diff --git a/packages/cli/src/ui/AppContainer.tsx b/packages/cli/src/ui/AppContainer.tsx
index d14a789d10..55ccc7438f 100644
--- a/packages/cli/src/ui/AppContainer.tsx
+++ b/packages/cli/src/ui/AppContainer.tsx
@@ -582,6 +582,13 @@ Logging in with Google... Restarting Gemini CLI to continue.
       settings.merged.security?.auth?.selectedType &&
       !settings.merged.security?.auth?.useExternal
     ) {
+      // We skip validation for Gemini API key here because it might be stored
+      // in the keychain, which we can't check synchronously.
+      // The useAuth hook handles validation for this case.
+      if (settings.merged.security.auth.selectedType === AuthType.USE_GEMINI) {
+        return;
+      }
+
       const error = validateAuthMethod(
         settings.merged.security.auth.selectedType,
       );
diff --git a/packages/cli/src/ui/auth/ApiAuthDialog.test.tsx b/packages/cli/src/ui/auth/ApiAuthDialog.test.tsx
index 1250c1d54e..a17c2708bf 100644
--- a/packages/cli/src/ui/auth/ApiAuthDialog.test.tsx
+++ b/packages/cli/src/ui/auth/ApiAuthDialog.test.tsx
@@ -12,8 +12,18 @@ import {
   useTextBuffer,
   type TextBuffer,
 } from '../components/shared/text-buffer.js';
+import { clearApiKey } from '@google/gemini-cli-core';
 
 // Mocks
+vi.mock('@google/gemini-cli-core', async (importOriginal) => {
+  const actual =
+    await importOriginal<typeof import('@google/gemini-cli-core')>();
+  return {
+    ...actual,
+    clearApiKey: vi.fn().mockResolvedValue(undefined),
+  };
+});
+
 vi.mock('../hooks/useKeypress.js', () => ({
   useKeypress: vi.fn(),
 }));
@@ -37,7 +47,8 @@ describe('ApiAuthDialog', () => {
   let mockBuffer: TextBuffer;
 
   beforeEach(() => {
-    vi.resetAllMocks();
+    vi.clearAllMocks();
+    vi.stubEnv('GEMINI_API_KEY', '');
     mockBuffer = {
       text: '',
       lines: [''],
@@ -91,7 +102,9 @@ describe('ApiAuthDialog', () => {
     ({ keyName, sequence, expectedCall, args }) => {
       mockBuffer.text = 'submitted-key'; // Set for the onSubmit case
       render(<ApiAuthDialog onSubmit={onSubmit} onCancel={onCancel} />);
-      const keypressHandler = mockedUseKeypress.mock.calls[0][0];
+      // calls[0] is the ApiAuthDialog's useKeypress (Ctrl+C handler)
+      // calls[1] is the TextInput's useKeypress (typing handler)
+      const keypressHandler = mockedUseKeypress.mock.calls[1][0];
 
       keypressHandler({
         name: keyName,
@@ -117,4 +130,20 @@ describe('ApiAuthDialog', () => {
 
     expect(lastFrame()).toContain('Invalid API Key');
   });
+
+  it('calls clearApiKey and clears buffer when Ctrl+C is pressed', async () => {
+    render(<ApiAuthDialog onSubmit={onSubmit} onCancel={onCancel} />);
+    // calls[0] is the ApiAuthDialog's useKeypress (Ctrl+C handler)
+    const keypressHandler = mockedUseKeypress.mock.calls[0][0];
+
+    await keypressHandler({
+      name: 'c',
+      ctrl: true,
+      meta: false,
+      shift: false,
+    });
+
+    expect(clearApiKey).toHaveBeenCalled();
+    expect(mockBuffer.setText).toHaveBeenCalledWith('');
+  });
 });
diff --git a/packages/cli/src/ui/auth/ApiAuthDialog.tsx b/packages/cli/src/ui/auth/ApiAuthDialog.tsx
index a1723efa2f..6345599634 100644
--- a/packages/cli/src/ui/auth/ApiAuthDialog.tsx
+++ b/packages/cli/src/ui/auth/ApiAuthDialog.tsx
@@ -5,11 +5,15 @@
  */
 
 import type React from 'react';
+import { useRef, useEffect } from 'react';
 import { Box, Text } from 'ink';
 import { theme } from '../semantic-colors.js';
 import { TextInput } from '../components/shared/TextInput.js';
 import { useTextBuffer } from '../components/shared/text-buffer.js';
 import { useUIState } from '../contexts/UIStateContext.js';
+import { clearApiKey, debugLogger } from '@google/gemini-cli-core';
+import { useKeypress } from '../hooks/useKeypress.js';
+import { keyMatchers, Command } from '../keyMatchers.js';
 
 interface ApiAuthDialogProps {
   onSubmit: (apiKey: string) => void;
@@ -27,9 +31,20 @@ export function ApiAuthDialog({
   const { mainAreaWidth } = useUIState();
   const viewportWidth = mainAreaWidth - 8;
 
