diff --git a/core/context/mcp/MCPConnection.ts b/core/context/mcp/MCPConnection.ts
index f1199066f2a..7a1019d6937 100644
--- a/core/context/mcp/MCPConnection.ts
+++ b/core/context/mcp/MCPConnection.ts
@@ -1,5 +1,6 @@
 import { Client } from "@modelcontextprotocol/sdk/client/index.js";
 import { Transport } from "@modelcontextprotocol/sdk/shared/transport.js";
+import * as URI from "uri-js";
 import { fileURLToPath } from "url";
 
 import {
@@ -445,6 +446,28 @@ Org-level secrets can only be used for MCP by Background Agents (https://docs.co
     };
   }
 
+  /**
+   * Converts a URI (file://, vscode-remote://, etc.) to a filesystem path.
+   * @param uri The URI to convert
+   * @returns The filesystem path
+   */
+  private uriToFsPath(uri: string): string {
+    // Handle file:// URIs using Node's built-in converter
+    if (uri.startsWith("file://")) {
+      return fileURLToPath(uri);
+    }
+
+    // For other URI schemes (vscode-remote://, etc.), extract the path portion
+    const parsed = URI.parse(uri);
+    if (parsed.scheme && parsed.path) {
+      // The path from URI.parse already includes the leading /
+      return parsed.path;
+    }
+
+    // If it's not a URI, return as-is
+    return uri;
+  }
+
   /**
    * Resolves the current working directory of the current workspace.
    * @param cwd The cwd parameter provided by user.
@@ -455,8 +478,9 @@ Org-level secrets can only be used for MCP by Background Agents (https://docs.co
       return this.resolveWorkspaceCwd(undefined);
     }
 
-    if (cwd.startsWith("file://")) {
-      return fileURLToPath(cwd);
+    // Check if it's a URI (has a scheme like file://, vscode-remote://, etc.)
+    if (cwd.includes("://")) {
+      return this.uriToFsPath(cwd);
     }
 
     // Return cwd if cwd is an absolute path.
@@ -473,10 +497,8 @@ Org-level secrets can only be used for MCP by Background Agents (https://docs.co
       const target = cwd ?? ".";
       const resolved = await resolveRelativePathInDir(target, IDE);
       if (resolved) {
-        if (resolved.startsWith("file://")) {
-          return fileURLToPath(resolved);
-        }
-        return resolved;
+        // resolved is a URI, convert to filesystem path
+        return this.uriToFsPath(resolved);
       }
       return resolved;
     }
@@ -559,24 +581,31 @@ Org-level secrets can only be used for MCP by Background Agents (https://docs.co
       ...(options.env ?? {}),
     };
 
+    // Always try to set a proper PATH
+    const ideInfo = await this.extras?.ide?.getIdeInfo();
+    const isWindowsHostWithWslRemote =
+      process.platform === "win32" && ideInfo?.remoteName === "wsl";
+
+    // Set initial PATH - use process.env.PATH if available
     if (process.env.PATH !== undefined) {
-      // Set the initial PATH from process.env
       env.PATH = process.env.PATH;
+    }
 
