diff --git a/.changeset/dev-engine-watch.md b/.changeset/dev-engine-watch.md
new file mode 100644
index 0000000000..79dea7b880
--- /dev/null
+++ b/.changeset/dev-engine-watch.md
@@ -0,0 +1,7 @@
+---
+"@runfusion/fusion": minor
+---
+
+summary: Add safe development source watching with automatic engine restarts.
+category: feature
+dev: Use `pnpm dev:watch`; restarts close new admission, drain active agents, rebuild dist, and respawn the supervised child.
diff --git a/README.md b/README.md
index 1ec174c4ef..3f3bb3874e 100644
--- a/README.md
+++ b/README.md
@@ -665,6 +665,7 @@ pnpm local --no-engine        # Start local dashboard/API only
 pnpm build                    # Build default workspace packages (excludes desktop/mobile)
 pnpm build:all                # Build all packages (including desktop/mobile)
 pnpm dev dashboard            # Run dashboard + AI engine
+pnpm dev:watch                # Dashboard + AI engine; restart on source edits after agents drain
 pnpm dev:ui                   # Dashboard only (no AI engine)
 pnpm lint                     # Lint all packages
 pnpm typecheck                # Type-check all packages
diff --git a/docs/contributing.md b/docs/contributing.md
index 2fa192ff44..372dd6327e 100644
--- a/docs/contributing.md
+++ b/docs/contributing.md
@@ -72,9 +72,10 @@ pnpm local             # fast local dashboard/API + AI engine startup on a safe
 pnpm local --no-engine # fast local dashboard/API-only startup
 pnpm local --prebuild <none|client|full>  # local dashboard/API + AI engine startup with an explicit prebuild level
 pnpm dev               # source-mode CLI; dashboard gets a client-only prebuild, other commands skip it
+pnpm dev:watch         # dashboard + engine; gracefully restart runtime source after active agents drain
 FUSION_DEV_PREBUILD=full pnpm dev dashboard  # production-like full workspace prebuild
 pnpm dev:ui            # dashboard dev server only
-pnpm dev:hmr           # dashboard API + Vite HMR UI, with no startup prebuild
+pnpm dev:hmr           # dashboard API + Vite UI HMR + graceful runtime source restarts
 pnpm lint              # lint all packages
 pnpm test              # merge-gate suite + changed-only affected tests (bounded; never full-suite)
 pnpm test:gate         # the merge gate: curated engine-core suite + CI-shape test
diff --git a/package.json b/package.json
index a042a2f1ad..0344181e5f 100644
--- a/package.json
+++ b/package.json
@@ -34,6 +34,7 @@
     "smoke:boot": "node scripts/boot-smoke.mjs",
     "local": "node scripts/start-local.mjs",
     "dev": "node scripts/dev-with-memory.mjs",
+    "dev:watch": "node scripts/dev-with-memory.mjs --watch",
     "start": "node scripts/dev-with-memory.mjs",
     "dev:ui": "pnpm --filter @fusion/dashboard dev",
     "dev:hmr": "node scripts/dev-hmr.mjs",
diff --git a/packages/cli/src/__tests__/dev-with-memory-lib.test.ts b/packages/cli/src/__tests__/dev-with-memory-lib.test.ts
index 25e1d65db1..418a3d8ef6 100644
--- a/packages/cli/src/__tests__/dev-with-memory-lib.test.ts
+++ b/packages/cli/src/__tests__/dev-with-memory-lib.test.ts
@@ -1,12 +1,21 @@
-import { describe, expect, it } from "vitest";
+import { afterEach, describe, expect, it, vi } from "vitest";
 import {
   buildForwardedDevArgs,
   buildDevNodeArgs,
+  createDevWatchRestartCoordinator,
   getPrebuildCommand,
   normalizePrebuildMode,
   parseDevWrapperArgs,
   resolvePrebuildMode,
 } from "../../../../scripts/dev-with-memory-lib.mjs";
+import {
+  createDevSourceWatcher,
+  isRestartableSourceFile,
+} from "../../../../scripts/lib/dev-source-watch.mjs";
+
+afterEach(() => {
+  vi.useRealTimers();
+});
 
 describe("buildDevNodeArgs", () => {
   it("enables source-condition resolution before loading the tsx runtime", () => {
@@ -44,6 +53,26 @@ describe("dev-with-memory prebuild options", () => {
       inspectFlags: ["--inspect=9230"],
       args: ["dashboard", "--port", "4050"],
       requestedPrebuild: "none",
+      watchSource: false,
+      watchSourceFromFlag: false,
+    });
+  });
+
+  it("keeps the wrapper-only watch flag out of CLI arguments", () => {
+    expect(parseDevWrapperArgs(["--watch", "dashboard", "--port", "4050"], {})).toEqual({
+      inspectFlags: [],
+      args: ["dashboard", "--port", "4050"],
+      requestedPrebuild: "auto",
+      watchSource: true,
+      watchSourceFromFlag: true,
+    });
+  });
+
+  it("allows source watching to be enabled through the development environment", () => {
+    expect(parseDevWrapperArgs(["dashboard"], { FUSION_DEV_WATCH: "1" })).toMatchObject({
+      args: ["dashboard"],
+      watchSource: true,
+      watchSourceFromFlag: false,
     });
   });
 
