diff --git a/crates/goose/src/agents/agent.rs b/crates/goose/src/agents/agent.rs
index 814d351d64cc..3064fdc7ea5a 100644
--- a/crates/goose/src/agents/agent.rs
+++ b/crates/goose/src/agents/agent.rs
@@ -952,6 +952,52 @@ impl Agent {
         Ok(None)
     }
 
+    /// Create events for successful compaction
+    fn create_compaction_events(messages: &Conversation) -> Vec<AgentEvent> {
+        vec![
+            AgentEvent::Message(Message::assistant().with_summarization_requested(
+                "Context limit reached. Conversation has been automatically compacted to continue.",
+            )),
+            AgentEvent::HistoryReplaced(messages.messages().to_vec()),
+        ]
+    }
+
+    /// Check if an error message indicates a context limit error
+    fn is_context_limit_error(error_msg: &str) -> bool {
+        let error_lower = error_msg.to_lowercase();
+        error_lower.contains("exceed context limit")
+            || error_lower.contains("exceeds context limit")
+            || error_lower.contains("context_length_exceeded")
+            || (error_lower.contains("input length")
+                && error_lower.contains("max_tokens")
+                && error_lower.contains("exceed"))
+            || (error_lower.contains("input_tokens")
+                && error_lower.contains("max_tokens")
+                && error_lower.contains("exceed"))
+    }
+
+    /// Handle context limit exceeded error by attempting compaction
+    /// Returns Ok(compacted_messages) if successful, Err if compaction fails
+    async fn handle_context_limit_error(
+        &self,
+        messages: &[Message],
+        error_msg: &str,
+    ) -> Result<Conversation> {
+        info!("Context length exceeded, attempting compaction");
+
+        match auto_compact::perform_compaction(self, messages).await {
+            Ok(compact_result) => {
+                Ok(compact_result.messages)
+            }
+            Err(e) => {
+                Err(anyhow::anyhow!(
+                    "Context length exceeded and cannot summarize: {}. Unable to continue. Compaction error: {}",
+                    error_msg, e
+                ))
+            }
+        }
+    }
+
     #[instrument(skip(self, unfixed_conversation, session), fields(user_message))]
     pub async fn reply(
         &self,
@@ -1266,29 +1312,52 @@ impl Agent {
                             }
                         }
                         Err(ProviderError::ContextLengthExceeded(error_msg)) => {
-                            info!("Context length exceeded, attempting compaction");
-
-                            match auto_compact::perform_compaction(self, messages.messages()).await {
-                                Ok(compact_result) => {
-                                    messages = compact_result.messages;
-
-                                    yield AgentEvent::Message(
-                                        Message::assistant().with_summarization_requested(
-                                            "Context limit reached. Conversation has been automatically compacted to continue."
-                                        )
-                                    );
-                                    yield AgentEvent::HistoryReplaced(messages.messages().to_vec());
-
+                            match self.handle_context_limit_error(messages.messages(), &error_msg).await {
+                                Ok(compacted_messages) => {
+                                    messages = compacted_messages;
+                                    // Yield compaction events and continue
+                                    for event in Self::create_compaction_events(&messages) {
+                                        yield event;
+                                    }
                                     continue;
                                 }
-                                Err(_) => {
+                                Err(e) => {
                                     yield AgentEvent::Message(Message::assistant().with_context_length_exceeded(
-                                        format!("Context length exceeded and cannot summarize: {}. Unable to continue.", error_msg)
+                                        e.to_string()
                                     ));
                                     break;
                                 }
                             }
                         }
+                        Err(ProviderError::RequestFailed(error_msg)) => {
+                            // Check if this is actually a context limit error that wasn't properly classified
+                            if Self::is_context_limit_error(&error_msg) {
+                                info!("Context length exceeded (detected from RequestFailed)");
+
+                                match self.handle_context_limit_error(messages.messages(), &error_msg).await {
+                                    Ok(compacted_messages) => {
+                                        messages = compacted_messages;
+                                        // Yield compaction events and continue
+                                        for event in Self::create_compaction_events(&messages) {
+                                            yield event;
+                                        }
+                                        continue;
+                                    }
+                                    Err(e) => {
+                                        yield AgentEvent::Message(Message::assistant().with_context_length_exceeded(
+                                            e.to_string()
+                                        ));
+                                        break;
+                                    }
+                                }
+                            } else {
+                                error!("Error: {}", error_msg);
+                                yield AgentEvent::Message(Message::assistant().with_text(
+                                        format!("Ran into this error: {}.\n\nPlease retry if you think this is a transient or recoverable error.", error_msg)
+                                    ));
+                                break;
+                            }
+                        }
                         Err(e) => {
                             error!("Error: {}", e);
                             yield AgentEvent::Message(Message::assistant().with_text(