diff --git a/base-action/src/run-claude-sdk.ts b/base-action/src/run-claude-sdk.ts
index d67c6c4..fe923b9 100644
--- a/base-action/src/run-claude-sdk.ts
+++ b/base-action/src/run-claude-sdk.ts
@@ -136,6 +136,7 @@ function sanitizeSdkOutput(
 export async function runClaudeWithSdk(
   promptPath: string,
   { sdkOptions, showFullOutput, hasJsonSchema }: ParsedSdkOptions,
+  onMessage?: (message: SDKMessage) => void,
 ): Promise<ClaudeRunResult> {
   // Create prompt configuration - may be a string or multi-block message
   const prompt = await createPromptConfig(promptPath, showFullOutput);
@@ -161,9 +162,13 @@ export async function runClaudeWithSdk(
     for await (const message of query({ prompt, options: sdkOptions })) {
       messages.push(message);
 
-      const sanitized = sanitizeSdkOutput(message, showFullOutput);
-      if (sanitized) {
-        console.log(sanitized);
+      if (onMessage) {
+        onMessage(message);
+      } else {
+        const sanitized = sanitizeSdkOutput(message, showFullOutput);
+        if (sanitized) {
+          console.log(sanitized);
+        }
       }
 
       if (message.type === "result") {
diff --git a/base-action/src/run-claude.ts b/base-action/src/run-claude.ts
index b18b3f9..91fcf9b 100644
--- a/base-action/src/run-claude.ts
+++ b/base-action/src/run-claude.ts
@@ -1,6 +1,7 @@
 import { runClaudeWithSdk } from "./run-claude-sdk";
 import type { ClaudeRunResult } from "./run-claude-sdk";
 import { parseSdkOptions } from "./parse-sdk-options";
+import type { SDKMessage } from "@anthropic-ai/claude-agent-sdk";
 
 export type ClaudeOptions = {
   claudeArgs?: string;
@@ -19,7 +20,8 @@ export type ClaudeOptions = {
 export async function runClaude(
   promptPath: string,
   options: ClaudeOptions,
+  onMessage?: (message: SDKMessage) => void,
 ): Promise<ClaudeRunResult> {
   const parsedOptions = parseSdkOptions(options);
-  return runClaudeWithSdk(promptPath, parsedOptions);
+  return runClaudeWithSdk(promptPath, parsedOptions, onMessage);
 }
diff --git a/src/ci-output-formatter.ts b/src/ci-output-formatter.ts
new file mode 100644
index 0000000..755f0c5
--- /dev/null
+++ b/src/ci-output-formatter.ts
@@ -0,0 +1,303 @@
+/**
+ * Human-readable CI output formatter for Claude Code SDK messages.
+ *
+ * When show_full_output is true, replaces raw JSON dumps with concise,
+ * scannable log lines that show what Claude is doing in real time.
+ */
+
+import type {
+  SDKMessage,
+  SDKSystemMessage,
+  SDKAssistantMessage,
+  SDKUserMessage,
+  SDKResultMessage,
+  SDKPermissionDenial,
+} from "@anthropic-ai/claude-agent-sdk";
+
+const MAX_LINE_LENGTH = 200;
+
+export function truncate(
+  text: string,
+  maxLen: number = MAX_LINE_LENGTH,
+): string {
+  const oneLine = text.replace(/\n/g, " ").trim();
+  if (oneLine.length <= maxLen) return oneLine;
+  return oneLine.slice(0, maxLen - 3) + "...";
+}
+
+function countLines(text: string): number {
+  if (!text || !text.trim()) return 0;
+  return text.split("\n").length;
+}
+
+/**
+ * Format tool-specific parameters for concise display.
+ */
+export function formatToolParams(
+  toolName: string,
+  input: Record<string, unknown>,
+): string {
+  switch (toolName) {
+    case "Bash": {
+      const cmd = String(input.command ?? "");
+      const desc = input.description ? ` — "${input.description}"` : "";
+      return `${truncate(cmd, 120)}${desc}`;
+    }
+    case "Read":
+    case "Write":
+    case "Edit":
+      return String(input.file_path ?? "");
+    case "NotebookEdit":
+      return String(input.notebook_path ?? "");
+    case "Grep": {
+      const pattern = String(input.pattern ?? "");
+      const path = input.path ? ` in ${input.path}` : "";
+      return `"${pattern}"${path}`;
+    }
+    case "Glob":
+      return String(input.pattern ?? "");
+    case "WebFetch":
+      return String(input.url ?? "");
+    case "WebSearch":
+      return String(input.query ?? "");
+    case "Task": {
+      const desc = input.description
+        ? ` — ${input.description}`
+        : input.prompt
+          ? ` — ${truncate(String(input.prompt), 80)}`
+          : "";
+      return `${input.subagent_type ?? "agent"}${desc}`;
+    }
+    default:
+      // MCP tools and others — just show the name
+      return "";
+  }
+}
+
+/**
+ * Format a tool result (from user message tool_result content blocks).