@@ -120,3 +149,175 @@ describe("dev-with-memory prebuild options", () => {
     });
   });
 });
+
+describe("development source restart watcher", () => {
+  it("holds source changes until the child acknowledges its IPC listener", () => {
+    const send = vi.fn((_message: unknown, callback?: (error?: Error) => void) => callback?.());
+    const child = { connected: true, send };
+    const coordinator = createDevWatchRestartCoordinator({ log: vi.fn(), warn: vi.fn() });
+    coordinator.attach(child);
+
+    coordinator.request(["packages/core/src/store.ts"]);
+    expect(send).not.toHaveBeenCalled();
+
+    coordinator.onMessage({ type: "fusion:dev-source-restart-armed" });
+    expect(send).toHaveBeenCalledWith(
+      { type: "fusion:dev-source-changed" },
+      expect.any(Function),
+    );
+    expect(coordinator.detach(child)).toBe(true);
+  });
+
+  it("re-arms after the watched child is replaced", () => {
+    const first = { connected: true, send: vi.fn((_message: unknown, callback?: (error?: Error) => void) => callback?.()) };
+    const second = { connected: true, send: vi.fn((_message: unknown, callback?: (error?: Error) => void) => callback?.()) };
+    const coordinator = createDevWatchRestartCoordinator({ log: vi.fn(), warn: vi.fn() });
+
+    coordinator.attach(first);
+    coordinator.onMessage({ type: "fusion:dev-source-restart-armed" });
+    coordinator.request(["packages/core/src/first.ts"]);
+    expect(coordinator.detach(first)).toBe(true);
+
+    coordinator.attach(second);
+    coordinator.request(["packages/core/src/second.ts"]);
+    expect(second.send).not.toHaveBeenCalled();
+    coordinator.onMessage({ type: "fusion:dev-source-restart-armed" });
+    expect(second.send).toHaveBeenCalledTimes(1);
+  });
+
+  it("retains changes while the child is disconnected and sends them later", () => {
+    const log = vi.fn();
+    const warn = vi.fn();
+    const send = vi.fn((_message: unknown, callback?: (error?: Error) => void) => callback?.());
+    const child = { connected: false, send };
+    const coordinator = createDevWatchRestartCoordinator({ log, warn });
+    coordinator.attach(child);
+    coordinator.onMessage({ type: "fusion:dev-source-restart-armed" });
+
+    coordinator.request(["packages/core/src/first.ts"]);
+    child.connected = true;
+    coordinator.request(["packages/core/src/second.ts"]);
+
+    expect(warn).toHaveBeenCalledWith(expect.stringContaining("not connected"));
+    expect(send).toHaveBeenCalledWith(
+      { type: "fusion:dev-source-changed" },
+      expect.any(Function),
+    );
+    expect(log).toHaveBeenLastCalledWith(
+      expect.stringContaining("packages/core/src/first.ts, packages/core/src/second.ts"),
+    );
+  });
+
+  it("retains changes after a send callback error and retries later", () => {
+    const log = vi.fn();
+    const warn = vi.fn();
+    const send = vi.fn()
+      .mockImplementationOnce((_message: unknown, callback?: (error?: Error) => void) => callback?.(new Error("send failed")))
+      .mockImplementationOnce((_message: unknown, callback?: (error?: Error) => void) => callback?.());
+    const child = { connected: true, send };
+    const coordinator = createDevWatchRestartCoordinator({ log, warn });
+    coordinator.attach(child);
+    coordinator.onMessage({ type: "fusion:dev-source-restart-armed" });
+
+    coordinator.request(["packages/core/src/first.ts"]);
+    coordinator.request(["packages/core/src/second.ts"]);
+
+    expect(warn).toHaveBeenCalledWith(expect.stringContaining("send failed"));
+    expect(send).toHaveBeenCalledTimes(2);
+    expect(log).toHaveBeenLastCalledWith(
+      expect.stringContaining("packages/core/src/first.ts, packages/core/src/second.ts"),
+    );
+  });
+
+  it("restarts for runtime sources but ignores tests and generated declarations", () => {
+    expect(isRestartableSourceFile("store.ts")).toBe(true);
+    expect(isRestartableSourceFile("routes/system.tsx")).toBe(true);
+    expect(isRestartableSourceFile("__tests__/store.test.ts")).toBe(false);
+    expect(isRestartableSourceFile("store.spec.ts")).toBe(false);
+    expect(isRestartableSourceFile("generated/runtime.d.ts")).toBe(false);
+    expect(isRestartableSourceFile("README.md")).toBe(false);
+  });
+
+  it("coalesces source events into one restart and reports the changed paths", () => {
+    vi.useFakeTimers();
+    const listeners: Array<(eventType: string, filename: string | Buffer | null) => void> = [];
+    const close = vi.fn();
+    const onRestart = vi.fn();
+
+    const watcher = createDevSourceWatcher({
+      rootDir: "/repo",
+      watchPaths: ["packages/core/src", "packages/engine/src"],
+      debounceMs: 250,
+      watch: (_path, _options, listener) => {
+        listeners.push(listener);
+        return { close, on: vi.fn() };
+      },
+      onRestart,
+    });
+
+    listeners[0]?.("change", "store.ts");
+    listeners[1]?.("rename", "triage.ts");
+    listeners[1]?.("change", "__tests__/triage.test.ts");
+
+    vi.advanceTimersByTime(249);
+    expect(onRestart).not.toHaveBeenCalled();
+    vi.advanceTimersByTime(1);
+    expect(onRestart).toHaveBeenCalledTimes(1);
+    expect(onRestart).toHaveBeenCalledWith([
+      "packages/core/src/store.ts",
+      "packages/engine/src/triage.ts",
+    ]);
+
+    watcher.close();
+    expect(close).toHaveBeenCalledTimes(2);
+  });
+
+  it("does not starve a restart during a sustained source event stream", () => {
+    vi.useFakeTimers();
+    let listener: ((eventType: string, filename: string | Buffer | null) => void) | undefined;
+    const onRestart = vi.fn();
+    const watcher = createDevSourceWatcher({
+      rootDir: "/repo",
+      watchPaths: ["packages/core/src"],
+      debounceMs: 350,
+      maxWaitMs: 1_000,
+      watch: (_path, _options, nextListener) => {
+        listener = nextListener;
+        return { close: vi.fn(), on: vi.fn() } as never;
+      },
+      onRestart,
+    });
+
+    for (let elapsed = 0; elapsed < 1_000; elapsed += 200) {
+      listener?.("change", `file-${elapsed}.ts`);
+      vi.advanceTimersByTime(200);
+    }
+    vi.advanceTimersByTime(1);
+
+    expect(onRestart).toHaveBeenCalledTimes(1);
+    watcher.close();
+  });
+
+  it("continues closing source watchers when one close throws", () => {
+    const logger = { warn: vi.fn() };
+    const closes = [
+      vi.fn(() => {
+        throw new Error("close failed");
+      }),
+      vi.fn(),
+    ];
+    let index = 0;
+    const watcher = createDevSourceWatcher({
+      rootDir: "/repo",
+      watchPaths: ["packages/core/src", "packages/engine/src"],
+      watch: () => ({ close: closes[index++]!, on: vi.fn() }) as never,
+      onRestart: vi.fn(),
+      logger,
+    });
+
+    expect(() => watcher.close()).not.toThrow();
+    expect(closes[0]).toHaveBeenCalledOnce();
+    expect(closes[1]).toHaveBeenCalledOnce();
+    expect(logger.warn).toHaveBeenCalledWith(expect.stringContaining("close failed"));
+  });
+});
diff --git a/packages/cli/src/commands/__tests__/dev-source-restart.test.ts b/packages/cli/src/commands/__tests__/dev-source-restart.test.ts
new file mode 100644
index 0000000000..f9441426e1
--- /dev/null
+++ b/packages/cli/src/commands/__tests__/dev-source-restart.test.ts
@@ -0,0 +1,149 @@
+import { EventEmitter } from "node:events";
+import { afterEach, describe, expect, it, vi } from "vitest";
+
+import {
+  DEV_SOURCE_CHANGE_MESSAGE,
+  registerDevSourceRestart,
+} from "../dev-source-restart.js";
+
+afterEach(() => {
+  vi.useRealTimers();
+});
+
+function createHarness(currentlyActive: number) {
+  const processEvents = new EventEmitter();
+  const getLiveRunningAgentCounts = vi.fn().mockResolvedValue({ currentlyActive, projectsActive: {} });
+  const beginDrain = vi.fn();
+  const requestRestart = vi.fn().mockReturnValue(true);
+  const log = vi.fn();
+  const warn = vi.fn();
+  const notifyArmed = vi.fn();
+  const dispose = registerDevSourceRestart({
+    enabled: true,
+    processEvents,
+    beginDrain,
+    notifyArmed,
+    getLiveRunningAgentCounts,
+    requestRestart,
+    logger: { log, warn },
+    recheckIntervalMs: 1_000,
+  });
+  return { processEvents, beginDrain, notifyArmed, getLiveRunningAgentCounts, requestRestart, log, warn, dispose };
+}
+
+describe("registerDevSourceRestart", () => {
+  it("acknowledges that the child restart listener is armed", () => {
+    const harness = createHarness(0);
+    expect(harness.notifyArmed).toHaveBeenCalledOnce();
+    harness.dispose();
+  });
+
+  it("requests the canonical restart immediately when no agents are active", async () => {
+    vi.useFakeTimers();
+    const harness = createHarness(0);
+
+    harness.processEvents.emit("message", {
+      type: DEV_SOURCE_CHANGE_MESSAGE,
+    });
+    await vi.advanceTimersByTimeAsync(0);
+
+    expect(harness.beginDrain).toHaveBeenCalledTimes(1);
+    expect(harness.beginDrain.mock.invocationCallOrder[0]).toBeLessThan(
+      harness.getLiveRunningAgentCounts.mock.invocationCallOrder[0]!,
+    );
+    expect(harness.getLiveRunningAgentCounts).toHaveBeenCalledTimes(1);
+    expect(harness.requestRestart).toHaveBeenCalledWith("dev-source-change");
+    harness.dispose();
+  });
+
+  it("coalesces edits and waits for active agents to reach a safe boundary", async () => {
+    vi.useFakeTimers();
+    const harness = createHarness(2);
+
+    harness.processEvents.emit("message", { type: DEV_SOURCE_CHANGE_MESSAGE });
+    harness.processEvents.emit("message", { type: DEV_SOURCE_CHANGE_MESSAGE });
+    await vi.advanceTimersByTimeAsync(0);
+
+    expect(harness.getLiveRunningAgentCounts).toHaveBeenCalledTimes(1);
+    expect(harness.requestRestart).not.toHaveBeenCalled();
+    expect(harness.log).toHaveBeenCalledWith(expect.stringContaining("2 active agents"));
+
+    harness.getLiveRunningAgentCounts.mockResolvedValue({ currentlyActive: 0, projectsActive: {} });
+    await vi.advanceTimersByTimeAsync(1_000);
+
+    expect(harness.requestRestart).toHaveBeenCalledTimes(1);
+    expect(harness.requestRestart).toHaveBeenCalledWith("dev-source-change");
+    harness.dispose();
+  });
+
+  it("recovers from a liveness read error and retries after the drain is closed", async () => {
+    vi.useFakeTimers();
+    const harness = createHarness(0);
+    harness.getLiveRunningAgentCounts.mockRejectedValueOnce(new Error("database unavailable"));
+
+    harness.processEvents.emit("message", { type: DEV_SOURCE_CHANGE_MESSAGE });
+    await vi.advanceTimersByTimeAsync(0);
+
+    expect(harness.warn).toHaveBeenCalledWith(expect.stringContaining("database unavailable"));
+    expect(harness.requestRestart).not.toHaveBeenCalled();
+
+    harness.getLiveRunningAgentCounts.mockResolvedValueOnce({ currentlyActive: 0, projectsActive: {} });
+    await vi.advanceTimersByTimeAsync(1_000);
+    expect(harness.getLiveRunningAgentCounts).toHaveBeenCalledTimes(2);
+    expect(harness.requestRestart).toHaveBeenCalledWith("dev-source-change");
+    harness.dispose();
+  });
+
+  it("contains a synchronous drain failure in the IPC handler", async () => {
+    const harness = createHarness(0);
+    harness.beginDrain.mockImplementation(() => {
+      throw new Error("drain failed");
+    });
+
+    expect(() => {
+      harness.processEvents.emit("message", { type: DEV_SOURCE_CHANGE_MESSAGE });
+    }).not.toThrow();
+    await Promise.resolve();
+    await Promise.resolve();
+    await Promise.resolve();
+
+    expect(harness.warn).toHaveBeenCalledWith(expect.stringContaining("drain failed"));
+    expect(harness.getLiveRunningAgentCounts).not.toHaveBeenCalled();
+    harness.dispose();
+  });
+
+  it("keeps the restart pending when the host initially declines it", async () => {
+    vi.useFakeTimers();
+    const harness = createHarness(0);
+    harness.requestRestart.mockReturnValueOnce(false).mockReturnValueOnce(true);
+
+    harness.processEvents.emit("message", { type: DEV_SOURCE_CHANGE_MESSAGE });
+    await vi.advanceTimersByTimeAsync(0);
+    expect(harness.requestRestart).toHaveBeenCalledTimes(1);
+
+    await vi.advanceTimersByTimeAsync(1_000);
+    expect(harness.requestRestart).toHaveBeenCalledTimes(2);
+    harness.dispose();
+  });
+
+  it("does not bind when the caller safety gate is disabled", () => {
+    const processEvents = new EventEmitter();
+    const requestRestart = vi.fn();
+    const beginDrain = vi.fn();
+    const getLiveRunningAgentCounts = vi.fn();
+
+    const dispose = registerDevSourceRestart({
+      enabled: false,
+      processEvents,
+      beginDrain,
+      getLiveRunningAgentCounts,
+      requestRestart,
+    });
+    processEvents.emit("message", { type: DEV_SOURCE_CHANGE_MESSAGE });
+
+    expect(getLiveRunningAgentCounts).not.toHaveBeenCalled();
+    expect(beginDrain).not.toHaveBeenCalled();
+    expect(requestRestart).not.toHaveBeenCalled();
+    dispose();
+  });
+});
diff --git a/packages/cli/src/commands/dashboard.ts b/packages/cli/src/commands/dashboard.ts
index 70f400cfcf..3a808f483c 100644
--- a/packages/cli/src/commands/dashboard.ts
+++ b/packages/cli/src/commands/dashboard.ts
@@ -145,6 +145,10 @@ import { handleOpencodeGoApiKeySaved, syncStartupModels } from "./startup-model-
 import { DashboardTUI, DashboardLogSink, isTTYAvailable, type SystemInfo, type GitStatus, type GitCommit, type GitCommitDetail, type GitBranch, type GitWorktree, type FileEntry, type FileReadResult, type TaskStep as TUITaskStep, type TaskLogEntry as TUITaskLogEntry, type TaskDetailData, type TaskEvent } from "./dashboard-tui/index.js";
 import { DASHBOARD_STARTUP_STATUS, runTuiStartupPrelude } from "./dashboard-startup-chain.js";
 import { phaseTime } from "../startup-phase.js";
+import {
+  DEV_SOURCE_RESTART_ARMED_MESSAGE,
+  registerDevSourceRestart,
+} from "./dev-source-restart.js";
 
