diff --git a/src/core/config/CustomModesManager.ts b/src/core/config/CustomModesManager.ts
index a9a2e6a6b5..f66f518479 100644
--- a/src/core/config/CustomModesManager.ts
+++ b/src/core/config/CustomModesManager.ts
@@ -10,7 +10,7 @@ import { type ModeConfig, type PromptComponent, customModesSettingsSchema, modeC
 
 import { fileExistsAtPath } from "../../utils/fs"
 import { getWorkspacePath } from "../../utils/path"
-import { getGlobalRooDirectory } from "../../services/roo-config"
+import { getGlobalRooDirectory, getProjectRooDirectoryForCwd } from "../../services/roo-config"
 import { logger } from "../../utils/logging"
 import { GlobalFileNames } from "../../shared/globalFileNames"
 import { ensureSettingsDirectoryExists } from "../../utils/globalContext"
@@ -566,14 +566,15 @@ export class CustomModesManager {
 			if (scope === "project") {
 				const workspacePath = getWorkspacePath()
 				if (workspacePath) {
-					rulesFolderPath = path.join(workspacePath, ".roo", `rules-${slug}`)
+					const rooDir = await getProjectRooDirectoryForCwd(workspacePath)
+					rulesFolderPath = path.join(rooDir, `rules-${slug}`)
 				} else {
 					return // No workspace, can't delete project rules
 				}
 			} else {
-				// Global scope - use OS home directory
-				const homeDir = os.homedir()
-				rulesFolderPath = path.join(homeDir, ".roo", `rules-${slug}`)
+				// Global scope - use global .roo directory
+				const globalRooDir = getGlobalRooDirectory()
+				rulesFolderPath = path.join(globalRooDir, `rules-${slug}`)
 			}
 
 			// Check if the rules folder exists and delete it
@@ -665,7 +666,8 @@ export class CustomModesManager {
 				if (!workspacePath) {
 					return false
 				}
-				modeRulesDir = path.join(workspacePath, ".roo", `rules-${slug}`)
+				const rooDir = await getProjectRooDirectoryForCwd(workspacePath)
+				modeRulesDir = path.join(rooDir, `rules-${slug}`)
 			}
 
 			try {
@@ -769,9 +771,13 @@ export class CustomModesManager {
 			}
 
 			// Check for .roo/rules-{slug}/ directory (or rules-{slug}/ for global)
-			const modeRulesDir = isGlobalMode
-				? path.join(baseDir, `rules-${slug}`)
-				: path.join(baseDir, ".roo", `rules-${slug}`)
+			let modeRulesDir: string
+			if (isGlobalMode) {
+				modeRulesDir = path.join(baseDir, `rules-${slug}`)
+			} else {
+				const rooDir = await getProjectRooDirectoryForCwd(baseDir)
+				modeRulesDir = path.join(rooDir, `rules-${slug}`)
+			}
 
 			let rulesFiles: RuleFile[] = []
 			try {
@@ -855,7 +861,7 @@ export class CustomModesManager {
 			rulesFolderPath = path.join(baseDir, `rules-${importMode.slug}`)
 		} else {
 			const workspacePath = getWorkspacePath()
-			baseDir = path.join(workspacePath, ".roo")
+			baseDir = await getProjectRooDirectoryForCwd(workspacePath)
 			rulesFolderPath = path.join(baseDir, `rules-${importMode.slug}`)
 		}
 
diff --git a/src/core/webview/webviewMessageHandler.ts b/src/core/webview/webviewMessageHandler.ts
index 97ef0ddc3c..a611dddedf 100644
--- a/src/core/webview/webviewMessageHandler.ts
+++ b/src/core/webview/webviewMessageHandler.ts
@@ -50,6 +50,7 @@ import { getModels, flushModels } from "../../api/providers/fetchers/modelCache"
 import { GetModelsOptions } from "../../shared/api"
 import { generateSystemPrompt } from "./generateSystemPrompt"
 import { getCommand } from "../../utils/commands"
+import { getProjectRooDirectoryForCwd } from "../../services/roo-config"
 
 const ALLOWED_VSCODE_SETTINGS = new Set(["terminal.integrated.inheritEnv"])
 
