diff --git a/docs/connected-hosts.md b/docs/connected-hosts.md
index f30e81dca4..b4b99f6616 100644
--- a/docs/connected-hosts.md
+++ b/docs/connected-hosts.md
@@ -25,6 +25,7 @@ permissions closes existing routes. A routed API cannot select a second hop.
 A producer that registers a host through a routed API is qualified on B as
 `route:<B principal>:<A serverId>:<A producer>`, with each component percent-encoded. This namespace belongs to the authenticated link
 principal. An ordinary direct B consumer does not become that producer by supplying a source key.
+The optional `server_info.sourceId` reports this producer identity for source-owner controls; it does not describe the authenticated admission principal.
 Trusted server plugins retain the authority of their runtime; they are not sandboxed by this feature.
 
 ## Connections and recovery
diff --git a/packages/app/e2e/support/helpers/connected-hosts.ts b/packages/app/e2e/support/helpers/connected-hosts.ts
index d57a5a0498..70c288e4c4 100644
--- a/packages/app/e2e/support/helpers/connected-hosts.ts
+++ b/packages/app/e2e/support/helpers/connected-hosts.ts
@@ -28,6 +28,9 @@ export async function correctConnection(page: Page, value: string) {
   await saveConnectedHost(page);
 }
 export async function inspectConnectedHost(page: Page, label: string) {
+  await expect(
+    page.getByText(/^(connecting|offline|error|online|disabled) · (Enabled|Disabled) · User$/),
+  ).toBeVisible();
   await page.getByRole("button", { name: `Details for ${label}`, exact: true }).click();
   await expect(page.getByText("Connected host details", { exact: true })).toBeVisible();
 }
diff --git a/packages/app/src/connected-hosts/index.tsx b/packages/app/src/connected-hosts/index.tsx
index 2dbdff5e8d..e1966f1508 100644
--- a/packages/app/src/connected-hosts/index.tsx
+++ b/packages/app/src/connected-hosts/index.tsx
@@ -85,7 +85,7 @@ function ConnectedHosts({ client, connected }: { client: DaemonClient; connected
           model={model}
           canManage={canManage}
           manageSources={info?.permissions?.includes("access.manage") === true}
-          sourceId={info?.principalId}
+          sourceId={info?.sourceId}
           pending={state.pending !== null}
         />
       ) : null}
@@ -151,7 +151,7 @@ function HostRow({
   return (
     <SettingsRow
       label={host.label ?? host.serverId ?? host.registrationId}
-      hint={`${host.status} · ${host.enabled ? "Enabled" : "Disabled"} · ${host.source.id}/${host.source.key}`}
+      hint={`${host.status} · ${host.enabled ? "Enabled" : "Disabled"} · ${sourceLabel(host.source.id)}`}
     >
       <View style={styles.actions}>
         <Button
@@ -180,7 +180,9 @@ function HostDetails({ host }: { host: HostSummary }) {
       <SettingsRow label="Connection" hint={host.targetDescription} />
       <SettingsRow label="Metadata" hint={JSON.stringify(host.metadata)} />
       <SettingsRow label="Status" hint={host.status} />
-      <SettingsRow label="Source" hint={`${host.source.id}/${host.source.key}`} />
+      <SettingsRow label="Source" hint={sourceLabel(host.source.id)} />
+      <SettingsRow label="Source identity" hint={host.source.id} />
+      <SettingsRow label="Source key" hint={host.source.key} />
       <SettingsRow label="Last online" hint={host.lastOnlineAt ?? "Never"} />
       <SettingsRow label="Next retry" hint={host.nextRetryAt ?? "None scheduled"} />
       {host.error ? <SettingsRow label={host.error.code} error={host.error.message} /> : null}
@@ -293,3 +295,21 @@ const styles = StyleSheet.create((theme) => ({
   section: { gap: theme.spacing[3] },
   actions: { flexDirection: "row", flexWrap: "wrap", gap: theme.spacing[2] },
 }));
+
+function sourceLabel(sourceId: string): string {
+  if (sourceId === "owner") return "User";
+  if (sourceId.startsWith("plugin:")) return `Plugin: ${sourceId.slice("plugin:".length)}`;
+  if (sourceId.startsWith("route:")) {
+    const components = sourceId.split(":");
+    let producer: string;
+    try {
+      producer = decodeURIComponent(components[3] ?? "");
+    } catch {
+      return "User (via host)";
+    }
+    return producer.startsWith("plugin:")
+      ? `Plugin: ${producer.slice("plugin:".length)} (via host)`
+      : "User (via host)";
+  }
+  return "User";
+}
diff --git a/packages/cli/src/utils/client.ts b/packages/cli/src/utils/client.ts
index 30714e0a31..27d1a4dbcb 100644
--- a/packages/cli/src/utils/client.ts
+++ b/packages/cli/src/utils/client.ts
@@ -42,15 +42,15 @@ export function buildDaemonConnectionCommandError(options: ConnectOptions & { er
   if (error && typeof error === "object" && "message" in error) message = String(error.message);
   if (options.target.kind === "endpoint")
     message = message.replaceAll(options.target.host, describeDaemonTarget(options.target));
-  if (message.startsWith("Cannot connect to daemon at "))
-    return error as { code: string; message: string; details: string };
   let code = "DAEMON_UNREACHABLE";
   if (typeof error === "object" && error !== null && "code" in error) code = String(error.code);
   else if (message === "Password required") code = "AUTH_REQUIRED";
   else if (message === "Incorrect password") code = "AUTH_FAILED";
   return {
     code,
-    message: `Cannot connect to daemon at ${describeDaemonTarget(options.target)}: ${message}`,
+    message: message.startsWith("Cannot connect to daemon at ")
+      ? message
+      : `Cannot connect to daemon at ${describeDaemonTarget(options.target)}: ${message}`,
     details: describeConnectionRemedy(code, options.target),
   };
 }
diff --git a/packages/cli/src/utils/daemon-target.test.ts b/packages/cli/src/utils/daemon-target.test.ts
index fc989ab476..77b297c493 100644
--- a/packages/cli/src/utils/daemon-target.test.ts
+++ b/packages/cli/src/utils/daemon-target.test.ts
@@ -1,6 +1,10 @@
 import { test, expect } from "vitest";
 import { selectDaemonTarget, describeDaemonTarget } from "./daemon-target.js";
-import { resolveDaemonCredential, resolveClientPaseoHome } from "./client.js";
+import {
+  resolveDaemonCredential,
+  resolveClientPaseoHome,
+  buildDaemonConnectionCommandError,
+} from "./client.js";
 import { mkdtemp, rm, writeFile } from "node:fs/promises";
 import { join } from "node:path";
 import { tmpdir } from "node:os";
@@ -44,6 +48,18 @@ test("endpoint descriptions redact pairing material and credentials", () => {
   ).not.toContain("private");
 });
 
