diff --git a/.github/workflows/frontend-nightly.yml b/.github/workflows/frontend-nightly.yml
index 7ad149c8f..35ec830fe 100644
--- a/.github/workflows/frontend-nightly.yml
+++ b/.github/workflows/frontend-nightly.yml
@@ -11,7 +11,7 @@ on:
   workflow_dispatch:
     inputs:
       important:
-        description: 'Mark this nightly as an important update (escalates the in-app restart prompt). Retro-flag an already-published nightly by re-running only the publish-feed job with this input set.'
+        description: "Mark this nightly as an important update (escalates the in-app restart prompt). Retro-flag an already-published nightly by re-running only the publish-feed job with this input set."
         type: boolean
         default: false
 
diff --git a/backend/internal/service/project/service.go b/backend/internal/service/project/service.go
index 041e75060..5a5c8d43e 100644
--- a/backend/internal/service/project/service.go
+++ b/backend/internal/service/project/service.go
@@ -2,6 +2,7 @@ package project
 
 import (
 	"context"
+	"errors"
 	"os"
 	"path/filepath"
 	"regexp"
@@ -252,6 +253,13 @@ func (m *Service) Add(ctx context.Context, in AddInput) (Project, error) {
 	return m.projectFromRow(row), nil
 }
 
+type repositorySetupTarget int
+
+const (
+	repositorySetupPlainFolder repositorySetupTarget = iota
+	repositorySetupUnbornRepo
+)
+
 // InitializeRepository prepares a selected folder for project registration by ensuring it has an initial Git commit.
 func (m *Service) InitializeRepository(ctx context.Context, in InitializeRepositoryInput) (InitializeRepositoryResult, error) {
 	path, err := normalizePath(in.Path)
@@ -265,19 +273,63 @@ func (m *Service) InitializeRepository(ctx context.Context, in InitializeReposit
 	m.addMu.Lock()
 	defer m.addMu.Unlock()
 
-	if !isGitRepo(path) {
+	target, err := classifyRepositorySetupTarget(ctx, path)
+	if err != nil {
+		return InitializeRepositoryResult{}, err
+	}
+
+	if target == repositorySetupPlainFolder {
 		if _, err := gitOutput(ctx, path, "init", "-b", domain.DefaultBranchName); err != nil {
 			return InitializeRepositoryResult{}, apierr.Invalid("GIT_INIT_FAILED", "Could not initialize a Git repository in this folder.", map[string]any{"error": err.Error()})
 		}
-	} else if repoHasCommit(ctx, path) {
-		return InitializeRepositoryResult{}, apierr.Conflict("PROJECT_ALREADY_INITIALIZED", "This repository already has commits.", map[string]any{"path": path})
 	}
 