@@ -801,7 +802,7 @@ export const webviewMessageHandler = async (
 			}
 
 			const workspaceFolder = vscode.workspace.workspaceFolders[0]
-			const rooDir = path.join(workspaceFolder.uri.fsPath, ".roo")
+			const rooDir = await getProjectRooDirectoryForCwd(workspaceFolder.uri.fsPath)
 			const mcpPath = path.join(rooDir, "mcp.json")
 
 			try {
@@ -2483,7 +2484,8 @@ export const webviewMessageHandler = async (
 						vscode.window.showErrorMessage(t("common:errors.no_workspace_for_project_command"))
 						break
 					}
-					commandsDir = path.join(workspaceRoot, ".roo", "commands")
+					const rooDir = await getProjectRooDirectoryForCwd(workspaceRoot)
+					commandsDir = path.join(rooDir, "commands")
 				}
 
 				// Ensure the commands directory exists
diff --git a/src/services/marketplace/SimpleInstaller.ts b/src/services/marketplace/SimpleInstaller.ts
index be002e2f1d..58dd7f32b0 100644
--- a/src/services/marketplace/SimpleInstaller.ts
+++ b/src/services/marketplace/SimpleInstaller.ts
@@ -6,6 +6,7 @@ import type { MarketplaceItem, MarketplaceItemType, InstallMarketplaceItemOption
 import { GlobalFileNames } from "../../shared/globalFileNames"
 import { ensureSettingsDirectoryExists } from "../../utils/globalContext"
 import type { CustomModesManager } from "../../core/config/CustomModesManager"
+import { getProjectRooDirectoryForCwd } from "../../services/roo-config"
 
 export interface InstallOptions extends InstallMarketplaceItemOptions {
 	target: "project" | "global"
@@ -375,7 +376,8 @@ export class SimpleInstaller {
 			if (!workspaceFolder) {
 				throw new Error("No workspace folder found")
 			}
-			return path.join(workspaceFolder.uri.fsPath, ".roo", "mcp.json")
+			const rooDir = await getProjectRooDirectoryForCwd(workspaceFolder.uri.fsPath)
+			return path.join(rooDir, "mcp.json")
 		} else {
 			const globalSettingsPath = await ensureSettingsDirectoryExists(this.context)
 			return path.join(globalSettingsPath, GlobalFileNames.mcpSettings)
diff --git a/src/services/mcp/McpHub.ts b/src/services/mcp/McpHub.ts
index 10a74712ef..9a1a6fe3ca 100644
--- a/src/services/mcp/McpHub.ts
+++ b/src/services/mcp/McpHub.ts
@@ -32,6 +32,7 @@ import {
 import { fileExistsAtPath } from "../../utils/fs"
 import { arePathsEqual } from "../../utils/path"
 import { injectVariables } from "../../utils/config"
+import { getProjectRooDirectoryForCwd } from "../../services/roo-config"
 
 export type McpConnection = {
 	server: McpServer
@@ -536,7 +537,7 @@ export class McpHub {
 		}
 
 		const workspaceFolder = vscode.workspace.workspaceFolders[0]
-		const projectMcpDir = path.join(workspaceFolder.uri.fsPath, ".roo")
+		const projectMcpDir = await getProjectRooDirectoryForCwd(workspaceFolder.uri.fsPath)
 		const projectMcpPath = path.join(projectMcpDir, "mcp.json")
 
 		try {
diff --git a/src/services/roo-config/__tests__/index.spec.ts b/src/services/roo-config/__tests__/index.spec.ts
index 8e9bf929cc..d098c84c08 100644
--- a/src/services/roo-config/__tests__/index.spec.ts
+++ b/src/services/roo-config/__tests__/index.spec.ts
@@ -1,11 +1,13 @@
 import * as path from "path"
+import * as vscode from "vscode"
 import { describe, it, expect, beforeEach, afterEach, vi } from "vitest"
 
