diff --git a/containers/agent/setup-iptables.sh b/containers/agent/setup-iptables.sh
index d349d68f..a9b6a735 100644
--- a/containers/agent/setup-iptables.sh
+++ b/containers/agent/setup-iptables.sh
@@ -32,8 +32,11 @@ fi
 # Get Squid proxy configuration from environment
 SQUID_HOST="${SQUID_PROXY_HOST:-squid-proxy}"
 SQUID_PORT="${SQUID_PROXY_PORT:-3128}"
+# Intercept port for NAT-redirected transparent proxy traffic
+# Squid's "intercept" mode handles relative URLs by extracting destination from Host header
+SQUID_INTERCEPT_PORT="${SQUID_INTERCEPT_PORT:-3129}"
 
-echo "[iptables] Squid proxy: ${SQUID_HOST}:${SQUID_PORT}"
+echo "[iptables] Squid proxy: ${SQUID_HOST}:${SQUID_PORT} (intercept: ${SQUID_INTERCEPT_PORT})"
 
 # Resolve Squid hostname to IP
 # Use awk's NR to get first line to avoid host binary dependency in chroot mode
@@ -154,15 +157,18 @@ for port in "${DANGEROUS_PORTS[@]}"; do
 done
 echo "[iptables] NAT blacklist applied for ${#DANGEROUS_PORTS[@]} dangerous ports"
 
-# Redirect standard HTTP/HTTPS ports to Squid
+# Redirect standard HTTP/HTTPS ports to Squid's INTERCEPT port
 # This provides defense-in-depth: iptables enforces port policy, Squid enforces domain policy
-echo "[iptables] Redirect HTTP (80) and HTTPS (443) to Squid..."
-iptables -t nat -A OUTPUT -p tcp --dport 80 -j DNAT --to-destination "${SQUID_IP}:${SQUID_PORT}"
-iptables -t nat -A OUTPUT -p tcp --dport 443 -j DNAT --to-destination "${SQUID_IP}:${SQUID_PORT}"
+# We use the intercept port (not the regular port) because NAT-redirected traffic is "transparent" -
+# clients send relative URLs (GET /path) which require Squid's intercept mode to handle properly.
+# The regular port (3128) is for explicit proxy usage via HTTP_PROXY/HTTPS_PROXY env vars.
+echo "[iptables] Redirect HTTP (80) and HTTPS (443) to Squid intercept port..."
+iptables -t nat -A OUTPUT -p tcp --dport 80 -j DNAT --to-destination "${SQUID_IP}:${SQUID_INTERCEPT_PORT}"
+iptables -t nat -A OUTPUT -p tcp --dport 443 -j DNAT --to-destination "${SQUID_IP}:${SQUID_INTERCEPT_PORT}"
 
 # If user specified additional ports via --allow-host-ports, redirect those too
 if [ -n "$AWF_ALLOW_HOST_PORTS" ]; then
-  echo "[iptables] Redirect user-specified ports to Squid..."
+  echo "[iptables] Redirect user-specified ports to Squid intercept port..."
 
   # Parse comma-separated port list
   IFS=',' read -ra PORTS <<< "$AWF_ALLOW_HOST_PORTS"
@@ -173,13 +179,13 @@ if [ -n "$AWF_ALLOW_HOST_PORTS" ]; then
 
     if [[ $port_spec == *"-"* ]]; then
       # Port range (e.g., "3000-3010")
-      echo "[iptables]   Redirect port range $port_spec to Squid..."
+      echo "[iptables]   Redirect port range $port_spec to Squid intercept port..."
       # For port ranges, use --dport with range syntax (without multiport)
-      iptables -t nat -A OUTPUT -p tcp --dport "$port_spec" -j DNAT --to-destination "${SQUID_IP}:${SQUID_PORT}"
+      iptables -t nat -A OUTPUT -p tcp --dport "$port_spec" -j DNAT --to-destination "${SQUID_IP}:${SQUID_INTERCEPT_PORT}"
     else
       # Single port (e.g., "3000")
-      echo "[iptables]   Redirect port $port_spec to Squid..."
-      iptables -t nat -A OUTPUT -p tcp --dport "$port_spec" -j DNAT --to-destination "${SQUID_IP}:${SQUID_PORT}"
+      echo "[iptables]   Redirect port $port_spec to Squid intercept port..."
+      iptables -t nat -A OUTPUT -p tcp --dport "$port_spec" -j DNAT --to-destination "${SQUID_IP}:${SQUID_INTERCEPT_PORT}"
     fi
   done
 else
diff --git a/src/docker-manager.ts b/src/docker-manager.ts
index ef1602c9..423e08cd 100644
--- a/src/docker-manager.ts
+++ b/src/docker-manager.ts
@@ -267,7 +267,7 @@ export function generateDockerCompose(
     },
     volumes: squidVolumes,
     healthcheck: {
-      test: ['CMD', 'nc', '-z', 'localhost', '3128'],
+      test: ['CMD-SHELL', 'nc -z localhost 3128 && nc -z localhost 3129'],
       interval: '5s',
       timeout: '3s',
       retries: 5,
@@ -713,6 +713,7 @@ export async function writeConfigs(config: WrapperConfig): Promise<void> {
     domains: config.allowedDomains,
     blockedDomains: config.blockedDomains,
     port: SQUID_PORT,
+    interceptPort: SQUID_INTERCEPT_PORT,
     sslBump: config.sslBump,
     caFiles: sslConfig?.caFiles,
     sslDbPath: sslConfig ? '/var/spool/squid_ssl_db' : undefined,
diff --git a/src/squid-config.test.ts b/src/squid-config.test.ts
index 620034b7..b4931784 100644
--- a/src/squid-config.test.ts
+++ b/src/squid-config.test.ts
@@ -1120,6 +1120,27 @@ describe('generateSquidConfig', () => {
       expect(result).toContain('http_port 3128');
       expect(result).not.toContain('https_port');
     });
+
+    it('should add intercept port when specified', () => {
+      const config: SquidConfig = {
+        domains: ['github.com'],
+        port: 3128,
+        interceptPort: 3129,
+      };
+      const result = generateSquidConfig(config);
+      expect(result).toContain('http_port 3128');
+      expect(result).toContain('http_port 3129 intercept');
+    });
+
+    it('should not add intercept port when not specified', () => {
+      const config: SquidConfig = {
+        domains: ['github.com'],
+        port: 3128,
+      };
+      const result = generateSquidConfig(config);
+      expect(result).toContain('http_port 3128');
+      expect(result).not.toContain('intercept');
+    });
   });
 });
 
