diff --git a/src/resources/extensions/gsd/auto.ts b/src/resources/extensions/gsd/auto.ts
index 07575ce81..a4c6f498b 100644
--- a/src/resources/extensions/gsd/auto.ts
+++ b/src/resources/extensions/gsd/auto.ts
@@ -197,6 +197,33 @@ function shouldUseWorktreeIsolation(): boolean {
   return true; // default: worktree
 }
 
+/**
+ * Detect and escape a stale worktree cwd (#608).
+ *
+ * After milestone completion + merge, the worktree directory is removed but
+ * the process cwd may still point inside `.gsd/worktrees/<MID>/`.
+ * When a new session starts, `process.cwd()` is passed as `base` to startAuto
+ * and all subsequent writes land in the wrong directory. This function detects
+ * that scenario and chdir back to the project root.
+ *
+ * Returns the corrected base path.
+ */
+function escapeStaleWorktree(base: string): string {
+  const marker = `${pathSep}.gsd${pathSep}worktrees${pathSep}`;
+  const idx = base.indexOf(marker);
+  if (idx === -1) return base;
+
+  // base is inside .gsd/worktrees/<something> — extract the project root
+  const projectRoot = base.slice(0, idx);
+  try {
+    process.chdir(projectRoot);
+  } catch {
+    // If chdir fails, return the original — caller will handle errors downstream
+    return base;
+  }
+  return projectRoot;
+}
+
 /** Crash recovery prompt — set by startAuto, consumed by first dispatchNextUnit */
 let pendingCrashRecovery: string | null = null;
 
@@ -447,14 +474,18 @@ export async function stopAuto(ctx?: ExtensionContext, pi?: ExtensionAPI): Promi
         `Auto-worktree teardown failed: ${err instanceof Error ? err.message : String(err)}`,
         "warning",
       );
-      // Force basePath back to original even if teardown failed
-      if (originalBasePath) {
-        basePath = originalBasePath;
-        try { process.chdir(basePath); } catch { /* best-effort */ }
-      }
     }
   }
 
+  // Always restore cwd to project root on stop (#608).
+  // Even if isInAutoWorktree returned false (e.g., module state was already
+  // cleared by mergeMilestoneToMain), the process cwd may still be inside
+  // the worktree directory. Force it back to originalBasePath.
+  if (originalBasePath) {
+    basePath = originalBasePath;
+    try { process.chdir(basePath); } catch { /* best-effort */ }
+  }
+
   const ledger = getLedger();
   if (ledger && ledger.units.length > 0) {
     const totals = getProjectTotals(ledger.units);
@@ -543,6 +574,11 @@ export async function startAuto(
 ): Promise<void> {
   const requestedStepMode = options?.step ?? false;
 