+	if _, err := gitOutput(ctx, path, "add", "-A"); err != nil {
+		return InitializeRepositoryResult{}, apierr.Invalid("GIT_ADD_FAILED", "Could not stage files for the initial commit.", map[string]any{"error": err.Error()})
+	}
 	if _, err := gitOutput(ctx, path, "-c", "user.name=Agent Orchestrator", "-c", "user.email=ao@example.com", "commit", "--allow-empty", "-m", "initial commit"); err != nil {
 		return InitializeRepositoryResult{}, apierr.Invalid("INITIAL_COMMIT_FAILED", "Could not create the initial commit.", map[string]any{"error": err.Error()})
 	}
 	return InitializeRepositoryResult{Path: path}, nil
 }
+
+func classifyRepositorySetupTarget(ctx context.Context, path string) (repositorySetupTarget, error) {
+	if isBareGitRepository(ctx, path) {
+		return repositorySetupPlainFolder, apierr.Invalid("PROJECT_BARE_REPOSITORY", "Selected folder must be a non-bare Git repository or a plain folder.", map[string]any{
+			"path":         path,
+			"suggestedFix": "Use a normal checkout, or select a plain folder for AO to initialize.",
+		})
+	}
+
+	if isGitRepo(path) {
+		if repoHasCommit(ctx, path) {
+			return repositorySetupUnbornRepo, apierr.Conflict("PROJECT_ALREADY_INITIALIZED", "This repository already has commits.", map[string]any{"path": path})
+		}
+		return repositorySetupUnbornRepo, nil
+	}
+
+	if top, err := gitOutput(ctx, path, "rev-parse", "--show-toplevel"); err == nil {
+		root := normalizeGitReportedPath(path, strings.TrimSpace(top))
+		selected := comparablePath(path)
+		if !samePath(root, selected) {
+			return repositorySetupPlainFolder, apierr.Invalid("PROJECT_PATH_NOT_REPO_ROOT", "Selected folder is inside a Git repository. Select the repository root instead.", map[string]any{
+				"path":         path,
+				"repoRoot":     root,
+				"suggestedFix": "Select the repository root folder, then try again.",
+			})
+		}
+		return repositorySetupPlainFolder, apierr.Invalid("UNSUPPORTED_GIT_REPO", "Selected folder contains an unsupported Git repository layout.", map[string]any{"path": path})
+	}
+
+	if hasGitMetadata(path) {
+		return repositorySetupPlainFolder, apierr.Invalid("UNSUPPORTED_GIT_REPO", "Selected folder contains Git metadata that AO could not inspect.", map[string]any{
+			"path":         path,
+			"suggestedFix": "Repair the Git repository or select a plain folder.",
+		})
+	}
+
+	return repositorySetupPlainFolder, nil
+}
 func (m *Service) activeProjectCount(ctx context.Context) (int, error) {
 	projects, err := m.store.ListProjects(ctx)
 	if err != nil {
@@ -483,6 +535,42 @@ func repoHasCommit(ctx context.Context, path string) bool {
 	_, err := gitOutput(ctx, path, "rev-parse", "--verify", "HEAD")
 	return err == nil
 }
+
+func isBareGitRepository(ctx context.Context, path string) bool {
+	out, err := gitOutput(ctx, path, "rev-parse", "--is-bare-repository")
+	return err == nil && strings.TrimSpace(out) == "true"
+}
+
+func hasGitMetadata(path string) bool {
+	_, err := os.Lstat(filepath.Join(path, ".git"))
+	return err == nil || !errors.Is(err, os.ErrNotExist)
+}
+
+func normalizeGitReportedPath(base, reported string) string {
+	if reported == "" {
+		return comparablePath(reported)
+	}
+	if !filepath.IsAbs(reported) {
+		reported = filepath.Join(base, reported)
+	}
+	return comparablePath(reported)
+}
+
+func comparablePath(path string) string {
+	clean := filepath.Clean(path)
+	if resolved, err := filepath.EvalSymlinks(clean); err == nil {
+		clean = resolved
+	}
+	return filepath.Clean(clean)
+}
+
+func samePath(a, b string) bool {
+	if strings.EqualFold(a, b) {
+		return true
+	}
+	return a == b
+}
+
 func isGitRepo(path string) bool {
 	cmd := aoprocess.Command("git", "-C", path, "rev-parse", "--show-toplevel")
 	out, err := cmd.Output()
diff --git a/backend/internal/service/project/service_test.go b/backend/internal/service/project/service_test.go
index 8b1cf6e10..c8cbd5ee0 100644
--- a/backend/internal/service/project/service_test.go
+++ b/backend/internal/service/project/service_test.go
@@ -513,6 +513,13 @@ func TestManager_InitializeRepositoryRecovery(t *testing.T) {
 		if _, err := exec.Command("git", "-C", dir, "rev-parse", "--verify", "HEAD").CombinedOutput(); err != nil {
 			t.Fatalf("expected initial commit: %v", err)
 		}
+		out, err := exec.Command("git", "-C", dir, "show", "HEAD:notes.txt").CombinedOutput()
+		if err != nil {
+			t.Fatalf("expected existing file in initial commit: %v (%s)", err, out)
+		}
+		if got := string(out); got != "keep me\n" {
+			t.Fatalf("HEAD:notes.txt = %q, want %q", got, "keep me\n")
+		}
 		if _, err := m.Add(ctx, project.AddInput{Path: dir, ProjectID: ptr("plain")}); err != nil {
 			t.Fatalf("Add after init: %v", err)
 		}
@@ -523,18 +530,59 @@ func TestManager_InitializeRepositoryRecovery(t *testing.T) {
 		if out, err := exec.Command("git", "init", "-b", "main", dir).CombinedOutput(); err != nil {
 			t.Fatalf("git init: %v (%s)", err, out)
 		}
+		if err := os.WriteFile(filepath.Join(dir, "notes.txt"), []byte("unborn file\n"), 0o644); err != nil {
+			t.Fatal(err)
+		}
 		if _, err := m.InitializeRepository(ctx, project.InitializeRepositoryInput{Path: dir}); err != nil {
 			t.Fatalf("InitializeRepository unborn: %v", err)
 		}
 		if _, err := exec.Command("git", "-C", dir, "rev-parse", "--verify", "HEAD").CombinedOutput(); err != nil {
 			t.Fatalf("expected initial commit: %v", err)
 		}
+		out, err := exec.Command("git", "-C", dir, "show", "HEAD:notes.txt").CombinedOutput()
+		if err != nil {
+			t.Fatalf("expected unborn repo file in initial commit: %v (%s)", err, out)
+		}
+		if got := string(out); got != "unborn file\n" {
+			t.Fatalf("HEAD:notes.txt = %q, want %q", got, "unborn file\n")
+		}
 	})
 
