diff --git a/agent/x/agentmcp/configwatcher.go b/agent/x/agentmcp/configwatcher.go
new file mode 100644
index 0000000000..36684e6c57
--- /dev/null
+++ b/agent/x/agentmcp/configwatcher.go
@@ -0,0 +1,435 @@
+package agentmcp
+
+import (
+	"context"
+	"path/filepath"
+	"sync"
+	"time"
+
+	"github.com/fsnotify/fsnotify"
+	"golang.org/x/xerrors"
+
+	"cdr.dev/slog/v3"
+	"github.com/coder/quartz"
+)
+
+// defaultWatchDebounce coalesces editor-style multi-event writes
+// (truncate plus rename plus chmod) into a single reload. The
+// value is small enough to keep the late-file recovery latency
+// well under a second.
+const defaultWatchDebounce = 250 * time.Millisecond
+
+// configWatcher watches the parent directories of one or more
+// .mcp.json paths and fires a single debounced callback when any
+// of those paths is created, modified, removed, or renamed.
+//
+// The watcher is deliberately tolerant of late-arriving config:
+// if the parent directory does not exist yet, it walks up to the
+// first existing ancestor and re-arms deeper as ancestors appear.
+// Symlinks are resolved once at arming time; the watcher does not
+// chase arbitrary symlink targets on every event.
+type configWatcher struct {
+	logger   slog.Logger
+	clock    quartz.Clock
+	debounce time.Duration
+
+	// onChange is invoked once per debounce window when a watched
+	// path is touched. It runs on a clock-managed timer goroutine
+	// and must return promptly; callers should hand off to a
+	// singleflight or background goroutine.
+	onChange func()
+
+	mu        sync.Mutex
+	watcher   *fsnotify.Watcher
+	files     map[string]string // resolved path -> watched ancestor dir.
+	dirs      map[string]int    // ancestor dir -> refcount.
+	timer     *quartz.Timer
+	closed    bool
+	closedCh  chan struct{}
+	closeOnce sync.Once
+	runDoneCh chan struct{}  // closed when run() exits.
+	firesWG   sync.WaitGroup // tracks in-flight fire callbacks.
+}
+
+// newConfigWatcher creates a configWatcher and starts its event
+// loop. Sync registers the actual paths to watch. The watcher does
+// nothing until Sync is called.
+func newConfigWatcher(
+	logger slog.Logger,
+	clock quartz.Clock,
+	debounce time.Duration,
+	onChange func(),
+) (*configWatcher, error) {
+	if onChange == nil {
+		return nil, xerrors.New("onChange callback is required")
+	}
+	if debounce <= 0 {
+		debounce = defaultWatchDebounce
+	}
+
+	w, err := fsnotify.NewWatcher()
+	if err != nil {
+		return nil, xerrors.Errorf("create fsnotify watcher: %w", err)
+	}
+
+	cw := &configWatcher{
+		logger:    logger,
+		clock:     clock,
+		debounce:  debounce,
+		onChange:  onChange,
+		watcher:   w,
+		files:     make(map[string]string),
+		dirs:      make(map[string]int),
+		closedCh:  make(chan struct{}),
+		runDoneCh: make(chan struct{}),
+	}
+	go cw.run()
+	return cw, nil
+}
+
+// Sync replaces the watched set with paths. Files no longer in the
+// list are removed; new files are added. Symlinks are resolved
+// once. Individual arm failures are logged and skipped; partial
+// arming is acceptable because parseAndDedup is the source of
+// truth and the watcher exists purely to trigger a fresh stat.
+//
+// Sync is idempotent and safe to call repeatedly.
+func (cw *configWatcher) Sync(paths []string) {
+	if cw == nil {
+		return
+	}
+
+	resolved := make(map[string]struct{}, len(paths))
+	for _, p := range paths {
+		rp := resolvePath(p)
+		if rp == "" {
+			continue
+		}
+		resolved[rp] = struct{}{}
+	}
+
+	cw.mu.Lock()
+	if cw.closed {
+		cw.mu.Unlock()
+		return
+	}
+
+	// Remove paths that are no longer wanted.
+	for rp, dir := range cw.files {
+		if _, keep := resolved[rp]; keep {
+			continue
+		}
+		delete(cw.files, rp)
+		cw.releaseDirLocked(dir)
+	}
+
+	// Add new paths.
+	for rp := range resolved {
+		if _, already := cw.files[rp]; already {
+			continue
+		}
+		dir, err := cw.armAncestorLocked(rp)
+		if err != nil {
+			cw.logger.Warn(context.Background(),
+				"failed to arm config file watch",
+				slog.F("path", rp), slog.Error(err))
+			continue
+		}
+		cw.files[rp] = dir
+	}
+	cw.mu.Unlock()
+}
+
+// armAncestorLocked walks up the parent chain from rp until it
+// finds an existing directory, then watches that directory.
+// Returns the actual directory it ended up watching. The last
+// fsnotify Add error is preserved so callers can distinguish a
+// missing-ancestor failure from an inotify-limit (ENOSPC) failure.
