diff --git a/apps/desktop/electron/ipc/hub.ts b/apps/desktop/electron/ipc/hub.ts
index 68dd5550..f71fe7f7 100644
--- a/apps/desktop/electron/ipc/hub.ts
+++ b/apps/desktop/electron/ipc/hub.ts
@@ -281,6 +281,17 @@ export function registerHubIpcHandlers(): void {
         return
       }
 
+      // Agent error events: forward so the UI can display them
+      if (event.type === 'agent_error') {
+        safeLog(`[IPC] Sending agent_error event to renderer: ${(event as { message: string }).message}`)
+        mainWindowRef.webContents.send('localChat:event', {
+          agentId,
+          streamId: null,
+          event,
+        })
+        return
+      }
+
       // Filter events same as Hub.consumeAgent()
       const maybeMessage = (event as { message?: { role?: string } }).message
       const isAssistantMessage = maybeMessage?.role === 'assistant'
diff --git a/apps/desktop/src/components/local-chat.tsx b/apps/desktop/src/components/local-chat.tsx
index 5384c063..ade9db6c 100644
--- a/apps/desktop/src/components/local-chat.tsx
+++ b/apps/desktop/src/components/local-chat.tsx
@@ -1,6 +1,10 @@
+import { useState, useCallback } from 'react'
 import { Loading } from '@multica/ui/components/ui/loading'
 import { ChatView } from '@multica/ui/components/chat-view'
 import { useLocalChat } from '../hooks/use-local-chat'
+import { useProvider } from '../hooks/use-provider'
+import { ApiKeyDialog } from './api-key-dialog'
+import { OAuthDialog } from './oauth-dialog'
 
 export function LocalChat() {
   const {
@@ -17,8 +21,41 @@ export function LocalChat() {
     sendMessage,
     loadMore,
     resolveApproval,
+    clearError,
   } = useLocalChat()
 
+  const { providers, current, setProvider: switchProvider, refresh: refreshProviders } = useProvider()
+
+  // Provider config dialog state
+  const [apiKeyDialogOpen, setApiKeyDialogOpen] = useState(false)
+  const [oauthDialogOpen, setOauthDialogOpen] = useState(false)
+
+  const handleConfigureProvider = useCallback(() => {
+    const providerId = current?.provider
+    if (!providerId) return
+
+    const meta = providers.find((p) => p.id === providerId)
+    if (!meta) return
+
+    if (meta.authMethod === 'oauth') {
+      setOauthDialogOpen(true)
+    } else {
+      setApiKeyDialogOpen(true)
+    }
+  }, [current, providers])
+
+  const handleProviderConfigSuccess = useCallback(async () => {
+    const providerId = current?.provider
+    if (!providerId) return
+
+    await refreshProviders()
+    await switchProvider(providerId)
+    clearError()
+  }, [current, refreshProviders, switchProvider, clearError])
+
+  // Derive provider info for dialogs
+  const currentMeta = current ? providers.find((p) => p.id === current.provider) : null
+
   if (initError) {
     return (
       <div className="flex-1 flex items-center justify-center text-sm text-destructive">
@@ -36,19 +73,48 @@ export function LocalChat() {
     )
   }
 