+  const pendingPromise = useRef<{ cancel: () => void } | null>(null);
+
+  useEffect(
+    () => () => {
+      pendingPromise.current?.cancel();
+    },
+    [],
+  );
+
+  const initialApiKey = defaultValue;
+
   const buffer = useTextBuffer({
-    initialText: defaultValue || '',
-    initialCursorOffset: defaultValue?.length || 0,
+    initialText: initialApiKey || '',
+    initialCursorOffset: initialApiKey?.length || 0,
     viewport: {
       width: viewportWidth,
       height: 4,
@@ -44,6 +59,41 @@ export function ApiAuthDialog({
     onSubmit(value);
   };
 
+  const handleClear = () => {
+    pendingPromise.current?.cancel();
+
+    let isCancelled = false;
+    const wrappedPromise = new Promise<void>((resolve, reject) => {
+      clearApiKey().then(
+        () => !isCancelled && resolve(),
+        (error) => !isCancelled && reject(error),
+      );
+    });
+
+    pendingPromise.current = {
+      cancel: () => {
+        isCancelled = true;
+      },
+    };
+
+    return wrappedPromise
+      .then(() => {
+        buffer.setText('');
+      })
+      .catch((err) => {
+        debugLogger.debug('Failed to clear API key:', err);
+      });
+  };
+
+  useKeypress(
+    async (key) => {
+      if (keyMatchers[Command.CLEAR_INPUT](key)) {
+        await handleClear();
+      }
+    },
+    { isActive: true },
+  );
+
   return (
     <Box
       borderStyle="round"
@@ -89,7 +139,7 @@ export function ApiAuthDialog({
       )}
       <Box marginTop={1}>
         <Text color={theme.text.secondary}>
-          (Press Enter to submit, Esc to cancel)
+          (Press Enter to submit, Esc to cancel, Ctrl+C to clear stored key)
         </Text>
       </Box>
     </Box>
diff --git a/packages/cli/src/ui/auth/AuthDialog.test.tsx b/packages/cli/src/ui/auth/AuthDialog.test.tsx
index eb6ac512b1..16f0f9cbe8 100644
--- a/packages/cli/src/ui/auth/AuthDialog.test.tsx
+++ b/packages/cli/src/ui/auth/AuthDialog.test.tsx
@@ -232,6 +232,21 @@ describe('AuthDialog', () => {
       );
     });
 
+    it('skips API key dialog if env var is present but empty', async () => {
+      mockedValidateAuthMethod.mockReturnValue(null);
+      process.env['GEMINI_API_KEY'] = ''; // Empty string
+      // props.settings.merged.security.auth.selectedType is undefined here
+
+      renderWithProviders(<AuthDialog {...props} />);
+      const { onSelect: handleAuthSelect } =
+        mockedRadioButtonSelect.mock.calls[0][0];
+      await handleAuthSelect(AuthType.USE_GEMINI);
+
+      expect(props.setAuthState).toHaveBeenCalledWith(
+        AuthState.Unauthenticated,
+      );
+    });
+
     it('shows API key dialog on initial setup if no env var is present', async () => {
       mockedValidateAuthMethod.mockReturnValue(null);
       // process.env['GEMINI_API_KEY'] is not set
@@ -247,7 +262,7 @@ describe('AuthDialog', () => {
       );
     });
 
-    it('shows API key dialog on re-auth to allow editing', async () => {
+    it('skips API key dialog on re-auth if env var is present (cannot edit)', async () => {
       mockedValidateAuthMethod.mockReturnValue(null);
       process.env['GEMINI_API_KEY'] = 'test-key-from-env';
       // Simulate that the user has already authenticated once
@@ -260,7 +275,7 @@ describe('AuthDialog', () => {
       await handleAuthSelect(AuthType.USE_GEMINI);
 
       expect(props.setAuthState).toHaveBeenCalledWith(
-        AuthState.AwaitingApiKeyInput,
+        AuthState.Unauthenticated,
       );
     });
 
diff --git a/packages/cli/src/ui/auth/AuthDialog.tsx b/packages/cli/src/ui/auth/AuthDialog.tsx
index a1ee28ec91..b133acf52b 100644
--- a/packages/cli/src/ui/auth/AuthDialog.tsx
+++ b/packages/cli/src/ui/auth/AuthDialog.tsx
@@ -116,9 +116,6 @@ export function AuthDialog({
         return;
       }
       if (authType) {
-        const isInitialAuthSelection =
-          !settings.merged.security?.auth?.selectedType;
-
         await clearCachedCredentialFile();
 
