diff --git a/Cargo.lock b/Cargo.lock
index df54850a893..98962e01375 100644
--- a/Cargo.lock
+++ b/Cargo.lock
@@ -7569,6 +7569,7 @@ dependencies = [
  "uv-state",
  "uv-static",
  "uv-virtualenv",
+ "uv-warnings",
 ]
 
 [[package]]
diff --git a/crates/uv-tool/Cargo.toml b/crates/uv-tool/Cargo.toml
index 875d11e2c16..531445aa042 100644
--- a/crates/uv-tool/Cargo.toml
+++ b/crates/uv-tool/Cargo.toml
@@ -33,6 +33,7 @@ uv-settings = { workspace = true }
 uv-state = { workspace = true }
 uv-static = { workspace = true }
 uv-virtualenv = { workspace = true }
+uv-warnings = { workspace = true }
 
 fs-err = { workspace = true }
 owo-colors = { workspace = true }
diff --git a/crates/uv-tool/src/lib.rs b/crates/uv-tool/src/lib.rs
index e97b0b18097..314197b4d88 100644
--- a/crates/uv-tool/src/lib.rs
+++ b/crates/uv-tool/src/lib.rs
@@ -13,11 +13,12 @@ use uv_dirs::user_executable_directory;
 use uv_fs::{LockedFile, LockedFileError, LockedFileMode, Simplified};
 use uv_install_wheel::read_record;
 use uv_installer::SitePackages;
-use uv_normalize::{InvalidNameError, PackageName};
+use uv_normalize::PackageName;
 use uv_pep440::Version;
 use uv_python::{BrokenLink, Interpreter, PythonEnvironment};
 use uv_state::{StateBucket, StateStore};
 use uv_static::EnvVars;
+use uv_warnings::warn_user;
 
 pub(crate) use receipt::ToolReceipt;
 pub use tool::{Tool, ToolEntrypoint};
@@ -77,8 +78,6 @@ pub enum Error {
     #[error("Failed to find a directory to install executables into")]
     NoExecutableDirectory,
     #[error(transparent)]
-    ToolName(#[from] InvalidNameError),
-    #[error(transparent)]
     EnvironmentError(#[from] uv_python::Error),
     #[error("Failed to find a receipt for tool `{0}` at {1}")]
     MissingToolReceipt(String, PathBuf),
@@ -101,7 +100,6 @@ impl Error {
             | Self::VirtualEnvError(_)
             | Self::EntrypointRead(_)
             | Self::NoExecutableDirectory
-            | Self::ToolName(_)
             | Self::EnvironmentError(_)
             | Self::MissingToolReceipt(_, _)
             | Self::EnvironmentRead(_, _)
@@ -148,6 +146,8 @@ impl InstalledTools {
 
     /// Return the metadata for all installed tools.
     ///
+    /// Directories with invalid package names are skipped with a warning.
+    ///
     /// If a tool is present, but is missing a receipt or the receipt is invalid, the tool will be
     /// included with an error.
     ///
@@ -162,7 +162,13 @@ impl InstalledTools {
             else {
                 continue;
             };
-            let name = PackageName::from_str(name)?;
+            let Ok(name) = PackageName::from_str(name) else {
+                warn_user!(
+                    "Ignoring tool directory `{}` with an invalid package name; move it outside the tool directory, or remove it if no longer needed",
+                    directory.user_display()
+                );
+                continue;
+            };
             let path = directory.join("uv-receipt.toml");
             let contents = match fs_err::read_to_string(&path) {
                 Ok(contents) => contents,
diff --git a/crates/uv/src/commands/tool/upgrade.rs b/crates/uv/src/commands/tool/upgrade.rs
index e93598b32eb..577220e3de7 100644
--- a/crates/uv/src/commands/tool/upgrade.rs
+++ b/crates/uv/src/commands/tool/upgrade.rs
@@ -1,4 +1,4 @@
-use anyhow::Result;
+use anyhow::{Context, Result};
 use itertools::Itertools;
 use owo_colors::OwoColorize;
 use std::collections::BTreeMap;
@@ -13,7 +13,7 @@ use uv_configuration::{Concurrency, Constraints, DryRun, HashCheckingMode, Targe
 use uv_distribution::LoweredExtraBuildDependencies;
 use uv_distribution_types::{ExtraBuildRequires, Index, Name, Requirement, RequirementSource};
 use uv_errors::{ErrorOptions, Hints, write_error_chain_with_options};
-use uv_fs::CWD;
+use uv_fs::{CWD, Simplified};
 use uv_installer::{InstallationStrategy, Planner, SitePackages};
 use uv_normalize::PackageName;
 use uv_pep440::{Operator, Version};
@@ -68,7 +68,12 @@ pub(crate) async fn upgrade(
         if names.is_empty() {
             installed_tools
                 .tools()
-                .unwrap_or_default()
+                .with_context(|| {
+                    format!(
+                        "Failed to inspect installed tools in `{}`",
+                        installed_tools.root().user_display()
+                    )
+                })?
                 .into_iter()
                 .map(|(name, _)| (name, Vec::new()))
                 .collect()
diff --git a/crates/uv/tests/tool/tool_upgrade.rs b/crates/uv/tests/tool/tool_upgrade.rs
index 422d704e921..22f315e9bb5 100644
--- a/crates/uv/tests/tool/tool_upgrade.rs
+++ b/crates/uv/tests/tool/tool_upgrade.rs
@@ -94,8 +94,6 @@ fn tool_upgrade_all_ignores_invalid_tool_name() -> Result<()> {
 
