diff --git a/packages/cli/src/config/config.test.ts b/packages/cli/src/config/config.test.ts
index 6aab4487..cd06f5dc 100644
--- a/packages/cli/src/config/config.test.ts
+++ b/packages/cli/src/config/config.test.ts
@@ -955,7 +955,72 @@ describe('loadCliConfig ideMode', () => {
     await expect(
       loadCliConfig(settings, [], 'test-session', argv),
     ).rejects.toThrow(
-      "Could not run in ide mode, make sure you're running in vs code integrated terminal. Try running in a fresh terminal.",
+      'Could not connect to IDE. Make sure you have the companion VS Code extension installed from the marketplace or via /ide install.',
     );
   });
+
+  it('should warn and overwrite if settings contain the reserved _ide_server name and ideMode is active', async () => {
+    const consoleWarnSpy = vi
+      .spyOn(console, 'warn')
+      .mockImplementation(() => {});
+
+    process.argv = ['node', 'script.js', '--ide-mode'];
+    const argv = await parseArguments();
+    process.env.TERM_PROGRAM = 'vscode';
+    process.env.GEMINI_CLI_IDE_SERVER_PORT = '3000';
+    const settings: Settings = {
+      mcpServers: {
+        _ide_server: new ServerConfig.MCPServerConfig(
+          undefined,
+          undefined,
+          undefined,
+          undefined,
+          'http://malicious:1234',
+        ),
+      },
+    };
+
+    const config = await loadCliConfig(settings, [], 'test-session', argv);
+
+    expect(consoleWarnSpy).toHaveBeenCalledWith(
+      '[WARN]',
+      'Ignoring user-defined MCP server config for "_ide_server" as it is a reserved name.',
+    );
+
+    const mcpServers = config.getMcpServers();
+    expect(mcpServers['_ide_server']).toBeDefined();
+    expect(mcpServers['_ide_server'].httpUrl).toBe('http://localhost:3000/mcp');
+
+    consoleWarnSpy.mockRestore();
+  });
+
+  it('should NOT warn if settings contain the reserved _ide_server name and ideMode is NOT active', async () => {
+    const consoleWarnSpy = vi
+      .spyOn(console, 'warn')
+      .mockImplementation(() => {});
+
+    process.argv = ['node', 'script.js'];
+    const argv = await parseArguments();
+    const settings: Settings = {
+      mcpServers: {
+        _ide_server: new ServerConfig.MCPServerConfig(
+          undefined,
+          undefined,
+          undefined,
+          undefined,
+          'http://malicious:1234',
+        ),
+      },
+    };
+
+    const config = await loadCliConfig(settings, [], 'test-session', argv);
+
+    expect(consoleWarnSpy).not.toHaveBeenCalled();
+
+    const mcpServers = config.getMcpServers();
+    expect(mcpServers['_ide_server']).toBeDefined();
+    expect(mcpServers['_ide_server'].url).toBe('http://malicious:1234');
+
+    consoleWarnSpy.mockRestore();
+  });
 });
diff --git a/packages/cli/src/config/config.ts b/packages/cli/src/config/config.ts
index 69708a61..83549139 100644
--- a/packages/cli/src/config/config.ts
+++ b/packages/cli/src/config/config.ts
@@ -306,10 +306,15 @@ export async function loadCliConfig(
   }
 
   if (ideMode) {
+    if (mcpServers[IDE_SERVER_NAME]) {
+      logger.warn(
+        `Ignoring user-defined MCP server config for "${IDE_SERVER_NAME}" as it is a reserved name.`,
+      );
+    }
     const companionPort = process.env.GEMINI_CLI_IDE_SERVER_PORT;
     if (!companionPort) {
       throw new Error(
-        "Could not run in ide mode, make sure you're running in vs code integrated terminal. Try running in a fresh terminal.",
+        'Could not connect to IDE. Make sure you have the companion VS Code extension installed from the marketplace or via /ide install.',
       );
     }
     const httpUrl = `http://localhost:${companionPort}/mcp`;
diff --git a/packages/core/src/services/ideContext.test.ts b/packages/core/src/services/ideContext.test.ts
index 0e6ff045..9aa4c013 100644
--- a/packages/core/src/services/ideContext.test.ts
+++ b/packages/core/src/services/ideContext.test.ts
@@ -122,4 +122,19 @@ describe('ideContext - Active File', () => {
     const activeFile = ideContext.getActiveFileContext();
     expect(activeFile).toEqual(testFile);
   });
+
+  it('should clear the active file context', () => {
+    const testFile = {
+      filePath: '/path/to/test/file.ts',
+      cursor: { line: 5, character: 10 },
+    };
+
+    ideContext.setActiveFileContext(testFile);
+
+    expect(ideContext.getActiveFileContext()).toEqual(testFile);
+
+    ideContext.clearActiveFileContext();
+
+    expect(ideContext.getActiveFileContext()).toBeUndefined();
+  });
 });
diff --git a/packages/core/src/services/ideContext.ts b/packages/core/src/services/ideContext.ts
index 6bbe8cb9..b5f0b4af 100644
--- a/packages/core/src/services/ideContext.ts
+++ b/packages/core/src/services/ideContext.ts
@@ -68,6 +68,14 @@ export function createIdeContextStore() {
     notifySubscribers();
   }
 
+  /**
+   * Clears the active file context and notifies all registered subscribers of the change.
+   */
+  function clearActiveFileContext(): void {
+    activeFileContext = undefined;
+    notifySubscribers();
+  }
+
   /**
    * Retrieves the current active file context.
    * @returns The `ActiveFile` object if a file is active, otherwise `undefined`.
@@ -96,6 +104,7 @@ export function createIdeContextStore() {
     setActiveFileContext,
     getActiveFileContext,
     subscribeToActiveFile,
+    clearActiveFileContext,
   };
 }
 
diff --git a/packages/core/src/tools/mcp-client.ts b/packages/core/src/tools/mcp-client.ts
index 24c975c3..5849884d 100644
--- a/packages/core/src/tools/mcp-client.ts
+++ b/packages/core/src/tools/mcp-client.ts
@@ -215,6 +215,9 @@ export async function connectAndDiscover(
       mcpClient.onerror = (error) => {
         console.error(`MCP ERROR (${mcpServerName}):`, error.toString());
         updateMCPServerStatus(mcpServerName, MCPServerStatus.DISCONNECTED);
+        if (mcpServerName === IDE_SERVER_NAME) {
+          ideContext.clearActiveFileContext();
+        }
       };
 
       if (mcpServerName === IDE_SERVER_NAME) {