diff --git a/.storybook/mocks/orpc.ts b/.storybook/mocks/orpc.ts
index db46ca56ff..dec1c2a70f 100644
--- a/.storybook/mocks/orpc.ts
+++ b/.storybook/mocks/orpc.ts
@@ -25,6 +25,8 @@ export interface MockORPCClientOptions {
   providersConfig?: Record<string, { apiKeySet: boolean; baseUrl?: string; models?: string[] }>;
   /** List of available provider names */
   providersList?: string[];
+  /** Mock for projects.remove - return error string to simulate failure */
+  onProjectRemove?: (projectPath: string) => { success: true } | { success: false; error: string };
 }
 
 /**
@@ -52,6 +54,7 @@ export function createMockORPCClient(options: MockORPCClientOptions = {}): APICl
     executeBash,
     providersConfig = {},
     providersList = [],
+    onProjectRemove,
   } = options;
 
   const workspaceMap = new Map(workspaces.map((w) => [w.id, w]));
@@ -99,7 +102,12 @@ export function createMockORPCClient(options: MockORPCClientOptions = {}): APICl
         branches: ["main", "develop", "feature/new-feature"],
         recommendedTrunk: "main",
       }),
-      remove: async () => ({ success: true, data: undefined }),
+      remove: async (input: { projectPath: string }) => {
+        if (onProjectRemove) {
+          return onProjectRemove(input.projectPath);
+        }
+        return { success: true, data: undefined };
+      },
       secrets: {
         get: async () => [],
         update: async () => ({ success: true, data: undefined }),
diff --git a/src/browser/App.tsx b/src/browser/App.tsx
index 20874b4c3b..280a728961 100644
--- a/src/browser/App.tsx
+++ b/src/browser/App.tsx
@@ -183,11 +183,11 @@ function AppInner() {
   const openWorkspaceInTerminal = useOpenTerminal();
 
   const handleRemoveProject = useCallback(
-    async (path: string) => {
+    async (path: string): Promise<{ success: boolean; error?: string }> => {
       if (selectedWorkspace?.projectPath === path) {
         setSelectedWorkspace(null);
       }
-      await removeProject(path);
+      return removeProject(path);
     },
     // eslint-disable-next-line react-hooks/exhaustive-deps
     [selectedWorkspace, setSelectedWorkspace]
diff --git a/src/browser/components/PopoverError.tsx b/src/browser/components/PopoverError.tsx
new file mode 100644
index 0000000000..f7cd4e9824
--- /dev/null
+++ b/src/browser/components/PopoverError.tsx
@@ -0,0 +1,44 @@
+import { createPortal } from "react-dom";
+import type { PopoverErrorState } from "@/browser/hooks/usePopoverError";
+
+interface PopoverErrorProps {
+  error: PopoverErrorState | null;
+  prefix: string;
+  onDismiss?: () => void;
+}
+
+/**
+ * Floating error popover that displays near the trigger element.
+ * Styled to match the app's toast error design.
+ */
+export function PopoverError(props: PopoverErrorProps) {
+  if (!props.error) return null;
+
+  return createPortal(
+    <div
+      role="alert"
+      aria-live="assertive"
+      className="bg-dark border-toast-error-border text-toast-error-text pointer-events-auto fixed z-[10000] flex max-w-80 animate-[toastSlideIn_0.2s_ease-out] items-start gap-2 rounded border px-3 py-2 text-xs shadow-[0_4px_12px_rgba(0,0,0,0.3)]"
+      style={{
+        top: `${props.error.position.top}px`,
+        left: `${props.error.position.left}px`,
+      }}
+    >
+      <span className="text-sm leading-none">⚠</span>
+      <div className="flex-1 leading-[1.4] break-words whitespace-pre-wrap">
+        <span className="font-medium">{props.prefix}</span>
+        <p className="text-light mt-1">{props.error.error}</p>
+      </div>
+      {props.onDismiss && (
+        <button
+          onClick={props.onDismiss}
+          aria-label="Dismiss"
+          className="flex h-4 w-4 shrink-0 cursor-pointer items-center justify-center border-0 bg-transparent p-0 text-base leading-none text-inherit opacity-60 transition-opacity hover:opacity-100"
+        >
+          ×
+        </button>
+      )}
+    </div>,
+    document.body
+  );
+}
diff --git a/src/browser/components/ProjectSidebar.tsx b/src/browser/components/ProjectSidebar.tsx
index fc106b9a9f..2ff5e5e870 100644
--- a/src/browser/components/ProjectSidebar.tsx
+++ b/src/browser/components/ProjectSidebar.tsx
@@ -1,5 +1,4 @@
-import React, { useState, useEffect, useCallback, useRef } from "react";
-import { createPortal } from "react-dom";
+import React, { useState, useEffect, useCallback } from "react";
 import { cn } from "@/common/lib/utils";
 import type { FrontendWorkspaceMetadata } from "@/common/types/workspace";
 import { usePersistedState } from "@/browser/hooks/usePersistedState";
@@ -28,6 +27,8 @@ import { RenameProvider } from "@/browser/contexts/WorkspaceRenameContext";
 import { useProjectContext } from "@/browser/contexts/ProjectContext";
 import { ChevronRight, KeyRound } from "lucide-react";
 import { useWorkspaceContext } from "@/browser/contexts/WorkspaceContext";
+import { usePopoverError } from "@/browser/hooks/usePopoverError";
+import { PopoverError } from "./PopoverError";
 
