diff --git a/crates/goose/src/providers/formats/openai.rs b/crates/goose/src/providers/formats/openai.rs
index fd2dbd6f6608..2c82e79c4f89 100644
--- a/crates/goose/src/providers/formats/openai.rs
+++ b/crates/goose/src/providers/formats/openai.rs
@@ -9,6 +9,7 @@ use anyhow::{anyhow, Error};
 use async_stream::try_stream;
 use chrono;
 use futures::Stream;
+use regex::Regex;
 use rmcp::model::{
     object, AnnotateAble, CallToolRequestParams, Content, ErrorCode, ErrorData, RawContent,
     ResourceContents, Role, Tool,
@@ -17,6 +18,62 @@ use serde::{Deserialize, Serialize};
 use serde_json::{json, Value};
 use std::borrow::Cow;
 use std::ops::Deref;
+use uuid::Uuid;
+
+/// Parse XML-style tool calls from content (Qwen3-coder fallback format when many tools are provided)
+/// Format: <function=name><parameter=key>value</parameter>...</function>
+/// Returns a tuple of (prefix_text, tool_calls) where prefix_text is any text before the first function tag
+fn parse_xml_tool_calls(content: &str) -> (Option<String>, Vec<MessageContent>) {
+    let mut tool_calls = Vec::new();
+
+    let function_re = Regex::new(r"<function=([^>]+)>([\s\S]*?)</function>").unwrap();
+    let param_re = Regex::new(r"<parameter=([^>]+)>([\s\S]*?)</parameter>").unwrap();
+
+    let prefix = content
+        .find("<function=")
+        .and_then(|idx| content.get(..idx))
+        .map(|s| s.trim())
+        .filter(|s| !s.is_empty())
+        .map(|s| s.to_string());
+
+    for func_cap in function_re.captures_iter(content) {
+        let function_name = func_cap[1].trim().to_string();
+        let function_body = &func_cap[2];
+
+        let mut arguments = serde_json::Map::new();
+        for param_cap in param_re.captures_iter(function_body) {
+            let param_name = param_cap[1].trim().to_string();
+            let param_value = param_cap[2].trim().to_string();
+            arguments.insert(param_name, serde_json::Value::String(param_value));
+        }
+
+        let id = Uuid::new_v4().to_string();
+
+        if is_valid_function_name(&function_name) {
+            tool_calls.push(MessageContent::tool_request(
+                id,
+                Ok(CallToolRequestParams {
+                    meta: None,
+                    task: None,
+                    name: function_name.into(),
+                    arguments: Some(object(serde_json::Value::Object(arguments))),
+                }),
+            ));
+        } else {
+            let error = ErrorData {
+                code: ErrorCode::INVALID_REQUEST,
+                message: Cow::from(format!(
+                    "The provided function name '{}' had invalid characters, it must match this regex [a-zA-Z0-9_-]+",
+                    function_name
+                )),
+                data: None,
+            };
+            tool_calls.push(MessageContent::tool_request(id, Err(error)));
+        }
+    }
+
+    (prefix, tool_calls)
+}
 
 #[derive(Serialize, Deserialize, Debug, Default)]
 struct DeltaToolCallFunction {
@@ -368,6 +425,28 @@ pub fn response_to_message(response: &Value) -> anyhow::Result<Message> {
         }
     }
 
+    // Fallback: If no JSON tool_calls found, check for XML-style tool calls in content
+    // This handles models like Qwen3-coder that output XML when given many tools
+    let has_tool_requests = content
+        .iter()
+        .any(|c| matches!(c, MessageContent::ToolRequest(_)));
+
+    if !has_tool_requests {
+        if let Some(text) = original.get("content").and_then(|c| c.as_str()) {
+            if text.contains("<function=") {
+                let (prefix, xml_tool_calls) = parse_xml_tool_calls(text);
+                if !xml_tool_calls.is_empty() {
+                    // Replace text content with parsed tool calls
+                    content.clear();
+                    if let Some(prefix_text) = prefix {
+                        content.push(MessageContent::text(prefix_text));
+                    }
+                    content.extend(xml_tool_calls);
+                }
+            }
+        }
+    }
+
     Ok(Message::new(
         Role::Assistant,
         chrono::Utc::now().timestamp(),
@@ -471,6 +550,9 @@ where
         use futures::StreamExt;
 
         let mut accumulated_reasoning: Vec<Value> = Vec::new();
+        // Track accumulated text content for XML tool call detection
+        let mut accumulated_text: String = String::new();
+        let mut last_chunk_id: Option<String> = None;
 
