diff --git a/src/core/config/CustomModesManager.ts b/src/core/config/CustomModesManager.ts
index a9a2e6a6b5..21d761cfb1 100644
--- a/src/core/config/CustomModesManager.ts
+++ b/src/core/config/CustomModesManager.ts
@@ -96,8 +96,18 @@ export class CustomModesManager {
 			return undefined
 		}
 
-		const workspaceRoot = getWorkspacePath()
-		const roomodesPath = path.join(workspaceRoot, ROOMODES_FILENAME)
+		// Check if .roo is a workspace folder itself
+		const rooWorkspaceFolder = workspaceFolders.find((folder) => path.basename(folder.uri.fsPath) === ".roo")
+
+		let roomodesPath: string
+		if (rooWorkspaceFolder) {
+			// .roo is a workspace folder itself, look for .roomodes directly in it
+			roomodesPath = path.join(rooWorkspaceFolder.uri.fsPath, ROOMODES_FILENAME.replace(".roo/", ""))
+		} else {
+			// Use the current workspace path (which considers the active file's workspace)
+			const workspaceRoot = getWorkspacePath()
+			roomodesPath = path.join(workspaceRoot, ROOMODES_FILENAME)
+		}
 		const exists = await fileExistsAtPath(roomodesPath)
 		return exists ? roomodesPath : undefined
 	}
diff --git a/src/core/mentions/index.ts b/src/core/mentions/index.ts
index a57dfcb6d4..7572a8ef97 100644
--- a/src/core/mentions/index.ts
+++ b/src/core/mentions/index.ts
@@ -274,20 +274,41 @@ async function getFileOrFolderContent(
 	maxReadFileLine?: number,
 ): Promise<string> {
 	const unescapedPath = unescapeSpaces(mentionPath)
-	const absPath = path.resolve(cwd, unescapedPath)
+
+	// Check if this is an absolute path from a different workspace folder
+	let absPath: string
+	let displayPath: string = mentionPath
+
+	if (path.isAbsolute(unescapedPath)) {
+		absPath = unescapedPath
+
+		// In multi-folder workspaces, convert absolute paths to relative paths
+		// based on the workspace folder they belong to
+		if (vscode.workspace.workspaceFolders && vscode.workspace.workspaceFolders.length > 1) {
+			const workspaceFolder = vscode.workspace.getWorkspaceFolder(vscode.Uri.file(absPath))
+			if (workspaceFolder) {
+				// Use relative path from the workspace folder
+				const relativePath = path.relative(workspaceFolder.uri.fsPath, absPath)
+				displayPath = path.join(workspaceFolder.name, relativePath).toPosix()
+			}
+		}
+	} else {
+		absPath = path.resolve(cwd, unescapedPath)
+		displayPath = mentionPath
+	}
 
 	try {
 		const stats = await fs.stat(absPath)
 
