diff --git a/pkg/transport/middleware/token_injection.go b/pkg/transport/middleware/token_injection.go
index cfd46fc1f8..49fce30fbe 100644
--- a/pkg/transport/middleware/token_injection.go
+++ b/pkg/transport/middleware/token_injection.go
@@ -14,8 +14,15 @@ import (
 	"github.com/stacklok/toolhive/pkg/transport/types"
 )
 
+// retryAfterSecs tells MCP clients how long to wait before retrying.
+// Matches the initial MonitoredTokenSource backoff interval so that clients
+// retry around the same time the next token refresh attempt happens.
+const retryAfterSecs = "10"
+
 // CreateTokenInjectionMiddleware returns a middleware that injects a Bearer token
-// from the provided oauth2.TokenSource. It returns 401 when the workload is unauthenticated.
+// from the provided oauth2.TokenSource. It returns 503 Service Unavailable with a
+// Retry-After header when the token cannot be retrieved, so that MCP clients treat
+// the failure as transient rather than initiating an OAuth discovery flow.
 func CreateTokenInjectionMiddleware(tokenSource oauth2.TokenSource) types.MiddlewareFunction {
 	return func(next http.Handler) http.Handler {
 		return http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
@@ -24,8 +31,11 @@ func CreateTokenInjectionMiddleware(tokenSource oauth2.TokenSource) types.Middle
 				if err != nil {
 					slog.Warn("unable to retrieve OAuth token", "error", err)
 					// The token source (AuthenticatedTokenSource) handles marking
-					// the workload as unauthenticated in its Token() method
-					http.Error(w, "Authentication required", http.StatusUnauthorized)
+					// the workload as unauthenticated in its Token() method.
+					// Return 503 instead of 401 so MCP clients do not mistake this
+					// for a server that requires client-side OAuth authentication.
+					w.Header().Set("Retry-After", retryAfterSecs)
+					http.Error(w, "Token temporarily unavailable", http.StatusServiceUnavailable)
 					return
 				}
 
diff --git a/pkg/transport/middleware/token_injection_test.go b/pkg/transport/middleware/token_injection_test.go
new file mode 100644
index 0000000000..c8f08f7d7e
--- /dev/null
+++ b/pkg/transport/middleware/token_injection_test.go
@@ -0,0 +1,108 @@
+// SPDX-FileCopyrightText: Copyright 2025 Stacklok, Inc.
+// SPDX-License-Identifier: Apache-2.0
+
+package middleware
+
+import (
+	"errors"
+	"net/http"
+	"net/http/httptest"
+	"testing"
+
+	"github.com/stretchr/testify/assert"
+	"github.com/stretchr/testify/require"
+	"golang.org/x/oauth2"
+)
+
+// stubTokenSource implements oauth2.TokenSource for testing.
+type stubTokenSource struct {
+	token *oauth2.Token
+	err   error
+}
+
+func (s *stubTokenSource) Token() (*oauth2.Token, error) {
+	return s.token, s.err
+}
+
+func TestCreateTokenInjectionMiddleware(t *testing.T) {
+	t.Parallel()
+
+	tests := []struct {
+		name            string
+		tokenSource     oauth2.TokenSource
+		wantStatus      int
+		wantNextCalled  bool
+		wantAuthHeader  string
+		wantRetryAfter  string
+		wantBodyContain string
+	}{
+		{
+			name: "token source error returns 503 with Retry-After",
+			tokenSource: &stubTokenSource{
+				err: errors.New("token expired"),
+			},
+			wantStatus:      http.StatusServiceUnavailable,
+			wantNextCalled:  false,
+			wantRetryAfter:  retryAfterSecs,
+			wantBodyContain: "Token temporarily unavailable",
+		},
+		{
+			name: "token source succeeds injects Bearer token",
+			tokenSource: &stubTokenSource{
+				token: &oauth2.Token{AccessToken: "test-access-token"},
+			},
+			wantStatus:     http.StatusOK,
+			wantNextCalled: true,
+			wantAuthHeader: "Bearer test-access-token",
+		},
+		{
+			name:           "nil token source passes request through",
+			tokenSource:    nil,
+			wantStatus:     http.StatusOK,
+			wantNextCalled: true,
+			wantAuthHeader: "",
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			t.Parallel()
+
+			nextCalled := false
+			var capturedReq *http.Request
+
+			next := http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+				nextCalled = true
+				capturedReq = r
+				w.WriteHeader(http.StatusOK)
+			})
+
+			mw := CreateTokenInjectionMiddleware(tt.tokenSource)
+			handler := mw(next)
+
+			req := httptest.NewRequest(http.MethodPost, "/mcp", nil)
+			rec := httptest.NewRecorder()
+			handler.ServeHTTP(rec, req)
+
+			assert.Equal(t, tt.wantStatus, rec.Code)
+			assert.Equal(t, tt.wantNextCalled, nextCalled)
+
+			if tt.wantRetryAfter != "" {
+				assert.Equal(t, tt.wantRetryAfter, rec.Header().Get("Retry-After"))
+			}
+
+			if tt.wantBodyContain != "" {
+				assert.Contains(t, rec.Body.String(), tt.wantBodyContain)
+			}
+
+			if tt.wantNextCalled {
+				require.NotNil(t, capturedReq)
+				if tt.wantAuthHeader != "" {
+					assert.Equal(t, tt.wantAuthHeader, capturedReq.Header.Get("Authorization"))
+				} else {
+					assert.Empty(t, capturedReq.Header.Get("Authorization"))
+				}
+			}
+		})
+	}
+}