+// Callers must hold cw.mu.
+func (cw *configWatcher) armAncestorLocked(rp string) (string, error) {
+	dir := filepath.Dir(rp)
+	var lastAddDir string
+	var lastAddErr error
+	for {
+		// Bail out if we somehow reached the root without finding
+		// an existing directory. filepath.Dir("/") == "/" on POSIX
+		// and "C:\" == "C:\" on Windows, so guard against an
+		// infinite loop.
+		if dir == "" || dir == "." {
+			return "", noAncestorErr(rp, lastAddDir, lastAddErr)
+		}
+
+		if cw.dirs[dir] > 0 {
+			cw.dirs[dir]++
+			return dir, nil
+		}
+
+		err := cw.watcher.Add(dir)
+		if err == nil {
+			cw.dirs[dir] = 1
+			return dir, nil
+		}
+		lastAddDir = dir
+		lastAddErr = err
+
+		parent := filepath.Dir(dir)
+		if parent == dir {
+			return "", noAncestorErr(rp, lastAddDir, lastAddErr)
+		}
+		dir = parent
+	}
+}
+
+// noAncestorErr formats the failure to register a watch on any
+// ancestor of path. If the loop tried at least one Add, the
+// underlying error (usually inotify ENOSPC) is wrapped so the
+// operator sees the actual kernel-level cause instead of a generic
+// "no existing ancestor" message.
+func noAncestorErr(path, lastDir string, lastErr error) error {
+	if lastErr != nil {
+		return xerrors.Errorf("cannot watch any ancestor of %q (last attempt on %q): %w", path, lastDir, lastErr)
+	}
+	return xerrors.Errorf("no existing ancestor for %q", path)
+}
+
+// releaseDirLocked decrements the refcount for dir and removes the
+// watch when no remaining file points at it. Callers must hold
+// cw.mu.
+func (cw *configWatcher) releaseDirLocked(dir string) {
+	cw.dirs[dir]--
+	if cw.dirs[dir] > 0 {
+		return
+	}
+	delete(cw.dirs, dir)
+	if err := cw.watcher.Remove(dir); err != nil {
+		// Removal can fail when the directory no longer exists;
+		// fsnotify already dropped the watch, so this is benign.
+		cw.logger.Debug(context.Background(),
+			"failed to remove config dir watch",
+			slog.F("dir", dir), slog.Error(err))
+	}
+}
+
+// run is the watcher loop. It exits when the underlying
+// fsnotify.Watcher closes its channels or Close is called.
+func (cw *configWatcher) run() {
+	defer close(cw.runDoneCh)
+	ctx := context.Background()
+	for {
+		select {
+		case <-cw.closedCh:
+			return
+		case evt, ok := <-cw.watcher.Events:
+			if !ok {
+				return
+			}
+			cw.handleEvent(ctx, evt)
+		case err, ok := <-cw.watcher.Errors:
+			if !ok {
+				return
+			}
+			cw.logger.Warn(ctx,
+				"fsnotify watch error; config file changes may not be detected until the next HTTP request",
+				slog.Error(err))
+		}
+	}
+}
+
+// handleEvent decides whether the event concerns one of the
+// watched files (or could promote an ancestor watch) and, if so,
+// schedules a debounced fire.
+func (cw *configWatcher) handleEvent(ctx context.Context, evt fsnotify.Event) {
+	cw.mu.Lock()
+	if cw.closed {
+		cw.mu.Unlock()
+		return
+	}
+
+	// Match against any watched file. fsnotify event names are
+	// already absolute when the watched directory is absolute,
+	// which it is because armAncestorLocked called filepath.Dir
+	// on a path resolved to absolute. The filepath.Abs call below
+	// is a defensive normalization.
+	evtAbs, err := filepath.Abs(evt.Name)
+	if err != nil {
+		cw.mu.Unlock()
+		return
+	}
+
+	matchedFile := ""
+	for rp := range cw.files {
+		if rp == evtAbs {
+			matchedFile = rp
+			break
+		}
+	}
+
+	// If a directory we are watching for an ancestor of an
+	// unrealized path just gained a new child, try to re-arm
+	// deeper. This handles `mkdir ~/.config; touch
+	// ~/.config/.mcp.json` cases.
+	if matchedFile == "" && evt.Has(fsnotify.Create) {
+		for rp, dir := range cw.files {
+			// Only re-arm files whose final parent is not yet
+			// being watched directly.
+			expected := filepath.Dir(rp)
+			if dir == expected {
+				continue
+			}
+			// If this event is a directory inside our currently
+			// watched ancestor that lies on the way to rp,
+			// re-arm.
+			if isAncestorPathSegment(evtAbs, rp) {
+				cw.releaseDirLocked(dir)
+				newDir, armErr := cw.armAncestorLocked(rp)
+				if armErr != nil {
+					cw.logger.Debug(ctx,
+						"failed to re-arm config file watch on ancestor create",
+						slog.F("path", rp), slog.Error(armErr))
+					// Leave the file unarmed for now;
+					// next Sync will retry.
