diff --git a/desktop/src/components/chat/MessageList.test.tsx b/desktop/src/components/chat/MessageList.test.tsx
index 923e762..fd1f98a 100644
--- a/desktop/src/components/chat/MessageList.test.tsx
+++ b/desktop/src/components/chat/MessageList.test.tsx
@@ -3708,3 +3708,50 @@ describe('buildToolGroupResults', () => {
     expect(again.get('group-use-agent-1')!.childToolCallsByParent).toBe(group.childToolCallsByParent)
   })
 })
+
+describe('activity groups', () => {
+  const thinking = (id: string): UIMessage => ({ id, type: 'thinking', content: `thought ${id}`, timestamp: 1 })
+  const tool = (id: string, toolName = 'Bash'): UIMessage => ({
+    id: `use-${id}`,
+    type: 'tool_use',
+    toolName,
+    toolUseId: id,
+    input: {},
+    timestamp: 1,
+  })
+  const text = (id: string): UIMessage => ({ id, type: 'assistant_text', content: `answer ${id}`, timestamp: 2 })
+
+  it('folds thinking between tool calls into one group up to the next reply text', () => {
+    const { renderItems } = buildRenderModel([
+      thinking('t1'),
+      tool('glob', 'Glob'),
+      thinking('t2'),
+      tool('ls'),
+      thinking('t3'),
+      tool('read', 'Read'),
+      thinking('t4'),
+      text('answer'),
+    ])
+
+    expect(renderItems).toHaveLength(2)
+    const group = renderItems[0]!
+    expect(group.kind).toBe('tool_group')
+    if (group.kind !== 'tool_group') return
+    expect(group.steps.map((step) => step.id)).toEqual(['t1', 'use-glob', 't2', 'use-ls', 't3', 'use-read', 't4'])
+    expect(group.toolCalls.map((call) => call.id)).toEqual(['use-glob', 'use-ls', 'use-read'])
+    expect(renderItems[1]).toMatchObject({ kind: 'message', message: { id: 'answer' } })
+  })
+
+  it('keeps thinking without tool calls as its own message', () => {
+    const { renderItems } = buildRenderModel([thinking('t1'), text('answer')])
+
+    expect(renderItems.map((item) => item.kind)).toEqual(['message', 'message'])
+  })
+
+  it('keeps thinking out of agent groups', () => {
+    const { renderItems } = buildRenderModel([thinking('t1'), tool('a1', 'Agent'), thinking('t2'), tool('b', 'Bash')])
+
+    expect(renderItems.map((item) => (item.kind === 'tool_group' ? item.steps.map((step) => step.id) : item.message.id)))
+      .toEqual(['t1', ['use-a1'], ['t2', 'use-b']])
+  })
+})
diff --git a/desktop/src/components/chat/MessageList.tsx b/desktop/src/components/chat/MessageList.tsx
index 4bd4423..e9bb95e 100644
--- a/desktop/src/components/chat/MessageList.tsx
+++ b/desktop/src/components/chat/MessageList.tsx
@@ -37,9 +37,11 @@ type MemoryEvent = Extract<UIMessage, { type: 'memory_event' }>
 type GoalEvent = Extract<UIMessage, { type: 'goal_event' }>
 type BackgroundTaskEvent = Extract<UIMessage, { type: 'background_task' }>
 type CompactSummaryEvent = Extract<UIMessage, { type: 'compact_summary' }>
+type ThinkingMessage = Extract<UIMessage, { type: 'thinking' }>
+type ActivityStep = ToolCall | ThinkingMessage
 
 type RenderItem =
-  | { kind: 'tool_group'; toolCalls: ToolCall[]; id: string }
+  | { kind: 'tool_group'; toolCalls: ToolCall[]; steps: ActivityStep[]; id: string }
   | { kind: 'message'; message: UIMessage }
 
