diff --git a/apps/web/components/session/prepare-progress.tsx b/apps/web/components/session/prepare-progress.tsx
index 3533960917..56299bb35b 100644
--- a/apps/web/components/session/prepare-progress.tsx
+++ b/apps/web/components/session/prepare-progress.tsx
@@ -210,8 +210,13 @@ export function PrepareProgress({ sessionId }: PrepareProgressProps) {
   return (
     <div className="px-3 py-2 space-y-1.5 border-b border-border/50">
       <div className="flex items-center gap-1.5 text-xs font-medium text-muted-foreground">
-        {status === "preparing" && <IconLoader2 className="h-3 w-3 animate-spin" />}
-        {status === "failed" && <IconX className="h-3 w-3 text-destructive" />}
+        {status === "preparing" && (
+          <IconLoader2
+            data-testid="prepare-progress-header-spinner"
+            className="h-3.5 w-3.5 animate-spin"
+          />
+        )}
+        {status === "failed" && <IconX className="h-3.5 w-3.5 text-destructive" />}
         <span>
           {status === "preparing" && "Preparing environment..."}
           {status === "failed" && (prepareState.errorMessage ?? "Environment preparation failed")}
diff --git a/apps/web/components/task/file-browser-hooks.ts b/apps/web/components/task/file-browser-hooks.ts
index 6ca5300780..f8d1e81ed7 100644
--- a/apps/web/components/task/file-browser-hooks.ts
+++ b/apps/web/components/task/file-browser-hooks.ts
@@ -277,6 +277,36 @@ function useTreeLoader(ctx: TreeLoaderContext) {
   return loadTree;
 }
 
+function useFileChangeSubscription({
+  sessionIdRef,
+  expandedPaths,
+  setTree,
+  setLoadState,
+}: {
+  sessionIdRef: React.MutableRefObject<string>;
+  expandedPaths: Set<string>;
+  setTree: React.Dispatch<React.SetStateAction<FileTreeNode | null>>;
+  setLoadState: React.Dispatch<React.SetStateAction<LoadState>>;
+}) {
+  useEffect(() => {
+    const client = getWebSocketClient();
+    if (!client) return;
+    return client.on("session.workspace.file.changes", (msg) => {
+      const changes = msg.payload?.changes;
+      if (!changes || changes.length === 0) return;
+      applyFileChanges({
+        client,
+        sessionId: sessionIdRef.current,
+        expandedPaths,
+        changes,
+        setTree,
+        setLoadState,
+      });
+    });
+    // eslint-disable-next-line react-hooks/exhaustive-deps
+  }, [expandedPaths]);
+}
+
 /**
  * Hook for tree loading with retry logic, file-change subscription, and expanded state.
  * @param sessionId - Session ID for API calls (agentctl routing).
@@ -317,11 +347,18 @@ export function useFileBrowserTree(sessionId: string, resetKey?: string) {
     setLoadError,
   });
 
-  // Full reset: clear tree + loading state. Only fires when the environment changes.
+  // Refs for effects below to read without adding deps — avoids infinite
+  // retry loops and wipe-on-reconnect when `isReady`/`loadState`/`tree` tick.
+  const agentctlIsReadyRef = useRef(agentctlStatus.isReady);
+  const loadStateRef = useRef(loadState);
+  const treeRef = useRef(tree);
+  agentctlIsReadyRef.current = agentctlStatus.isReady;
+  loadStateRef.current = loadState;
+  treeRef.current = tree;
   useEffect(() => {
     setTree(null);
     setIsLoadingTree(true);
-    setLoadState("loading");
+    setLoadState(agentctlIsReadyRef.current ? "loading" : "waiting");
     setLoadError(null);
     retryAttemptRef.current = 0;
     clearRetryTimer();
@@ -329,16 +366,26 @@ export function useFileBrowserTree(sessionId: string, resetKey?: string) {
     const savedPaths = getFilesPanelExpandedPaths(effectiveResetKey);
     setExpandedPaths(savedPaths.length > 0 ? new Set(savedPaths) : new Set());
     if (savedPaths.length > 0) hasInitializedExpandedRef.current = effectiveResetKey;
-    void loadTree({ resetRetry: true });
+    // Only load now if agentctl is ready; otherwise the sibling effect fires
+    // on the ready flip. Prevents burning the retry budget during slow prepare.
+    if (agentctlIsReadyRef.current) void loadTree({ resetRetry: true });
+    else setIsLoadingTree(false);
     return () => {
       clearRetryTimer();
     };
   }, [clearRetryTimer, loadTree, effectiveResetKey]);
 