+					delete(cw.files, rp)
+					continue
+				}
+				cw.files[rp] = newDir
+				// The new dir may already contain the
+				// target file. Treat that as a match.
+				matchedFile = rp
+			}
+		}
+	}
+
+	cw.mu.Unlock()
+
+	if matchedFile == "" {
+		return
+	}
+	cw.scheduleFire()
+}
+
+// isAncestorPathSegment reports whether candidate is on the path
+// from the currently watched ancestor toward target.
+func isAncestorPathSegment(candidate, target string) bool {
+	// candidate must be a prefix of target's directory chain.
+	tdir := filepath.Dir(target)
+	for {
+		if tdir == candidate {
+			return true
+		}
+		parent := filepath.Dir(tdir)
+		if parent == tdir {
+			return false
+		}
+		tdir = parent
+	}
+}
+
+// scheduleFire arms or extends a single debounce timer.
+func (cw *configWatcher) scheduleFire() {
+	cw.mu.Lock()
+	defer cw.mu.Unlock()
+	if cw.closed {
+		return
+	}
+	if cw.timer != nil {
+		// Reset existing timer to extend the debounce window.
+		// Stop reports whether the call stopped the timer before
+		// it fired; if so we owe a Done because Add was called
+		// when the timer was created.
+		if cw.timer.Stop() {
+			cw.firesWG.Done()
+		}
+	}
+	cw.firesWG.Add(1)
+	cw.timer = cw.clock.AfterFunc(cw.debounce, cw.fire, "agentmcp", "watch_debounce")
+}
+
+// fire is called once per debounce window. It invokes onChange
+// outside the lock so reload code can re-enter Sync safely.
+func (cw *configWatcher) fire() {
+	defer cw.firesWG.Done()
+
+	cw.mu.Lock()
+	if cw.closed {
+		cw.mu.Unlock()
+		return
+	}
+	cw.timer = nil
+	cw.mu.Unlock()
+
+	cw.onChange()
+}
+
+// Close stops the watcher and waits for the run goroutine and
+// any in-flight debounced fire callbacks to exit. Close is
+// idempotent.
+func (cw *configWatcher) Close() error {
+	if cw == nil {
+		return nil
+	}
+	var closeErr error
+	cw.closeOnce.Do(func() {
+		cw.mu.Lock()
+		cw.closed = true
+		if cw.timer != nil {
+			// Stop returns true if the call prevented the timer
+			// callback from running. Account for the Add() that
+			// scheduleFire performed when arming this timer.
+			if cw.timer.Stop() {
+				cw.firesWG.Done()
+			}
+			cw.timer = nil
+		}
+		cw.mu.Unlock()
+
+		close(cw.closedCh)
+		if err := cw.watcher.Close(); err != nil {
+			closeErr = xerrors.Errorf("close fsnotify watcher: %w", err)
+		}
+		// Wait for run() to exit, then wait for any in-flight
+		// fire callback to return. Callers should not observe a
+		// stale onChange after Close returns; this is critical
+		// for tests that use slogtest, which panics on log
+		// calls made after the test has finished.
+		<-cw.runDoneCh
+		cw.firesWG.Wait()
+	})
+	return closeErr
+}
+
+// resolvePath converts a path to an absolute, symlink-resolved
+// form. If the file does not exist, falls back to filepath.Abs so
+// the caller can still arm an ancestor directory.
+func resolvePath(p string) string {
+	if p == "" {
+		return ""
+	}
+	if abs, err := filepath.Abs(p); err == nil {
+		// EvalSymlinks fails on non-existent paths. Resolve as
+		// far as possible without erroring out: walk up until
+		// we find an existing ancestor, eval its symlinks, and
+		// re-join the trailing segments.
+		if resolved, err := filepath.EvalSymlinks(abs); err == nil {
+			return resolved
+		}
+		return resolvePathBestEffort(abs)
+	}
+	return ""
+}
+
+func resolvePathBestEffort(abs string) string {
+	dir := filepath.Dir(abs)
+	base := filepath.Base(abs)
+	for dir != "" && dir != "." {
+		if resolved, err := filepath.EvalSymlinks(dir); err == nil {
+			return filepath.Join(resolved, base)
+		}
+		parent := filepath.Dir(dir)
+		base = filepath.Join(filepath.Base(dir), base)
+		if parent == dir {
+			break
+		}
+		dir = parent
+	}
+	return abs
+}
diff --git a/agent/x/agentmcp/configwatcher_internal_test.go b/agent/x/agentmcp/configwatcher_internal_test.go
new file mode 100644
index 0000000000..621e91604b
--- /dev/null
+++ b/agent/x/agentmcp/configwatcher_internal_test.go
@@ -0,0 +1,514 @@
+package agentmcp
+
+import (
+	"context"
+	"encoding/json"
+	"net/http"
+	"net/http/httptest"
+	"os"
+	"path/filepath"
+	"sync"
+	"sync/atomic"
+	"testing"
+	"time"
+
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+
+	"cdr.dev/slog/v3"
+	"cdr.dev/slog/v3/sloggers/slogtest"
+	"github.com/coder/coder/v2/agent/agentexec"
+	"github.com/coder/coder/v2/codersdk/workspacesdk"
+	"github.com/coder/coder/v2/testutil"
+	"github.com/coder/quartz"
+)
+
+// These tests exercise the dual-agent late-file regression: the
+// inner sandbox agent settles startup quickly and calls Reload
+// while `~/.mcp.json` still does not exist on disk. The host
+// agent then writes the file ~20s later. Before this fix, the
+// manager cached an empty snapshot and stayed empty until a
+// subsequent HTTP call lazily re-statted the file. With the
+// fsnotify-backed watcher, the manager picks up the late file
+// without external prompting.