 // Re-export for backward compatibility with tests
 export { promptForPort };
@@ -1295,6 +1299,23 @@ export async function runDashboard(port: number, opts: { paused?: boolean; dev?:
     getRecent: (limit?: number) => logSink.getRecentEntries(limit),
     subscribe: (listener: (entry: import("./dashboard-tui/log-ring-buffer.js").LogEntry) => void) => logSink.subscribeEntries(listener),
   };
+  const bindDevSourceRestart = (centralCore: CentralCore, beginDrain: () => void) => {
+    disposeCallbacks.push(registerDevSourceRestart({
+      enabled: process.env.FUSION_DEV_WATCH === "1"
+        && systemControlForServer.supervised
+        && Boolean(systemControlForServer.sourceWorkspaceRoot),
+      beginDrain,
+      notifyArmed: () => {
+        process.send?.({ type: DEV_SOURCE_RESTART_ARMED_MESSAGE });
+      },
+      getLiveRunningAgentCounts: () => centralCore.getLiveRunningAgentCounts(),
+      requestRestart: (reason) => requestSelfRestart?.(reason) ?? false,
+      logger: {
+        log: (message) => logSink.log(message, "dashboard"),
+        warn: (message) => logSink.warn(message, "dashboard"),
+      },
+    }));
+  };
 
