diff --git a/nemoclaw/src/lib/subprocess-env.ts b/nemoclaw/src/lib/subprocess-env.ts
index 0ab7a9ad5e5..c00e633c059 100644
--- a/nemoclaw/src/lib/subprocess-env.ts
+++ b/nemoclaw/src/lib/subprocess-env.ts
@@ -48,6 +48,30 @@ const ALLOWED_ENV_PREFIXES = ["LC_", "XDG_", "OPENSHELL_", "GRPC_"];
 
 // ── Public API ─────────────────────────────────────────────────
 
+/**
+ * When any HTTP proxy is forwarded, ensure localhost and loopback traffic is
+ * not routed through it. Without this, tools that respect HTTP_PROXY (curl,
+ * Node.js http, Python requests) will tunnel loopback requests to the user's
+ * proxy (e.g. Privoxy), which fails with HTTP 500.
+ * See: #2616
+ */
+export function withLocalNoProxy(env: Record<string, string>): void {
+  const hasProxy = env.HTTP_PROXY || env.HTTPS_PROXY || env.http_proxy || env.https_proxy;
+  if (!hasProxy) return;
+  for (const key of ["NO_PROXY", "no_proxy"] as const) {
+    const current = env[key] ?? "";
+    const parts = current ? current.split(",").map((s) => s.trim()) : [];
+    let changed = false;
+    for (const host of ["localhost", "127.0.0.1"]) {
+      if (!parts.includes(host)) {
+        parts.push(host);
+        changed = true;
+      }
+    }
+    if (changed) env[key] = parts.join(",");
+  }
+}
+
 export function buildSubprocessEnv(extra?: Record<string, string>): Record<string, string> {
   const env: Record<string, string> = {};
   for (const [key, value] of Object.entries(process.env)) {
@@ -59,5 +83,6 @@ export function buildSubprocessEnv(extra?: Record<string, string>): Record<strin
   if (extra) {
     Object.assign(env, extra);
   }
+  withLocalNoProxy(env);
   return env;
 }
diff --git a/src/lib/onboard-ollama-proxy.ts b/src/lib/onboard-ollama-proxy.ts
index 3e6a15acbd5..c9938fbf148 100644
--- a/src/lib/onboard-ollama-proxy.ts
+++ b/src/lib/onboard-ollama-proxy.ts
@@ -18,6 +18,7 @@ const {
   getOllamaWarmupCommand,
   validateOllamaModel,
 } = require("./local-inference");
+const { buildSubprocessEnv } = require("./subprocess-env");
 const { prompt } = require("./credentials");
 const { promptManualModelId } = require("./model-prompts");
 