 type RenderModel = {
@@ -50,6 +52,7 @@ type RenderModel = {
 
 type ToolGroupResults = {
   toolCalls: ToolCall[]
+  steps: ActivityStep[]
   resultMap: Map<string, ToolResult>
   childToolCallsByParent: Map<string, ToolCall[]>
   agentTaskNotifications: Record<string, AgentTaskNotification>
@@ -468,25 +471,39 @@ export function buildRenderModel(messages: UIMessage[], activeAskUserQuestionToo
   const lastUnresolvedAskUserQuestionIndexByToolUseId = new Map<string, number>()
   let lastUnresolvedAskUserQuestionIndex: number | null = null
   let pendingToolCalls: ToolCall[] = []
+  let pendingSteps: ActivityStep[] = []
 
   const flushGroup = () => {
     if (pendingToolCalls.length > 0) {
       items.push({
         kind: 'tool_group',
         toolCalls: [...pendingToolCalls],
-        id: `group-${pendingToolCalls[0]!.id}`,
+        steps: [...pendingSteps],
+        id: `group-${pendingSteps[0]!.id}`,
       })
-      pendingToolCalls = []
+    } else {
+      for (const step of pendingSteps) items.push({ kind: 'message', message: step })
     }
+    pendingToolCalls = []
+    pendingSteps = []
   }
+  const pendingIsAgentGroup = () =>
+    pendingToolCalls.length > 0 && pendingToolCalls.every((pendingToolCall) => pendingToolCall.toolName === 'Agent')
   const appendRootToolCall = (toolCall: ToolCall) => {
     const nextIsAgent = toolCall.toolName === 'Agent'
-    const pendingIsAgentGroup = pendingToolCalls.every((pendingToolCall) => pendingToolCall.toolName === 'Agent')
+    const hasPendingThinking = pendingSteps.length > pendingToolCalls.length
 
-    if (pendingToolCalls.length > 0 && pendingIsAgentGroup !== nextIsAgent) {
+    if (pendingToolCalls.length > 0 && pendingIsAgentGroup() !== nextIsAgent) {
+      flushGroup()
+    } else if (nextIsAgent && hasPendingThinking) {
       flushGroup()
     }
     pendingToolCalls.push(toolCall)
+    pendingSteps.push(toolCall)
+  }
+  const appendThinking = (message: ThinkingMessage) => {
+    if (pendingIsAgentGroup()) flushGroup()
+    pendingSteps.push(message)
   }
 
   for (const msg of messages) {
@@ -555,6 +572,8 @@ export function buildRenderModel(messages: UIMessage[], activeAskUserQuestionToo
       } else {
         appendRootToolCall(msg)
       }
+    } else if (msg.type === 'thinking') {
+      appendThinking(msg)
     } else {
       flushGroup()
       items.push({ kind: 'message', message: msg })
@@ -613,6 +632,7 @@ export function buildToolGroupResults(
     const prior = previous.get(item.id)
     groups.set(item.id, {
       toolCalls: prior && sameItems(prior.toolCalls, item.toolCalls) ? prior.toolCalls : item.toolCalls,
+      steps: prior && sameItems(prior.steps, item.steps) ? prior.steps : item.steps,
       resultMap: prior && sameMapEntries(prior.resultMap, resultMap, Object.is) ? prior.resultMap : resultMap,
       childToolCallsByParent: prior && sameMapEntries(prior.childToolCallsByParent, childMap, sameItems)
         ? prior.childToolCallsByParent
@@ -1030,7 +1050,7 @@ function getMessageContentWeight(message: UIMessage): number {
 
 function getRenderItemContentWeight(item: RenderItem): number {
   if (item.kind === 'message') return getMessageContentWeight(item.message)
-  return item.toolCalls.reduce((total, toolCall) => total + getMessageContentWeight(toolCall), 0)
+  return item.steps.reduce((total, step) => total + getMessageContentWeight(step), 0)
 }
 
