diff --git a/package.json b/package.json
index 80ec250a3..7fb168bbd 100644
--- a/package.json
+++ b/package.json
@@ -43,7 +43,8 @@
     "build:pi-coding-agent": "npm run build -w @gsd/pi-coding-agent",
     "build:native-pkg": "npm run build -w @gsd/native",
     "build:pi": "npm run build:native-pkg && npm run build:pi-tui && npm run build:pi-ai && npm run build:pi-agent-core && npm run build:pi-coding-agent",
-    "build": "npm run build:pi && tsc && npm run copy-themes",
+    "build": "npm run build:pi && tsc && npm run copy-resources && npm run copy-themes",
+    "copy-resources": "node -e \"const{cpSync,rmSync}=require('fs');rmSync('dist/resources',{recursive:true,force:true});cpSync('src/resources','dist/resources',{recursive:true,force:true})\"",
     "copy-themes": "node -e \"const{mkdirSync,cpSync}=require('fs');const{resolve}=require('path');const src=resolve(__dirname,'packages/pi-coding-agent/dist/modes/interactive/theme');mkdirSync('pkg/dist/modes/interactive/theme',{recursive:true});cpSync(src,'pkg/dist/modes/interactive/theme',{recursive:true})\"",
     "test:unit": "node --import ./src/resources/extensions/gsd/tests/resolve-ts.mjs --experimental-strip-types --test src/resources/extensions/gsd/tests/*.test.ts src/resources/extensions/gsd/tests/*.test.mjs src/tests/*.test.ts",
     "test:integration": "node --import ./src/resources/extensions/gsd/tests/resolve-ts.mjs --experimental-strip-types --test src/resources/extensions/gsd/tests/*integration*.test.ts src/tests/integration/*.test.ts",
@@ -52,7 +53,7 @@
     "test:native": "node --test packages/native/src/__tests__/grep.test.mjs",
     "build:native": "node native/scripts/build.js",
     "build:native:dev": "node native/scripts/build.js --dev",
-    "dev": "tsc --watch",
+    "dev": "node scripts/dev.js",
     "postinstall": "node scripts/link-workspace-packages.cjs && node scripts/postinstall.js",
     "pi:install-global": "node scripts/install-pi-global.js",
     "pi:uninstall-global": "node scripts/uninstall-pi-global.js",
diff --git a/scripts/dev.js b/scripts/dev.js
new file mode 100644
index 000000000..dc87dce60
--- /dev/null
+++ b/scripts/dev.js
@@ -0,0 +1,47 @@
+#!/usr/bin/env node
+
+/**
+ * Dev supervisor — runs tsc --watch and watch-resources.js in parallel.
+ *
+ * Both processes terminate together when either exits or when the parent
+ * receives SIGINT/SIGTERM. This avoids the problem with shell backgrounding
+ * (`&`) where the watcher can outlive tsc and orphan.
+ */
+
+import { spawn } from 'node:child_process'
+import { resolve, dirname } from 'node:path'
+import { fileURLToPath } from 'node:url'
+
+const __dirname = dirname(fileURLToPath(import.meta.url))
+const root = resolve(__dirname, '..')
+
+const procs = [
+  spawn('node', [resolve(__dirname, 'watch-resources.js')], {
+    cwd: root, stdio: 'inherit'
+  }),
+  spawn('npx', ['tsc', '--watch'], {
+    cwd: root, stdio: 'inherit'
+  })
+]
+
+function cleanup() {
+  for (const p of procs) {
+    try { p.kill() } catch {}
+  }
+}
+
+// If either child exits, kill the other and exit with its code
+for (const p of procs) {
+  p.on('exit', (code) => {
+    cleanup()
+    process.exit(code ?? 1)
+  })
+}
+
+// Forward signals to children
+for (const sig of ['SIGINT', 'SIGTERM']) {
+  process.on(sig, () => {
+    cleanup()
+    process.exit(0)
+  })
+}
diff --git a/scripts/watch-resources.js b/scripts/watch-resources.js
new file mode 100644
index 000000000..900afae51
--- /dev/null
+++ b/scripts/watch-resources.js
@@ -0,0 +1,58 @@
+#!/usr/bin/env node
+
+/**
+ * Watch src/resources/ and sync changes to dist/resources/.
+ *
+ * Runs alongside `tsc --watch` to ensure non-TS resources (prompts, agents,
+ * skills, workflow files) are kept in sync with the build output.
+ *
+ * This solves the `npm link` branch-drift problem: without dist/resources/,
+ * `initResources()` reads from src/resources/ which changes with git branch
+ * switches, causing stale extensions to be synced to ~/.gsd/agent/ for ALL
+ * projects using gsd.
+ */
+
+import { watch } from 'node:fs'
+import { cpSync, mkdirSync, rmSync } from 'node:fs'
+import { resolve, dirname } from 'node:path'
+import { fileURLToPath } from 'node:url'
+
+const __dirname = dirname(fileURLToPath(import.meta.url))
+const src = resolve(__dirname, '..', 'src', 'resources')
+const dest = resolve(__dirname, '..', 'dist', 'resources')
+
+function sync() {
+  // Remove dest first to mirror deletions from src (prevents stale files)
+  rmSync(dest, { recursive: true, force: true })
+  mkdirSync(dest, { recursive: true })
+  cpSync(src, dest, { recursive: true, force: true })
+}
+
+// Initial sync
+sync()
+process.stderr.write(`[watch-resources] Initial sync done\n`)
+
+// Watch for changes — recursive, debounced.
+// fs.watch({ recursive: true }) is supported on macOS and Windows.
+// On Linux (Node <20.13) it throws ERR_FEATURE_UNAVAILABLE_ON_PLATFORM.
+// Fall back to polling on unsupported platforms.
+let timer = null
+const onChange = () => {
+  if (timer) clearTimeout(timer)
+  timer = setTimeout(() => {
+    sync()
+    process.stderr.write(`[watch-resources] Synced at ${new Date().toLocaleTimeString()}\n`)
+  }, 300)
+}
+
+try {
+  watch(src, { recursive: true }, onChange)
+} catch {
+  // Fallback: poll every 2s (Linux without recursive watch support)
+  process.stderr.write(`[watch-resources] fs.watch recursive not supported, falling back to polling\n`)
+  setInterval(() => {
+    try { sync() } catch {}
+  }, 2000)
+}
+
+process.stderr.write(`[watch-resources] Watching src/resources/ → dist/resources/\n`)
diff --git a/src/loader.ts b/src/loader.ts
index 674b9533e..9a0d03c87 100644
--- a/src/loader.ts
+++ b/src/loader.ts
@@ -69,8 +69,12 @@ try {
 process.env.GSD_BIN_PATH = process.argv[1]
 
