diff --git a/src/cli.ts b/src/cli.ts
index 11bedd424..b6d610878 100644
--- a/src/cli.ts
+++ b/src/cli.ts
@@ -18,7 +18,7 @@ import { loadStoredEnvKeys } from './wizard.js'
 import { getPiDefaultModelAndProvider, migratePiCredentials } from './pi-migration.js'
 import { shouldRunOnboarding, runOnboarding } from './onboarding.js'
 import chalk from 'chalk'
-import { checkForUpdates } from './update-check.js'
+import { checkForUpdates, checkAndPromptForUpdates } from './update-check.js'
 import { printHelp, printSubcommandHelp } from './help-text.js'
 
 // ---------------------------------------------------------------------------
@@ -211,9 +211,17 @@ if (!isPrintMode && shouldRunOnboarding(authStorage, settingsManager.getDefaultP
   process.stdin.pause()
 }
 
-// Non-blocking update check — runs at most once per 24h, fire-and-forget
+// Update check — interactive prompt when stdin is a TTY, passive banner otherwise
 if (!isPrintMode) {
-  checkForUpdates().catch(() => {})
+  if (process.stdin.isTTY) {
+    const updated = await checkAndPromptForUpdates().catch(() => false)
+    if (updated) {
+      // User chose to update — exit so they relaunch with the new version
+      process.exit(0)
+    }
+  } else {
+    checkForUpdates().catch(() => {})
+  }
 }
 
 // Warn if terminal is too narrow for readable output
diff --git a/src/update-check.ts b/src/update-check.ts
index 18dc66cd1..50213cf3f 100644
--- a/src/update-check.ts
+++ b/src/update-check.ts
@@ -2,6 +2,7 @@ import { existsSync, readFileSync, writeFileSync, mkdirSync } from 'node:fs'
 import { dirname, join } from 'node:path'
 import chalk from 'chalk'
 import { appRoot } from './app-paths.js'
+import { execSync } from 'node:child_process'
 
 const CACHE_FILE = join(appRoot, '.update-check')
 const NPM_PACKAGE_NAME = 'gsd-pi'
@@ -108,3 +109,112 @@ export async function checkForUpdates(options: UpdateCheckOptions = {}): Promise
     clearTimeout(timeout)
   }
 }
+
+const PROMPT_TIMEOUT_MS = 30_000
+
+/**
+ * Interactive update prompt shown at startup when a newer version is available.
+ * Fetches the latest version (with cache), then asks the user whether to
+ * update now or skip. Runs at most once per 24 hours (same cache as checkForUpdates).
+ * Defaults to skip after 30 seconds of inactivity.
+ *
+ * Returns true if an update was performed, false otherwise.
+ */
+export async function checkAndPromptForUpdates(options: UpdateCheckOptions = {}): Promise<boolean> {
+  const currentVersion = options.currentVersion || process.env.GSD_VERSION || '0.0.0'
+  const cachePath = options.cachePath || CACHE_FILE
+  const registryUrl = options.registryUrl || `https://registry.npmjs.org/${NPM_PACKAGE_NAME}/latest`
+  const checkIntervalMs = options.checkIntervalMs ?? CHECK_INTERVAL_MS
+  const fetchTimeoutMs = options.fetchTimeoutMs ?? FETCH_TIMEOUT_MS
+
+  // Determine latest version (from cache or network)
+  let latestVersion: string | null = null
+
+  const cache = readUpdateCache(cachePath)
+  if (cache && Date.now() - cache.lastCheck < checkIntervalMs) {
+    latestVersion = cache.latestVersion
+  } else {
+    const controller = new AbortController()
+    const timeout = setTimeout(() => controller.abort(), fetchTimeoutMs)
+    try {
+      const res = await fetch(registryUrl, { signal: controller.signal })
+      clearTimeout(timeout)
+      if (res.ok) {
+        const data = (await res.json()) as { version?: string }
+        if (data.version) {
+          latestVersion = data.version
+          writeUpdateCache({ lastCheck: Date.now(), latestVersion }, cachePath)
+        }
+      }
+    } catch {
+      // Network unavailable — silently skip
+    } finally {
+      clearTimeout(timeout)
+    }
+  }
+
+  if (!latestVersion || compareSemver(latestVersion, currentVersion) <= 0) {
+    return false
+  }
+
+  // Update available — show interactive prompt
+  // Measure visible (ANSI-free) width to size the box, then render with chalk.
+  const midContent = `  ${chalk.bold('Update available!')} ${chalk.dim(`v${currentVersion}`)} → ${chalk.bold.green(`v${latestVersion}`)}  `
+  const midVisible = `  Update available! v${currentVersion} → v${latestVersion}  `
+  const innerWidth = midVisible.length
+  const top = '╔' + '═'.repeat(innerWidth) + '╗'
+  const bot = '╚' + '═'.repeat(innerWidth) + '╝'
+
+  process.stderr.write('\n')
+  process.stderr.write(
+    `  ${chalk.yellow(top)}\n` +
+    `  ${chalk.yellow('║')}${midContent}${chalk.yellow('║')}\n` +
+    `  ${chalk.yellow(bot)}\n\n`,
+  )
+
+  // Use readline for a simple two-option prompt that works without @clack/prompts
+  const readline = await import('node:readline')
+  const rl = readline.createInterface({ input: process.stdin, output: process.stderr })
+
+  const choice = await new Promise<string>((resolve) => {
+    process.stderr.write(
+      `  ${chalk.bold('[1]')} Update now   ${chalk.dim(`npm install -g ${NPM_PACKAGE_NAME}@latest`)}\n` +
+      `  ${chalk.bold('[2]')} Skip\n\n`,
+    )
+
+    // Default to skip if the user doesn't respond within PROMPT_TIMEOUT_MS
+    const timer = setTimeout(() => {
+      process.stderr.write('\n')
+      rl.close()
+      resolve('2')
+    }, PROMPT_TIMEOUT_MS)
+
+    rl.question(`  ${chalk.bold('Choose [1/2]:')} `, (answer) => {
+      clearTimeout(timer)
+      resolve(answer.trim())
+    })
+  })
+
+  rl.close()
+
+  // Clean up stdin state so the TUI can start with a clean slate
+  process.stdin.removeAllListeners('data')
+  process.stdin.removeAllListeners('keypress')
+  if (process.stdin.setRawMode) process.stdin.setRawMode(false)
+  process.stdin.pause()
+
+  if (choice === '1') {
+    process.stderr.write(`\n  ${chalk.dim('Running:')} npm install -g ${NPM_PACKAGE_NAME}@latest\n\n`)
+    try {
+      execSync(`npm install -g ${NPM_PACKAGE_NAME}@latest`, { stdio: 'inherit' })
+      process.stderr.write(`\n  ${chalk.green.bold(`✓ Updated to v${latestVersion}`)}\n\n`)
+      return true
+    } catch {
+      process.stderr.write(`\n  ${chalk.yellow(`Update failed. You can run: npm install -g ${NPM_PACKAGE_NAME}@latest`)}\n\n`)
+    }
+  } else {
+    process.stderr.write(`  ${chalk.dim('Skipped. Run')} gsd update ${chalk.dim('anytime to upgrade.')}\n\n`)
+  }
+
+  return false
+}