diff --git a/packages/cli/src/commands/daemon/set-password.ts b/packages/cli/src/commands/daemon/set-password.ts
index d572269ad1..b5a79ae65d 100644
--- a/packages/cli/src/commands/daemon/set-password.ts
+++ b/packages/cli/src/commands/daemon/set-password.ts
@@ -57,6 +57,17 @@ function createCommandError(code: string, message: string, details?: string): Co
   return { code, message, ...(details ? { details } : {}) };
 }
 
+function terminalPasswordPrompt(): PromptPassword {
+  if (!process.stdin.isTTY) {
+    throw createCommandError(
+      "PASSWORD_TTY_REQUIRED",
+      "paseo daemon set-password needs a terminal to read the password",
+      "Run it in an interactive terminal, or set PASEO_PASSWORD in the daemon's environment instead.",
+    );
+  }
+  return (message) => passwordPrompt({ message });
+}
+
 async function promptForPassword(promptPassword: PromptPassword): Promise<string> {
   const first = await promptPassword("New daemon password");
   if (isCancel(first)) {
@@ -112,7 +123,7 @@ export async function runSetPasswordCommand(
   const promptPassword =
     typeof options.promptPassword === "function"
       ? (options.promptPassword as PromptPassword)
-      : (message: string) => passwordPrompt({ message });
+      : terminalPasswordPrompt();
   const newPassword = await promptForPassword(promptPassword);
   const result = await setDaemonPasswordInConfig(newPassword, {
     home: options.daemonTarget.kind === "instance" ? options.daemonTarget.home : undefined,
diff --git a/packages/cli/tests/32-daemon-set-password.test.ts b/packages/cli/tests/32-daemon-set-password.test.ts
index 7b174e1631..7452b08f0a 100644
--- a/packages/cli/tests/32-daemon-set-password.test.ts
+++ b/packages/cli/tests/32-daemon-set-password.test.ts
@@ -6,6 +6,7 @@ import { tmpdir } from "node:os";
 import { join } from "node:path";
 import type { Command } from "commander";
 import { isBearerTokenValid } from "@getpaseo/server/auth";
+import { runLocalPaseo } from "./helpers/local-cli.ts";
 import {
   runSetPasswordCommand,
   setDaemonPasswordInConfig,
@@ -105,6 +106,27 @@ try {
     );
     console.log("✓ command refuses password mismatch\n");
   }
+
+  {
+    console.log("Test 4: piped stdin fails with a message instead of exiting silently");
+    const pipedHome = join(root, "piped");
+    await mkdir(pipedHome, { recursive: true });
+    const run = runLocalPaseo(["daemon", "set-password", "--home", pipedHome, "--json"]);
+    run.stdin.end("x\nx\n");
+    const result = await run;
+
+    assert.strictEqual(result.exitCode, 1, result.stderr);
+    const error = JSON.parse(result.stderr).error as {
+      code: string;
+      message: string;
+      details: string;
+    };
+    assert.strictEqual(error.code, "PASSWORD_TTY_REQUIRED");
+    assert.match(error.message, /needs a terminal/);
+    assert.match(error.details, /PASEO_PASSWORD/);
+    await assert.rejects(readFile(join(pipedHome, "config.json"), "utf-8"));
+    console.log("✓ piped stdin reports that a terminal is required\n");
+  }
 } finally {
   await rm(root, { recursive: true, force: true });
 }