diff --git a/src/browser/components/GitStatusIndicator.tsx b/src/browser/components/GitStatusIndicator.tsx
index 88960d4897..942c45c592 100644
--- a/src/browser/components/GitStatusIndicator.tsx
+++ b/src/browser/components/GitStatusIndicator.tsx
@@ -7,6 +7,8 @@ interface GitStatusIndicatorProps {
   gitStatus: GitStatus | null;
   workspaceId: string;
   tooltipPosition?: "right" | "bottom";
+  /** When true, shows blue pulsing styling to indicate agent is working */
+  isWorking?: boolean;
 }
 
 /**
@@ -18,6 +20,7 @@ export const GitStatusIndicator: React.FC<GitStatusIndicatorProps> = ({
   gitStatus,
   workspaceId,
   tooltipPosition = "right",
+  isWorking = false,
 }) => {
   const [showTooltip, setShowTooltip] = useState(false);
   const [tooltipCoords, setTooltipCoords] = useState<{ top: number; left: number }>({
@@ -118,6 +121,7 @@ export const GitStatusIndicator: React.FC<GitStatusIndicatorProps> = ({
       onTooltipMouseEnter={handleTooltipMouseEnter}
       onTooltipMouseLeave={handleTooltipMouseLeave}
       onContainerRef={handleContainerRef}
+      isWorking={isWorking}
     />
   );
 };
diff --git a/src/browser/components/GitStatusIndicatorView.tsx b/src/browser/components/GitStatusIndicatorView.tsx
index e1b72009b1..5e96c844af 100644
--- a/src/browser/components/GitStatusIndicatorView.tsx
+++ b/src/browser/components/GitStatusIndicatorView.tsx
@@ -35,6 +35,8 @@ export interface GitStatusIndicatorViewProps {
   onTooltipMouseEnter: () => void;
   onTooltipMouseLeave: () => void;
   onContainerRef: (el: HTMLSpanElement | null) => void;
+  /** When true, shows blue pulsing styling to indicate agent is working */
+  isWorking?: boolean;
 }
 
 /**
@@ -57,6 +59,7 @@ export const GitStatusIndicatorView: React.FC<GitStatusIndicatorViewProps> = ({
   onTooltipMouseEnter,
   onTooltipMouseLeave,
   onContainerRef,
+  isWorking = false,
 }) => {
   // Handle null gitStatus (loading state)
   if (!gitStatus) {
@@ -202,13 +205,20 @@ export const GitStatusIndicatorView: React.FC<GitStatusIndicatorViewProps> = ({
     </div>
   );
 
+  // Dynamic color based on working state
+  const statusColor = isWorking ? "text-blue-400 animate-pulse" : "text-muted";
+  const dirtyColor = isWorking ? "text-blue-400" : "text-git-dirty";
+
   return (
     <>
       <span
         ref={onContainerRef}
         onMouseEnter={onMouseEnter}
         onMouseLeave={onMouseLeave}
-        className="text-accent relative mr-1.5 flex items-center gap-1 font-mono text-[11px]"
+        className={cn(
+          "relative mr-1.5 flex items-center gap-1 font-mono text-[11px] transition-colors",
+          statusColor
+        )}
       >
         {gitStatus.ahead > 0 && (
           <span className="flex items-center font-normal">↑{gitStatus.ahead}</span>
@@ -217,7 +227,7 @@ export const GitStatusIndicatorView: React.FC<GitStatusIndicatorViewProps> = ({
           <span className="flex items-center font-normal">↓{gitStatus.behind}</span>
         )}
         {gitStatus.dirty && (
-          <span className="text-git-dirty flex items-center leading-none font-normal">*</span>
+          <span className={cn("flex items-center leading-none font-normal", dirtyColor)}>*</span>
         )}
       </span>
 
diff --git a/src/browser/components/RuntimeBadge.tsx b/src/browser/components/RuntimeBadge.tsx
index b5f175bda2..93244ac994 100644
--- a/src/browser/components/RuntimeBadge.tsx
+++ b/src/browser/components/RuntimeBadge.tsx
@@ -8,6 +8,8 @@ import { TooltipWrapper, Tooltip } from "./Tooltip";
 interface RuntimeBadgeProps {
   runtimeConfig?: RuntimeConfig;
   className?: string;
+  /** When true, shows blue pulsing styling to indicate agent is working */
+  isWorking?: boolean;
 }
 
 /** Server rack icon for SSH runtime */
@@ -56,8 +58,8 @@ function WorktreeIcon() {
   );
 }
 
