diff --git a/.github/workflows/stale-repo-identifier.lock.yml b/.github/workflows/stale-repo-identifier.lock.yml
index df7057fa1a8..bc323d3f910 100644
--- a/.github/workflows/stale-repo-identifier.lock.yml
+++ b/.github/workflows/stale-repo-identifier.lock.yml
@@ -31,7 +31,6 @@ name: "Stale Repository Identifier"
 "on":
   schedule:
   - cron: "0 9 1 * *"
-    # Friendly format: every 12h (scattered)
   workflow_dispatch:
     inputs:
       organization:
diff --git a/actions/setup/sh/check_mcp_servers.sh b/actions/setup/sh/check_mcp_servers.sh
index 2eb35471dde..1b704e6dc77 100755
--- a/actions/setup/sh/check_mcp_servers.sh
+++ b/actions/setup/sh/check_mcp_servers.sh
@@ -19,8 +19,8 @@ set -e
 #   GATEWAY_API_KEY     : API key for gateway authentication
 #
 # Exit codes:
-#   0 - All server checks completed (warnings logged for failures)
-#   1 - Invalid arguments or configuration file issues
+#   0 - All MCP server checks succeeded (some may be skipped if not HTTP-based)
+#   1 - Invalid arguments, configuration file issues, or any MCP server failed to connect
 
 if [ "$#" -ne 3 ]; then
   echo "Usage: $0 GATEWAY_CONFIG_PATH GATEWAY_URL GATEWAY_API_KEY" >&2
@@ -135,9 +135,12 @@ while IFS= read -r SERVER_NAME; do
     AUTH_HEADER=$(echo "$SERVER_CONFIG" | jq -r '.headers.Authorization' 2>/dev/null)
     echo "Authentication: From gateway config (${AUTH_HEADER:0:20}...)"
   else
-    echo "WARNING: No Authorization header in gateway configuration for: $SERVER_NAME"
+    echo "ERROR: No Authorization header in gateway configuration for: $SERVER_NAME"
     echo "The gateway should have included authentication headers in its output."
-    echo "Skipping authentication check..."
+    echo "This indicates the gateway failed to properly configure the server."
+    SERVERS_FAILED=$((SERVERS_FAILED + 1))
+    echo ""
+    continue
   fi
   echo ""
   
diff --git a/actions/setup/sh/mcp_exit_code_logic_test.sh b/actions/setup/sh/mcp_exit_code_logic_test.sh
new file mode 100755
index 00000000000..8253eb9aa50
--- /dev/null
+++ b/actions/setup/sh/mcp_exit_code_logic_test.sh
@@ -0,0 +1,154 @@
+#!/bin/bash
+# Fast unit test for MCP gateway failure exit code logic
+# Tests the final exit code determination without network timeouts
+
+set -e
+
+# Color codes
+GREEN='\033[0;32m'
+RED='\033[0;31m'
+NC='\033[0m'
+
+TESTS_RUN=0
+TESTS_PASSED=0
+TESTS_FAILED=0
+
+print_result() {
+  local test_name="$1"
+  local result="$2"
+  
+  TESTS_RUN=$((TESTS_RUN + 1))
+  
+  if [ "$result" = "PASS" ]; then
+    echo -e "${GREEN}✓ PASS${NC}: $test_name"
+    TESTS_PASSED=$((TESTS_PASSED + 1))
+  else
+    echo -e "${RED}✗ FAIL${NC}: $test_name"
+    TESTS_FAILED=$((TESTS_FAILED + 1))
+  fi
+}
+
+echo "========================================"
+echo "MCP Gateway Exit Code Logic Tests"
+echo "========================================"
+echo ""
+
+# Test 1: Simulate exit code logic with failures
