diff --git a/crates/agent2/src/agent.rs b/crates/agent2/src/agent.rs
index d722162087..44d4075b89 100644
--- a/crates/agent2/src/agent.rs
+++ b/crates/agent2/src/agent.rs
@@ -166,33 +166,41 @@ impl LanguageModels {
         cx.background_spawn(async move {
             for (provider_id, provider_name, authenticate_task) in authenticate_all_providers {
                 if let Err(err) = authenticate_task.await {
-                    if matches!(err, language_model::AuthenticateError::CredentialsNotFound) {
-                        // Since we're authenticating these providers in the
-                        // background for the purposes of populating the
-                        // language selector, we don't care about providers
-                        // where the credentials are not found.
-                    } else {
-                        // Some providers have noisy failure states that we
-                        // don't want to spam the logs with every time the
-                        // language model selector is initialized.
-                        //
-                        // Ideally these should have more clear failure modes
-                        // that we know are safe to ignore here, like what we do
-                        // with `CredentialsNotFound` above.
-                        match provider_id.0.as_ref() {
-                            "lmstudio" | "ollama" => {
-                                // LM Studio and Ollama both make fetch requests to the local APIs to determine if they are "authenticated".
-                                //
-                                // These fail noisily, so we don't log them.
-                            }
-                            "copilot_chat" => {
-                                // Copilot Chat returns an error if Copilot is not enabled, so we don't log those errors.
-                            }
-                            _ => {
-                                log::error!(
-                                    "Failed to authenticate provider: {}: {err}",
-                                    provider_name.0
-                                );
+                    match err {
+                        language_model::AuthenticateError::CredentialsNotFound => {
+                            // Since we're authenticating these providers in the
+                            // background for the purposes of populating the
+                            // language selector, we don't care about providers
+                            // where the credentials are not found.
+                        }
+                        language_model::AuthenticateError::ConnectionRefused => {
+                            // Not logging connection refused errors as they are mostly from LM Studio's noisy auth failures.
+                            // LM Studio only has one auth method (endpoint call) which fails for users who haven't enabled it.
+                            // TODO: Better manage LM Studio auth logic to avoid these noisy failures.
+                        }
+                        _ => {
+                            // Some providers have noisy failure states that we
+                            // don't want to spam the logs with every time the
+                            // language model selector is initialized.
+                            //
+                            // Ideally these should have more clear failure modes
+                            // that we know are safe to ignore here, like what we do
+                            // with `CredentialsNotFound` above.
+                            match provider_id.0.as_ref() {
+                                "lmstudio" | "ollama" => {
+                                    // LM Studio and Ollama both make fetch requests to the local APIs to determine if they are "authenticated".
+                                    //
+                                    // These fail noisily, so we don't log them.
+                                }
+                                "copilot_chat" => {
+                                    // Copilot Chat returns an error if Copilot is not enabled, so we don't log those errors.
+                                }
+                                _ => {
+                                    log::error!(
+                                        "Failed to authenticate provider: {}: {err}",
+                                        provider_name.0
+                                    );
+                                }
                             }
                         }
                     }
diff --git a/crates/language_model/src/language_model.rs b/crates/language_model/src/language_model.rs
index fac302104f..fb35a1cae1 100644
--- a/crates/language_model/src/language_model.rs
+++ b/crates/language_model/src/language_model.rs
@@ -681,6 +681,8 @@ pub trait LanguageModelTool: 'static + DeserializeOwned + JsonSchema {
 /// An error that occurred when trying to authenticate the language model provider.
 #[derive(Debug, Error)]
 pub enum AuthenticateError {
+    #[error("connection refused")]
+    ConnectionRefused,
     #[error("credentials not found")]
     CredentialsNotFound,
     #[error(transparent)]
diff --git a/crates/language_models/src/provider/lmstudio.rs b/crates/language_models/src/provider/lmstudio.rs
index 80b28a396b..e6e1726ff5 100644
--- a/crates/language_models/src/provider/lmstudio.rs
+++ b/crates/language_models/src/provider/lmstudio.rs
@@ -111,7 +111,30 @@ impl State {
         }
 
         let fetch_models_task = self.fetch_models(cx);
-        cx.spawn(async move |_this, _cx| Ok(fetch_models_task.await?))
+        cx.spawn(async move |_this, _cx| {
+            match fetch_models_task.await {
+                Ok(()) => Ok(()),
+                Err(err) => {
+                    // If any cause in the error chain is an std::io::Error with
+                    // ErrorKind::ConnectionRefused, treat this as "credentials not found"
+                    // (i.e. LM Studio not running).
+                    let mut connection_refused = false;
+                    for cause in err.chain() {
+                        if let Some(io_err) = cause.downcast_ref::<std::io::Error>() {
+                            if io_err.kind() == std::io::ErrorKind::ConnectionRefused {
+                                connection_refused = true;
+                                break;
+                            }
+                        }
+                    }
+                    if connection_refused {
+                        Err(AuthenticateError::ConnectionRefused)
+                    } else {
+                        Err(AuthenticateError::Other(err))
+                    }
+                }
+            }
+        })
     }
 }