diff --git a/src/tools/filesystem.ts b/src/tools/filesystem.ts
index 7aa40719..44202aa5 100644
--- a/src/tools/filesystem.ts
+++ b/src/tools/filesystem.ts
@@ -676,6 +676,32 @@ export async function listDirectory(dirPath: string, depth: number = 2): Promise
     const results: string[] = [];
 
     const MAX_NESTED_ITEMS = 100; // Maximum items to show per nested directory
+    const isAccessDeniedError = (err: NodeJS.ErrnoException) =>
+        err.code === 'EPERM' || err.code === 'EACCES' || err.code === 'ETIMEDOUT';
+
+    const getDisplayPath = (targetPath: string): string => path.basename(targetPath) || targetPath;
+
+    function addDeniedEntry(displayPath: string): void {
+        // Keep the payload path-only so the UI can parse denied entries reliably.
+        results.push(`[DENIED] ${displayPath}`);
+    }
+
+    try {
+        const stats = await fs.stat(validPath);
+        if (!stats.isDirectory()) {
+            throw new Error(`Directory not found: ${dirPath}`);
+        }
+    } catch (error) {
+        const err = error as NodeJS.ErrnoException;
+        if (err.code === 'ENOENT' || err.code === 'ENOTDIR') {
+            throw new Error(`Directory not found: ${dirPath}`);
+        }
+        if (isAccessDeniedError(err)) {
+            addDeniedEntry(getDisplayPath(validPath));
+            return results;
+        }
+        throw error;
+    }
 
     async function listRecursive(currentPath: string, currentDepth: number, relativePath: string = '', isTopLevel: boolean = true): Promise<void> {
         if (currentDepth <= 0) return;
@@ -685,14 +711,11 @@ export async function listDirectory(dirPath: string, depth: number = 2): Promise
             entries = await fs.readdir(currentPath, { withFileTypes: true });
         } catch (error) {
             const err = error as NodeJS.ErrnoException;
-            const displayPath = relativePath || path.basename(currentPath);
-            // Keep [DENIED] prefix so UI parser regex still matches.
-            // Append a hint for permission/timeout errors so user gets context.
-            if (err.code === 'EPERM' || err.code === 'EACCES' || err.code === 'ETIMEDOUT') {
-                results.push(`[DENIED] ${displayPath} — not accessible (permission denied, cloud-only file, or Full Disk Access not granted)`);
-            } else {
-                results.push(`[DENIED] ${displayPath}`);
+            if (isTopLevel && (err.code === 'ENOENT' || err.code === 'ENOTDIR')) {
+                throw new Error(`Directory not found: ${dirPath}`);
             }
+            const displayPath = relativePath || getDisplayPath(currentPath);
+            addDeniedEntry(displayPath);
             return;
         }
 
@@ -1010,4 +1033,4 @@ export async function writePdf(
     } else {
         throw new Error('Invalid content type for writePdf. Expected string (markdown) or array of operations.');
     }
-}
\ No newline at end of file
+}
diff --git a/test/test-list-directory-errors.js b/test/test-list-directory-errors.js
new file mode 100644
index 00000000..b6b972f8
--- /dev/null
+++ b/test/test-list-directory-errors.js
@@ -0,0 +1,106 @@
+import assert from 'assert';
+import fs from 'fs/promises';
+import os from 'os';
+import path from 'path';
+import { pathToFileURL } from 'url';
+
+import { configManager } from '../dist/config-manager.js';
+import { listDirectory } from '../dist/tools/filesystem.js';
+
+const TEST_ROOT_PREFIX = path.join(os.tmpdir(), 'desktop-commander-list-directory-errors-');
+
+async function setup() {
+  const originalConfig = await configManager.getConfig();
+  const testRoot = await fs.realpath(await fs.mkdtemp(TEST_ROOT_PREFIX));
+  await configManager.setValue('allowedDirectories', [testRoot]);
+  return { originalConfig, testRoot };
+}
+
+async function teardown(originalConfig, testRoot) {
+  await configManager.updateConfig(originalConfig);
+  await fs.rm(testRoot, { recursive: true, force: true });
+}
+
+async function testMissingDirectoryReturnsNotFound(testRoot) {
+  const missingDir = path.join(testRoot, 'missing-dir');
+
+  await assert.rejects(
+    listDirectory(missingDir, 1),
+    (error) => {
+      assert(error instanceof Error);
+      assert(error.message.includes(`Directory not found: ${missingDir}`));
+      assert(!error.message.includes('[DENIED]'));
+      return true;
+    },
+    'Missing directories should raise a not-found error instead of returning [DENIED]',
+  );
+
+  console.log('✓ missing directory returns not-found error');
+}
+
+async function testTopLevelStatAccessDeniedReturnsDeniedEntry(testRoot) {
+  const deniedDir = path.join(testRoot, 'stat-denied');
+  await fs.mkdir(deniedDir);
+
+  const originalStat = fs.stat;
+  fs.stat = async (target, ...args) => {
+    if (path.resolve(String(target)) === deniedDir) {
+      const error = new Error(`EACCES: permission denied, stat '${deniedDir}'`);
+      error.code = 'EACCES';
+      throw error;
+    }
+    return originalStat.call(fs, target, ...args);
+  };
+
+  try {
+    const entries = await listDirectory(deniedDir, 1);
+    assert.deepStrictEqual(entries, ['[DENIED] stat-denied']);
+    console.log('✓ top-level stat access error returns denied entry');
+  } finally {
+    fs.stat = originalStat;
+  }
+}
+
+async function testFilePathReturnsNotFound(testRoot) {
+  const filePath = path.join(testRoot, 'not-a-directory.txt');
+  await fs.writeFile(filePath, 'not a directory');
+
+  await assert.rejects(
+    listDirectory(filePath, 1),
+    (error) => {
+      assert(error instanceof Error);
+      assert(error.message.includes(`Directory not found: ${filePath}`));
+      assert(!error.message.includes('Path is not a directory'));
+      return true;
+    },
+    'File paths should use the same not-found contract as missing directories',
+  );
+
+  console.log('✓ file path returns not-found error');
+}
+
+export default async function runTests() {
+  let originalConfig;
+  let testRoot;
+  try {
+    ({ originalConfig, testRoot } = await setup());
+    await testMissingDirectoryReturnsNotFound(testRoot);
+    await testTopLevelStatAccessDeniedReturnsDeniedEntry(testRoot);
+    await testFilePathReturnsNotFound(testRoot);
+    console.log('\n✅ list_directory error tests passed!');
+    return true;
+  } catch (error) {
+    console.error('❌ list_directory error test failed:', error instanceof Error ? error.message : String(error));
+    return false;
+  } finally {
+    if (originalConfig && testRoot) {
+      await teardown(originalConfig, testRoot);
+    }
+  }
+}
+
+if (process.argv[1] && import.meta.url === pathToFileURL(process.argv[1]).href) {
+  runTests().then((ok) => {
+    process.exit(ok ? 0 : 1);
+  });
+}