         'outer: while let Some(response) = stream.next().await {
             if response.as_ref().is_ok_and(|s| s == "data: [DONE]") {
@@ -493,6 +575,11 @@ where
                 }
             }
 
+            // Track chunk ID for message construction
+            if chunk.id.is_some() {
+                last_chunk_id = chunk.id.clone();
+            }
+
             let mut usage = extract_usage_with_output_tokens(&chunk);
 
             if chunk.choices.is_empty() {
@@ -620,6 +707,38 @@ where
                 )
             } else if chunk.choices[0].delta.content.is_some() {
                 let text = chunk.choices[0].delta.content.as_ref().unwrap();
+
+                accumulated_text.push_str(text);
+
+                let is_final = chunk.choices[0].finish_reason.is_some();
+
+                if is_final && accumulated_text.contains("<function=") {
+                    let (prefix, xml_tool_calls) = parse_xml_tool_calls(&accumulated_text);
+
+                    if !xml_tool_calls.is_empty() {
+                        let mut contents = Vec::new();
+                        if let Some(prefix_text) = prefix {
+                            contents.push(MessageContent::text(prefix_text));
+                        }
+                        contents.extend(xml_tool_calls);
+
+                        let mut msg = Message::new(
+                            Role::Assistant,
+                            chrono::Utc::now().timestamp(),
+                            contents,
+                        );
+
+                        if let Some(id) = last_chunk_id.clone() {
+                            msg = msg.with_id(id);
+                        }
+
+                        yield (Some(msg), usage);
+                        accumulated_text.clear();
+                        continue;
+                    }
+                }
+
+                // Normal text streaming - yield the text chunk
                 let mut msg = Message::new(
                     Role::Assistant,
                     chrono::Utc::now().timestamp(),
@@ -1661,4 +1780,190 @@ data: [DONE]
 
