diff --git a/src/resources/extensions/gsd/commands/context.ts b/src/resources/extensions/gsd/commands/context.ts
index 7bbaa5790..771cba6ec 100644
--- a/src/resources/extensions/gsd/commands/context.ts
+++ b/src/resources/extensions/gsd/commands/context.ts
@@ -1,7 +1,7 @@
 import type { ExtensionAPI, ExtensionCommandContext } from "@gsd/pi-coding-agent";
 
 import { checkRemoteAutoSession, isAutoActive, isAutoPaused, stopAutoRemote } from "../auto.js";
-import { assertSafeDirectory } from "../validate-directory.js";
+import { validateDirectory } from "../validate-directory.js";
 import { resolveProjectRoot } from "../worktree.js";
 import { showNextAction } from "../../shared/tui.js";
 import { handleStatus } from "./handlers/core.js";
@@ -12,13 +12,24 @@ export interface GsdDispatchContext {
   trimmed: string;
 }
 
+/**
+ * Typed error for when GSD is run outside a valid project directory.
+ * Command handlers catch this to show a friendly message instead of a raw exception.
+ */
+export class GSDNoProjectError extends Error {
+  constructor(reason: string) {
+    super(reason);
+    this.name = "GSDNoProjectError";
+  }
+}
+
 export function projectRoot(): string {
   const cwd = process.cwd();
   const root = resolveProjectRoot(cwd);
-  if (root !== cwd) {
-    assertSafeDirectory(cwd);
-  } else {
-    assertSafeDirectory(root);
+  const pathToCheck = root !== cwd ? cwd : root;
+  const result = validateDirectory(pathToCheck);
+  if (result.severity === "blocked") {
+    throw new GSDNoProjectError(result.reason ?? "GSD must be run inside a project directory.");
   }
   return root;
 }
diff --git a/src/resources/extensions/gsd/commands/dispatcher.ts b/src/resources/extensions/gsd/commands/dispatcher.ts
index 9f28cbbaa..6b635ff1a 100644
--- a/src/resources/extensions/gsd/commands/dispatcher.ts
+++ b/src/resources/extensions/gsd/commands/dispatcher.ts
@@ -1,5 +1,6 @@
 import type { ExtensionAPI, ExtensionCommandContext } from "@gsd/pi-coding-agent";
 
+import { GSDNoProjectError } from "./context.js";
 import { handleAutoCommand } from "./handlers/auto.js";
 import { handleCoreCommand } from "./handlers/core.js";
 import { handleOpsCommand } from "./handlers/ops.js";
@@ -21,10 +22,21 @@ export async function handleGSDCommand(
     () => handleOpsCommand(trimmed, ctx, pi),
   ];
 
-  for (const handler of handlers) {
-    if (await handler()) {
+  try {
+    for (const handler of handlers) {
+      if (await handler()) {
+        return;
+      }
+    }
+  } catch (err) {
+    if (err instanceof GSDNoProjectError) {
+      ctx.ui.notify(
+        "No project found in this directory. `cd` into a project directory or run `/gsd new-project` to initialize one.",
+        "warning",
+      );
       return;
     }
+    throw err;
   }
 
   ctx.ui.notify(`Unknown: /gsd ${trimmed}. Run /gsd help for available commands.`, "warning");