 function shouldVirtualizeRenderItems(metrics: VirtualRenderItemMetric[]) {
@@ -1129,7 +1149,7 @@ function getMessageMetricSignature(message: UIMessage): string {
 
 function getRenderItemMetricSignature(item: RenderItem): string {
   if (item.kind === 'message') return getMessageMetricSignature(item.message)
-  return item.toolCalls.map(getMessageMetricSignature).join('|')
+  return item.steps.map(getMessageMetricSignature).join('|')
 }
 
 function findVirtualStartIndex(offsets: number[], target: number) {
@@ -1894,6 +1914,9 @@ export function MessageList({ sessionId, compact = false }: MessageListProps = {
         {item.kind === 'tool_group' ? (
           <ToolCallGroup
             {...toolGroupResults.get(item.id)!}
+            activeThinkingId={
+              activeThinkingId && item.steps.some((step) => step.id === activeThinkingId) ? activeThinkingId : null
+            }
             isStreaming={
               chatState === 'tool_executing' &&
               item.toolCalls.some((tc) => !toolResultMap.has(tc.toolUseId))
diff --git a/desktop/src/components/chat/ToolCallGroup.test.tsx b/desktop/src/components/chat/ToolCallGroup.test.tsx
index 5c3505d..2f51855 100644
--- a/desktop/src/components/chat/ToolCallGroup.test.tsx
+++ b/desktop/src/components/chat/ToolCallGroup.test.tsx
@@ -74,9 +74,32 @@ describe('ToolCallGroup', () => {
     expect(screen.getByRole('button', { name: /Read 3 files/ })).toHaveAttribute('aria-expanded', 'false')
   })
 
-  it('opens a group with a failed call', () => {
+  it('keeps a group with a failed call collapsed and marks it as failed', () => {
     renderGroup([resultFor('a'), resultFor('b', true), resultFor('c')])
 
-    expect(screen.getByRole('button', { name: /Read 3 files/ })).toHaveAttribute('aria-expanded', 'true')
+    const header = screen.getByRole('button', { name: /Read 3 files/ })
+    expect(header).toHaveAttribute('aria-expanded', 'false')
+    expect(header.querySelector('.text-\\[var\\(--color-error\\)\\]')).not.toBeNull()
+  })
+
+  it('folds thinking into the group summary and shows it as running while it streams', () => {
+    const toolCalls = ['a', 'b'].map(readCall)
+    const thinking = { id: 'think-1', type: 'thinking', content: 'Checking the second file', timestamp: 1 } as const
+    const resultMap = new Map(['a', 'b'].map((id) => [id, resultFor(id)]))
+    render(
+      <ToolCallGroup
+        toolCalls={toolCalls}
+        steps={[toolCalls[0]!, thinking, toolCalls[1]!]}
+        activeThinkingId="think-1"
+        resultMap={resultMap}
+        childToolCallsByParent={new Map()}
+        agentTaskNotifications={{}}
+      />,
+    )
+
+    const header = screen.getByRole('button', { name: /Read 2 files, thought once/ })
+    expect(header.querySelector('.animate-pulse-dot')).not.toBeNull()
+    fireEvent.click(header)
+    expect(screen.getByText('Checking the second file')).toBeInTheDocument()
   })
 })
diff --git a/desktop/src/components/chat/ToolCallGroup.tsx b/desktop/src/components/chat/ToolCallGroup.tsx
index df23b77..b165353 100644
--- a/desktop/src/components/chat/ToolCallGroup.tsx
+++ b/desktop/src/components/chat/ToolCallGroup.tsx
@@ -1,6 +1,7 @@
 import { memo, useEffect, useState } from 'react'
 import { BookMarked, Check, ChevronDown, ChevronRight, CircleAlert, CircleDot, Settings, Square } from 'lucide-react'
 import { ToolCallBlock } from './ToolCallBlock'
+import { ThinkingBlock } from './ThinkingBlock'
 import { MarkdownRenderer } from '../markdown/MarkdownRenderer'
 import { Modal } from '../shared/Modal'
 import { useTranslation } from '../../i18n'
@@ -12,6 +13,8 @@ import { getCuaToolDisplay } from '../../lib/cuaToolDisplay'
 
