diff --git a/packages/core/src/utils/googleQuotaErrors.test.ts b/packages/core/src/utils/googleQuotaErrors.test.ts
index fdef9beead..97cc37433b 100644
--- a/packages/core/src/utils/googleQuotaErrors.test.ts
+++ b/packages/core/src/utils/googleQuotaErrors.test.ts
@@ -107,6 +107,63 @@ describe('classifyGoogleError', () => {
     expect((result as RetryableQuotaError).retryDelayMs).toBe(9000);
   });
 
+  it('should return TerminalQuotaError for MODEL_CAPACITY_EXHAUSTED when no retry delay is specified', () => {
+    const apiError: GoogleApiError = {
+      code: 429,
+      message:
+        'No capacity available for model gemini-3.1-pro-preview on the server',
+      details: [
+        {
+          '@type': 'type.googleapis.com/google.rpc.ErrorInfo',
+          reason: 'MODEL_CAPACITY_EXHAUSTED',
+          domain: 'cloudcode-pa.googleapis.com',
+          metadata: { model: 'gemini-3.1-pro-preview' },
+        },
+      ],
+    };
+    vi.spyOn(errorParser, 'parseGoogleApiError').mockReturnValue(apiError);
+    const result = classifyGoogleError(new Error());
+    expect(result).toBeInstanceOf(TerminalQuotaError);
+  });
+
+  it('should return TerminalQuotaError for MODEL_CAPACITY_EXHAUSTED even when the domain is not a Cloud Code domain (domain-agnostic)', () => {
+    const apiError: GoogleApiError = {
+      code: 429,
+      message:
+        'No capacity available for model gemini-3.1-pro-preview on the server',
+      details: [
+        {
+          '@type': 'type.googleapis.com/google.rpc.ErrorInfo',
+          reason: 'MODEL_CAPACITY_EXHAUSTED',
+          domain: 'other.googleapis.com',
+          metadata: { model: 'gemini-3.1-pro-preview' },
+        },
+      ],
+    };
+    vi.spyOn(errorParser, 'parseGoogleApiError').mockReturnValue(apiError);
+    const result = classifyGoogleError(new Error());
+    expect(result).toBeInstanceOf(TerminalQuotaError);
+  });
+
+  it('should return TerminalQuotaError for MODEL_CAPACITY_EXCEEDED when no retry delay is specified', () => {
+    const apiError: GoogleApiError = {
+      code: 429,
+      message:
+        'No capacity available for model gemini-3.1-pro-preview on the server',
+      details: [
+        {
+          '@type': 'type.googleapis.com/google.rpc.ErrorInfo',
+          reason: 'MODEL_CAPACITY_EXCEEDED',
+          domain: 'cloudcode-pa.googleapis.com',
+          metadata: { model: 'gemini-3.1-pro-preview' },
+        },
+      ],
+    };
+    vi.spyOn(errorParser, 'parseGoogleApiError').mockReturnValue(apiError);
+    const result = classifyGoogleError(new Error());
+    expect(result).toBeInstanceOf(TerminalQuotaError);
+  });
+
   it('should return original error if code is not 429, 499 or 503', () => {
     const apiError: GoogleApiError = {
       code: 500,
diff --git a/packages/core/src/utils/googleQuotaErrors.ts b/packages/core/src/utils/googleQuotaErrors.ts
index 1efadb7772..9d656964fe 100644
--- a/packages/core/src/utils/googleQuotaErrors.ts
+++ b/packages/core/src/utils/googleQuotaErrors.ts
@@ -330,6 +330,23 @@ export function classifyGoogleError(error: unknown): unknown {
       );
     }
 
+    if (
+      errorInfo.reason === 'MODEL_CAPACITY_EXHAUSTED' ||
+      errorInfo.reason === 'MODEL_CAPACITY_EXCEEDED'
+    ) {
+      // If no server backoff delay is specified, treat capacity exhaustion as a terminal error
+      // to trigger immediate model fallback without retrying on the same exhausted model.
+      if (delaySeconds === undefined) {
+        return new TerminalQuotaError(
+          googleApiError.message,
+          googleApiError,
+          delaySeconds,
+          errorInfo.reason,
+        );
+      }
+      // Otherwise, fall through to RetryableQuotaError to honor the server's requested delay.
+    }
+
     // New Cloud Code API quota handling
     if (errorInfo.domain) {
       if (isCloudCodeDomain(errorInfo.domain)) {