+  // Fire the initial load on the waiting → ready transition. `loadState` is
+  // read via a ref so a failed load (which sets state back to "waiting") does
+  // not re-fire this effect and cancel the retry timer via `resetRetry: true`.
+  // "loaded" only counts when a tree is actually present — `applyFileChanges`
+  // can flip state to "loaded" while the tree is still null.
   useEffect(() => {
-    if (!agentctlStatus.isReady || loadState === "loaded") return;
+    if (!agentctlStatus.isReady) return;
+    if (loadStateRef.current === "loading") return;
+    if (loadStateRef.current === "loaded" && treeRef.current) return;
     void loadTree({ resetRetry: true });
-  }, [agentctlStatus.isReady, loadState, loadTree]);
+  }, [agentctlStatus.isReady, loadTree]);
 
   useEffect(() => {
     if (!tree || isLoadingTree || hasInitializedExpandedRef.current === effectiveResetKey) return;
@@ -353,22 +400,7 @@ export function useFileBrowserTree(sessionId: string, resetKey?: string) {
     }
   }, [expandedPaths, effectiveResetKey]);
 
-  useEffect(() => {
-    const client = getWebSocketClient();
-    if (!client) return;
-    return client.on("session.workspace.file.changes", (msg) => {
-      const changes = msg.payload?.changes;
-      if (!changes || changes.length === 0) return;
-      applyFileChanges({
-        client,
-        sessionId: sessionIdRef.current,
-        expandedPaths,
-        changes,
-        setTree,
-        setLoadState,
-      });
-    });
-  }, [expandedPaths]);
+  useFileChangeSubscription({ sessionIdRef, expandedPaths, setTree, setLoadState });
 
   const collapseAll = useCallback(() => {
     setExpandedPaths(new Set());
diff --git a/apps/web/components/task/file-browser-load-state.tsx b/apps/web/components/task/file-browser-load-state.tsx
index 8a720402ab..7d64be0bf6 100644
--- a/apps/web/components/task/file-browser-load-state.tsx
+++ b/apps/web/components/task/file-browser-load-state.tsx
@@ -35,7 +35,10 @@ export function renderSessionOrLoadState({
   }
   if (loadState === "waiting") {
     return (
-      <div className="p-4 text-sm text-muted-foreground flex items-center gap-2">
+      <div
+        data-testid="file-tree-waiting"
+        className="p-4 text-sm text-muted-foreground flex items-center gap-2"
+      >
         <IconLoader2 className="h-3.5 w-3.5 animate-spin" />
         Preparing workspace...
       </div>
@@ -43,7 +46,7 @@ export function renderSessionOrLoadState({
   }
   if (loadState === "manual") {
     return (
-      <div className="p-4 text-sm text-muted-foreground space-y-2">
+      <div data-testid="file-tree-manual" className="p-4 text-sm text-muted-foreground space-y-2">
         <div>{loadError ?? "Workspace is still starting."}</div>
         <button
           type="button"
diff --git a/apps/web/components/task/passthrough-terminal.tsx b/apps/web/components/task/passthrough-terminal.tsx
index 1dd86ed1ed..e7f63f3ea7 100644
--- a/apps/web/components/task/passthrough-terminal.tsx
+++ b/apps/web/components/task/passthrough-terminal.tsx
@@ -79,9 +79,12 @@ export function PassthroughTerminal(props: PassthroughTerminalProps) {
   const sessionId = propSessionId ?? storeSessionId;
 
   const { session, isActive } = useSession(sessionId);
-  useSessionAgentctl(sessionId);
+  const agentctlStatus = useSessionAgentctl(sessionId);
   const taskId = session?.task_id ?? null;
-  const canConnect = Boolean(sessionId && isActive);
+  // Gate WS connection on agentctl readiness. During a long prepare script
+  // the backend terminal endpoint isn't accepting connections yet, and
+  // spamming reconnects burns cycles and confuses the loading state.
+  const canConnect = Boolean(sessionId && isActive && agentctlStatus.isReady);
   const wsBaseUrl = useWsBaseUrl();
 
   const [isTerminalReady, setIsTerminalReady] = useState(false);
diff --git a/apps/web/e2e/fixtures/backend.ts b/apps/web/e2e/fixtures/backend.ts
index c59c570080..b3b48b3b71 100644
--- a/apps/web/e2e/fixtures/backend.ts
+++ b/apps/web/e2e/fixtures/backend.ts
@@ -181,8 +181,44 @@ export const backendFixture = base.extend<object, { backend: BackendContext }>({
       const agentctlPortBase = 30001 + workerInfo.workerIndex * 50;
       const agentctlPortMax = agentctlPortBase + 49;
 