 		if (stats.isFile()) {
 			if (rooIgnoreController && !rooIgnoreController.validateAccess(absPath)) {
-				return `(File ${mentionPath} is ignored by .rooignore)`
+				return `(File ${displayPath} is ignored by .rooignore)`
 			}
 			try {
 				const content = await extractTextFromFile(absPath, maxReadFileLine)
 				return content
 			} catch (error) {
-				return `(Failed to read contents of ${mentionPath}): ${error.message}`
+				return `(Failed to read contents of ${displayPath}): ${error.message}`
 			}
 		} else if (stats.isDirectory()) {
 			const entries = await fs.readdir(absPath, { withFileTypes: true })
@@ -315,8 +336,24 @@ async function getFileOrFolderContent(
 				if (entry.isFile()) {
 					folderContent += `${linePrefix}${displayName}\n`
 					if (!isIgnored) {
-						const filePath = path.join(mentionPath, entry.name)
 						const absoluteFilePath = path.resolve(absPath, entry.name)
+
+						// Determine the display path for the file
+						let fileDisplayPath: string
+						if (vscode.workspace.workspaceFolders && vscode.workspace.workspaceFolders.length > 1) {
+							const workspaceFolder = vscode.workspace.getWorkspaceFolder(
+								vscode.Uri.file(absoluteFilePath),
+							)
+							if (workspaceFolder) {
+								const relativePath = path.relative(workspaceFolder.uri.fsPath, absoluteFilePath)
+								fileDisplayPath = path.join(workspaceFolder.name, relativePath).toPosix()
+							} else {
+								fileDisplayPath = path.join(displayPath, entry.name).toPosix()
+							}
+						} else {
+							fileDisplayPath = path.join(displayPath, entry.name).toPosix()
+						}
+
 						fileContentPromises.push(
 							(async () => {
 								try {
@@ -325,7 +362,7 @@ async function getFileOrFolderContent(
 										return undefined
 									}
 									const content = await extractTextFromFile(absoluteFilePath, maxReadFileLine)
-									return `<file_content path="${filePath.toPosix()}">\n${content}\n</file_content>`
+									return `<file_content path="${fileDisplayPath}">\n${content}\n</file_content>`
 								} catch (error) {
 									return undefined
 								}
@@ -341,10 +378,10 @@ async function getFileOrFolderContent(
 			const fileContents = (await Promise.all(fileContentPromises)).filter((content) => content)
 			return `${folderContent}\n${fileContents.join("\n\n")}`.trim()
 		} else {
-			return `(Failed to read contents of ${mentionPath})`
+			return `(Failed to read contents of ${displayPath})`
 		}
 	} catch (error) {
-		throw new Error(`Failed to access path "${mentionPath}": ${error.message}`)
+		throw new Error(`Failed to access path "${displayPath}": ${error.message}`)
 	}
 }
 
diff --git a/src/core/task/Task.ts b/src/core/task/Task.ts
index 5e96b6fb16..49fa9e7494 100644
--- a/src/core/task/Task.ts
+++ b/src/core/task/Task.ts
@@ -279,10 +279,23 @@ export class Task extends EventEmitter<TaskEvents> implements TaskLike {
 
 		this.taskId = historyItem ? historyItem.id : crypto.randomUUID()
 
-		// Normal use-case is usually retry similar history task with new workspace.
-		this.workspacePath = parentTask
-			? parentTask.workspacePath
-			: getWorkspacePath(path.join(os.homedir(), "Desktop"))
+		// Store the initial workspace path when the task is created
+		// In multi-folder workspaces, we want to maintain the same workspace context throughout the task
+		if (parentTask) {
+			// Inherit workspace from parent task
+			this.workspacePath = parentTask.workspacePath
+		} else {
+			// Determine workspace based on current context
+			// If there's an active editor, use its workspace folder
+			// Otherwise, use the first workspace folder or fallback to Desktop
+			const currentFileUri = vscode.window.activeTextEditor?.document.uri
+			if (currentFileUri) {
+				const workspaceFolder = vscode.workspace.getWorkspaceFolder(currentFileUri)
+				this.workspacePath = workspaceFolder?.uri.fsPath || getWorkspacePath(path.join(os.homedir(), "Desktop"))
+			} else {
+				this.workspacePath = getWorkspacePath(path.join(os.homedir(), "Desktop"))
+			}
+		}
 
