diff --git a/src/proxy/proxy-manager.ts b/src/proxy/proxy-manager.ts
index 86bee51d..1f8a6436 100644
--- a/src/proxy/proxy-manager.ts
+++ b/src/proxy/proxy-manager.ts
@@ -691,64 +691,88 @@ export class ProxyManager extends EventEmitter implements IProxyManager {
     const delays = [500, 1000, 2000, 4000, 8000]; // More generous backoff for Windows CI
     let lastError: Error | undefined;
 
-    for (let attempt = 0; attempt <= maxRetries; attempt++) {
-      const timeoutMs = delays[Math.min(attempt, delays.length - 1)];
-
-      try {
-        const received = await new Promise<boolean>((resolve, reject) => {
-          let resolved = false;
-
-          const handler = () => {
-            if (resolved) return;
-            resolved = true;
-            // Detach on success too — this listener is registered with on(),
-            // and each un-removed acknowledgment handler would otherwise stay
-            // on the manager for its lifetime (issue #420).
-            cleanup();
-            resolve(true);
-          };
-
-          const cleanup = () => {
-            this.removeListener('init-received', handler);
-            if (timer) clearTimeout(timer);
-          };
-
-          this.on('init-received', handler);
-
-          const timer = setTimeout(() => {
-            if (resolved) return;
-            resolved = true;
-            this.removeListener('init-received', handler);
-            resolve(false);
-          }, timeoutMs);
-
-          try {
-            this.sendCommand(initCommand);
-          } catch (error) {
-            cleanup();
-            reject(error);
-          }
-        });
+    // Latch the ack for the whole retry sequence (issue #512): the worker
+    // acks exactly once, and on a slow boot (>500ms — inspected or heavily
+    // loaded host) that ack lands between attempt windows. A per-attempt
+    // listener silently drops it, and for a worker that then exits (dry-run)
+    // every remaining retry fails against a process that already did its job.
+    let acked = false;
+    const onAck = () => {
+      acked = true;
+    };
+    this.on('init-received', onAck);
+
+    // Wait up to ms, ending early (true) the moment the ack arrives — or
+    // immediately when it was already latched by the long-lived listener
+    const waitForAck = (ms: number): Promise<boolean> =>
+      new Promise<boolean>((resolve) => {
+        if (acked) {
+          resolve(true);
+          return;
+        }
+        let settled = false;
+        const settle = (value: boolean) => {
+          if (settled) return;
+          settled = true;
+          clearTimeout(timer);
+          this.removeListener('init-received', onAckNow);
+          resolve(value);
+        };
+        const onAckNow = () => settle(true);
+        this.on('init-received', onAckNow);
+        const timer = setTimeout(() => settle(false), ms);
+      });
 
-        if (received) {
-          this.logger.info(`[ProxyManager] Init command acknowledged on attempt ${attempt + 1}`);
+    try {
+      for (let attempt = 0; attempt <= maxRetries; attempt++) {
+        if (acked) {
+          this.logger.info(`[ProxyManager] Init command acknowledged before attempt ${attempt + 1}`);
           return;
         }
+        const timeoutMs = delays[Math.min(attempt, delays.length - 1)];
+
+        let sendFailed = false;
+        try {
+          this.sendCommand(initCommand);
+        } catch (error) {
+          lastError = error as Error;
+          sendFailed = true;
+          this.logger.warn(
+            `[ProxyManager] Error sending init on attempt ${attempt + 1}: ${lastError.message}`
+          );
+          // Once the worker has exited without acking, no ack can arrive —
+          // fail fast with the detailed exit message instead of burning the
+          // remaining retries against a process that is gone (issue #512)
+          if (this.lastExitDetails) {
+            break;
+          }
+        }
 
-        this.logger.warn(
-          `[ProxyManager] Init not acknowledged, attempt ${attempt + 1}/${maxRetries + 1}`
-        );
-      } catch (error) {
-        lastError = error as Error;
-        this.logger.warn(
-          `[ProxyManager] Error sending init on attempt ${attempt + 1}: ${lastError.message}`
-        );
-      }
+        // A failed send delivered nothing to wait for; an earlier attempt's
+        // late ack is still caught by the latch during the backoff below
+        if (!sendFailed) {
+          if (await waitForAck(timeoutMs)) {
+            this.logger.info(`[ProxyManager] Init command acknowledged on attempt ${attempt + 1}`);
+            return;
+          }
+
+          this.logger.warn(
+            `[ProxyManager] Init not acknowledged, attempt ${attempt + 1}/${maxRetries + 1}`
+          );
+        }
 