+echo "Test 1: Exit code logic with SERVERS_FAILED > 0"
+SERVERS_FAILED=1
+SERVERS_SUCCEEDED=0
+if [ $SERVERS_FAILED -gt 0 ]; then
+  print_result "SERVERS_FAILED > 0 triggers exit 1 logic" "PASS"
+elif [ $SERVERS_SUCCEEDED -eq 0 ]; then
+  print_result "Secondary condition not needed" "FAIL"
+else
+  print_result "Should not reach success path" "FAIL"
+fi
+echo ""
+
+# Test 2: No successes should fail
+echo "Test 2: Exit code logic with SERVERS_SUCCEEDED = 0"
+SERVERS_FAILED=0
+SERVERS_SUCCEEDED=0
+if [ $SERVERS_FAILED -gt 0 ]; then
+  print_result "Should not trigger first condition" "FAIL"
+elif [ $SERVERS_SUCCEEDED -eq 0 ]; then
+  print_result "SERVERS_SUCCEEDED = 0 triggers exit 1 logic" "PASS"
+else
+  print_result "Should not reach success path" "FAIL"
+fi
+echo ""
+
+# Test 3: Success case
+echo "Test 3: Exit code logic with successes and no failures"
+SERVERS_FAILED=0
+SERVERS_SUCCEEDED=2
+if [ $SERVERS_FAILED -gt 0 ]; then
+  print_result "Should not trigger first condition" "FAIL"
+elif [ $SERVERS_SUCCEEDED -eq 0 ]; then
+  print_result "Should not trigger second condition" "FAIL"
+else
+  print_result "Success case triggers exit 0 logic" "PASS"
+fi
+echo ""
+
+# Test 4: Verify actual script exit codes with quick-fail configs
+echo "Test 4: Actual script with invalid config (quick exit)"
+tmpdir=$(mktemp -d)
+# Invalid JSON - should fail immediately
+echo "not json" > "$tmpdir/bad.json"
+if bash actions/setup/sh/check_mcp_servers.sh "$tmpdir/bad.json" "http://localhost:8080" "key" >/dev/null 2>&1; then
+  print_result "Invalid JSON should fail" "FAIL"
+else
+  exit_code=$?
+  if [ $exit_code -eq 1 ]; then
+    print_result "Invalid JSON returns exit code 1" "PASS"
+  else
+    echo "  Expected 1, got $exit_code"
+    print_result "Invalid JSON exit code" "FAIL"
+  fi
+fi
+rm -rf "$tmpdir"
+echo ""
+
+# Test 5: Empty servers (quick exit)
+echo "Test 5: Actual script with empty servers (quick exit)"
+tmpdir=$(mktemp -d)
+cat > "$tmpdir/empty.json" <<'EOF'
+{
+  "mcpServers": {}
+}
+EOF
+if bash actions/setup/sh/check_mcp_servers.sh "$tmpdir/empty.json" "http://localhost:8080" "key" >/dev/null 2>&1; then
+  print_result "Empty mcpServers returns exit code 0" "PASS"
+else
+  echo "  Empty servers should exit 0 (no servers to check)"
+  print_result "Empty mcpServers handling" "FAIL"
+fi
+rm -rf "$tmpdir"
+echo ""
+
+# Test 6: Only stdio servers (quick exit - no HTTP servers to check)
+echo "Test 6: Only stdio servers (should fail - no HTTP servers checked)"
+tmpdir=$(mktemp -d)
+cat > "$tmpdir/stdio.json" <<'EOF'
+{
+  "mcpServers": {
+    "stdio-server": {
+      "type": "stdio",
+      "command": "node",
+      "args": ["server.js"]
+    }
+  }
+}
+EOF
+if bash actions/setup/sh/check_mcp_servers.sh "$tmpdir/stdio.json" "http://localhost:8080" "key" >/dev/null 2>&1; then
+  print_result "stdio-only should fail (no HTTP servers)" "FAIL"
+else
+  exit_code=$?