-      // For non-Windows platforms or WSL remotes, try to get the PATH from user shell
-      const ideInfo = await this.extras?.ide?.getIdeInfo();
-      const isWindowsHostWithWslRemote =
-        process.platform === "win32" && ideInfo?.remoteName === "wsl";
-      if (process.platform !== "win32" || isWindowsHostWithWslRemote) {
-        try {
-          const shellEnvPath = await getEnvPathFromUserShell(
-            ideInfo?.remoteName,
+    // For non-Windows platforms or remote connections, get proper shell PATH
+    if (process.platform !== "win32" || isWindowsHostWithWslRemote) {
+      try {
+        const shellEnvPath = await getEnvPathFromUserShell(ideInfo?.remoteName);
+        // Always use shell path if available (it includes defaults as fallback)
+        if (shellEnvPath) {
+          env.PATH = shellEnvPath;
+        }
+      } catch (err) {
+        console.error("Error getting PATH from shell:", err);
+        // If we still don't have a PATH, this is a critical issue
+        if (!env.PATH) {
+          console.error(
+            "WARNING: No PATH set for MCP server. Command execution will likely fail.",
           );
-          if (shellEnvPath && shellEnvPath !== process.env.PATH) {
-            env.PATH = shellEnvPath;
-          }
-        } catch (err) {
-          console.error("Error getting PATH:", err);
         }
       }
     }
diff --git a/core/context/mcp/MCPConnection.vitest.ts b/core/context/mcp/MCPConnection.vitest.ts
index 7920a9a1ddc..d613ada3603 100644
--- a/core/context/mcp/MCPConnection.vitest.ts
+++ b/core/context/mcp/MCPConnection.vitest.ts
@@ -175,6 +175,39 @@ describe("MCPConnection", () => {
       );
       expect(mockResolve).toHaveBeenCalledWith("src", ide);
     });
+
+    it("should convert file:// URIs to filesystem paths", async () => {
+      const conn = new MCPConnection(baseOptions);
+
+      await expect(
+        (conn as any).resolveCwd("file:///home/user/project"),
+      ).resolves.toBe("/home/user/project");
+    });
+
+    it("should convert vscode-remote:// URIs to filesystem paths", async () => {
+      const conn = new MCPConnection(baseOptions);
+
+      await expect(
+        (conn as any).resolveCwd(
+          "vscode-remote://ssh-remote+myserver/home/user/project",
+        ),
+      ).resolves.toBe("/home/user/project");
+    });
+
+    it("should handle workspace URIs from remote IDE", async () => {
+      const ide = {} as any;
+      const mockResolve = vi
+        .spyOn(ideUtils, "resolveRelativePathInDir")
+        .mockResolvedValue(
+          "vscode-remote://ssh-remote+myserver/home/user/workspace/src",
+        );
+      const conn = new MCPConnection(baseOptions, { ide });
+
+      await expect((conn as any).resolveCwd("src")).resolves.toBe(
+        "/home/user/workspace/src",
+      );
+      expect(mockResolve).toHaveBeenCalledWith("src", ide);
+    });
   });
 
   describe("connectClient", () => {
diff --git a/core/util/shellPath.ts b/core/util/shellPath.ts
index 961307c28bb..bd58c9e8368 100644
--- a/core/util/shellPath.ts
+++ b/core/util/shellPath.ts
@@ -2,6 +2,19 @@ import { exec } from "child_process";
 import { promisify } from "util";
 
 const execAsync = promisify(exec);
+
+// Common Unix binary paths that should be included in PATH
+const DEFAULT_UNIX_PATHS = [
+  "/usr/local/bin",
+  "/usr/bin",
+  "/bin",
+  "/usr/local/sbin",
+  "/usr/sbin",
+  "/sbin",
+  "/opt/homebrew/bin", // macOS Homebrew on Apple Silicon
+  "/home/linuxbrew/.linuxbrew/bin", // Linux Homebrew
+];
+
 export async function getEnvPathFromUserShell(
   remoteName?: string,
 ): Promise<string | undefined> {
@@ -11,20 +24,34 @@ export async function getEnvPathFromUserShell(
     return undefined;
   }
 
-  if (!process.env.SHELL) {
-    return undefined;
-  }
+  // Try to find a shell to use
+  const shell = process.env.SHELL || "/bin/bash";
 
   try {
     // Source common profile files
-    const command = `${process.env.SHELL} -l -c 'for f in ~/.zprofile ~/.zshrc ~/.bash_profile ~/.bashrc; do [ -f "$f" ] && source "$f" 2>/dev/null; done; echo $PATH'`;
+    const command = `${shell} -l -c 'for f in ~/.zprofile ~/.zshrc ~/.bash_profile ~/.bashrc; do [ -f "$f" ] && source "$f" 2>/dev/null; done; echo $PATH'`;
 
     const { stdout } = await execAsync(command, {
       encoding: "utf8",
+      timeout: 5000, // 5 second timeout
     });
 
-    return stdout.trim();
+    const pathFromShell = stdout.trim();
+    if (pathFromShell) {
+      return pathFromShell;
+    }
   } catch (error) {
-    return process.env.PATH; // Fallback to current PATH
+    // If shell command fails, fall through to default handling
+    console.warn("Failed to get PATH from shell:", error);
   }
+
+  // Fallback: build a reasonable default PATH
+  if (!process.env.PATH) {
+    return DEFAULT_UNIX_PATHS.join(":");
+  }
+
+  // Merge current PATH with common paths (avoiding duplicates)
+  const currentPaths = process.env.PATH.split(":");
+  const allPaths = [...new Set([...currentPaths, ...DEFAULT_UNIX_PATHS])];
+  return allPaths.join(":");
 }