diff --git a/bin/tact/src/tui/mod.rs b/bin/tact/src/tui/mod.rs
index 6945a72..d924c75 100644
--- a/bin/tact/src/tui/mod.rs
+++ b/bin/tact/src/tui/mod.rs
@@ -502,7 +502,11 @@ pub(crate) async fn run(
                 1,
             )
         };
+    let workspace = config.agent().workspace().to_path_buf();
     let mut terminal = TerminalSession::enter().map_err(RuntimeError::Terminal)?;
+    terminal
+        .report_working_directory(&workspace)
+        .map_err(RuntimeError::Terminal)?;
     let ConfiguredAgent {
         agent,
         events,
@@ -541,7 +545,6 @@ pub(crate) async fn run(
         worker::MemoryReviewState::fresh(memory_enabled)
     };
     let (commands, mut worker_updates) = worker::spawn(agent, memory_review, shutdown.clone());
-    let workspace = config.agent().workspace().to_path_buf();
     let (agent_event_sender, mut agent_events) = mpsc::unbounded_channel();
     agent_events::forward(PaneId::Main, 0, events, agent_event_sender.clone());
     let (subagent_sender, mut subagent_events) = mpsc::unbounded_channel();
@@ -775,7 +778,14 @@ pub(crate) async fn run(
                             continue;
                         }
                         let record = runtime.journal_mut()?.append_agent(event)?;
+                        // `tool.result` is the canonical completion event for every agent tool.
+                        let tool_finished = record.kind() == "tool.result";
                         apply_app_update!(app.update(AppEvent::Transcript { pane, record }));
+                        if tool_finished {
+                            terminal
+                                .report_working_directory(&workspace)
+                                .map_err(RuntimeError::Terminal)?;
+                        }
                     }
                     ForwardedAgentEvent::Closed { pane, session_id, generation } => {
                         let mut stream_closed = false;
@@ -1173,6 +1183,9 @@ pub(crate) async fn run(
             }, if editor_task.is_some() && !stopping => {
                 editor_task = None;
                 terminal.resume().map_err(RuntimeError::Terminal)?;
+                terminal
+                    .report_working_directory(&workspace)
+                    .map_err(RuntimeError::Terminal)?;
                 app.refresh_terminal_images();
                 input = Some(EventStream::new());
                 match result.map_err(RuntimeError::ExternalEditorTask)?? {
diff --git a/bin/tact/src/tui/terminal.rs b/bin/tact/src/tui/terminal.rs
index 88f1e1d..b5b1c15 100644
--- a/bin/tact/src/tui/terminal.rs
+++ b/bin/tact/src/tui/terminal.rs
@@ -23,6 +23,7 @@ use ratatui::{
 use std::{
     io::{self, IsTerminal, Stdout, Write, stdin, stdout},
     panic,
+    path::Path,
     sync::{
         Once,
         atomic::{AtomicBool, Ordering},
@@ -251,6 +252,10 @@ impl TerminalSession {
         copy_to_clipboard(self.terminal.backend_mut(), text)
     }
 
+    pub(crate) fn report_working_directory(&mut self, path: &Path) -> io::Result<()> {
+        write_osc7_working_directory(self.terminal.backend_mut(), path)
+    }
+
     pub(crate) fn suspend(&mut self) -> io::Result<()> {
         if !self.active {
             return Ok(());
@@ -288,6 +293,14 @@ fn copy_to_clipboard(output: &mut impl Write, text: &str) -> io::Result<()> {
     execute!(output, CopyToClipboard::to_clipboard_from(text))
 }
 
+fn write_osc7_working_directory(output: &mut impl Write, path: &Path) -> io::Result<()> {
+    let uri = url::Url::from_directory_path(path).map_err(|()| {
+        io::Error::new(io::ErrorKind::InvalidInput, "working directory is relative")
+    })?;
+    write!(output, "\x1b]7;{uri}\x1b\\")?;
+    output.flush()
+}
+
 impl Drop for TerminalSession {
     fn drop(&mut self) {
         if !self.active {
@@ -371,6 +384,7 @@ mod tests {
     use super::{
         MeasuredBackend, StableCursorBackend, activate_commands, begin_synchronized_update,
         copy_to_clipboard, end_synchronized_update, reset_after_resume, restore_commands,
+        write_osc7_working_directory,
     };
     use crate::{
         app::config::ReasoningEffort,
@@ -424,6 +438,15 @@ mod tests {
         assert_eq!(output, b"\x1b]52;c;Y29weSBtZQ==\x1b\\");
     }
 
+    #[test]
+    fn osc7_working_directory_uses_an_encoded_file_uri() {
+        let mut output = Vec::new();
+
+        write_osc7_working_directory(&mut output, Path::new("/work/with space")).unwrap();
+
+        assert_eq!(output, b"\x1b]7;file:///work/with%20space/\x1b\\");
+    }
+
     #[test]
     fn unchanged_frames_produce_zero_ratatui_diff_cells() {
         let backend = MeasuredBackend {