diff --git a/core/tools/implementations/runTerminalCommand.ts b/core/tools/implementations/runTerminalCommand.ts
index 8f6201bd12c..d9e8df01cb5 100644
--- a/core/tools/implementations/runTerminalCommand.ts
+++ b/core/tools/implementations/runTerminalCommand.ts
@@ -27,7 +27,15 @@ function getShellCommand(command: string): { shell: string; args: string[] } {
     // Windows: Use PowerShell
     return {
       shell: "powershell.exe",
-      args: ["-NoLogo", "-ExecutionPolicy", "Bypass", "-Command", command],
+      args: [
+        "-NoLogo",
+        "-NoProfile",
+        "-NonInteractive",
+        "-ExecutionPolicy",
+        "Bypass",
+        "-Command",
+        command,
+      ],
     };
   } else {
     // Unix/macOS: Use login shell to source .bashrc/.zshrc etc.
@@ -150,6 +158,7 @@ export const runTerminalCommandImpl: ToolImpl = async (args, extras) => {
             cwd,
             env: getColorEnv(), // Add enhanced environment for colors
           });
+          childProc.stdin?.end();
 
           // Track this process for foreground cancellation
           if (toolCallId && waitForCompletion) {
diff --git a/extensions/cli/src/tools/runTerminalCommand.test.ts b/extensions/cli/src/tools/runTerminalCommand.test.ts
index 32e8ba8ecb2..5633a73720d 100644
--- a/extensions/cli/src/tools/runTerminalCommand.test.ts
+++ b/extensions/cli/src/tools/runTerminalCommand.test.ts
@@ -77,6 +77,14 @@ describe("runTerminalCommandTool", () => {
         /Error \(exit code|Command timed out|not found|not recognized/,
       );
     });
+
+    it("should reject on non-zero exit code even with empty stderr", async () => {
+      const command = "exit 42";
+
+      await expect(runTerminalCommandTool.run({ command })).rejects.toMatch(
+        /Error \(exit code 42\)/,
+      );
+    });
   });
 
   describe("platform-specific features", () => {
diff --git a/extensions/cli/src/tools/runTerminalCommand.ts b/extensions/cli/src/tools/runTerminalCommand.ts
index 6b640c6a1c3..e4984c9bcdb 100644
--- a/extensions/cli/src/tools/runTerminalCommand.ts
+++ b/extensions/cli/src/tools/runTerminalCommand.ts
@@ -68,7 +68,15 @@ function getShellCommand(command: string): { shell: string; args: string[] } {
     // Windows: Use PowerShell
     return {
       shell: "powershell.exe",
-      args: ["-NoLogo", "-ExecutionPolicy", "Bypass", "-Command", command],
+      args: [
+        "-NoLogo",
+        "-NoProfile",
+        "-NonInteractive",
+        "-ExecutionPolicy",
+        "Bypass",
+        "-Command",
+        command,
+      ],
     };
   }
 
@@ -190,12 +198,14 @@ IMPORTANT: To edit files, use Edit/MultiEdit tools instead of bash commands (sed
       // Use same shell logic as core implementation
       const { shell, args } = getShellCommand(command);
       const child = spawn(shell, args);
+      // Close stdin immediately as this tool runs non-interactively and should not wait on stdin
+      child.stdin?.end();
       let stdout = "";
       let stderr = "";
       let timeoutId: NodeJS.Timeout;
       let isResolved = false;
 
-      // Determine timeout: use provided timeout (capped at 600s), test env variable, or default 120s
+      // Determine timeout: use provided timeout (capped at 600s), test env variable, or default 180s
       let TIMEOUT_MS = 180000; // 180 seconds default
       if (timeout !== undefined) {
         // Cap at 600 seconds (10 minutes)
@@ -206,6 +216,8 @@ IMPORTANT: To edit files, use Edit/MultiEdit tools instead of bash commands (sed
         process.env.TEST_TERMINAL_TIMEOUT
       ) {
         TIMEOUT_MS = parseInt(process.env.TEST_TERMINAL_TIMEOUT, 10);
+      } else if (process.env.NODE_ENV === "test") {
+        TIMEOUT_MS = 15000;
       }
 
       /**
@@ -330,9 +342,10 @@ IMPORTANT: To edit files, use Edit/MultiEdit tools instead of bash commands (sed
           moveToBackground,
         );
 
-        // Only reject on non-zero exit code if there's also stderr
-        if (code !== 0 && stderr) {
-          reject(`Error (exit code ${code}): ${stderr}`);
+        // Reject on non-zero exit code
+        if (code !== 0 && code !== null) {
+          const errorMessage = stderr || stdout || "Command failed";
+          reject(`Error (exit code ${code}): ${errorMessage}`);
           return;
         }
 
diff --git a/extensions/cli/vitest.setup.ts b/extensions/cli/vitest.setup.ts
index efbec2ab8db..734b01ab7d3 100644
--- a/extensions/cli/vitest.setup.ts
+++ b/extensions/cli/vitest.setup.ts
@@ -6,6 +6,9 @@ import { resetConsoleOverrides } from "./src/init.js";
 process.env.CONTINUE_CLI_ENABLE_TELEMETRY = "0";
 process.env.CONTINUE_ALLOW_ANONYMOUS_TELEMETRY = "0";
 
+// Ensure terminal command timeout in tests fires before vitest's 30s test timeout
+process.env.TEST_TERMINAL_TIMEOUT = "15000";
+
 // Mock fetch to prevent actual API calls in tests
 const originalFetch = global.fetch;
 global.fetch = vi