diff --git a/src/lib/onboard/credential-navigation.test.ts b/src/lib/onboard/credential-navigation.test.ts
index 4921f4456e4..4d9d4fe3beb 100644
--- a/src/lib/onboard/credential-navigation.test.ts
+++ b/src/lib/onboard/credential-navigation.test.ts
@@ -4,12 +4,14 @@
 import { describe, expect, it, vi } from "vitest";
 
 import * as credentials from "../credentials/store";
+import { validateNvidiaApiKeyValue } from "../validation";
 import {
   BACK_TO_SELECTION,
   replaceNamedCredential,
   returningToProviderSelection,
   shouldReturnToProviderSelection,
 } from "./credential-navigation";
+import { createValidationRecoveryPromptHelpers } from "./validation-recovery-prompt";
 
 describe("credential prompt navigation helpers", () => {
   it("treats both the shared back sentinel and credential back intents as provider-selection navigation", () => {
@@ -74,4 +76,37 @@ describe("credential prompt navigation helpers", () => {
       vi.restoreAllMocks();
     }
   });
+
+  it("returns to provider selection instead of staging back as the re-entered API key (#3697)", async () => {
+    const answers = ["retry", "", "back"];
+    const exitOnboardFromPrompt = vi.fn(() => {
+      throw new Error("unexpected exit");
+    }) as unknown as () => never;
+    vi.spyOn(console, "log").mockImplementation(() => {});
+    vi.spyOn(console, "error").mockImplementation(() => {});
+    const { promptValidationRecovery } = createValidationRecoveryPromptHelpers({
+      isNonInteractive: () => false,
+      prompt: async () => answers.shift() ?? "",
+      validateNvidiaApiKeyValue: (key, credentialEnv) =>
+        validateNvidiaApiKeyValue(key, credentialEnv ?? undefined),
+      getTransportRecoveryMessage: () => "",
+      exitOnboardFromPrompt,
+    });
+    delete process.env.OPENAI_API_KEY;
+    try {
+      await expect(
+        promptValidationRecovery(
+          "OpenAI",
+          { kind: "credential", retry: "credential" },
+          "OPENAI_API_KEY",
+        ),
+      ).resolves.toBe("selection");
+      expect(process.env.OPENAI_API_KEY).toBeUndefined();
+      expect(answers).toEqual([]);
+      expect(exitOnboardFromPrompt).not.toHaveBeenCalled();
+    } finally {
+      delete process.env.OPENAI_API_KEY;
+      vi.restoreAllMocks();
+    }
+  });
 });
diff --git a/src/lib/onboard/validation-recovery-prompt.ts b/src/lib/onboard/validation-recovery-prompt.ts
index bb39aca867e..ee9edc7479e 100644
--- a/src/lib/onboard/validation-recovery-prompt.ts
+++ b/src/lib/onboard/validation-recovery-prompt.ts
@@ -1,7 +1,8 @@
 // SPDX-FileCopyrightText: Copyright (c) 2026 NVIDIA CORPORATION & AFFILIATES. All rights reserved.
 // SPDX-License-Identifier: Apache-2.0
 
-import { normalizeCredentialValue, saveCredential } from "../credentials/store";
+import { getCredentialPromptIntent, saveCredential } from "../credentials/store";
+import { BACK_TO_SELECTION, type BackToSelection, isBackToSelection } from "../navigation";
 import type { ProbeRecovery } from "../validation-recovery";
 
 export interface ValidationRecoveryPromptDeps {
@@ -18,7 +19,7 @@ export interface ValidationRecoveryPromptHelpers {
     label: string,
     helpUrl?: string | null,
     validator?: ((value: string) => string | null) | null,
-  ): Promise<string>;
+  ): Promise<string | BackToSelection>;
   promptValidationRecovery(
     label: string,
     recovery: ProbeRecovery,
@@ -35,7 +36,7 @@ export function createValidationRecoveryPromptHelpers(
     label: string,
     helpUrl: string | null = null,
     validator: ((value: string) => string | null) | null = null,
-  ): Promise<string> {
+  ): Promise<string | BackToSelection> {
     if (helpUrl) {
       console.log("");
       console.log(`  Get your ${label} from: ${helpUrl}`);
@@ -43,9 +44,12 @@ export function createValidationRecoveryPromptHelpers(
     }
 
     while (true) {
-      const key = normalizeCredentialValue(await deps.prompt(`  ${label}: `, { secret: true }));
+      const intent = getCredentialPromptIntent(await deps.prompt(`  ${label}: `, { secret: true }));
+      if (intent.kind === "exit") deps.exitOnboardFromPrompt();
+      if (intent.kind === "back") return BACK_TO_SELECTION;
+      const key = intent.kind === "credential" ? intent.value : "";
       if (!key) {
-        console.error(`  ${label} is required.`);
+        console.error(`  ${label} is required. Type back to change provider, or exit to quit.`);
         continue;
       }
       const validationError = typeof validator === "function" ? validator(key) : null;
@@ -103,8 +107,13 @@ export function createValidationRecoveryPromptHelpers(
       if (looksLikeToken) {
         console.log("  ⚠️  That looks like an API key — do not paste credentials here.");
         console.log("  Treating as 'retry'. You will be prompted to enter the key securely.");
-        await replaceNamedCredential(credentialEnv, `${label} API key`, helpUrl, validator);
-        return "credential";
+        const pasted = await replaceNamedCredential(
+          credentialEnv,
+          `${label} API key`,
+          helpUrl,
+          validator,
+        );
+        return isBackToSelection(pasted) ? "selection" : "credential";
       }
       if (choice === "back") {
         console.log("  Returning to provider selection.");
@@ -115,8 +124,13 @@ export function createValidationRecoveryPromptHelpers(
         deps.exitOnboardFromPrompt();
       }
       if (choice === "" || choice === "retry") {
-        await replaceNamedCredential(credentialEnv, `${label} API key`, helpUrl, validator);
-        return "credential";
+        const replaced = await replaceNamedCredential(
+          credentialEnv,
+          `${label} API key`,
+          helpUrl,
+          validator,
+        );
+        return isBackToSelection(replaced) ? "selection" : "credential";
       }
       console.log("  Please choose a provider/model again.");
       console.log("");