-/** Folder icon for local project-dir runtime (reserved for future use) */
-function _LocalIcon() {
+/** Folder icon for local project-dir runtime */
+function LocalIcon() {
   return (
     <svg
       width="10"
@@ -81,9 +83,17 @@ function _LocalIcon() {
  * Shows icon-only badge with tooltip describing the runtime type.
  * - SSH: server icon with hostname
  * - Worktree: git branch icon (isolated worktree)
- * - Local: folder icon (project directory, no badge shown by default)
+ * - Local: folder icon (project directory)
+ *
+ * When isWorking=true, badges show blue color with pulse animation.
+ * When idle, badges show gray styling.
  */
-export function RuntimeBadge({ runtimeConfig, className }: RuntimeBadgeProps) {
+export function RuntimeBadge({ runtimeConfig, className, isWorking = false }: RuntimeBadgeProps) {
+  // Dynamic styling based on working state
+  const workingStyles = isWorking
+    ? "bg-blue-500/20 text-blue-400 border-blue-500/40 animate-pulse"
+    : "bg-muted/30 text-muted border-muted/50";
+
   // SSH runtime: show server icon with hostname
   if (isSSHRuntime(runtimeConfig)) {
     const hostname = extractSshHostname(runtimeConfig);
@@ -91,8 +101,8 @@ export function RuntimeBadge({ runtimeConfig, className }: RuntimeBadgeProps) {
       <TooltipWrapper inline>
         <span
           className={cn(
-            "inline-flex items-center rounded px-1 py-0.5",
-            "bg-accent/10 text-accent border border-accent/30",
+            "inline-flex items-center rounded px-1 py-0.5 border transition-colors",
+            workingStyles,
             className
           )}
         >
@@ -109,8 +119,8 @@ export function RuntimeBadge({ runtimeConfig, className }: RuntimeBadgeProps) {
       <TooltipWrapper inline>
         <span
           className={cn(
-            "inline-flex items-center rounded px-1 py-0.5",
-            "bg-muted/50 text-muted-foreground border border-muted",
+            "inline-flex items-center rounded px-1 py-0.5 border transition-colors",
+            workingStyles,
             className
           )}
         >
@@ -121,10 +131,22 @@ export function RuntimeBadge({ runtimeConfig, className }: RuntimeBadgeProps) {
     );
   }
 
-  // Local project-dir runtime: don't show badge (it's the simplest/default)
-  // Could optionally show LocalIcon if we want visibility
+  // Local project-dir runtime: show folder icon
   if (isLocalProjectRuntime(runtimeConfig)) {
-    return null; // No badge for simple local runtimes
+    return (
+      <TooltipWrapper inline>
+        <span
+          className={cn(
+            "inline-flex items-center rounded px-1 py-0.5 border transition-colors",
+            workingStyles,
+            className
+          )}
+        >
+          <LocalIcon />
+        </span>
+        <Tooltip align="right">Local: project directory</Tooltip>
+      </TooltipWrapper>
+    );
   }
 
   return null;
diff --git a/src/browser/components/WorkspaceHeader.tsx b/src/browser/components/WorkspaceHeader.tsx
index 1f50523e75..c6be5716f5 100644
--- a/src/browser/components/WorkspaceHeader.tsx
+++ b/src/browser/components/WorkspaceHeader.tsx
@@ -4,8 +4,8 @@ import { RuntimeBadge } from "./RuntimeBadge";
 import { TooltipWrapper, Tooltip } from "./Tooltip";
 import { formatKeybind, KEYBINDS } from "@/browser/utils/ui/keybinds";
 import { useGitStatus } from "@/browser/stores/GitStatusStore";
+import { useWorkspaceSidebarState } from "@/browser/stores/WorkspaceStore";
 import type { RuntimeConfig } from "@/common/types/runtime";
-import { WorkspaceStatusDot } from "./WorkspaceStatusDot";
 import { useTutorial } from "@/browser/contexts/TutorialContext";
 
