diff --git a/packages/core/src/ide/ide-client.ts b/packages/core/src/ide/ide-client.ts
index 7c4b50d8ba..c8242c02cc 100644
--- a/packages/core/src/ide/ide-client.ts
+++ b/packages/core/src/ide/ide-client.ts
@@ -7,18 +7,18 @@
 import * as fs from 'node:fs';
 import { isSubpath } from '../utils/paths.js';
 import { detectIde, type DetectedIde, getIdeInfo } from '../ide/detect-ide.js';
+import { ideContextStore } from './ideContext.js';
 import {
-  ideContextStore,
+  IdeContextNotificationSchema,
   IdeDiffAcceptedNotificationSchema,
   IdeDiffClosedNotificationSchema,
-  CloseDiffResponseSchema,
-  type DiffUpdateResult,
-} from './ideContext.js';
-import { IdeContextNotificationSchema } from './types.js';
+  IdeDiffRejectedNotificationSchema,
+} from './types.js';
 import { getIdeProcessInfo } from './process-utils.js';
 import { Client } from '@modelcontextprotocol/sdk/client/index.js';
 import { StreamableHTTPClientTransport } from '@modelcontextprotocol/sdk/client/streamableHttp.js';
 import { StdioClientTransport } from '@modelcontextprotocol/sdk/client/stdio.js';
+import { CallToolResultSchema } from '@modelcontextprotocol/sdk/types.js';
 import * as os from 'node:os';
 import * as path from 'node:path';
 import { EnvHttpProxyAgent } from 'undici';
@@ -31,6 +31,16 @@ const logger = {
   error: (...args: any[]) => console.error('[ERROR] [IDEClient]', ...args),
 };
 
+export type DiffUpdateResult =
+  | {
+      status: 'accepted';
+      content?: string;
+    }
+  | {
+      status: 'rejected';
+      content: undefined;
+    };
+
 export type IDEConnectionState = {
   status: IDEConnectionStatus;
   details?: string; // User-facing
@@ -193,22 +203,26 @@ export class IdeClient {
   }
 
   /**
-   * A diff is accepted with any modifications if the user performs one of the
-   * following actions:
-   * - Clicks the checkbox icon in the IDE to accept
-   * - Runs `command+shift+p` > "Gemini CLI: Accept Diff in IDE" to accept
-   * - Selects "accept" in the CLI UI
-   * - Saves the file via `ctrl/command+s`
+   * Opens a diff view in the IDE, allowing the user to review and accept or
+   * reject changes.
    *
-   * A diff is rejected if the user performs one of the following actions:
-   * - Clicks the "x" icon in the IDE
-   * - Runs "Gemini CLI: Close Diff in IDE"
-   * - Selects "no" in the CLI UI
-   * - Closes the file
+   * This method sends a request to the IDE to display a diff between the
+   * current content of a file and the new content provided. It then waits for
+   * a notification from the IDE indicating that the user has either accepted
+   * (potentially with manual edits) or rejected the diff.
+   *
+   * A mutex ensures that only one diff view can be open at a time to prevent
+   * race conditions.
+   *
+   * @param filePath The absolute path to the file to be diffed.
+   * @param newContent The proposed new content for the file.
+   * @returns A promise that resolves with a `DiffUpdateResult`, indicating
+   *   whether the diff was 'accepted' or 'rejected' and including the final
+   *   content if accepted.
    */
   async openDiff(
     filePath: string,
-    newContent?: string,
+    newContent: string,
   ): Promise<DiffUpdateResult> {
     const release = await this.acquireMutex();
 
@@ -226,6 +240,30 @@ export class IdeClient {
             newContent,
           },
         })
+        .then((result) => {
+          const parsedResult = CallToolResultSchema.safeParse(result);
+          if (!parsedResult.success) {
+            const err = new Error('Failed to parse tool result from IDE');
+            logger.debug(err, parsedResult.error);
+            this.diffResponses.delete(filePath);
+            reject(err);
+            return;
+          }
+
+          if (parsedResult.data.isError) {
+            const textPart = parsedResult.data.content.find(
+              (part) => part.type === 'text',
+            );
+            const errorMessage =
+              textPart?.text ?? `Tool 'openDiff' reported an error.`;
+            logger.debug(
+              `callTool for ${filePath} failed with isError:`,
+              errorMessage,
+            );
+            this.diffResponses.delete(filePath);
+            reject(new Error(errorMessage));
+          }
+        })
         .catch((err) => {
           logger.debug(`callTool for ${filePath} failed:`, err);
           this.diffResponses.delete(filePath);
@@ -279,14 +317,56 @@ export class IdeClient {
         },
       });
 
