diff --git a/ui/desktop/src/components/BaseChat2.tsx b/ui/desktop/src/components/BaseChat2.tsx
index d578e18c115c..e40974409539 100644
--- a/ui/desktop/src/components/BaseChat2.tsx
+++ b/ui/desktop/src/components/BaseChat2.tsx
@@ -2,7 +2,6 @@ import React, { useCallback, useEffect, useRef, useState } from 'react';
 import { useLocation } from 'react-router-dom';
 import { SearchView } from './conversation/SearchView';
 import LoadingGoose from './LoadingGoose';
-import { getThinkingMessage } from '../types/message';
 import PopularChatTopics from './PopularChatTopics';
 import ProgressiveMessageList from './ProgressiveMessageList';
 import { MainPanelLayout } from './Layout/MainPanelLayout';
@@ -23,6 +22,7 @@ import { scanRecipe } from '../recipe';
 import { useCostTracking } from '../hooks/useCostTracking';
 import RecipeActivities from './recipes/RecipeActivities';
 import { useToolCount } from './alerts/useToolCount';
+import { getThinkingMessage } from '../types/message';
 
 interface BaseChatProps {
   setChat: (chat: ChatType) => void;
@@ -179,13 +179,6 @@ function BaseChatContent({
 
   const initialPrompt = messages.length == 0 && recipe?.prompt ? recipe.prompt : '';
 
-  // Map chatState to LoadingGoose message
-  const getLoadingMessage = (): string | undefined => {
-    if (messages.length === 0 && chatState === ChatState.Thinking) {
-      return 'loading conversation...';
-    }
-    return getThinkingMessage(messages[messages.length - 1]);
-  };
   return (
     <div className="h-full flex flex-col min-h-0">
       <h2>Warning: BaseChat2!</h2>
@@ -255,10 +248,16 @@ function BaseChatContent({
             ) : null}
           </ScrollArea>
 
-          {/* Fixed loading indicator at bottom left of chat container */}
           {chatState !== ChatState.Idle && !sessionLoadError && (
             <div className="absolute bottom-1 left-4 z-20 pointer-events-none">
-              <LoadingGoose message={getLoadingMessage()} chatState={chatState} />
+              <LoadingGoose
+                chatState={chatState}
+                message={
+                  messages.length > 0
+                    ? getThinkingMessage(messages[messages.length - 1])
+                    : undefined
+                }
+              />
             </div>
           )}
         </div>
diff --git a/ui/desktop/src/components/LoadingGoose.tsx b/ui/desktop/src/components/LoadingGoose.tsx
index 70e6156979d3..56cddb27aa61 100644
--- a/ui/desktop/src/components/LoadingGoose.tsx
+++ b/ui/desktop/src/components/LoadingGoose.tsx
@@ -8,18 +8,29 @@ interface LoadingGooseProps {
   chatState?: ChatState;
 }
 
-const LoadingGoose = ({ message, chatState = ChatState.Idle }: LoadingGooseProps) => {
-  // Determine the appropriate message based on state
-  const getLoadingMessage = () => {
-    if (message) return message; // Custom message takes priority
+const STATE_MESSAGES: Record<ChatState, string> = {
+  [ChatState.LoadingConversation]: 'loading conversation...',
+  [ChatState.Thinking]: 'goose is thinking…',
+  [ChatState.Streaming]: 'goose is working on it…',
+  [ChatState.WaitingForUserInput]: 'goose is waiting…',
+  [ChatState.Compacting]: 'goose is compacting the conversation...',
+  [ChatState.Idle]: 'goose is working on it…',
+};
 
-    if (chatState === ChatState.Thinking) return 'goose is thinking…';
-    if (chatState === ChatState.Streaming) return 'goose is working on it…';
-    if (chatState === ChatState.WaitingForUserInput) return 'goose is waiting…';
+const STATE_ICONS: Record<ChatState, React.ReactNode> = {
+  [ChatState.LoadingConversation]: <AnimatedIcons className="flex-shrink-0" cycleInterval={600} />,
+  [ChatState.Thinking]: <AnimatedIcons className="flex-shrink-0" cycleInterval={600} />,
+  [ChatState.Streaming]: <FlyingBird className="flex-shrink-0" cycleInterval={150} />,
+  [ChatState.WaitingForUserInput]: (
+    <AnimatedIcons className="flex-shrink-0" cycleInterval={600} variant="waiting" />
+  ),
+  [ChatState.Compacting]: <AnimatedIcons className="flex-shrink-0" cycleInterval={600} />,
+  [ChatState.Idle]: <GooseLogo size="small" hover={false} />,
+};
 
-    // Default fallback
-    return 'goose is working on it…';
-  };
+const LoadingGoose = ({ message, chatState = ChatState.Idle }: LoadingGooseProps) => {
+  const displayMessage = message || STATE_MESSAGES[chatState];
+  const icon = STATE_ICONS[chatState];
 
   return (
     <div className="w-full animate-fade-slide-up">
@@ -27,16 +38,8 @@ const LoadingGoose = ({ message, chatState = ChatState.Idle }: LoadingGooseProps
         data-testid="loading-indicator"
         className="flex items-center gap-2 text-xs text-textStandard py-2"
       >
-        {chatState === ChatState.Thinking ? (
-          <AnimatedIcons className="flex-shrink-0" cycleInterval={600} />
-        ) : chatState === ChatState.Streaming ? (
-          <FlyingBird className="flex-shrink-0" cycleInterval={150} />
-        ) : chatState === ChatState.WaitingForUserInput ? (
-          <AnimatedIcons className="flex-shrink-0" cycleInterval={600} variant="waiting" />
-        ) : (
-          <GooseLogo size="small" hover={false} />
-        )}
-        {getLoadingMessage()}
+        {icon}
+        {displayMessage}
       </div>
     </div>
   );
diff --git a/ui/desktop/src/hooks/useChatStream.ts b/ui/desktop/src/hooks/useChatStream.ts
index 9fa88c750497..b9b5bd355367 100644
--- a/ui/desktop/src/hooks/useChatStream.ts
+++ b/ui/desktop/src/hooks/useChatStream.ts
@@ -2,7 +2,7 @@ import { useCallback, useEffect, useRef, useState } from 'react';
 import { ChatState } from '../types/chatState';
 import { Conversation, Message, resumeAgent, Session } from '../api';
 import { getApiUrl } from '../config';
-import { createUserMessage } from '../types/message';
+import { createUserMessage, getCompactingMessage, getThinkingMessage } from '../types/message';
 