+      // Install a `git` shim that can sleep on `fetch`/`pull` before execing
+      // the real git binary. Tests that need to simulate slow network git
+      // operations write a millisecond value to `${tmpDir}/git-delay-ms`; the
+      // shim reads it on every invocation and sleeps the matching duration.
+      // When the file is absent the shim is a transparent passthrough, so
+      // other tests in the same worker are unaffected.
+      const shimDir = path.join(tmpDir, "bin");
+      const shimPath = path.join(shimDir, "git");
+      const shimDelayFile = path.join(tmpDir, "git-delay-ms");
+      const originalPath = process.env.PATH ?? "";
+      fs.mkdirSync(shimDir, { recursive: true });
+      fs.writeFileSync(
+        shimPath,
+        `#!/bin/sh
+if [ -f "$KANDEV_E2E_GIT_DELAY_FILE" ] && { [ "$1" = "fetch" ] || [ "$1" = "pull" ]; }; then
+  delay_ms=$(cat "$KANDEV_E2E_GIT_DELAY_FILE" 2>/dev/null)
+  case "$delay_ms" in
+    ''|*[!0-9]*) ;;
+    *)
+      if [ "$delay_ms" -gt 0 ]; then
+        sleep_secs=$((delay_ms / 1000))
+        [ "$sleep_secs" -lt 1 ] && sleep_secs=1
+        sleep "$sleep_secs"
+      fi
+      ;;
+  esac
+fi
+export PATH="$KANDEV_E2E_ORIGINAL_PATH"
+exec git "$@"
+`,
+        { mode: 0o755 },
+      );
+
       const backendEnv = {
         ...stripGitHubTokens(process.env as Record<string, string>),
+        PATH: `${shimDir}:${originalPath}`,
+        KANDEV_E2E_ORIGINAL_PATH: originalPath,
+        KANDEV_E2E_GIT_DELAY_FILE: shimDelayFile,
         HOME: tmpDir,
         KANDEV_DATA_DIR: dataDir,
         KANDEV_SERVER_PORT: String(backendPort),
diff --git a/apps/web/e2e/tests/session/long-prepare-panels.spec.ts b/apps/web/e2e/tests/session/long-prepare-panels.spec.ts
new file mode 100644
index 0000000000..08525e3b75
--- /dev/null
+++ b/apps/web/e2e/tests/session/long-prepare-panels.spec.ts
@@ -0,0 +1,77 @@
+import fs from "node:fs";
+import path from "node:path";
+import { test, expect } from "../../fixtures/test-base";
+import { SessionPage } from "../../pages/session-page";
+
+/**
+ * Regression: when workspace preparation takes longer than the file-tree
+ * retry budget (~18s), the right-sidebar file tree and terminal must keep
+ * waiting instead of giving up. We simulate a slow workspace prepare by
+ * writing a delay file that the backend fixture's `git` shim reads — so
+ * `git fetch` inside the worktree preparer blocks for N seconds, which
+ * serialises agentctl readiness behind it (same ordering that a real slow
+ * git pull on a big monorepo would produce).
+ */
+test.describe("Long prepare (slow git fetch)", () => {
+  test("file tree and terminal keep waiting and recover when fetch completes", async ({
+    testPage,
+    apiClient,
+    seedData,
+    backend,
+  }) => {
+    test.setTimeout(120_000);
+
+    // Sleep 25s on every `git fetch`/`git pull` run by the backend. The
+    // worktree fetch timeout is 90s (see worktree/manager.go) so 25s fits
+    // comfortably under it. 25s is well past the file-tree retry budget
+    // (~18s), which is what we want to exercise.
+    const delayFile = path.join(backend.tmpDir, "git-delay-ms");
+    fs.writeFileSync(delayFile, "25000");
+
+    try {
+      // Force the worktree executor path; otherwise the task resolves with an
+      // empty executor_type and runEnvironmentPreparer short-circuits, meaning
+      // no fetch is ever invoked and the shim sleep never runs.
+      const task = await apiClient.createTaskWithAgent(
+        seedData.workspaceId,
+        "Slow Git Fetch Task",
+        seedData.agentProfileId,
+        {
+          description: "/e2e:simple-message",
+          workflow_id: seedData.workflowId,
+          workflow_step_id: seedData.startStepId,
+          repository_ids: [seedData.repositoryId],
+          executor_profile_id: seedData.worktreeExecutorProfileId,
+        },
+      );
+
+      await testPage.goto(`/t/${task.id}`);
+      const session = new SessionPage(testPage);
+      await session.waitForLoad();
+
+      // While git fetch is sleeping, agentctl cannot become ready. The file
+      // tree must sit in the "waiting" state (the fix: useFileBrowserTree
+      // gates its initial load on agentctlStatus.isReady instead of racing
+      // the 18s retry budget).
+      const fileTreeWaiting = testPage.getByTestId("file-tree-waiting");
+      const fileTreeManual = testPage.getByTestId("file-tree-manual");
+      await expect(fileTreeWaiting).toBeVisible({ timeout: 15_000 });
+      await expect(fileTreeManual).toHaveCount(0);
+
+      // Wait past the pre-fix retry budget (1+2+5+10 = 18s). The file tree
+      // must NOT have transitioned to the "manual" (Load Files) state —
+      // that's the regression.
+      await testPage.waitForTimeout(19_000);
+      await expect(fileTreeManual).toHaveCount(0);
+      await expect(fileTreeWaiting).toBeVisible();
+
+      // Fetch eventually returns, worktree creation proceeds, agentctl
+      // becomes ready. File tree leaves the waiting state automatically.
+      await expect(fileTreeWaiting).toBeHidden({ timeout: 30_000 });
+      await expect(fileTreeManual).toHaveCount(0);
+    } finally {
+      // Restore fast git for any subsequent tests that share this worker.
+      if (fs.existsSync(delayFile)) fs.unlinkSync(delayFile);
+    }
+  });
+});