diff --git a/crates/chat-cli/src/cli/chat/tools/fs_read.rs b/crates/chat-cli/src/cli/chat/tools/fs_read.rs
index 5c5c0abf2..0c92656bc 100644
--- a/crates/chat-cli/src/cli/chat/tools/fs_read.rs
+++ b/crates/chat-cli/src/cli/chat/tools/fs_read.rs
@@ -181,7 +181,8 @@ impl FsRead {
                             FsReadOperation::Line(FsLine { path, .. })
                             | FsReadOperation::Directory(FsDirectory { path, .. })
                             | FsReadOperation::Search(FsSearch { path, .. }) => {
-                                let Ok(path) = directories::canonicalizes_path(os, path) else {
+                                // always use absolute file path for permission check
+                                let Ok(path) = directories::canonicalizes_path_absolute(os, path) else {
                                     ask = true;
                                     continue;
                                 };
@@ -208,7 +209,8 @@ impl FsRead {
                                 let denied_match_set = paths
                                     .iter()
                                     .flat_map(|path| {
-                                        let Ok(path) = directories::canonicalizes_path(os, path) else {
+                                        // always use absolute file path for permission check
+                                        let Ok(path) = directories::canonicalizes_path_absolute(os, path) else {
                                             return vec![];
                                         };
                                         deny_set.matches(path.as_ref() as &str)
@@ -1488,6 +1490,8 @@ mod tests {
             "operations": [
                 { "path": "/home/user/", "mode": "Directory" },
                 { "path": "/home/user/file.txt", "mode": "Line" },
+                { "path": "/home/user/folder", "mode": "Directory" },
+                { "path": "/home/user/folder/file.txt", "mode": "Line" },
             ]
         }))
         .unwrap();
@@ -1537,4 +1541,52 @@ mod tests {
         let res = outside_tool.eval_perm(&os, &agent);
         assert!(matches!(res, PermissionEvalResult::Ask));
     }
+
+    #[tokio::test]
+    async fn test_fs_read_relative_to_cwd() {
+        use std::fs;
+        use tempfile::TempDir;
+
+        let temp_dir = TempDir::new().unwrap();
+        let temp_path = temp_dir.path();
+
+        // Create test files and directories
+        let test_file = temp_path.join("file.txt");
+        let test_folder = temp_path.join("folder");
+        let test_folder2 = temp_path.join("folder-2");
+        let test_file2 = test_folder2.join("nested.txt");
+        fs::write(&test_file, "test content").unwrap();
+        fs::create_dir(&test_folder).unwrap();
+        fs::create_dir(&test_folder2).unwrap();
+        fs::write(&test_file2, "nested content").unwrap();
+
+        let os = Os::new().await.unwrap();
+        let agent = Agent {
+            name: "test_agent".to_string(),
+            tools_settings: HashMap::new(), // No fs_read settings
+            ..Default::default()
+        };
+        
+        // Save original CWD and change to temp directory
+        let original_cwd = std::env::current_dir().unwrap();
+        std::env::set_current_dir(temp_path).unwrap();
+
+        // all of these files are under CWD through relative path. reading them should be allowed by default
+        let fs_read = serde_json::from_value::<FsRead>(serde_json::json!({
+            "operations": [
+                { "path": "./file.txt", "mode": "Line" },
+                { "path": "./folder-2/nested.txt", "mode": "Line" },
+                { "path": "./folder/../folder-2/nested.txt", "mode": "Line" },
+                { "path": "./folder", "mode": "Directory" },
+                { "path": "./folder-2/", "mode": "Directory" },
+                { "path": "./folder/../folder-2", "mode": "Directory" },
+            ]
+        })).unwrap();
+
+        let res = fs_read.eval_perm(&os, &agent);
+        assert!(matches!(res, PermissionEvalResult::Allow));
+
+        // Restore original CWD
+        std::env::set_current_dir(original_cwd).unwrap();
+    }
 }
diff --git a/crates/chat-cli/src/util/directories.rs b/crates/chat-cli/src/util/directories.rs
index 89c6f3bc4..1ed519069 100644
--- a/crates/chat-cli/src/util/directories.rs
+++ b/crates/chat-cli/src/util/directories.rs
@@ -1,7 +1,6 @@
 use std::env::VarError;
 use std::path::{
-    PathBuf,
-    StripPrefixError,
+    Path, PathBuf, StripPrefixError
 };
 
 use globset::{
@@ -181,6 +180,7 @@ pub fn chat_local_agent_dir(os: &Os) -> Result<PathBuf> {
 }
 