+ */
+export function formatToolResult(content: unknown): string {
+  if (typeof content === "string") {
+    if (!content.trim()) return "(empty)";
+    const lines = countLines(content);
+    if (lines === 1 && content.length <= MAX_LINE_LENGTH) {
+      return content.trim();
+    }
+    const firstLine = truncate(content.split("\n")[0] ?? "", 150);
+    return `${firstLine} (${lines} lines)`;
+  }
+
+  // Content blocks array (e.g., [{type: "tool_result", content: [{type: "text", text: "..."}]}])
+  if (Array.isArray(content)) {
+    const texts = content
+      .filter(
+        (block: { type?: string }) =>
+          block && typeof block === "object" && block.type === "text",
+      )
+      .map((block: { text?: string }) => String(block.text ?? ""));
+    if (texts.length > 0) {
+      return formatToolResult(texts.join("\n"));
+    }
+    // Image or other content
+    return `(${content.length} content blocks)`;
+  }
+
+  return "(complex result)";
+}
+
+export function formatDuration(ms: number): string {
+  if (ms < 1000) return `${ms}ms`;
+  const totalSeconds = Math.floor(ms / 1000);
+  const minutes = Math.floor(totalSeconds / 60);
+  const seconds = totalSeconds % 60;
+  if (minutes === 0) return `${seconds}s`;
+  return `${minutes}m${seconds.toString().padStart(2, "0")}s`;
+}
+
+export function formatCost(usd: number): string {
+  if (usd < 0.01) return `$${usd.toFixed(4)}`;
+  return `$${usd.toFixed(2)}`;
+}
+
+export function formatPermissionDenials(
+  denials: SDKPermissionDenial[],
+): string {
+  if (denials.length === 0) return "";
+  const tools = denials
+    .map((d) => {
+      const input = d.tool_input;
+      if (d.tool_name === "Bash" && input.command) {
+        const cmd = String(input.command).split(" ")[0];
+        return `Bash(${cmd})`;
+      }
+      return d.tool_name;
+    })
+    .join(", ");
+  const label =
+    denials.length === 1
+      ? "1 permission denial"
+      : `${denials.length} permission denials`;
+  return ` — ⚠️ ${label}: ${tools}`;
+}
+
+/**
+ * Creates a message handler that outputs human-readable CI logs.
+ * Returns an (SDKMessage) => void callback to pass to runClaudeWithSdk.
+ */
+export function createCiOutputFormatter(): (message: SDKMessage) => void {
+  // Track tool_use_id → tool name for correlating results back to their tool call
+  const toolUseMap = new Map<string, string>();
+
+  return (message: SDKMessage): void => {
+    switch (message.type) {
+      case "system": {
+        if (message.subtype === "init") {
+          const init = message as SDKSystemMessage;
+          const toolCount = init.tools.length;
+          const mcpCount = init.mcp_servers.filter(
+            (s) => s.status === "connected",
+          ).length;
+          const mcpInfo = mcpCount > 0 ? `, ${mcpCount} MCP servers` : "";
+          console.log(
+            `🚀 Claude Code v${init.claude_code_version} (${init.model}) — ${toolCount} tools${mcpInfo}`,
+          );
+        } else if (message.subtype === "task_started") {
+          const task = message as {
+            subtype: "task_started";
+            description: string;
+          };
+          console.log(`   📋 Task started: ${truncate(task.description)}`);
+        } else if (message.subtype === "task_progress") {
+          const task = message as {
+            subtype: "task_progress";
+            description: string;
+            usage: { tool_uses: number };
+            last_tool_name?: string;
+          };
+          const lastTool = task.last_tool_name
+            ? `, last: ${task.last_tool_name}`
+            : "";
+          console.log(
+            `   📋 Task progress: ${task.usage.tool_uses} tool uses${lastTool}`,
+          );
+        } else if (message.subtype === "task_notification") {
+          const task = message as {
+            subtype: "task_notification";
+            status: string;
+            summary: string;
+          };
+          console.log(
+            `   📋 Task ${task.status}: ${truncate(task.summary, 150)}`,
+          );
+        }
+        // Skip status, compact_boundary, hook_* subtypes
+        break;
+      }
+
+      case "assistant": {
+        const assistant = message as SDKAssistantMessage;
