diff --git a/src/__tests__/bugfixes.test.ts b/src/__tests__/bugfixes.test.ts
index edaa2715..863f3639 100644
--- a/src/__tests__/bugfixes.test.ts
+++ b/src/__tests__/bugfixes.test.ts
@@ -288,3 +288,30 @@ describe('Context overflow 500 fix', () => {
     expect(content).toContain('automatic compaction has failed')
   })
 })
+
+// ---------------------------------------------------------------------------
+// Fix N: Project-scope MCP servers from .mcp.json not detected for 3P providers (issue #696)
+// ---------------------------------------------------------------------------
+describe('Project-scope MCP approval — third-party providers (issue #696)', () => {
+  test('handleMcpjsonServerApprovals is NOT gated behind usesAnthropicSetup', async () => {
+    const content = await file('interactiveHelpers.tsx').text()
+
+    // The call site for handleMcpjsonServerApprovals must not sit inside an
+    // `if (usesAnthropicSetup) { ... }` block, or third-party providers will
+    // never get the dialog and project-scope .mcp.json servers will be silently
+    // dropped from /mcp listings (issue #696).
+    const approvalCallIdx = content.indexOf('await handleMcpjsonServerApprovals(root)')
+    expect(approvalCallIdx).toBeGreaterThan(-1)
+
+    // Look at the 800 chars BEFORE the call site for any `if (usesAnthropicSetup)`
+    // block that would still be open. Pick a window that's definitely inside the
+    // showSetupScreens function but not in earlier dialogs.
+    const before = content.slice(Math.max(0, approvalCallIdx - 800), approvalCallIdx)
+    expect(before).not.toMatch(/if\s*\(\s*usesAnthropicSetup\s*\)\s*{[^}]*$/)
+  })
+
+  test('issue #696 is referenced from the comment so future readers can find context', async () => {
+    const content = await file('interactiveHelpers.tsx').text()
+    expect(content).toContain('#696')
+  })
+})
diff --git a/src/interactiveHelpers.tsx b/src/interactiveHelpers.tsx
index 60ee7c16..c655f38e 100644
--- a/src/interactiveHelpers.tsx
+++ b/src/interactiveHelpers.tsx
@@ -158,24 +158,25 @@ export async function showSetupScreens(root: Root, permissionMode: PermissionMod
     // Now that trust is established, prefetch system context if it wasn't already
     void getSystemContext();
 
-    // Skip MCP approval dialogs for third-party providers (no interactive auth prompts)
-    if (usesAnthropicSetup) {
-      // If settings are valid, check for any mcp.json servers that need approval
-      const {
-        errors: allErrors
-      } = getSettingsWithAllErrors();
-      if (allErrors.length === 0) {
-        await handleMcpjsonServerApprovals(root);
-      }
+    // MCP approval and external-includes warnings are about workspace
+    // trust, not about Anthropic auth. They must run for all providers
+    // — including third-party — otherwise project-scoped .mcp.json
+    // servers never get the approval that writes
+    // enableAllProjectMcpServers / enabledMcpjsonServers into
+    // settings.local.json, and the servers are silently dropped from
+    // /mcp and `mcp list` (issue #696).
+    const { errors: allErrors } = getSettingsWithAllErrors();
+    if (allErrors.length === 0) {
+      await handleMcpjsonServerApprovals(root);
+    }
 
-      // Check for claude.md includes that need approval
-      if (await shouldShowClaudeMdExternalIncludesWarning()) {
-        const externalIncludes = getExternalClaudeMdIncludes(await getMemoryFiles(true));
-        const {
-          ClaudeMdExternalIncludesDialog
-        } = await import('./components/ClaudeMdExternalIncludesDialog.js');
-        await showSetupDialog(root, done => <ClaudeMdExternalIncludesDialog onDone={done} isStandaloneDialog externalIncludes={externalIncludes} />);
-      }
+    // Check for claude.md includes that need approval
+    if (await shouldShowClaudeMdExternalIncludesWarning()) {
+      const externalIncludes = getExternalClaudeMdIncludes(await getMemoryFiles(true));
+      const {
+        ClaudeMdExternalIncludesDialog
+      } = await import('./components/ClaudeMdExternalIncludesDialog.js');
+      await showSetupDialog(root, done => <ClaudeMdExternalIncludesDialog onDone={done} isStandaloneDialog externalIncludes={externalIncludes} />);
     }
   }