diff --git a/frontend/src/utils/__tests__/status.test.ts b/frontend/src/utils/__tests__/status.test.ts
new file mode 100644
index 0000000000..cca6c0efaf
--- /dev/null
+++ b/frontend/src/utils/__tests__/status.test.ts
@@ -0,0 +1,209 @@
+import { describe, it, expect } from "vitest";
+import { getStatusCode, getIndicatorColor, IndicatorColor } from "../status";
+import { AgentState } from "#/types/agent-state";
+import { I18nKey } from "#/i18n/declaration";
+
+describe("getStatusCode", () => {
+  it("should prioritize agent readiness over stale runtime status", () => {
+    // Test case: Agent is ready (AWAITING_USER_INPUT) but runtime status is still starting
+    const result = getStatusCode(
+      { id: "", message: "", type: "info", status_update: true }, // statusMessage
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus (stale)
+      AgentState.AWAITING_USER_INPUT, // agentState (ready)
+    );
+
+    // Should return agent state message, not runtime status
+    expect(result).toBe(I18nKey.AGENT_STATUS$WAITING_FOR_TASK);
+  });
+
+  it("should show runtime status when agent is not ready", () => {
+    // Test case: Agent is loading and runtime is starting
+    const result = getStatusCode(
+      { id: "", message: "", type: "info", status_update: true }, // statusMessage
+      "CONNECTED", // webSocketStatus
+      "STARTING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus
+      AgentState.LOADING, // agentState (not ready)
+    );
+
+    // Should return runtime status since agent is not ready
+    expect(result).toBe("STATUS$STARTING_RUNTIME");
+  });
+
+  it("should handle agent running state with stale runtime status", () => {
+    // Test case: Agent is running but runtime status is stale
+    const result = getStatusCode(
+      { id: "", message: "", type: "info", status_update: true }, // statusMessage
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$BUILDING_RUNTIME", // runtimeStatus (stale)
+      AgentState.RUNNING, // agentState (ready)
+    );
+
+    // Should return agent state message, not runtime status
+    expect(result).toBe(I18nKey.AGENT_STATUS$RUNNING_TASK);
+  });
+
+  it("should handle agent finished state with stale runtime status", () => {
+    // Test case: Agent is finished but runtime status is stale
+    const result = getStatusCode(
+      { id: "", message: "", type: "info", status_update: true }, // statusMessage
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$SETTING_UP_WORKSPACE", // runtimeStatus (stale)
+      AgentState.FINISHED, // agentState (ready)
+    );
+
+    // Should return agent state message, not runtime status
+    expect(result).toBe(I18nKey.AGENT_STATUS$WAITING_FOR_TASK);
+  });
+
+  it("should still respect stopped states", () => {
+    // Test case: Runtime is stopped - should always show stopped
+    const result = getStatusCode(
+      { id: "", message: "", type: "info", status_update: true }, // statusMessage
+      "CONNECTED", // webSocketStatus
+      "STOPPED", // conversationStatus
+      "STATUS$STOPPED", // runtimeStatus
+      AgentState.RUNNING, // agentState
+    );
+
+    // Should return stopped status regardless of agent state
+    expect(result).toBe(I18nKey.CHAT_INTERFACE$STOPPED);
+  });
+
+  it("should handle null agent state with runtime status", () => {
+    // Test case: No agent state, runtime is starting
+    const result = getStatusCode(
+      { id: "", message: "", type: "info", status_update: true }, // statusMessage
+      "CONNECTED", // webSocketStatus
+      "STARTING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus
+      null, // agentState
+    );
+
+    // Should return runtime status since no agent state
+    expect(result).toBe("STATUS$STARTING_RUNTIME");
+  });
+});
+
+describe("getIndicatorColor", () => {
+  it("should prioritize agent readiness over stale runtime status for AWAITING_USER_INPUT", () => {
+    // Test case: Agent is ready (AWAITING_USER_INPUT) but runtime status is still starting
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus (stale)
+      AgentState.AWAITING_USER_INPUT, // agentState (ready)
+    );
+
+    // Should return blue for AWAITING_USER_INPUT, not yellow for stale runtime
+    expect(result).toBe(IndicatorColor.BLUE);
+  });
+
+  it("should prioritize agent readiness over stale runtime status for RUNNING", () => {
+    // Test case: Agent is running but runtime status is stale
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$BUILDING_RUNTIME", // runtimeStatus (stale)
+      AgentState.RUNNING, // agentState (ready)
+    );
+
+    // Should return green for RUNNING, not yellow for stale runtime
+    expect(result).toBe(IndicatorColor.GREEN);
+  });
+
+  it("should prioritize agent readiness over stale runtime status for FINISHED", () => {
+    // Test case: Agent is finished but runtime status is stale
