diff --git a/packages/cli/src/ui/commands/mcpCommand.test.ts b/packages/cli/src/ui/commands/mcpCommand.test.ts
index 2a6401b3..ad04cb69 100644
--- a/packages/cli/src/ui/commands/mcpCommand.test.ts
+++ b/packages/cli/src/ui/commands/mcpCommand.test.ts
@@ -212,9 +212,9 @@ describe('mcpCommand', () => {
         );
         expect(message).toContain('server2_tool1');
 
-        // Server 3 - Disconnected
+        // Server 3 - Disconnected but with cached tools, so shows as Ready
         expect(message).toContain(
-          '🔴 \u001b[1mserver3\u001b[0m - Disconnected (1 tools cached)',
+          '🟢 \u001b[1mserver3\u001b[0m - Ready (1 tool)',
         );
         expect(message).toContain('server3_tool1');
 
diff --git a/packages/cli/src/ui/commands/mcpCommand.ts b/packages/cli/src/ui/commands/mcpCommand.ts
index dc5442cc..11c71f1a 100644
--- a/packages/cli/src/ui/commands/mcpCommand.ts
+++ b/packages/cli/src/ui/commands/mcpCommand.ts
@@ -94,7 +94,15 @@ const getMcpStatus = async (
     const promptRegistry = await config.getPromptRegistry();
     const serverPrompts = promptRegistry.getPromptsByServer(serverName) || [];
 
-    const status = getMCPServerStatus(serverName);
+    const originalStatus = getMCPServerStatus(serverName);
+    const hasCachedItems = serverTools.length > 0 || serverPrompts.length > 0;
+
+    // If the server is "disconnected" but has prompts or cached tools, display it as Ready
+    // by using CONNECTED as the display status.
+    const status =
+      originalStatus === MCPServerStatus.DISCONNECTED && hasCachedItems
+        ? MCPServerStatus.CONNECTED
+        : originalStatus;
 
     // Add status indicator with descriptive text
     let statusIndicator = '';
@@ -260,11 +268,14 @@ const getMcpStatus = async (
       message += '  No tools or prompts available\n';
     } else if (serverTools.length === 0) {
       message += '  No tools available';
-      if (status === MCPServerStatus.DISCONNECTED && needsAuthHint) {
+      if (originalStatus === MCPServerStatus.DISCONNECTED && needsAuthHint) {
         message += ` ${COLOR_GREY}(type: "/mcp auth ${serverName}" to authenticate this server)${RESET_COLOR}`;
       }
       message += '\n';
-    } else if (status === MCPServerStatus.DISCONNECTED && needsAuthHint) {
+    } else if (
+      originalStatus === MCPServerStatus.DISCONNECTED &&
+      needsAuthHint
+    ) {
       // This case is for when serverTools.length > 0
       message += `  ${COLOR_GREY}(type: "/mcp auth ${serverName}" to authenticate this server)${RESET_COLOR}\n`;
     }
diff --git a/packages/core/src/tools/mcp-client.ts b/packages/core/src/tools/mcp-client.ts
index f9ccc380..00f2197a 100644
--- a/packages/core/src/tools/mcp-client.ts
+++ b/packages/core/src/tools/mcp-client.ts
@@ -366,33 +366,47 @@ export async function connectAndDiscover(
 ): Promise<void> {
   updateMCPServerStatus(mcpServerName, MCPServerStatus.CONNECTING);
 
+  let mcpClient: Client | undefined;
   try {
-    const mcpClient = await connectToMcpServer(
+    mcpClient = await connectToMcpServer(
       mcpServerName,
       mcpServerConfig,
       debugMode,
     );
-    try {
-      updateMCPServerStatus(mcpServerName, MCPServerStatus.CONNECTED);
-      mcpClient.onerror = (error) => {
-        console.error(`MCP ERROR (${mcpServerName}):`, error.toString());
-        updateMCPServerStatus(mcpServerName, MCPServerStatus.DISCONNECTED);
-      };
-      await discoverPrompts(mcpServerName, mcpClient, promptRegistry);
 
-      const tools = await discoverTools(
-        mcpServerName,
-        mcpServerConfig,
-        mcpClient,
-      );
-      for (const tool of tools) {
-        toolRegistry.registerTool(tool);
-      }
-    } catch (error) {
-      mcpClient.close();
-      throw error;
+    mcpClient.onerror = (error) => {
+      console.error(`MCP ERROR (${mcpServerName}):`, error.toString());
+      updateMCPServerStatus(mcpServerName, MCPServerStatus.DISCONNECTED);
+    };
+
+    // Attempt to discover both prompts and tools
+    const prompts = await discoverPrompts(
+      mcpServerName,
+      mcpClient,
+      promptRegistry,
+    );
+    const tools = await discoverTools(
+      mcpServerName,
+      mcpServerConfig,
+      mcpClient,
+    );
+
+    // If we have neither prompts nor tools, it's a failed discovery
+    if (prompts.length === 0 && tools.length === 0) {
+      throw new Error('No prompts or tools found on the server.');
+    }
+
+    // If we found anything, the server is connected
+    updateMCPServerStatus(mcpServerName, MCPServerStatus.CONNECTED);
+
+    // Register any discovered tools
+    for (const tool of tools) {
+      toolRegistry.registerTool(tool);
     }
   } catch (error) {
+    if (mcpClient) {
+      mcpClient.close();
+    }
     console.error(
       `Error connecting to MCP server '${mcpServerName}': ${getErrorMessage(
         error,
@@ -423,7 +437,8 @@ export async function discoverTools(
     const tool = await mcpCallableTool.tool();
 
     if (!Array.isArray(tool.functionDeclarations)) {
-      throw new Error(`Server did not return valid function declarations.`);
+      // This is a valid case for a prompt-only server
+      return [];
     }
 
     const discoveredTools: DiscoveredMCPTool[] = [];
@@ -454,7 +469,17 @@ export async function discoverTools(
     }
     return discoveredTools;
   } catch (error) {
-    throw new Error(`Error discovering tools: ${error}`);
+    if (
+      error instanceof Error &&
+      !error.message?.includes('Method not found')
+    ) {
+      console.error(
+        `Error discovering tools from ${mcpServerName}: ${getErrorMessage(
+          error,
+        )}`,
+      );
+    }
+    return [];
   }
 }
 
@@ -469,7 +494,7 @@ export async function discoverPrompts(
   mcpServerName: string,
   mcpClient: Client,
   promptRegistry: PromptRegistry,
-): Promise<void> {
+): Promise<Prompt[]> {
   try {
     const response = await mcpClient.request(
       { method: 'prompts/list', params: {} },
@@ -484,6 +509,7 @@ export async function discoverPrompts(
           invokeMcpPrompt(mcpServerName, mcpClient, prompt.name, params),
       });
     }
+    return response.prompts;
   } catch (error) {
     // It's okay if this fails, not all servers will have prompts.
     // Don't log an error if the method is not found, which is a common case.
@@ -497,6 +523,7 @@ export async function discoverPrompts(
         )}`,
       );
     }
+    return [];
   }
 }