diff --git a/apps/web/components/header.tsx b/apps/web/components/header.tsx
index d50e4517..161b4edd 100644
--- a/apps/web/components/header.tsx
+++ b/apps/web/components/header.tsx
@@ -82,7 +82,6 @@ export function Header({ onAddMemory }: { onAddMemory?: () => void }) {
 	}, [conversations])
 
 	useEffect(() => {
-		console.log("searchParams", searchParams.get("mcp"))
 		const mcpParam = searchParams.get("mcp")
 		if (mcpParam === "manual") {
 			setMcpInitialClient("mcp-url")
diff --git a/apps/web/components/new/chat/index.tsx b/apps/web/components/new/chat/index.tsx
index 694e7c12..f18deb1b 100644
--- a/apps/web/components/new/chat/index.tsx
+++ b/apps/web/components/new/chat/index.tsx
@@ -50,7 +50,7 @@ function ChatEmptyStatePlaceholder() {
 						<Button
 							key={suggestion}
 							variant="default"
-							className="rounded-full text-base gap-1 h-10! border-[#2261CA33] bg-[#041127] border w-fit py-[4px] pl-[8px] pr-[12px]"
+							className="rounded-full text-base gap-1 h-10! border-[#2261CA33] bg-[#041127] border w-fit py-[4px] pl-[8px] pr-[12px] hover:bg-[#0A1A3A] hover:[&_span]:text-white hover:[&_svg]:text-white transition-colors"
 						>
 							<SearchIcon className="size-4 text-[#267BF1]" />
 							<span className="text-[#267BF1] text-[12px]">{suggestion}</span>
@@ -78,6 +78,7 @@ export function ChatSidebar() {
 	const [loadingFollowUps, setLoadingFollowUps] = useState<
 		Record<string, boolean>
 	>({})
+	const [isInputExpanded, setIsInputExpanded] = useState(false)
 	const pendingFollowUpGenerations = useRef<Set<string>>(new Set())
 	const { selectedProject } = useProject()
 	const { setCurrentChatId } = usePersistentChat()
@@ -199,8 +200,6 @@ export function ChatSidebar() {
 		}
 	}, [messages, followUpQuestions, loadingFollowUps, status])
 
-	console.log(messages)
-
 	const handleSend = () => {
 		if (!input.trim() || status === "submitted" || status === "streaming")
 			return
@@ -284,7 +283,7 @@ export function ChatSidebar() {
 				>
 					<motion.button
 						onClick={toggleChat}
-						className="flex items-center gap-2 rounded-full px-3 py-1.5 text-xs font-medium border-[1px] border-[#17181A] text-white cursor-pointer"
+						className="flex items-center gap-2 rounded-full px-3 py-1.5 text-xs font-medium border border-[#17181A] text-white cursor-pointer"
 						style={{
 							background: "linear-gradient(180deg, #0A0E14 0%, #05070A 100%)",
 						}}
@@ -297,7 +296,7 @@ export function ChatSidebar() {
 				<motion.div
 					key="open"
 					className={cn(
-						"w-[450px] h-[calc(100vh-95px)] bg-[#05070A] backdrop-blur-md flex flex-col rounded-2xl m-4 border border-[#17181AB2] relative",
+						"w-[450px] h-[calc(100vh-95px)] bg-[#05070A] backdrop-blur-md flex flex-col rounded-2xl m-4 mt-2 border border-[#17181AB2] relative",
 						dmSansClassName(),
 					)}
 					initial={{ x: "100px", opacity: 0 }}
@@ -354,6 +353,12 @@ export function ChatSidebar() {
 							dmSansClassName(),
 						)}
 					>
+						{isInputExpanded && (
+							<div
+								className="absolute inset-0 z-10! rounded-2xl pointer-events-none"
+								style={{ backgroundColor: "#000000E5" }}
+							/>
+						)}
 						{messages.length === 0 && <ChatEmptyStatePlaceholder />}
 						<div
 							className={cn(
@@ -429,24 +434,12 @@ export function ChatSidebar() {
 									? "Structuring response..."
 									: "Waiting for input..."
 						}
-						chainOfThoughtComponent={(() => {
-							const lastUserMessage = [...messages]
-								.reverse()
-								.find((msg) => msg.role === "user")
-							const lastAgentMessage = [...messages]
-								.reverse()
-								.find((msg) => msg.role === "assistant")
-							const userMessageText =
-								lastUserMessage?.parts.find((part) => part.type === "text")
-									?.text ?? ""
-
-							return userMessageText ? (
-								<ChainOfThought
-									userMessage={userMessageText}
-									lastAgentMessage={lastAgentMessage}
-								/>
+						onExpandedChange={setIsInputExpanded}
+						chainOfThoughtComponent={
+							messages.length > 0 ? (
+								<ChainOfThought messages={messages} />
 							) : null
-						})()}
+						}
 					/>
 				</motion.div>
 			)}
diff --git a/apps/web/components/new/chat/input/chain-of-thought.tsx b/apps/web/components/new/chat/input/chain-of-thought.tsx
index cbf602b2..8667e490 100644
--- a/apps/web/components/new/chat/input/chain-of-thought.tsx
+++ b/apps/web/components/new/chat/input/chain-of-thought.tsx
@@ -18,169 +18,198 @@ interface ReasoningStep {
 	message: string
 }
 