+
+// awaitTools polls cachedTools until the predicate succeeds or
+// the context expires. It avoids time.Sleep loops in callers.
+func awaitTools(ctx context.Context, t *testing.T, m *Manager, pred func([]workspacesdk.MCPToolInfo) bool) []workspacesdk.MCPToolInfo {
+	t.Helper()
+	var final []workspacesdk.MCPToolInfo
+	testutil.Eventually(ctx, t, func(context.Context) bool {
+		final = m.cachedTools()
+		return pred(final)
+	}, testutil.IntervalFast)
+	return final
+}
+
+// useFastDebounce shortens the watcher's debounce window so
+// real-clock tests do not stall on the 250 ms default. Must be
+// called before any Reload arms the watcher.
+func useFastDebounce(t *testing.T, m *Manager) {
+	t.Helper()
+	m.mu.Lock()
+	m.watchDebounce = 10 * time.Millisecond
+	m.mu.Unlock()
+}
+
+func TestWatcher_LateFileTriggersReload(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+	configPath := filepath.Join(dir, ".mcp.json")
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+	t.Cleanup(func() { _ = m.Close() })
+
+	// First Reload arms the watcher but finds nothing on disk.
+	require.NoError(t, m.Reload(ctx, []string{configPath}))
+	require.Empty(t, m.cachedTools(), "manager should start with no tools")
+
+	// Write the file after the manager has already settled. The
+	// watcher must observe the Create event, debounce it, and
+	// trigger a fresh Reload without any external HTTP call.
+	_, entry := fakeMCPServerConfig(t, "srv")
+	writeMCPConfig(t, dir, map[string]mcpServerEntry{"srv": entry})
+
+	tools := awaitTools(ctx, t, m, func(tools []workspacesdk.MCPToolInfo) bool {
+		return len(tools) == 1
+	})
+	require.Len(t, tools, 1)
+	assert.Contains(t, tools[0].Name, "echo")
+
+	// The snapshot must now reflect the on-disk file so the
+	// next Reload short-circuits.
+	assert.False(t, m.SnapshotChanged([]string{configPath}))
+}
+
+func TestWatcher_RewriteTriggersReload(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+
+	_, entry := fakeMCPServerConfig(t, "srv")
+	configPath := writeMCPConfig(t, dir, map[string]mcpServerEntry{"srv": entry})
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+	t.Cleanup(func() { _ = m.Close() })
+
+	require.NoError(t, m.Reload(ctx, []string{configPath}))
+	tools := m.cachedTools()
+	require.Len(t, tools, 1)
+	assert.Contains(t, tools[0].Name, "srv")
+
+	// Overwrite the config with a different server name. The
+	// watcher should fire and the cache should reflect the new
+	// server without any caller-driven Reload.
+	_, entry2 := fakeMCPServerConfig(t, "srv2")
+	writeMCPConfig(t, dir, map[string]mcpServerEntry{"srv2": entry2})
+
+	tools = awaitTools(ctx, t, m, func(tools []workspacesdk.MCPToolInfo) bool {
+		return len(tools) == 1 && len(tools[0].Name) > 0 &&
+			(tools[0].ServerName == "srv2")
+	})
+	require.Len(t, tools, 1)
+	assert.Equal(t, "srv2", tools[0].ServerName)
+}
+
+func TestWatcher_RemovalTransitionsToEmpty(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+
+	_, entry := fakeMCPServerConfig(t, "srv")
+	configPath := writeMCPConfig(t, dir, map[string]mcpServerEntry{"srv": entry})
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+	t.Cleanup(func() { _ = m.Close() })
+
+	require.NoError(t, m.Reload(ctx, []string{configPath}))
+	require.Len(t, m.cachedTools(), 1)
+
+	require.NoError(t, os.Remove(configPath))
+
+	awaitTools(ctx, t, m, func(tools []workspacesdk.MCPToolInfo) bool {
+		return len(tools) == 0
+	})
+	assert.Empty(t, m.cachedTools())
+}
+
+// TestWatcher_DebouncesBurst uses the quartz mock clock to
+// confirm that three writes inside a single debounce window
+// produce exactly one onChange invocation. This is the
+// guarantee that lets the watcher coalesce editor-style
+// multi-event writes (write + chmod + rename) into a single
+// Reload.
