diff --git a/src/resources/extensions/gsd/gsd-db.ts b/src/resources/extensions/gsd/gsd-db.ts
index fdb53492a..933b3d32e 100644
--- a/src/resources/extensions/gsd/gsd-db.ts
+++ b/src/resources/extensions/gsd/gsd-db.ts
@@ -1119,7 +1119,9 @@ export function insertMilestone(m: {
   ).run({
     ":id": m.id,
     ":title": m.title ?? "",
-    ":status": m.status ?? "active",
+    // Default to "queued" — never auto-create milestones as "active" (#3380).
+    // Callers that need "active" must pass it explicitly.
+    ":status": m.status ?? "queued",
     ":depends_on": JSON.stringify(m.depends_on ?? []),
     ":created_at": new Date().toISOString(),
     ":vision": m.planning?.vision ?? "",
diff --git a/src/resources/extensions/gsd/tests/phantom-milestone-default-queued.test.ts b/src/resources/extensions/gsd/tests/phantom-milestone-default-queued.test.ts
new file mode 100644
index 000000000..97c12b4a3
--- /dev/null
+++ b/src/resources/extensions/gsd/tests/phantom-milestone-default-queued.test.ts
@@ -0,0 +1,39 @@
+/**
+ * Regression test for #3695 — insertMilestone defaults status to "queued"
+ *
+ * Milestones were being auto-created with status "active", causing phantom
+ * milestones to appear as active work.  The fix defaults to "queued" so
+ * new milestones must be explicitly activated.
+ */
+
+import { describe, test } from 'node:test';
+import assert from 'node:assert/strict';
+import { readFileSync } from 'node:fs';
+import { fileURLToPath } from 'node:url';
+import { dirname, join } from 'node:path';
+
+const __filename = fileURLToPath(import.meta.url);
+const __dirname = dirname(__filename);
+
+const dbSrc = readFileSync(
+  join(__dirname, '..', 'gsd-db.ts'),
+  'utf-8',
+);
+
+describe('insertMilestone defaults status to queued (#3695)', () => {
+  test('insertMilestone function exists', () => {
+    assert.match(dbSrc, /export function insertMilestone\(/,
+      'insertMilestone should be exported from gsd-db.ts');
+  });
+
+  test('default status is "queued" not "active"', () => {
+    // The status parameter should default to "queued" via nullish coalescing
+    assert.match(dbSrc, /m\.status\s*\?\?\s*"queued"/,
+      'insertMilestone should default status to "queued"');
+  });
+
+  test('comment explains the rationale', () => {
+    assert.match(dbSrc, /never auto-create milestones as "active"/i,
+      'should have a comment explaining why default is queued');
+  });
+});