+        const content = assistant.message?.content;
+        if (!Array.isArray(content)) break;
+
+        for (const block of content) {
+          if (block.type === "thinking" || block.type === "redacted_thinking") {
+            continue;
+          }
+
+          if (block.type === "text" && block.text) {
+            const text = block.text.trim();
+            if (text) {
+              console.log(`💬 ${truncate(text)}`);
+            }
+          }
+
+          if (block.type === "tool_use") {
+            const toolBlock = block as {
+              type: "tool_use";
+              id: string;
+              name: string;
+              input: Record<string, unknown>;
+            };
+            // Track tool_use_id → display label for result correlation
+            const params = formatToolParams(toolBlock.name, toolBlock.input);
+            const paramStr = params ? `: ${params}` : "";
+            const displayLabel = `${toolBlock.name}${paramStr}`;
+            toolUseMap.set(toolBlock.id, displayLabel);
+            console.log(`🔧 ${displayLabel}`);
+          }
+        }
+        break;
+      }
+
+      case "user": {
+        const user = message as SDKUserMessage;
+        const content = user.message?.content;
+        if (!Array.isArray(content)) break;
+
+        for (const block of content as Array<{
+          type: string;
+          content?: unknown;
+          is_error?: boolean;
+          tool_use_id?: string;
+        }>) {
+          if (block.type === "tool_result") {
+            const isError = block.is_error === true;
+            const resultContent = block.content;
+            // Look up which tool call this result belongs to
+            const toolLabel = block.tool_use_id
+              ? toolUseMap.get(block.tool_use_id)
+              : undefined;
+            const prefix = toolLabel ? `[${toolLabel}] ` : "";
+
+            if (isError) {
+              const errorText =
+                typeof resultContent === "string"
+                  ? resultContent
+                  : Array.isArray(resultContent)
+                    ? resultContent
+                        .filter(
+                          (b: { type?: string }) =>
+                            b && typeof b === "object" && b.type === "text",
+                        )
+                        .map((b: { text?: string }) => String(b.text ?? ""))
+                        .join(" ")
+                    : "unknown error";
+              console.log(`   ↳ ❌ ${prefix}${truncate(errorText)}`);
+            } else if (resultContent) {
+              console.log(`   ↳ ${prefix}${formatToolResult(resultContent)}`);
+            }
+          }
+        }
+        break;
+      }
+
+      case "result": {
+        const result = message as SDKResultMessage;
+        const duration = formatDuration(result.duration_ms);
+        const cost = formatCost(result.total_cost_usd);
+        const turns = result.num_turns;
+        const denials = formatPermissionDenials(result.permission_denials);
+
+        if (result.subtype === "success") {
+          console.log(
+            `✅ Done — ${turns} turns, ${cost}, ${duration}${denials}`,
+          );
+        } else {
+          const errors =
+            "errors" in result && result.errors
+              ? `: ${result.errors.join(", ")}`
+              : "";
+          console.log(
+            `❌ Failed (${result.subtype}) — ${turns} turns, ${cost}, ${duration}${errors}${denials}`,
+          );
+        }
+        break;
+      }
+
+      // Skip stream_event, tool_progress, tool_use_summary, rate_limit, etc.
+      default:
+        break;
+    }
+  };
+}
diff --git a/src/entrypoints/run.ts b/src/entrypoints/run.ts
index cfc95d2..ba2ed1d 100644
--- a/src/entrypoints/run.ts
+++ b/src/entrypoints/run.ts
@@ -34,6 +34,7 @@ import { installPlugins } from "../../base-action/src/install-plugins";
 import { preparePrompt } from "../../base-action/src/prepare-prompt";
 import { runClaude } from "../../base-action/src/run-claude";
 import type { ClaudeRunResult } from "../../base-action/src/run-claude-sdk";
+import { createCiOutputFormatter } from "../ci-output-formatter";
 
 /**
  * Install Claude Code CLI, handling retry logic and custom executable paths.