+  // Show "Configure" button when error is about provider/API key
+  const errorAction = error?.code === 'AGENT_ERROR' && currentMeta
+    ? { label: 'Configure', onClick: handleConfigureProvider }
+    : undefined
+
   return (
-    <ChatView
-      messages={messages}
-      streamingIds={streamingIds}
-      isLoading={isLoading}
-      isLoadingHistory={isLoadingHistory}
-      isLoadingMore={isLoadingMore}
-      hasMore={hasMore}
-      error={error}
-      pendingApprovals={pendingApprovals}
-      sendMessage={sendMessage}
-      loadMore={loadMore}
-      resolveApproval={resolveApproval}
-    />
+    <>
+      <ChatView
+        messages={messages}
+        streamingIds={streamingIds}
+        isLoading={isLoading}
+        isLoadingHistory={isLoadingHistory}
+        isLoadingMore={isLoadingMore}
+        hasMore={hasMore}
+        error={error}
+        pendingApprovals={pendingApprovals}
+        sendMessage={sendMessage}
+        loadMore={loadMore}
+        resolveApproval={resolveApproval}
+        errorAction={errorAction}
+      />
+
+      {currentMeta && currentMeta.authMethod === 'api-key' && (
+        <ApiKeyDialog
+          open={apiKeyDialogOpen}
+          onOpenChange={setApiKeyDialogOpen}
+          providerId={currentMeta.id}
+          providerName={currentMeta.name}
+          onSuccess={handleProviderConfigSuccess}
+        />
+      )}
+
+      {currentMeta && currentMeta.authMethod === 'oauth' && (
+        <OAuthDialog
+          open={oauthDialogOpen}
+          onOpenChange={setOauthDialogOpen}
+          providerId={currentMeta.id}
+          providerName={currentMeta.name}
+          loginCommand={currentMeta.loginCommand}
+          onSuccess={handleProviderConfigSuccess}
+        />
+      )}
+    </>
   )
 }
diff --git a/apps/desktop/src/hooks/use-local-chat.ts b/apps/desktop/src/hooks/use-local-chat.ts
index cf637f25..749ee071 100644
--- a/apps/desktop/src/hooks/use-local-chat.ts
+++ b/apps/desktop/src/hooks/use-local-chat.ts
@@ -5,6 +5,7 @@ import type {
   ExecApprovalRequestPayload,
   ApprovalDecision,
   AgentMessageItem,
+  AgentErrorEvent,
 } from '@multica/sdk'
 import { DEFAULT_MESSAGES_LIMIT } from '@multica/sdk'
 
@@ -56,6 +57,14 @@ export function useLocalChat() {
       const payload = data as unknown as StreamPayload
       if (!payload.event) return
 
+      // Handle agent error events
+      if (payload.event.type === 'agent_error') {
+        const errorEvent = payload.event as AgentErrorEvent
+        chatRef.current.setError({ code: 'AGENT_ERROR', message: errorEvent.message })
+        setIsLoading(false)
+        return
+      }
+
       chatRef.current.handleStream(payload)
       if (payload.event.type === 'message_start') setIsLoading(true)
       if (payload.event.type === 'message_end') setIsLoading(false)
@@ -133,6 +142,10 @@ export function useLocalChat() {
     [],
   )
 
+  const clearError = useCallback(() => {
+    chatRef.current.setError(null)
+  }, [])
+
   return {
     agentId,
     initError,
@@ -147,5 +160,6 @@ export function useLocalChat() {
     sendMessage,
     loadMore,
     resolveApproval,
+    clearError,
   }
 }
diff --git a/packages/sdk/src/actions/index.ts b/packages/sdk/src/actions/index.ts
index c378a6d6..b3ef94e3 100644
--- a/packages/sdk/src/actions/index.ts
+++ b/packages/sdk/src/actions/index.ts
@@ -38,6 +38,7 @@ export {
   type CompactionEvent,
   type CompactionStartEvent,
   type CompactionEndEvent,
+  type AgentErrorEvent,
   type ContentBlock,
   type TextContent,
   type ThinkingContent,
diff --git a/packages/sdk/src/actions/stream.ts b/packages/sdk/src/actions/stream.ts
index c0249353..dfaf06fa 100644
--- a/packages/sdk/src/actions/stream.ts
+++ b/packages/sdk/src/actions/stream.ts
@@ -45,16 +45,22 @@ export type CompactionEndEvent = {
 /** Union of all compaction events */
 export type CompactionEvent = CompactionStartEvent | CompactionEndEvent;
 
+/** Emitted when an agent encounters an error during execution */
+export type AgentErrorEvent = {
+  type: "agent_error";
+  message: string;
+};
+
 // --- Stream event types ---
 