         Ok(())
     }
+
+    // Tests for XML tool call parsing (Qwen3-coder fallback format)
+
+    #[test]
+    fn test_parse_xml_tool_calls_single() {
+        let content = r#"<function=developer__text_editor>
+<parameter=command>write</parameter>
+<parameter=path>/tmp/test.txt</parameter>
+<parameter=file_text>hello world</parameter>
+</function>"#;
+
+        let (prefix, tool_calls) = parse_xml_tool_calls(content);
+
+        assert!(prefix.is_none(), "Should have no prefix");
+        assert_eq!(tool_calls.len(), 1, "Should have 1 tool call");
+
+        if let MessageContent::ToolRequest(request) = &tool_calls[0] {
+            let tool_call = request.tool_call.as_ref().unwrap();
+            assert_eq!(tool_call.name, "developer__text_editor");
+            let args = tool_call.arguments.as_ref().unwrap();
+            assert_eq!(args.get("command").unwrap(), "write");
+            assert_eq!(args.get("path").unwrap(), "/tmp/test.txt");
+            assert_eq!(args.get("file_text").unwrap(), "hello world");
+        } else {
+            panic!("Expected ToolRequest content");
+        }
+    }
+
+    #[test]
+    fn test_parse_xml_tool_calls_with_prefix() {
+        let content = r#"I'll create the file for you.
+
+<function=developer__text_editor>
+<parameter=command>write</parameter>
+<parameter=path>/tmp/test.txt</parameter>
+</function>"#;
+
+        let (prefix, tool_calls) = parse_xml_tool_calls(content);
+
+        assert_eq!(
+            prefix,
+            Some("I'll create the file for you.".to_string()),
+            "Should have prefix text"
+        );
+        assert_eq!(tool_calls.len(), 1, "Should have 1 tool call");
+    }
+
+    #[test]
+    fn test_parse_xml_tool_calls_multiple() {
+        let content = r#"<function=developer__shell>
+<parameter=command>ls -la</parameter>
+</function>
+<function=developer__text_editor>
+<parameter=command>view</parameter>
+<parameter=path>/tmp/test.txt</parameter>
+</function>"#;
+
+        let (prefix, tool_calls) = parse_xml_tool_calls(content);
+
+        assert!(prefix.is_none());
+        assert_eq!(tool_calls.len(), 2, "Should have 2 tool calls");
+
+        if let MessageContent::ToolRequest(request) = &tool_calls[0] {
+            let tool_call = request.tool_call.as_ref().unwrap();
+            assert_eq!(tool_call.name, "developer__shell");
+        } else {
+            panic!("Expected ToolRequest content");
+        }
+
+        if let MessageContent::ToolRequest(request) = &tool_calls[1] {
+            let tool_call = request.tool_call.as_ref().unwrap();
+            assert_eq!(tool_call.name, "developer__text_editor");
+        } else {
+            panic!("Expected ToolRequest content");
+        }
+    }
+
+    #[test]
+    fn test_parse_xml_tool_calls_no_match() {
+        let content = "This is just regular text without any tool calls.";
+
+        let (prefix, tool_calls) = parse_xml_tool_calls(content);
+
+        assert!(prefix.is_none());
+        assert!(tool_calls.is_empty(), "Should have no tool calls");
+    }
+
+    #[test]
+    fn test_parse_xml_tool_calls_qwen_format() {
+        // Test the exact format observed from Qwen3-coder via Ollama
+        let content = r#"I'll create a file at /tmp/hello.txt with the content "hello".
+
+<function=developer__text_editor>
+<parameter=command>
+write
+</parameter>
+<parameter=path>
+/tmp/hello.txt
+</parameter>
+<parameter=file_text>
+hello
+</parameter>
+</function>
+</tool_call>"#;
+
+        let (prefix, tool_calls) = parse_xml_tool_calls(content);
+
+        assert!(prefix.is_some(), "Should have prefix");
+        assert_eq!(tool_calls.len(), 1, "Should have 1 tool call");
+
+        if let MessageContent::ToolRequest(request) = &tool_calls[0] {
+            let tool_call = request.tool_call.as_ref().unwrap();
+            assert_eq!(tool_call.name, "developer__text_editor");
+            let args = tool_call.arguments.as_ref().unwrap();
+            assert_eq!(args.get("command").unwrap(), "write");
+            assert_eq!(args.get("path").unwrap(), "/tmp/hello.txt");
+            assert_eq!(args.get("file_text").unwrap(), "hello");
+        } else {
+            panic!("Expected ToolRequest content");
+        }
+    }
+
+    #[test]
+    fn test_response_to_message_xml_fallback() -> anyhow::Result<()> {
+        // Test that response_to_message falls back to XML parsing when no JSON tool_calls
+        let response = json!({
+            "choices": [{
+                "message": {
+                    "role": "assistant",
+                    "content": "<function=developer__shell>\n<parameter=command>ls</parameter>\n</function>"
+                }
+            }]
+        });
+
+        let message = response_to_message(&response)?;
+
+        assert_eq!(message.content.len(), 1);
+        if let MessageContent::ToolRequest(request) = &message.content[0] {
+            let tool_call = request.tool_call.as_ref().unwrap();
+            assert_eq!(tool_call.name, "developer__shell");
+        } else {
+            panic!("Expected ToolRequest content from XML parsing");
+        }
+
+        Ok(())
+    }
+
+    #[test]
+    fn test_response_to_message_prefers_json_over_xml() -> anyhow::Result<()> {
+        // Test that JSON tool_calls take precedence over XML in content
+        let response = json!({
+            "choices": [{
+                "message": {
+                    "role": "assistant",
+                    "content": "<function=wrong_tool>\n<parameter=x>y</parameter>\n</function>",
+                    "tool_calls": [{
+                        "id": "call_123",
+                        "function": {
+                            "name": "correct_tool",
+                            "arguments": "{\"a\": \"b\"}"
+                        }
+                    }]
+                }
+            }]
+        });
+
+        let message = response_to_message(&response)?;
+
+        // Should have both text (from content) and tool request (from tool_calls)
+        // The XML in content should NOT be parsed since we have JSON tool_calls
+        let tool_requests: Vec<_> = message
+            .content
+            .iter()
+            .filter(|c| matches!(c, MessageContent::ToolRequest(_)))
+            .collect();
+
+        assert_eq!(tool_requests.len(), 1);
+        if let MessageContent::ToolRequest(request) = tool_requests[0] {
+            let tool_call = request.tool_call.as_ref().unwrap();
+            assert_eq!(tool_call.name, "correct_tool");
+        } else {
+            panic!("Expected ToolRequest");
+        }
+
+        Ok(())
+    }
 }