Type": "application/x-ndjson" },
+    }),
+    "x_ai",
+    TEST_MODEL
+  );
+}
+
+function wrapStalledNdjson(onCancel: () => void): Response {
+  const body = new ReadableStream<Uint8Array>({
+    cancel() {
+      onCancel();
+      return new Promise<void>(() => {});
+    },
+  });
+  return wrapZedCompletionStream(
+    new Response(body, {
+      status: 200,
+      headers: { "Content-Type": "application/x-ndjson" },
+    }),
+    "x_ai",
+    TEST_MODEL
+  );
+}
+
+async function resolvesWithin(promise: Promise<unknown>, timeoutMs: number): Promise<void> {
+  let timeout: ReturnType<typeof setTimeout> | undefined;
+  try {
+    await Promise.race([
+      promise,
+      new Promise<never>((_, reject) => {
+        timeout = setTimeout(
+          () => reject(new Error(`operation exceeded ${timeoutMs}ms`)),
+          timeoutMs
+        );
+      }),
+    ]);
+  } finally {
+    if (timeout) clearTimeout(timeout);
+  }
+}
+
+async function waitFor(predicate: () => boolean, timeoutMs: number): Promise<void> {
+  const deadline = Date.now() + timeoutMs;
+  while (!predicate() && Date.now() < deadline) {
+    await new Promise((resolve) => setTimeout(resolve, 1));
+  }
+  assert.equal(predicate(), true, `condition was not met within ${timeoutMs}ms`);
+}
+
+function parseSsePayloads(text: string): Array<Record<string, unknown>> {
+  return text
+    .split(/\r?\n/)
+    .filter((line) => line.startsWith("data: ") && line.slice(6) !== "[DONE]")
+    .map((line) => JSON.parse(line.slice(6)) as Record<string, unknown>);
+}
+
+function assertNoSensitiveFailureText(text: string): void {
+  assert.doesNotMatch(text, /TOP_SECRET|zed-secret|\/srv\/omniroute\/zed-handler\.ts/);
+}
+
+test.after(async () => {
+  core.resetDbInstance();
+  await loggerResource.closeSharedLoggerResource();
+  globalThis.fetch = originalFetch;
+  if (originalDataDir === undefined) delete process.env.DATA_DIR;
+  else process.env.DATA_DIR = originalDataDir;
+  if (originalPluginsDir === undefined) delete process.env.OMNIROUTE_PLUGINS_DIR;
+  else process.env.OMNIROUTE_PLUGINS_DIR = originalPluginsDir;
+  fs.rmSync(TEST_DATA_DIR, { recursive: true, force: true, maxRetries: 5, retryDelay: 100 });
+  fs.rmSync(TEST_PLUGINS_DIR, { recursive: true, force: true, maxRetries: 5, retryDelay: 100 });
+});
+
+test("zed-hosted pre-content status.failed becomes a sanitized 502 readiness failure", async () => {
+  const readiness = await ensureStreamReadiness(wrapOpenFailedNdjson(), {
+    timeoutMs: 100,
+    provider: "zed-hosted",
+    model: TEST_MODEL,
+  });
+
+  assert.equal(readiness.ok, false, "the structured error must remain eligible for fallback");
+  if (readiness.ok) assert.fail("pre-content Zed failure must not make the stream ready");
+  assert.equal(readiness.response.status, 502);
+  assert.equal(readiness.code, "STREAM_EARLY_EOF");
+
+  const bodyText = await readiness.response.text();
+  const body = JSON.parse(bodyText) as {
+    error: { message: string; type: string; code: string };
+    upstream_details?: { error?: { message?: string } };
+  };
+  assert.equal(body.error.type, "stream_early_eof");
+  assert.equal(body.error.code, "STREAM_EARLY_EOF");
+  assert.match(body.upstream_details?.error?.message ?? "", /Zed stream failed/i);
+  assertNoSensitiveFailureText(bodyText);
+  assert.equal(networkCalls, 0);
+});
+
+test("zed-hosted partial failure reaches stream finalization and persistence as 502", async () => {
+  const roleChunk = {
+    event: {
+      id: "chatcmpl-zed-partial",
+      object: "chat.completion.chunk",
+      choices: [{ index: 0, delta: { role: "assistant" }, finish_reason: null }],
+    },
+  };
+  const contentChunk = {
+    event: {
+      id: "chatcmpl-zed-partial",
+      object: "chat.completion.chunk",
+      choices: [{ index: 0, delta: { content: "partial answer" }, finish_reason: null }],
+    },
+  };
+  const readiness = await ensureStreamReadiness(
+    wrapOpenNdjson([
+      roleChunk,
+      contentChunk,