 /// Canonicalizes path given by expanding the path given
+/// Works for glob pattern
 pub fn canonicalizes_path(os: &Os, path_as_str: &str) -> Result<String> {
     let context = |input: &str| Ok(os.env.get(input).ok());
     let home_dir = || os.env.home().map(|p| p.to_string_lossy().to_string());
@@ -188,6 +188,21 @@ pub fn canonicalizes_path(os: &Os, path_as_str: &str) -> Result<String> {
     Ok(shellexpand::full_with_context(path_as_str, home_dir, context)?.to_string())
 }
 
+/// Canonicalizes path and converts to absolute path.
+/// This method requires that the file exist and doesn't support glob pattern.
+pub fn canonicalizes_path_absolute(os: &Os, path_as_str: &str) -> Result<String> {
+    let expanded = canonicalizes_path(os, path_as_str)?;
+    
+    if Path::new(&expanded).is_relative() {
+        // This handles relative path: "./folder" and "../file" and "./folder-1/../folder-2" and turn them into absolute path
+        // This also resolves symlinks
+        let absolute_path = std::fs::canonicalize(&expanded)?;
+        Ok(absolute_path.to_string_lossy().to_string())
+    } else {
+        Ok(expanded)
+    }
+}
+
 /// Given a globset builder and a path, build globs for both the file and directory patterns
 /// This is needed because by default glob does not match children of a dir so we need both
 /// patterns to exist in a globset.
@@ -469,4 +484,54 @@ mod tests {
         let result = canonicalizes_path(&test_os, "**/middle/**/path").unwrap();
         assert_eq!(result, "**/middle/**/path");
     }
+
+    #[tokio::test]
+    async fn test_canonicalizes_path_absolute() {
+        use std::fs;
+        use tempfile::TempDir;
+
+        let temp_dir = TempDir::new().unwrap();
+        let temp_path = temp_dir.path();
+
+        // Create test files and directories
+        let test_file = temp_path.join("file");
+        let test_folder = temp_path.join("folder");
+        let test_folder2 = temp_path.join("folder-2");
+        fs::write(&test_file, "test content").unwrap();
+        fs::create_dir(&test_folder).unwrap();
+        fs::create_dir(&test_folder2).unwrap();
+
+        let test_os = Os::new().await.unwrap();
+        
+        // Save original CWD and change to temp directory
+        let original_cwd = std::env::current_dir().unwrap();
+        std::env::set_current_dir(temp_path).unwrap();
+
+        // absolute path should remain unchanged
+        let result: String = canonicalizes_path_absolute(&test_os, &test_file.to_string_lossy()).unwrap();
+        assert_eq!(result, test_file.to_string_lossy());
+
+        // "./" should resolve to temp directory
+        let result = canonicalizes_path_absolute(&test_os, "./").unwrap();
+        assert_eq!(result, temp_path.canonicalize().unwrap().to_string_lossy().trim_end_matches('/'));
+
+        // "./file" should resolve to file
+        let result = canonicalizes_path_absolute(&test_os, "./file").unwrap();
+        assert_eq!(result, test_file.canonicalize().unwrap().to_string_lossy());
+
+        // "./folder/" should resolve to folder/
+        let result = canonicalizes_path_absolute(&test_os, "./folder/").unwrap();
+        assert_eq!(result, test_folder.canonicalize().unwrap().to_string_lossy());
+
+        // "./folder" should also resolve to folder/
+        let result = canonicalizes_path_absolute(&test_os, "./folder").unwrap();
+        assert_eq!(result, test_folder.canonicalize().unwrap().to_string_lossy());
+
+        // "./folder/../folder-2" should resolve to folder-2/
+        let result = canonicalizes_path_absolute(&test_os, "./folder/../folder-2").unwrap();
+        assert_eq!(result, test_folder2.canonicalize().unwrap().to_string_lossy());
+        
+        // Restore original CWD
+        std::env::set_current_dir(original_cwd).unwrap();
+    }
 }