-      if (result) {
-        const parsed = CloseDiffResponseSchema.parse(result);
-        return parsed.content;
+      if (!result) {
+        return undefined;
+      }
+
+      const parsedResult = CallToolResultSchema.safeParse(result);
+      if (!parsedResult.success) {
+        logger.debug(
+          `Failed to parse tool result from IDE for closeDiff:`,
+          parsedResult.error,
+        );
+        return undefined;
+      }
+
+      if (parsedResult.data.isError) {
+        const textPart = parsedResult.data.content.find(
+          (part) => part.type === 'text',
+        );
+        const errorMessage =
+          textPart?.text ?? `Tool 'closeDiff' reported an error.`;
+        logger.debug(
+          `callTool for closeDiff ${filePath} failed with isError:`,
+          errorMessage,
+        );
+        return undefined;
+      }
+
+      const textPart = parsedResult.data.content.find(
+        (part) => part.type === 'text',
+      );
+
+      if (textPart?.text) {
+        try {
+          const parsedJson = JSON.parse(textPart.text);
+          if (parsedJson && typeof parsedJson.content === 'string') {
+            return parsedJson.content;
+          }
+          if (parsedJson && parsedJson.content === null) {
+            return undefined;
+          }
+        } catch (_e) {
+          logger.debug(
+            `Invalid JSON in closeDiff response for ${filePath}:`,
+            textPart.text,
+          );
+        }
       }
     } catch (err) {
-      logger.debug(`callTool for ${filePath} failed:`, err);
+      logger.debug(`callTool for closeDiff ${filePath} failed:`, err);
     }
-    return;
+    return undefined;
   }
 
   // Closes the diff. Instead of waiting for a notification,
@@ -648,6 +728,22 @@ export class IdeClient {
       },
     );
 
+    this.client.setNotificationHandler(
+      IdeDiffRejectedNotificationSchema,
+      (notification) => {
+        const { filePath } = notification.params;
+        const resolver = this.diffResponses.get(filePath);
+        if (resolver) {
+          resolver({ status: 'rejected', content: undefined });
+          this.diffResponses.delete(filePath);
+        } else {
+          logger.debug(`No resolver found for ${filePath}`);
+        }
+      },
+    );
+
+    // For backwards compatability. Newer extension versions will only send
+    // IdeDiffRejectedNotificationSchema.
     this.client.setNotificationHandler(
       IdeDiffClosedNotificationSchema,
       (notification) => {
diff --git a/packages/core/src/ide/ideContext.ts b/packages/core/src/ide/ideContext.ts
index cb57b99f4b..527d4135cc 100644
--- a/packages/core/src/ide/ideContext.ts
+++ b/packages/core/src/ide/ideContext.ts
@@ -4,71 +4,12 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
-import { z } from 'zod';
 import {
   IDE_MAX_OPEN_FILES,
   IDE_MAX_SELECTED_TEXT_LENGTH,
 } from './constants.js';
 import type { IdeContext } from './types.js';
 
