diff --git a/packages/adapters/claude-local/src/server/execute.max-turns-classification.test.ts b/packages/adapters/claude-local/src/server/execute.max-turns-classification.test.ts
new file mode 100644
index 00000000000..2fb496918dd
--- /dev/null
+++ b/packages/adapters/claude-local/src/server/execute.max-turns-classification.test.ts
@@ -0,0 +1,97 @@
+import { beforeEach, describe, expect, it, vi } from "vitest";
+
+const { runAdapterExecutionTargetProcess } = vi.hoisted(() => ({
+  runAdapterExecutionTargetProcess: vi.fn(),
+}));
+
+vi.mock("./acp.js", () => ({
+  createClaudeAcpExecutor: () => vi.fn(),
+  resolveClaudeExecutionEngineForRun: async () => ({ engine: "cli", explicit: true }),
+}));
+
+vi.mock("@paperclipai/adapter-utils/execution-target", async () => {
+  const actual = await vi.importActual<typeof import("@paperclipai/adapter-utils/execution-target")>(
+    "@paperclipai/adapter-utils/execution-target",
+  );
+  return {
+    ...actual,
+    ensureAdapterExecutionTargetCommandResolvable: vi.fn(async () => undefined),
+    ensureAdapterExecutionTargetRuntimeCommandInstalled: vi.fn(async () => undefined),
+    resolveAdapterExecutionTargetCommandForLogs: vi.fn(async () => "claude"),
+    runAdapterExecutionTargetProcess,
+  };
+});
+
+import { execute } from "./execute.js";
+
+// Tool output the agent itself printed. It carries the literal phrase the
+// model-not-found detector scans for, but the provider never returned it.
+const POISONED_TOOL_OUTPUT =
+  'execute.ts:1199: : failed && isClaudeModelNotFoundError({ ... ? "model_not_found"';
+
+function buildProcResult(resultEvent: Record<string, unknown>, extraStdout = "") {
+  return {
+    exitCode: 1,
+    signal: null,
+    timedOut: false,
+    stdout: [
+      JSON.stringify({ type: "system", subtype: "init", session_id: "claude-session-1", model: "claude-sonnet" }),
+      ...(extraStdout
+        ? [
+            JSON.stringify({
+              type: "assistant",
+              session_id: "claude-session-1",
+              message: { content: [{ type: "text", text: extraStdout }] },
+            }),
+          ]
+        : []),
+      JSON.stringify({ type: "result", session_id: "claude-session-1", ...resultEvent }),
+    ].join("\n"),
+    stderr: "",
+    pid: 321,
+    startedAt: new Date().toISOString(),
+  };
+}
+
+function buildContext() {
+  return {
+    runId: "run-1",
+    agent: {
+      id: "agent-1",
+      companyId: "company-1",
+      name: "Claude Coder",
+      adapterType: "claude_local",
+      adapterConfig: {},
+    },
+    runtime: { sessionId: null, sessionParams: null, sessionDisplayId: null, taskKey: null },
+    config: { engine: "cli" },
+    context: {},
+    onLog: vi.fn(async () => {}),
+  };
+}
+
+describe("claude_local failure classification precedence", () => {
+  beforeEach(() => {
+    vi.clearAllMocks();
+  });
+
+  it("keeps max_turns_exhausted when stdout mentions model_not_found", async () => {
+    runAdapterExecutionTargetProcess.mockResolvedValue(
+      buildProcResult({ is_error: true, subtype: "error_max_turns" }, POISONED_TOOL_OUTPUT),
+    );
+
+    const result = await execute(buildContext() as never);
+
+    expect(result.errorCode).toBe("max_turns_exhausted");
+  });
+
+  it("still reports model_not_found when the provider returns it", async () => {
+    runAdapterExecutionTargetProcess.mockResolvedValue(
+      buildProcResult({ is_error: true, subtype: "error", result: "API Error: 404 model not found" }),
+    );
+
+    const result = await execute(buildContext() as never);
+
+    expect(result.errorCode).toBe("model_not_found");
+  });
+});
diff --git a/packages/adapters/claude-local/src/server/execute.ts b/packages/adapters/claude-local/src/server/execute.ts
index de03c588c03..ac7198ebe6d 100644
--- a/packages/adapters/claude-local/src/server/execute.ts
+++ b/packages/adapters/claude-local/src/server/execute.ts
@@ -1224,7 +1224,14 @@ export async function execute(ctx: AdapterExecutionContext): Promise<AdapterExec
       ? proc.errorCode
       : loginMeta.requiresLogin
       ? "claude_auth_required"
-      : failed && isClaudeModelNotFoundError({
+      // Structured CLI signals outrank the model-not-found detector, which
+      // scans the run's full stdout for a literal "model not found" phrase.
+      // An agent's own tool output (grepping runtime source, tailing logs,
+      // echoing an issue body) lands in that stdout, so a genuine
+      // error_max_turns run that merely *mentions* the phrase would otherwise
+      // be sealed as model_not_found. Same guard the providerQuota and
+      // transientUpstream branches above already apply.
+      : failed && !clearSessionForMaxTurns && !poisonedPreviousMessageId && isClaudeModelNotFoundError({
         parsed,
         stdout: proc.stdout,
         stderr: proc.stderr,