 		this.instanceId = crypto.randomUUID().slice(0, 8)
 		this.taskNumber = -1
diff --git a/src/core/task/__tests__/multi-folder-workspace.spec.ts b/src/core/task/__tests__/multi-folder-workspace.spec.ts
new file mode 100644
index 0000000000..a9dbfbaddf
--- /dev/null
+++ b/src/core/task/__tests__/multi-folder-workspace.spec.ts
@@ -0,0 +1,302 @@
+import { describe, it, expect, vi, beforeEach, afterEach } from "vitest"
+import * as vscode from "vscode"
+import * as path from "path"
+import * as os from "os"
+import { Task } from "../Task"
+import { ClineProvider } from "../../webview/ClineProvider"
+
+// Mock vscode module
+vi.mock("vscode", () => ({
+	workspace: {
+		workspaceFolders: [],
+		getWorkspaceFolder: vi.fn(),
+		createFileSystemWatcher: vi.fn(() => ({
+			onDidChange: vi.fn(),
+			onDidCreate: vi.fn(),
+			onDidDelete: vi.fn(),
+			dispose: vi.fn(),
+		})),
+	},
+	window: {
+		activeTextEditor: undefined,
+		showErrorMessage: vi.fn(),
+		createTextEditorDecorationType: vi.fn(() => ({
+			dispose: vi.fn(),
+		})),
+	},
+	Uri: {
+		file: vi.fn((path) => ({ fsPath: path })),
+	},
+	RelativePattern: vi.fn(),
+	DiagnosticSeverity: {
+		Error: 0,
+		Warning: 1,
+		Information: 2,
+		Hint: 3,
+	},
+	languages: {
+		getDiagnostics: vi.fn(() => []),
+	},
+}))
+
+// Mock other dependencies
+vi.mock("../../webview/ClineProvider")
+vi.mock("../../../utils/path", () => ({
+	getWorkspacePath: vi.fn(() => "/default/workspace"),
+}))
+vi.mock("../../ignore/RooIgnoreController")
+vi.mock("../../protect/RooProtectedController")
+vi.mock("../../context-tracking/FileContextTracker")
+vi.mock("../../../integrations/editor/DiffViewProvider")
+vi.mock("../../../integrations/editor/DecorationController")
+vi.mock("../../../services/browser/UrlContentFetcher")
+vi.mock("../../../integrations/terminal/TerminalRegistry")
+vi.mock("../../../utils/fs", () => ({
+	fileExistsAtPath: vi.fn(() => Promise.resolve(false)),
+}))
+vi.mock("../../../api", () => ({
+	buildApiHandler: vi.fn(() => ({
+		getModel: vi.fn(() => ({ info: {} })),
+	})),
+}))
+vi.mock("../../tools/ToolRepetitionDetector", () => ({
+	ToolRepetitionDetector: vi.fn().mockImplementation(() => ({})),
+}))
+vi.mock("../../tools/AutoApprovalHandler", () => ({
+	AutoApprovalHandler: vi.fn().mockImplementation(() => ({})),
+}))
+
+describe("Multi-folder Workspace Support", () => {
+	let mockProvider: ClineProvider
+
+	beforeEach(() => {
+		mockProvider = {
+			context: {
+				globalStorageUri: { fsPath: "/global/storage" },
+			},
+		} as any
+
+		vi.clearAllMocks()
+	})
+
+	afterEach(() => {
+		vi.restoreAllMocks()
+	})
+
+	describe("Task workspace path initialization", () => {
+		it("should use the active editor's workspace folder in multi-folder workspace", () => {
+			// Setup multi-folder workspace
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/frontend" }, name: "frontend" },
+				{ uri: { fsPath: "/workspace/backend" }, name: "backend" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+
+			// Set active editor in backend folder
+			const activeFileUri = { fsPath: "/workspace/backend/src/index.ts" }
+			;(vscode.window as any).activeTextEditor = {
+				document: { uri: activeFileUri },
+			}
+			;(vscode.workspace.getWorkspaceFolder as any).mockReturnValue(workspaceFolders[1])
+
+			// Create task
+			const task = new Task({
+				provider: mockProvider,
+				apiConfiguration: {} as any,
+				task: "Test task",
+				startTask: false,
+			})
+
+			// Should use backend workspace folder
+			expect(task.workspacePath).toBe("/workspace/backend")
+		})
+
+		it("should maintain consistent workspace path throughout task lifetime", () => {
+			// Setup multi-folder workspace
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/frontend" }, name: "frontend" },
+				{ uri: { fsPath: "/workspace/backend" }, name: "backend" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+
+			// Set active editor in frontend folder
+			const activeFileUri = { fsPath: "/workspace/frontend/src/App.tsx" }
+			;(vscode.window as any).activeTextEditor = {
+				document: { uri: activeFileUri },
+			}
+			;(vscode.workspace.getWorkspaceFolder as any).mockReturnValue(workspaceFolders[0])
+
+			// Create task
+			const task = new Task({
+				provider: mockProvider,
+				apiConfiguration: {} as any,
+				task: "Test task",
+				startTask: false,
+			})
+
+			const initialWorkspacePath = task.workspacePath
+			expect(initialWorkspacePath).toBe("/workspace/frontend")
+
+			// Change active editor to backend folder
+			;(vscode.window as any).activeTextEditor = {
+				document: { uri: { fsPath: "/workspace/backend/src/index.ts" } },
+			}
+			;(vscode.workspace.getWorkspaceFolder as any).mockReturnValue(workspaceFolders[1])
+
+			// Workspace path should remain the same
+			expect(task.workspacePath).toBe(initialWorkspacePath)
+			expect(task.cwd).toBe(initialWorkspacePath)
+		})
+
+		it("should inherit workspace path from parent task", () => {
+			const parentTask = {
+				workspacePath: "/workspace/parent",
+			} as any
+
+			const task = new Task({
+				provider: mockProvider,
+				apiConfiguration: {} as any,
+				task: "Child task",
+				parentTask,
+				startTask: false,
+			})
+
+			expect(task.workspacePath).toBe("/workspace/parent")
+		})
+