+test("malformed endpoint diagnostics never expose the supplied credential", () => {
+  const target = { kind: "endpoint" as const, host: "alice:example-secret@localhost:6767" };
+  expect(describeDaemonTarget(target)).not.toContain("example-secret");
+  for (const message of [
+    `Invalid connection ${target.host}`,
+    `Cannot connect to daemon at ${target.host}`,
+  ]) {
+    const diagnostic = buildDaemonConnectionCommandError({ target, error: new Error(message) });
+    expect(JSON.stringify(diagnostic)).not.toContain("example-secret");
+  }
+});
+
 test("CLI selects an explicit password before a matching local credential and never sends the latter remotely", async () => {
   const home = await mkdtemp(join(tmpdir(), "paseo-cli-credential-"));
   const previousPassword = process.env.PASEO_PASSWORD;
diff --git a/packages/cli/src/utils/daemon-target.ts b/packages/cli/src/utils/daemon-target.ts
index cfe8db8a15..50b49353b6 100644
--- a/packages/cli/src/utils/daemon-target.ts
+++ b/packages/cli/src/utils/daemon-target.ts
@@ -1,3 +1,4 @@
+import { parseHostTarget } from "@getpaseo/protocol/host-target";
 import { resolvePaseoHome } from "@getpaseo/server/daemon-control";
 