   /*
    * FNXC:DashboardShutdown 2026-06-27-10:32:
@@ -2440,6 +2461,7 @@ export async function runDashboard(port: number, opts: { paused?: boolean; dev?:
       }, 300);
       return true;
     };
+    bindDevSourceRestart(centralCoreForEngine, () => engineManager.beginDrain());
     registerHandler(process, "SIGINT", () => void shutdown("SIGINT"));
     registerHandler(process, "SIGTERM", () => void shutdown("SIGTERM"));
 
@@ -2775,6 +2797,12 @@ export async function runDashboard(port: number, opts: { paused?: boolean; dev?:
       }, 300);
       return true;
     };
+    if (centralCoreForMesh) {
+      bindDevSourceRestart(centralCoreForMesh, () => {
+        triggerScheduler?.stop();
+        heartbeatMonitorImpl?.stop();
+      });
+    }
     registerHandler(process, "SIGINT", () => void devShutdown("SIGINT"));
     registerHandler(process, "SIGTERM", () => void devShutdown("SIGTERM"));
 
diff --git a/packages/cli/src/commands/dev-source-restart.ts b/packages/cli/src/commands/dev-source-restart.ts
new file mode 100644
index 0000000000..5609ea7a47
--- /dev/null
+++ b/packages/cli/src/commands/dev-source-restart.ts
@@ -0,0 +1,121 @@
+import type { EventEmitter } from "node:events";
+
+export const DEV_SOURCE_CHANGE_MESSAGE = "fusion:dev-source-changed";
+export const DEV_SOURCE_RESTART_ARMED_MESSAGE = "fusion:dev-source-restart-armed";
+
+interface DevSourceChangeMessage {
+  type: typeof DEV_SOURCE_CHANGE_MESSAGE;
+}
+
+interface DevSourceRestartOptions {
+  enabled: boolean;
+  processEvents?: Pick<EventEmitter, "on" | "off">;
+  notifyArmed?: () => void;
+  beginDrain: () => Promise<void> | void;
+  getLiveRunningAgentCounts: () => Promise<{ currentlyActive: number }>;
+  requestRestart: (reason: string) => boolean;
+  logger?: Pick<Console, "log" | "warn">;
+  recheckIntervalMs?: number;
+}
+
+function isDevSourceChangeMessage(message: unknown): message is DevSourceChangeMessage {
+  return Boolean(message)
+    && typeof message === "object"
+    && (message as { type?: unknown }).type === DEV_SOURCE_CHANGE_MESSAGE;
+}
+
+/**
+ * FNXC:DevEngineWatch 2026-08-04-01:25:
+ * A source edit is an intentional restart, not a crash or operating-system
+ * signal. Wait for live top-level agents to drain, then enter the dashboard's
+ * canonical exit-86 path so its existing graceful teardown and supervisor own
+ * the lifecycle. Liveness read failures defer rather than aborting active work.
+ */
+export function registerDevSourceRestart({
+  enabled,
+  processEvents = process,
+  notifyArmed,
+  beginDrain,
+  getLiveRunningAgentCounts,
+  requestRestart,
+  logger = console,
+  recheckIntervalMs = 15_000,
+}: DevSourceRestartOptions): () => void {
+  if (!enabled) return () => undefined;
+
+  let disposed = false;
+  let pending = false;
+  let checking = false;
+  let restartAccepted = false;
+  let deferredForActiveWork = false;
+  let drainStarted = false;
+  let timer: ReturnType<typeof setTimeout> | undefined;
+
+  const schedule = (delayMs: number) => {
+    if (disposed || timer) return;
+    timer = setTimeout(() => {
+      timer = undefined;
+      void checkRestartSafety();
+    }, delayMs);
+    timer.unref?.();
+  };
+
+  const checkRestartSafety = async () => {
+    if (disposed || restartAccepted || !pending || checking) return;
+    checking = true;
+    try {
+      const { currentlyActive } = await getLiveRunningAgentCounts();
+      if (currentlyActive > 0) {
+        if (!deferredForActiveWork) {
+          const noun = currentlyActive === 1 ? "agent" : "agents";
+          logger.log(`[fusion:dev] source restart deferred until ${currentlyActive} active ${noun} reach a safe boundary`);
+          deferredForActiveWork = true;
+        }
+        schedule(recheckIntervalMs);
+        return;
+      }
+
+      if (deferredForActiveWork) {
+        logger.log("[fusion:dev] active work drained — applying pending source restart");
+        deferredForActiveWork = false;
+      }
+      restartAccepted = requestRestart("dev-source-change");
+      if (restartAccepted) {
+        pending = false;
+      } else {
+        logger.warn("[fusion:dev] source restart request was declined by the host lifecycle");
+        schedule(recheckIntervalMs);
+      }
+    } catch (error) {
+      logger.warn(`[fusion:dev] could not verify restart safety: ${error instanceof Error ? error.message : String(error)}`);
+      schedule(recheckIntervalMs);
+    } finally {
+      checking = false;
+    }
+  };
+
+  const onMessage = (message: unknown) => {
+    if (restartAccepted || !isDevSourceChangeMessage(message)) return;
+    pending = true;
+    if (drainStarted) return;
+    drainStarted = true;
+    // FNXC:DevSourceRestart 2026-08-04-09:19:
+    // Enter the promise chain before draining so synchronous failures are logged instead of escaping IPC dispatch.
+    void Promise.resolve()
+      .then(beginDrain)
+      .then(() => schedule(0))
+      .catch((error) => {
+        logger.warn(`[fusion:dev] could not begin source restart drain: ${error instanceof Error ? error.message : String(error)}`);
+      });
+  };
+
+  processEvents.on("message", onMessage);
+  notifyArmed?.();
+  return () => {
+    disposed = true;
+    pending = false;
+    if (timer) clearTimeout(timer);
+    timer = undefined;
+    processEvents.off("message", onMessage);
+  };
+}
diff --git a/packages/core/src/central/central-core.ts b/packages/core/src/central/central-core.ts
index 38547837aa..85e5d0bcee 100644
--- a/packages/core/src/central/central-core.ts
+++ b/packages/core/src/central/central-core.ts
@@ -2138,9 +2138,14 @@ export class CentralCore extends EventEmitter<CentralCoreEvents> {
   incremented by real work and the durable counter it maintained was fiction.
 