diff --git a/src/squid-config.ts b/src/squid-config.ts
index 5e1478d6..de1faada 100644
--- a/src/squid-config.ts
+++ b/src/squid-config.ts
@@ -155,6 +155,11 @@ http_port 3128 ssl-bump \\
   dynamic_cert_mem_cache_size=16MB \\
   options=NO_SSLv3,NO_TLSv1,NO_TLSv1_1
 
+# Intercept port for NAT-redirected transparent proxy traffic
+# Traffic is DNAT'd here by iptables. Squid uses "intercept" mode to handle
+# relative URLs (GET /path) by extracting the destination from the Host header.
+http_port 3129 intercept
+
 # SSL certificate database for dynamic certificate generation
 # Using 16MB for certificate cache (sufficient for typical AI agent sessions)
 sslcrtd_program /usr/lib/squid/security_file_certgen -s ${sslDbPath} -M 16MB
@@ -205,7 +210,7 @@ ${urlAclSection}${urlAccessRules}`;
  * // Blocked: internal.example.com -> acl blocked_domains dstdomain .internal.example.com
  */
 export function generateSquidConfig(config: SquidConfig): string {
-  const { domains, blockedDomains, port, sslBump, caFiles, sslDbPath, urlPatterns, enableHostAccess, allowHostPorts } = config;
+  const { domains, blockedDomains, port, interceptPort, sslBump, caFiles, sslDbPath, urlPatterns, enableHostAccess, allowHostPorts } = config;
 
   // Parse domains into plain domains and wildcard patterns
   // Note: parseDomainList extracts and preserves protocol info from prefixes (http://, https://)
@@ -408,10 +413,16 @@ export function generateSquidConfig(config: SquidConfig): string {
 
   // Generate SSL Bump section if enabled
   let sslBumpSection = '';
-  // Port configuration: Use normal proxy mode (not intercept mode)
-  // With targeted port redirection in iptables, traffic is explicitly redirected
-  // to Squid on specific ports (80, 443, + user-specified), maintaining defense-in-depth
+  // Port configuration:
+  // - Regular port (3128): For explicit proxy usage via HTTP_PROXY/HTTPS_PROXY env vars
+  //   Clients aware of the proxy send absolute URLs (GET http://example.com/path)
+  // - Intercept port (3129): For NAT-redirected transparent proxy traffic
+  //   Traffic is DNAT'd here by iptables. Squid uses "intercept" mode to handle
+  //   relative URLs (GET /path) by extracting the destination from the Host header.
   let portConfig = `http_port ${port}`;
+  if (interceptPort) {
+    portConfig += `\nhttp_port ${interceptPort} intercept`;
+  }
 
   // For SSL Bump, we need to check hasPlainDomains and hasPatterns for the 'both' protocol domains
   // since those are the ones that go into allowed_domains / allowed_domains_regex ACLs
diff --git a/src/types.ts b/src/types.ts
index a1e1f726..611921fb 100644
--- a/src/types.ts
+++ b/src/types.ts
@@ -474,6 +474,21 @@ export interface SquidConfig {
    * @example "3000-3010,8000-8090"
    */
   allowHostPorts?: string;
+
+  /**
+   * Port number for transparently intercepted traffic (NAT/DNAT redirected)
+   *
+   * When traffic is redirected via iptables NAT (DNAT) to Squid, it arrives
+   * as "transparent" traffic - the client doesn't know it's talking to a proxy.
+   * This requires Squid's "intercept" mode which handles relative URLs and
+   * reconstructs the original destination from the Host header.
+   *
+   * This port should be used for NAT-redirected traffic, while the regular
+   * `port` is used for explicit proxy connections (HTTP_PROXY env var).
+   *
+   * @default 3129
+   */
+  interceptPort?: number;
 }
 
 /**