diff --git a/packages/core/src/cross-spawn-spawner.ts b/packages/core/src/cross-spawn-spawner.ts
index ad8d4126d454..b2d573bc4dec 100644
--- a/packages/core/src/cross-spawn-spawner.ts
+++ b/packages/core/src/cross-spawn-spawner.ts
@@ -24,6 +24,7 @@ import {
 import * as NodeChildProcess from "node:child_process"
 import { PassThrough } from "node:stream"
 import launch from "cross-spawn"
+import { injectTraceContext } from "./effect/observability"
 
 const toError = (err: unknown): Error => (err instanceof globalThis.Error ? err : new globalThis.Error(String(err)))
 
@@ -104,8 +105,17 @@ export const make = Effect.gen(function* () {
     return path.resolve(opts.cwd)
   })
 
-  const env = (opts: ChildProcess.CommandOptions) =>
-    opts.extendEnv ? { ...globalThis.process.env, ...opts.env } : opts.env
+  const env = (opts: ChildProcess.CommandOptions) => {
+    if (opts.env === undefined && !opts.extendEnv) {
+      // Caller relies on default env inheritance. Only synthesize an env object
+      // when there's an active trace context to inject — otherwise leave it
+      // undefined so node passes through process.env unchanged.
+      const injected = injectTraceContext({ ...globalThis.process.env })
+      return injected.TRACEPARENT ? injected : undefined
+    }
+    const merged = opts.extendEnv ? { ...globalThis.process.env, ...opts.env } : opts.env!
+    return injectTraceContext(merged)
+  }
 
   const input = (x: ChildProcess.CommandInput | undefined): NodeChildProcess.IOType | undefined =>
     Stream.isStream(x) ? "pipe" : x
diff --git a/packages/core/src/effect/observability.ts b/packages/core/src/effect/observability.ts
index 0203079abe1e..28f219ac919a 100644
--- a/packages/core/src/effect/observability.ts
+++ b/packages/core/src/effect/observability.ts
@@ -1,3 +1,4 @@
+import { context as otelContext, trace, type Context } from "@opentelemetry/api"
 import { Effect, Layer, Logger } from "effect"
 import { FetchHttpClient } from "effect/unstable/http"
 import { OtlpLogger, OtlpSerialization } from "effect/unstable/observability"
@@ -104,4 +105,22 @@ export const layer = !base
       }),
     )
 
-export const Observability = { enabled, layer }
+// Injects the W3C trace context for the given (or active) OTel context into
+// an env object using the OTel env-carrier variable names (TRACEPARENT,
+// TRACESTATE). Subprocess instrumentation that follows the spec will then
+// adopt this trace as its parent. No-op when no valid span context is active.
+export function injectTraceContext(
+  env: NodeJS.ProcessEnv,
+  ctx: Context = otelContext.active(),
+): NodeJS.ProcessEnv {
+  const sc = trace.getSpan(ctx)?.spanContext()
+  if (!sc || !trace.isSpanContextValid(sc)) return env
+  const flags = (sc.traceFlags ?? 0).toString(16).padStart(2, "0")
+  const out: NodeJS.ProcessEnv = { ...env, TRACEPARENT: `00-${sc.traceId}-${sc.spanId}-${flags}` }
+  const tracestate = sc.traceState?.serialize()
+  if (tracestate) out.TRACESTATE = tracestate
+  else delete out.TRACESTATE
+  return out
+}
+
+export const Observability = { enabled, layer, injectTraceContext }
diff --git a/packages/core/test/effect/observability.test.ts b/packages/core/test/effect/observability.test.ts
index 50ea23f89463..282a978d7b8c 100644
--- a/packages/core/test/effect/observability.test.ts
+++ b/packages/core/test/effect/observability.test.ts
@@ -1,5 +1,6 @@
 import { afterEach, describe, expect, test } from "bun:test"
-import { resource } from "@opencode-ai/core/effect/observability"
+import { context, ROOT_CONTEXT, trace, TraceFlags } from "@opentelemetry/api"
+import { injectTraceContext, resource } from "@opencode-ai/core/effect/observability"
 