   `getLiveRunningAgentCounts` SURVIVES and is now the only global readout. It is
-  TELEMETRY, not a limiter: it derives live per-project agent counts from the
-  registered side-effect-safe source so the dashboard can show "N running (all
-  projects)". Nothing gates on it.
+  TELEMETRY, not a capacity limiter: it derives live per-project agent counts
+  from the registered side-effect-safe source so the dashboard can show "N
+  running (all projects)". Task admission does not gate on it.
+
+  FNXC:DevEngineWatch 2026-08-04-01:25:
+  The opt-in source-development restart also reads this conservative telemetry
+  to wait for active work to drain. That is shutdown safety, not capacity
+  arbitration; it never reserves slots or changes task admission.
   */
   async getLiveRunningAgentCounts(options?: { source?: RunningAgentCountSource }): Promise<RunningAgentCounts> {
     this.ensureInitialized();
diff --git a/packages/engine/src/__tests__/project-engine-manager.test.ts b/packages/engine/src/__tests__/project-engine-manager.test.ts
index cdb0a2f059..359d6c9331 100644
--- a/packages/engine/src/__tests__/project-engine-manager.test.ts
+++ b/packages/engine/src/__tests__/project-engine-manager.test.ts
@@ -18,6 +18,7 @@ vi.mock("../project-engine.js", () => {
     ProjectEngine: vi.fn().mockImplementation(function (config: any) {
       return {
         start: vi.fn().mockResolvedValue(undefined),
+        beginDrain: vi.fn(),
         stop: vi.fn().mockResolvedValue(undefined),
         getTaskStore: vi.fn().mockReturnValue({ projectId: config.projectId }),
         getHeartbeatMonitor: vi.fn().mockReturnValue(undefined),
@@ -295,6 +296,37 @@ describe("ProjectEngineManager", () => {
   });
 
   describe("stopAll", () => {
+    it("closes admission on every engine before asynchronous shutdown work", async () => {
+      const manager = new ProjectEngineManager(centralCore);
+      await manager.startAll();
+      const engineA = manager.getEngine("proj_aaa")!;
+      engineA.beginDrain = vi.fn();
+
+      manager.beginDrain();
+
+      expect(engineA.beginDrain).toHaveBeenCalledOnce();
+      await expect(manager.ensureEngine("proj_aaa")).rejects.toThrow(
+        "ProjectEngineManager is stopped",
+      );
+      expect(centralCore.markLocalNodeOffline).not.toHaveBeenCalled();
+    });
+
+    it("continues draining other engines when one engine throws", async () => {
+      const manager = new ProjectEngineManager(centralCore);
+      await manager.startAll();
+      const engineA = manager.getEngine("proj_aaa")!;
+      const engineB = manager.getEngine("proj_bbb")!;
+      engineA.beginDrain = vi.fn(() => {
+        throw new Error("drain failed");
+      });
+      engineB.beginDrain = vi.fn();
+
+      expect(() => manager.beginDrain()).not.toThrow();
+
+      expect(engineA.beginDrain).toHaveBeenCalledOnce();
+      expect(engineB.beginDrain).toHaveBeenCalledOnce();
+    });
+
     it("stops all engines and clears state", async () => {
       const manager = new ProjectEngineManager(centralCore);
       await manager.startAll();
diff --git a/packages/engine/src/__tests__/reliability-interactions/engine-stop-aborts-execution.test.ts b/packages/engine/src/__tests__/reliability-interactions/engine-stop-aborts-execution.test.ts
index e7427a0c90..89468a0700 100644
--- a/packages/engine/src/__tests__/reliability-interactions/engine-stop-aborts-execution.test.ts
+++ b/packages/engine/src/__tests__/reliability-interactions/engine-stop-aborts-execution.test.ts
@@ -15,6 +15,55 @@ describe("FN-5403 reliability interactions: engine stop aborts execution", () =>
   beforeEach(() => vi.useFakeTimers());
   afterEach(() => vi.useRealTimers());
 
+  it("closes every runtime admission source without aborting active execution", () => {
+    const runtime = new InProcessRuntime({ projectId: "p", workingDirectory: "/tmp", isolationMode: "in-process" } as any, {} as any) as any;
+    runtime.status = "active";
+    runtime.workflowContinuationTimer = setInterval(() => undefined, 1_000);
+    runtime.selfHealingManager = { stop: vi.fn() };
+    runtime.routineScheduler = { stop: vi.fn() };
+    runtime.triggerScheduler = { stop: vi.fn() };
+    runtime.stuckTaskDetector = { stop: vi.fn() };
+    runtime.heartbeatMonitor = { stop: vi.fn() };
+    runtime.triageProcessor = { stop: vi.fn() };
+    runtime.scheduler = { stop: vi.fn() };
+    runtime.missionAutopilot = { stop: vi.fn() };
+    runtime.missionExecutionLoop = { stop: vi.fn() };
+    runtime.executor = makeExecutor();
+
+    runtime.beginDrain();
+
+    expect(runtime.getStatus()).toBe("paused");
+    expect(runtime.workflowContinuationTimer).toBeUndefined();
+    for (const source of [
+      runtime.selfHealingManager,
+      runtime.routineScheduler,
+      runtime.triggerScheduler,
+      runtime.stuckTaskDetector,
+      runtime.heartbeatMonitor,
+      runtime.triageProcessor,
+      runtime.scheduler,
+      runtime.missionAutopilot,
+      runtime.missionExecutionLoop,
+    ]) {
+      expect(source.stop).toHaveBeenCalledOnce();
+    }
+    expect(runtime.executor.abortAllInFlight).not.toHaveBeenCalled();
+  });
+
+  it("continues closing admission sources when one stop throws", () => {
+    const runtime = new InProcessRuntime({ projectId: "p", workingDirectory: "/tmp", isolationMode: "in-process" } as any, {} as any) as any;
+    runtime.status = "active";
+    runtime.selfHealingManager = { stop: vi.fn(() => {
+      throw new Error("stop failed");
+    }) };
+    runtime.routineScheduler = { stop: vi.fn() };
+
+    expect(() => runtime.beginDrain()).not.toThrow();
+
+    expect(runtime.selfHealingManager.stop).toHaveBeenCalledOnce();
+    expect(runtime.routineScheduler.stop).toHaveBeenCalledOnce();
+  });
+
   it("FN-5403: engine stop aborts executor AI sessions before drain completes", async () => {
     const runtime = new InProcessRuntime({ projectId: "p", workingDirectory: "/tmp", isolationMode: "in-process" } as any, {} as any) as any;
     let aborted = false;
diff --git a/packages/engine/src/project-engine-manager.ts b/packages/engine/src/project-engine-manager.ts
index 9dacff4f96..769d13030b 100644
--- a/packages/engine/src/project-engine-manager.ts
+++ b/packages/engine/src/project-engine-manager.ts
@@ -256,8 +256,8 @@ export class ProjectEngineManager {
     runtimeLog.log(`Engine startup complete: ${started} started, ${failed} failed`);
   }
 