 	t.Run("already committed repo", func(t *testing.T) {
 		_, err := m.InitializeRepository(ctx, project.InitializeRepositoryInput{Path: gitRepo(t)})
 		wantCode(t, err, "PROJECT_ALREADY_INITIALIZED")
 	})
+
+	t.Run("repo subdirectory is rejected", func(t *testing.T) {
+		repo := gitRepo(t)
+		subdir := filepath.Join(repo, "nested")
+		if err := os.Mkdir(subdir, 0o755); err != nil {
+			t.Fatal(err)
+		}
+		_, err := m.InitializeRepository(ctx, project.InitializeRepositoryInput{Path: subdir})
+		wantCode(t, err, "PROJECT_PATH_NOT_REPO_ROOT")
+		if _, statErr := os.Stat(filepath.Join(subdir, ".git")); !errors.Is(statErr, os.ErrNotExist) {
+			t.Fatalf("unexpected nested .git after rejected init: %v", statErr)
+		}
+	})
+
+	t.Run("bare repo is rejected", func(t *testing.T) {
+		dir := filepath.Join(t.TempDir(), "bare.git")
+		if out, err := exec.Command("git", "init", "--bare", dir).CombinedOutput(); err != nil {
+			t.Fatalf("git init --bare: %v (%s)", err, out)
+		}
+		_, err := m.InitializeRepository(ctx, project.InitializeRepositoryInput{Path: dir})
+		wantCode(t, err, "PROJECT_BARE_REPOSITORY")
+	})
+
+	t.Run("unsupported git metadata is rejected", func(t *testing.T) {
+		dir := t.TempDir()
+		if err := os.WriteFile(filepath.Join(dir, ".git"), []byte("gitdir: missing\n"), 0o644); err != nil {
+			t.Fatal(err)
+		}
+		_, err := m.InitializeRepository(ctx, project.InitializeRepositoryInput{Path: dir})
+		wantCode(t, err, "UNSUPPORTED_GIT_REPO")
+	})
 }
 func TestManager_AddValidationAndConflicts(t *testing.T) {
 	ctx := context.Background()
diff --git a/frontend/src/renderer/components/CreateProjectAgentSheet.tsx b/frontend/src/renderer/components/CreateProjectAgentSheet.tsx
index 6691b724a..4f9db7ab8 100644
--- a/frontend/src/renderer/components/CreateProjectAgentSheet.tsx
+++ b/frontend/src/renderer/components/CreateProjectAgentSheet.tsx
@@ -20,36 +20,28 @@ export type CreateProjectAgentSelection = {
 	trackerIntake?: TrackerIntakeConfig;
 };
 