-export function ChainOfThought({
-	userMessage,
-	lastAgentMessage,
-}: {
-	userMessage: string
-	lastAgentMessage: UIMessage | undefined
-}) {
+export function ChainOfThought({ messages }: { messages: UIMessage[] }) {
 	const { user } = useAuth()
 
-	const reasoningSteps: ReasoningStep[] = []
-	if (lastAgentMessage) {
-		lastAgentMessage.parts.forEach((part) => {
-			if (part.type === "tool-searchMemories") {
-				if (
-					part.state === "input-available" ||
-					part.state === "input-streaming"
-				) {
-					reasoningSteps.push({
-						type: part.type,
-						state: part.state,
-						message: "Searching memories...",
-					})
-				} else if (part.state === "output-available") {
-					reasoningSteps.push({
-						type: part.type,
-						state: part.state,
-						message: "Found relevant memories",
-					})
-				} else if (part.state === "output-error") {
-					reasoningSteps.push({
-						type: part.type,
-						state: part.state,
-						message: "Error searching memories",
-					})
-				}
-			}
-		})
-	}
+	// Group messages into user-assistant pairs
+	const messagePairs: Array<{
+		userMessage: UIMessage
+		agentMessage?: UIMessage
+	}> = []
 
-	const memoryResults: MemoryResult[] = []
-	if (lastAgentMessage) {
-		lastAgentMessage.parts.forEach((part) => {
-			if (
-				part.type === "tool-searchMemories" &&
-				part.state === "output-available"
-			) {
-				const output = part.output as { results?: MemoryResult[] } | undefined
-				const results = Array.isArray(output?.results) ? output.results : []
-				memoryResults.push(...results)
-			}
-		})
+	for (let i = 0; i < messages.length; i++) {
+		const message = messages[i]
+		if (message.role === "user") {
+			// Find the next assistant message after this user message
+			const agentMessage = messages
+				.slice(i + 1)
+				.find((msg) => msg.role === "assistant")
+			messagePairs.push({
+				userMessage: message,
+				agentMessage,
+			})
+		}
 	}
 
 	return (
 		<div className="m-3 mb-0 space-y-3 relative z-10">
-			<div className="absolute left-[11px] top-0 bottom-0 w-[1px] bg-[#151F31] self-stretch mb-0 z-[-10]" />
+			<div className="absolute left-[11px] top-0 bottom-0 w-px bg-[#151F31] self-stretch mb-0 -z-10" />
 
-			<div className="flex items-start gap-3 text-[#525D6E] py-1 bg-[#01173C]">
-				{user && (
-					<Avatar className="size-[21px]">
-						<AvatarImage src={user?.image ?? ""} />
-						<AvatarFallback className="text-[10px]">
-							{user?.name?.charAt(0)}
-						</AvatarFallback>
-					</Avatar>
-				)}
-				<p>{userMessage}</p>
-			</div>
+			{messagePairs.map((pair, pairIdx) => {
+				const userMessageText =
+					pair.userMessage.parts.find((part) => part.type === "text")?.text ??
+					""
 
