diff --git a/src/lib/agent-interface.spec.ts b/src/lib/agent-interface.spec.ts
index c4f1486f..489dbb1c 100644
--- a/src/lib/agent-interface.spec.ts
+++ b/src/lib/agent-interface.spec.ts
@@ -1,4 +1,4 @@
-import { describe, it, expect, vi, beforeEach } from 'vitest';
+import { describe, it, expect, vi, beforeEach, afterEach } from 'vitest';
 
 const { mockQuery, mockConfig } = vi.hoisted(() => ({
   mockQuery: vi.fn(),
@@ -61,13 +61,22 @@ vi.mock('./token-refresh.js', () => ({
 
 vi.mock('./credential-proxy.js', () => ({
   startCredentialProxy: vi.fn(),
+  startClaimTokenProxy: vi.fn(),
+}));
+
+vi.mock('./config-store.js', () => ({
+  getActiveEnvironment: vi.fn(() => null),
+  isUnclaimedEnvironment: vi.fn(() => false),
 }));
 
 vi.mock('../utils/urls.js', () => ({
   getLlmGatewayUrlFromHost: vi.fn(() => 'http://localhost:8000'),
 }));
 
-import { runAgent, AgentErrorType } from './agent-interface.js';
+import { runAgent, AgentErrorType, initializeAgent, type AgentConfig } from './agent-interface.js';
+import { startCredentialProxy, startClaimTokenProxy } from './credential-proxy.js';
+import { getActiveEnvironment, isUnclaimedEnvironment } from './config-store.js';
+import { hasCredentials, getCredentials } from './credentials.js';
 import { InstallerEventEmitter } from './events.js';
 import type { InstallerOptions } from '../utils/types.js';
 