-type RecoveryCode = "NOT_A_GIT_REPO" | "PROJECT_UNBORN";
-
 const EMPTY_INTAKE: IntakeForm = { enabled: false, repo: "", assignee: "" };
 
 type CreateProjectAgentSheetProps = {
 	error?: string | null;
 	isCreating: boolean;
 	isInitializing?: boolean;
-	onInitialize?: (selection: CreateProjectAgentSelection) => Promise<void>;
 	onOpenChange: (open: boolean) => void;
 	onSubmit: (selection: CreateProjectAgentSelection) => Promise<void>;
 	open: boolean;
 	path: string | null;
-	recoveryCode?: RecoveryCode | null;
-	recoveryError?: string | null;
 };
 
-const RECOVERY_SETUP_MESSAGE = "Let Agent Orchestrator set up this repository so agents can start?";
+const SETUP_NOTE = "If this folder needs Git setup, AO will initialize it and create the first commit before starting.";
 
 export function CreateProjectAgentSheet({
 	error,
 	isCreating,
 	isInitializing = false,
-	onInitialize,
 	onOpenChange,
 	onSubmit,
 	open,
 	path,
-	recoveryCode,
-	recoveryError,
 }: CreateProjectAgentSheetProps) {
 	const queryClient = useQueryClient();
 	const agentsQuery = useQuery({
@@ -73,11 +65,9 @@ export function CreateProjectAgentSheet({
 	const [workerAgent, setWorkerAgent] = useState("");
 	const [orchestratorAgent, setOrchestratorAgent] = useState("");
 	const isBusy = isCreating || isInitializing;
-	const hasRecovery = Boolean(recoveryCode);
 	const [intake, setIntake] = useState<IntakeForm>(EMPTY_INTAKE);
 	const intakeIncomplete = intakeNeedsRule(intake);
 	const canSubmit = workerAgent !== "" && orchestratorAgent !== "" && !intakeIncomplete && !isBusy && !isLoadingAgents;
-	const canInitialize = Boolean(canSubmit && recoveryCode && onInitialize);
 
 	useEffect(() => {
 		if (!open) {
@@ -115,12 +105,6 @@ export function CreateProjectAgentSheet({
 						aria-busy={isBusy || undefined}
 						onSubmit={(event) => {
 							event.preventDefault();
-							if (hasRecovery) {
-								if (canInitialize) {
-									void onInitialize?.({ workerAgent, orchestratorAgent, trackerIntake: buildIntake(intake) });
-								}
-								return;
-							}
 							if (!canSubmit) return;
 							void onSubmit({ workerAgent, orchestratorAgent, trackerIntake: buildIntake(intake) });
 						}}
@@ -189,16 +173,11 @@ export function CreateProjectAgentSheet({
 							<IntakeFields form={intake} onChange={(patch) => setIntake((f) => ({ ...f, ...patch }))} compact />
 						</div>
 
