diff --git a/packages/claude-code-plugin/hooks/session-start.py b/packages/claude-code-plugin/hooks/session-start.py
index 14a9bf75..f6918044 100644
--- a/packages/claude-code-plugin/hooks/session-start.py
+++ b/packages/claude-code-plugin/hooks/session-start.py
@@ -344,6 +344,35 @@ def register_hook_in_settings(settings_file: Path) -> bool:
     return True
 
 
+def _install_hook_with_lib(
+    source_file: Path, hooks_dir: Path, target_file: Path
+) -> None:
+    """Copy hook file AND its lib/ dependencies to the target hooks directory.
+
+    Copies the hook script and, if present, the sibling lib/ directory
+    so that runtime imports (e.g. hud_state) work from ~/.claude/hooks/.
+
+    Args:
+        source_file: Path to the source hook script.
+        hooks_dir: Target directory (e.g. ~/.claude/hooks/).
+        target_file: Full target path for the hook script.
+    """
+    hooks_dir.mkdir(parents=True, exist_ok=True)
+    shutil.copy(source_file, target_file)
+    target_file.chmod(0o755)
+
+    # Copy lib/ directory alongside the hook (#1102)
+    source_lib = source_file.parent / "lib"
+    if source_lib.is_dir():
+        target_lib = hooks_dir / "lib"
+        shutil.copytree(
+            source_lib,
+            target_lib,
+            dirs_exist_ok=True,
+            ignore=shutil.ignore_patterns("__pycache__", "*.pyc"),
+        )
+
+
 HUD_FILENAME = "codingbuddy-hud.py"
 
 # tmux suggestion messages (i18n)
@@ -648,9 +677,7 @@ def main():
             source_file = find_plugin_source()
 
             if source_file:
-                hooks_dir.mkdir(parents=True, exist_ok=True)
-                shutil.copy(source_file, target_file)
-                target_file.chmod(0o755)
+                _install_hook_with_lib(source_file, hooks_dir, target_file)
                 installed_hook = True
             else:
                 # Source not found - provide manual installation guide
diff --git a/packages/claude-code-plugin/hooks/test_session_start.py b/packages/claude-code-plugin/hooks/test_session_start.py
index d828a8c4..7aff866c 100644
--- a/packages/claude-code-plugin/hooks/test_session_start.py
+++ b/packages/claude-code-plugin/hooks/test_session_start.py
@@ -309,6 +309,90 @@ def test_finds_agents_from_relative_path(self):
             assert len(json_files) > 0
 
 
+class TestHookLibCopy:
+    """Tests for lib/ directory copying alongside hook file (#1102)."""
+
+    def test_copies_lib_dir_when_installing_hook(self):
+        """Test that lib/ directory is copied alongside the hook file."""
+        with tempfile.TemporaryDirectory() as tmpdir:
+            home = Path(tmpdir) / "home"
+            home.mkdir()
+
+            # Create mock plugin source with lib/
+            plugin_dir = Path(tmpdir) / "plugin" / "hooks"
+            plugin_dir.mkdir(parents=True)
+            source_file = plugin_dir / "user-prompt-submit.py"
+            source_file.write_text("# mock hook")
+
+            lib_dir = plugin_dir / "lib"
+            lib_dir.mkdir()
+            (lib_dir / "hud_state.py").write_text("# mock hud_state")
+            (lib_dir / "__init__.py").write_text("")
+
+            hooks_dir = home / ".claude" / "hooks"
+            target_file = hooks_dir / session_hook.HOOK_FILENAME
+
+            # Simulate main() behavior: find source and install
+            with patch.object(session_hook, "find_plugin_source", return_value=source_file):
+                with patch.object(Path, "home", return_value=home):
+                    session_hook._install_hook_with_lib(source_file, hooks_dir, target_file)
+
+            # Verify hook file was copied
+            assert target_file.exists()
+
+            # Verify lib/ was copied
+            target_lib = hooks_dir / "lib"
+            assert target_lib.is_dir()
+            assert (target_lib / "hud_state.py").exists()
+            assert (target_lib / "__init__.py").exists()
+
+    def test_updates_lib_dir_when_already_exists(self):
+        """Test that lib/ directory is updated when it already exists."""
+        with tempfile.TemporaryDirectory() as tmpdir:
+            # Create source with new file
+            plugin_dir = Path(tmpdir) / "plugin" / "hooks"
+            plugin_dir.mkdir(parents=True)
+            source_file = plugin_dir / "user-prompt-submit.py"
+            source_file.write_text("# mock hook")
+            source_lib = plugin_dir / "lib"
+            source_lib.mkdir()
+            (source_lib / "hud_state.py").write_text("# updated version")
+            (source_lib / "new_module.py").write_text("# new")
+
+            # Create existing target with old lib
+            hooks_dir = Path(tmpdir) / "target_hooks"
+            hooks_dir.mkdir(parents=True)
+            target_file = hooks_dir / session_hook.HOOK_FILENAME
+            target_lib = hooks_dir / "lib"
+            target_lib.mkdir()
+            (target_lib / "hud_state.py").write_text("# old version")
+
+            session_hook._install_hook_with_lib(source_file, hooks_dir, target_file)
+
+            # Verify updated
+            assert (target_lib / "hud_state.py").read_text() == "# updated version"
+            assert (target_lib / "new_module.py").exists()
+
+    def test_works_when_source_has_no_lib(self):
+        """Test graceful handling when source has no lib/ directory."""
+        with tempfile.TemporaryDirectory() as tmpdir:
+            plugin_dir = Path(tmpdir) / "plugin" / "hooks"
+            plugin_dir.mkdir(parents=True)
+            source_file = plugin_dir / "user-prompt-submit.py"
+            source_file.write_text("# mock hook")
+            # No lib/ directory
+
+            hooks_dir = Path(tmpdir) / "target_hooks"
+            hooks_dir.mkdir(parents=True)
+            target_file = hooks_dir / session_hook.HOOK_FILENAME
+
+            # Should not raise
+            session_hook._install_hook_with_lib(source_file, hooks_dir, target_file)
+
+            assert target_file.exists()
+            assert not (hooks_dir / "lib").exists()
+
+
 if __name__ == "__main__":
     import pytest
     pytest.main([__file__, "-v"])