diff --git a/apps/mobile/src/lib/threadActivity.test.ts b/apps/mobile/src/lib/threadActivity.test.ts
index acda68455420..5d256f7c6206 100644
--- a/apps/mobile/src/lib/threadActivity.test.ts
+++ b/apps/mobile/src/lib/threadActivity.test.ts
@@ -2513,7 +2513,7 @@ describe("buildThreadFeed", () => {
   });
 
   it.each(["tool", "failed-tool", "assistant", "turn", "unknown-turn"] as const)(
-    "preserves a %s boundary in expanded activity history",
+    "keeps thoughts in order across a %s in expanded activity history",
     (boundary) => {
       const turnId = TurnId.make("reasoning-boundary");
       const messages: OrchestrationThread["messages"] = [1, 3].map((second) => ({
@@ -2576,8 +2576,10 @@ describe("buildThreadFeed", () => {
         (entry) => entry.type === "message" && entry.message.role === "reasoning",
       );
       if (boundary === "failed-tool") {
-        expect(rows.filter((entry) => entry.type === "work-toggle")).toHaveLength(3);
-        expect(rows.some((entry) => entry.type === "work-toggle" && entry.hasFailure)).toBe(true);
+        // A failed call stays inside the run instead of splitting it.
+        expect(rows.filter((entry) => entry.type === "work-toggle")).toMatchObject([
+          { hasFailure: true, hiddenCount: 3 },
+        ]);
       }
       expect(reasoningRows).toEqual(
         messages.map((message) => ({
diff --git a/apps/mobile/src/lib/threadActivity.ts b/apps/mobile/src/lib/threadActivity.ts
index a32843ce3f73..887be4a9272d 100644
--- a/apps/mobile/src/lib/threadActivity.ts
+++ b/apps/mobile/src/lib/threadActivity.ts
@@ -1901,10 +1901,7 @@ function activityRunTurnId(entry: ThreadFeedEntry): TurnId | null {
     !isContextCompactionActivityGroup(entry) &&
     !isUserInputActivityGroup(entry) &&
     entry.activities.every(
-      (activity) =>
-        !activity.workEntry.agentSpawn &&
-        activity.workEntry.tone !== "error" &&
-        !workEntryIndicatesToolFailure(activity.workEntry),
+      (activity) => !activity.workEntry.agentSpawn && activity.workEntry.tone !== "error",
     )
   ) {
     return entry.turnId;
diff --git a/apps/web/src/components/chat/MessagesTimeline.logic.test.ts b/apps/web/src/components/chat/MessagesTimeline.logic.test.ts
index ac9009204bd2..b2b46302dd25 100644
--- a/apps/web/src/components/chat/MessagesTimeline.logic.test.ts
+++ b/apps/web/src/components/chat/MessagesTimeline.logic.test.ts
@@ -2137,7 +2137,7 @@ describe("deriveMessagesTimelineRows", () => {
     expect(rows[1]).toMatchObject({ entries: [thought] });
   });
 
-  it("shows each tool once across expanded activity histories separated by a failed tool", () => {
+  it("keeps thoughts and tools in one activity row across a failed tool", () => {
     const thought = reasoningEntry("reasoning-entry", "2026-01-01T00:00:01Z", "turn-1");
     const tools = ["a", "b", "c"].map((id, index) => {
       const entry = toolEntry(id, `2026-01-01T00:00:0${index + 2}Z`, "turn-1");
@@ -2161,23 +2161,57 @@ describe("deriveMessagesTimelineRows", () => {
       supportsConversationRollback: false,
     } satisfies Parameters<typeof deriveMessagesTimelineRows>[0];
     const rows = deriveMessagesTimelineRows(input);
-    const expanded = deriveMessagesTimelineRows({
+    expect(rows.map((row) => row.kind)).toEqual(["working", "activity-group"]);
+    expect(rows.at(-1)).toMatchObject({
+      id: "live-activity-row",
+      entries: [thought, ...tools],
+      active: true,
+    });
+    const settled = deriveMessagesTimelineRows({
       ...input,
-      expandedWorkGroupIds: new Set(rows.flatMap((row) => ("groupId" in row ? [row.groupId] : []))),
-    });
-    const visibleTools = expanded.flatMap((row) =>
-      row.kind === "activity-group" && row.expanded
-        ? row.entries.flatMap((entry) => (entry.kind === "work" ? [entry.entry.id] : []))
-        : row.kind === "work"
-          ? row.groupedEntries.map((entry) => entry.id)
-          : [],
-    );
-    expect(visibleTools).toEqual(["a", "b", "c"]);
-    expect(expanded.filter((row) => row.id === "live-activity-row")).toMatchObject([
-      { kind: "work-live", entry: { id: "c" } },
-    ]);
+      timelineEntries: [
+        thought,
+        ...tools,
+        reasoningEntry("reasoning-next", "2026-01-01T00:00:05Z", "turn-1"),
+        { ...tools[1]!, id: "d", entry: { ...tools[1]!.entry, id: "d", toolCallId: "d" } },
+      ],
+      isWorking: false,
+      activeTurnStartedAt: null,
+    });
+    expect(settled.map((row) => row.kind)).toEqual(["activity-group"]);
   });
 