+		it("should fallback to first workspace folder when no active editor", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/frontend" }, name: "frontend" },
+				{ uri: { fsPath: "/workspace/backend" }, name: "backend" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+			;(vscode.window as any).activeTextEditor = undefined
+
+			// Mock getWorkspacePath to return first folder
+			const { getWorkspacePath } = require("../../../utils/path")
+			getWorkspacePath.mockReturnValue("/workspace/frontend")
+
+			const task = new Task({
+				provider: mockProvider,
+				apiConfiguration: {} as any,
+				task: "Test task",
+				startTask: false,
+			})
+
+			expect(task.workspacePath).toBe("/workspace/frontend")
+		})
+	})
+
+	describe(".roo folder detection", () => {
+		it("should detect .roo folder as a workspace folder", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/src" }, name: "src" },
+				{ uri: { fsPath: "/workspace/.roo" }, name: ".roo" },
+				{ uri: { fsPath: "/workspace/docs" }, name: "docs" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+
+			// Check if .roo is detected as a workspace folder
+			const rooWorkspaceFolder = workspaceFolders.find((folder) => path.basename(folder.uri.fsPath) === ".roo")
+
+			expect(rooWorkspaceFolder).toBeDefined()
+			expect(rooWorkspaceFolder?.uri.fsPath).toBe("/workspace/.roo")
+		})
+
+		it("should use .roo subfolder in active workspace folder", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/frontend" }, name: "frontend" },
+				{ uri: { fsPath: "/workspace/backend" }, name: "backend" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+
+			// Set active editor in backend folder
+			const activeFileUri = { fsPath: "/workspace/backend/src/index.ts" }
+			;(vscode.window as any).activeTextEditor = {
+				document: { uri: activeFileUri },
+			}
+			;(vscode.workspace.getWorkspaceFolder as any).mockReturnValue(workspaceFolders[1])
+
+			// Determine .roo folder path
+			const targetWorkspaceFolder = vscode.workspace.getWorkspaceFolder(vscode.Uri.file(activeFileUri.fsPath))
+			const rooPath = path.join(targetWorkspaceFolder!.uri.fsPath, ".roo")
+
+			expect(rooPath).toBe("/workspace/backend/.roo")
+		})
+	})
+
+	describe("File mention paths in multi-folder workspace", () => {
+		it("should convert absolute paths to workspace-relative paths", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/frontend" }, name: "frontend" },
+				{ uri: { fsPath: "/workspace/backend" }, name: "backend" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+
+			// Mock getWorkspaceFolder to return the correct folder
+			;(vscode.workspace.getWorkspaceFolder as any).mockImplementation((uri: any) => {
+				const filePath = uri.fsPath
+				if (filePath.startsWith("/workspace/frontend")) {
+					return workspaceFolders[0]
+				} else if (filePath.startsWith("/workspace/backend")) {
+					return workspaceFolders[1]
+				}
+				return undefined
+			})
+
+			// Test absolute path from backend folder
+			const absolutePath = "/workspace/backend/src/api/server.ts"
+			const fileUri = vscode.Uri.file(absolutePath)
+			const workspaceFolder = vscode.workspace.getWorkspaceFolder(fileUri)
+
+			expect(workspaceFolder).toBeDefined()
+			expect(workspaceFolder?.name).toBe("backend")
+
+			// Convert to relative path
+			const relativePath = path.relative(workspaceFolder!.uri.fsPath, absolutePath)
+			const displayPath = path.join(workspaceFolder!.name, relativePath)
+
+			expect(displayPath).toBe("backend/src/api/server.ts")
+		})
+
+		it("should handle file mentions across different workspace folders", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/frontend" }, name: "frontend" },
+				{ uri: { fsPath: "/workspace/backend" }, name: "backend" },
+			]
+			;(vscode.workspace as any).workspaceFolders = workspaceFolders
+
+			// Mock getWorkspaceFolder
+			;(vscode.workspace.getWorkspaceFolder as any).mockImplementation((uri: any) => {
+				const filePath = uri.fsPath
+				if (filePath.startsWith("/workspace/frontend")) {
+					return workspaceFolders[0]
+				} else if (filePath.startsWith("/workspace/backend")) {
+					return workspaceFolders[1]
+				}
+				return undefined
+			})
+
+			// Test files from different folders
+			const frontendFile = "/workspace/frontend/src/App.tsx"
+			const backendFile = "/workspace/backend/src/server.ts"
+
+			// Get workspace folders for each file
+			const frontendFolder = vscode.workspace.getWorkspaceFolder(vscode.Uri.file(frontendFile))
+			const backendFolder = vscode.workspace.getWorkspaceFolder(vscode.Uri.file(backendFile))
+
+			// Convert to display paths
+			const frontendDisplayPath = path.join(
+				frontendFolder!.name,
+				path.relative(frontendFolder!.uri.fsPath, frontendFile),
+			)
+			const backendDisplayPath = path.join(
+				backendFolder!.name,
+				path.relative(backendFolder!.uri.fsPath, backendFile),
+			)
+
+			expect(frontendDisplayPath).toBe("frontend/src/App.tsx")
+			expect(backendDisplayPath).toBe("backend/src/server.ts")
+		})
+	})
+})
diff --git a/src/core/webview/webviewMessageHandler.ts b/src/core/webview/webviewMessageHandler.ts
index f5dc6a467f..d726c7d43f 100644
--- a/src/core/webview/webviewMessageHandler.ts
+++ b/src/core/webview/webviewMessageHandler.ts
@@ -800,9 +800,33 @@ export const webviewMessageHandler = async (
 				return
 			}
 