-export const IdeDiffAcceptedNotificationSchema = z.object({
-  jsonrpc: z.literal('2.0'),
-  method: z.literal('ide/diffAccepted'),
-  params: z.object({
-    filePath: z.string(),
-    content: z.string(),
-  }),
-});
-
-export const IdeDiffClosedNotificationSchema = z.object({
-  jsonrpc: z.literal('2.0'),
-  method: z.literal('ide/diffClosed'),
-  params: z.object({
-    filePath: z.string(),
-    content: z.string().optional(),
-  }),
-});
-
-export const CloseDiffResponseSchema = z
-  .object({
-    content: z
-      .array(
-        z.object({
-          text: z.string(),
-          type: z.literal('text'),
-        }),
-      )
-      .min(1),
-  })
-  .transform((val, ctx) => {
-    try {
-      const parsed = JSON.parse(val.content[0].text);
-      const innerSchema = z.object({ content: z.string().optional() });
-      const validationResult = innerSchema.safeParse(parsed);
-      if (!validationResult.success) {
-        validationResult.error.issues.forEach((issue) => ctx.addIssue(issue));
-        return z.NEVER;
-      }
-      return validationResult.data;
-    } catch (_) {
-      ctx.addIssue({
-        code: z.ZodIssueCode.custom,
-        message: 'Invalid JSON in text content',
-      });
-      return z.NEVER;
-    }
-  });
-
-export type DiffUpdateResult =
-  | {
-      status: 'accepted';
-      content?: string;
-    }
-  | {
-      status: 'rejected';
-      content: undefined;
-    };
-
 type IdeContextSubscriber = (ideContext?: IdeContext) => void;
 
 export class IdeContextStore {
diff --git a/packages/core/src/ide/types.ts b/packages/core/src/ide/types.ts
index 69310eea65..f94132db59 100644
--- a/packages/core/src/ide/types.ts
+++ b/packages/core/src/ide/types.ts
@@ -63,8 +63,86 @@ export const IdeContextSchema = z.object({
 });
 export type IdeContext = z.infer<typeof IdeContextSchema>;
 
+/**
+ * A notification that the IDE context has been updated.
+ */
 export const IdeContextNotificationSchema = z.object({
   jsonrpc: z.literal('2.0'),
   method: z.literal('ide/contextUpdate'),
   params: IdeContextSchema,
 });
+
+/**
+ * A notification that a diff has been accepted in the IDE.
+ */
+export const IdeDiffAcceptedNotificationSchema = z.object({
+  jsonrpc: z.literal('2.0'),
+  method: z.literal('ide/diffAccepted'),
+  params: z.object({
+    /**
+     * The absolute path to the file that was diffed.
+     */
+    filePath: z.string(),
+    /**
+     * The full content of the file after the diff was accepted, which includes any manual edits the user may have made.
+     */
+    content: z.string(),
+  }),
+});
+
+/**
+ * A notification that a diff has been rejected in the IDE.
+ */
+export const IdeDiffRejectedNotificationSchema = z.object({
+  jsonrpc: z.literal('2.0'),
+  method: z.literal('ide/diffRejected'),
+  params: z.object({
+    /**
+     * The absolute path to the file that was diffed.
+     */
+    filePath: z.string(),
+  }),
+});
+
+/**
+ * This is defineded for backwards compatability only. Newer extension versions
+ * will only send IdeDiffRejectedNotificationSchema.
+ *
+ * A notification that a diff has been closed in the IDE.
+ */
+export const IdeDiffClosedNotificationSchema = z.object({
+  jsonrpc: z.literal('2.0'),
+  method: z.literal('ide/diffClosed'),
+  params: z.object({
+    filePath: z.string(),
+    content: z.string().optional(),
+  }),
+});
+
+/**
+ * The request to open a diff view in the IDE.
+ */
+export const OpenDiffRequestSchema = z.object({
+  /**
+   * The absolute path to the file to be diffed.
+   */
+  filePath: z.string(),
+  /**
+   * The proposed new content for the file.
+   */
+  newContent: z.string(),
+});
+
+/**
+ * The request to close a diff view in the IDE.
+ */
+export const CloseDiffRequestSchema = z.object({
+  /**
+   * The absolute path to the file to be diffed.
+   */
+  filePath: z.string(),
+  /**
+   * @deprecated
+   */
+  suppressNotification: z.boolean().optional(),
+});
diff --git a/packages/core/src/tools/tools.ts b/packages/core/src/tools/tools.ts
index 6029b9f8d2..5c51dba755 100644
--- a/packages/core/src/tools/tools.ts
+++ b/packages/core/src/tools/tools.ts
@@ -6,7 +6,7 @@
 
