diff --git a/packages/pi-ai/src/types.ts b/packages/pi-ai/src/types.ts
index af3afc5c8..51db40313 100644
--- a/packages/pi-ai/src/types.ts
+++ b/packages/pi-ai/src/types.ts
@@ -250,7 +250,7 @@ export type AssistantMessageEvent =
 	| { type: "thinking_end"; contentIndex: number; content: string; partial: AssistantMessage }
 	| { type: "toolcall_start"; contentIndex: number; partial: AssistantMessage }
 	| { type: "toolcall_delta"; contentIndex: number; delta: string; partial: AssistantMessage }
-	| { type: "toolcall_end"; contentIndex: number; toolCall: ToolCall; partial: AssistantMessage }
+	| { type: "toolcall_end"; contentIndex: number; toolCall: ToolCall; partial: AssistantMessage; malformedArguments?: boolean }
 	| { type: "server_tool_use"; contentIndex: number; partial: AssistantMessage }
 	| { type: "web_search_result"; contentIndex: number; partial: AssistantMessage }
 	| { type: "done"; reason: Extract<StopReason, "stop" | "length" | "toolUse">; message: AssistantMessage }
diff --git a/src/resources/extensions/claude-code-cli/partial-builder.ts b/src/resources/extensions/claude-code-cli/partial-builder.ts
index 6886cccee..99bd7ca0f 100644
--- a/src/resources/extensions/claude-code-cli/partial-builder.ts
+++ b/src/resources/extensions/claude-code-cli/partial-builder.ts
@@ -244,7 +244,12 @@ export class PartialMessageBuilder {
 					try {
 						block.arguments = JSON.parse(jsonStr);
 					} catch {
+						// Stream was truncated mid-tool-call — JSON is garbage.
+						// Preserve the raw string for diagnostics but signal the
+						// malformation explicitly so downstream consumers can
+						// distinguish this from a healthy tool completion (#2574).
 						block.arguments = { _raw: jsonStr };
+						return { type: "toolcall_end", contentIndex, toolCall: block, partial: this.partial, malformedArguments: true };
 					}
 					return { type: "toolcall_end", contentIndex, toolCall: block, partial: this.partial };
 				}
diff --git a/src/resources/extensions/claude-code-cli/tests/partial-builder.test.ts b/src/resources/extensions/claude-code-cli/tests/partial-builder.test.ts
new file mode 100644
index 000000000..2a9612986
--- /dev/null
+++ b/src/resources/extensions/claude-code-cli/tests/partial-builder.test.ts
@@ -0,0 +1,105 @@
+import { describe, test } from "node:test";
+import assert from "node:assert/strict";
+import { PartialMessageBuilder } from "../partial-builder.ts";
+import type { BetaRawMessageStreamEvent } from "../sdk-types.ts";
+
+describe("PartialMessageBuilder — malformed tool arguments (#2574)", () => {
+	/**
+	 * Helper: feed a tool_use block through the builder lifecycle and return
+	 * the toolcall_end event. Simulates: content_block_start → N deltas → content_block_stop.
+	 */
+	function feedToolCall(
+		builder: PartialMessageBuilder,
+		jsonFragments: string[],
+	) {
+		// Start the tool_use block at stream index 0
+		builder.handleEvent({
+			type: "content_block_start",
+			index: 0,
+			content_block: { type: "tool_use", id: "tool_1", name: "gsd_plan_slice", input: {} },
+		} as BetaRawMessageStreamEvent);
+
+		// Feed JSON fragments as input_json_delta
+		for (const fragment of jsonFragments) {
+			builder.handleEvent({
+				type: "content_block_delta",
+				index: 0,
+				delta: { type: "input_json_delta", partial_json: fragment },
+			} as BetaRawMessageStreamEvent);
+		}
+
+		// Stop the block — this is where JSON parse happens
+		return builder.handleEvent({
+			type: "content_block_stop",
+			index: 0,
+		} as BetaRawMessageStreamEvent);
+	}
+
+	test("valid JSON → toolcall_end without malformedArguments", () => {
+		const builder = new PartialMessageBuilder("claude-sonnet-4-20250514");
+		const event = feedToolCall(builder, ['{"milestone', 'Id": "M001"}']);
+
+		assert.ok(event, "event should not be null");
+		assert.equal(event!.type, "toolcall_end");
+		// Valid JSON should NOT have the malformedArguments flag
+		assert.equal(
+			(event as any).malformedArguments,
+			undefined,
+			"valid JSON should not set malformedArguments",
+		);
+		// Arguments should be parsed correctly
+		if (event!.type === "toolcall_end") {
+			assert.deepEqual(event!.toolCall.arguments, { milestoneId: "M001" });
+		}
+	});
+
+	test("truncated JSON → toolcall_end WITH malformedArguments: true", () => {
+		const builder = new PartialMessageBuilder("claude-sonnet-4-20250514");
+		// Simulate a stream truncation: JSON is cut off mid-value
+		const event = feedToolCall(builder, ['{"milestone', 'Id": "M00']);
+
+		assert.ok(event, "event should not be null");
+		assert.equal(event!.type, "toolcall_end");
+		assert.equal(
+			(event as any).malformedArguments,
+			true,
+			"truncated JSON should set malformedArguments: true",
+		);
+		// The _raw field should contain the original broken JSON
+		if (event!.type === "toolcall_end") {
+			assert.equal(
+				event!.toolCall.arguments._raw,
+				'{"milestoneId": "M00',
+				"_raw should contain the truncated JSON string",
+			);
+		}
+	});
+
+	test("no JSON deltas → malformedArguments: true (empty accumulator is not valid JSON)", () => {
+		const builder = new PartialMessageBuilder("claude-sonnet-4-20250514");
+		// No deltas — the accumulator is initialized to "" by content_block_start,
+		// and "" is not valid JSON, so this correctly signals malformed.
+		const event = feedToolCall(builder, []);
+
+		assert.ok(event, "event should not be null");
+		assert.equal(event!.type, "toolcall_end");
+		assert.equal(
+			(event as any).malformedArguments,
+			true,
+			"empty accumulator (no JSON deltas) is not valid JSON → malformed",
+		);
+	});
+
+	test("garbage input (non-JSON) → malformedArguments: true", () => {
+		const builder = new PartialMessageBuilder("claude-sonnet-4-20250514");
+		const event = feedToolCall(builder, ["not json at all <html>"]);
+
+		assert.ok(event, "event should not be null");
+		assert.equal(event!.type, "toolcall_end");
+		assert.equal(
+			(event as any).malformedArguments,
+			true,
+			"non-JSON content should set malformedArguments: true",
+		);
+	});
+});