@@ -243,15 +244,24 @@ async function run() {
       promptFile,
     });
 
-    const claudeResult: ClaudeRunResult = await runClaude(promptConfig.path, {
-      claudeArgs: prepareResult.claudeArgs,
-      disallowedTools: process.env.DISALLOWED_TOOLS || undefined,
-      appendSystemPrompt: process.env.APPEND_SYSTEM_PROMPT,
-      model: process.env.ANTHROPIC_MODEL,
-      pathToClaudeCodeExecutable:
-        process.env.INPUT_PATH_TO_CLAUDE_CODE_EXECUTABLE,
-      showFullOutput: process.env.INPUT_SHOW_FULL_OUTPUT,
-    });
+    const showFullOutput =
+      process.env.INPUT_SHOW_FULL_OUTPUT === "true" ||
+      process.env.ACTIONS_STEP_DEBUG === "true";
+    const onMessage = showFullOutput ? createCiOutputFormatter() : undefined;
+
+    const claudeResult: ClaudeRunResult = await runClaude(
+      promptConfig.path,
+      {
+        claudeArgs: prepareResult.claudeArgs,
+        disallowedTools: process.env.DISALLOWED_TOOLS || undefined,
+        appendSystemPrompt: process.env.APPEND_SYSTEM_PROMPT,
+        model: process.env.ANTHROPIC_MODEL,
+        pathToClaudeCodeExecutable:
+          process.env.INPUT_PATH_TO_CLAUDE_CODE_EXECUTABLE,
+        showFullOutput: process.env.INPUT_SHOW_FULL_OUTPUT,
+      },
+      onMessage,
+    );
 
     claudeSuccess = claudeResult.conclusion === "success";
     executionFile = claudeResult.executionFile;
diff --git a/test/ci-output-formatter.test.ts b/test/ci-output-formatter.test.ts
new file mode 100644
index 0000000..60883a7
--- /dev/null
+++ b/test/ci-output-formatter.test.ts
@@ -0,0 +1,741 @@
+import { expect, test, describe, beforeEach, afterEach } from "bun:test";
+import {
+  createCiOutputFormatter,
+  truncate,
+  formatToolParams,
+  formatToolResult,
+  formatDuration,
+  formatCost,
+  formatPermissionDenials,
+} from "../src/ci-output-formatter";
+import type { SDKMessage } from "@anthropic-ai/claude-agent-sdk";
+
+// Capture console.log output
+let logged: string[];
+const originalLog = console.log;
+
+beforeEach(() => {
+  logged = [];
+  console.log = (...args: unknown[]) => {
+    logged.push(args.map(String).join(" "));
+  };
+});
+
+afterEach(() => {
+  console.log = originalLog;
+});
+
+// --- Helper factories for SDK messages ---
+
+function makeSystemInit(
+  overrides: Partial<{
+    claude_code_version: string;
+    model: string;
+    tools: string[];
+    mcp_servers: { name: string; status: string }[];
+  }> = {},
+): SDKMessage {
+  return {
+    type: "system",
+    subtype: "init",
+    claude_code_version: overrides.claude_code_version ?? "2.1.59",
+    model: overrides.model ?? "claude-sonnet-4-6",
+    tools: overrides.tools ?? ["Read", "Write", "Edit", "Bash", "Grep"],
+    mcp_servers: overrides.mcp_servers ?? [],
+    apiKeySource: "api_key",
+    betas: [],
+    cwd: "/tmp",
+    permissionMode: "default",
+    slash_commands: [],
+    output_style: "text",
+    skills: [],
+    plugins: [],
+    uuid: "00000000-0000-0000-0000-000000000001" as `${string}-${string}-${string}-${string}-${string}`,
+    session_id: "test-session",
+  } as unknown as SDKMessage;
+}
+
+function makeAssistantMessage(content: unknown[]): SDKMessage {
+  return {
+    type: "assistant",
+    message: {
+      content,
+      id: "msg_test",
+      type: "message",
+      role: "assistant",
+      model: "claude-sonnet-4-6",
+      stop_reason: null,
+      stop_sequence: null,
+      usage: {
+        input_tokens: 0,
+        output_tokens: 0,
+        cache_creation_input_tokens: 0,
+        cache_read_input_tokens: 0,
+      },
+    },
+    parent_tool_use_id: null,
+    uuid: "00000000-0000-0000-0000-000000000002" as `${string}-${string}-${string}-${string}-${string}`,
+    session_id: "test-session",
+  } as unknown as SDKMessage;
+}
+
+function makeUserToolResult(
+  results: Array<{
+    tool_use_id: string;
+    content: unknown;
+    is_error?: boolean;
+  }>,
+): SDKMessage {
+  return {
+    type: "user",
+    message: {
+      role: "user",
+      content: results.map((r) => ({
+        type: "tool_result",
+        tool_use_id: r.tool_use_id,
+        content: r.content,
+        is_error: r.is_error ?? false,
+      })),
+    },
+    parent_tool_use_id: null,
+    session_id: "test-session",
+  } as unknown as SDKMessage;
+}
+
+function makeResultSuccess(