-			const workspaceFolder = vscode.workspace.workspaceFolders[0]
-			const rooDir = path.join(workspaceFolder.uri.fsPath, ".roo")
-			const mcpPath = path.join(rooDir, "mcp.json")
+			// Check if .roo is a workspace folder itself
+			const rooWorkspaceFolder = vscode.workspace.workspaceFolders.find(
+				(folder) => path.basename(folder.uri.fsPath) === ".roo",
+			)
+
+			let rooDir: string
+			let mcpPath: string
+
+			if (rooWorkspaceFolder) {
+				// .roo is a workspace folder itself
+				rooDir = rooWorkspaceFolder.uri.fsPath
+				mcpPath = path.join(rooDir, "mcp.json")
+			} else {
+				// Use the workspace folder of the active file, or fall back to first workspace folder
+				const activeFileUri = vscode.window.activeTextEditor?.document.uri
+				let targetWorkspaceFolder = vscode.workspace.workspaceFolders[0]
+
+				if (activeFileUri) {
+					const activeWorkspaceFolder = vscode.workspace.getWorkspaceFolder(activeFileUri)
+					if (activeWorkspaceFolder) {
+						targetWorkspaceFolder = activeWorkspaceFolder
+					}
+				}
+
+				rooDir = path.join(targetWorkspaceFolder.uri.fsPath, ".roo")
+				mcpPath = path.join(rooDir, "mcp.json")
+			}
 