 export type DaemonTarget = { kind: "instance"; home: string } | { kind: "endpoint"; host: string };
@@ -39,13 +40,8 @@ export function selectDaemonTarget(
 export function describeDaemonTarget(target: DaemonTarget): string {
   if (target.kind === "instance") return `home ${target.home}`;
   try {
-    const url = new URL(target.host);
-    if (url.password) url.password = "REDACTED";
-    for (const key of url.searchParams.keys())
-      if (/password|token|secret/i.test(key)) url.searchParams.set(key, "REDACTED");
-    if (url.hash) url.hash = "REDACTED";
-    return url.toString();
+    return parseHostTarget(target.host).description;
   } catch {
-    return target.host.replace(/([?&](?:password|token|secret)=)[^&]*/gi, "$1REDACTED");
+    return "<invalid endpoint>";
   }
 }
diff --git a/packages/protocol/src/host-target.test.ts b/packages/protocol/src/host-target.test.ts
index 27544248a4..df0127e573 100644
--- a/packages/protocol/src/host-target.test.ts
+++ b/packages/protocol/src/host-target.test.ts
@@ -20,7 +20,7 @@ test("SSH daemon credentials are separate from SSH authentication and excluded f
     kind: "ssh",
     ssh: { host: "deploy@build-box", sshPort: 2222, daemonPort: 7777 },
     password: "secret",
-    description: "ssh://deploy@build-box:2222 (daemon port 7777)",
+    description: "ssh://build-box:2222 (daemon port 7777)",
   });
 });
 test.each([
@@ -31,6 +31,46 @@ test.each([
   "unix://",
   "tcp://host:0",
   "C:\\Users\\socket",
+  "alice:example-secret@localhost:6767",
+  "not-a-scheme://localhost:6767",
+  "localhost/path:6767",
+  "localhost?password=example-secret:6767",
+  "localhost#example-secret:6767",
+  "tcp://localhost/path:6767",
+  "relay://alice:example-secret@localhost:6767/server?key=private",
 ])("invalid target syntax is rejected without echoing %s", (connection) => {
   expect(() => parseHostTarget(connection)).toThrow("Invalid host connection");
 });
+
+test("SSH aliases and DNS names retain their connection semantics", () => {
+  expect(parseHostTarget("build-box.example.:6767").description).toBe(
+    "tcp://build-box.example.:6767",
+  );
+  expect(parseHostTarget("ssh://deploy@my_ssh-alias")).toMatchObject({
+    kind: "ssh",
+    ssh: { host: "deploy@my_ssh-alias" },
+  });
+});
+
+test("encoded SSH usernames cannot leak into the target description", () => {
+  expect(parseHostTarget("ssh://alice%3Aexample-secret@my-alias").description).toBe(
+    "ssh://my-alias (daemon port 6767)",
+  );
+});
+
+test("pairing offers cannot publish a credential-bearing or malformed relay authority", () => {
+  for (const endpoint of [
+    "alice:example-secret@localhost:6767",
+    "localhost/path:6767",
+    "localhost?token=example-secret:6767",
+  ]) {
+    const offer = {
+      v: 2,
+      serverId: "srv_test",
+      daemonPublicKeyB64: "private-key",
+      relay: { endpoint, useTls: false },
+    };
+    const url = `https://app.paseo.sh/#offer=${Buffer.from(JSON.stringify(offer)).toString("base64url")}`;
+    expect(() => parseHostTarget(url)).toThrow("Invalid host connection");
+  }
+});
diff --git a/packages/protocol/src/host-target.ts b/packages/protocol/src/host-target.ts
index b3566ab583..498b20b1e7 100644
--- a/packages/protocol/src/host-target.ts
+++ b/packages/protocol/src/host-target.ts
@@ -64,7 +64,7 @@ function parse(input: string): HostTarget {
   }
   if (input.startsWith("tcp://")) return tcpTarget(input);
   if (/^wss?:\/\//.test(input)) return websocketTarget(input);
-  const endpoint = normalizeHostPort(/^\d+$/.test(input) ? `127.0.0.1:${input}` : input);
+  const endpoint = validatedEndpoint(/^\d+$/.test(input) ? `127.0.0.1:${input}` : input);
   return {
     kind: "socket",
     url: buildDaemonWebSocketUrl(endpoint, { useTls: false }),
@@ -72,23 +72,27 @@ function parse(input: string): HostTarget {
   };
 }
 function relayTarget(offer: ConnectionOffer, password?: string): HostTarget {
+  const endpoint = validatedEndpoint(offer.relay.endpoint);
   return {
     kind: "socket",
     url: buildRelayWebSocketUrl({
-      endpoint: offer.relay.endpoint,
+      endpoint,
       serverId: offer.serverId,
       role: "client",
       useTls: offer.relay.useTls ?? shouldUseTlsForDefaultHostedRelay(offer.relay.endpoint),
     }),
     offer,
     password,
-    description: `relay://${offer.relay.endpoint}/${offer.serverId}`,
+    description: `relay://${endpoint}/${encodeURIComponent(offer.serverId)}`,
   };
 }
 
 function tcpTarget(input: string): HostTarget {
+  const uri = new URL(input);
+  if (uri.pathname && uri.pathname !== "/") throw new Error("Unexpected TCP path");
+  if (uri.hash) throw new Error("Unexpected TCP fragment");
   const parts = parseConnectionUri(input);
-  const endpoint = normalizeHostPort(
+  const endpoint = validatedEndpoint(
     `${parts.isIpv6 ? `[${parts.host}]` : parts.host}:${parts.port}`,
   );
   return {
@@ -118,6 +122,16 @@ function sshTarget(input: string): HostTarget {
     kind: "ssh",
     ssh,
     ...(password ? { password } : {}),
-    description: `ssh://${ssh.host}${ssh.sshPort ? `:${ssh.sshPort}` : ""} (daemon port ${ssh.daemonPort})`,
+    description: `ssh://${uri.hostname}${ssh.sshPort ? `:${ssh.sshPort}` : ""} (daemon port ${ssh.daemonPort})`,
   };
 }
+
+/** A bare endpoint has exactly one authority; URL syntax must use an explicit supported scheme. */
+function validatedEndpoint(input: string): string {
+  if (!/^(?:[a-zA-Z0-9_][a-zA-Z0-9_.-]*|\[[0-9a-fA-F:.]+\]):[0-9]{1,5}$/.test(input))
+    throw new Error("Invalid endpoint");
+  // URL parsing validates IPv6 literals and rejects invalid authority/port encodings.
+  const url = new URL(`http://${input}`);
+  if (!url.hostname) throw new Error("Missing endpoint host");
+  return normalizeHostPort(input);
+}
diff --git a/packages/protocol/src/messages.ts b/packages/protocol/src/messages.ts
index 736bcc63ca..4d3df09c8c 100644
--- a/packages/protocol/src/messages.ts
+++ b/packages/protocol/src/messages.ts
@@ -902,8 +902,10 @@ export type RecentProviderSessionDescriptorPayload = z.infer<
   typeof RecentProviderSessionDescriptorPayloadSchema
 >;
 