+  it.each(["failed", "declined"] as const)(
+    "settles the activity row while the latest tool is %s",
+    (status) => {
+      const thought = reasoningEntry("reasoning-entry", "2026-01-01T00:00:01Z", "turn-1");
+      const tool = toolEntry("last-tool", "2026-01-01T00:00:02Z", "turn-1");
+      const rows = deriveMessagesTimelineRows({
+        timelineEntries: [
+          thought,
+          {
+            ...tool,
+            entry: {
+              ...tool.entry,
+              command: "echo nope",
+              toolCallId: "last-tool",
+              toolLifecycleStatus: status,
+              sourceActivityKind: "tool.completed" as const,
+            },
+          },
+        ],
+        runningTurnId: TurnId.make("turn-1"),
+        isWorking: true,
+        activeTurnStartedAt: "2026-01-01T00:00:00Z",
+        turnDiffSummaries: [],
+        supportsConversationRollback: false,
+      });
+      expect(rows.map((row) => row.kind)).toEqual(["working", "activity-group", "thinking"]);
+      expect(rows[1]).toMatchObject({ id: "activity-group:reasoning-entry", active: false });
+      expect(rows[2]).toMatchObject({ id: "live-activity-row" });
+    },
+  );
+
   it("folds mixed activity under worked-for and restores ordered details when expanded", () => {
     const entries = [
       reasoningEntry("reasoning-entry", "2026-01-01T00:00:01Z", "turn-1"),
diff --git a/apps/web/src/components/chat/MessagesTimeline.logic.ts b/apps/web/src/components/chat/MessagesTimeline.logic.ts
index 8a82168c20dc..57ed45a89d1d 100644
--- a/apps/web/src/components/chat/MessagesTimeline.logic.ts
+++ b/apps/web/src/components/chat/MessagesTimeline.logic.ts
@@ -312,7 +312,7 @@ export type TimelineLatestTurn = Pick<
   "turnId" | "state" | "startedAt" | "completedAt"
 >;
 
-export const LIVE_ACTIVITY_ROW_ID = "live-activity-row";
+const LIVE_ACTIVITY_ROW_ID = "live-activity-row";
 
 type ActivityEntry = Extract<TimelineEntry, { kind: "message" | "work" }>;
 
@@ -323,8 +323,7 @@ function isActivityEntry(entry: TimelineEntry): entry is ActivityEntry {
         entry.entry.agentSpawn === undefined &&
         entry.entry.questionAnswer === undefined &&
         entry.entry.sourceActivityKind !== "context-compaction" &&
-        entry.entry.tone !== "error" &&
-        !workEntryDisplayIndicatesToolFailure(entry.entry);
+        entry.entry.tone !== "error";
 }
 