 // Re-export WorkspaceSelection for backwards compatibility
 export type { WorkspaceSelection } from "./WorkspaceListItem";
@@ -240,12 +241,8 @@ const ProjectSidebarInner: React.FC<ProjectSidebarProps> = ({
     Record<string, boolean>
   >("expandedOldWorkspaces", {});
   const [deletingWorkspaceIds, setDeletingWorkspaceIds] = useState<Set<string>>(new Set());
-  const [removeError, setRemoveError] = useState<{
-    workspaceId: string;
-    error: string;
-    position: { top: number; left: number };
-  } | null>(null);
-  const removeErrorTimeoutRef = useRef<number | null>(null);
+  const workspaceRemoveError = usePopoverError();
+  const projectRemoveError = usePopoverError();
   const [secretsModalState, setSecretsModalState] = useState<{
     isOpen: boolean;
     projectPath: string;
@@ -284,39 +281,6 @@ const ProjectSidebarInner: React.FC<ProjectSidebarProps> = ({
     }));
   };
 
-  const showRemoveError = useCallback(
-    (workspaceId: string, error: string, anchor?: { top: number; left: number }) => {
-      if (removeErrorTimeoutRef.current) {
-        window.clearTimeout(removeErrorTimeoutRef.current);
-      }
-
-      const position = anchor ?? {
-        top: window.scrollY + 32,
-        left: Math.max(window.innerWidth - 420, 16),
-      };
-
-      setRemoveError({
-        workspaceId,
-        error,
-        position,
-      });
-
-      removeErrorTimeoutRef.current = window.setTimeout(() => {
-        setRemoveError(null);
-        removeErrorTimeoutRef.current = null;
-      }, 5000);
-    },
-    []
-  );
-
-  useEffect(() => {
-    return () => {
-      if (removeErrorTimeoutRef.current) {
-        window.clearTimeout(removeErrorTimeoutRef.current);
-      }
-    };
-  }, []);
-
   const handleRemoveWorkspace = useCallback(
     async (workspaceId: string, buttonElement: HTMLElement) => {
       // Mark workspace as being deleted for UI feedback
@@ -378,7 +342,7 @@ const ProjectSidebarInner: React.FC<ProjectSidebarProps> = ({
         const errorMessage = result.error ?? "Failed to remove workspace";
         console.error("Force delete failed:", result.error);
 
