diff --git a/src/App.tsx b/src/App.tsx
index d798eb2a6..2b8c22de2 100644
--- a/src/App.tsx
+++ b/src/App.tsx
@@ -10,6 +10,7 @@ import { StatusBar } from './components/StatusBar';
 import { FileTreePanel } from './components/FileTreePanel';
 import { CodeReferencesPanel } from './components/CodeReferencesPanel';
 import { FileEntry } from './services/zip';
+import { getActiveProviderConfig } from './core/llm/settings-service';
 
 const AppContent = () => {
   const {
@@ -49,6 +50,12 @@ const AppContent = () => {
       setGraph(result.graph);
       setFileContents(result.fileContents);
       setViewMode('exploring');
+
+      // Initialize (or re-initialize) the agent AFTER a repo loads so it captures
+      // the current codebase context (file contents + graph tools) in the worker.
+      if (getActiveProviderConfig()) {
+        initializeAgent();
+      }
       
       // Auto-start embeddings pipeline in background
       // Uses WebGPU if available, falls back to WASM
@@ -73,7 +80,7 @@ const AppContent = () => {
         setProgress(null);
       }, 3000);
     }
-  }, [setViewMode, setGraph, setFileContents, setProgress, setProjectName, runPipeline, startEmbeddings]);
+  }, [setViewMode, setGraph, setFileContents, setProgress, setProjectName, runPipeline, startEmbeddings, initializeAgent]);
 
   const handleGitClone = useCallback(async (files: FileEntry[]) => {
     // Extract project name from first file path (e.g., "owner-repo-123/src/..." -> "owner-repo")
@@ -91,6 +98,12 @@ const AppContent = () => {
       setGraph(result.graph);
       setFileContents(result.fileContents);
       setViewMode('exploring');
+
+      // Initialize (or re-initialize) the agent AFTER a repo loads so it captures
+      // the current codebase context (file contents + graph tools) in the worker.
+      if (getActiveProviderConfig()) {
+        initializeAgent();
+      }
       
       // Auto-start embeddings pipeline in background
       // Uses WebGPU if available, falls back to WASM
@@ -115,7 +128,7 @@ const AppContent = () => {
         setProgress(null);
       }, 3000);
     }
-  }, [setViewMode, setGraph, setFileContents, setProgress, setProjectName, runPipelineFromFiles, startEmbeddings]);
+  }, [setViewMode, setGraph, setFileContents, setProgress, setProjectName, runPipelineFromFiles, startEmbeddings, initializeAgent]);
 
   const handleFocusNode = useCallback((nodeId: string) => {
     graphCanvasRef.current?.focusNode(nodeId);
diff --git a/src/components/RightPanel.tsx b/src/components/RightPanel.tsx
index 06d15319e..5b4ea57aa 100644
--- a/src/components/RightPanel.tsx
+++ b/src/components/RightPanel.tsx
@@ -8,6 +8,7 @@ import { vscDarkPlus } from 'react-syntax-highlighter/dist/esm/styles/prism';
 import ReactMarkdown from 'react-markdown';
 import { useAppState } from '../hooks/useAppState';
 import { ToolCallCard } from './ToolCallCard';
+import { isProviderConfigured } from '../core/llm/settings-service';
 
 // Custom syntax theme
 const customTheme = {
@@ -492,7 +493,11 @@ export const RightPanel = () => {
             {!isAgentReady && !isAgentInitializing && (
               <div className="mt-2 text-xs text-amber-200 flex items-center gap-2">
                 <AlertTriangle className="w-3.5 h-3.5" />
-                <span>Configure an LLM provider to enable chat.</span>
+                <span>
+                  {isProviderConfigured()
+                    ? 'Initializing AI agent...'
+                    : 'Configure an LLM provider to enable chat.'}
+                </span>
               </div>
             )}
           </div>
diff --git a/src/hooks/useAppState.tsx b/src/hooks/useAppState.tsx
index 3f034a749..86309a84f 100644
--- a/src/hooks/useAppState.tsx
+++ b/src/hooks/useAppState.tsx
@@ -520,6 +520,23 @@ export const AppStateProvider = ({ children }: { children: ReactNode }) => {
       timestamp: Date.now(),
     };
     setChatMessages(prev => [...prev, userMessage]);
+
+    // If embeddings are running and we're currently creating the vector index,
+    // avoid a confusing "Embeddings not ready" error and give a clear wait message.
+    if (embeddingStatus === 'indexing') {
+      const assistantMessage: ChatMessage = {
+        id: `assistant-${Date.now()}`,
+        role: 'assistant',
+        content: 'Wait a moment, vector index is being created.',
+        timestamp: Date.now(),
+      };
+      setChatMessages(prev => [...prev, assistantMessage]);
+      setAgentError(null);
+      setIsChatLoading(false);
+      setCurrentToolCalls([]);
+      return;
+    }
+
     setIsChatLoading(true);
     setCurrentToolCalls([]);
 
@@ -778,7 +795,7 @@ export const AppStateProvider = ({ children }: { children: ReactNode }) => {
       setIsChatLoading(false);
       setCurrentToolCalls([]);
     }
-  }, [chatMessages, isAgentReady, initializeAgent, resolveFilePath, findFileNodeId, addCodeReference, clearAICodeReferences, clearAIToolHighlights, graph]);
+  }, [chatMessages, isAgentReady, initializeAgent, resolveFilePath, findFileNodeId, addCodeReference, clearAICodeReferences, clearAIToolHighlights, graph, embeddingStatus]);
 
   const clearChat = useCallback(() => {
     setChatMessages([]);