     tool_dir.child("tool backup").create_dir_all()?;
 
-    // Silently treating an enumeration error as an empty tool directory hides a broken
-    // installation and exits successfully; see astral-sh/uv#21058.
     uv_snapshot!(context.filters(), context.tool_upgrade()
         .arg("--all")
         .env(EnvVars::UV_TOOL_DIR, tool_dir.as_os_str())
@@ -103,12 +101,34 @@ fn tool_upgrade_all_ignores_invalid_tool_name() -> Result<()> {
         .env(EnvVars::PATH, bin_dir.as_os_str()), @"
     exit_code: 0 (success)
     ----- stderr -----
+    warning: Ignoring tool directory `tools/tool backup` with an invalid package name; move it outside the tool directory, or remove it if no longer needed
     Nothing to upgrade
     ");
 
     Ok(())
 }
 
+#[test]
+fn tool_upgrade_all_unreadable_receipt() -> Result<()> {
+    let context = uv_test::test_context!("3.12").with_tool_dirs();
+    let tool_dir = context.temp_dir.child("tools");
+
+    tool_dir.child("babel").create_dir_all()?;
+    tool_dir
+        .child("babel")
+        .child("uv-receipt.toml")
+        .write_binary(&[0xff])?;
+
+    uv_snapshot!(context.filters(), context.tool_upgrade().arg("--all"), @"
+    exit_code: 2 (failure)
+    ----- stderr -----
+    error: Failed to inspect installed tools in `tools`
+      Caused by: failed to read from file `[TEMP_DIR]/tools/babel/uv-receipt.toml`: stream did not contain valid UTF-8
+    ");
+
+    Ok(())
+}
+
 #[test]
 fn tool_upgrade_preserves_workspace_member_editability() -> Result<()> {
     let context = uv_test::test_context!("3.12").with_filtered_exe_suffix();
@@ -754,7 +774,7 @@ fn tool_upgrade_pinned_hint_with_mixed_constraint() {
 }
 
 #[test]
-fn tool_upgrade_all() {
+fn tool_upgrade_all() -> Result<()> {
     let context = uv_test::test_context!("3.12")
         .with_filtered_counts()
         .with_filtered_exe_suffix();
@@ -796,6 +816,9 @@ fn tool_upgrade_all() {
     Installed 1 executable: pybabel
     ");
 
+    // An invalid directory must not prevent valid tools from being upgraded.
+    tool_dir.child("tool backup").create_dir_all()?;
+
     // Upgrade all from PyPI.
     uv_snapshot!(context.filters(), context.tool_upgrade()
         .arg("--all")
@@ -806,6 +829,7 @@ fn tool_upgrade_all() {
         .env(EnvVars::PATH, bin_dir.as_os_str()), @"
     exit_code: 0 (success)
     ----- stderr -----
+    warning: Ignoring tool directory `tools/tool backup` with an invalid package name; move it outside the tool directory, or remove it if no longer needed
     Updated babel v2.6.0 -> v2.14.0
      - babel==2.6.0
      + babel==2.14.0
@@ -816,6 +840,8 @@ fn tool_upgrade_all() {
      + python-dotenv==1.0.1
     Installed 1 executable: dotenv
     ");
+
+    Ok(())
 }
 
 #[test]