 // GSD_WORKFLOW_PATH — absolute path to bundled GSD-WORKFLOW.md, used by patched gsd extension
-// when dispatching workflow prompts (dist/loader.js → ../src/resources/GSD-WORKFLOW.md)
-const resourcesDir = resolve(dirname(fileURLToPath(import.meta.url)), '..', 'src', 'resources')
+// when dispatching workflow prompts. Prefers dist/resources/ (stable, set at build time)
+// over src/resources/ (live working tree) — see resource-loader.ts for rationale.
+const loaderPackageRoot = resolve(dirname(fileURLToPath(import.meta.url)), '..')
+const distRes = join(loaderPackageRoot, 'dist', 'resources')
+const srcRes = join(loaderPackageRoot, 'src', 'resources')
+const resourcesDir = existsSync(distRes) ? distRes : srcRes
 process.env.GSD_WORKFLOW_PATH = join(resourcesDir, 'GSD-WORKFLOW.md')
 
 // GSD_BUNDLED_EXTENSION_PATHS — colon-joined list of all bundled extension entry point absolute
diff --git a/src/resource-loader.ts b/src/resource-loader.ts
index 89a97627a..c7c00331c 100644
--- a/src/resource-loader.ts
+++ b/src/resource-loader.ts
@@ -4,9 +4,18 @@ import { cpSync, existsSync, mkdirSync, readFileSync, readdirSync, writeFileSync
 import { dirname, join, relative, resolve } from 'node:path'
 import { fileURLToPath } from 'node:url'
 
-// Resolves to the bundled src/resources/ inside the npm package at runtime:
-//   dist/resource-loader.js → .. → package root → src/resources/
-const resourcesDir = resolve(dirname(fileURLToPath(import.meta.url)), '..', 'src', 'resources')
+// Resolve resources directory — prefer dist/resources/ (stable, set at build time)
+// over src/resources/ (live working tree, changes with git branch).
+//
+// Why this matters: with `npm link`, src/resources/ points into the gsd-2 repo's
+// working tree. Switching branches there changes src/resources/ for ALL projects
+// that use gsd — causing stale/broken extensions to be synced to ~/.gsd/agent/.
+// dist/resources/ is populated by the build step (`npm run copy-resources`) and
+// reflects the built state, not the currently checked-out branch.
+const packageRoot = resolve(dirname(fileURLToPath(import.meta.url)), '..')
+const distResources = join(packageRoot, 'dist', 'resources')
+const srcResources = join(packageRoot, 'src', 'resources')
+const resourcesDir = existsSync(distResources) ? distResources : srcResources
 const bundledExtensionsDir = join(resourcesDir, 'extensions')
 
 function isExtensionFile(name: string): boolean {
diff --git a/src/resources/extensions/gsd/prompt-loader.ts b/src/resources/extensions/gsd/prompt-loader.ts
index 64e86ca08..9b83607b3 100644
--- a/src/resources/extensions/gsd/prompt-loader.ts
+++ b/src/resources/extensions/gsd/prompt-loader.ts
@@ -6,6 +6,13 @@
  *
  * Templates live at prompts/ relative to this module's directory.
  * They use {{variableName}} syntax for substitution.
+ *
+ * Templates are cached on first read per session. This prevents a running
+ * session from being invalidated when another `gsd` launch overwrites
+ * ~/.gsd/agent/ with newer templates via initResources(). Without caching,
+ * the in-memory extension code (which knows variable set A) can read a
+ * newer template from disk (which expects variable set B), causing a
+ * "template declares {{X}} but no value was provided" crash mid-session.
  */
 
 import { readFileSync } from "node:fs";
@@ -14,6 +21,10 @@ import { fileURLToPath } from "node:url";
 
 const promptsDir = join(dirname(fileURLToPath(import.meta.url)), "prompts");
 
+// Cache templates on first read — a running session uses the template versions
+// that were on disk when it first loaded them, immune to later overwrites.
+const templateCache = new Map<string, string>();
+
 /**
  * Load a prompt template and substitute variables.
  *
@@ -21,8 +32,12 @@ const promptsDir = join(dirname(fileURLToPath(import.meta.url)), "prompts");
  * @param vars - Key-value pairs to substitute for {{key}} placeholders
  */
 export function loadPrompt(name: string, vars: Record<string, string> = {}): string {
-  const path = join(promptsDir, `${name}.md`);
-  let content = readFileSync(path, "utf-8");
+  let content = templateCache.get(name);
+  if (content === undefined) {
+    const path = join(promptsDir, `${name}.md`);
+    content = readFileSync(path, "utf-8");
+    templateCache.set(name, content);
+  }
 
   // Check BEFORE substitution: find all {{varName}} placeholders the template
   // declares and verify every one has a value in vars. Checking after substitution