 type ToolCall = Extract<UIMessage, { type: 'tool_use' }>
 type ToolResult = Extract<UIMessage, { type: 'tool_result' }>
+type ThinkingMessage = Extract<UIMessage, { type: 'thinking' }>
+type ActivityStep = ToolCall | ThinkingMessage
 type MemoryToolAction = 'saved' | 'referenced'
 
 type MemoryToolFile = {
@@ -32,6 +35,8 @@ type Props = {
   resultMap: Map<string, ToolResult>
   childToolCallsByParent: Map<string, ToolCall[]>
   agentTaskNotifications: Record<string, AgentTaskNotification>
+  steps?: ActivityStep[]
+  activeThinkingId?: string | null
   isStreaming?: boolean
 }
 
@@ -47,7 +52,11 @@ const TOOL_VERBS: Record<string, (count: number, t: (key: TranslationKey, params
   WebFetch: (n, t) => n === 1 ? t('toolGroup.fetchedOne') : t('toolGroup.fetchedMany', { count: n }),
 }
 
-function generateSummary(toolCalls: ToolCall[], t: (key: TranslationKey, params?: Record<string, string | number>) => string): string {
+function generateSummary(
+  toolCalls: ToolCall[],
+  t: (key: TranslationKey, params?: Record<string, string | number>) => string,
+  thinkingCount = 0,
+): string {
   const counts = new Map<string, number>()
   for (const tc of toolCalls) {
     counts.set(tc.toolName, (counts.get(tc.toolName) ?? 0) + 1)
@@ -59,6 +68,9 @@ function generateSummary(toolCalls: ToolCall[], t: (key: TranslationKey, params?
     const label = getCuaToolDisplay(name, undefined, t)?.title ?? name
     parts.push(verbFn ? verbFn(count, t) : `${label} (${count})`)
   }
+  if (thinkingCount > 0) {
+    parts.push(thinkingCount === 1 ? t('toolGroup.thoughtOne') : t('toolGroup.thoughtMany', { count: thinkingCount }))
+  }
 
   return parts.join(', ')
 }
@@ -113,13 +125,16 @@ export const ToolCallGroup = memo(function ToolCallGroup({
   resultMap,
   childToolCallsByParent,
   agentTaskNotifications,
+  steps = toolCalls,
+  activeThinkingId = null,
   isStreaming,
 }: Props) {
   const memoryActivity = getMemoryToolActivity(toolCalls, resultMap)
   if (memoryActivity) {
     const memoryToolCalls = toolCalls.filter(isMemoryToolCall)
     const regularToolCalls = toolCalls.filter((toolCall) => !isMemoryToolCall(toolCall))
-    if (regularToolCalls.length > 0) {
+    const regularSteps = steps.filter((step) => step.type === 'thinking' || !isMemoryToolCall(step))
+    if (regularSteps.length > 0) {
       return (
         <div className="mb-2 space-y-2">
           <MemoryToolActivityGroup
@@ -134,6 +149,8 @@ export const ToolCallGroup = memo(function ToolCallGroup({
             resultMap={resultMap}
             childToolCallsByParent={childToolCallsByParent}
             agentTaskNotifications={agentTaskNotifications}
+            steps={regularSteps}
+            activeThinkingId={activeThinkingId}
             isStreaming={isStreaming}
           />
         </div>
@@ -156,6 +173,8 @@ export const ToolCallGroup = memo(function ToolCallGroup({
       resultMap={resultMap}
       childToolCallsByParent={childToolCallsByParent}
       agentTaskNotifications={agentTaskNotifications}
+      steps={steps}
+      activeThinkingId={activeThinkingId}
       isStreaming={isStreaming}
     />
   )
@@ -166,9 +185,11 @@ function ToolCallGroupContent({
   resultMap,
   childToolCallsByParent,
   agentTaskNotifications,
+  steps = toolCalls,
+  activeThinkingId = null,
   isStreaming,
 }: Props) {
-  const allAgents = toolCalls.every((toolCall) => toolCall.toolName === 'Agent')
+  const allAgents = toolCalls.length > 0 && toolCalls.every((toolCall) => toolCall.toolName === 'Agent')
 