 const otelResourceAttributes = process.env.OTEL_RESOURCE_ATTRIBUTES
 const opencodeClient = process.env.OPENCODE_CLIENT
@@ -44,3 +45,52 @@ describe("resource", () => {
     expect(resource().attributes["service.instance.id"]).not.toBe("override")
   })
 })
+
+describe("injectTraceContext", () => {
+  const traceId = "0af7651916cd43dd8448eb211c80319c"
+  const spanId = "b7ad6b7169203331"
+
+  const ctxFor = (sc: { traceId: string; spanId: string; traceFlags: number }) =>
+    trace.setSpan(ROOT_CONTEXT, trace.wrapSpanContext(sc))
+
+  test("leaves env unchanged when no active span", () => {
+    const env = { FOO: "bar" }
+    expect(injectTraceContext(env, ROOT_CONTEXT)).toEqual({ FOO: "bar" })
+  })
+
+  test("injects TRACEPARENT from the given OTel context", () => {
+    const env = injectTraceContext({ FOO: "bar" }, ctxFor({ traceId, spanId, traceFlags: TraceFlags.SAMPLED }))
+    expect(env.FOO).toBe("bar")
+    expect(env.TRACEPARENT).toBe(`00-${traceId}-${spanId}-01`)
+  })
+
+  test("encodes unsampled trace flags as 00", () => {
+    expect(injectTraceContext({}, ctxFor({ traceId, spanId, traceFlags: TraceFlags.NONE })).TRACEPARENT).toBe(
+      `00-${traceId}-${spanId}-00`,
+    )
+  })
+
+  test("ignores invalid span contexts", () => {
+    expect(
+      injectTraceContext({ FOO: "bar" }, ctxFor({ traceId: "0".repeat(32), spanId, traceFlags: 1 })),
+    ).toEqual({ FOO: "bar" })
+  })
+
+  test("overwrites any stale TRACEPARENT inherited from the env", () => {
+    const env = injectTraceContext(
+      { TRACEPARENT: "00-stale-stale-00" },
+      ctxFor({ traceId, spanId, traceFlags: TraceFlags.SAMPLED }),
+    )
+    expect(env.TRACEPARENT).toBe(`00-${traceId}-${spanId}-01`)
+  })
+
+  test("falls back to the global active context when ctx is omitted", () => {
+    // Without a registered context manager, the global active context is ROOT,
+    // so injection should be a no-op rather than throw.
+    expect(injectTraceContext({ FOO: "bar" })).toEqual({ FOO: "bar" })
+    // Sanity: context.with does not propagate without a context manager.
+    context.with(ctxFor({ traceId, spanId, traceFlags: TraceFlags.SAMPLED }), () => {
+      expect(injectTraceContext({}).TRACEPARENT).toBeUndefined()
+    })
+  })
+})
diff --git a/packages/opencode/src/mcp/index.ts b/packages/opencode/src/mcp/index.ts
index db43412f73d2..adac588e40e5 100644
--- a/packages/opencode/src/mcp/index.ts
+++ b/packages/opencode/src/mcp/index.ts
@@ -31,6 +31,7 @@ import { EffectBridge } from "@/effect/bridge"
 import { InstanceState } from "@/effect/instance-state"
 import { ChildProcess, ChildProcessSpawner } from "effect/unstable/process"
 import { CrossSpawnSpawner } from "@opencode-ai/core/cross-spawn-spawner"
+import { injectTraceContext } from "@opencode-ai/core/effect/observability"
 
 const log = Log.create({ service: "mcp" })
 const DEFAULT_TIMEOUT = 30_000
@@ -425,11 +426,11 @@ export const layer = Layer.effect(
         command: cmd,
         args,
         cwd,
-        env: {
+        env: injectTraceContext({
           ...process.env,
           ...(cmd === "opencode" ? { BUN_BE_BUN: "1" } : {}),
           ...mcp.environment,
-        },
+        }) as Record<string, string>,
       })
       transport.stderr?.on("data", (chunk: Buffer) => {
         log.info(`mcp stderr: ${chunk.toString()}`, { key })