-// =====================================================================// Session Inbound Messages (Session receives these)
-// =====================================================================
+// ============================================================================
+// Session Inbound Messages (Session receives these)
+// ============================================================================
+
 export const VoiceAudioChunkMessageSchema = z.object({
   type: z.literal("voice_audio_chunk"),
   audio: z.string(), // base64 encoded
@@ -1229,8 +1231,10 @@ export const SendAgentMessageSchema = z.object({
   attachments: AgentAttachmentsSchema,
 });
 
-// =====================================================================// Agent RPCs (requestId-correlated)
-// =====================================================================
+// ============================================================================
+// Agent RPCs (requestId-correlated)
+// ============================================================================
+
 const DirectorySyncRequestSchema = z.object({
   generation: z.string().optional(),
   afterSeq: z.number().int().nonnegative().optional(),
@@ -1654,8 +1658,10 @@ export const WriteProjectConfigRequestMessageSchema = z.object({
   expectedRevision: PaseoConfigRevisionSchema.nullable(),
 });
 
-// =====================================================================// Dictation Streaming (lossless, resumable)
-// =====================================================================
+// ============================================================================
+// Dictation Streaming (lossless, resumable)
+// ============================================================================
+
 export const DictationStreamStartMessageSchema = z.object({
   type: z.literal("dictation_stream_start"),
   dictationId: z.string(),
@@ -2952,8 +2958,10 @@ export const PushUnregisterResponseSchema = z.object({
   }),
 });
 
-// =====================================================================// Terminal Messages
-// =====================================================================
+// ============================================================================
+// Terminal Messages
+// ============================================================================
+
 export const ListTerminalsRequestSchema = z.object({
   type: z.literal("list_terminals_request"),
   cwd: z.string().optional(),
@@ -3436,8 +3444,10 @@ export const SessionInboundMessageSchema = z.discriminatedUnion("type", [
 
 export type SessionInboundMessage = z.infer<typeof SessionInboundMessageSchema>;
 
-// =====================================================================// Session Outbound Messages (Session emits these)
-// =====================================================================
+// ============================================================================
+// Session Outbound Messages (Session emits these)
+// ============================================================================
+
 export const ActivityLogPayloadSchema = z.object({
   subscriptionId: z.string().optional(),
   id: z.string(),
@@ -3592,8 +3602,9 @@ export const ServerInfoStatusPayloadSchema = z
     serverId: z.string().trim().min(1),
     hostname: ServerInfoHostnameSchema.optional(),
     version: ServerInfoVersionSchema.optional(),
+    // Authenticated producer for host registration ownership, separate from admission authority.
+    sourceId: z.string().optional(),
     // COMPAT(sessionPermissions): optional while clients support older daemons.
-    principalId: z.string().optional(),
     permissions: z.array(DaemonPermissionSchema).optional(),
     // COMPAT(desktopManaged): added in v0.1.X, remove optional parsing after 2027-01-16.
     desktopManaged: z.boolean().optional(),
@@ -6414,8 +6425,10 @@ export const ListCommandsResponseSchema = z.object({
   }),
 });
 
-// =====================================================================// Terminal Outbound Messages
-// =====================================================================
+// ============================================================================
+// Terminal Outbound Messages
+// ============================================================================
+
 const TerminalInfoSchema = z.object({
   id: z.string(),
   name: z.string(),
@@ -7580,8 +7593,10 @@ export type CaptureTerminalRequest = z.infer<typeof CaptureTerminalRequestSchema
 export type CaptureTerminalResponse = z.infer<typeof CaptureTerminalResponseSchema>;
 export type TerminalStreamExit = z.infer<typeof TerminalStreamExitSchema>;
 
-// =====================================================================// WebSocket Level Messages (wraps session messages)
-// =====================================================================
+// ============================================================================
+// WebSocket Level Messages (wraps session messages)
+// ============================================================================
+
 // WebSocket-only messages (not session messages)
 export const WSPingMessageSchema = z.object({
   type: z.literal("ping"),
@@ -7671,8 +7686,10 @@ export type WSInboundMessage = z.infer<typeof WSInboundMessageSchema>;
 export type WSOutboundMessage = z.infer<typeof WSOutboundMessageSchema>;
 export type WSHelloMessage = z.infer<typeof WSHelloMessageSchema>;
 
