diff --git a/crates/goose/src/agents/agent.rs b/crates/goose/src/agents/agent.rs
index 42291dfd565a..5f89c9c5d4e0 100644
--- a/crates/goose/src/agents/agent.rs
+++ b/crates/goose/src/agents/agent.rs
@@ -634,6 +634,7 @@ impl Agent {
 
     /// Load extensions from session into the agent
     /// Skips extensions that are already loaded
+    /// Uses the session's working_dir for extension initialization
     pub async fn load_extensions_from_session(
         self: &Arc<Self>,
         session: &Session,
@@ -651,11 +652,15 @@ impl Agent {
             }
         };
 
+        // Capture the session's working_dir to pass to extensions
+        let working_dir = session.working_dir.clone();
+
         let extension_futures = enabled_configs
             .into_iter()
             .map(|config| {
                 let config_clone = config.clone();
                 let agent_ref = self.clone();
+                let working_dir_clone = working_dir.clone();
 
                 async move {
                     let name = config_clone.name().to_string();
@@ -674,7 +679,10 @@ impl Agent {
                         };
                     }
 
-                    match agent_ref.add_extension(config_clone).await {
+                    match agent_ref
+                        .add_extension_with_working_dir(config_clone, Some(working_dir_clone))
+                        .await
+                    {
                         Ok(_) => ExtensionLoadResult {
                             name,
                             success: true,
@@ -698,6 +706,14 @@ impl Agent {
     }
 
     pub async fn add_extension(&self, extension: ExtensionConfig) -> ExtensionResult<()> {
+        self.add_extension_with_working_dir(extension, None).await
+    }
+
+    pub async fn add_extension_with_working_dir(
+        &self,
+        extension: ExtensionConfig,
+        working_dir: Option<std::path::PathBuf>,
+    ) -> ExtensionResult<()> {
         match &extension {
             ExtensionConfig::Frontend {
                 tools,
@@ -726,7 +742,7 @@ impl Agent {
             }
             _ => {
                 self.extension_manager
-                    .add_extension(extension.clone())
+                    .add_extension_with_working_dir(extension.clone(), working_dir)
                     .await?;
             }
         }
diff --git a/crates/goose/src/agents/extension_manager.rs b/crates/goose/src/agents/extension_manager.rs
index 27cc65060ec4..15ef6fcd2cbf 100644
--- a/crates/goose/src/agents/extension_manager.rs
+++ b/crates/goose/src/agents/extension_manager.rs
@@ -466,13 +466,6 @@ impl ExtensionManager {
         &self.context
     }
 
-    /// Resolve the working directory for an extension.
-    /// Falls back to current_dir when working_dir is not available.
-    async fn resolve_working_dir(&self) -> PathBuf {
-        // Fall back to current_dir - working_dir is passed through the call chain from session
-        std::env::current_dir().unwrap_or_default()
-    }
-
     pub async fn supports_resources(&self) -> bool {
         self.extensions
             .lock()
@@ -481,7 +474,14 @@ impl ExtensionManager {
             .any(|ext| ext.supports_resources())
     }
 
-    pub async fn add_extension(self: &Arc<Self>, config: ExtensionConfig) -> ExtensionResult<()> {
+    /// Add an extension with an optional working directory.
+    /// If working_dir is None, falls back to current_dir.
+    #[allow(clippy::too_many_lines)]
+    pub async fn add_extension_with_working_dir(
+        self: &Arc<Self>,
+        config: ExtensionConfig,
+        working_dir: Option<PathBuf>,
+    ) -> ExtensionResult<()> {
         let config_name = config.key().to_string();
         let sanitized_name = normalize(&config_name);
 
@@ -489,8 +489,9 @@ impl ExtensionManager {
             return Ok(());
         }
 
-        // Resolve working_dir: session > current_dir
-        let effective_working_dir = self.resolve_working_dir().await;
+        // Resolve working_dir: explicit > current_dir
+        let effective_working_dir =
+            working_dir.unwrap_or_else(|| std::env::current_dir().unwrap_or_default());
 
         let mut temp_dir = None;
 
@@ -555,6 +556,17 @@ impl ExtensionManager {
                     .ok_or_else(|| {
                         ExtensionError::ConfigError(format!("Unknown builtin extension: {}", name))
                     })?;
+
+                // Set GOOSE_WORKING_DIR in the current process for builtin extensions
+                // since they run in-process and read from std::env::var
+                if effective_working_dir.exists() && effective_working_dir.is_dir() {
+                    std::env::set_var("GOOSE_WORKING_DIR", &effective_working_dir);
+                    tracing::info!(
+                        "Set GOOSE_WORKING_DIR for builtin extension: {:?}",
+                        effective_working_dir
+                    );
+                }
+
                 let (server_read, client_write) = tokio::io::duplex(65536);
                 let (client_read, server_write) = tokio::io::duplex(65536);
                 (def.spawn_server)(server_read, server_write);
diff --git a/crates/goose/src/agents/extension_manager_extension.rs b/crates/goose/src/agents/extension_manager_extension.rs
index 9a54e0d81307..377c592d3559 100644
--- a/crates/goose/src/agents/extension_manager_extension.rs
+++ b/crates/goose/src/agents/extension_manager_extension.rs
@@ -211,7 +211,7 @@ impl ExtensionManagerClient {
         };
 
         extension_manager
-            .add_extension(config)
+            .add_extension_with_working_dir(config, None)
             .await
             .map(|_| {
                 vec![Content::text(format!(
diff --git a/crates/goose/tests/mcp_integration_test.rs b/crates/goose/tests/mcp_integration_test.rs
index 88bb3d323e19..71fae27d8e3f 100644
--- a/crates/goose/tests/mcp_integration_test.rs
+++ b/crates/goose/tests/mcp_integration_test.rs
@@ -264,7 +264,9 @@ async fn test_replayed_session(
 
     #[allow(clippy::redundant_closure_call)]
     let result = (async || -> Result<(), Box<dyn std::error::Error>> {
-        extension_manager.add_extension(extension_config).await?;
+        extension_manager
+            .add_extension_with_working_dir(extension_config, None)
+            .await?;
         let mut results = Vec::new();
         for tool_call in tool_calls {
             let tool_call = CallToolRequestParam {