+  overrides: Partial<{
+    num_turns: number;
+    total_cost_usd: number;
+    duration_ms: number;
+    permission_denials: Array<{
+      tool_name: string;
+      tool_use_id: string;
+      tool_input: Record<string, unknown>;
+    }>;
+  }> = {},
+): SDKMessage {
+  return {
+    type: "result",
+    subtype: "success",
+    is_error: false,
+    num_turns: overrides.num_turns ?? 10,
+    total_cost_usd: overrides.total_cost_usd ?? 0.42,
+    duration_ms: overrides.duration_ms ?? 65000,
+    duration_api_ms: 60000,
+    stop_reason: "end_turn",
+    result: "done",
+    usage: {
+      input_tokens: 1000,
+      output_tokens: 500,
+      cache_creation_input_tokens: 0,
+      cache_read_input_tokens: 0,
+    },
+    modelUsage: {},
+    permission_denials: overrides.permission_denials ?? [],
+    uuid: "00000000-0000-0000-0000-000000000099" as `${string}-${string}-${string}-${string}-${string}`,
+    session_id: "test-session",
+  } as unknown as SDKMessage;
+}
+
+function makeResultError(
+  errors: string[],
+  overrides: Partial<{
+    subtype: string;
+    num_turns: number;
+    total_cost_usd: number;
+    duration_ms: number;
+    permission_denials: Array<{
+      tool_name: string;
+      tool_use_id: string;
+      tool_input: Record<string, unknown>;
+    }>;
+  }> = {},
+): SDKMessage {
+  return {
+    type: "result",
+    subtype: overrides.subtype ?? "error_during_execution",
+    is_error: true,
+    num_turns: overrides.num_turns ?? 5,
+    total_cost_usd: overrides.total_cost_usd ?? 0.15,
+    duration_ms: overrides.duration_ms ?? 30000,
+    duration_api_ms: 25000,
+    stop_reason: null,
+    errors,
+    usage: {
+      input_tokens: 500,
+      output_tokens: 100,
+      cache_creation_input_tokens: 0,
+      cache_read_input_tokens: 0,
+    },
+    modelUsage: {},
+    permission_denials: overrides.permission_denials ?? [],
+    uuid: "00000000-0000-0000-0000-000000000099" as `${string}-${string}-${string}-${string}-${string}`,
+    session_id: "test-session",
+  } as unknown as SDKMessage;
+}
+
+// --- Unit tests for helper functions ---
+
+describe("truncate", () => {
+  test("returns short text unchanged", () => {
+    expect(truncate("hello world")).toBe("hello world");
+  });
+
+  test("truncates long text with ellipsis", () => {
+    const long = "a".repeat(250);
+    const result = truncate(long);
+    expect(result.length).toBe(200);
+    expect(result.endsWith("...")).toBe(true);
+  });
+
+  test("collapses newlines to spaces", () => {
+    expect(truncate("line1\nline2\nline3")).toBe("line1 line2 line3");
+  });
+
+  test("trims whitespace", () => {
+    expect(truncate("  hello  ")).toBe("hello");
+  });
+
+  test("respects custom maxLen", () => {
+    const result = truncate("a".repeat(50), 20);
+    expect(result.length).toBe(20);
+    expect(result.endsWith("...")).toBe(true);
+  });
+});
+
+describe("formatToolParams", () => {
+  test("Bash: shows command and description", () => {
+    const result = formatToolParams("Bash", {
+      command: "git log --oneline -10",
+      description: "Show recent git history",
+    });
+    expect(result).toBe('git log --oneline -10 — "Show recent git history"');
+  });
+
+  test("Bash: shows command only when no description", () => {
+    const result = formatToolParams("Bash", { command: "ls -la" });
+    expect(result).toBe("ls -la");
+  });
+
+  test("Read/Write/Edit: shows file_path", () => {
+    for (const tool of ["Read", "Write", "Edit"]) {
+      const result = formatToolParams(tool, {
+        file_path: "/src/index.ts",
+      });
+      expect(result).toBe("/src/index.ts");
+    }
+  });
+
+  test("Grep: shows pattern and path", () => {
+    const result = formatToolParams("Grep", {
+      pattern: "TODO",
+      path: "src/",
+    });
+    expect(result).toBe('"TODO" in src/');
+  });
+
+  test("Grep: shows pattern only when no path", () => {
+    const result = formatToolParams("Grep", { pattern: "TODO" });
+    expect(result).toBe('"TODO"');
+  });
+
+  test("Glob: shows pattern", () => {
+    expect(formatToolParams("Glob", { pattern: "**/*.ts" })).toBe("**/*.ts");
+  });
+
+  test("WebFetch: shows url", () => {
+    expect(formatToolParams("WebFetch", { url: "https://example.com" })).toBe(
+      "https://example.com",
+    );
+  });
+
