diff --git a/src/resources/extensions/gsd/auto-loop.ts b/src/resources/extensions/gsd/auto-loop.ts
index 74616f3f3..933f1a5b8 100644
--- a/src/resources/extensions/gsd/auto-loop.ts
+++ b/src/resources/extensions/gsd/auto-loop.ts
@@ -221,6 +221,15 @@ export async function runUnit(
     s.pendingResolve = resolve;
   });
 
+  // Ensure cwd matches basePath before dispatch (#1389).
+  // async_bash and background jobs can drift cwd away from the worktree.
+  // Realigning here prevents commits from landing on the wrong branch.
+  try {
+    if (process.cwd() !== s.basePath) {
+      process.chdir(s.basePath);
+    }
+  } catch { /* non-fatal — chdir may fail if dir was removed */ }
+
   // ── Send the prompt ──
   debugLog("runUnit", { phase: "send-message", unitType, unitId });
 
diff --git a/src/resources/extensions/gsd/auto.ts b/src/resources/extensions/gsd/auto.ts
index 0d74f8448..2a83ab22a 100644
--- a/src/resources/extensions/gsd/auto.ts
+++ b/src/resources/extensions/gsd/auto.ts
@@ -1145,6 +1145,9 @@ export async function dispatchHookUnit(
   ctx.ui.setStatus("gsd-auto", s.stepMode ? "next" : "auto");
   ctx.ui.notify(`Running post-unit hook: ${hookName}`, "info");
 
+  // Ensure cwd matches basePath before hook dispatch (#1389)
+  try { if (process.cwd() !== s.basePath) process.chdir(s.basePath); } catch {}
+
   debugLog("dispatchHookUnit", {
     phase: "send-message",
     promptLength: hookPrompt.length,
diff --git a/src/resources/extensions/gsd/worktree-resolver.ts b/src/resources/extensions/gsd/worktree-resolver.ts
index bdc081d52..b944f3d15 100644
--- a/src/resources/extensions/gsd/worktree-resolver.ts
+++ b/src/resources/extensions/gsd/worktree-resolver.ts
@@ -13,6 +13,8 @@
  * `process.chdir()` internally — this class MUST NOT double-chdir.
  */
 
+import { existsSync, unlinkSync } from "node:fs";
+import { join } from "node:path";
 import type { AutoSession } from "./auto/session.js";
 import { debugLog } from "./debug-logger.js";
 
@@ -372,6 +374,15 @@ export class WorktreeResolver {
       });
       ctx.notify(`Milestone merge failed: ${msg}`, "warning");
 
+      // Clean up stale merge state left by failed squash-merge (#1389)
+      try {
+        const gitDir = join(originalBase || this.s.basePath, ".git");
+        for (const f of ["SQUASH_MSG", "MERGE_HEAD", "MERGE_MSG"]) {
+          const p = join(gitDir, f);
+          if (existsSync(p)) unlinkSync(p);
+        }
+      } catch { /* best-effort */ }
+
       // Error recovery: always restore to project root
       if (originalBase) {
         try {