+  if [ $exit_code -eq 1 ]; then
+    print_result "stdio-only returns exit code 1" "PASS"
+  else
+    echo "  Expected 1, got $exit_code"
+    print_result "stdio-only exit code" "FAIL"
+  fi
+fi
+rm -rf "$tmpdir"
+echo ""
+
+# Print summary
+echo "========================================"
+echo "Test Summary"
+echo "========================================"
+echo "Tests run: $TESTS_RUN"
+echo "Tests passed: $TESTS_PASSED"
+echo "Tests failed: $TESTS_FAILED"
+echo ""
+
+if [ $TESTS_FAILED -gt 0 ]; then
+  echo -e "${RED}Some tests failed${NC}"
+  exit 1
+else
+  echo -e "${GREEN}All tests passed!${NC}"
+  exit 0
+fi
diff --git a/actions/setup/sh/mcp_gateway_failure_handling_test.sh b/actions/setup/sh/mcp_gateway_failure_handling_test.sh
new file mode 100755
index 00000000000..febe2393144
--- /dev/null
+++ b/actions/setup/sh/mcp_gateway_failure_handling_test.sh
@@ -0,0 +1,236 @@
+#!/bin/bash
+# Test script for verifying MCP gateway failure handling
+# This test verifies that start_mcp_gateway.sh correctly terminates the gateway
+# when check_mcp_servers.sh detects server connection failures
+
+set -e
+
+SCRIPT_DIR="$(cd "$(dirname "${BASH_SOURCE[0]}")" && pwd)"
+CHECK_SCRIPT="$SCRIPT_DIR/check_mcp_servers.sh"
+
+# Color codes for output
+GREEN='\033[0;32m'
+RED='\033[0;31m'
+NC='\033[0m' # No Color
+
+# Test counters
+TESTS_RUN=0
+TESTS_PASSED=0
+TESTS_FAILED=0
+
+# Print test result
+print_result() {
+  local test_name="$1"
+  local result="$2"
+  
+  TESTS_RUN=$((TESTS_RUN + 1))
+  
+  if [ "$result" = "PASS" ]; then
+    echo -e "${GREEN}✓ PASS${NC}: $test_name"
+    TESTS_PASSED=$((TESTS_PASSED + 1))
+  else
+    echo -e "${RED}✗ FAIL${NC}: $test_name"
+    TESTS_FAILED=$((TESTS_FAILED + 1))
+  fi
+}
+
+echo "========================================"
+echo "MCP Gateway Failure Handling Tests"
+echo "========================================"
+echo ""
+
+# Test 1: Server with connection failure returns exit code 1
+test_server_connection_failure() {
+  echo "Test 1: Server connection failure returns exit code 1"
+  
+  local tmpdir=$(mktemp -d)
+  local config_file="$tmpdir/config.json"
+  
+  # Create config with HTTP server that cannot be reached
+  cat > "$config_file" <<'EOF'
+{
+  "mcpServers": {
+    "unreachable-server": {
+      "type": "http",
+      "url": "http://localhost:9999/mcp/unreachable",
+      "headers": {
+        "Authorization": "Bearer test-token"
+      }
+    }
+  }
+}
+EOF
+  
+  # Script should fail with exit code 1 (server cannot be connected)
+  # Use timeout to avoid long waits, but check the actual script exit code
+  timeout 20 bash "$CHECK_SCRIPT" "$config_file" "http://localhost:9999" "test-key" >/dev/null 2>&1
+  local exit_code=$?
+  
+  # timeout returns 124 on timeout, but we want the script's exit code
+  # Script should fail before timeout with exit code 1
+  if [ $exit_code -eq 1 ]; then
+    print_result "Connection failure returns exit code 1" "PASS"
+  elif [ $exit_code -eq 124 ]; then
+    echo "  Test timed out - script may be hanging"
+    print_result "Connection failure test timed out" "FAIL"
+  else
+    echo "  Expected exit code 1, got $exit_code"
+    print_result "Connection failure returns correct exit code" "FAIL"
+  fi
+  
+  rm -rf "$tmpdir"
+}
+
+# Test 2: Multiple servers with at least one failure returns exit code 1
+test_multiple_servers_with_failure() {
+  echo ""
+  echo "Test 2: Multiple servers with at least one failure returns exit code 1"
+  
+  local tmpdir=$(mktemp -d)
+  local config_file="$tmpdir/config.json"
+  
+  # Create config with multiple HTTP servers, all unreachable
+  cat > "$config_file" <<'EOF'
+{
+  "mcpServers": {
+    "server1": {
+      "type": "http",
+      "url": "http://localhost:9998/mcp/server1",
+      "headers": {
+        "Authorization": "Bearer token1"
+      }
+    },
+    "server2": {
+      "type": "http",
+      "url": "http://localhost:9997/mcp/server2",
+      "headers": {
+        "Authorization": "Bearer token2"
+      }
+    }
+  }
+}
+EOF
+  
+  # Script should fail because all servers are unreachable
+  # Use timeout to avoid long waits (multiple servers = more retry time)
+  timeout 30 bash "$CHECK_SCRIPT" "$config_file" "http://localhost:9998" "test-key" >/dev/null 2>&1
+  local exit_code=$?