-// =====================================================================// Helper functions for message conversion
-// =====================================================================
+// ============================================================================
+// Helper functions for message conversion
+// ============================================================================
+
 /**
  * Extract session message from WebSocket message
  * Returns null if message should be handled at WS level only
diff --git a/packages/server/package.json b/packages/server/package.json
index 7f00ae3e99..6d957847ab 100644
--- a/packages/server/package.json
+++ b/packages/server/package.json
@@ -89,7 +89,7 @@
     "speech:transcribe:local": "tsx scripts/transcribe-local-wav.ts",
     "test": "npm run test:unit && npm run test:integration",
     "test:unit": "vitest run --fileParallelism --exclude \"**/*.e2e.test.ts\"",
-    "test:integration": "vitest run --maxWorkers=1 src/server/git-filename-diffs.e2e.test.ts src/server/daemon-e2e/checkout-diff-content.e2e.test.ts src/server/daemon-e2e/filesystem.e2e.test.ts src/server/daemon-e2e/file-download.e2e.test.ts src/server/daemon-e2e/cli-logs-follow.e2e.test.ts src/server/creation/creation.e2e.test.ts src/server/daemon-e2e/terminal-workspace-sdk.e2e.test.ts src/server/workspace-create-worktree-source.e2e.test.ts src/server/daemon-e2e/models.e2e.test.ts src/server/daemon-e2e/live-preferences.e2e.test.ts src/server/daemon-e2e/oversized-message.e2e.test.ts src/server/agent/model-catalog.e2e.test.ts src/server/plugins/plugin-paseo-api.e2e.test.ts src/server/connected-hosts/hosts.e2e.test.ts && vitest run --maxWorkers=1 src/server/daemon-e2e/git-operations.e2e.test.ts src/server/session.create-agent-worktree-autoarchive.e2e.test.ts src/server/agent/providers/opencode-bridge.local.e2e.test.ts src/server/daemon-e2e/relay-transport.e2e.test.ts -t \"merges into|creates a worktree and auto-archives both|versioned runtime|oversized attachments\"",
+    "test:integration": "vitest run --maxWorkers=1 src/server/git-filename-diffs.e2e.test.ts src/server/daemon-e2e/checkout-diff-content.e2e.test.ts src/server/daemon-e2e/filesystem.e2e.test.ts src/server/daemon-e2e/file-download.e2e.test.ts src/server/daemon-e2e/cli-logs-follow.e2e.test.ts src/server/creation/creation.e2e.test.ts src/server/daemon-e2e/terminal-workspace-sdk.e2e.test.ts src/server/workspace-create-worktree-source.e2e.test.ts src/server/daemon-e2e/models.e2e.test.ts src/server/daemon-e2e/live-preferences.e2e.test.ts src/server/daemon-e2e/oversized-message.e2e.test.ts src/server/agent/model-catalog.e2e.test.ts src/server/plugins/plugin-paseo-api.e2e.test.ts src/server/connected-hosts/hosts.e2e.test.ts && vitest run --maxWorkers=1 src/server/daemon-e2e/git-operations.e2e.test.ts src/server/session.create-agent-worktree-autoarchive.e2e.test.ts src/server/agent/providers/opencode-bridge.local.e2e.test.ts src/server/daemon-e2e/relay-transport.e2e.test.ts -t \"merges into|creates a worktree and auto-archives both|versioned runtime|oversized attachments|connected hosts\"",
     "test:hub-cli-contract": "vitest run --maxWorkers=1 src/server/hub/hub-cli-contract.test.ts",
     "test:integration:all": "npm run test:e2e",
     "test:integration:real": "vitest run real.e2e.test.ts",
diff --git a/packages/server/src/server/connected-hosts/hosts.e2e.test.ts b/packages/server/src/server/connected-hosts/hosts.e2e.test.ts
index 0c91b42506..e97efff9a5 100644
--- a/packages/server/src/server/connected-hosts/hosts.e2e.test.ts