+  // Escape stale worktree cwd from a previous milestone (#608).
+  // After milestone merge + worktree removal, the process cwd may still point
+  // inside .gsd/worktrees/<MID>/ — detect and chdir back to project root.
+  base = escapeStaleWorktree(base);
+
   // If resuming from paused state, just re-activate and dispatch next unit.
   // The conversation is still intact — no need to reinitialize everything.
   if (paused) {
@@ -1360,6 +1396,13 @@ async function dispatchNextUnit(
           `Milestone merge failed: ${err instanceof Error ? err.message : String(err)}`,
           "warning",
         );
+        // Ensure cwd is restored even if merge failed partway through (#608).
+        // mergeMilestoneToMain may have chdir'd but then thrown, leaving us
+        // in an indeterminate location.
+        if (originalBasePath) {
+          basePath = originalBasePath;
+          try { process.chdir(basePath); } catch { /* best-effort */ }
+        }
       }
     }
     sendDesktopNotification("GSD", `Milestone ${mid} complete!`, "success", "milestone");
diff --git a/src/resources/extensions/gsd/tests/stale-worktree-cwd.test.ts b/src/resources/extensions/gsd/tests/stale-worktree-cwd.test.ts
new file mode 100644
index 000000000..163b0a804
--- /dev/null
+++ b/src/resources/extensions/gsd/tests/stale-worktree-cwd.test.ts
@@ -0,0 +1,139 @@
+/**
+ * stale-worktree-cwd.test.ts — Tests for #608 fix.
+ *
+ * Verifies that when process.cwd() is inside a stale .gsd/worktrees/ path,
+ * startAuto escapes back to the project root before proceeding.
+ */
+
+import test from "node:test";
+import assert from "node:assert/strict";
+import { mkdtempSync, mkdirSync, rmSync, existsSync, realpathSync, writeFileSync } from "node:fs";
+import { join, sep } from "node:path";
+import { tmpdir } from "node:os";
+import { execSync } from "node:child_process";
+
+import {
+  createAutoWorktree,
+  teardownAutoWorktree,
+  mergeMilestoneToMain,
+} from "../auto-worktree.ts";
+
+function run(command: string, cwd: string): string {
+  return execSync(command, { cwd, stdio: ["ignore", "pipe", "pipe"], encoding: "utf-8" }).trim();
+}
+
+function createTempRepo(): string {
+  const dir = realpathSync(mkdtempSync(join(tmpdir(), "stale-wt-test-")));
+  run("git init", dir);
+  run("git config user.email test@test.com", dir);
+  run("git config user.name Test", dir);
+  writeFileSync(join(dir, "README.md"), "# test\n");
+  run("git add .", dir);
+  run("git commit -m init", dir);
+  run("git branch -M main", dir);
+  return dir;
+}
+
+// ─── escapeStaleWorktree is called by startAuto, test the detection logic ────
+
+test("detects stale worktree path and extracts project root", () => {
+  // Simulate the path pattern: /project/.gsd/worktrees/M004/...
+  const projectRoot = "/Users/test/myproject";
+  const stalePath = `${projectRoot}${sep}.gsd${sep}worktrees${sep}M004`;
+
+  const marker = `${sep}.gsd${sep}worktrees${sep}`;
+  const idx = stalePath.indexOf(marker);
+
+  assert.ok(idx !== -1, "marker found in stale path");
+  assert.equal(stalePath.slice(0, idx), projectRoot, "project root extracted correctly");
+});
+
+test("does not trigger on normal project path", () => {
+  const normalPath = "/Users/test/myproject";
+  const marker = `${sep}.gsd${sep}worktrees${sep}`;
+  const idx = normalPath.indexOf(marker);
+
+  assert.equal(idx, -1, "marker not found in normal path");
+});
+
+// ─── Integration: mergeMilestoneToMain restores cwd ─────────────────────────
+
+test("mergeMilestoneToMain restores cwd to project root", () => {
+  const savedCwd = process.cwd();
+  let tempDir = "";
+
+  try {
+    tempDir = createTempRepo();
+
+    // Create milestone planning artifacts
+    const msDir = join(tempDir, ".gsd", "milestones", "M050");
+    mkdirSync(msDir, { recursive: true });
+    writeFileSync(join(msDir, "CONTEXT.md"), "# M050 Context\n");
+    const roadmap = [
+      "# M050: Test Milestone",
+      "**Vision**: testing",
+      "## Success Criteria",
+      "- It works",
+      "## Slices",
+      "- [x] S01 — First slice",
+    ].join("\n");
+    writeFileSync(join(msDir, "ROADMAP.md"), roadmap);
+    run("git add .", tempDir);
+    run("git commit -m \"add milestone\"", tempDir);
+
+    // Create auto-worktree (enters the worktree dir)
+    const wtPath = createAutoWorktree(tempDir, "M050");
+    assert.equal(process.cwd(), wtPath, "cwd is in worktree after create");
+
+    // Add a change in the worktree
+    writeFileSync(join(wtPath, "feature.txt"), "new feature\n");
+    run("git add .", wtPath);
+    run("git commit -m \"feat: add feature\"", wtPath);
+
+    // Merge back — should restore cwd to tempDir
+    mergeMilestoneToMain(tempDir, "M050", roadmap);
+
+    assert.equal(process.cwd(), tempDir, "cwd restored to project root after merge");
+    assert.ok(!existsSync(wtPath), "worktree directory removed after merge");
+  } finally {
+    process.chdir(savedCwd);
+    if (tempDir && existsSync(tempDir)) {
+      rmSync(tempDir, { recursive: true, force: true });
+    }
+  }
+});
+
+// ─── Integration: stale worktree directory is detectable ────────────────────
+
+test("process.cwd() inside removed worktree is recoverable", () => {
+  const savedCwd = process.cwd();
+  let tempDir = "";
+
+  try {
+    tempDir = createTempRepo();
+
+    // Create a .gsd/worktrees/M099 directory to simulate stale state
+    const staleWtDir = join(tempDir, ".gsd", "worktrees", "M099");
+    mkdirSync(staleWtDir, { recursive: true });
+
+    // Enter the stale directory
+    process.chdir(staleWtDir);
+    const cwdBefore = process.cwd();
+    assert.ok(cwdBefore.includes(`${sep}.gsd${sep}worktrees${sep}`), "cwd is inside worktree dir");
+
+    // Simulate escapeStaleWorktree logic
+    const marker = `${sep}.gsd${sep}worktrees${sep}`;
+    const idx = cwdBefore.indexOf(marker);
+    assert.ok(idx !== -1, "marker found");
+
+    const projectRoot = cwdBefore.slice(0, idx);
+    process.chdir(projectRoot);
+
+    assert.equal(process.cwd(), tempDir, "successfully escaped to project root");
+  } finally {
+    process.chdir(savedCwd);
+    if (tempDir && existsSync(tempDir)) {
+      rmSync(tempDir, { recursive: true, force: true });
+    }
+  }
+});