+  
+  if [ $exit_code -eq 1 ]; then
+    print_result "Multiple server failures return exit code 1" "PASS"
+  elif [ $exit_code -eq 124 ]; then
+    echo "  Test timed out - script may be hanging"
+    print_result "Multiple server failures test timed out" "FAIL"
+  else
+    echo "  Expected exit code 1, got $exit_code"
+    print_result "Multiple server failures return correct exit code" "FAIL"
+  fi
+  
+  rm -rf "$tmpdir"
+}
+
+# Test 3: Verify exit code 1 for initialize request failure
+test_initialize_failure() {
+  echo ""
+  echo "Test 3: Initialize request failure returns exit code 1"
+  
+  local tmpdir=$(mktemp -d)
+  local config_file="$tmpdir/config.json"
+  
+  # Create config with unreachable server
+  cat > "$config_file" <<'EOF'
+{
+  "mcpServers": {
+    "test-server": {
+      "type": "http",
+      "url": "http://localhost:8765/mcp/test",
+      "headers": {
+        "Authorization": "Bearer test-token"
+      }
+    }
+  }
+}
+EOF
+  
+  # Capture both exit code and output (with timeout)
+  output=$(timeout 20 bash "$CHECK_SCRIPT" "$config_file" "http://localhost:8765" "test-key" 2>&1)
+  exit_code=$?
+  
+  # Should fail with exit code 1
+  if [ $exit_code -eq 1 ]; then
+    # Verify error message mentions failure
+    if echo "$output" | grep -q "failed"; then
+      print_result "Initialize failure detected and reported" "PASS"
+    else
+      echo "  Exit code correct but error message not found"
+      print_result "Initialize failure error message" "FAIL"
+    fi
+  else
+    echo "  Expected exit code 1, got $exit_code"
+    print_result "Initialize failure returns exit code 1" "FAIL"
+  fi
+  
+  rm -rf "$tmpdir"
+}
+
+# Test 4: Verify no servers successfully checked returns exit code 1
+test_no_successful_checks() {
+  echo ""
+  echo "Test 4: No successful server checks returns exit code 1"
+  
+  local tmpdir=$(mktemp -d)
+  local config_file="$tmpdir/config.json"
+  
+  # Create config with only stdio servers (which get skipped)
+  cat > "$config_file" <<'EOF'
+{
+  "mcpServers": {
+    "stdio-server": {
+      "type": "stdio",
+      "command": "node",
+      "args": ["server.js"]
+    }
+  }
+}
+EOF
+  
+  # Should exit 1 because no HTTP servers were successfully checked
+  timeout 5 bash "$CHECK_SCRIPT" "$config_file" "http://localhost:8080" "test-key" >/dev/null 2>&1
+  local exit_code=$?
+  
+  if [ $exit_code -eq 1 ]; then
+    print_result "No successful checks returns exit code 1" "PASS"
+  elif [ $exit_code -eq 124 ]; then
+    echo "  Test timed out unexpectedly"
+    print_result "No successful checks test timed out" "FAIL"
+  else
+    echo "  Expected exit code 1, got $exit_code"
+    print_result "No successful checks returns correct exit code" "FAIL"
+  fi
+  
+  rm -rf "$tmpdir"
+}
+
+# Run all tests
+test_server_connection_failure
+test_multiple_servers_with_failure
+test_initialize_failure
+test_no_successful_checks
+
+# Print summary
+echo ""
+echo "========================================"
+echo "Test Summary"
+echo "========================================"
+echo "Tests run: $TESTS_RUN"
+echo "Tests passed: $TESTS_PASSED"
+echo "Tests failed: $TESTS_FAILED"
+echo ""
+
+if [ $TESTS_FAILED -gt 0 ]; then
+  echo -e "${RED}Some tests failed${NC}"
+  exit 1
+else
+  echo -e "${GREEN}All tests passed!${NC}"
+  exit 0
+fi
diff --git a/actions/setup/sh/start_mcp_gateway.sh b/actions/setup/sh/start_mcp_gateway.sh
index d65159e5850..91043877bde 100755
--- a/actions/setup/sh/start_mcp_gateway.sh
+++ b/actions/setup/sh/start_mcp_gateway.sh
@@ -235,6 +235,11 @@ if jq -e '.error' /tmp/gh-aw/mcp-config/gateway-output.json >/dev/null 2>&1; the
   exit 1
 fi
 
+# Log gateway version for debugging and troubleshooting
+GATEWAY_VERSION=$(jq -r '.gateway.version // "unknown"' /tmp/gh-aw/mcp-config/gateway-output.json 2>/dev/null)
+echo "Gateway version: $GATEWAY_VERSION"
+echo ""
+
 # Convert gateway output to agent-specific format
 echo "Converting gateway configuration to agent format..."
 export MCP_GATEWAY_OUTPUT=/tmp/gh-aw/mcp-config/gateway-output.json