+func TestWatcher_DebouncesBurst(t *testing.T) {
+	t.Parallel()
+
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	mClock := quartz.NewMock(t)
+
+	var fires atomic.Int64
+	fired := make(chan struct{}, 4)
+	cw, err := newConfigWatcher(logger, mClock, 100*time.Millisecond, func() {
+		fires.Add(1)
+		fired <- struct{}{}
+	})
+	require.NoError(t, err)
+	t.Cleanup(func() { _ = cw.Close() })
+
+	dir := t.TempDir()
+	target := filepath.Join(dir, ".mcp.json")
+	cw.Sync([]string{target})
+
+	// First burst: simulate three fsnotify events landing within
+	// the debounce window. We do this by directly calling
+	// scheduleFire, which is exactly what handleEvent does for
+	// each matching event.
+	cw.scheduleFire()
+	cw.scheduleFire()
+	cw.scheduleFire()
+
+	// Before the timer fires, no callback should have run.
+	require.Equal(t, int64(0), fires.Load())
+
+	// Advance past the debounce window. Only one fire is
+	// expected because all three scheduleFire calls reused the
+	// same timer.
+	_, waiter := mClock.AdvanceNext()
+	waiter.MustWait(testutil.Context(t, testutil.WaitShort))
+
+	select {
+	case <-fired:
+	case <-time.After(testutil.WaitShort):
+		t.Fatal("expected one fire after debounce window")
+	}
+
+	// Drain any spurious extra fire briefly.
+	select {
+	case <-fired:
+		t.Fatal("unexpected additional fire within debounce window")
+	default:
+	}
+	require.Equal(t, int64(1), fires.Load())
+
+	// A second burst after the first window settles must fire
+	// again (debounce per-window, not global).
+	cw.scheduleFire()
+	cw.scheduleFire()
+	_, waiter = mClock.AdvanceNext()
+	waiter.MustWait(testutil.Context(t, testutil.WaitShort))
+
+	select {
+	case <-fired:
+	case <-time.After(testutil.WaitShort):
+		t.Fatal("expected fire after second window")
+	}
+	require.Equal(t, int64(2), fires.Load())
+}
+
+// TestWatcher_CloseStopsGoroutine asserts that Close releases the
+// fsnotify watcher fd and stops its goroutine. We rely on the
+// race detector and on creating a fresh manager on the same path
+// to surface fd or goroutine leaks.
+func TestWatcher_CloseStopsGoroutine(t *testing.T) {
+	t.Parallel()
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+	configPath := filepath.Join(dir, ".mcp.json")
+
+	for range 5 {
+		m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+		useFastDebounce(t, m)
+		m.MarkStartupSettled()
+		require.NoError(t, m.Reload(ctx, []string{configPath}))
+		require.NoError(t, m.Close())
+
+		// After Close the watcher field is cleared and the
+		// fsnotify watcher is shut down.
+		m.mu.RLock()
+		w := m.watcher
+		m.mu.RUnlock()
+		require.Nil(t, w, "watcher must be nil after Close")
+	}
+}
+
+// TestWatcher_DualAgentHTTPNoStall mimics the dual-agent
+// workspace scenario from workspace-otto-aa16: the inner sandbox
+// agent calls MarkStartupSettled and Reload while the host agent
+// has not yet written ~/.mcp.json. Once the file appears, an
+// HTTP request to /tools must return the MCP tools quickly
+// instead of triggering a multi-second "reload canceled" stall.
+func TestWatcher_DualAgentHTTPNoStall(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+	configPath := filepath.Join(dir, ".mcp.json")
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+	t.Cleanup(func() { _ = m.Close() })
+
+	// First Reload races ahead of the host agent: empty config.
+	require.NoError(t, m.Reload(ctx, []string{configPath}))
+	require.Empty(t, m.cachedTools())
+
+	api := NewAPI(logger, m, func() []string { return []string{configPath} })
+
+	// Host agent writes the file later.
+	_, entry := fakeMCPServerConfig(t, "srv")
+	writeMCPConfig(t, dir, map[string]mcpServerEntry{"srv": entry})
+
+	// Wait for the watcher to pick up the file so we know the
+	// cache is warm before issuing the HTTP request.