+      nestedFailedStatusLine(),
+      { event: { ignored: "after failure" } },
+    ]),
+    {
+      timeoutMs: 100,
+      provider: "zed-hosted",
+      model: TEST_MODEL,
+    }
+  );
+
+  assert.equal(readiness.ok, true, "partial model output must remain deliverable");
+  const completionEvents: StreamCompletionEvent[] = [];
+  const persistedFailures: Array<{
+    connectionId: string;
+    model: string;
+    status: number;
+    code?: string;
+  }> = [];
+  const streamFailures: Array<{ status: number; message: string; code?: string; type?: string }> =
+    [];
+  const pipelineErrors: Array<{ message: string; statusCode: number }> = [];
+  let streamCompletionRecorded = false;
+  let failureCompletionRecorded = false;
+
+  const recordCompletion = (payload: StreamCompletionEvent): void => {
+    if (streamCompletionRecorded) return;
+    streamCompletionRecorded = true;
+    if (payload.status !== 200) failureCompletionRecorded = true;
+    completionEvents.push(payload);
+  };
+  const finalizers = createStreamFailureFinalizers({
+    isFailureCompletionRecorded: () => failureCompletionRecorded,
+    isStreamCompletionRecorded: () => streamCompletionRecorded,
+    onStreamComplete: recordCompletion,
+    persistFailureUsage: (status, code) =>
+      persistedFailures.push({
+        connectionId: TEST_CONNECTION_ID,
+        model: TEST_MODEL,
+        status,
+        code,
+      }),
+    onStreamFailure: (failure) => streamFailures.push(failure),
+  });
+  const streamController = createStreamController({
+    onError: (event) => {
+      pipelineErrors.push({ message: event.message, statusCode: event.statusCode });
+      return finalizers.onPipelineStreamError(event);
+    },
+    provider: "zed-hosted",
+    model: TEST_MODEL,
+    connectionId: TEST_CONNECTION_ID,
+    clientResponseFormat: FORMATS.OPENAI,
+  });
+  const transformStream = createPassthroughStreamWithLogger(
+    "zed-hosted",
+    null,
+    null,
+    TEST_MODEL,
+    TEST_CONNECTION_ID,
+    { messages: [{ role: "user", content: "test" }] },
+    recordCompletion,
+    null,
+    finalizers.handleStreamFailure,
+    FORMATS.OPENAI
+  );
+  const responseHeaders: Record<string, string> = {};
+  const finalStream = assembleStreamingPipeline({
+    providerResponse: readiness.response,
+    transformStream,
+    streamController,
+    createPiiTransform: null,
+    clientRawRequestHeaders: null,
+    clientResponseFormat: FORMATS.OPENAI,
+    echoModel: null,
+    responseHeaders,
+  });
+  const text = await new Response(finalStream, { headers: responseHeaders }).text();
+  const payloads = parseSsePayloads(text);
+  const errorPayload = payloads.find((payload) => "error" in payload) as
+    { error: { message: string; type: string; code: string } } | undefined;
+
+  assert.match(text, /partial answer/);
+  assert.ok(errorPayload, "the stream handler must emit its format-safe terminal error");
+  assert.equal(errorPayload.error.type, "server_error");
+  assert.equal(errorPayload.error.code, "server_error");
+  assert.equal(errorPayload.error.message, "Zed upstream stream failed");
+  assert.match(text, /"finish_reason":"error"/);
+  assert.doesNotMatch(text, /\[Zed error\]|"finish_reason":"stop"|response\.failed/);
+  assert.doesNotMatch(text, /"ignored":"after failure"/);
+  assertNoSensitiveFailureText(text);
+
+  assert.equal(completionEvents.length, 1, "the failure must finalize exactly once");
+  assert.equal(completionEvents[0].status, 502);
+  assert.equal(completionEvents[0].error, "Zed upstream stream failed");
+  assert.equal(completionEvents[0].errorCode, "stream_pipeline_error");
+  assert.deepEqual(persistedFailures, [
+    {
+      connectionId: TEST_CONNECTION_ID,
+      model: TEST_MODEL,
+      status: 502,
+      code: "stream_pipeline_error",
+    },
+  ]);
+  assert.deepEqual(streamFailures, [
+    {
+      status: 502,
+      message: "Zed upstream stream failed",
+      code: "stream_pipeline_error",
+      type: "stream_error",
+    },
