diff --git a/packages/server/src/server/agent/providers/claude/agent.env.test.ts b/packages/server/src/server/agent/providers/claude/agent.env.test.ts
index 018894af6..642e562f6 100644
--- a/packages/server/src/server/agent/providers/claude/agent.env.test.ts
+++ b/packages/server/src/server/agent/providers/claude/agent.env.test.ts
@@ -68,6 +68,12 @@ describe("Claude SDK env", () => {
       logger: createTestLogger(),
       queryFactory,
       resolveBinary: async () => "/test/claude/bin",
+      runtimeSettings: {
+        env: {
+          MCP_TIMEOUT: "claude-startup-timeout",
+          MCP_TOOL_TIMEOUT: "claude-tool-timeout",
+        },
+      },
     });
     const session = await client.createSession(
       {
@@ -82,6 +88,8 @@ describe("Claude SDK env", () => {
       expect(result.sessionId).toBe("managed-agent-env-session");
       expect(capturedEnv?.PASEO_AGENT_ID).toBe(launchContext.env?.PASEO_AGENT_ID);
       expect(capturedEnv?.PASEO_TEST_FLAG).toBe(launchContext.env?.PASEO_TEST_FLAG);
+      expect(capturedEnv?.MCP_TIMEOUT).toBe("claude-startup-timeout");
+      expect(capturedEnv?.MCP_TOOL_TIMEOUT).toBe("claude-tool-timeout");
     } finally {
       await session.close();
     }
diff --git a/packages/server/src/server/agent/providers/claude/agent.ts b/packages/server/src/server/agent/providers/claude/agent.ts
index fcd6b4694..c02697c8d 100644
--- a/packages/server/src/server/agent/providers/claude/agent.ts
+++ b/packages/server/src/server/agent/providers/claude/agent.ts
@@ -3075,14 +3075,7 @@ class ClaudeAgentSession implements AgentSession {
     return createProviderEnv({
       baseEnv: process.env,
       runtimeSettings: this.runtimeSettings,
-      overlays: [
-        {
-          // Increase MCP timeouts for long-running tool calls (10 minutes)
-          MCP_TIMEOUT: "600000",
-          MCP_TOOL_TIMEOUT: "600000",
-        },
-        this.launchEnv,
-      ],
+      overlays: [this.launchEnv],
     });
   }
 
diff --git a/packages/server/src/server/workspace-git-service.observation.test.ts b/packages/server/src/server/workspace-git-service.observation.test.ts
index 61d90f212..165435a1f 100644
--- a/packages/server/src/server/workspace-git-service.observation.test.ts
+++ b/packages/server/src/server/workspace-git-service.observation.test.ts
@@ -503,6 +503,15 @@ describe("WorkspaceGitService checkout observation", () => {
       ...current,
       upstreamStatus: facts.upstreamStatus,
     }));
+    const runGitFetch = vi.fn(async (_cwd, observer) => {
+      observer?.onRefSnapshot("before");
+      await releaseFetch.promise;
+      observer?.onRefSnapshot("after");
+      return {
+        changes: [{ kind: "moved" as const, ref: "origin/main", beforeOid: "a", afterOid: "b" }],
+        error: null,
+      };
+    });
     const service = createService(watcher, {
       getCheckoutSnapshotFacts,
       getCheckoutRefDerivedState,
@@ -515,22 +524,16 @@ describe("WorkspaceGitService checkout observation", () => {
         }),
       ),
       hasOriginRemote: vi.fn(async () => true),
-      runGitFetch: vi.fn(async (_cwd, observer) => {
-        observer?.onRefSnapshot("before");
-        await releaseFetch.promise;
-        observer?.onRefSnapshot("after");
-        return {
-          changes: [{ kind: "moved" as const, ref: "origin/main", beforeOid: "a", afterOid: "b" }],
-          error: null,
-        };
-      }),
+      runGitFetch,
     });
     const listener = vi.fn();
     const subscription = service.registerWorkspace({ cwd: REPO_CWD }, listener);
+    await service.getSnapshot(REPO_CWD);
     await vi.waitFor(() => {
+      expect(runGitFetch).toHaveBeenCalledTimes(1);
       expect(service.getMetrics().fetchInFlightCount).toBe(1);
-      expect(service.getMetrics().workspaceRefreshInFlightCount).toBe(0);
     });
+    expect(service.getMetrics().workspaceRefreshInFlightCount).toBe(0);
     listener.mockClear();
 
     watcher.records
@@ -539,7 +542,9 @@ describe("WorkspaceGitService checkout observation", () => {
         { path: path.join(GIT_DIR, "refs", "remotes", "origin", "main"), type: "create" },
       ]);
     releaseFetch.resolve();
-    await flushPromises();
+    await vi.waitFor(() => {
+      expect(service.getMetrics().fetchInFlightCount).toBe(0);
+    });
     await vi.advanceTimersByTimeAsync(1_000);
     await vi.waitFor(() => {
       expect(getCheckoutRefDerivedState).toHaveBeenCalledTimes(1);
@@ -798,6 +803,10 @@ describe("WorkspaceGitService checkout observation", () => {
         ...current,
         upstreamStatus: facts.upstreamStatus,
       }));
+    const runGitFetch = vi.fn(async () => ({
+      changes: [{ kind: "moved" as const, ref: "origin/main", beforeOid: "a", afterOid: "b" }],
+      error: null,
+    }));
     const service = createService(watcher, {
       getCheckoutSnapshotFacts,
       getCheckoutRefDerivedState,
@@ -810,13 +819,16 @@ describe("WorkspaceGitService checkout observation", () => {
         }),
       ),
       hasOriginRemote: vi.fn(async () => true),
-      runGitFetch: vi.fn(async () => ({
-        changes: [{ kind: "moved" as const, ref: "origin/main", beforeOid: "a", afterOid: "b" }],
-        error: null,
-      })),
+      runGitFetch,
     });
     const subscription = service.registerWorkspace({ cwd: REPO_CWD }, vi.fn());
 
+    await service.getSnapshot(REPO_CWD);
+    await vi.waitFor(() => {
+      expect(runGitFetch).toHaveBeenCalledTimes(1);
+      expect(service.getMetrics().fetchInFlightCount).toBe(0);
+    });
+    expect(service.getMetrics().workspaceRefreshInFlightCount).toBe(0);
     await vi.advanceTimersByTimeAsync(1_000);
     await vi.waitFor(() => {
       expect(getCheckoutRefDerivedState).toHaveBeenCalledTimes(1);