+  test("WebSearch: shows query", () => {
+    expect(formatToolParams("WebSearch", { query: "bun test" })).toBe(
+      "bun test",
+    );
+  });
+
+  test("Task: shows subagent_type and description", () => {
+    const result = formatToolParams("Task", {
+      subagent_type: "Explore",
+      description: "Find auth code",
+    });
+    expect(result).toBe("Explore — Find auth code");
+  });
+
+  test("unknown tool: returns empty string", () => {
+    expect(formatToolParams("mcp__github__get_issue", {})).toBe("");
+  });
+});
+
+describe("formatToolResult", () => {
+  test("short string: returned as-is", () => {
+    expect(formatToolResult("file contents here")).toBe("file contents here");
+  });
+
+  test("multiline string: first line + count", () => {
+    const result = formatToolResult("line1\nline2\nline3");
+    expect(result).toContain("line1");
+    expect(result).toContain("(3 lines)");
+  });
+
+  test("empty string: shows (empty)", () => {
+    expect(formatToolResult("")).toBe("(empty)");
+  });
+
+  test("whitespace-only string: shows (empty)", () => {
+    expect(formatToolResult("   \n  \n  ")).toBe("(empty)");
+  });
+
+  test("content blocks array with text", () => {
+    const result = formatToolResult([{ type: "text", text: "hello world" }]);
+    expect(result).toBe("hello world");
+  });
+
+  test("content blocks array without text", () => {
+    const result = formatToolResult([{ type: "image", source: {} }]);
+    expect(result).toBe("(1 content blocks)");
+  });
+
+  test("non-string, non-array: shows complex result", () => {
+    expect(formatToolResult(42)).toBe("(complex result)");
+    expect(formatToolResult(null)).toBe("(complex result)");
+  });
+});
+
+describe("formatDuration", () => {
+  test("milliseconds for < 1s", () => {
+    expect(formatDuration(500)).toBe("500ms");
+  });
+
+  test("seconds for < 1m", () => {
+    expect(formatDuration(45000)).toBe("45s");
+  });
+
+  test("minutes and seconds for >= 1m", () => {
+    expect(formatDuration(65000)).toBe("1m05s");
+  });
+
+  test("large durations", () => {
+    expect(formatDuration(455000)).toBe("7m35s");
+  });
+});
+
+describe("formatCost", () => {
+  test("small costs show 4 decimals", () => {
+    expect(formatCost(0.0012)).toBe("$0.0012");
+  });
+
+  test("larger costs show 2 decimals", () => {
+    expect(formatCost(1.65)).toBe("$1.65");
+  });
+
+  test("boundary at 0.01", () => {
+    expect(formatCost(0.01)).toBe("$0.01");
+  });
+});
+
+describe("formatPermissionDenials", () => {
+  test("empty array returns empty string", () => {
+    expect(formatPermissionDenials([])).toBe("");
+  });
+
+  test("single denial", () => {
+    const result = formatPermissionDenials([
+      {
+        tool_name: "Bash",
+        tool_use_id: "id1",
+        tool_input: { command: "git push origin main" },
+      },
+    ]);
+    expect(result).toContain("1 permission denial");
+    expect(result).toContain("Bash(git)");
+  });
+
+  test("multiple denials with consistent grammar", () => {
+    const result = formatPermissionDenials([
+      {
+        tool_name: "Bash",
+        tool_use_id: "id1",
+        tool_input: { command: "bun test" },
+      },
+      {
+        tool_name: "Write",
+        tool_use_id: "id2",
+        tool_input: {},
+      },
+    ]);
+    expect(result).toContain("2 permission denials");
+    expect(result).toContain("Bash(bun)");
+    expect(result).toContain("Write");
+  });
+
+  test("non-Bash tools show tool name only", () => {
+    const result = formatPermissionDenials([
+      {
+        tool_name: "Edit",
+        tool_use_id: "id1",
+        tool_input: { file_path: "/etc/passwd" },
+      },
+    ]);
+    expect(result).toContain("Edit");
+    expect(result).not.toContain("file_path");
+  });
+});
+
+// --- Integration tests for createCiOutputFormatter ---
+
+describe("createCiOutputFormatter", () => {
+  describe("system init", () => {
+    test("formats init message with version, model, tools", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(makeSystemInit());
+      expect(logged[0]).toContain("Claude Code v2.1.59");
+      expect(logged[0]).toContain("claude-sonnet-4-6");
+      expect(logged[0]).toContain("5 tools");
+    });
+
+    test("includes MCP server count when connected", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeSystemInit({