+	awaitTools(ctx, t, m, func(tools []workspacesdk.MCPToolInfo) bool {
+		return len(tools) == 1
+	})
+
+	req := httptest.NewRequest(http.MethodGet, "/tools", nil).WithContext(ctx)
+	rec := httptest.NewRecorder()
+
+	start := time.Now()
+	api.Routes().ServeHTTP(rec, req)
+	elapsed := time.Since(start)
+
+	require.Equal(t, http.StatusOK, rec.Code)
+	require.Less(t, elapsed, testutil.WaitShort,
+		"warm HTTP request should not stall on watcher reload; took %s", elapsed)
+
+	var resp workspacesdk.ListMCPToolsResponse
+	require.NoError(t, json.NewDecoder(rec.Body).Decode(&resp))
+	require.Len(t, resp.Tools, 1)
+	assert.Contains(t, resp.Tools[0].Name, "echo")
+}
+
+// TestWatcher_LateParentDirTriggersReload exercises the
+// ancestor-walk-up branch (handleEvent re-arm path,
+// armAncestorLocked walk-up). The watcher is started with the
+// final parent directory missing; once that directory is
+// created, the watcher must promote its watch deeper and then
+// fire on the file write.
+func TestWatcher_LateParentDirTriggersReload(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	root := t.TempDir()
+	// Parent directory does not exist yet: armAncestorLocked
+	// will watch root instead.
+	missing := filepath.Join(root, "config")
+	configPath := filepath.Join(missing, ".mcp.json")
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+	t.Cleanup(func() { _ = m.Close() })
+
+	require.NoError(t, m.Reload(ctx, []string{configPath}))
+	require.Empty(t, m.cachedTools())
+
+	// Create the missing parent directory. fsnotify will deliver
+	// a Create event on root; handleEvent must release the root
+	// watch, re-arm on the new parent, and schedule a reload.
+	require.NoError(t, os.MkdirAll(missing, 0o755))
+
+	_, entry := fakeMCPServerConfig(t, "srv")
+	writeMCPConfig(t, missing, map[string]mcpServerEntry{"srv": entry})
+
+	tools := awaitTools(ctx, t, m, func(tools []workspacesdk.MCPToolInfo) bool {
+		return len(tools) == 1
+	})
+	require.Len(t, tools, 1)
+	assert.Contains(t, tools[0].Name, "echo")
+}
+
+// TestWatcher_SharedParentRefcount covers the multi-path
+// directory-watch refcount path: two configured paths in the
+// same parent dir should produce a single fsnotify watch, and
+// removing one path via a subsequent Sync must keep the
+// remaining path armed.
+func TestWatcher_SharedParentRefcount(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+	pathA := filepath.Join(dir, "a.mcp.json")
+	pathB := filepath.Join(dir, "b.mcp.json")
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+	t.Cleanup(func() { _ = m.Close() })
+
+	// First Reload arms both paths, sharing the dir watch.
+	require.NoError(t, m.Reload(ctx, []string{pathA, pathB}))
+
+	m.mu.RLock()
+	w := m.watcher
+	m.mu.RUnlock()
+	require.NotNil(t, w, "watcher must be armed")
+
+	w.mu.Lock()
+	require.Equal(t, 2, len(w.files), "two files tracked")
+	require.Equal(t, 1, len(w.dirs), "shared parent dir")
+	require.Equal(t, 2, w.dirs[dir], "refcount equals number of files")
+	w.mu.Unlock()
+
+	// Second Reload removes pathB, so the dir refcount drops to
+	// 1 but the watch must remain in place for pathA.
+	require.NoError(t, m.Reload(ctx, []string{pathA}))
+
+	w.mu.Lock()
+	require.Equal(t, 1, len(w.files), "one file tracked after removal")
+	require.Equal(t, 1, w.dirs[dir], "refcount decremented but not zero")
+	w.mu.Unlock()
+
+	// Writing pathA should still trigger a reload via the
+	// surviving dir watch.
+	_, entry := fakeMCPServerConfig(t, "srv")
+	cfg := mcpConfigFile{MCPServers: make(map[string]json.RawMessage)}
+	raw, err := json.Marshal(entry)
+	require.NoError(t, err)
+	cfg.MCPServers["srv"] = raw
+	data, err := json.Marshal(cfg)
+	require.NoError(t, err)
+	require.NoError(t, os.WriteFile(pathA, data, 0o600))
+
+	tools := awaitTools(ctx, t, m, func(tools []workspacesdk.MCPToolInfo) bool {
+		return len(tools) == 1
+	})
+	require.Len(t, tools, 1)
+}
+
+// TestWatcher_CloseDoesNotStallOnInFlightReload guards the
+// shutdown-ordering invariant: Close() must mark the manager
+// closed before w.Close() so an in-flight watcher-driven Reload
+// short-circuits instead of blocking firesWG.Wait() for the full
+// connect timeout. Without the ordering, this test would block
+// at Close() for ~30 s.
+//
+// The test installs a connectStartedHook that signals when a
+// watcher-driven reload has reached connectAll and then blocks
+// until released. While the hook is blocking the singleflight
+// reload goroutine, the test calls Close() and asserts it
+// returns quickly: the DEREM-5 ordering ensures m.closedCh is
+// closed before w.Close()'s firesWG.Wait(), so waitReload
+// observes the close, fire() returns, and firesWG drains. If
+// the ordering is reverted, w.Close() blocks on firesWG.Wait()
+// while fire() is stuck inside waitReload waiting for the
+// connect that will never finish.