+++ b/packages/server/src/server/connected-hosts/hosts.e2e.test.ts
@@ -19,6 +19,8 @@ async function api(instance: TestPaseoDaemon) {
     reconnect: { enabled: false },
   });
   await client.connect();
+  expect(client.getLastServerInfoMessage()).toMatchObject({ sourceId: "owner" });
+  expect(client.getLastServerInfoMessage()).not.toHaveProperty("principalId");
   const paseo = createPaseoApi(client);
   cleanup.push(async () => {
     await paseo.dispose();
@@ -46,6 +48,16 @@ test("SDK saves unreachable hosts, rejects syntax and preserves source identity
   await expect(paseo.hosts.add({ connection: "ssh://-bad" })).rejects.toMatchObject({
     code: "invalid_connection",
   });
+  for (const connection of [
+    "alice:example-secret@localhost:6767",
+    "not-a-scheme://localhost:6767",
+    "localhost/path:6767",
+  ]) {
+    const failure = await paseo.hosts.add({ connection }).catch((error: unknown) => error);
+    expect(failure).toMatchObject({ code: "invalid_connection" });
+    expect(String(failure)).not.toContain("example-secret");
+    expect((await paseo.hosts.list()).hosts).toEqual([]);
+  }
   const saved = await paseo.hosts.add({
     connection: "tcp://127.0.0.1:1?password=private-secret",
     label: "Unavailable",
@@ -241,6 +253,14 @@ class RoutePeer {
           ).length,
       )
       .toBe(1);
+    const info = peer.messages.find(
+      (message) => message.type === "status" && message.payload.status === "server_info",
+    );
+    if (info?.type !== "status") throw new Error("Missing routed server info");
+    expect(info.payload).toMatchObject({
+      sourceId: `route:owner:${origin.getLastServerInfoMessage()!.serverId}:owner`,
+    });
+    expect(info.payload).not.toHaveProperty("principalId");
     return peer;
   }
   send(message: SessionInboundMessage) {
@@ -436,6 +456,13 @@ test("CLI host commands manage the selected daemon and emit secret-free structur
         )
       ).stdout,
     );
+  const malformed = await cli("add", "alice:example-secret@localhost:6767").catch(
+    (error: unknown) => error,
+  );
+  expect(malformed).toHaveProperty("stderr");
+  expect((malformed as { stderr: string }).stderr).toContain("invalid_connection");
+  expect((malformed as { stderr: string }).stderr).not.toContain("example-secret");
+  expect(await cli("ls")).toEqual([]);
   const saved = await cli(
     "add",
     "tcp://127.0.0.1:1?password=cli-secret",
diff --git a/packages/server/src/server/daemon-e2e/relay-transport.e2e.test.ts b/packages/server/src/server/daemon-e2e/relay-transport.e2e.test.ts
index 4da97d6eba..4a21810ddf 100644
--- a/packages/server/src/server/daemon-e2e/relay-transport.e2e.test.ts
+++ b/packages/server/src/server/daemon-e2e/relay-transport.e2e.test.ts
@@ -1,3 +1,14 @@
+import { createPaseoApi, type PaseoApi } from "@getpaseo/client";
+import { createHostClient } from "@getpaseo/client/node";
+import { hashSync } from "bcryptjs";
+import { once } from "node:events";
+import {
+  decodeTerminalStreamFrame,
+  encodeTerminalStreamFrame,
+  TerminalStreamOpcode,
+} from "@getpaseo/protocol/binary-frames/index";
+import type { DaemonClient as HostClient } from "@getpaseo/client/internal/daemon-client";
+import type { SessionOutboundMessage } from "@getpaseo/protocol/messages";
 import { describe, expect, test } from "vitest";
 import { withTimeout } from "../../utils/promise-timeout.js";
 import { DaemonClient } from "../test-utils/daemon-client.js";
@@ -194,9 +205,9 @@ async function waitForCapturedLog(
   let relayProcess: ChildProcess | null = null;
   let relayStdoutLines: string[] = [];
 