-      if (attempt < maxRetries) {
-        const waitMs = delays[Math.min(attempt, delays.length - 1)];
-        await new Promise((resolve) => setTimeout(resolve, waitMs));
+        if (attempt < maxRetries) {
+          const waitMs = delays[Math.min(attempt, delays.length - 1)];
+          if (await waitForAck(waitMs)) {
+            this.logger.info(
+              `[ProxyManager] Init command acknowledged during backoff after attempt ${attempt + 1}`
+            );
+            return;
+          }
+        }
       }
+    } finally {
+      this.removeListener('init-received', onAck);
     }
 
     let detailMessage = `Failed to initialize proxy after ${maxRetries + 1} attempts. ${
diff --git a/tests/unit/proxy/proxy-manager.handshake.test.ts b/tests/unit/proxy/proxy-manager.handshake.test.ts
index a9e016ea..8d488a30 100644
--- a/tests/unit/proxy/proxy-manager.handshake.test.ts
+++ b/tests/unit/proxy/proxy-manager.handshake.test.ts
@@ -61,31 +61,93 @@ describe('ProxyManager sendInitWithRetry', () => {
     expect(sendCommandMock).toHaveBeenCalledTimes(1);
   });
 
-  it('retries when acknowledgement arrives after the first timeout', async () => {
+  it('latches an acknowledgement that lands between attempt windows (issue #512)', async () => {
+    vi.useFakeTimers();
+    // The worker acks once, 600ms after the init send — after attempt 1's
+    // 500ms window expired, during the backoff sleep. Pre-#512 this ack was
+    // dropped (its listener had been removed) and the whole launch failed if
+    // the worker then exited; now it resolves the retry loop without a resend.
+    const sendCommandMock = vi
+      .spyOn(manager as unknown as { sendCommand: (command: object) => void }, 'sendCommand')
+      .mockImplementationOnce(() => {
+        setTimeout(() => (manager as unknown as EventEmitter).emit('init-received'), 600);
+      });
+
+    const initPromise = (manager as unknown as { sendInitWithRetry: (command: object) => Promise<void> }).sendInitWithRetry(
+      { cmd: 'init' }
+    );
+
+    vi.advanceTimersByTime(500); // attempt 1 window expires without the ack
+    await Promise.resolve();
+    vi.advanceTimersByTime(100); // ack fires during the backoff sleep
+    await Promise.resolve();
+    await initPromise;
+
+    expect(sendCommandMock).toHaveBeenCalledTimes(1);
+  });
+
+  it('retries and resolves when only a later attempt is acknowledged', async () => {
     vi.useFakeTimers();
     let attempt = 0;
     const sendCommandMock = vi
       .spyOn(manager as unknown as { sendCommand: (command: object) => void }, 'sendCommand')
       .mockImplementation(() => {
         attempt += 1;
-        const delay = attempt === 1 ? 600 : 100;
-        setTimeout(() => (manager as unknown as EventEmitter).emit('init-received'), delay);
+        if (attempt === 2) {
+          setTimeout(() => (manager as unknown as EventEmitter).emit('init-received'), 100);
+        }
+        // attempt 1: message lost entirely — no ack ever fires for it
       });
 
     const initPromise = (manager as unknown as { sendInitWithRetry: (command: object) => Promise<void> }).sendInitWithRetry(
       { cmd: 'init' }
     );
 
-    vi.advanceTimersByTime(600); // first ack (lost) + first timeout (500)
+    vi.advanceTimersByTime(500); // attempt 1 window expires
     await Promise.resolve();
     vi.advanceTimersByTime(500); // backoff before retry
     await Promise.resolve();
-    vi.advanceTimersByTime(100); // second attempt acknowledges
+    vi.advanceTimersByTime(100); // attempt 2 acknowledges
     await Promise.resolve();
     await initPromise;
     expect(sendCommandMock).toHaveBeenCalledTimes(2);
   });
 