-			{(reasoningSteps.length > 0 || memoryResults.length > 0) && (
-				<div className="flex gap-3">
-					<div className="flex flex-col items-center mx-2 bg-[#01173C] py-1 h-fit">
-						<div className="size-[7px] rounded-full bg-[#151F31] shrink-0" />
-					</div>
+				const reasoningSteps: ReasoningStep[] = []
+				if (pair.agentMessage) {
+					pair.agentMessage.parts.forEach((part) => {
+						if (part.type === "tool-searchMemories") {
+							if (
+								part.state === "input-available" ||
+								part.state === "input-streaming"
+							) {
+								reasoningSteps.push({
+									type: part.type,
+									state: part.state,
+									message: "Searching memories...",
+								})
+							} else if (part.state === "output-available") {
+								reasoningSteps.push({
+									type: part.type,
+									state: part.state,
+									message: "Found relevant memories",
+								})
+							} else if (part.state === "output-error") {
+								reasoningSteps.push({
+									type: part.type,
+									state: part.state,
+									message: "Error searching memories",
+								})
+							}
+						}
+					})
+				}
 
-					<div className="flex-1 space-y-1">
-						{reasoningSteps.length > 0 && (
-							<div className="space-y-1.5">
-								{reasoningSteps.map((step, idx) => (
-									<div
-										key={`${step.type}-${step.state}-${idx}`}
-										className="text-[#525D6E]"
-									>
-										{step.message}
-									</div>
-								))}
-							</div>
-						)}
+				const memoryResults: MemoryResult[] = []
+				if (pair.agentMessage) {
+					pair.agentMessage.parts.forEach((part) => {
+						if (
+							part.type === "tool-searchMemories" &&
+							part.state === "output-available"
+						) {
+							const output = part.output as
+								| { results?: MemoryResult[] }
+								| undefined
+							const results = Array.isArray(output?.results)
+								? output.results
+								: []
+							memoryResults.push(...results)
+						}
+					})
+				}
 
-						{memoryResults.length > 0 && (
-							<div className="grid grid-cols-2 gap-2 max-h-64 overflow-y-auto">
-								{memoryResults.map((result, idx) => {
-									const isClickable =
-										result.url &&
-										(result.url.startsWith("http://") ||
-											result.url.startsWith("https://"))
+				return (
+					<div key={pair.userMessage.id || pairIdx} className="space-y-3">
+						<div className="flex items-start gap-3 text-[#525D6E] py-1">
+							{user && (
+								<Avatar className="size-[21px]">
+									<AvatarImage src={user?.image ?? ""} />
+									<AvatarFallback className="text-[10px]">
+										{user?.name?.charAt(0)}
+									</AvatarFallback>
+								</Avatar>
+							)}
+							<p>{userMessageText}</p>
+						</div>
 
-									const content = (
-										<div className="">
-											<div className="bg-[#060D17] p-2 px-[10px] rounded-xl m-[2px]">
-												{result.title && (
-													<div className="text-xs text-[#525D6E] line-clamp-2">
-														{result.title}
-													</div>
-												)}
-												{result.content && (
-													<div className="text-xs text-[#525D6E]/80 line-clamp-2 mt-1">
-														{result.content}
-													</div>
-												)}
-												{result.url && (
-													<div className="text-xs text-[#525D6E] mt-1 truncate">
-														{result.url}
-													</div>
-												)}
-											</div>
-											{result.score && (
-												<div className="flex justify-center p-1">
-													<div
-														className={cn(
-															"text-[10px] inline-block bg-clip-text text-transparent font-medium",
-															dmSansClassName(),
-														)}
-														style={{
-															backgroundImage:
-																"var(--grad-1, linear-gradient(94deg, #369BFD 4.8%, #36FDFD 77.04%, #36FDB5 143.99%))",
-														}}
-													>
-														Relevancy score: {(result.score * 100).toFixed(1)}%
-													</div>
+						{(reasoningSteps.length > 0 || memoryResults.length > 0) && (
+							<div className="flex gap-3">
+								<div className="flex flex-col items-center mx-2 py-1 h-fit">
+									<div className="size-[7px] rounded-full bg-[#151F31] shrink-0" />
+								</div>
+
+								<div className="flex-1 space-y-1">
+									{reasoningSteps.length > 0 && (
+										<div className="space-y-1.5">
+											{reasoningSteps.map((step, idx) => (
+												<div
+													key={`${step.type}-${step.state}-${idx}`}
+													className="text-[#525D6E]"
+												>
+													{step.message}
 												</div>
-											)}
+											))}
 										</div>
-									)
+									)}
 