-  const startRelay = async (options: { useLocalRelay?: boolean } = {}) => {
+  const startRelay = async (options: { useLocalRelay?: boolean; port?: number } = {}) => {
     relayStdoutLines = [];
-    relayPort = await getAvailablePort();
+    relayPort = options.port ?? (await getAvailablePort());
     const relayDir = path.resolve(process.cwd(), "../relay");
     const relayArgs = [
       "wrangler",
@@ -255,10 +266,142 @@ async function waitForCapturedLog(
 
   const stopRelay = async () => {
     if (!relayProcess) return;
-    relayProcess.kill("SIGTERM");
+    const process = relayProcess;
     relayProcess = null;
+    const exited = once(process, "exit");
+    process.kill("SIGTERM");
+    await withTimeout(exited, 10000, "Local relay did not stop");
   };
 
+  test("connected hosts route RPC and binary traffic through local E2EE relay and recover scopes", async () => {
+    let a: Awaited<ReturnType<typeof createTestPaseoDaemon>> | undefined;
+    let b: Awaited<ReturnType<typeof createTestPaseoDaemon>> | undefined;
+    let origin: ReturnType<typeof createHostClient> | undefined;
+    let api: PaseoApi | undefined;
+    let remote: PaseoApi | undefined;
+    let sibling: PaseoApi | undefined;
+    let terminalRoute: Awaited<ReturnType<typeof openConnectedHostTerminal>> | undefined;
+    try {
+      await startRelay({ useLocalRelay: true });
+      const port = relayPort;
+      b = await createTestPaseoDaemon({
+        relayEnabled: true,
+        relayEndpoint: `127.0.0.1:${port}`,
+        relayUseTls: false,
+        relayPublicUseTls: false,
+        auth: { password: hashSync("relay-password", 4) },
+      });
+      a = await createTestPaseoDaemon();
+      origin = createHostClient(`127.0.0.1:${a.port}`, { clientId: crypto.randomUUID() });
+      await origin.connect();
+      api = createPaseoApi(origin);
+      const offerUrl = await getPairingOfferUrl({
+        paseoHome: b.paseoHome,
+        relayEnabled: true,
+        relayEndpoint: b.config.relayEndpoint,
+      });
+      const { serverId, daemonPublicKeyB64 } = decodeOfferFromFragmentUrl(offerUrl);
+      const connection = new URL(`relay://127.0.0.1:${port}/${serverId}`);
+      connection.searchParams.set("key", daemonPublicKeyB64);
+      connection.searchParams.set("password", "wrong-password");
+      const saved = await api.hosts.add({ connection: connection.toString() });
+      await expect
+        .poll(async () => (await api!.hosts.list()).hosts[0]?.error?.code, { timeout: 20000 })
+        .toBe("authentication_failed");
+      expect(JSON.stringify(await api.hosts.list())).not.toMatch(/wrong-password|relay-password/);
+      connection.searchParams.set("password", "relay-password");
+      await api.hosts.update(saved.registrationId, { connection: connection.toString() });
+      await expect
+        .poll(async () => (await api!.hosts.list()).hosts[0]?.status, { timeout: 20000 })
+        .toBe("online");
+      remote = await api.hosts.client(serverId);
+      sibling = await api.hosts.client(serverId);
+      expect((await remote.workspaces.list()).entries).toEqual([]);
+      const observed = await remote.workspaces.list({ subscribe: {} });
+      let snapshots = 0;
+      observed.subscription.subscribe({
+        snapshot: () => {
+          snapshots++;
+        },
+      });
+      const workspace = await remote.workspaces.create({
+        source: { kind: "directory", path: b.staticDir },
+        title: "Relayed workspace",
+      });
+      const terminal = await workspace.terminals.create({
+        command: process.execPath,
+        args: ["-e", "process.stdin.on('data', data => process.stdout.write(data))"],
+      });
+      terminalRoute = await openConnectedHostTerminal(origin, serverId, terminal.id);
+      terminalRoute.write("ENCRYPTED_BINARY_BEFORE\n");
+      await expect.poll(() => terminalRoute!.output()).toContain("ENCRYPTED_BINARY_BEFORE");
+      terminalRoute.close();
+      terminalRoute = undefined;
+      const before = snapshots;
+      await stopRelay();
+      await expect
+        .poll(
+          async () => {
+            try {
+              await remote!.workspaces.list();
+              return "online";
+            } catch (error) {
+              return (error as { code: string }).code;
+            }
+          },
+          { timeout: 15000 },
+        )
+        .toBe("host_offline");
+      await startRelay({ useLocalRelay: true, port });
+      await expect
+        .poll(
+          async () => {
+            try {
+              return (await remote!.workspaces.list()).entries.length;
+            } catch {
+              return -1;
+            }
+          },
+          { timeout: 30000 },
+        )
+        .toBe(1);
+      await expect.poll(() => snapshots, { timeout: 15000 }).toBeGreaterThan(before);
+      terminalRoute = await openConnectedHostTerminal(origin, serverId, terminal.id);
+      terminalRoute.write("ENCRYPTED_BINARY_AFTER\n");
+      await expect.poll(() => terminalRoute!.output()).toContain("ENCRYPTED_BINARY_AFTER");
+      terminalRoute.close();
+      terminalRoute = undefined;
+      await remote.dispose();
+      remote = undefined;
+      expect((await sibling.workspaces.list()).entries).toHaveLength(1);
+      await sibling.terminals.ref(terminal.id).kill();
+      await api.dispose();
+      await expect(sibling.workspaces.list()).rejects.toThrow();
+      const direct = createHostClient(`127.0.0.1:${b.port}`, {
+        clientId: crypto.randomUUID(),
+        password: "relay-password",
+        reconnect: { enabled: false },
+      });
+      try {
+        await direct.connect();
+        const directApi = createPaseoApi(direct);
+        expect((await directApi.workspaces.list()).entries).toHaveLength(1);
+        await directApi.dispose();
+      } finally {
+        await direct.close();
+      }
+    } finally {
+      terminalRoute?.close();
+      await remote?.dispose();
+      await sibling?.dispose();
+      await api?.dispose();
+      await origin?.close();
+      await a?.close();
+      await b?.close();
+      await stopRelay();
+    }
+  }, 120000);
+
   test("oversized attachments fail without disconnecting or resubmitting over the relay", async () => {