 /**
- * Hub forwards AgentEvent from pi-agent-core and CompactionEvent as-is.
+ * Hub forwards AgentEvent from pi-agent-core, CompactionEvent, and AgentErrorEvent as-is.
  * StreamPayload wraps them with routing metadata.
  */
 export interface StreamPayload {
   streamId: string;
   agentId: string;
-  event: AgentEvent | CompactionEvent;
+  event: AgentEvent | CompactionEvent | AgentErrorEvent;
 }
 
 /** Extract thinking/reasoning content from an AgentEvent that carries a message */
diff --git a/packages/ui/src/components/chat-view.tsx b/packages/ui/src/components/chat-view.tsx
index 89c6217a..b47edf0b 100644
--- a/packages/ui/src/components/chat-view.tsx
+++ b/packages/ui/src/components/chat-view.tsx
@@ -38,6 +38,8 @@ export interface ChatViewProps {
   loadMore?: () => void;
   resolveApproval: (approvalId: string, decision: "allow-once" | "allow-always" | "deny") => void;
   onDisconnect?: () => void;
+  /** Optional action button in the error banner (e.g. "Configure Provider") */
+  errorAction?: { label: string; onClick: () => void };
 }
 
 export function ChatView({
@@ -53,6 +55,7 @@ export function ChatView({
   loadMore,
   resolveApproval,
   onDisconnect,
+  errorAction,
 }: ChatViewProps) {
   const mainRef = useRef<HTMLElement>(null);
   const sentinelRef = useRef<HTMLDivElement>(null);
@@ -219,16 +222,28 @@ export function ChatView({
         <div className="container px-4" role="alert" aria-live="polite">
           <div className="rounded-lg bg-destructive/5 border border-destructive/15 text-xs px-3 py-2 flex items-center justify-between gap-3">
             <span className="text-foreground leading-snug">{error.message}</span>
-            {onDisconnect && (
-              <Button
-                variant="destructive"
-                size="sm"
-                onClick={onDisconnect}
-                className="shrink-0 text-xs h-7 px-2.5"
-              >
-                Disconnect
-              </Button>
-            )}
+            <div className="flex items-center gap-2 shrink-0">
+              {errorAction && (
+                <Button
+                  variant="outline"
+                  size="sm"
+                  onClick={errorAction.onClick}
+                  className="shrink-0 text-xs h-7 px-2.5"
+                >
+                  {errorAction.label}
+                </Button>
+              )}
+              {onDisconnect && (
+                <Button
+                  variant="destructive"
+                  size="sm"
+                  onClick={onDisconnect}
+                  className="shrink-0 text-xs h-7 px-2.5"
+                >
+                  Disconnect
+                </Button>
+              )}
+            </div>
           </div>
         </div>
       )}
@@ -236,8 +251,8 @@ export function ChatView({
       <footer className="container px-4 pb-3 pt-1">
         <ChatInput
           onSubmit={sendMessage}
-          disabled={isLoading || !!error}
-          placeholder={error ? "Connection error" : "Ask your Agent..."}
+          disabled={isLoading || (!!error && error.code !== 'AGENT_ERROR')}
+          placeholder={error && error.code !== 'AGENT_ERROR' ? "Connection error" : "Ask your Agent..."}
         />
       </footer>
     </div>
diff --git a/src/agent/async-agent.ts b/src/agent/async-agent.ts
index 0f7f7d88..9aed5913 100644
--- a/src/agent/async-agent.ts
+++ b/src/agent/async-agent.ts
@@ -62,11 +62,14 @@ export class AsyncAgent {
         // Normal text is delivered via message_end event; only handle errors here
         if (result.error) {
           this.channel.send({ id: uuidv7(), content: `[error] ${result.error}` });
+          this.agent.emitError(result.error);
         }
       })
       .catch((err) => {
         const message = err instanceof Error ? err.message : String(err);
         this.channel.send({ id: uuidv7(), content: `[error] ${message}` });
+        // Also emit through subscriber mechanism so IPC listeners receive the error
+        this.agent.emitError(message);
       })
       .finally(() => {
         this.pendingWrites = Math.max(0, this.pendingWrites - 1);
diff --git a/src/agent/events.ts b/src/agent/events.ts
index 8eb8b422..3ae35b64 100644
--- a/src/agent/events.ts
+++ b/src/agent/events.ts
@@ -21,10 +21,16 @@ export type CompactionEndEvent = {
   type: "compaction_end";
   removed: number;
   kept: number;
-  tokensRemoved?: number;
-  tokensKept?: number;
+  tokensRemoved?: number | undefined;
+  tokensKept?: number | undefined;
   reason: "count" | "tokens" | "summary" | "pruning";
 };
 
