diff --git a/cli/azd/cmd/middleware/middleware.go b/cli/azd/cmd/middleware/middleware.go
index ab413c50052..bd54052e71f 100644
--- a/cli/azd/cmd/middleware/middleware.go
+++ b/cli/azd/cmd/middleware/middleware.go
@@ -10,6 +10,7 @@ import (
 	"log"
 	"slices"
 
+	"github.com/AlecAivazis/survey/v2/terminal"
 	"github.com/azure/azure-dev/cli/azd/cmd/actions"
 	"github.com/azure/azure-dev/cli/azd/pkg/ioc"
 	"github.com/spf13/pflag"
@@ -99,6 +100,11 @@ func (r *MiddlewareRunner) RunAction(
 
 			var middleware Middleware
 			if err := actionContainer.ResolveNamed(middlewareName, &middleware); err != nil {
+				// Check if the error is an interrupt error (user cancelled a prompt)
+				// In this case, we should not continue and return the error immediately
+				if errors.Is(err, terminal.InterruptErr) {
+					return nil, err
+				}
 				log.Printf("failed resolving middleware '%s' : %v\n", middlewareName, err)
 			}
 
diff --git a/cli/azd/cmd/middleware/middleware_test.go b/cli/azd/cmd/middleware/middleware_test.go
index cc7da658414..009dafc7df5 100644
--- a/cli/azd/cmd/middleware/middleware_test.go
+++ b/cli/azd/cmd/middleware/middleware_test.go
@@ -8,6 +8,7 @@ import (
 	"fmt"
 	"testing"
 
+	"github.com/AlecAivazis/survey/v2/terminal"
 	"github.com/azure/azure-dev/cli/azd/cmd/actions"
 	"github.com/azure/azure-dev/cli/azd/test/mocks"
 	"github.com/stretchr/testify/require"
@@ -161,6 +162,41 @@ func Test_Middleware_RunAction(t *testing.T) {
 		require.Nil(t, result)
 		require.NoError(t, err)
 	})
+
+	// Test that interrupt errors during middleware resolution are propagated and not ignored
+	t.Run("interrupt error during middleware resolution", func(t *testing.T) {
+		mockContext := mocks.NewMockContext(context.Background())
+		middlewareRunner := NewMiddlewareRunner(mockContext.Container)
+
+		// Register a middleware constructor that returns an interrupt error
+		// This simulates what happens when a user cancels a prompt during dependency initialization
+		err := middlewareRunner.Use("interrupt-middleware", func() (Middleware, error) {
+			return nil, terminal.InterruptErr
+		})
+		require.NoError(t, err)
+
+		// Register an action that should not run if interrupt occurs
+		actionRan := false
+		err = mockContext.Container.RegisterNamedTransient("test-action", func() actions.Action {
+			return &testAction{
+				runFunc: func(ctx context.Context) (*actions.ActionResult, error) {
+					actionRan = true
+					return &actions.ActionResult{
+						Message: &actions.ResultMessage{Header: "Action"},
+					}, nil
+				},
+			}
+		})
+		require.NoError(t, err)
+
+		result, err := middlewareRunner.RunAction(*mockContext.Context, &Options{Name: "test"}, "test-action")
+
+		// Verify that the interrupt error is returned and the action does not run
+		require.Nil(t, result)
+		require.Error(t, err)
+		require.ErrorIs(t, err, terminal.InterruptErr)
+		require.False(t, actionRan)
+	})
 }
 
 func registerAction(t *testing.T, mockContext *mocks.MockContext, name string, runLog *[]string) *bool {
diff --git a/cli/azd/extensions/azure.ai.finetune/go.mod b/cli/azd/extensions/azure.ai.finetune/go.mod
index 245759a75d1..ab3a8b87aec 100644
--- a/cli/azd/extensions/azure.ai.finetune/go.mod
+++ b/cli/azd/extensions/azure.ai.finetune/go.mod
@@ -10,7 +10,9 @@ require (
 	github.com/braydonk/yaml v0.9.0
 	github.com/fatih/color v1.18.0
 	github.com/openai/openai-go/v3 v3.2.0
+	github.com/sethvargo/go-retry v0.3.0
 	github.com/spf13/cobra v1.10.1
+	gopkg.in/yaml.v3 v3.0.1
 )
 
 require (
@@ -61,7 +63,6 @@ require (
 	github.com/pkg/browser v0.0.0-20240102092130-5ac0b6a4141c // indirect
 	github.com/pmezard/go-difflib v1.0.1-0.20181226105442-5d4384ee4fb2 // indirect
 	github.com/rivo/uniseg v0.4.7 // indirect
-	github.com/sethvargo/go-retry v0.3.0 // indirect
 	github.com/spf13/pflag v1.0.10 // indirect
 	github.com/stretchr/testify v1.11.1 // indirect
 	github.com/theckman/yacspin v0.13.12 // indirect
@@ -86,5 +87,4 @@ require (
 	google.golang.org/genproto/googleapis/rpc v0.0.0-20251007200510-49b9836ed3ff // indirect
 	google.golang.org/grpc v1.76.0 // indirect
 	google.golang.org/protobuf v1.36.10 // indirect
-	gopkg.in/yaml.v3 v3.0.1 // indirect
 )