diff --git a/apps/desktop/src/lib/trpc/routers/external/index.ts b/apps/desktop/src/lib/trpc/routers/external/index.ts
index 80c2afca7a4..c32d9f067d1 100644
--- a/apps/desktop/src/lib/trpc/routers/external/index.ts
+++ b/apps/desktop/src/lib/trpc/routers/external/index.ts
@@ -3,6 +3,7 @@ import path from "node:path";
 import { clipboard, shell } from "electron";
 import { db } from "main/lib/db";
 import { EXTERNAL_APPS, type ExternalApp } from "main/lib/db/schemas";
+import { terminalManager } from "main/lib/terminal";
 import { z } from "zod";
 import { publicProcedure, router } from "../..";
 
@@ -151,7 +152,7 @@ export const createExternalRouter = () => {
 					path: z.string(),
 					line: z.number().optional(),
 					column: z.number().optional(),
-					cwd: z.string().optional(),
+					paneId: z.string().optional(),
 				}),
 			)
 			.mutation(async ({ input }) => {
@@ -166,10 +167,20 @@ export const createExternalRouter = () => {
 				}
 
 				// Convert to absolute path - required for editor commands to work reliably
+				// Query actual cwd from the terminal's pty process if paneId is provided
 				if (!path.isAbsolute(filePath)) {
-					filePath = input.cwd
-						? path.resolve(input.cwd, filePath)
-						: path.resolve(filePath);
+					const cwd = input.paneId
+						? terminalManager.getCwd(input.paneId)
+						: null;
+					if (!cwd) {
+						console.warn(
+							`[openFileInEditor] Cannot resolve relative path "${filePath}": no cwd available for paneId "${input.paneId}"`,
+						);
+						throw new Error(
+							`Cannot open relative path "${filePath}" - terminal session not found`,
+						);
+					}
+					filePath = path.resolve(cwd, filePath);
 				}
 
 				// Build the file location string (file:line:column format for URL schemes)
diff --git a/apps/desktop/src/main/lib/terminal/manager.ts b/apps/desktop/src/main/lib/terminal/manager.ts
index 5444399585a..0b37aa381b4 100644
--- a/apps/desktop/src/main/lib/terminal/manager.ts
+++ b/apps/desktop/src/main/lib/terminal/manager.ts
@@ -263,6 +263,28 @@ export class TerminalManager extends EventEmitter {
 		};
 	}
 
+	/**
+	 * Get the current working directory of a terminal session.
+	 * Uses cwd tracked from OSC 7 sequences emitted by the shell.
+	 * Falls back to the initial cwd if no OSC 7 has been received.
+	 */
+	getCwd(paneId: string): string | null {
+		const session = this.sessions.get(paneId);
+		if (!session || !session.isAlive) {
+			console.warn(
+				`[TerminalManager.getCwd] Session not found or not alive for paneId: ${paneId}`,
+			);
+			return null;
+		}
+
+		// Use tracked cwd from OSC 7 if available, otherwise fall back to initial cwd
+		const cwd = session.trackedCwd ?? session.cwd;
+		console.log(
+			`[TerminalManager.getCwd] paneId: ${paneId}, trackedCwd: ${session.trackedCwd}, initialCwd: ${session.cwd}, returning: ${cwd}`,
+		);
+		return cwd;
+	}
+
 	async killByWorkspaceId(
 		workspaceId: string,
 	): Promise<{ killed: number; failed: number }> {
diff --git a/apps/desktop/src/main/lib/terminal/parse-cwd.ts b/apps/desktop/src/main/lib/terminal/parse-cwd.ts
new file mode 100644
index 00000000000..91034188b24
--- /dev/null
+++ b/apps/desktop/src/main/lib/terminal/parse-cwd.ts
@@ -0,0 +1,36 @@
+/**
+ * Parse OSC 7 escape sequences to extract the current working directory.
+ * OSC 7 format: ESC]7;file://hostname/path BEL (or ESC\)
+ *
+ * This is emitted by shells when the directory changes.
+ */
+
+const ESC = "\x1b";
+const BEL = "\x07";
+
+// Match OSC 7 sequences: ESC]7;file://hostname/path followed by BEL or ST (ESC\)
+const OSC7_PATTERN = new RegExp(
+	`${ESC}\\]7;file://[^/]*((?:/[^${BEL}${ESC}]*)*)(?:${BEL}|${ESC}\\\\)`,
+	"g",
+);
+
+/**
+ * Parse terminal output data for OSC 7 directory sequences.
+ * Returns the last (most recent) directory found, or null if none.
+ */
+export function parseCwd(data: string): string | null {
+	let lastMatch: string | null = null;
+
+	for (const match of data.matchAll(OSC7_PATTERN)) {
+		const path = match[1];
+		if (path) {
+			try {
+				lastMatch = decodeURIComponent(path);
+			} catch {
+				lastMatch = path;
+			}
+		}
+	}
+
+	return lastMatch;
+}
diff --git a/apps/desktop/src/main/lib/terminal/session.ts b/apps/desktop/src/main/lib/terminal/session.ts
index 4c9ea1005d4..0840eb01b7e 100644
--- a/apps/desktop/src/main/lib/terminal/session.ts
+++ b/apps/desktop/src/main/lib/terminal/session.ts
@@ -9,6 +9,7 @@ import {
 } from "../terminal-escape-filter";
 import { HistoryReader, HistoryWriter } from "../terminal-history";
 import { buildTerminalEnv, FALLBACK_SHELL, getDefaultShell } from "./env";
+import { parseCwd } from "./parse-cwd";
 import type { InternalCreateSessionParams, TerminalSession } from "./types";
 