 export type MessagesTimelineRow =
@@ -391,7 +390,6 @@ export type MessagesTimelineRow =
       createdAt: string;
       message: ChatMessage;
       durationStart: string;
-      reasoningMessages?: ReadonlyArray<ChatMessage>;
       showAssistantMeta: boolean;
       showAssistantCopyButton: boolean;
       assistantCopyStreaming: boolean;
@@ -1158,7 +1156,9 @@ export function deriveMessagesTimelineRows(input: {
         const active =
           input.isWorking &&
           activityTurnId === unsettledTurnId &&
-          cursor === input.timelineEntries.length;
+          cursor === input.timelineEntries.length &&
+          !latestToolFailed &&
+          (latestVisibleToolEntry === undefined || latestToolKeepsActivityLive);
         const groupId =
           timelineEntry.kind === "work"
             ? workGroupId(timelineEntry.id, timelineEntry.entry)
diff --git a/apps/web/src/components/chat/MessagesTimeline.tsx b/apps/web/src/components/chat/MessagesTimeline.tsx
index 117e2d51c276..483859ba0300 100644
--- a/apps/web/src/components/chat/MessagesTimeline.tsx
+++ b/apps/web/src/components/chat/MessagesTimeline.tsx
@@ -171,7 +171,6 @@ import { useAssistantCitationTarget, type CitationHistoryPage } from "./useAssis
 import {
   computeStableMessagesTimelineRows,
   deriveMessagesTimelineRowsWithState,
-  LIVE_ACTIVITY_ROW_ID,
   deriveUnsettledTurnId,
   type MessagesTimelineRowsProjection,
   liveWorkEntryLabel,
@@ -2606,6 +2605,7 @@ function ActivityGroupTimelineRow({
   const liveWork = trailingWork.findLast(workEntryIsActiveTurnActivity) ?? trailingWork.at(-1);
   const thinking = row.active && liveWork === undefined;
   const iconWork = row.active ? liveWork : work.at(-1);
+  const failed = iconWork !== undefined && workEntryDisplayIndicatesToolFailure(iconWork);
   const label = row.active
     ? liveWork
       ? liveWorkEntryLabel(liveWork, ctx.workspaceRoot, true)
@@ -2639,20 +2639,11 @@ function ActivityGroupTimelineRow({
           if (next.kind === "message") messages.push(next.message);
         }
         details.push(
-          <ReasoningTimelineRow
+          <ReasoningTraceBlock
             key={entry.id}
-            disclosureAnchorKey={row.id}
-            row={{
-              kind: "message",
-              id: row.active && index === row.entries.length - 1 ? LIVE_ACTIVITY_ROW_ID : entry.id,
-              createdAt: entry.createdAt,
-              message: entry.message,
-              reasoningMessages: messages,
-              durationStart: entry.createdAt,
-              showAssistantMeta: false,
-              showAssistantCopyButton: false,
-              assistantCopyStreaming: false,
-            }}
+            messages={messages}
+            live={row.active && index === row.entries.length - 1}
+            showHeader={work.length > 0}
           />,
         );
       }
@@ -2663,6 +2654,7 @@ function ActivityGroupTimelineRow({
       <button
         type="button"
         className="group/live-work flex min-h-6 w-full max-w-full cursor-pointer items-center rounded-md text-left focus-visible:outline-none focus-visible:ring-2 focus-visible:ring-inset focus-visible:ring-ring/70"
+        aria-label={failed ? `${label}, tool call failed` : undefined}
         aria-expanded={row.expanded}
         onClick={() => ctx.onToggleWorkGroup(row.groupId, row.id)}
       >
@@ -2670,6 +2662,7 @@ function ActivityGroupTimelineRow({
           label={label}
           iconName={iconWork ? workEntryIconName(iconWork) : "brain"}
           toolIcon={iconWork?.toolIcon ?? iconWork?.toolSource?.icon}
+          failed={failed}
           active={row.active}
           shimmer={thinking}
         />
@@ -2691,6 +2684,73 @@ function ThinkingTimelineRow() {
   );
 }
 
+/**
+ * Thinking inside an expanded activity group: the trace is already one click
+ * deep, so the text renders under its "Thought" header without another toggle.
+ * A group whose row already reads "Thought" (no visible tool) skips the header.
+ */
+function ReasoningTraceBlock({
+  messages,
+  live,
+  showHeader,
+}: {
+  messages: ReadonlyArray<ChatMessage>;
+  live: boolean;
+  showHeader: boolean;
+}) {
+  const ctx = use(TimelineRowCtx);
+  const { isWorking, unsettledTurnId } = use(TimelineRowActivityCtx);
+  const first = messages[0]!;
+  const streaming =
+    live &&
+    messages.some((reasoningMessage) => reasoningMessage.streaming) &&
+    isWorking &&
+    first.turnId !== null &&
+    first.turnId === unsettledTurnId;
+  if (
+    messages.every((reasoningMessage) => reasoningMessage.text.trim().length === 0) &&
+    !streaming
+  ) {
+    return null;
+  }
+  const label = streaming ? "Thinking" : "Thought";
+  return (
+    <div className="flex flex-col">
+      {showHeader ? (
+        <div className="flex min-h-6 select-none items-center gap-1.5 px-0.5 py-0.5 text-sm leading-relaxed">
+          <span className="flex size-6 shrink-0 items-center justify-center text-icon-muted">
+            <BrainIcon aria-hidden className="block size-4 shrink-0 stroke-[1.8] opacity-70" />
+          </span>
+          <span
+            ref={streaming ? observeVisibleAnimation : undefined}
+            className="relative min-w-0 flex-1 truncate text-secondary-label"
+          >
+            {label}
+            {streaming ? <ActivityShimmerOverlay>{label}</ActivityShimmerOverlay> : null}
+          </span>
+        </div>
+      ) : null}
+      <div className="ms-7 flex max-h-96 flex-col gap-3 overflow-auto px-0.5 py-1 select-text">
+        {messages.map((reasoningMessage) => (
+          <ChatMarkdown
+            key={reasoningMessage.id}
+            className="text-foreground"
+            text={reasoningMessage.text}
+            cwd={ctx.markdownCwd}
+            threadRef={ctx.threadRef ?? undefined}
+            isStreaming={streaming && reasoningMessage.streaming}
+            lineBreaks
+            skills={ctx.skills}
+            headingLevelOffset={MESSAGE_HEADING_LEVEL}
+            onUseArtifactTemplate={ctx.onUseArtifactTemplate}
+            onImageExpand={ctx.onImageExpand}
+          />
+        ))}
+      </div>
+    </div>
+  );
+}
+
 /**
  * A provider's thinking trace. Collapsed by default: reasoning is context for
  * the answer, not the answer. The open/closed flag lives on the list so it
@@ -2698,35 +2758,18 @@ function ThinkingTimelineRow() {
  */
 const ReasoningTimelineRow = memo(function ReasoningTimelineRow({
   row,
-  disclosureAnchorKey = row.id,
 }: {
   row: Extract<TimelineRow, { kind: "message" }>;
-  disclosureAnchorKey?: string;
 }) {
   const ctx = use(TimelineRowCtx);
-  const { isWorking, unsettledTurnId } = use(TimelineRowActivityCtx);
   const { message } = row;
-  const messages = row.reasoningMessages ?? [message];
-  // A block left open by a crashed provider or a restarted server never gets
-  // its completion. Only the live turn may claim to still be thinking, so a
-  // settled turn cannot shimmer "Thinking" at the user forever.
-  const streaming =
-    row.id === LIVE_ACTIVITY_ROW_ID &&
-    messages.some((reasoningMessage) => reasoningMessage.streaming) &&
-    isWorking &&
-    message.turnId !== null &&
-    message.turnId === unsettledTurnId;
   const expanded = ctx.expandedReasoningMessageIds.has(message.id);
   const { onToggleReasoning } = ctx;
   const toggle = useCallback(() => {
-    onToggleReasoning(message.id, !expanded, disclosureAnchorKey);
-  }, [expanded, message.id, disclosureAnchorKey, onToggleReasoning]);
-  const label = `${streaming ? "Thinking" : "Thought"}${messages.length > 1 ? ` (×${messages.length})` : ""}`;
+    onToggleReasoning(message.id, !expanded, row.id);
+  }, [expanded, message.id, row.id, onToggleReasoning]);
 