-						{hasRecovery ? (
-							<div className="space-y-3 rounded-md border border-border bg-surface/70 px-3 py-3 text-[12px] leading-5">
-								<p className="font-medium text-foreground">{RECOVERY_SETUP_MESSAGE}</p>
-								{recoveryError ? (
-									<div className="rounded-md border border-destructive/40 bg-destructive/10 px-3 py-2 text-destructive">
-										Setup failed: {recoveryError}
-									</div>
-								) : null}
-							</div>
-						) : error ? (
+						<div className="rounded-md border border-border bg-surface/70 px-3 py-2 text-[12px] leading-5 text-muted-foreground">
+							{SETUP_NOTE}
+						</div>
+
+						{error ? (
 							<div className="rounded-md border border-destructive/40 bg-destructive/10 px-3 py-2 text-[12px] leading-5 text-destructive">
 								{error}
 							</div>
@@ -208,20 +187,9 @@ export function CreateProjectAgentSheet({
 							<Button type="button" variant="ghost" disabled={isBusy} onClick={() => onOpenChange(false)}>
 								Cancel
 							</Button>
-							{!hasRecovery ? (
-								<Button type="submit" variant="primary" disabled={!canSubmit}>
-									{isCreating ? "Creating..." : "Create and start"}
-								</Button>
-							) : (
-								<Button
-									type="submit"
-									variant="primary"
-									disabled={!canInitialize}
-									aria-busy={isInitializing || undefined}
-								>
-									Yes
-								</Button>
-							)}
+							<Button type="submit" variant="primary" disabled={!canSubmit}>
+								{isInitializing ? "Setting up..." : isCreating ? "Creating..." : "Create and start"}
+							</Button>
 						</div>
 					</form>
 				</Dialog.Content>
diff --git a/frontend/src/renderer/components/OrchestratorReplacementDialog.tsx b/frontend/src/renderer/components/OrchestratorReplacementDialog.tsx
index c9f3817e6..8c342a789 100644
--- a/frontend/src/renderer/components/OrchestratorReplacementDialog.tsx
+++ b/frontend/src/renderer/components/OrchestratorReplacementDialog.tsx
@@ -41,13 +41,18 @@ export function OrchestratorReplacementDialog({
 							<AlertTriangle className="size-4" aria-hidden="true" />
 						</div>
 						<div className="min-w-0 flex-1">
-							<Dialog.Title className="text-sm font-medium text-foreground">Orchestrator replacement failed</Dialog.Title>
+							<Dialog.Title className="text-sm font-medium text-foreground">
+								Orchestrator replacement failed
+							</Dialog.Title>
 							<Dialog.Description className="mt-2 text-[13px] leading-5 text-muted-foreground">
 								{error ?? "The project orchestrator could not be replaced."}
 							</Dialog.Description>
 						</div>
 						<Dialog.Close asChild>
-							<button className="rounded-md p-1 text-passive hover:bg-interactive-hover hover:text-foreground" type="button">
+							<button
+								className="rounded-md p-1 text-passive hover:bg-interactive-hover hover:text-foreground"
+								type="button"
+							>
 								<X className="size-4" aria-hidden="true" />
 								<span className="sr-only">Close</span>
 							</button>
diff --git a/frontend/src/renderer/components/ProjectSettingsForm.test.tsx b/frontend/src/renderer/components/ProjectSettingsForm.test.tsx
index 8811eefb9..7098aad03 100644
--- a/frontend/src/renderer/components/ProjectSettingsForm.test.tsx
+++ b/frontend/src/renderer/components/ProjectSettingsForm.test.tsx
@@ -95,7 +95,11 @@ beforeEach(() => {
 	putMock.mockReset();
 	postMock.mockReset();
 	putMock.mockResolvedValue({ data: { project: {} }, error: undefined });
-	postMock.mockResolvedValue({ data: { orchestrator: { id: "proj-1-orch-2" } }, error: undefined, response: { status: 200 } });
+	postMock.mockResolvedValue({
+		data: { orchestrator: { id: "proj-1-orch-2" } },
+		error: undefined,
+		response: { status: 200 },
+	});
 });
 
