diff --git a/packages/cli/src/gemini.ts b/packages/cli/src/gemini.ts
index 420f3242..32e34c20 100644
--- a/packages/cli/src/gemini.ts
+++ b/packages/cli/src/gemini.ts
@@ -24,7 +24,24 @@ async function main() {
   const settings = loadSettings(process.cwd());
   const config = await loadCliConfig(settings.merged);
   if (settings.merged.theme) {
-    themeManager.setActiveTheme(settings.merged.theme);
+    try {
+      themeManager.setActiveTheme(settings.merged.theme);
+    } catch (error: unknown) {
+      // If the theme is not found during initial load, log a warning and continue.
+      // The useThemeCommand hook in App.tsx will handle opening the dialog.
+      if (
+        error instanceof Error &&
+        error.message.includes('Theme') &&
+        error.message.includes('not found')
+      ) {
+        console.warn(
+          `Warning: ${error instanceof Error ? error.message : String(error)}`,
+        );
+      } else {
+        // Re-throw other errors to be caught by the main catch block
+        throw error;
+      }
+    }
   }
 
   // hop into sandbox if we are outside and sandboxing is enabled
diff --git a/packages/cli/src/ui/App.tsx b/packages/cli/src/ui/App.tsx
index 9fe651b5..725a2012 100644
--- a/packages/cli/src/ui/App.tsx
+++ b/packages/cli/src/ui/App.tsx
@@ -39,12 +39,13 @@ export const App = ({ config, settings, cliVersion }: AppProps) => {
   const { history, addItem, clearItems } = useHistory();
   const [startupWarnings, setStartupWarnings] = useState<string[]>([]);
   const [showHelp, setShowHelp] = useState<boolean>(false);
+  const [themeError, setThemeError] = useState<string | null>(null);
   const {
     isThemeDialogOpen,
     openThemeDialog,
     handleThemeSelect,
     handleThemeHighlight,
-  } = useThemeCommand(settings);
+  } = useThemeCommand(settings, setThemeError);
 
   const [staticKey, setStaticKey] = useState(0);
   const refreshStatic = useCallback(() => {
@@ -191,11 +192,18 @@ export const App = ({ config, settings, cliVersion }: AppProps) => {
       )}
 
       {isThemeDialogOpen ? (
-        <ThemeDialog
-          onSelect={handleThemeSelect}
-          onHighlight={handleThemeHighlight}
-          settings={settings}
-        />
+        <Box flexDirection="column">
+          {themeError && (
+            <Box marginBottom={1}>
+              <Text color={Colors.AccentRed}>{themeError}</Text>
+            </Box>
+          )}
+          <ThemeDialog
+            onSelect={handleThemeSelect}
+            onHighlight={handleThemeHighlight}
+            settings={settings}
+          />
+        </Box>
       ) : (
         <>
           <LoadingIndicator
diff --git a/packages/cli/src/ui/hooks/useThemeCommand.ts b/packages/cli/src/ui/hooks/useThemeCommand.ts
index c32a7c2e..b1ae170f 100644
--- a/packages/cli/src/ui/hooks/useThemeCommand.ts
+++ b/packages/cli/src/ui/hooks/useThemeCommand.ts
@@ -4,7 +4,7 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
-import { useState, useCallback } from 'react';
+import { useState, useCallback, useEffect } from 'react';
 import { themeManager } from '../themes/theme-manager.js';
 import { LoadedSettings, SettingScope } from '../../config/settings.js'; // Import LoadedSettings, AppSettings, MergedSetting
 
@@ -20,36 +20,83 @@ interface UseThemeCommandReturn {
 
 export const useThemeCommand = (
   loadedSettings: LoadedSettings,
+  setThemeError: (error: string | null) => void,
 ): UseThemeCommandReturn => {
   // Determine the effective theme
   const effectiveTheme = loadedSettings.merged.theme;
 
   // Initial state: Open dialog if no theme is set in either user or workspace settings
-  const [isThemeDialogOpen, setIsThemeDialogOpen] = useState(
-    effectiveTheme === undefined,
-  );
+  const [isThemeDialogOpen, setIsThemeDialogOpen] = useState(false);
   // TODO: refactor how theme's are accessed to avoid requiring a forced render.
   const [, setForceRender] = useState(0);
 
+  // Apply initial theme on component mount
+  useEffect(() => {
+    try {
+      themeManager.setActiveTheme(effectiveTheme);
+      setThemeError(null); // Clear any previous theme error on success
+    } catch (error: unknown) {
+      // If theme is not found during initial load, open the theme selection dialog and set error message
+      if (
+        error instanceof Error &&
+        error.message.includes('Theme') &&
+        error.message.includes('not found')
+      ) {
+        setIsThemeDialogOpen(true);
+        setThemeError(
+          `Error: ${error instanceof Error ? error.message : String(error)}`,
+        );
+      } else {
+        console.error(
+          `Error setting initial theme: ${error instanceof Error ? error.message : String(error)}`,
+        );
+        setThemeError(
+          `Error setting initial theme: ${error instanceof Error ? error.message : String(error)}`,
+        );
+      }
+    }
+  }, [effectiveTheme, setThemeError]); // Re-run if effectiveTheme or setThemeError changes
+
   const openThemeDialog = useCallback(() => {
     setIsThemeDialogOpen(true);
   }, []);
 
-  const applyTheme = useCallback((themeName: string | undefined) => {
-    try {
-      themeManager.setActiveTheme(themeName);
-      setForceRender((v) => v + 1); // Trigger potential re-render
-    } catch (error) {
-      console.error(`Error setting theme: ${error}`);
-    }
-  }, []);
+  const applyTheme = useCallback(
+    (themeName: string | undefined) => {
+      try {
+        themeManager.setActiveTheme(themeName);
+        setForceRender((v) => v + 1); // Trigger potential re-render
+        setThemeError(null); // Clear any previous theme error on success
+      } catch (error: unknown) {
+        // If theme is not found, open the theme selection dialog and set error message
+        if (
+          error instanceof Error &&
+          error.message.includes('Theme') &&
+          error.message.includes('not found')
+        ) {
+          setIsThemeDialogOpen(true);
+          setThemeError(
+            `Error: ${error instanceof Error ? error.message : String(error)}`,
+          );
+        } else {
+          console.error(
+            `Error setting theme: ${error instanceof Error ? error.message : String(error)}`,
+          );
+          setThemeError(
+            `Error setting theme: ${error instanceof Error ? error.message : String(error)}`,
+          );
+        }
+      }
+    },
+    [setForceRender, setThemeError],
+  );
 
   const handleThemeHighlight = useCallback(
     (themeName: string | undefined) => {
       applyTheme(themeName);
     },
     [applyTheme],
-  ); // Added applyTheme to dependencies
+  );
 
   const handleThemeSelect = useCallback(
     (themeName: string | undefined, scope: SettingScope) => {