 // Use vi.hoisted to ensure mocks are available during hoisting
-const { mockStat, mockReadFile, mockHomedir } = vi.hoisted(() => ({
+const { mockStat, mockReadFile, mockHomedir, mockWorkspaceFolders } = vi.hoisted(() => ({
 	mockStat: vi.fn(),
 	mockReadFile: vi.fn(),
 	mockHomedir: vi.fn(),
+	mockWorkspaceFolders: vi.fn(),
 }))
 
 // Mock fs/promises module
@@ -21,6 +23,18 @@ vi.mock("os", () => ({
 	homedir: mockHomedir,
 }))
 
+// Mock vscode module
+vi.mock("vscode", () => ({
+	workspace: {
+		get workspaceFolders() {
+			return mockWorkspaceFolders()
+		},
+	},
+	Uri: {
+		file: (path: string) => ({ fsPath: path }),
+	},
+}))
+
 import {
 	getGlobalRooDirectory,
 	getProjectRooDirectoryForCwd,
@@ -29,12 +43,14 @@ import {
 	readFileIfExists,
 	getRooDirectoriesForCwd,
 	loadConfiguration,
+	findWorkspaceWithRoo,
 } from "../index"
 
 describe("RooConfigService", () => {
 	beforeEach(() => {
 		vi.clearAllMocks()
 		mockHomedir.mockReturnValue("/mock/home")
+		mockWorkspaceFolders.mockReturnValue(undefined)
 	})
 
 	afterEach(() => {
@@ -54,10 +70,81 @@ describe("RooConfigService", () => {
 		})
 	})
 
+	describe("findWorkspaceWithRoo", () => {
+		it("should return undefined when no workspace folders exist", () => {
+			mockWorkspaceFolders.mockReturnValue(undefined)
+			const result = findWorkspaceWithRoo()
+			expect(result).toBeUndefined()
+		})
+
+		it("should return undefined when workspace folders array is empty", () => {
+			mockWorkspaceFolders.mockReturnValue([])
+			const result = findWorkspaceWithRoo()
+			expect(result).toBeUndefined()
+		})
+
+		it("should return the workspace folder named .roo", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/project1" }, name: "project1", index: 0 },
+				{ uri: { fsPath: "/workspace/.roo" }, name: ".roo", index: 1 },
+				{ uri: { fsPath: "/workspace/project2" }, name: "project2", index: 2 },
+			]
+			mockWorkspaceFolders.mockReturnValue(workspaceFolders)
+
+			const result = findWorkspaceWithRoo()
+			expect(result).toBe(workspaceFolders[1])
+		})
+
+		it("should return undefined when no workspace folder is named .roo", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/project1" }, name: "project1", index: 0 },
+				{ uri: { fsPath: "/workspace/project2" }, name: "project2", index: 1 },
+			]
+			mockWorkspaceFolders.mockReturnValue(workspaceFolders)
+
+			const result = findWorkspaceWithRoo()
+			expect(result).toBeUndefined()
+		})
+
+		it("should handle workspace folders with .roo in path but not as basename", () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/.roo/subproject" }, name: "subproject", index: 0 },
+				{ uri: { fsPath: "/workspace/project.roo" }, name: "project.roo", index: 1 },
+			]
+			mockWorkspaceFolders.mockReturnValue(workspaceFolders)
+
+			const result = findWorkspaceWithRoo()
+			expect(result).toBeUndefined()
+		})
+	})
+
 	describe("getProjectRooDirectoryForCwd", () => {
-		it("should return correct path for given cwd", () => {
+		it("should return .roo workspace folder path when it exists", async () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/project1" }, name: "project1", index: 0 },
+				{ uri: { fsPath: "/workspace/.roo" }, name: ".roo", index: 1 },
+			]
+			mockWorkspaceFolders.mockReturnValue(workspaceFolders)
+
+			const cwd = "/workspace/project1"
+			const result = await getProjectRooDirectoryForCwd(cwd)
+			expect(result).toBe("/workspace/.roo")
+		})
+
+		it("should return cwd/.roo when no .roo workspace folder exists", async () => {
+			const workspaceFolders = [{ uri: { fsPath: "/workspace/project1" }, name: "project1", index: 0 }]
+			mockWorkspaceFolders.mockReturnValue(workspaceFolders)
+
 			const cwd = "/custom/project/path"
-			const result = getProjectRooDirectoryForCwd(cwd)
+			const result = await getProjectRooDirectoryForCwd(cwd)
+			expect(result).toBe(path.join(cwd, ".roo"))
+		})
+
+		it("should return cwd/.roo when no workspace folders exist", async () => {
+			mockWorkspaceFolders.mockReturnValue(undefined)
+
+			const cwd = "/custom/project/path"
+			const result = await getProjectRooDirectoryForCwd(cwd)
 			expect(result).toBe(path.join(cwd, ".roo"))
 		})
 	})
@@ -206,13 +293,26 @@ describe("RooConfigService", () => {
 	})
 