 describe("ProjectSettingsForm", () => {
diff --git a/frontend/src/renderer/components/SessionsBoard.tsx b/frontend/src/renderer/components/SessionsBoard.tsx
index 30f4fde97..8a5cb42c0 100644
--- a/frontend/src/renderer/components/SessionsBoard.tsx
+++ b/frontend/src/renderer/components/SessionsBoard.tsx
@@ -169,7 +169,13 @@ export function SessionsBoard({ projectId }: SessionsBoardProps) {
 				type="button"
 			>
 				<OrchestratorIcon className="h-3.5 w-3.5" aria-hidden="true" />
-				{isProjectRestarting ? "Restarting..." : isSpawning ? "Spawning..." : orchestrator ? "Orchestrator" : "Spawn Orchestrator"}
+				{isProjectRestarting
+					? "Restarting..."
+					: isSpawning
+						? "Spawning..."
+						: orchestrator
+							? "Orchestrator"
+							: "Spawn Orchestrator"}
 			</button>
 		</>
 	) : undefined;
diff --git a/frontend/src/renderer/components/Sidebar.test.tsx b/frontend/src/renderer/components/Sidebar.test.tsx
index 91f914888..72d9ef3b5 100644
--- a/frontend/src/renderer/components/Sidebar.test.tsx
+++ b/frontend/src/renderer/components/Sidebar.test.tsx
@@ -250,16 +250,10 @@ describe("Sidebar", () => {
 
 		await user.click(screen.getByRole("button", { name: "Create and start" }));
 
-		expect(
-			await screen.findByText("Let Agent Orchestrator set up this repository so agents can start?"),
-		).toBeInTheDocument();
-		expect(screen.getByRole("button", { name: "Yes" })).toBeInTheDocument();
-		expect(screen.queryByRole("button", { name: "Create and start" })).not.toBeInTheDocument();
+		await waitFor(() => expect(onInitializeProject).toHaveBeenCalledWith("/repo/new-project"));
+		expect(screen.queryByRole("button", { name: "Yes" })).not.toBeInTheDocument();
 		expect(screen.queryByLabelText("Manual Git setup")).not.toBeInTheDocument();
 
-		await user.click(screen.getByRole("button", { name: "Yes" }));
-
-		await waitFor(() => expect(onInitializeProject).toHaveBeenCalledWith("/repo/new-project"));
 		await waitFor(() => expect(onCreateProject).toHaveBeenCalledTimes(2));
 		expect(onCreateProject).toHaveBeenLastCalledWith(
 			expect.objectContaining({
@@ -273,19 +267,17 @@ describe("Sidebar", () => {
 	it("shows repository initialization recovery for git repos with no commits", async () => {
 		const onCreateProject = vi
 			.fn()
-			.mockRejectedValueOnce(
-				codedError("This repo has no commits yet.", "PROJECT_UNBORN"),
-			) as unknown as CreateProjectHandler;
-		renderSidebar({ onCreateProject });
+			.mockRejectedValueOnce(codedError("This repo has no commits yet.", "PROJECT_UNBORN"))
+			.mockResolvedValueOnce(undefined) as unknown as CreateProjectHandler;
+		const onInitializeProject = vi.fn().mockResolvedValue(undefined) as InitializeProjectHandler;
+		renderSidebar({ onCreateProject, onInitializeProject });
 		const user = await openCreateProjectDialog("/repo/unborn");
 
 		await user.click(screen.getByRole("button", { name: "Create and start" }));
 
-		expect(
-			await screen.findByText("Let Agent Orchestrator set up this repository so agents can start?"),
-		).toBeInTheDocument();
-		expect(screen.getByRole("button", { name: "Yes" })).toBeInTheDocument();
-		expect(screen.queryByRole("button", { name: "Create and start" })).not.toBeInTheDocument();
+		await waitFor(() => expect(onInitializeProject).toHaveBeenCalledWith("/repo/unborn"));
+		await waitFor(() => expect(onCreateProject).toHaveBeenCalledTimes(2));
+		expect(screen.queryByRole("button", { name: "Yes" })).not.toBeInTheDocument();
 		expect(screen.queryByLabelText("Manual Git setup")).not.toBeInTheDocument();
 	});
 