 const DEFAULT_COLS = 80;
@@ -153,6 +154,12 @@ export function setupDataHandler(
 			dataToStore = extractContentAfterClear(data);
 		}
 
+		// Track cwd from OSC 7 sequences
+		const cwdFromData = parseCwd(data);
+		if (cwdFromData) {
+			session.trackedCwd = cwdFromData;
+		}
+
 		const filteredData = session.escapeFilter.filter(dataToStore);
 		session.scrollback += filteredData;
 		session.historyWriter?.write(filteredData);
diff --git a/apps/desktop/src/main/lib/terminal/types.ts b/apps/desktop/src/main/lib/terminal/types.ts
index f099ed3b2fb..11a18f72029 100644
--- a/apps/desktop/src/main/lib/terminal/types.ts
+++ b/apps/desktop/src/main/lib/terminal/types.ts
@@ -8,6 +8,8 @@ export interface TerminalSession {
 	paneId: string;
 	workspaceId: string;
 	cwd: string;
+	/** Current working directory tracked from OSC 7 sequences */
+	trackedCwd?: string;
 	cols: number;
 	rows: number;
 	lastActive: number;
diff --git a/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/Terminal.tsx b/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/Terminal.tsx
index 14bfdda99a6..ca6ceb2193c 100644
--- a/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/Terminal.tsx
+++ b/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/Terminal.tsx
@@ -198,11 +198,7 @@ export const Terminal = ({ tabId, workspaceId }: TerminalProps) => {
 			xterm,
 			fitAddon,
 			cleanup: cleanupQuerySuppression,
-		} = createTerminalInstance(
-			container,
-			workspaceCwd,
-			initialThemeRef.current,
-		);
+		} = createTerminalInstance(container, paneId, initialThemeRef.current);
 		xtermRef.current = xterm;
 		fitAddonRef.current = fitAddon;
 		isExitedRef.current = false;
@@ -397,7 +393,7 @@ export const Terminal = ({ tabId, workspaceId }: TerminalProps) => {
 			xtermRef.current = null;
 			searchAddonRef.current = null;
 		};
-	}, [paneId, workspaceId, workspaceCwd]);
+	}, [paneId, workspaceId]);
 
 	useEffect(() => {
 		const xterm = xtermRef.current;
diff --git a/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/helpers.ts b/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/helpers.ts
index 4f216287283..c9b36abc519 100644
--- a/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/helpers.ts
+++ b/apps/desktop/src/renderer/screens/main/components/WorkspaceView/ContentView/TabsContent/Terminal/helpers.ts
@@ -90,7 +90,7 @@ function loadRenderer(xterm: XTerm): { dispose: () => void } {
 
 export function createTerminalInstance(
 	container: HTMLDivElement,
-	cwd?: string,
+	paneId: string,
 	initialTheme?: ITheme | null,
 ): {
 	xterm: XTerm;
@@ -148,7 +148,7 @@ export function createTerminalInstance(
 					path,
 					line,
 					column,
-					cwd,
+					paneId,
 				})
 				.catch((error) => {
 					console.error(