diff --git a/src/resources/extensions/gsd/git-service.ts b/src/resources/extensions/gsd/git-service.ts
index d7c543182..88c07f50a 100644
--- a/src/resources/extensions/gsd/git-service.ts
+++ b/src/resources/extensions/gsd/git-service.ts
@@ -50,9 +50,9 @@ export interface GitPreferences {
   main_branch?: string;
   merge_strategy?: "squash" | "merge";
   /** Controls auto-mode git isolation strategy.
-   *  - "worktree": (default) creates a milestone worktree for isolated work
+   *  - "worktree": creates a milestone worktree for isolated work
    *  - "branch": works directly in the project root (for submodule-heavy repos)
-   *  - "none": no git isolation — commits land on the user's current branch directly
+   *  - "none": (default) no git isolation — commits land on the user's current branch directly
    */
   isolation?: "worktree" | "branch" | "none";
   /** When false, GSD will not modify .gitignore at all — no baseline patterns
diff --git a/src/resources/extensions/gsd/tests/worktree-resolver.test.ts b/src/resources/extensions/gsd/tests/worktree-resolver.test.ts
index d227d6efb..9cfda718d 100644
--- a/src/resources/extensions/gsd/tests/worktree-resolver.test.ts
+++ b/src/resources/extensions/gsd/tests/worktree-resolver.test.ts
@@ -914,3 +914,49 @@ test("isolationDegraded is reset by session.reset() (#2483)", () => {
 
   assert.equal(s.isolationDegraded, false);
 });
+
+// ─── #2625 — Default isolation mode change must not orphan worktree commits ──
+
+test("mergeAndExit still merges when mode is 'none' but session is in a worktree (#2625)", () => {
+  // Scenario: user upgraded from a version where default was "worktree" to one
+  // where default is "none". They have an active worktree with committed work.
+  // mergeAndExit must detect the active worktree and merge regardless of config.
+  const s = makeSession({
+    basePath: "/project/.gsd/worktrees/M001",
+    originalBasePath: "/project",
+  });
+  const deps = makeDeps({
+    isInAutoWorktree: () => true,
+    getIsolationMode: () => "none", // config says "none" — but we ARE in a worktree
+  });
+  const ctx = makeNotifyCtx();
+  const resolver = new WorktreeResolver(s, deps);
+
+  resolver.mergeAndExit("M001", ctx);
+
+  // Must still merge — not skip silently
+  assert.equal(findCalls(deps.calls, "mergeMilestoneToMain").length, 1,
+    "must call mergeMilestoneToMain even when isolation mode is 'none' but we are in a worktree");
+  assert.equal(s.basePath, "/project", "basePath must be restored to project root");
+  assert.ok(ctx.messages.some((m) => m.msg.includes("merged to main")),
+    "must notify about the merge");
+});
+
+test("mergeAndExit in none mode remains a no-op when NOT in a worktree (#2625)", () => {
+  // When mode is "none" and we are genuinely not in a worktree, it should still be a no-op.
+  const s = makeSession({
+    basePath: "/project",
+    originalBasePath: "/project",
+  });
+  const deps = makeDeps({
+    isInAutoWorktree: () => false,
+    getIsolationMode: () => "none",
+  });
+  const ctx = makeNotifyCtx();
+  const resolver = new WorktreeResolver(s, deps);
+
+  resolver.mergeAndExit("M001", ctx);
+
+  assert.equal(findCalls(deps.calls, "mergeMilestoneToMain").length, 0,
+    "must NOT merge when not in a worktree and mode is none");
+});
diff --git a/src/resources/extensions/gsd/worktree-resolver.ts b/src/resources/extensions/gsd/worktree-resolver.ts
index 6c459ba67..413096fe0 100644
--- a/src/resources/extensions/gsd/worktree-resolver.ts
+++ b/src/resources/extensions/gsd/worktree-resolver.ts
@@ -350,7 +350,13 @@ export class WorktreeResolver {
       data: { milestoneId, mode },
     });
 
-    if (mode === "none") {
+    // #2625: If we are physically inside an auto-worktree, we MUST merge
+    // regardless of the current isolation config. This prevents data loss when
+    // the default isolation mode changes between versions (e.g., "worktree" ->
+    // "none"): the worktree branch still holds real commits that need merging.
+    const inWorktree = this.deps.isInAutoWorktree(this.s.basePath) && this.s.originalBasePath;
+
+    if (mode === "none" && !inWorktree) {
       debugLog("WorktreeResolver", {
         action: "mergeAndExit",
         milestoneId,
@@ -361,8 +367,7 @@ export class WorktreeResolver {
     }
 
     if (
-      mode === "worktree" ||
-      (this.deps.isInAutoWorktree(this.s.basePath) && this.s.originalBasePath)
+      mode === "worktree" || inWorktree
     ) {
       this._mergeWorktreeMode(milestoneId, ctx);
     } else if (mode === "branch") {