+  ]);
+  assert.deepEqual(pipelineErrors, [{ message: "Zed upstream stream failed", statusCode: 502 }]);
+  assertNoSensitiveFailureText(JSON.stringify(completionEvents));
+  assert.equal(networkCalls, 0);
+});
+
+test("zed-hosted client cancellation does not await a stalled upstream cancel hook", async () => {
+  let upstreamCancelCalls = 0;
+  const response = wrapStalledNdjson(() => {
+    upstreamCancelCalls += 1;
+  });
+  assert.ok(response.body);
+
+  const reader = response.body.getReader();
+  const pendingRead = reader.read();
+  await resolvesWithin(reader.cancel("client disconnected"), 100);
+  const readResult = await pendingRead;
+  assert.equal(readResult.done, true);
+  await waitFor(() => upstreamCancelCalls === 1, 100);
+
+  await resolvesWithin(reader.cancel("duplicate cancel"), 100);
+  await new Promise((resolve) => setTimeout(resolve, 10));
+  assert.equal(upstreamCancelCalls, 1, "the upstream cancel hook must be requested exactly once");
+  assert.equal(networkCalls, 0);
+});
diff --git a/tests/unit/zed-hosted-stream-error-boundary.test.ts b/tests/unit/zed-hosted-stream-error-boundary.test.ts
new file mode 100644
index 0000000000..1565c1c1bd
--- /dev/null
+++ b/tests/unit/zed-hosted-stream-error-boundary.test.ts
@@ -0,0 +1,84 @@
+import assert from "node:assert/strict";
+import { spawn } from "node:child_process";
+import { fileURLToPath } from "node:url";
+import test from "node:test";
+
+const repoRoot = fileURLToPath(new URL("../../", import.meta.url));
+const fixturePath = fileURLToPath(
+  new URL("../fixtures/zed-hosted-stream-error-boundary-child.ts", import.meta.url)
+);
+
+type FixtureResult = {
+  code: number | null;
+  signal: NodeJS.Signals | null;
+  stdout: string;
+  stderr: string;
+};
+
+function runFixture(): Promise<FixtureResult> {
+  // Keep the parent process pristine: the fast unit suite can run files with
+  // --test-isolation=none, so all stateful imports and mutations live in the child.
+  const childEnv: NodeJS.ProcessEnv = {
+    PATH: process.env.PATH,
+    NODE_PATH: process.env.NODE_PATH,
+    LANG: process.env.LANG,
+    LC_ALL: process.env.LC_ALL,
+    TZ: process.env.TZ,
+    TMPDIR: process.env.TMPDIR,
+    NODE_ENV: "test",
+    API_KEY_SECRET: "zed-boundary-test-only-secret-with-32-plus-characters",
+    DISABLE_SQLITE_AUTO_BACKUP: "true",
+    NO_COLOR: "1",
+  };
+  // Inheriting this marker makes Node silently skip the nested --test run.
+  delete childEnv.NODE_TEST_CONTEXT;
+
+  return new Promise((resolve, reject) => {
+    const child = spawn(process.execPath, ["--import", "tsx/esm", "--test", fixturePath], {
+      cwd: repoRoot,
+      env: childEnv,
+      stdio: ["ignore", "pipe", "pipe"],
+    });
+    let stdout = "";
+    let stderr = "";
+    let timedOut = false;
+
+    child.stdout.setEncoding("utf8");
+    child.stderr.setEncoding("utf8");
+    child.stdout.on("data", (chunk: string) => {
+      stdout += chunk;
+    });
+    child.stderr.on("data", (chunk: string) => {
+      stderr += chunk;
+    });
+
+    const timeout = setTimeout(() => {
+      timedOut = true;
+      child.kill("SIGKILL");
+    }, 120_000);
+
+    child.once("error", (error) => {
+      clearTimeout(timeout);
+      reject(error);
+    });
+    child.once("close", (code, signal) => {
+      clearTimeout(timeout);
+      if (timedOut) {
+        reject(new Error("Zed stream error boundary fixture timed out after 120 seconds"));
+        return;
+      }
+      resolve({ code, signal, stdout, stderr });
+    });
+  });
+}
+
+test("Zed stream error boundary passes in a process-isolated runtime", async () => {
+  const result = await runFixture();
+  const output = `${result.stdout}\n${result.stderr}`;
+
+  assert.equal(result.signal, null, output.slice(-12_000));
+  assert.equal(result.code, 0, output.slice(-12_000));
+  assert.match(output, /(?:^|\s)tests\s+3(?:\s|$)/m);
+  assert.match(output, /(?:^|\s)pass\s+3(?:\s|$)/m);
+  assert.match(output, /(?:^|\s)fail\s+0(?:\s|$)/m);
+});