@@ -364,3 +373,134 @@ describe('service unavailability handling', () => {
     expect(validateAndFormat).not.toHaveBeenCalled();
   });
 });
+
+describe('initializeAgent sdkEnv auth', () => {
+  const PROXY_PLACEHOLDER_TOKEN = 'workos-cli-proxy-placeholder';
+  const originalAnthropicApiKey = process.env.ANTHROPIC_API_KEY;
+  const originalAnthropicAuthToken = process.env.ANTHROPIC_AUTH_TOKEN;
+
+  beforeEach(() => {
+    vi.mocked(startCredentialProxy).mockReset();
+    vi.mocked(startClaimTokenProxy).mockReset();
+    vi.mocked(getActiveEnvironment).mockReset().mockReturnValue(null);
+    vi.mocked(isUnclaimedEnvironment).mockReset().mockReturnValue(false);
+    vi.mocked(hasCredentials).mockReset().mockReturnValue(false);
+    vi.mocked(getCredentials).mockReset().mockReturnValue(null);
+
+    // Simulate a user shell that has their own Anthropic key sitting in the
+    // environment. The SDK must NOT forward this to the WorkOS gateway.
+    process.env.ANTHROPIC_API_KEY = 'sk-ant-user-personal-key';
+    delete process.env.ANTHROPIC_AUTH_TOKEN;
+  });
+
+  afterEach(() => {
+    if (originalAnthropicApiKey === undefined) {
+      delete process.env.ANTHROPIC_API_KEY;
+    } else {
+      process.env.ANTHROPIC_API_KEY = originalAnthropicApiKey;
+    }
+    if (originalAnthropicAuthToken === undefined) {
+      delete process.env.ANTHROPIC_AUTH_TOKEN;
+    } else {
+      process.env.ANTHROPIC_AUTH_TOKEN = originalAnthropicAuthToken;
+    }
+  });
+
+  function makeAgentConfigForInit(): AgentConfig {
+    return {
+      workingDirectory: '/tmp/test',
+      workOSApiKey: 'sk_test_x',
+      workOSApiHost: 'https://api.workos.com',
+    };
+  }
+
+  it('seeds placeholder auth token on the credential proxy path', async () => {
+    vi.mocked(hasCredentials).mockReturnValue(true);
+    vi.mocked(getCredentials).mockReturnValue({
+      accessToken: 'real-workos-token',
+      refreshToken: 'refresh-token',
+      expiresAt: Date.now() + 60_000,
+      userId: 'user_x',
+    });
+    vi.mocked(startCredentialProxy).mockResolvedValue({
+      port: 12345,
+      url: 'http://127.0.0.1:12345',
+      stop: vi.fn(async () => {}),
+    });
+
+    const result = await initializeAgent(makeAgentConfigForInit(), makeOptions({ skipAuth: false, local: false }));
+
+    // The SDK runs a local auth-source check at startup and exits with
+    // "Not logged in" if nothing is present. A placeholder token prevents
+    // that false-positive; the proxy overwrites Authorization upstream.
+    expect(result.sdkEnv.ANTHROPIC_AUTH_TOKEN).toBe(PROXY_PLACEHOLDER_TOKEN);
+    // User's personal Anthropic key must not leak through to the gateway.
+    expect(result.sdkEnv.ANTHROPIC_API_KEY).toBeUndefined();
+    expect(result.sdkEnv.ANTHROPIC_BASE_URL).toBe('http://127.0.0.1:12345');
+  });
+
+  it('seeds placeholder auth token on the claim-token proxy path', async () => {
+    vi.mocked(getActiveEnvironment).mockReturnValue({
+      apiKey: 'sk_test_x',
+      clientId: 'client_x',
+      claimToken: 'claim_xyz',
+    } as unknown as ReturnType<typeof getActiveEnvironment>);
+    vi.mocked(isUnclaimedEnvironment).mockReturnValue(true);
+    vi.mocked(startClaimTokenProxy).mockResolvedValue({
+      port: 23456,
+      url: 'http://127.0.0.1:23456',
+      stop: vi.fn(async () => {}),
+    });
+
+    const result = await initializeAgent(makeAgentConfigForInit(), makeOptions({ skipAuth: false, local: false }));
+
+    expect(result.sdkEnv.ANTHROPIC_AUTH_TOKEN).toBe(PROXY_PLACEHOLDER_TOKEN);
+    expect(result.sdkEnv.ANTHROPIC_API_KEY).toBeUndefined();
+    expect(result.sdkEnv.ANTHROPIC_BASE_URL).toBe('http://127.0.0.1:23456');
+  });
+
+  it('seeds placeholder auth token in skip-auth mode', async () => {
+    const result = await initializeAgent(makeAgentConfigForInit(), makeOptions({ skipAuth: true, local: false }));
+
+    expect(result.sdkEnv.ANTHROPIC_AUTH_TOKEN).toBe(PROXY_PLACEHOLDER_TOKEN);
+    expect(result.sdkEnv.ANTHROPIC_API_KEY).toBeUndefined();
+  });
+
+  it('seeds placeholder auth token in local mode', async () => {
+    const result = await initializeAgent(makeAgentConfigForInit(), makeOptions({ skipAuth: false, local: true }));
+
+    expect(result.sdkEnv.ANTHROPIC_AUTH_TOKEN).toBe(PROXY_PLACEHOLDER_TOKEN);
+    expect(result.sdkEnv.ANTHROPIC_API_KEY).toBeUndefined();
+  });
+
+  it('strips ANTHROPIC_API_KEY on legacy fallback path (no refresh token)', async () => {
+    vi.mocked(hasCredentials).mockReturnValue(true);
+    // No refreshToken - triggers the legacy fallback branch in initializeAgent.
+    vi.mocked(getCredentials).mockReturnValue({
+      accessToken: 'real-workos-token',
+      expiresAt: Date.now() + 60_000,
+      userId: 'user_x',
+    });
+
+    const result = await initializeAgent(makeAgentConfigForInit(), makeOptions({ skipAuth: false, local: false }));
+
+    // Legacy path sends the real WorkOS access token as the bearer; the
+    // user's personal Anthropic key must not tag along as an x-api-key
+    // header to the WorkOS gateway.
+    expect(result.sdkEnv.ANTHROPIC_AUTH_TOKEN).toBe('real-workos-token');
+    expect(result.sdkEnv.ANTHROPIC_API_KEY).toBeUndefined();
+  });
+
+  it('preserves ANTHROPIC_API_KEY in direct mode', async () => {
+    const result = await initializeAgent(
+      makeAgentConfigForInit(),
+      makeOptions({ direct: true, skipAuth: false, local: false }),
+    );
+
+    // Direct mode talks to api.anthropic.com using the user's own key;
+    // the placeholder bearer must NOT be set here.
+    expect(result.sdkEnv.ANTHROPIC_API_KEY).toBe('sk-ant-user-personal-key');
+    expect(result.sdkEnv.ANTHROPIC_AUTH_TOKEN).toBeUndefined();
+    expect(result.sdkEnv.ANTHROPIC_BASE_URL).toBeUndefined();
+  });
+});
diff --git a/src/lib/agent-interface.ts b/src/lib/agent-interface.ts
index 59dae0f1..090a2538 100644
--- a/src/lib/agent-interface.ts
+++ b/src/lib/agent-interface.ts
@@ -345,6 +345,15 @@ export async function initializeAgent(config: AgentConfig, options: InstallerOpt
       CLAUDE_CODE_DISABLE_NONESSENTIAL_TRAFFIC: 'true',
     };
 