-  /** Gracefully stop all engines and reconciliation. */
-  async stopAll(): Promise<void> {
+  /** Close admission on every engine and stop reconciliation without tearing engines down. */
+  beginDrain(): void {
     this.stopped = true;
     this.reconciliationStopped = true;
 
@@ -267,6 +267,24 @@ export class ProjectEngineManager {
       this.reconciliationInterval = null;
     }
 
+    for (const engine of this.engines.values()) {
+      try {
+        engine.beginDrain?.();
+      } catch (error) {
+        runtimeLog.warn(
+          `Engine drain error: ${error instanceof Error ? error.message : String(error)}`,
+        );
+      }
+    }
+    for (const starting of this.starting.values()) {
+      void starting.then((engine) => engine.beginDrain?.()).catch(() => undefined);
+    }
+  }
+
+  /** Gracefully stop all engines and reconciliation. */
+  async stopAll(): Promise<void> {
+    this.beginDrain();
+
     /*
     FNXC:PostgresResourceLifecycle 2026-07-14-18:42:
     Project runtimes own the PostgreSQL pools CentralCore may have adopted. Persist mesh-offline state before stopping any engine so runtime backend shutdown cannot race the final central write against a closed pool.
diff --git a/packages/engine/src/project-engine.ts b/packages/engine/src/project-engine.ts
index 5275d83f11..b3ca6d60a1 100644
--- a/packages/engine/src/project-engine.ts
+++ b/packages/engine/src/project-engine.ts
@@ -1459,6 +1459,12 @@ export class ProjectEngine {
     runtimeLog.log(`ProjectEngine stopped for ${this.config.projectId}`);
   }
 
+  /** Stop new lifecycle admission while allowing active work to finish. */
+  beginDrain(): void {
+    this.shuttingDown = true;
+    this.runtime.beginDrain();
+  }
+
   // ── Public accessors ──
 
   /** Get the underlying InProcessRuntime. */
diff --git a/packages/engine/src/runtimes/in-process-runtime.ts b/packages/engine/src/runtimes/in-process-runtime.ts
index c50046ea96..c4b4fff5fe 100644
--- a/packages/engine/src/runtimes/in-process-runtime.ts
+++ b/packages/engine/src/runtimes/in-process-runtime.ts
@@ -1934,6 +1934,42 @@ export class InProcessRuntime
     }
   }
 
+  /**
+   * Close every process-local admission source without aborting work that is
+   * already running. Development source reload uses this boundary before it
+   * waits for the live-agent count to reach zero.
+   */
+  beginDrain(): void {
+    if (this.status !== "active") return;
+
+    this.setStatus("paused");
+    if (this.workflowContinuationTimer) {
+      clearInterval(this.workflowContinuationTimer);
+      this.workflowContinuationTimer = undefined;
+    }
+    const admissionStops: Array<readonly [string, () => void]> = [
+      ["self-healing manager", () => this.selfHealingManager?.stop()],
+      ["routine scheduler", () => this.routineScheduler?.stop()],
+      ["trigger scheduler", () => this.triggerScheduler?.stop()],
+      ["stuck task detector", () => this.stuckTaskDetector?.stop()],
+      ["heartbeat monitor", () => this.heartbeatMonitor?.stop()],
+      ["triage processor", () => this.triageProcessor?.stop()],
+      ["scheduler", () => this.scheduler?.stop()],
+      ["mission autopilot", () => this.missionAutopilot?.stop()],
+      ["mission execution loop", () => this.missionExecutionLoop?.stop()],
+    ];
+    for (const [label, stop] of admissionStops) {
+      try {
+        stop();
+      } catch (error) {
+        runtimeLog.warn(
+          `Failed to stop ${label} while draining ${this.config.projectId}: ${error instanceof Error ? error.message : String(error)}`,
+        );
+      }
+    }
+    runtimeLog.log(`InProcessRuntime draining for ${this.config.projectId}`);
+  }
+
   /**
    * Stop the runtime with graceful shutdown.
    *
diff --git a/scripts/dev-hmr.mjs b/scripts/dev-hmr.mjs
index 7db9d2b2de..91d66692d8 100644
--- a/scripts/dev-hmr.mjs
+++ b/scripts/dev-hmr.mjs
@@ -11,8 +11,8 @@
  *            (serves app/ with HMR; proxies /api and WS to the API)
  *
  * Open the URL Vite prints (e.g. http://localhost:5173), NOT the API URL.
- * Edits to packages/dashboard/app/** hot-reload. Edits to src/** (server
- * code) still require restarting this script.
+ * Edits to packages/dashboard/app/** hot-reload in Vite. Runtime source edits
+ * gracefully restart the API/engine child while Vite stays available.
  *
  * Env:
  *   FUSION_API_PORT   API port (default 4050). Vite's proxy reads the same
@@ -94,7 +94,7 @@ launch(
   "api",
   "32",
   "pnpm",
-  ["dev", "--prebuild=none", "dashboard", "--no-auth", "--port", API_PORT, "--host", "127.0.0.1"],
+  ["dev", "--watch", "--prebuild=none", "dashboard", "--no-auth", "--port", API_PORT, "--host", "127.0.0.1"],
   { cwd: repoRoot, env: { ...globalThis.process.env, FUSION_API_PORT: API_PORT } },
 );
 
diff --git a/scripts/dev-with-memory-lib.mjs b/scripts/dev-with-memory-lib.mjs
index 54cb0bf321..51b531faa2 100644
--- a/scripts/dev-with-memory-lib.mjs
+++ b/scripts/dev-with-memory-lib.mjs
@@ -17,6 +17,80 @@ export function buildDevNodeArgs({
   ];
 }
 