         settings.setValue(scope, 'security.auth.selectedType', authType);
@@ -135,7 +132,7 @@ export function AuthDialog({
         }
 
         if (authType === AuthType.USE_GEMINI) {
-          if (isInitialAuthSelection && process.env['GEMINI_API_KEY']) {
+          if (process.env['GEMINI_API_KEY'] !== undefined) {
             setAuthState(AuthState.Unauthenticated);
             return;
           } else {
diff --git a/packages/cli/src/ui/auth/__snapshots__/ApiAuthDialog.test.tsx.snap b/packages/cli/src/ui/auth/__snapshots__/ApiAuthDialog.test.tsx.snap
index 5f0f58b6b4..3b89525633 100644
--- a/packages/cli/src/ui/auth/__snapshots__/ApiAuthDialog.test.tsx.snap
+++ b/packages/cli/src/ui/auth/__snapshots__/ApiAuthDialog.test.tsx.snap
@@ -12,7 +12,7 @@ exports[`ApiAuthDialog > renders correctly 1`] = `
 │ │ Paste your API key here                                                                      │ │
 │ ╰──────────────────────────────────────────────────────────────────────────────────────────────╯ │
 │                                                                                                  │
-│ (Press Enter to submit, Esc to cancel)                                                           │
+│ (Press Enter to submit, Esc to cancel, Ctrl+C to clear stored key)                               │
 │                                                                                                  │
 ╰──────────────────────────────────────────────────────────────────────────────────────────────────╯"
 `;
diff --git a/packages/cli/src/ui/auth/useAuth.test.tsx b/packages/cli/src/ui/auth/useAuth.test.tsx
index 89560e58f7..c606bc76de 100644
--- a/packages/cli/src/ui/auth/useAuth.test.tsx
+++ b/packages/cli/src/ui/auth/useAuth.test.tsx
@@ -40,8 +40,8 @@ vi.mock('../../config/auth.js', () => ({
 describe('useAuth', () => {
   beforeEach(() => {
     vi.resetAllMocks();
-    process.env['GEMINI_API_KEY'] = '';
-    process.env['GEMINI_DEFAULT_AUTH_TYPE'] = '';
+    delete process.env['GEMINI_API_KEY'];
+    delete process.env['GEMINI_DEFAULT_AUTH_TYPE'];
   });
 
   afterEach(() => {
diff --git a/packages/cli/src/ui/auth/useAuth.ts b/packages/cli/src/ui/auth/useAuth.ts
index ec7365074c..004e362d10 100644
--- a/packages/cli/src/ui/auth/useAuth.ts
+++ b/packages/cli/src/ui/auth/useAuth.ts
@@ -55,11 +55,15 @@ export const useAuthCommand = (settings: LoadedSettings, config: Config) => {
   );
 
   const reloadApiKey = useCallback(async () => {
+    const envKey = process.env['GEMINI_API_KEY'];
+    if (envKey !== undefined) {
+      setApiKeyDefaultValue(envKey);
+      return envKey;
+    }
+
     const storedKey = (await loadApiKey()) ?? '';
-    const envKey = process.env['GEMINI_API_KEY'] ?? '';
-    const key = envKey || storedKey;
-    setApiKeyDefaultValue(key);
-    return key; // Return the key for immediate use
+    setApiKeyDefaultValue(storedKey);
+    return storedKey;
   }, []);
 
   useEffect(() => {
diff --git a/packages/cli/src/ui/components/DialogManager.tsx b/packages/cli/src/ui/components/DialogManager.tsx
index 2d04e533db..325009db67 100644
--- a/packages/cli/src/ui/components/DialogManager.tsx
+++ b/packages/cli/src/ui/components/DialogManager.tsx
@@ -166,6 +166,7 @@ export const DialogManager = ({
     return (
       <Box flexDirection="column">
         <ApiAuthDialog
+          key={uiState.apiKeyDefaultValue}
           onSubmit={uiActions.handleApiKeySubmit}
           onCancel={uiActions.handleApiKeyCancel}
           error={uiState.authError}
diff --git a/packages/core/src/core/contentGenerator.ts b/packages/core/src/core/contentGenerator.ts
index 0861a79864..d5f5c49b4d 100644
--- a/packages/core/src/core/contentGenerator.ts
+++ b/packages/core/src/core/contentGenerator.ts
@@ -66,7 +66,7 @@ export async function createContentGeneratorConfig(
   authType: AuthType | undefined,
 ): Promise<ContentGeneratorConfig> {
   const geminiApiKey =
-    (await loadApiKey()) || process.env['GEMINI_API_KEY'] || undefined;
+    process.env['GEMINI_API_KEY'] || (await loadApiKey()) || undefined;
   const googleApiKey = process.env['GOOGLE_API_KEY'] || undefined;
   const googleCloudProject =
     process.env['GOOGLE_CLOUD_PROJECT'] ||