+/** Emitted when an agent encounters an error during execution */
+export type AgentErrorEvent = {
+  type: "agent_error";
+  message: string;
+};
+
 /** Union of all Multica-specific events */
-export type MulticaEvent = CompactionStartEvent | CompactionEndEvent;
+export type MulticaEvent = CompactionStartEvent | CompactionEndEvent | AgentErrorEvent;
diff --git a/src/agent/runner.ts b/src/agent/runner.ts
index 9433d8bc..3deef81e 100644
--- a/src/agent/runner.ts
+++ b/src/agent/runner.ts
@@ -1,7 +1,7 @@
 import { Agent as PiAgentCore, type AgentEvent, type AgentMessage } from "@mariozechner/pi-agent-core";
 import { v7 as uuidv7 } from "uuid";
 import type { AgentOptions, AgentRunResult, ReasoningMode } from "./types.js";
-import type { MulticaEvent } from "./events.js";
+import type { MulticaEvent, CompactionEndEvent } from "./events.js";
 import { createAgentOutput } from "./cli/output.js";
 import { resolveModel, resolveTools, type ResolveToolsOptions } from "./tools.js";
 import {
@@ -163,11 +163,14 @@ export class Agent {
         : 0;
     }
 
-    this.agent = new PiAgentCore(
-      this.currentApiKey
-        ? { getApiKey: (_provider: string) => this.currentApiKey! }
-        : {},
-    );
+    this.agent = new PiAgentCore({
+      getApiKey: (_provider: string) => {
+        if (!this.currentApiKey) {
+          throw new Error(`No API key configured for provider: ${this.resolvedProvider}`);
+        }
+        return this.currentApiKey;
+      },
+    });
 
     // Load Agent Profile (if profileId is specified)
     // Every Agent should have a Profile for memory, tools config, and other settings
@@ -356,6 +359,11 @@ export class Agent {
     }
   }
 
+  /** Emit an error event through the subscriber mechanism */
+  emitError(message: string): void {
+    this.emitMulticaEvent({ type: "agent_error", message });
+  }
+
   async run(prompt: string): Promise<AgentRunResult> {
     // Run-level mutex: prevents concurrent run/runInternal from mis-tagging messages
     return this.withRunMutex(() => this._run(prompt));
@@ -402,6 +410,14 @@ export class Agent {
     await this.ensureInitialized();
     this.output.state.lastAssistantText = "";
 
+    // Early validation: check API key before calling PiAgentCore.prompt(),
+    // because getApiKey errors thrown inside PiAgentCore's internal async
+    // context result in UnhandledPromiseRejection instead of propagating.
+    if (!this.currentApiKey) {
+      const errorMsg = `No API key configured for provider: ${this.resolvedProvider}. Please configure a provider in Agent Settings.`;
+      return { text: "", error: errorMsg };
+    }
+
     const canRotate = !this.pinnedProfile && this.profileCandidates.length > 1;
     let lastError: unknown;
 
@@ -509,14 +525,15 @@ export class Agent {
       if (result?.kept) {
         this.agent.replaceMessages(result.kept);
       }
-      this.emitMulticaEvent({
+      const endEvent: CompactionEndEvent = {
         type: "compaction_end",
         removed: result?.removedCount ?? 0,
         kept: result?.kept.length ?? messages.length,
         tokensRemoved: result?.tokensRemoved,
         tokensKept: result?.tokensKept,
         reason: result?.reason ?? "tokens",
-      });
+      };
+      this.emitMulticaEvent(endEvent);
     } catch (err) {
       throw err;
     }