@@ -104,12 +105,11 @@ function spawnOllamaAuthProxy(token: string): number | null {
   const child = spawn(process.execPath, [path.join(SCRIPTS, "ollama-auth-proxy.js")], {
     detached: true,
     stdio: "ignore",
-    env: {
-      ...process.env,
+    env: buildSubprocessEnv({
       OLLAMA_PROXY_TOKEN: token,
       OLLAMA_PROXY_PORT: String(OLLAMA_PROXY_PORT),
       OLLAMA_BACKEND_PORT: String(OLLAMA_PORT),
-    },
+    }),
   });
   child.unref();
   persistProxyPid(child.pid);
@@ -275,7 +275,7 @@ function pullOllamaModel(model) {
     encoding: "utf8",
     stdio: "inherit",
     timeout: 600_000,
-    env: { ...process.env },
+    env: buildSubprocessEnv(),
   });
   if (result.signal === "SIGTERM") {
     console.error(
diff --git a/src/lib/subprocess-env.test.ts b/src/lib/subprocess-env.test.ts
new file mode 100644
index 00000000000..ab59972d0cc
--- /dev/null
+++ b/src/lib/subprocess-env.test.ts
@@ -0,0 +1,127 @@
+// SPDX-FileCopyrightText: Copyright (c) 2026 NVIDIA CORPORATION & AFFILIATES. All rights reserved.
+// SPDX-License-Identifier: Apache-2.0
+
+import { describe, it, expect, vi, beforeEach, afterEach } from "vitest";
+import { withLocalNoProxy } from "../../dist/lib/subprocess-env";
+
+describe("withLocalNoProxy", () => {
+  it("does nothing when no proxy vars are present", () => {
+    const env: Record<string, string> = { PATH: "/usr/bin" };
+    withLocalNoProxy(env);
+    expect(env).toEqual({ PATH: "/usr/bin" });
+  });
+
+  it("adds localhost and 127.0.0.1 to NO_PROXY and no_proxy when HTTP_PROXY is set and NO_PROXY is absent", () => {
+    const env: Record<string, string> = { HTTP_PROXY: "http://proxy:8888" };
+    withLocalNoProxy(env);
+    expect(env.NO_PROXY).toBe("localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("localhost,127.0.0.1");
+  });
+
+  it("adds localhost and 127.0.0.1 when HTTPS_PROXY is set", () => {
+    const env: Record<string, string> = { HTTPS_PROXY: "http://proxy:8888" };
+    withLocalNoProxy(env);
+    expect(env.NO_PROXY).toBe("localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("localhost,127.0.0.1");
+  });
+
+  it("adds localhost and 127.0.0.1 when lowercase http_proxy is set", () => {
+    const env: Record<string, string> = { http_proxy: "http://proxy:8888" };
+    withLocalNoProxy(env);
+    expect(env.NO_PROXY).toBe("localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("localhost,127.0.0.1");
+  });
+
+  it("appends only the missing loopback entries when NO_PROXY already has localhost", () => {
+    const env: Record<string, string> = {
+      HTTP_PROXY: "http://proxy:8888",
+      NO_PROXY: "example.com,localhost",
+      no_proxy: "example.com,localhost",
+    };
+    withLocalNoProxy(env);
+    expect(env.NO_PROXY).toBe("example.com,localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("example.com,localhost,127.0.0.1");
+  });
+
+  it("does not duplicate entries when both loopback hosts are already present", () => {
+    const env: Record<string, string> = {
+      HTTP_PROXY: "http://proxy:8888",
+      NO_PROXY: "localhost,127.0.0.1,corp.internal",
+      no_proxy: "localhost,127.0.0.1,corp.internal",
+    };
+    withLocalNoProxy(env);
+    expect(env.NO_PROXY).toBe("localhost,127.0.0.1,corp.internal");
+    expect(env.no_proxy).toBe("localhost,127.0.0.1,corp.internal");
+  });
+
+  it("preserves existing NO_PROXY entries and adds loopback hosts", () => {
+    const env: Record<string, string> = {
+      HTTP_PROXY: "http://proxy:8888",
+      NO_PROXY: "corp.internal,.nvidia.com",
+      no_proxy: "corp.internal,.nvidia.com",
+    };
+    withLocalNoProxy(env);
+    expect(env.NO_PROXY).toBe("corp.internal,.nvidia.com,localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("corp.internal,.nvidia.com,localhost,127.0.0.1");
+  });
+});
+
+describe("buildSubprocessEnv NO_PROXY injection", () => {
+  const originalEnv = process.env;
+
+  beforeEach(() => {
+    vi.resetModules();
+    process.env = { ...originalEnv };
+  });
+
+  afterEach(() => {
+    process.env = originalEnv;
+  });
+
+  it("injects NO_PROXY=localhost,127.0.0.1 when HTTP_PROXY is set and NO_PROXY is absent", async () => {
+    process.env.HTTP_PROXY = "http://proxy.example.com:8888";
+    delete process.env.NO_PROXY;
+    delete process.env.no_proxy;
+
+    const { buildSubprocessEnv } = await import("../../dist/lib/subprocess-env");
+    const env = buildSubprocessEnv();
+    expect(env.NO_PROXY).toBe("localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("localhost,127.0.0.1");
+  });
+
+  it("augments an existing NO_PROXY to add loopback hosts", async () => {
+    process.env.HTTP_PROXY = "http://proxy.example.com:8888";
+    process.env.NO_PROXY = "corp.internal";
+    process.env.no_proxy = "corp.internal";
+
+    const { buildSubprocessEnv } = await import("../../dist/lib/subprocess-env");
+    const env = buildSubprocessEnv();
+    expect(env.NO_PROXY).toBe("corp.internal,localhost,127.0.0.1");
+    expect(env.no_proxy).toBe("corp.internal,localhost,127.0.0.1");
+  });
+
+  it("does not add NO_PROXY when no proxy is set", async () => {
+    delete process.env.HTTP_PROXY;
+    delete process.env.HTTPS_PROXY;
+    delete process.env.http_proxy;
+    delete process.env.https_proxy;
+    delete process.env.NO_PROXY;
+    delete process.env.no_proxy;
+
+    const { buildSubprocessEnv } = await import("../../dist/lib/subprocess-env");
+    const env = buildSubprocessEnv();
+    expect(env.NO_PROXY).toBeUndefined();
+    expect(env.no_proxy).toBeUndefined();
+  });
+
+  it("extra vars passed to buildSubprocessEnv override env vars before NO_PROXY injection", async () => {
+    process.env.HTTP_PROXY = "http://proxy.example.com:8888";
+    delete process.env.NO_PROXY;
+    delete process.env.no_proxy;
+
+    const { buildSubprocessEnv } = await import("../../dist/lib/subprocess-env");
+    const env = buildSubprocessEnv({ MY_TOKEN: "abc123" });
+    expect(env.MY_TOKEN).toBe("abc123");
+    expect(env.NO_PROXY).toBe("localhost,127.0.0.1");
+  });
+});
diff --git a/src/lib/subprocess-env.ts b/src/lib/subprocess-env.ts
index 8efa17117ec..e118f3b158d 100644
--- a/src/lib/subprocess-env.ts
+++ b/src/lib/subprocess-env.ts
@@ -48,6 +48,30 @@ const ALLOWED_ENV_PREFIXES = ["LC_", "XDG_", "OPENSHELL_", "GRPC_"];
 