 interface WorkspaceHeaderProps {
@@ -24,6 +24,7 @@ export const WorkspaceHeader: React.FC<WorkspaceHeaderProps> = ({
   runtimeConfig,
 }) => {
   const gitStatus = useGitStatus(workspaceId);
+  const { canInterrupt } = useWorkspaceSidebarState(workspaceId);
   const handleOpenTerminal = useCallback(() => {
     void window.api.terminal.openWindow(workspaceId);
   }, [workspaceId]);
@@ -46,13 +47,13 @@ export const WorkspaceHeader: React.FC<WorkspaceHeaderProps> = ({
   return (
     <div className="bg-separator border-border-light flex h-8 items-center justify-between border-b px-[15px] [@media(max-width:768px)]:h-auto [@media(max-width:768px)]:flex-wrap [@media(max-width:768px)]:gap-2 [@media(max-width:768px)]:py-2 [@media(max-width:768px)]:pl-[60px]">
       <div className="text-foreground flex min-w-0 items-center gap-2 overflow-hidden font-semibold">
-        <WorkspaceStatusDot workspaceId={workspaceId} />
+        <RuntimeBadge runtimeConfig={runtimeConfig} isWorking={canInterrupt} />
         <GitStatusIndicator
           gitStatus={gitStatus}
           workspaceId={workspaceId}
           tooltipPosition="bottom"
+          isWorking={canInterrupt}
         />
-        <RuntimeBadge runtimeConfig={runtimeConfig} />
         <span className="min-w-0 truncate font-mono text-xs">
           {projectName} / {branch}
         </span>
diff --git a/src/browser/components/WorkspaceListItem.tsx b/src/browser/components/WorkspaceListItem.tsx
index 8a702e00bd..e3c2b32e17 100644
--- a/src/browser/components/WorkspaceListItem.tsx
+++ b/src/browser/components/WorkspaceListItem.tsx
@@ -3,11 +3,10 @@ import { cn } from "@/common/lib/utils";
 import { useGitStatus } from "@/browser/stores/GitStatusStore";
 import { useWorkspaceSidebarState } from "@/browser/stores/WorkspaceStore";
 import type { FrontendWorkspaceMetadata } from "@/common/types/workspace";
-import React, { useCallback, useState } from "react";
+import React, { useState } from "react";
 import { GitStatusIndicator } from "./GitStatusIndicator";
 import { RuntimeBadge } from "./RuntimeBadge";
 import { Tooltip, TooltipWrapper } from "./Tooltip";
-import { WorkspaceStatusDot } from "./WorkspaceStatusDot";
 import { WorkspaceStatusIndicator } from "./WorkspaceStatusIndicator";
 import { Shimmer } from "./ai-elements/shimmer";
 
@@ -24,11 +23,13 @@ export interface WorkspaceListItemProps {
   projectName: string;
   isSelected: boolean;
   isDeleting?: boolean;
-  lastReadTimestamp: number;
+  /** @deprecated No longer used since status dot was removed, kept for API compatibility */
+  lastReadTimestamp?: number;
   // Event handlers
   onSelectWorkspace: (selection: WorkspaceSelection) => void;
   onRemoveWorkspace: (workspaceId: string, button: HTMLElement) => Promise<void>;
-  onToggleUnread: (workspaceId: string) => void;
+  /** @deprecated No longer used since status dot was removed, kept for API compatibility */
+  onToggleUnread?: (workspaceId: string) => void;
 }
 
 const WorkspaceListItemInner: React.FC<WorkspaceListItemProps> = ({
@@ -37,10 +38,10 @@ const WorkspaceListItemInner: React.FC<WorkspaceListItemProps> = ({
   projectName,
   isSelected,
   isDeleting,
-  lastReadTimestamp,
+  lastReadTimestamp: _lastReadTimestamp,
   onSelectWorkspace,
   onRemoveWorkspace,
-  onToggleUnread,
+  onToggleUnread: _onToggleUnread,
 }) => {
   // Destructure metadata for convenience
   const { id: workspaceId, name: workspaceName, namedWorkspacePath } = metadata;
@@ -93,12 +94,6 @@ const WorkspaceListItemInner: React.FC<WorkspaceListItemProps> = ({
     }
   };
 
-  // Memoize toggle unread handler to prevent AgentStatusIndicator re-renders
-  const handleToggleUnread = useCallback(
-    () => onToggleUnread(workspaceId),
-    [onToggleUnread, workspaceId]
-  );
-
   const { canInterrupt } = useWorkspaceSidebarState(workspaceId);
 
   return (
@@ -135,16 +130,9 @@ const WorkspaceListItemInner: React.FC<WorkspaceListItemProps> = ({
         data-workspace-path={namedWorkspacePath}
         data-workspace-id={workspaceId}
       >
-        <div>
-          <WorkspaceStatusDot
-            workspaceId={workspaceId}
-            lastReadTimestamp={lastReadTimestamp}
-            onClick={handleToggleUnread}
-          />
-        </div>
         <div className="flex min-w-0 flex-1 flex-col gap-1">
           <div className="flex min-w-0 items-center gap-1.5">
-            <RuntimeBadge runtimeConfig={metadata.runtimeConfig} />
+            <RuntimeBadge runtimeConfig={metadata.runtimeConfig} isWorking={canInterrupt} />
             {isEditing ? (
               <input
                 className="bg-input-bg text-input-text border-input-border font-inherit focus:border-input-border-focus -mx-1 min-w-0 flex-1 rounded-sm border px-1 text-left text-[13px] outline-none"
@@ -181,6 +169,7 @@ const WorkspaceListItemInner: React.FC<WorkspaceListItemProps> = ({
                 gitStatus={gitStatus}
                 workspaceId={workspaceId}
                 tooltipPosition="right"
+                isWorking={canInterrupt}
               />
 
               <TooltipWrapper inline>