-        showRemoveError(workspaceId, errorMessage, modalState?.anchor ?? undefined);
+        workspaceRemoveError.showError(workspaceId, errorMessage, modalState?.anchor ?? undefined);
       }
     } finally {
       // Clear deleting state
@@ -582,9 +546,20 @@ const ProjectSidebarInner: React.FC<ProjectSidebarProps> = ({
                             <button
                               onClick={(event) => {
                                 event.stopPropagation();
-                                void onRemoveProject(projectPath);
+                                const buttonElement = event.currentTarget;
+                                void (async () => {
+                                  const result = await onRemoveProject(projectPath);
+                                  if (!result.success) {
+                                    const error = result.error ?? "Failed to remove project";
+                                    const rect = buttonElement.getBoundingClientRect();
+                                    const anchor = {
+                                      top: rect.top + window.scrollY,
+                                      left: rect.right + 10,
+                                    };
+                                    projectRemoveError.showError(projectPath, error, anchor);
+                                  }
+                                })();
                               }}
-                              title="Remove project"
                               aria-label={`Remove project ${projectName}`}
                               data-project-path={projectPath}
                               className="text-muted-dark hover:text-danger-light hover:bg-danger-light/10 mr-1 flex h-5 w-5 shrink-0 cursor-pointer items-center justify-center rounded-[3px] border-none bg-transparent text-base opacity-0 transition-all duration-200"
@@ -754,19 +729,16 @@ const ProjectSidebarInner: React.FC<ProjectSidebarProps> = ({
               onForceDelete={handleForceDelete}
             />
           )}
-          {removeError &&
-            createPortal(
-              <div
-                className="bg-error-bg border-error text-error font-monospace pointer-events-auto fixed z-[10000] max-w-96 rounded-md border p-3 px-4 text-xs leading-[1.4] break-words whitespace-pre-wrap shadow-[0_4px_16px_rgba(0,0,0,0.5)]"
-                style={{
-                  top: `${removeError.position.top}px`,
-                  left: `${removeError.position.left}px`,
-                }}
-              >
-                Failed to remove workspace: {removeError.error}
-              </div>,
-              document.body
-            )}
+          <PopoverError
+            error={workspaceRemoveError.error}
+            prefix="Failed to remove workspace"
+            onDismiss={workspaceRemoveError.clearError}
+          />
+          <PopoverError
+            error={projectRemoveError.error}
+            prefix="Failed to remove project"
+            onDismiss={projectRemoveError.clearError}
+          />
         </div>
       </DndProvider>
     </RenameProvider>
diff --git a/src/browser/contexts/ProjectContext.tsx b/src/browser/contexts/ProjectContext.tsx
index e20953f208..39c36f85fb 100644
--- a/src/browser/contexts/ProjectContext.tsx
+++ b/src/browser/contexts/ProjectContext.tsx
@@ -27,7 +27,7 @@ export interface ProjectContext {
   projects: Map<string, ProjectConfig>;
   refreshProjects: () => Promise<void>;
   addProject: (normalizedPath: string, projectConfig: ProjectConfig) => void;
-  removeProject: (path: string) => Promise<void>;
+  removeProject: (path: string) => Promise<{ success: boolean; error?: string }>;
 
   // Project creation modal
   isProjectCreateModalOpen: boolean;
@@ -94,8 +94,8 @@ export function ProjectProvider(props: { children: ReactNode }) {
   }, []);
 