-									if (isClickable) {
-										return (
-											<a
-												className="block p-2 bg-[#0C1829]/50 rounded-md border border-[#525D6E]/20 hover:bg-[#0C1829]/70 transition-colors cursor-pointer"
-												href={result.url}
-												key={result.documentId || idx}
-												rel="noopener noreferrer"
-												target="_blank"
-											>
-												{content}
-											</a>
-										)
-									}
+									{memoryResults.length > 0 && (
+										<div className="grid grid-cols-2 gap-2 max-h-64 overflow-y-auto">
+											{memoryResults.map((result, idx) => {
+												const isClickable =
+													result.url &&
+													(result.url.startsWith("http://") ||
+														result.url.startsWith("https://"))
 
-									return (
-										<div
-											className={cn("bg-[#0C1829] rounded-xl")}
-											key={result.documentId || idx}
-										>
-											{content}
+												const content = (
+													<div className="">
+														<div className="bg-[#060D17] p-2 px-[10px] rounded-xl m-[2px]">
+															{result.title && (
+																<div className="text-xs text-[#525D6E] line-clamp-2">
+																	{result.title}
+																</div>
+															)}
+															{result.content && (
+																<div className="text-xs text-[#525D6E]/80 line-clamp-2 mt-1">
+																	{result.content}
+																</div>
+															)}
+															{result.url && (
+																<div className="text-xs text-[#525D6E] mt-1 truncate">
+																	{result.url}
+																</div>
+															)}
+														</div>
+														{result.score && (
+															<div className="flex justify-center p-1">
+																<div
+																	className={cn(
+																		"text-[10px] inline-block bg-clip-text text-transparent font-medium",
+																		dmSansClassName(),
+																	)}
+																	style={{
+																		backgroundImage:
+																			"var(--grad-1, linear-gradient(94deg, #369BFD 4.8%, #36FDFD 77.04%, #36FDB5 143.99%))",
+																	}}
+																>
+																	Relevancy score:{" "}
+																	{(result.score * 100).toFixed(1)}%
+																</div>
+															</div>
+														)}
+													</div>
+												)
+
+												if (isClickable) {
+													return (
+														<a
+															className="block p-2 bg-[#0C1829]/50 rounded-md border border-[#525D6E]/20 hover:bg-[#0C1829]/70 transition-colors cursor-pointer"
+															href={result.url}
+															key={result.documentId || idx}
+															rel="noopener noreferrer"
+															target="_blank"
+														>
+															{content}
+														</a>
+													)
+												}
+
+												return (
+													<div
+														className={cn("bg-[#0C1829] rounded-xl")}
+														key={result.documentId || idx}
+													>
+														{content}
+													</div>
+												)
+											})}
 										</div>
-									)
-								})}
+									)}
+								</div>
 							</div>
 						)}
 					</div>
-				</div>
-			)}
+				)
+			})}
 		</div>
 	)
 }
diff --git a/apps/web/components/new/chat/input/index.tsx b/apps/web/components/new/chat/input/index.tsx
index a8aa0a25..1ca7a00b 100644
--- a/apps/web/components/new/chat/input/index.tsx
+++ b/apps/web/components/new/chat/input/index.tsx
@@ -17,6 +17,7 @@ interface ChatInputProps {
 	isResponding?: boolean
 	activeStatus?: string
 	chainOfThoughtComponent?: React.ReactNode
+	onExpandedChange?: (expanded: boolean) => void
 }
 