     await startRelay({ useLocalRelay: true });
     const daemon = await createTestPaseoDaemon({
@@ -932,3 +1075,73 @@ async function waitForCapturedLog(
     }
   }, 90000);
 });
+
+async function openConnectedHostTerminal(origin: HostClient, serverId: string, terminalId: string) {
+  const routeId = await origin.openHostRoute(serverId, crypto.randomUUID());
+  const messages: SessionOutboundMessage[] = [];
+  let output = "";
+  const detach = origin.subscribeRawMessages((message) => {
+    if (message.type !== "hosts.route.frame" || message.payload.subscriptionId !== routeId) return;
+    if (message.payload.binary) {
+      const frame = decodeTerminalStreamFrame(Buffer.from(message.payload.data, "base64"));
+      if (frame?.opcode === TerminalStreamOpcode.Output)
+        output += new TextDecoder().decode(frame.payload);
+    } else {
+      const frame = WSOutboundMessageSchema.parse(JSON.parse(message.payload.data));
+      if (frame.type === "session") messages.push(frame.message);
+    }
+  });
+  const close = () => {
+    detach();
+    origin.closeHostRoute(routeId);
+  };
+  try {
+    origin.sendHostFrame(
+      routeId,
+      JSON.stringify({
+        type: "hello",
+        clientId: "relay-binary",
+        clientType: "cli",
+        protocolVersion: 1,
+      }),
+      false,
+    );
+    await expect
+      .poll(() =>
+        messages.some(
+          (message) => message.type === "status" && message.payload.status === "server_info",
+        ),
+      )
+      .toBe(true);
+    origin.sendHostFrame(
+      routeId,
+      JSON.stringify({
+        type: "session",
+        message: { type: "subscribe_terminal_request", terminalId, requestId: "binary" },
+      }),
+      false,
+    );
+    await expect
+      .poll(() => messages.some((message) => message.type === "subscribe_terminal_response"))
+      .toBe(true);
+    const response = messages.find((message) => message.type === "subscribe_terminal_response");
+    if (response?.type !== "subscribe_terminal_response" || response.payload.slot == null)
+      throw new Error("Missing binary stream slot");
+    const slot = response.payload.slot;
+    return {
+      close,
+      output: () => output,
+      write: (payload: string) =>
+        origin.sendHostFrame(
+          routeId,
+          Buffer.from(
+            encodeTerminalStreamFrame({ opcode: TerminalStreamOpcode.Input, slot, payload }),
+          ).toString("base64"),
+          true,
+        ),
+    };
+  } catch (error) {
+    close();
+    throw error;
+  }
+}
diff --git a/packages/server/src/server/session.ts b/packages/server/src/server/session.ts
index 4b4d0feca6..ba517436f4 100644
--- a/packages/server/src/server/session.ts
+++ b/packages/server/src/server/session.ts
@@ -677,12 +677,12 @@ export class Session {
   isRouted(): boolean {
     return this.routed;
   }
-  getPrincipalId(): string {
-    return this.hostPrincipalId;
+  getHostSourceId(): string {
+    return this.hostSourceId;
   }
-  private hostPrincipalId: string;
+  private hostSourceId: string;
   setHostSource(sourceId: string): void {
-    this.hostPrincipalId = sourceId;
+    this.hostSourceId = sourceId;
     this.connectedHostSession?.setSource(sourceId);
   }
   setRouted(routed: boolean): void {
@@ -882,7 +882,7 @@ export class Session {
     this.appVersion = appVersion ?? null;
     this.clientCapabilities = parseClientCapabilities(clientCapabilities);
     this.sessionId = uuidv4();
-    this.hostPrincipalId = hostSource(options);
+    this.hostSourceId = hostSource(options);
     this.connectedHostSession = createHostSession(options, this);
     this.onMessage = onMessage;
     this.onMessageToSource = onMessageToSource ?? null;
diff --git a/packages/server/src/server/websocket-server.relay-reconnect.test.ts b/packages/server/src/server/websocket-server.relay-reconnect.test.ts
index 10694a6ebe..a3c821abd1 100644
--- a/packages/server/src/server/websocket-server.relay-reconnect.test.ts
+++ b/packages/server/src/server/websocket-server.relay-reconnect.test.ts
@@ -71,6 +71,18 @@ const sessionMock = vi.hoisted(() => {
     wantsSourceEvent = (source: object) => !this.delivery.isModern(source);
     getSessionId = vi.fn(() => "mock-session-id");
     getPermissions = vi.fn(() => this.args.permissions as string[]);
+    setPermissions = (permissions: string[]) => {
+      this.args.permissions = permissions;
+    };
+    private routed = false;
+    setRouted = (routed: boolean) => {
+      this.routed = routed;
+    };
+    isRouted = () => this.routed;
+    setHostSource = (sourceId: string) => {
+      this.args.sourceId = sourceId;
+    };
+    getHostSourceId = () => this.args.sourceId as string;
     allowsInbound = vi.fn(() => true);
     allowsPermission = vi.fn(() => true);
     publish = vi.fn((message: unknown) => {
@@ -473,16 +485,12 @@ function holdNextSessionMessage(session: (typeof sessionMock.instances)[number])
 function holdSessionCleanup(session: (typeof sessionMock.instances)[number]): {
   finish: () => void;
 } {
-  let finish = () => {};
-  session.cleanup.mockImplementationOnce(
-    () =>
-      new Promise<void>((resolve) => {
-        finish = resolve;
-      }),
-  );
-  return {
-    finish: () => finish(),
-  };
+  let finish!: () => void;
+  const pending = new Promise<void>((resolve) => {
+    finish = resolve;
+  });
+  session.cleanup.mockImplementationOnce(() => pending);
+  return { finish };
 }
 
 describe("relay external socket reconnect behavior", () => {
diff --git a/packages/server/src/server/websocket-server.ts b/packages/server/src/server/websocket-server.ts
index 391789ae13..d158815d3b 100644
--- a/packages/server/src/server/websocket-server.ts
+++ b/packages/server/src/server/websocket-server.ts
@@ -1846,7 +1846,7 @@ export class VoiceAssistantWebSocketServer {
       serverId: this.serverId,
       hostname: getHostName(),
       version: this.daemonVersion,
-      principalId: session.getPrincipalId(),
+      sourceId: session.getHostSourceId(),
       permissions: session.getPermissions(),
       // COMPAT(desktopManaged): added in v0.1.X, remove optional parsing after 2027-01-16.
       desktopManaged: this.daemonRuntimeConfig?.desktopManaged === true,