+          mcp_servers: [
+            { name: "github_comment", status: "connected" },
+            { name: "github_ci", status: "connected" },
+            { name: "failing", status: "error" },
+          ],
+        }),
+      );
+      expect(logged[0]).toContain("2 MCP servers");
+    });
+
+    test("omits MCP info when none connected", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(makeSystemInit({ mcp_servers: [] }));
+      expect(logged[0]).not.toContain("MCP");
+    });
+  });
+
+  describe("assistant messages", () => {
+    test("formats text content", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeAssistantMessage([
+          { type: "text", text: "I'll help you fix this bug." },
+        ]),
+      );
+      expect(logged[0]).toBe("💬 I'll help you fix this bug.");
+    });
+
+    test("skips thinking blocks", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeAssistantMessage([
+          { type: "thinking", thinking: "Let me think about this..." },
+          { type: "text", text: "Here's my answer." },
+        ]),
+      );
+      expect(logged).toHaveLength(1);
+      expect(logged[0]).toContain("Here's my answer.");
+    });
+
+    test("formats tool_use with params", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeAssistantMessage([
+          {
+            type: "tool_use",
+            id: "tu_1",
+            name: "Read",
+            input: { file_path: "/src/index.ts" },
+          },
+        ]),
+      );
+      expect(logged[0]).toBe("🔧 Read: /src/index.ts");
+    });
+
+    test("formats tool_use without params (MCP)", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeAssistantMessage([
+          {
+            type: "tool_use",
+            id: "tu_1",
+            name: "mcp__github_comment__update_claude_comment",
+            input: { body: "done" },
+          },
+        ]),
+      );
+      expect(logged[0]).toBe("🔧 mcp__github_comment__update_claude_comment");
+    });
+
+    test("handles multiple content blocks in one message", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeAssistantMessage([
+          { type: "text", text: "Reading files..." },
+          {
+            type: "tool_use",
+            id: "tu_1",
+            name: "Read",
+            input: { file_path: "a.ts" },
+          },
+          {
+            type: "tool_use",
+            id: "tu_2",
+            name: "Read",
+            input: { file_path: "b.ts" },
+          },
+        ]),
+      );
+      expect(logged).toHaveLength(3);
+      expect(logged[0]).toContain("Reading files...");
+      expect(logged[1]).toContain("Read: a.ts");
+      expect(logged[2]).toContain("Read: b.ts");
+    });
+  });
+
+  describe("tool results (user messages)", () => {
+    test("formats successful result", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeUserToolResult([
+          { tool_use_id: "tu_1", content: "file contents here" },
+        ]),
+      );
+      expect(logged[0]).toBe("   ↳ file contents here");
+    });
+
+    test("formats error result", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeUserToolResult([
+          {
+            tool_use_id: "tu_1",
+            content: "File does not exist",
+            is_error: true,
+          },
+        ]),
+      );
+      expect(logged[0]).toContain("↳ ❌");
+      expect(logged[0]).toContain("File does not exist");
+    });
+
+    test("skips empty content", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(makeUserToolResult([{ tool_use_id: "tu_1", content: null }]));
+      expect(logged).toHaveLength(0);
+    });
+  });
+
+  describe("tool result correlation (issue #1)", () => {
+    test("correlates results back to tool calls for parallel tools", () => {
+      const formatter = createCiOutputFormatter();
+
+      // Assistant sends parallel tool calls
+      formatter(
+        makeAssistantMessage([
+          {
+            type: "tool_use",
+            id: "tu_1",
+            name: "Read",
+            input: { file_path: "src/a.ts" },
+          },
+          {
+            type: "tool_use",
+            id: "tu_2",
+            name: "Read",
+            input: { file_path: "src/b.ts" },
+          },
+        ]),
+      );
+
+      // User message with results
+      formatter(