+export function createDevWatchRestartCoordinator({ log = console.log, warn = console.warn } = {}) {
+  let child;
+  let armed = false;
+  let queued = false;
+  let pendingPaths = [];
+
+  const requeuePaths = (changedPaths) => {
+    pendingPaths = [...new Set([...pendingPaths, ...changedPaths])];
+  };
+
+  const sendRestart = (changedPaths) => {
+    if (!child?.connected) {
+      requeuePaths(changedPaths);
+      warn("[fusion:dev] source restart deferred; the engine child is not connected");
+      return;
+    }
+    const preview = changedPaths.slice(0, 3).join(", ");
+    const remainder = Math.max(0, changedPaths.length - 3);
+    log(`[fusion:dev] source changed (${preview}${remainder > 0 ? ` +${remainder} more` : ""}) — restart queued…`);
+    queued = true;
+    try {
+      child.send({ type: "fusion:dev-source-changed" }, (error) => {
+        if (!error) return;
+        queued = false;
+        requeuePaths(changedPaths);
+        warn(`[fusion:dev] source restart message failed: ${error.message}`);
+      });
+    } catch (error) {
+      queued = false;
+      requeuePaths(changedPaths);
+      warn(`[fusion:dev] source restart message failed: ${error instanceof Error ? error.message : String(error)}`);
+    }
+  };
+
+  return {
+    attach(nextChild) {
+      child = nextChild;
+      armed = false;
+      queued = false;
+    },
+    request(changedPaths) {
+      if (queued) return;
+      if (!armed) {
+        pendingPaths = [...new Set([...pendingPaths, ...changedPaths])];
+        log("[fusion:dev] source changed while the engine child is starting — restart will queue when watch is armed");
+        return;
+      }
+      if (!child?.connected) {
+        requeuePaths(changedPaths);
+        warn("[fusion:dev] source restart deferred; the engine child is not connected");
+        return;
+      }
+      const paths = [...new Set([...pendingPaths, ...changedPaths])];
+      pendingPaths = [];
+      sendRestart(paths);
+    },
+    onMessage(message) {
+      if (!message || typeof message !== "object" || message.type !== "fusion:dev-source-restart-armed") return;
+      armed = true;
+      if (pendingPaths.length === 0) return;
+      const paths = pendingPaths;
+      pendingPaths = [];
+      sendRestart(paths);
+    },
+    detach(nextChild) {
+      if (child !== nextChild) return false;
+      const sourceRestart = queued;
+      child = undefined;
+      armed = false;
+      return sourceRestart;
+    },
+  };
+}
+
 const VALID_PREBUILD_MODES = new Set(["auto", "none", "client", "full"]);
 
 export function normalizePrebuildMode(value) {
@@ -50,6 +124,8 @@ export function parseDevWrapperArgs(rawArgs, env = process.env) {
   const inspectFlags = [];
   const args = [];
   let requestedPrebuild = env.FUSION_DEV_PREBUILD ?? "auto";
+  let watchSource = env.FUSION_DEV_WATCH === "1";
+  let watchSourceFromFlag = false;
 
   for (let i = 0; i < rawArgs.length; i += 1) {
     const arg = rawArgs[i];
@@ -78,6 +154,12 @@ export function parseDevWrapperArgs(rawArgs, env = process.env) {
       continue;
     }
 
+    if (arg === "--watch") {
+      watchSource = true;
+      watchSourceFromFlag = true;
+      continue;
+    }
+
     args.push(arg);
   }
 
@@ -85,6 +167,8 @@ export function parseDevWrapperArgs(rawArgs, env = process.env) {
     inspectFlags,
     args,
     requestedPrebuild: normalizePrebuildMode(requestedPrebuild),
+    watchSource,
+    watchSourceFromFlag,
   };
 }
 
diff --git a/scripts/dev-with-memory.mjs b/scripts/dev-with-memory.mjs
index 6ed6831bcd..3c62ff84ec 100644
--- a/scripts/dev-with-memory.mjs
+++ b/scripts/dev-with-memory.mjs
@@ -11,10 +11,12 @@
 import {
   buildForwardedDevArgs,
   buildDevNodeArgs,
+  createDevWatchRestartCoordinator,
   getPrebuildCommand,
   parseDevWrapperArgs,
   resolvePrebuildMode,
 } from "./dev-with-memory-lib.mjs";
+import { createDevSourceWatcher } from "./lib/dev-source-watch.mjs";
 
 // Set increased heap size (8GB) to prevent OOM during initial build/start
 const MEMORY_MB = process.env.FUSION_DEV_MEMORY_MB || "8192";
@@ -29,7 +31,8 @@ try {
   console.error(error instanceof Error ? error.message : String(error));
   process.exit(1);
 }
-const { inspectFlags, args, requestedPrebuild } = parsedArgs;
+const { inspectFlags, args, requestedPrebuild, watchSourceFromFlag } = parsedArgs;
+let { watchSource } = parsedArgs;
 
 // NODE_OPTIONS is shared with every spawned node process (build + run +
 // agents). Heap size belongs here. Inspector flags do NOT — see comment above.
@@ -41,6 +44,13 @@ process.env.NODE_OPTIONS = nodeOptions;
 // builds default to 127.0.0.1; this override only applies when starting
 // the dashboard via `pnpm dev dashboard` and only if no --host was passed.
 const forwardedArgs = buildForwardedDevArgs(args);
+if (watchSource && forwardedArgs[0] !== "dashboard") {
+  if (watchSourceFromFlag) {
+    console.error("[fusion:dev] --watch is supported for the dashboard engine process only");
+    process.exit(1);
+  }
+  watchSource = false;
+}
 const prebuildMode = resolvePrebuildMode(requestedPrebuild, forwardedArgs);
 const prebuildCommand = getPrebuildCommand(prebuildMode);
 
@@ -71,6 +81,18 @@ is what makes the dashboard advertise restart support. Any other exit code
 propagates unchanged (no crash-restart loop here — `--supervise` owns that).
 */
 const RESTART_EXIT_CODE = 86;
+let appChild;
+let sourceWatcher;
+const watchRestart = createDevWatchRestartCoordinator();
+
+function ensureSourceWatcher() {
+  if (!watchSource || sourceWatcher) return;
+  sourceWatcher = createDevSourceWatcher({
+    rootDir: process.cwd(),
+    onRestart: (paths) => watchRestart.request(paths),
+  });
+  console.log(`[fusion:dev] source watch active (${sourceWatcher.watchedPaths.join(", ")})`);
+}
 