 const TextDecoder = globalThis.TextDecoder;
 const resultsCache = new Map<string, { messages: Message[]; session: Session }>();
@@ -101,6 +101,7 @@ async function streamFromResponse(
   response: Response,
   initialMessages: Message[],
   updateMessages: (messages: Message[]) => void,
+  updateChatState: (state: ChatState) => void,
   onFinish: (error?: string) => void
 ): Promise<void> {
   let chunkCount = 0;
@@ -145,6 +146,14 @@ async function streamFromResponse(
               const msg = event.message;
               currentMessages = pushMessage(currentMessages, msg);
 
+              if (getCompactingMessage(msg)) {
+                log.state(ChatState.Compacting, { reason: 'compacting notification' });
+                updateChatState(ChatState.Compacting);
+              } else if (getThinkingMessage(msg)) {
+                log.state(ChatState.Thinking, { reason: 'thinking notification' });
+                updateChatState(ChatState.Thinking);
+              }
+
               // Only log every 10th message event to avoid spam
               if (messageEventCount % 10 === 0) {
                 log.stream('message-chunk', {
@@ -259,11 +268,11 @@ export function useChatStream({
     setMessagesAndLog([], 'session-reset');
     setSession(undefined);
     setSessionLoadError(undefined);
-    setChatState(ChatState.Thinking);
+    setChatState(ChatState.LoadingConversation);
 
     let cancelled = false;
 
-    log.state(ChatState.Thinking, { reason: 'session load start' });
+    log.state(ChatState.LoadingConversation, { reason: 'session load start' });
 
     (async () => {
       try {
@@ -342,6 +351,7 @@ export function useChatStream({
           response,
           currentMessages,
           (messages: Message[]) => setMessagesAndLog(messages, 'streaming'),
+          setChatState,
           onFinish
         );
 
diff --git a/ui/desktop/src/hooks/useMessageStream.ts b/ui/desktop/src/hooks/useMessageStream.ts
index 44ffa2527018..d05aaadbe067 100644
--- a/ui/desktop/src/hooks/useMessageStream.ts
+++ b/ui/desktop/src/hooks/useMessageStream.ts
@@ -1,6 +1,11 @@
 import { useCallback, useEffect, useId, useReducer, useRef, useState } from 'react';
 import useSWR from 'swr';
-import { createUserMessage, getThinkingMessage, hasCompletedToolCalls } from '../types/message';
+import {
+  createUserMessage,
+  getThinkingMessage,
+  getCompactingMessage,
+  hasCompletedToolCalls,
+} from '../types/message';
 import { Conversation, Message, Role } from '../api';
 
 import { getSession, Session } from '../api';
@@ -307,7 +312,9 @@ export function useMessageStream({
                       mutateChatState(ChatState.WaitingForUserInput);
                     }
 
-                    if (getThinkingMessage(newMessage)) {
+                    if (getCompactingMessage(newMessage)) {
+                      mutateChatState(ChatState.Compacting);
+                    } else if (getThinkingMessage(newMessage)) {
                       mutateChatState(ChatState.Thinking);
                     }
 
diff --git a/ui/desktop/src/types/chatState.ts b/ui/desktop/src/types/chatState.ts
index 4adc5f0ece57..067aee4f7b0b 100644
--- a/ui/desktop/src/types/chatState.ts
+++ b/ui/desktop/src/types/chatState.ts
@@ -3,4 +3,6 @@ export enum ChatState {
   Thinking = 'thinking',
   Streaming = 'streaming',
   WaitingForUserInput = 'waitingForUserInput',
+  Compacting = 'compacting',
+  LoadingConversation = 'loadingConversation',
 }
diff --git a/ui/desktop/src/types/message.ts b/ui/desktop/src/types/message.ts
index 9498ffec32b1..1c433f88d14b 100644
--- a/ui/desktop/src/types/message.ts
+++ b/ui/desktop/src/types/message.ts
@@ -3,6 +3,9 @@ import { Message, ToolConfirmationRequest, ToolRequest, ToolResponse } from '../
 export type ToolRequestMessageContent = ToolRequest & { type: 'toolRequest' };
 export type ToolResponseMessageContent = ToolResponse & { type: 'toolResponse' };
 
+// Compaction response message - must match backend constant
+const COMPACTION_THINKING_TEXT = 'goose is compacting the conversation...';
+
 export function createUserMessage(text: string): Message {
   return {
     id: generateMessageId(),
@@ -84,3 +87,19 @@ export function getThinkingMessage(message: Message | undefined): string | undef
 
   return undefined;
 }
+
+export function getCompactingMessage(message: Message | undefined): string | undefined {
+  if (!message || message.role !== 'assistant') {
+    return undefined;
+  }
+
+  for (const content of message.content) {
+    if (content.type === 'systemNotification' && content.notificationType === 'thinkingMessage') {
+      if (content.msg === COMPACTION_THINKING_TEXT) {
+        return content.msg;
+      }
+    }
+  }
+
+  return undefined;
+}