+  it('fails fast once the worker has exited without acking (issue #512)', async () => {
+    vi.useFakeTimers();
+    let attempt = 0;
+    const sendCommandMock = vi
+      .spyOn(manager as unknown as { sendCommand: (command: object) => void }, 'sendCommand')
+      .mockImplementation(() => {
+        attempt += 1;
+        if (attempt > 1) {
+          // Worker exited between attempts; ProxyManager recorded the exit
+          (manager as unknown as { lastExitDetails: unknown }).lastExitDetails = {
+            code: 1,
+            signal: null,
+            timestamp: Date.now(),
+            capturedStderr: ['boom'],
+          };
+          throw new Error('Proxy process not available');
+        }
+      });
+
+    const initPromise = (manager as unknown as { sendInitWithRetry: (command: object) => Promise<void> }).sendInitWithRetry(
+      { cmd: 'init' }
+    );
+    const rejection = expect(initPromise).rejects.toThrow('Proxy exit details -> code=1');
+
+    vi.advanceTimersByTime(500); // attempt 1 window expires
+    await Promise.resolve();
+    vi.advanceTimersByTime(500); // backoff, then attempt 2's send throws
+    await Promise.resolve();
+
+    // No further windows/backoffs are burned: the loop breaks on the dead
+    // worker instead of retrying four more times over ~15s
+    await rejection;
+    expect(sendCommandMock).toHaveBeenCalledTimes(2);
+  });
+
   it('throws after exhausting retries when acknowledgement never arrives', async () => {
     vi.useFakeTimers();
     const sendCommandMock = vi
diff --git a/tests/unit/proxy/proxy-manager.start.test.ts b/tests/unit/proxy/proxy-manager.start.test.ts
index 6a13f095..181930c6 100644
--- a/tests/unit/proxy/proxy-manager.start.test.ts
+++ b/tests/unit/proxy/proxy-manager.start.test.ts
@@ -491,36 +491,33 @@ describe('ProxyManager.start', () => {
       expect(logger.warn).toHaveBeenCalledWith(expect.stringContaining('Error sending init on attempt 1'));
     });
 
-    it('surfaces detailed error after exhausting init retries', async () => {
+    it('surfaces detailed error and fails fast once the worker exited without acking (issue #512)', async () => {
       fakeProcess.sendCommand.mockReset();
-      fakeProcess.sendCommand.mockImplementation(() => {
-        throw new Error('ipc failure');
-      });
-
-      (proxyManager as unknown as {
-        lastExitDetails: {
-          code: number | null;
-          signal: string | null;
-          timestamp: number;
-          capturedStderr: string[];
-        };
-      }).lastExitDetails = {
-        code: 12,
-        signal: 'SIGTERM',
-        timestamp: Date.now(),
-        capturedStderr: ['fatal: adapter crashed']
-      };
+      fakeProcess.sendCommand
+        .mockImplementationOnce(() => {
+          // First init is delivered but never acked; the worker dies shortly
+          // after — handleProxyExit records lastExitDetails
+          setTimeout(() => fakeProcess.emit('exit', 12, 'SIGTERM'), 100);
+        })
+        .mockImplementation(() => {
+          throw new Error('Proxy process not available');
+        });
 
       const startPromise = proxyManager.start(baseConfig);
 
       // Attach the rejection expectation BEFORE driving the rejection: the
       // async fake-timer loop yields through real ticks, where an unhandled
       // rejection would otherwise be flagged (issue #420).
-      const rejection = expect(startPromise).rejects.toThrow(/Failed to initialize proxy after 6 attempts\. Last error: ipc failure/);
-      await vi.advanceTimersByTimeAsync(16500);
+      // With exit details recorded, retrying is pointless (no ack can arrive
+      // from an exited worker) — the failure surfaces on attempt 2's failed
+      // send instead of burning ~15s of retries (issue #512), and carries
+      // the exit details.
+      const rejection = expect(startPromise).rejects.toThrow(/Failed to initialize proxy after 6 attempts\. Last error: Proxy process not available[\s\S]*code=12 signal=SIGTERM/);
+      await vi.advanceTimersByTimeAsync(8000);
 
       await rejection;
-      expect(logger.warn).toHaveBeenCalledWith(expect.stringContaining('Error sending init on attempt 6'));
+      expect(logger.warn).toHaveBeenCalledWith(expect.stringContaining('Error sending init on attempt 2'));
+      expect(logger.warn).not.toHaveBeenCalledWith(expect.stringContaining('Error sending init on attempt 3'));
     });
   });