 function runApp(extraArgs) {
   const tsx = spawn(process.execPath, buildDevNodeArgs({
@@ -80,22 +102,46 @@ function runApp(extraArgs) {
     entry: ENTRY,
     args: extraArgs,
   }), {
-    stdio: "inherit",
+    stdio: watchSource ? ["inherit", "inherit", "inherit", "ipc"] : "inherit",
     // FNXC:SystemPanel 2026-07-25-10:05: stamp the supervisor pid alongside the
     // flag so the child can tell a real supervising parent from an inherited
     // copy of the variable (see hasLiveSupervisingParent in commands/dashboard.ts).
-    env: { ...process.env, FUSION_RESTART_SUPERVISED: "1", FUSION_SUPERVISOR_PID: String(process.pid) },
+    env: {
+      ...process.env,
+      FUSION_RESTART_SUPERVISED: "1",
+      FUSION_SUPERVISOR_PID: String(process.pid),
+      ...(watchSource ? { FUSION_DEV_WATCH: "1" } : {}),
+    },
   });
+  appChild = tsx;
+  watchRestart.attach(tsx);
+  tsx.on("message", (message) => watchRestart.onMessage(message));
+  ensureSourceWatcher();
   tsx.on("close", (c) => {
+    const sourceRestart = watchRestart.detach(tsx);
+    if (appChild === tsx) appChild = undefined;
     if (c === RESTART_EXIT_CODE) {
       console.log("[fusion:dev] restart requested — restarting…");
-      runApp(extraArgs);
+      if (sourceRestart && prebuildCommand) {
+        runPrebuild(() => runApp(extraArgs));
+      } else {
+        runApp(extraArgs);
+      }
       return;
     }
     process.exit(c ?? 1);
   });
 }
 
+function runPrebuild(onSuccess) {
+  console.log(`[fusion] Running ${prebuildCommand.label} (${prebuildMode}) before source startup...`);
+  const build = spawn(prebuildCommand.command, prebuildCommand.args, { stdio: "inherit", shell: true });
+  build.on("close", (code) => {
+    if (code !== 0) process.exit(code ?? 1);
+    onSuccess();
+  });
+}
+
 async function warnIfSourceVersionBehind() {
   if (process.env.FUSION_SKIP_STARTUP_UPDATE_PREFLIGHT === "1") {
     return;
@@ -177,10 +223,5 @@ await warnIfDistStale();
 if (!prebuildCommand) {
   runApp(forwardedArgs);
 } else {
-  console.log(`[fusion] Running ${prebuildCommand.label} (${prebuildMode}) before source startup...`);
-  const build = spawn(prebuildCommand.command, prebuildCommand.args, { stdio: "inherit", shell: true });
-  build.on("close", (code) => {
-    if (code !== 0) process.exit(code ?? 1);
-    runApp(forwardedArgs);
-  });
+  runPrebuild(() => runApp(forwardedArgs));
 }
diff --git a/scripts/lib/dev-source-watch.mjs b/scripts/lib/dev-source-watch.mjs
new file mode 100644
index 0000000000..098482c9f6
--- /dev/null
+++ b/scripts/lib/dev-source-watch.mjs
@@ -0,0 +1,107 @@
+import { watch as fsWatch } from "node:fs";
+import { join } from "node:path";
+
+export const DEFAULT_DEV_SOURCE_WATCH_PATHS = [
+  "packages/core/src",
+  "packages/engine/src",
+  "packages/dashboard/src",
+  "packages/cli/src",
+];
+
+const RUNTIME_SOURCE_EXTENSION = /\.(?:[cm]?[jt]sx?|json)$/i;
+const NON_RUNTIME_SEGMENTS = new Set([
+  "__fixtures__",
+  "__generated__",
+  "__tests__",
+  "fixtures",
+  "generated",
+  "test",
+  "tests",
+]);
+
+export function isRestartableSourceFile(filename) {
+  if (filename === null || filename === undefined) return false;
+  const normalized = String(filename).replaceAll("\\", "/");
+  if (!normalized || !RUNTIME_SOURCE_EXTENSION.test(normalized)) return false;
+  if (/\.(?:test|spec)\.[cm]?[jt]sx?$/i.test(normalized)) return false;
+  if (/\.d\.[cm]?ts$/i.test(normalized)) return false;
+  return !normalized.split("/").some((segment) => NON_RUNTIME_SEGMENTS.has(segment));
+}
+
+/**
+ * FNXC:DevEngineWatch 2026-08-04-01:25:
+ * Watch only source roots that execute inside the long-lived dashboard/engine
+ * process. Tests, fixtures, generated declarations, build output, task state,
+ * and worktrees must not create restart storms. The supervisor owns process
+ * replacement; this helper only coalesces source events and reports paths.
+ */
+export function createDevSourceWatcher({
+  rootDir,
+  onRestart,
+  watchPaths = DEFAULT_DEV_SOURCE_WATCH_PATHS,
+  debounceMs = 350,
+  maxWaitMs = 2_000,
+  watch = fsWatch,
+  logger = console,
+}) {
+  const watchers = [];
+  const watchedPaths = [];
+  const changedPaths = new Set();
+  let debounceTimer;
+  let firstChangeAt;
+  let closed = false;
+
+  const scheduleRestart = (watchPath, filename) => {
+    if (closed || !isRestartableSourceFile(filename)) return;
+    const normalized = String(filename).replaceAll("\\", "/");
+    changedPaths.add(`${watchPath}/${normalized}`);
+    firstChangeAt ??= Date.now();
+    if (debounceTimer) clearTimeout(debounceTimer);
+    const elapsedMs = Date.now() - firstChangeAt;
+    const delayMs = Math.min(debounceMs, Math.max(0, maxWaitMs - elapsedMs));
+    debounceTimer = setTimeout(() => {
+      debounceTimer = undefined;
+      firstChangeAt = undefined;
+      const paths = [...changedPaths];
+      changedPaths.clear();
+      Promise.resolve(onRestart(paths)).catch((error) => {
+        logger.warn(`[fusion:dev] source restart request failed: ${error instanceof Error ? error.message : String(error)}`);
+      });
+    }, delayMs);
+    debounceTimer.unref?.();
+  };
+
+  for (const watchPath of watchPaths) {
+    const absolutePath = join(rootDir, watchPath);
+    try {
+      const watcher = watch(absolutePath, { recursive: true }, (_eventType, filename) => {
+        scheduleRestart(watchPath, filename);
+      });
+      watcher.on?.("error", (error) => {
+        logger.warn(`[fusion:dev] source watcher error for ${watchPath}: ${error instanceof Error ? error.message : String(error)}`);
+      });
+      watchers.push(watcher);
+      watchedPaths.push(watchPath);
+    } catch (error) {
+      logger.warn(`[fusion:dev] could not watch ${watchPath}: ${error instanceof Error ? error.message : String(error)}`);
+    }
+  }
+
+  return {
+    watchedPaths,
+    close() {
+      closed = true;
+      if (debounceTimer) clearTimeout(debounceTimer);
+      debounceTimer = undefined;
+      firstChangeAt = undefined;
+      changedPaths.clear();
+      for (const watcher of watchers) {
+        try {
+          watcher.close();
+        } catch (error) {
+          logger.warn(`[fusion:dev] source watcher close failed: ${error instanceof Error ? error.message : String(error)}`);
+        }
+      }
+    },
+  };
+}