-  if (
-    messages.every((reasoningMessage) => reasoningMessage.text.trim().length === 0) &&
-    !streaming
-  ) {
+  if (message.text.trim().length === 0) {
     return null;
   }
 
@@ -2742,12 +2785,8 @@ const ReasoningTimelineRow = memo(function ReasoningTimelineRow({
           <BrainIcon aria-hidden className="block size-4 shrink-0 stroke-[1.8] opacity-70" />
         </span>
         <span className="flex min-w-0 flex-1 items-center gap-1.5">
-          <span
-            ref={streaming ? observeVisibleAnimation : undefined}
-            className="relative min-w-0 flex-1 truncate text-secondary-label text-sm leading-relaxed"
-          >
-            {label}
-            {streaming ? <ActivityShimmerOverlay>{label}</ActivityShimmerOverlay> : null}
+          <span className="relative min-w-0 flex-1 truncate text-secondary-label text-sm leading-relaxed">
+            Thought
           </span>
           <span className="flex size-4 shrink-0 items-center justify-center" aria-hidden>
             <ChevronRightIcon
@@ -2760,21 +2799,18 @@ const ReasoningTimelineRow = memo(function ReasoningTimelineRow({
         </span>
       </button>
       {expanded ? (
-        <div className="mt-1 ms-7 flex max-h-96 flex-col gap-3 overflow-auto rounded-md bg-muted/40 px-3 py-2 text-secondary-label select-text">
-          {messages.map((reasoningMessage) => (
-            <ChatMarkdown
-              key={reasoningMessage.id}
-              text={reasoningMessage.text}
-              cwd={ctx.markdownCwd}
-              threadRef={ctx.threadRef ?? undefined}
-              isStreaming={streaming && reasoningMessage.streaming}
-              lineBreaks
-              skills={ctx.skills}
-              headingLevelOffset={MESSAGE_HEADING_LEVEL}
-              onUseArtifactTemplate={ctx.onUseArtifactTemplate}
-              onImageExpand={ctx.onImageExpand}
-            />
-          ))}
+        <div className="mt-1 ms-7 flex max-h-96 flex-col gap-3 overflow-auto px-0.5 py-1 select-text">
+          <ChatMarkdown
+            className="text-foreground"
+            text={message.text}
+            cwd={ctx.markdownCwd}
+            threadRef={ctx.threadRef ?? undefined}
+            lineBreaks
+            skills={ctx.skills}
+            headingLevelOffset={MESSAGE_HEADING_LEVEL}
+            onUseArtifactTemplate={ctx.onUseArtifactTemplate}
+            onImageExpand={ctx.onImageExpand}
+          />
         </div>
       ) : null}
     </div>