@@ -300,9 +292,8 @@ describe("Sidebar", () => {
 		const user = await openCreateProjectDialog();
 
 		await user.click(screen.getByRole("button", { name: "Create and start" }));
-		await user.click(await screen.findByRole("button", { name: "Yes" }));
 
-		expect(await screen.findByText("Setup failed: git init failed")).toBeInTheDocument();
+		expect((await screen.findAllByText("Setup failed: git init failed")).length).toBeGreaterThan(0);
 	});
 
 	it("shows needs-auth agents as unavailable while keeping authorized agents selectable", async () => {
diff --git a/frontend/src/renderer/components/Sidebar.tsx b/frontend/src/renderer/components/Sidebar.tsx
index 32b826453..af2ae5d5e 100644
--- a/frontend/src/renderer/components/Sidebar.tsx
+++ b/frontend/src/renderer/components/Sidebar.tsx
@@ -784,13 +784,9 @@ function CreateProjectFlow({
 	const [isChoosingPath, setIsChoosingPath] = useState(false);
 	const [isCreating, setIsCreating] = useState(false);
 	const [isInitializing, setIsInitializing] = useState(false);
-	const [recoveryCode, setRecoveryCode] = useState<"NOT_A_GIT_REPO" | "PROJECT_UNBORN" | null>(null);
-	const [recoveryError, setRecoveryError] = useState<string | null>(null);
 
 	const choosePath = async () => {
 		setError(null);
-		setRecoveryCode(null);
-		setRecoveryError(null);
 		setIsChoosingPath(true);
 		try {
 			const path = await aoBridge.app.chooseDirectory();
@@ -805,39 +801,38 @@ function CreateProjectFlow({
 	const createProject = async (selection: CreateProjectAgentSelection) => {
 		if (!selectedPath) return;
 		setError(null);
-		setRecoveryCode(null);
-		setRecoveryError(null);
 		setIsCreating(true);
 		try {
 			await onCreateProject({ path: selectedPath, ...selection });
 			setSelectedPath(null);
 		} catch (err) {
 			const code = err instanceof Error && "code" in err ? (err.code as string | undefined) : undefined;
-			setRecoveryCode(code === "NOT_A_GIT_REPO" || code === "PROJECT_UNBORN" ? code : null);
+			if (code === "NOT_A_GIT_REPO" || code === "PROJECT_UNBORN") {
+				setIsCreating(false);
+				setIsInitializing(true);
+				try {
+					await onInitializeProject(selectedPath);
+				} catch (setupErr) {
+					setError(setupErr instanceof Error ? `Setup failed: ${setupErr.message}` : "Setup failed");
+					return;
+				} finally {
+					setIsInitializing(false);
+				}
+
+				setIsCreating(true);
+				try {
+					await onCreateProject({ path: selectedPath, ...selection });
+					setSelectedPath(null);
+				} catch (retryErr) {
+					setError(retryErr instanceof Error ? retryErr.message : "Could not add project");
+				}
+				return;
+			}
 			setError(err instanceof Error ? err.message : "Could not add project");
 		} finally {
 			setIsCreating(false);
 		}
 	};
-
-	const initializeAndCreate = async (selection: CreateProjectAgentSelection) => {
-		if (!selectedPath) return;
-		setError(null);
-		setRecoveryError(null);
-		setIsInitializing(true);
-		try {
-			await onInitializeProject(selectedPath);
-			setRecoveryCode(null);
-			setIsCreating(true);
-			await onCreateProject({ path: selectedPath, ...selection });
-			setSelectedPath(null);
-		} catch (err) {
-			setRecoveryError(err instanceof Error ? err.message : "Could not initialize repository");
-		} finally {
-			setIsInitializing(false);
-			setIsCreating(false);
-		}
-	};
 	const label = isChoosingPath
 		? "Opening..."
 		: isInitializing
@@ -857,15 +852,10 @@ function CreateProjectFlow({
 				error={error}
 				isCreating={isCreating}
 				isInitializing={isInitializing}
-				onInitialize={initializeAndCreate}
-				recoveryCode={recoveryCode}
-				recoveryError={recoveryError}
 				onOpenChange={(open) => {
 					if (!open) {
 						setSelectedPath(null);
 						setError(null);
-						setRecoveryCode(null);
-						setRecoveryError(null);
 					}
 				}}
 				onSubmit={createProject}
diff --git a/frontend/src/renderer/hooks/useWorkspaceQuery.test.tsx b/frontend/src/renderer/hooks/useWorkspaceQuery.test.tsx
index 60fc3c4e8..9e21bfa96 100644
--- a/frontend/src/renderer/hooks/useWorkspaceQuery.test.tsx
+++ b/frontend/src/renderer/hooks/useWorkspaceQuery.test.tsx
@@ -101,7 +101,12 @@ describe("useWorkspaceQuery", () => {
 		await waitFor(() => expect(result.current.isSuccess).toBe(true));
 