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$SETTING_UP_WORKSPACE", // runtimeStatus (stale)
+      AgentState.FINISHED, // agentState (ready)
+    );
+
+    // Should return green for FINISHED, not yellow for stale runtime
+    expect(result).toBe(IndicatorColor.GREEN);
+  });
+
+  it("should show yellow when agent is not ready and runtime is starting", () => {
+    // Test case: Agent is loading and runtime is starting
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "STARTING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus
+      AgentState.LOADING, // agentState (not ready)
+    );
+
+    // Should return yellow since agent is not ready
+    expect(result).toBe(IndicatorColor.YELLOW);
+  });
+
+  it("should show orange for AWAITING_USER_CONFIRMATION even with stale runtime", () => {
+    // Test case: Agent is awaiting confirmation but runtime status is stale
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus (stale)
+      AgentState.AWAITING_USER_CONFIRMATION, // agentState (ready)
+    );
+
+    // Should return orange for AWAITING_USER_CONFIRMATION, not yellow for stale runtime
+    expect(result).toBe(IndicatorColor.ORANGE);
+  });
+
+  it("should still respect stopped states", () => {
+    // Test case: Runtime is stopped - should always show red
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "STOPPED", // conversationStatus
+      "STATUS$STOPPED", // runtimeStatus
+      AgentState.RUNNING, // agentState
+    );
+
+    // Should return red for stopped status regardless of agent state
+    expect(result).toBe(IndicatorColor.RED);
+  });
+
+  it("should handle null agent state with runtime status", () => {
+    // Test case: No agent state, runtime is starting
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "STARTING", // conversationStatus
+      "STATUS$STARTING_RUNTIME", // runtimeStatus
+      null, // agentState
+    );
+
+    // Should return yellow since no agent state and runtime is starting
+    expect(result).toBe(IndicatorColor.YELLOW);
+  });
+
+  it("should handle USER_CONFIRMED state with stale runtime status", () => {
+    // Test case: Agent is in USER_CONFIRMED state but runtime status is stale
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$BUILDING_RUNTIME", // runtimeStatus (stale)
+      AgentState.USER_CONFIRMED, // agentState (ready)
+    );
+
+    // Should return green for USER_CONFIRMED, not yellow for stale runtime
+    expect(result).toBe(IndicatorColor.GREEN);
+  });
+
+  it("should handle USER_REJECTED state with stale runtime status", () => {
+    // Test case: Agent is in USER_REJECTED state but runtime status is stale
+    const result = getIndicatorColor(
+      "CONNECTED", // webSocketStatus
+      "RUNNING", // conversationStatus
+      "STATUS$BUILDING_RUNTIME", // runtimeStatus (stale)
+      AgentState.USER_REJECTED, // agentState (ready)
+    );
+
+    // Should return green for USER_REJECTED, not yellow for stale runtime
+    expect(result).toBe(IndicatorColor.GREEN);
+  });
+});
diff --git a/frontend/src/utils/status.ts b/frontend/src/utils/status.ts
index 637d9336c8..3df5ee57cd 100644
--- a/frontend/src/utils/status.ts
+++ b/frontend/src/utils/status.ts
@@ -57,10 +57,23 @@ export function getIndicatorColor(
   ) {
     return IndicatorColor.RED;
   }
+
+  // Prioritize agent state when it indicates readiness, even if runtime status is stale
+  const agentIsReady =
+    agentState &&
+    [
+      AgentState.AWAITING_USER_INPUT,
+      AgentState.RUNNING,
+      AgentState.FINISHED,
+      AgentState.AWAITING_USER_CONFIRMATION,
+      AgentState.USER_CONFIRMED,
+      AgentState.USER_REJECTED,
+    ].includes(agentState);
+
   // Display a yellow working icon while the runtime is starting
   if (
     conversationStatus === "STARTING" ||
-    !["STATUS$READY", null].includes(runtimeStatus) ||
+    (!["STATUS$READY", null].includes(runtimeStatus) && !agentIsReady) ||
     (agentState != null &&
       [
         AgentState.LOADING,
@@ -96,10 +109,23 @@ export function getStatusCode(
     return I18nKey.CHAT_INTERFACE$STOPPED;
   }
 
-  // Handle runtime status messages
+  // Prioritize agent state when it indicates readiness, even if runtime status is stale
+  const agentIsReady =
+    agentState &&
+    [
+      AgentState.AWAITING_USER_INPUT,
+      AgentState.RUNNING,
+      AgentState.FINISHED,
+      AgentState.PAUSED,
+      AgentState.AWAITING_USER_CONFIRMATION,
+      AgentState.USER_CONFIRMED,
+      AgentState.USER_REJECTED,
+    ].includes(agentState);
+
   if (
     runtimeStatus &&
-    !["STATUS$READY", "STATUS$RUNTIME_STARTED"].includes(runtimeStatus)
+    !["STATUS$READY", "STATUS$RUNTIME_STARTED"].includes(runtimeStatus) &&
+    !agentIsReady // Skip runtime status check if agent is ready
   ) {
     const result = (I18nKey as { [key: string]: string })[runtimeStatus];
     if (result) {