diff --git a/src/node/orpc/router.ts b/src/node/orpc/router.ts
index b09501ee9c..b466fcd0a9 100644
--- a/src/node/orpc/router.ts
+++ b/src/node/orpc/router.ts
@@ -94,14 +94,19 @@ export const router = (authToken?: string) => {
         .output(schemas.providers.onConfigChanged.output)
         .handler(async function* ({ context }) {
           let resolveNext: (() => void) | null = null;
+          let pendingNotification = false;
           let ended = false;
 
           const push = () => {
             if (ended) return;
             if (resolveNext) {
+              // Listener is waiting - wake it up
               const resolve = resolveNext;
               resolveNext = null;
               resolve();
+            } else {
+              // No listener waiting yet - queue the notification
+              pendingNotification = true;
             }
           };
 
@@ -109,6 +114,13 @@ export const router = (authToken?: string) => {
 
           try {
             while (!ended) {
+              // If notification arrived before we started waiting, yield immediately
+              if (pendingNotification) {
+                pendingNotification = false;
+                yield undefined;
+                continue;
+              }
+              // Wait for next notification
               await new Promise<void>((resolve) => {
                 resolveNext = resolve;
               });
diff --git a/tests/e2e/scenarios/settings.spec.ts b/tests/e2e/scenarios/settings.spec.ts
index 7aaefed7b3..959ed0afbc 100644
--- a/tests/e2e/scenarios/settings.spec.ts
+++ b/tests/e2e/scenarios/settings.spec.ts
@@ -117,4 +117,56 @@ test.describe("Settings Modal", () => {
     await expect(page.getByPlaceholder(/model-id/i)).toBeVisible();
     await expect(page.getByRole("button", { name: /^Add$/i })).toBeVisible();
   });
+
+  test("provider settings updates propagate without reload", async ({ ui, page }) => {
+    await ui.projects.openFirstWorkspace();
+    await ui.settings.open();
+    await ui.settings.selectSection("Providers");
+
+    // Expand OpenAI provider - use the specific button with OpenAI icon
+    const openaiButton = page
+      .getByRole("button", { name: /OpenAI/i })
+      .filter({ has: page.getByText("OpenAI icon") });
+    await expect(openaiButton).toBeVisible();
+    await openaiButton.click();
+
+    // Wait for the provider section to expand - API Key label should be visible
+    await expect(page.getByText("API Key", { exact: true })).toBeVisible();
+
+    // Verify API key is not set initially (shows "Not set")
+    await expect(page.getByText("Not set").first()).toBeVisible();
+
+    // Click "Set" to enter edit mode - it's a text link, not a button role
+    const setLink = page.getByText("Set", { exact: true }).first();
+    await setLink.click();
+
+    // The password input should appear with autofocus
+    const apiKeyInput = page.locator('input[type="password"]');
+    await expect(apiKeyInput).toBeVisible();
+    await apiKeyInput.fill("sk-test-key-12345");
+
+    // Save by pressing Enter (the input has onKeyDown handler for Enter)
+    await page.keyboard.press("Enter");
+
+    // Verify the field now shows as set (masked value)
+    await expect(page.getByText("••••••••")).toBeVisible();
+
+    // Close settings
+    await ui.settings.close();
+
+    // Re-open settings and verify the change persisted without reload
+    await ui.settings.open();
+    await ui.settings.selectSection("Providers");
+
+    // Expand OpenAI again
+    await openaiButton.click();
+    await expect(page.getByText("API Key", { exact: true })).toBeVisible();
+
+    // The API key should still show as set
+    await expect(page.getByText("••••••••")).toBeVisible();
+
+    // The provider should show as configured (green indicator dot)
+    const configuredIndicator = openaiButton.locator(".bg-green-500");
+    await expect(configuredIndicator).toBeVisible();
+  });
 });