 		const [workspace] = result.current.data ?? [];
-		expect(workspace).toMatchObject({ id: "proj-1", name: "my-app", path: "/home/me/my-app", orchestratorAgent: "codex" });
+		expect(workspace).toMatchObject({
+			id: "proj-1",
+			name: "my-app",
+			path: "/home/me/my-app",
+			orchestratorAgent: "codex",
+		});
 		expect(workspace.sessions).toHaveLength(2);
 		expect(workspace.sessions[0]).toMatchObject({
 			id: "sess-1",
diff --git a/frontend/src/renderer/lib/restart-orchestrator.ts b/frontend/src/renderer/lib/restart-orchestrator.ts
index 0d41f7981..d921a4c80 100644
--- a/frontend/src/renderer/lib/restart-orchestrator.ts
+++ b/frontend/src/renderer/lib/restart-orchestrator.ts
@@ -44,7 +44,10 @@ export async function restartProjectOrchestrator({
 		});
 	} catch (error) {
 		await refreshWorkspaceState(queryClient);
-		setOrchestratorReplacementError(projectId, error instanceof Error ? error.message : "Could not replace orchestrator");
+		setOrchestratorReplacementError(
+			projectId,
+			error instanceof Error ? error.message : "Could not replace orchestrator",
+		);
 		onError?.(error);
 	} finally {
 		setProjectRestarting(projectId, false);
diff --git a/frontend/src/renderer/types/workspace.test.ts b/frontend/src/renderer/types/workspace.test.ts
index 1f9021da6..236f4fa47 100644
--- a/frontend/src/renderer/types/workspace.test.ts
+++ b/frontend/src/renderer/types/workspace.test.ts
@@ -239,7 +239,8 @@ describe("orchestratorHealth", () => {
 			}),
 		).toEqual({
 			state: "duplicates",
-			message: "Multiple orchestrators are active. The newest one is used; stale ones will be cleaned up on daemon reconcile.",
+			message:
+				"Multiple orchestrators are active. The newest one is used; stale ones will be cleaned up on daemon reconcile.",
 		});
 
 		expect(
diff --git a/frontend/src/renderer/types/workspace.ts b/frontend/src/renderer/types/workspace.ts
index 9d0ad4587..683478286 100644
--- a/frontend/src/renderer/types/workspace.ts
+++ b/frontend/src/renderer/types/workspace.ts
@@ -386,7 +386,8 @@ export function orchestratorHealth(workspace: WorkspaceSummary, restarting = fal
 	if (active.length > 1) {
 		return {
 			state: "duplicates",
-			message: "Multiple orchestrators are active. The newest one is used; stale ones will be cleaned up on daemon reconcile.",
+			message:
+				"Multiple orchestrators are active. The newest one is used; stale ones will be cleaned up on daemon reconcile.",
 		};
 	}
 	const orchestrator = newestActiveOrchestrator(workspace.sessions);