   if (allAgents) {
     return (
@@ -182,7 +203,7 @@ function ToolCallGroupContent({
     )
   }
 
-  if (toolCalls.length === 1) {
+  if (toolCalls.length === 1 && steps.length === 1) {
     const tc = toolCalls[0]!
     return (
       <ToolCallTree
@@ -199,6 +220,8 @@ function ToolCallGroupContent({
       resultMap={resultMap}
       childToolCallsByParent={childToolCallsByParent}
       agentTaskNotifications={agentTaskNotifications}
+      steps={steps}
+      activeThinkingId={activeThinkingId}
       isStreaming={isStreaming}
     />
   )
@@ -402,17 +425,20 @@ function AgentToolGroup({
   )
 }
 
-function ToolCallGroupMulti({ toolCalls, resultMap, childToolCallsByParent, isStreaming }: Props) {
+function ToolCallGroupMulti({
+  toolCalls,
+  resultMap,
+  childToolCallsByParent,
+  steps = toolCalls,
+  activeThinkingId = null,
+  isStreaming,
+}: Props) {
   const [expanded, setExpanded] = useState(false)
   const t = useTranslation()
-  const summary = generateSummary(toolCalls, t)
+  const summary = generateSummary(toolCalls, t, steps.length - toolCalls.length)
   const errorPresent = groupHasErrors(toolCalls, resultMap, childToolCallsByParent)
   const hasUnresolvedTools = hasUnresolvedToolCalls(toolCalls, resultMap, childToolCallsByParent)
-  const isRunning = !!isStreaming || hasUnresolvedTools
-
-  useEffect(() => {
-    if (errorPresent) setExpanded(true)
-  }, [errorPresent])
+  const isRunning = !!isStreaming || hasUnresolvedTools || activeThinkingId !== null
 
   return (
     <div className="mb-2">
@@ -431,17 +457,17 @@ function ToolCallGroupMulti({ toolCalls, resultMap, childToolCallsByParent, isSt
 
       {expanded && (
         <div className="mb-1 ml-[6px] mt-1.5 space-y-1 border-l border-[var(--color-border)] pl-[18px]">
-          {toolCalls.map((tc) => {
-            return (
+          {steps.map((step) => step.type === 'thinking'
+            ? <ThinkingBlock key={step.id} content={step.content} isActive={step.id === activeThinkingId} />
+            : (
               <ToolCallTree
-                key={tc.id}
-                toolCall={tc}
+                key={step.id}
+                toolCall={step}
                 resultMap={resultMap}
                 childToolCallsByParent={childToolCallsByParent}
                 compact
               />
-            )
-          })}
+            ))}
         </div>
       )}
     </div>
diff --git a/desktop/src/components/chat/streamingRenderCounts.test.tsx b/desktop/src/components/chat/streamingRenderCounts.test.tsx
index bc50207..cb4c169 100644
--- a/desktop/src/components/chat/streamingRenderCounts.test.tsx
+++ b/desktop/src/components/chat/streamingRenderCounts.test.tsx
@@ -6,7 +6,11 @@ import '@testing-library/jest-dom'
 const counts = vi.hoisted(() => ({
   commits: {} as Record<string, number>,
   toolGroups: {} as Record<string, number>,
-  toolGroupProps: {} as Record<string, { resultMap: Map<string, { content: unknown }> }>,
+  toolGroupProps: {} as Record<string, {
+    resultMap: Map<string, { content: unknown }>
+    steps?: Array<{ id: string; content?: unknown }>
+    activeThinkingId?: string | null
+  }>,
 }))
 
 vi.mock('../../api/sessions', () => ({
@@ -264,6 +268,35 @@ describe('components still update on the fields they use', () => {
     expect(result.current).toEqual({ providerId: 'p1', modelId: 'm2', effort: 'high' })
   })
 