+    // Placeholder bearer token for the Claude Agent SDK. The SDK's CLI
+    // subprocess runs a local auth-source check at startup and exits with
+    // "Not logged in · Please run /login" if no credentials are present in
+    // its environment — even when a proxy is handling auth upstream. Setting
+    // this token puts the SDK in custom-backend mode so it skips that check;
+    // the credential proxy rewrites the Authorization header with the real
+    // WorkOS token before forwarding upstream.
+    const PROXY_PLACEHOLDER_TOKEN = 'workos-cli-proxy-placeholder';
+
     if (options.direct) {
       // Direct mode: use user's Anthropic API key, skip gateway
       if (!process.env.ANTHROPIC_API_KEY) {
@@ -377,7 +386,10 @@ export async function initializeAgent(config: AgentConfig, options: InstallerOpt
         });
 
         sdkEnv.ANTHROPIC_BASE_URL = activeProxyHandle.url;
-        delete sdkEnv.ANTHROPIC_AUTH_TOKEN;
+        // Prevent the user's personal Anthropic key (if any) from being sent
+        // to the WorkOS gateway; auth is injected by the claim-token proxy.
+        delete sdkEnv.ANTHROPIC_API_KEY;
+        sdkEnv.ANTHROPIC_AUTH_TOKEN = PROXY_PLACEHOLDER_TOKEN;
         authMode = `claim-token-proxy:${activeProxyHandle.url}→${gatewayUrl}`;
         logInfo(`[agent-interface] Using claim token proxy for unclaimed environment`);
       } else if (!options.skipAuth && !options.local) {
@@ -419,8 +431,11 @@ export async function initializeAgent(config: AgentConfig, options: InstallerOpt
           sdkEnv.ANTHROPIC_BASE_URL = activeProxyHandle.url;
           logInfo(`[agent-interface] Using credential proxy at ${activeProxyHandle.url}`);
 
-          // Proxy handles auth, so we don't set ANTHROPIC_AUTH_TOKEN
-          delete sdkEnv.ANTHROPIC_AUTH_TOKEN;
+          // Prevent the user's personal Anthropic key (if any) from being
+          // sent to the WorkOS gateway; the credential proxy rewrites the
+          // Authorization header with the real WorkOS token.
+          delete sdkEnv.ANTHROPIC_API_KEY;
+          sdkEnv.ANTHROPIC_AUTH_TOKEN = PROXY_PLACEHOLDER_TOKEN;
           authMode = `proxy:${activeProxyHandle.url}→${gatewayUrl}`;
         } else {
           // No refresh token OR proxy disabled - fall back to old behavior (5 min limit)
@@ -440,22 +455,31 @@ export async function initializeAgent(config: AgentConfig, options: InstallerOpt
           }
 
           sdkEnv.ANTHROPIC_BASE_URL = gatewayUrl;
+          // Prevent the user's personal Anthropic key (if any) from being
+          // forwarded to the WorkOS gateway as an x-api-key header alongside
+          // the WorkOS access token we set below.
+          delete sdkEnv.ANTHROPIC_API_KEY;
           sdkEnv.ANTHROPIC_AUTH_TOKEN = creds.accessToken;
           authMode = options.local ? `local-gateway:${gatewayUrl}` : `workos-gateway:${gatewayUrl}`;
           logInfo('Sending access token to gateway (legacy mode)');
         }
       } else if (options.skipAuth) {
-        // Skip auth mode - direct to gateway without auth
+        // Skip auth mode - direct to gateway without a real token. The SDK's
+        // local auth-source check would otherwise fail with "Not logged in",
+        // so seed a placeholder bearer; the gateway is expected to accept
+        // unauthenticated requests here and ignore the placeholder value.
         sdkEnv.ANTHROPIC_BASE_URL = gatewayUrl;
-        delete sdkEnv.ANTHROPIC_AUTH_TOKEN;
+        delete sdkEnv.ANTHROPIC_API_KEY;
+        sdkEnv.ANTHROPIC_AUTH_TOKEN = PROXY_PLACEHOLDER_TOKEN;
         authMode = `skip-auth:${gatewayUrl}`;
-        logInfo('Skipping auth - no token sent to gateway');
+        logInfo('Skipping auth - placeholder bearer sent to gateway');
       } else {
-        // Local mode without auth
+        // Local mode without auth - same rationale as skip-auth above.
         sdkEnv.ANTHROPIC_BASE_URL = gatewayUrl;
-        delete sdkEnv.ANTHROPIC_AUTH_TOKEN;
+        delete sdkEnv.ANTHROPIC_API_KEY;
+        sdkEnv.ANTHROPIC_AUTH_TOKEN = PROXY_PLACEHOLDER_TOKEN;
         authMode = `local-gateway:${gatewayUrl}`;
-        logInfo('Local mode - no token sent to gateway');
+        logInfo('Local mode - placeholder bearer sent to gateway');
       }
 
       logInfo('Configured LLM gateway:', sdkEnv.ANTHROPIC_BASE_URL);