+func TestWatcher_CloseDoesNotStallOnInFlightReload(t *testing.T) {
+	t.Parallel()
+
+	if os.Getenv("TEST_MCP_FAKE_SERVER") == "1" {
+		runFakeMCPServer()
+		return
+	}
+
+	ctx := testutil.Context(t, testutil.WaitLong)
+	logger := slogtest.Make(t, nil).Leveled(slog.LevelDebug)
+	dir := t.TempDir()
+	configPath := filepath.Join(dir, ".mcp.json")
+
+	m := NewManager(ctx, logger, agentexec.DefaultExecer, nil)
+	useFastDebounce(t, m)
+	m.MarkStartupSettled()
+
+	// Arm the watcher with an initial empty Reload. We install the
+	// hook after this so the first connectAll (with empty
+	// toConnect) is not blocked.
+	require.NoError(t, m.Reload(ctx, []string{configPath}))
+
+	reached := make(chan struct{})
+	release := make(chan struct{})
+	var releaseOnce sync.Once
+	releaseHook := func() { releaseOnce.Do(func() { close(release) }) }
+	t.Cleanup(releaseHook)
+
+	m.mu.Lock()
+	var hookOnce sync.Once
+	m.connectStartedHook = func() {
+		hookOnce.Do(func() { close(reached) })
+		<-release
+	}
+	m.mu.Unlock()
+
+	// Write the file. The watcher will fire a debounced reload
+	// that hits the connectStartedHook and blocks there.
+	_, entry := fakeMCPServerConfig(t, "srv")
+	writeMCPConfig(t, dir, map[string]mcpServerEntry{"srv": entry})
+
+	select {
+	case <-reached:
+	case <-time.After(testutil.WaitLong):
+		t.Fatal("watcher-driven reload never reached connectAll")
+	}
+
+	// Reload is in-flight: connectAll is blocked inside the hook,
+	// the singleflight body has not returned, and fire() is
+	// blocked in waitReload. Now call Close. With the correct
+	// ordering (m.closedCh closed before w.Close()), this returns
+	// quickly even though the hook is still blocking.
+	done := make(chan error, 1)
+	go func() { done <- m.Close() }()
+
+	select {
+	case err := <-done:
+		require.NoError(t, err)
+	case <-time.After(testutil.WaitMedium):
+		t.Fatal("Close stalled; ordering bug: w.Close before m.closed=true")
+	}
+
+	// Release the hook so the leaked singleflight goroutine can
+	// drain. The manager is already closed, so its work has no
+	// observable effect.
+	releaseHook()
+}
diff --git a/agent/x/agentmcp/manager.go b/agent/x/agentmcp/manager.go
index 9bc9cdf6e1..23cba06c18 100644
--- a/agent/x/agentmcp/manager.go
+++ b/agent/x/agentmcp/manager.go
@@ -106,6 +106,28 @@ type Manager struct {
 	// caller and may outlive Close).
 	closedCh  chan struct{}
 	closeOnce sync.Once
+
+	// lastPaths records the most recent config paths passed to
+	// Reload/Tools. The fsnotify-backed watcher uses these to
+	// drive its own reloads when ~/.mcp.json appears late on
+	// dual-agent workspaces.
+	lastPaths []string
+
+	// watcher fires a debounced Reload when any watched config
+	// file is created, written, removed, or renamed. It is armed
+	// lazily on the first Reload call so tests that never call
+	// Reload do not pay for an extra goroutine and file
+	// descriptor.
+	watcher       *configWatcher
+	watcherOnce   sync.Once
+	watchDebounce time.Duration
+
+	// connectStartedHook is a test hook invoked at the start of
+	// connectAll, before any client is dialed. Production code
+	// leaves this nil; tests set it to coordinate with an
+	// in-flight reload (for example, to verify Close()'s
+	// shutdown ordering does not stall on a stuck connect).
+	connectStartedHook func()
 }
 
 // serverEntry pairs a server config with its connected client.
@@ -136,6 +158,7 @@ func NewManager(
 		snapshot:       make(map[string]fileSnapshot),
 		startupSettled: make(chan struct{}),
 		closedCh:       make(chan struct{}),
+		watchDebounce:  defaultWatchDebounce,
 	}
 }
 
@@ -258,6 +281,14 @@ func (m *Manager) startReloadIfNeeded(paths []string) (<-chan reloadResult, bool
 		}
 		return nil, false, err
 	}
+	// Arm the fsnotify watcher before deciding whether to short
+	// circuit. The first call lazily creates it; subsequent calls
+	// re-sync the watched path set if it changed. Arming before
+	// the SnapshotChanged check ensures any Create event that
+	// races with parseAndDedup is still delivered: the watcher
+	// is running when parseAndDedup returns the empty snapshot.