+  it('only the group holding the streaming thinking re-renders', () => {
+    const session = useChatStore.getState().sessions[SCENARIO_SESSION_ID]!
+    const liveTurn: PerSessionState['messages'] = [
+      ...session.messages,
+      { id: 'u2', type: 'user_text', content: 'Run the tests', timestamp: 1 },
+      { id: LIVE_GROUP_ID, type: 'tool_use', toolName: 'Bash', toolUseId: 'tu-live', input: { command: 'ls' }, timestamp: 2 },
+      { id: 'r-live', type: 'tool_result', toolUseId: 'tu-live', content: 'files', isError: false, timestamp: 3 },
+    ]
+    patchSession({ messages: liveTurn, chatState: 'thinking' })
+    render(<MessageList sessionId={SCENARIO_SESSION_ID} />)
+    resetCounts()
+
+    let thought = ''
+    for (let i = 0; i < 3; i++) {
+      thought += `step ${i} `
+      patchSession({
+        messages: [...liveTurn, { id: 'think-live', type: 'thinking', content: thought, timestamp: 4 }],
+        activeThinkingId: 'think-live',
+      })
+    }
+
+    expect(counts.toolGroups[HISTORY_GROUP_ID]).toBeUndefined()
+    expect(counts.toolGroups[LIVE_GROUP_ID]).toBe(3)
+    const liveProps = counts.toolGroupProps[LIVE_GROUP_ID]!
+    expect(liveProps.steps?.map((step) => step.id)).toEqual([LIVE_GROUP_ID, 'think-live'])
+    expect(liveProps.steps?.[1]?.content).toBe(thought)
+    expect(liveProps.activeThinkingId).toBe('think-live')
+  })
+
   it('a tool group re-renders when its own result arrives', () => {
     render(<MessageList sessionId={SCENARIO_SESSION_ID} />)
     const session = useChatStore.getState().sessions[SCENARIO_SESSION_ID]!
diff --git a/desktop/src/i18n/locales/en.ts b/desktop/src/i18n/locales/en.ts
index c58f868..017955a 100644
--- a/desktop/src/i18n/locales/en.ts
+++ b/desktop/src/i18n/locales/en.ts
@@ -1175,6 +1175,8 @@ export const en = {
   'toolGroup.searchedMany': 'searched {count} patterns',
   'toolGroup.agentOne': 'dispatched an agent',
   'toolGroup.agentMany': 'dispatched {count} agents',
+  'toolGroup.thoughtOne': 'thought once',
+  'toolGroup.thoughtMany': 'thought {count} times',
   'agentStatus.starting': 'Starting',
   'agentStatus.running': 'Running',
   'agentStatus.done': 'Done',
diff --git a/desktop/src/i18n/locales/zh.ts b/desktop/src/i18n/locales/zh.ts
index 2c15ce2..663fe6c 100644
--- a/desktop/src/i18n/locales/zh.ts
+++ b/desktop/src/i18n/locales/zh.ts
@@ -1177,6 +1177,8 @@ export const zh: Record<TranslationKey, string> = {
   'toolGroup.searchedMany': '搜索了 {count} 个模式',
   'toolGroup.agentOne': '派遣了一个代理',
   'toolGroup.agentMany': '派遣了 {count} 个代理',
+  'toolGroup.thoughtOne': '思考了 1 次',
+  'toolGroup.thoughtMany': '思考了 {count} 次',
   'agentStatus.starting': '开始中',
   'agentStatus.running': '进行中',
   'agentStatus.done': '完成',