 import type { FunctionDeclaration, PartListUnion } from '@google/genai';
 import { ToolErrorType } from './tool-error.js';
-import type { DiffUpdateResult } from '../ide/ideContext.js';
+import type { DiffUpdateResult } from '../ide/ide-client.js';
 import type { ShellExecutionConfig } from '../services/shellExecutionService.js';
 import { SchemaValidator } from '../utils/schemaValidator.js';
 import type { AnsiOutput } from '../utils/terminalSerializer.js';
diff --git a/packages/core/src/tools/write-file.test.ts b/packages/core/src/tools/write-file.test.ts
index adb6ebf751..5693978971 100644
--- a/packages/core/src/tools/write-file.test.ts
+++ b/packages/core/src/tools/write-file.test.ts
@@ -33,8 +33,8 @@ import {
 } from '../utils/editCorrector.js';
 import { createMockWorkspaceContext } from '../test-utils/mockWorkspaceContext.js';
 import { StandardFileSystemService } from '../services/fileSystemService.js';
+import type { DiffUpdateResult } from '../ide/ide-client.js';
 import { IdeClient } from '../ide/ide-client.js';
-import type { DiffUpdateResult } from '../ide/ideContext.js';
 
 const rootDir = path.resolve(os.tmpdir(), 'gemini-cli-test-root');
 
diff --git a/packages/vscode-ide-companion/src/ide-server.ts b/packages/vscode-ide-companion/src/ide-server.ts
index 32d56a893a..fe86b20f5d 100644
--- a/packages/vscode-ide-companion/src/ide-server.ts
+++ b/packages/vscode-ide-companion/src/ide-server.ts
@@ -5,7 +5,11 @@
  */
 
 import * as vscode from 'vscode';
-import { IdeContextNotificationSchema } from '@google/gemini-cli-core';
+import {
+  CloseDiffRequestSchema,
+  IdeContextNotificationSchema,
+  OpenDiffRequestSchema,
+} from '@google/gemini-cli-core';
 import { isInitializeRequest } from '@modelcontextprotocol/sdk/types.js';
 import { McpServer } from '@modelcontextprotocol/sdk/server/mcp.js';
 import { StreamableHTTPServerTransport } from '@modelcontextprotocol/sdk/server/streamableHttp.js';
@@ -15,7 +19,7 @@ import { type Server as HTTPServer } from 'node:http';
 import * as path from 'node:path';
 import * as fs from 'node:fs/promises';
 import * as os from 'node:os';
-import { z } from 'zod';
+import type { z } from 'zod';
 import type { DiffManager } from './diff-manager.js';
 import { OpenFilesManager } from './open-files-manager.js';
 
@@ -339,46 +343,23 @@ const createMcpServer = (diffManager: DiffManager) => {
     {
       description:
         '(IDE Tool) Open a diff view to create or modify a file. Returns a notification once the diff has been accepted or rejcted.',
-      inputSchema: z.object({
-        filePath: z.string(),
-        // TODO(chrstn): determine if this should be required or not.
-        newContent: z.string().optional(),
-      }).shape,
+      inputSchema: OpenDiffRequestSchema.shape,
     },
-    async ({
-      filePath,
-      newContent,
-    }: {
-      filePath: string;
-      newContent?: string;
-    }) => {
-      await diffManager.showDiff(filePath, newContent ?? '');
-      return {
-        content: [
-          {
-            type: 'text',
-            text: `Showing diff for ${filePath}`,
-          },
-        ],
-      };
+    async ({ filePath, newContent }: z.infer<typeof OpenDiffRequestSchema>) => {
+      await diffManager.showDiff(filePath, newContent);
+      return { content: [] };
     },
   );
   server.registerTool(
     'closeDiff',
     {
       description: '(IDE Tool) Close an open diff view for a specific file.',
-      inputSchema: z.object({
-        filePath: z.string(),
-        suppressNotification: z.boolean().optional(),
-      }).shape,
+      inputSchema: CloseDiffRequestSchema.shape,
     },
     async ({
       filePath,
       suppressNotification,
-    }: {
-      filePath: string;
-      suppressNotification?: boolean;
-    }) => {
+    }: z.infer<typeof CloseDiffRequestSchema>) => {
       const content = await diffManager.closeDiff(
         filePath,
         suppressNotification,