 			try {
 				await fs.mkdir(rooDir, { recursive: true })
diff --git a/src/services/mcp/McpHub.ts b/src/services/mcp/McpHub.ts
index 271c6e1fb3..a94c71eda5 100644
--- a/src/services/mcp/McpHub.ts
+++ b/src/services/mcp/McpHub.ts
@@ -347,6 +347,20 @@ export class McpHub {
 			return
 		}
 
+		// Watch for mcp.json in all workspace folders
+		for (const workspaceFolder of vscode.workspace.workspaceFolders) {
+			// Check if .roo is a workspace folder itself
+			if (path.basename(workspaceFolder.uri.fsPath) === ".roo") {
+				const projectMcpPattern = new vscode.RelativePattern(workspaceFolder, "mcp.json")
+				this.projectMcpWatcher = vscode.workspace.createFileSystemWatcher(projectMcpPattern)
+			} else {
+				// Watch for .roo/mcp.json in regular workspace folders
+				const projectMcpPattern = new vscode.RelativePattern(workspaceFolder, ".roo/mcp.json")
+				this.projectMcpWatcher = vscode.workspace.createFileSystemWatcher(projectMcpPattern)
+			}
+		}
+
+		// Use the first watcher if multiple were created (for simplicity)
 		const workspaceFolder = vscode.workspace.workspaceFolders[0]
 		const projectMcpPattern = new vscode.RelativePattern(workspaceFolder, ".roo/mcp.json")
 
@@ -553,8 +567,31 @@ export class McpHub {
 			return null
 		}
 
-		const workspaceFolder = vscode.workspace.workspaceFolders[0]
-		const projectMcpDir = path.join(workspaceFolder.uri.fsPath, ".roo")
+		// Check if there's a .roo folder in any workspace folder
+		// First, check if there's a .roo folder that is itself a workspace folder
+		const rooWorkspaceFolder = vscode.workspace.workspaceFolders.find(
+			(folder) => path.basename(folder.uri.fsPath) === ".roo",
+		)
+
+		if (rooWorkspaceFolder) {
+			// .roo is a workspace folder itself
+			const projectMcpPath = path.join(rooWorkspaceFolder.uri.fsPath, "mcp.json")
+			return projectMcpPath
+		}
+
+		// Otherwise, look for .roo subfolder in workspace folders
+		// Prioritize the workspace folder containing the active file
+		const activeFileUri = vscode.window.activeTextEditor?.document.uri
+		let targetWorkspaceFolder = vscode.workspace.workspaceFolders[0]
+
+		if (activeFileUri) {
+			const activeWorkspaceFolder = vscode.workspace.getWorkspaceFolder(activeFileUri)
+			if (activeWorkspaceFolder) {
+				targetWorkspaceFolder = activeWorkspaceFolder
+			}
+		}
+
+		const projectMcpDir = path.join(targetWorkspaceFolder.uri.fsPath, ".roo")
 		const projectMcpPath = path.join(projectMcpDir, "mcp.json")
 
 		try {