diff --git a/crates/agent2/src/tests/mod.rs b/crates/agent2/src/tests/mod.rs
index b13b1cbe1a..297453f1e6 100644
--- a/crates/agent2/src/tests/mod.rs
+++ b/crates/agent2/src/tests/mod.rs
@@ -286,6 +286,63 @@ async fn test_tool_authorization(cx: &mut TestAppContext) {
     );
 }
 
+#[gpui::test]
+async fn test_tool_hallucination(cx: &mut TestAppContext) {
+    let ThreadTest { model, thread, .. } = setup(cx, TestModel::Fake).await;
+    let fake_model = model.as_fake();
+
+    let mut events = thread.update(cx, |thread, cx| thread.send(model.clone(), "abc", cx));
+    cx.run_until_parked();
+    fake_model.send_last_completion_stream_event(LanguageModelCompletionEvent::ToolUse(
+        LanguageModelToolUse {
+            id: "tool_id_1".into(),
+            name: "nonexistent_tool".into(),
+            raw_input: "{}".into(),
+            input: json!({}),
+            is_input_complete: true,
+        },
+    ));
+    fake_model.end_last_completion_stream();
+
+    let tool_call = expect_tool_call(&mut events).await;
+    assert_eq!(tool_call.title, "nonexistent_tool");
+    assert_eq!(tool_call.status, acp::ToolCallStatus::Pending);
+    let update = expect_tool_call_update(&mut events).await;
+    assert_eq!(update.fields.status, Some(acp::ToolCallStatus::Failed));
+}
+
+async fn expect_tool_call(
+    events: &mut UnboundedReceiver<Result<AgentResponseEvent, LanguageModelCompletionError>>,
+) -> acp::ToolCall {
+    let event = events
+        .next()
+        .await
+        .expect("no tool call authorization event received")
+        .unwrap();
+    match event {
+        AgentResponseEvent::ToolCall(tool_call) => return tool_call,
+        event => {
+            panic!("Unexpected event {event:?}");
+        }
+    }
+}
+
+async fn expect_tool_call_update(
+    events: &mut UnboundedReceiver<Result<AgentResponseEvent, LanguageModelCompletionError>>,
+) -> acp::ToolCallUpdate {
+    let event = events
+        .next()
+        .await
+        .expect("no tool call authorization event received")
+        .unwrap();
+    match event {
+        AgentResponseEvent::ToolCallUpdate(tool_call_update) => return tool_call_update,
+        event => {
+            panic!("Unexpected event {event:?}");
+        }
+    }
+}
+
 async fn next_tool_call_authorization(
     events: &mut UnboundedReceiver<Result<AgentResponseEvent, LanguageModelCompletionError>>,
 ) -> ToolCallAuthorization {
diff --git a/crates/agent2/src/thread.rs b/crates/agent2/src/thread.rs
index efc58d12b1..8f8fae5c67 100644
--- a/crates/agent2/src/thread.rs
+++ b/crates/agent2/src/thread.rs
@@ -434,23 +434,10 @@ impl Thread {
         event_stream: &AgentResponseEventStream,
         cx: &mut Context<Self>,
     ) -> Option<Task<LanguageModelToolResult>> {
-        let Some(tool) = self.tools.get(tool_use.name.as_ref()).cloned() else {
-            if tool_use.is_input_complete {
-                let content = format!("No tool named {} exists", tool_use.name);
-                return Some(Task::ready(LanguageModelToolResult {
-                    content: LanguageModelToolResultContent::Text(Arc::from(content)),
-                    tool_use_id: tool_use.id,
-                    tool_name: tool_use.name,
-                    is_error: true,
-                    output: None,
-                }));
-            } else {
-                return None;
-            }
-        };
-
         cx.notify();
 
+        let tool = self.tools.get(tool_use.name.as_ref()).cloned();
+
         self.pending_tool_uses
             .insert(tool_use.id.clone(), tool_use.clone());
         let last_message = self.last_assistant_message();
@@ -468,8 +455,15 @@ impl Thread {
                 true
             }
         });
+
         if push_new_tool_use {
-            event_stream.send_tool_call(&tool_use, tool.kind());
+            event_stream.send_tool_call(
+                &tool_use,
+                // todo! add default
+                tool.as_ref()
+                    .map(|t| t.kind())
+                    .unwrap_or(acp::ToolKind::Other),
+            );
             last_message
                 .content
                 .push(MessageContent::ToolUse(tool_use.clone()));
@@ -487,6 +481,17 @@ impl Thread {
             return None;
         }
 
+        let Some(tool) = tool else {
+            let content = format!("No tool named {} exists", tool_use.name);
+            return Some(Task::ready(LanguageModelToolResult {
+                content: LanguageModelToolResultContent::Text(Arc::from(content)),
+                tool_use_id: tool_use.id,
+                tool_name: tool_use.name,
+                is_error: true,
+                output: None,
+            }));
+        };
+
         let tool_result = self.run_tool(tool, tool_use.clone(), event_stream.clone(), cx);
         Some(cx.foreground_executor().spawn(async move {
             match tool_result.await {