+	m.armWatcher(paths)
+
 	if firstSyncSettled && !m.SnapshotChanged(paths) {
 		return nil, false, nil
 	}
@@ -270,6 +301,82 @@ func (m *Manager) startReloadIfNeeded(paths []string) (<-chan reloadResult, bool
 	return ch, true, nil
 }
 
+// armWatcher lazily initializes the fsnotify-backed configWatcher
+// and syncs it to the latest config paths. Lazy initialization
+// keeps unit tests that never call Reload free of extra goroutines
+// and file descriptors.
+//
+// If the underlying watcher cannot be created (e.g. inotify limit
+// reached), the error is logged once and the manager continues
+// without a watcher. The lazy stat-on-request path remains the
+// primary mechanism; the watcher is an optimization that closes
+// the dual-agent race window.
+func (m *Manager) armWatcher(paths []string) {
+	m.watcherOnce.Do(func() {
+		cw, err := newConfigWatcher(
+			m.logger.Named("config_watcher"),
+			m.clock,
+			m.watchDebounce,
+			m.handleWatchedConfigChange,
+		)
+		if err != nil {
+			m.logger.Warn(m.ctx,
+				"failed to start MCP config watcher; falling back to lazy stat",
+				slog.Error(err))
+			return
+		}
+		// Close the watcher if the manager was closed between
+		// newConfigWatcher returning and us acquiring m.mu.
+		// Otherwise its goroutine and inotify fd leak.
+		m.mu.Lock()
+		if m.closed {
+			m.mu.Unlock()
+			_ = cw.Close()
+			return
+		}
+		m.watcher = cw
+		m.mu.Unlock()
+	})
+
+	m.mu.Lock()
+	m.lastPaths = slices.Clone(paths)
+	w := m.watcher
+	closed := m.closed
+	m.mu.Unlock()
+	if w == nil || closed {
+		return
+	}
+	w.Sync(paths)
+}
+
+// handleWatchedConfigChange is invoked by the watcher on a
+// debounced fire. It triggers a singleflight Reload using the
+// most recently observed path set so the cached server map and
+// snapshot are refreshed without waiting for the next HTTP
+// request.
+func (m *Manager) handleWatchedConfigChange() {
+	m.mu.RLock()
+	paths := slices.Clone(m.lastPaths)
+	closed := m.closed
+	m.mu.RUnlock()
+	if closed || len(paths) == 0 {
+		return
+	}
+
+	logger := m.logger.With(slog.F("trigger", "fsnotify"))
+	logger.Debug(m.ctx, "reloading due to config change")
+	if err := m.Reload(m.ctx, paths); err != nil {
+		if errors.Is(err, ErrManagerClosed) ||
+			errors.Is(err, context.Canceled) {
+			logger.Debug(m.ctx,
+				"watched reload short-circuited by shutdown",
+				slog.Error(err))
+			return
+		}
+		logger.Warn(m.ctx, "watched reload failed", slog.Error(err))
+	}
+}
+
 func (m *Manager) waitReload(ctx context.Context, ch <-chan reloadResult, timeout time.Duration) error {
 	// Prefer caller cancellation when it already happened before the
 	// wait. Otherwise select may choose a ready reload result instead.
@@ -515,6 +622,10 @@ func (m *Manager) classifyServers(wanted map[string]ServerConfig) (*serverDiff,
 func (m *Manager) connectAll(ctx context.Context, toConnect []ServerConfig) []connectedServer {
 	logger := m.logger.With(agentchat.Fields(ctx)...)
 
+	if hook := m.connectStartedHook; hook != nil {
+		hook()
+	}
+
 	var (
 		mu        sync.Mutex
 		connected []connectedServer
@@ -756,13 +867,34 @@ func (m *Manager) RefreshTools(ctx context.Context) error {
 }
 
 // Close terminates all MCP server connections and child
-// processes.
+// processes, stops the config file watcher, and waits for any
+// in-flight watcher-driven reload to complete.
 func (m *Manager) Close() error {
+	// Mark the manager closed and signal closedCh first, then
+	// hand the watcher off and release the lock. Marking closed
+	// before w.Close() ensures that any in-flight
+	// handleWatchedConfigChange short-circuits and any Reload
+	// blocked in waitReload observes m.closedCh, instead of
+	// blocking firesWG.Wait() inside w.Close() until a 30 s
+	// connectAll times out.
+	m.mu.Lock()
+	m.closed = true
+	m.closeOnce.Do(func() { close(m.closedCh) })
+	w := m.watcher
+	m.watcher = nil
+	m.mu.Unlock()
+
+	// Close the watcher outside the manager lock. Its goroutine
+	// may call handleWatchedConfigChange, which takes m.mu, so
+	// holding m.mu while waiting for the watcher to drain would
+	// deadlock. Close on a nil watcher is a no-op.
+	if w != nil {
+		_ = w.Close()
+	}
+
 	m.mu.Lock()
 	defer m.mu.Unlock()
 
-	m.closed = true
-	m.closeOnce.Do(func() { close(m.closedCh) })
 	var errs []error
 	for _, entry := range m.servers {
 		if err := entry.client.Close(); err != nil {