 // ── Public API ─────────────────────────────────────────────────
 
+/**
+ * When any HTTP proxy is forwarded, ensure localhost and loopback traffic is
+ * not routed through it. Without this, tools that respect HTTP_PROXY (curl,
+ * Node.js http, Python requests) will tunnel loopback requests to the user's
+ * proxy (e.g. Privoxy), which fails with HTTP 500.
+ * See: #2616
+ */
+export function withLocalNoProxy(env: Record<string, string>): void {
+  const hasProxy = env.HTTP_PROXY || env.HTTPS_PROXY || env.http_proxy || env.https_proxy;
+  if (!hasProxy) return;
+  for (const key of ["NO_PROXY", "no_proxy"] as const) {
+    const current = env[key] ?? "";
+    const parts = current ? current.split(",").map((s) => s.trim()) : [];
+    let changed = false;
+    for (const host of ["localhost", "127.0.0.1"]) {
+      if (!parts.includes(host)) {
+        parts.push(host);
+        changed = true;
+      }
+    }
+    if (changed) env[key] = parts.join(",");
+  }
+}
+
 export function buildSubprocessEnv(extra?: Record<string, string>): Record<string, string> {
   const env: Record<string, string> = {};
   for (const [key, value] of Object.entries(process.env)) {
@@ -59,5 +83,6 @@ export function buildSubprocessEnv(extra?: Record<string, string>): Record<strin
   if (extra) {
     Object.assign(env, extra);
   }
+  withLocalNoProxy(env);
   return env;
 }