 	describe("getRooDirectoriesForCwd", () => {
-		it("should return directories for given cwd", () => {
+		it("should return directories for given cwd", async () => {
 			const cwd = "/custom/project/path"
 
-			const result = getRooDirectoriesForCwd(cwd)
+			const result = await getRooDirectoriesForCwd(cwd)
 
 			expect(result).toEqual([path.join("/mock/home", ".roo"), path.join(cwd, ".roo")])
 		})
+
+		it("should use .roo workspace folder when it exists", async () => {
+			const workspaceFolders = [
+				{ uri: { fsPath: "/workspace/project1" }, name: "project1", index: 0 },
+				{ uri: { fsPath: "/workspace/.roo" }, name: ".roo", index: 1 },
+			]
+			mockWorkspaceFolders.mockReturnValue(workspaceFolders)
+
+			const cwd = "/workspace/project1"
+			const result = await getRooDirectoriesForCwd(cwd)
+
+			expect(result).toEqual([path.join("/mock/home", ".roo"), "/workspace/.roo"])
+		})
 	})
 
 	describe("loadConfiguration", () => {
diff --git a/src/services/roo-config/index.ts b/src/services/roo-config/index.ts
index b46c39e354..ba5c6208a1 100644
--- a/src/services/roo-config/index.ts
+++ b/src/services/roo-config/index.ts
@@ -1,6 +1,36 @@
 import * as path from "path"
 import * as os from "os"
 import fs from "fs/promises"
+import * as vscode from "vscode"
+
+/**
+ * Finds the workspace folder that contains a .roo directory
+ *
+ * @returns The workspace folder containing .roo, or undefined if not found
+ *
+ * @example
+ * ```typescript
+ * const workspaceWithRoo = findWorkspaceWithRoo()
+ * if (workspaceWithRoo) {
+ *   // .roo folder exists as one of the workspace folders
+ *   const rooPath = workspaceWithRoo.uri.fsPath
+ * }
+ * ```
+ */
+export function findWorkspaceWithRoo(): vscode.WorkspaceFolder | undefined {
+	if (!vscode.workspace.workspaceFolders || vscode.workspace.workspaceFolders.length === 0) {
+		return undefined
+	}
+
+	// Check if any workspace folder is named .roo
+	for (const folder of vscode.workspace.workspaceFolders) {
+		if (path.basename(folder.uri.fsPath) === ".roo") {
+			return folder
+		}
+	}
+
+	return undefined
+}
 
 /**
  * Gets the global .roo directory path based on the current platform
@@ -56,8 +86,19 @@ export function getGlobalRooDirectory(): string {
  * │   └── index.ts
  * └── package.json
  * ```
+ *
+ * @note In multi-root workspaces, if .roo is one of the workspace folders,
+ * this function will return that folder's path instead of creating a .roo
+ * subdirectory in the first workspace folder.
  */
 export function getProjectRooDirectoryForCwd(cwd: string): string {
+	// Check if .roo is one of the workspace folders in a multi-root workspace
+	const workspaceWithRoo = findWorkspaceWithRoo()
+	if (workspaceWithRoo) {
+		return workspaceWithRoo.uri.fsPath
+	}
+
+	// Default behavior: create .roo as a subdirectory
 	return path.join(cwd, ".roo")
 }