   const removeProject = useCallback(
-    async (path: string) => {
-      if (!api) return;
+    async (path: string): Promise<{ success: boolean; error?: string }> => {
+      if (!api) return { success: false, error: "API not connected" };
       try {
         const result = await api.projects.remove({ projectPath: path });
         if (result.success) {
@@ -104,11 +104,15 @@ export function ProjectProvider(props: { children: ReactNode }) {
             next.delete(path);
             return next;
           });
+          return { success: true };
         } else {
           console.error("Failed to remove project:", result.error);
+          return { success: false, error: result.error };
         }
       } catch (error) {
-        console.error("Failed to remove project:", error);
+        const errorMessage = error instanceof Error ? error.message : String(error);
+        console.error("Failed to remove project:", errorMessage);
+        return { success: false, error: errorMessage };
       }
     },
     [api]
diff --git a/src/browser/hooks/usePopoverError.ts b/src/browser/hooks/usePopoverError.ts
new file mode 100644
index 0000000000..f677942ea3
--- /dev/null
+++ b/src/browser/hooks/usePopoverError.ts
@@ -0,0 +1,79 @@
+import { useCallback, useEffect, useRef, useState } from "react";
+
+export interface PopoverErrorState {
+  id: string;
+  error: string;
+  position: { top: number; left: number };
+}
+
+export interface UsePopoverErrorResult {
+  error: PopoverErrorState | null;
+  showError: (id: string, error: string, anchor?: { top: number; left: number }) => void;
+  clearError: () => void;
+}
+
+/**
+ * Hook for managing popover error state with auto-dismiss and click-outside behavior.
+ * @param autoDismissMs - Time in ms before auto-dismissing (default: 5000)
+ */
+export function usePopoverError(autoDismissMs = 5000): UsePopoverErrorResult {
+  const [error, setError] = useState<PopoverErrorState | null>(null);
+  const timeoutRef = useRef<number | null>(null);
+
+  const clearError = useCallback(() => {
+    setError(null);
+    if (timeoutRef.current) {
+      window.clearTimeout(timeoutRef.current);
+      timeoutRef.current = null;
+    }
+  }, []);
+
+  const showError = useCallback(
+    (id: string, errorMsg: string, anchor?: { top: number; left: number }) => {
+      if (timeoutRef.current) {
+        window.clearTimeout(timeoutRef.current);
+      }
+
+      const position = anchor ?? {
+        top: window.scrollY + 32,
+        left: Math.max(window.innerWidth - 420, 16),
+      };
+
+      setError({ id, error: errorMsg, position });
+
+      timeoutRef.current = window.setTimeout(() => {
+        setError(null);
+        timeoutRef.current = null;
+      }, autoDismissMs);
+    },
+    [autoDismissMs]
+  );
+
+  // Cleanup timeout on unmount
+  useEffect(() => {
+    return () => {
+      if (timeoutRef.current) {
+        window.clearTimeout(timeoutRef.current);
+      }
+    };
+  }, []);
+
+  // Click-outside to dismiss
+  useEffect(() => {
+    if (!error) return;
+
+    const handleClickOutside = () => clearError();
+
+    // Delay to avoid immediate dismissal from the triggering click
+    const timeoutId = window.setTimeout(() => {
+      document.addEventListener("click", handleClickOutside, { once: true });
+    }, 0);
+
+    return () => {
+      window.clearTimeout(timeoutId);
+      document.removeEventListener("click", handleClickOutside);
+    };
+  }, [error, clearError]);
+
+  return { error, showError, clearError };
+}
diff --git a/src/browser/stories/App.errors.stories.tsx b/src/browser/stories/App.errors.stories.tsx
index bbff3fa985..968dc23882 100644
--- a/src/browser/stories/App.errors.stories.tsx
+++ b/src/browser/stories/App.errors.stories.tsx
@@ -15,8 +15,14 @@ import {
   createStaticChatHandler,
 } from "./mockFactory";
 import { getAutoRetryKey } from "@/common/constants/storage";
-import { selectWorkspace, setupSimpleChatStory, setupCustomChatStory } from "./storyHelpers";
+import {
+  selectWorkspace,
+  setupSimpleChatStory,
+  setupCustomChatStory,
+  expandProjects,
+} from "./storyHelpers";
 import { createMockORPCClient } from "../../../.storybook/mocks/orpc";
+import { userEvent, waitFor } from "@storybook/test";
 
 export default {
   ...appMeta,
@@ -240,3 +246,67 @@ export const LargeDiff: AppStory = {
     />
   ),
 };
+
+/**
+ * Project removal error popover.
+ *
+ * Shows the error popup when attempting to remove a project that has active workspaces.
+ * The play function hovers the project and clicks the remove button to trigger the error.
+ */
+export const ProjectRemovalError: AppStory = {
+  render: () => (
+    <AppWithMocks
+      setup={() => {
+        const workspaces = [
+          createWorkspace({ id: "ws-1", name: "main", projectName: "my-app" }),
+          createWorkspace({ id: "ws-2", name: "feature/auth", projectName: "my-app" }),
+        ];
+
+        // Expand the project so workspaces are visible
+        expandProjects(["/mock/my-app"]);
+
+        return createMockORPCClient({
+          projects: groupWorkspacesByProject(workspaces),
+          workspaces,
+          onProjectRemove: () => ({
+            success: false,
+            error:
+              "Cannot remove project with active workspaces. Please remove all 2 workspace(s) first.",
+          }),
+        });
+      }}
+    />
+  ),
+  play: async ({ canvasElement }: { canvasElement: HTMLElement }) => {
+    // Wait for the remove button to exist in DOM
+    await waitFor(
+      () => {
+        const removeButton = canvasElement.querySelector(
+          'button[aria-label="Remove project my-app"]'
+        );
+        if (!removeButton) throw new Error("Remove button not found");
+      },
+      { timeout: 5000 }
+    );
+
+    // Get the project row container and hover to reveal the button
+    const removeButton = canvasElement.querySelector('button[aria-label="Remove project my-app"]')!;
+    const projectRow = removeButton.closest("[data-project-path]")!;
+    await userEvent.hover(projectRow);
+
+    // Small delay for hover state to apply
+    await new Promise((r) => setTimeout(r, 100));
+
+    // Click the remove button
+    await userEvent.click(removeButton);
+
+    // Wait for the error popover to appear
+    await waitFor(
+      () => {
+        const errorPopover = document.querySelector('[role="alert"]');
+        if (!errorPopover) throw new Error("Error popover not found");
+      },
+      { timeout: 2000 }
+    );
+  },
+};