 export default function ChatInput({
@@ -28,6 +29,7 @@ export default function ChatInput({
 	isResponding = false,
 	activeStatus,
 	chainOfThoughtComponent,
+	onExpandedChange,
 }: ChatInputProps) {
 	const [isMultiline, setIsMultiline] = useState(false)
 	const [isExpanded, setIsExpanded] = useState(false)
@@ -48,11 +50,12 @@ export default function ChatInput({
 
 	return (
 		<motion.div
-			className={cn("bg-[#01173C] relative")}
+			className={cn("relative z-20!")}
 			animate={{
-				padding: isExpanded ? "0.5rem" : "0",
+				padding: isExpanded ? "16px" : "0",
 				margin: isExpanded ? "0" : "16px",
 				borderRadius: isExpanded ? "0 0 12px 12px" : "12px",
+				backgroundColor: isExpanded ? "#000B1B" : "#01173C",
 			}}
 			transition={{
 				duration: 0.3,
@@ -61,18 +64,15 @@ export default function ChatInput({
 		>
 			<div
 				className={cn(
-					"absolute bottom-full left-0 right-0 overflow-hidden transition-all duration-300 ease-out bg-[#01173C]",
+					"absolute bottom-full left-0 right-0 overflow-hidden transition-all duration-300 ease-out bg-[#000B1B]",
 					isExpanded
-						? "max-h-[80vh] opacity-100 overflow-y-auto pt-1.5 pb-2 rounded-t-xl px-2"
+						? "max-h-[80vh] opacity-100 overflow-y-auto pt-1.5 pb-2 rounded-t-xl px-4"
 						: "max-h-0 opacity-0",
 				)}
 				style={{
 					zIndex: isExpanded ? 50 : 0,
 				}}
 			>
-				{isExpanded && (
-					<div className="absolute top-0 left-0 right-0 h-10 bg-linear-to-b from-[#01173C] via-[#01173C]/50 to-transparent pointer-events-none z-10" />
-				)}
 				{chainOfThoughtComponent}
 			</div>
 			<button
@@ -82,8 +82,11 @@ export default function ChatInput({
 					!chainOfThoughtComponent && "disabled:cursor-not-allowed",
 				)}
 				onClick={() => {
-					setIsExpanded(!isExpanded)
+					const newExpanded = !isExpanded
+					setIsExpanded(newExpanded)
+					onExpandedChange?.(newExpanded)
 				}}
+				disabled={!chainOfThoughtComponent}
 			>
 				<div className="flex items-center gap-3">
 					<NovaOrb size={24} className="blur-[1px]! z-10" />
diff --git a/apps/web/components/new/chat/message/agent-message.tsx b/apps/web/components/new/chat/message/agent-message.tsx
index cab3407e..bf9f0eb0 100644
--- a/apps/web/components/new/chat/message/agent-message.tsx
+++ b/apps/web/components/new/chat/message/agent-message.tsx
@@ -62,7 +62,7 @@ export function AgentMessage({
 							return (
 								<div
 									key={`${message.id}-${partIndex}`}
-									className="text-sm text-white/90"
+									className="text-sm text-white/90 chat-markdown-content"
 								>
 									<Streamdown>{part.text}</Streamdown>
 								</div>
diff --git a/apps/web/globals.css b/apps/web/globals.css
index c71ee39d..4343eb06 100644
--- a/apps/web/globals.css
+++ b/apps/web/globals.css
@@ -66,3 +66,19 @@
 	-webkit-background-clip: text;
 	-webkit-text-fill-color: transparent;
 }
+
+/* css to fix for ordered list numbers being cut off in chat agent messages */
+.chat-markdown-content ol {
+	padding-left: 1.5rem;
+	margin-left: 0;
+}
+
+.chat-markdown-content ul {
+	padding-left: 1.5rem;
+	margin-left: 0;
+}
+
+.chat-markdown-content li {
+	margin-left: 0;
+	padding-left: 0.25rem;
+}