+        makeUserToolResult([
+          { tool_use_id: "tu_1", content: "contents of a" },
+          { tool_use_id: "tu_2", content: "contents of b" },
+        ]),
+      );
+
+      // Results should include tool labels
+      expect(logged[2]).toContain("[Read: src/a.ts]");
+      expect(logged[2]).toContain("contents of a");
+      expect(logged[3]).toContain("[Read: src/b.ts]");
+      expect(logged[3]).toContain("contents of b");
+    });
+
+    test("omits correlation prefix for single tool calls", () => {
+      const formatter = createCiOutputFormatter();
+
+      formatter(
+        makeAssistantMessage([
+          {
+            type: "tool_use",
+            id: "tu_1",
+            name: "Read",
+            input: { file_path: "src/a.ts" },
+          },
+        ]),
+      );
+
+      formatter(
+        makeUserToolResult([{ tool_use_id: "tu_1", content: "file contents" }]),
+      );
+
+      // Single result still has prefix since the map tracks it
+      expect(logged[1]).toContain("[Read: src/a.ts]");
+    });
+  });
+
+  describe("subagent messages (issue #2)", () => {
+    test("formats task_started", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "system",
+        subtype: "task_started",
+        task_id: "task_1",
+        description: "Find auth implementation",
+        uuid: "00000000-0000-0000-0000-000000000010",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged[0]).toContain("Task started");
+      expect(logged[0]).toContain("Find auth implementation");
+    });
+
+    test("formats task_progress", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "system",
+        subtype: "task_progress",
+        task_id: "task_1",
+        description: "searching",
+        usage: { total_tokens: 5000, tool_uses: 8, duration_ms: 15000 },
+        last_tool_name: "Grep",
+        uuid: "00000000-0000-0000-0000-000000000011",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged[0]).toContain("8 tool uses");
+      expect(logged[0]).toContain("last: Grep");
+    });
+
+    test("formats task_progress without last_tool_name", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "system",
+        subtype: "task_progress",
+        task_id: "task_1",
+        description: "starting",
+        usage: { total_tokens: 100, tool_uses: 0, duration_ms: 1000 },
+        uuid: "00000000-0000-0000-0000-000000000011",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged[0]).toContain("0 tool uses");
+      expect(logged[0]).not.toContain("last:");
+    });
+
+    test("formats task_notification", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "system",
+        subtype: "task_notification",
+        task_id: "task_1",
+        status: "completed",
+        output_file: "/tmp/output",
+        summary: "Found 3 auth-related files in src/auth/",
+        uuid: "00000000-0000-0000-0000-000000000012",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged[0]).toContain("Task completed");
+      expect(logged[0]).toContain("Found 3 auth-related files");
+    });
+  });
+
+  describe("result messages", () => {
+    test("formats success result", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeResultSuccess({
+          num_turns: 46,
+          total_cost_usd: 1.65,
+          duration_ms: 455000,
+        }),
+      );
+      expect(logged[0]).toBe("✅ Done — 46 turns, $1.65, 7m35s");
+    });
+
+    test("formats error result", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeResultError(["API timeout", "retry failed"], {
+          num_turns: 5,
+          total_cost_usd: 0.15,
+          duration_ms: 30000,
+        }),
+      );
+      expect(logged[0]).toContain("❌ Failed");
+      expect(logged[0]).toContain("error_during_execution");
+      expect(logged[0]).toContain("API timeout, retry failed");
+    });
+
+    test("includes permission denials in result", () => {
+      const formatter = createCiOutputFormatter();
+      formatter(
+        makeResultSuccess({
+          num_turns: 10,
+          total_cost_usd: 0.42,
+          duration_ms: 65000,
+          permission_denials: [
+            {
+              tool_name: "Bash",
+              tool_use_id: "id1",
+              tool_input: { command: "bun test" },
+            },
+          ],
+        }),
+      );
+      expect(logged[0]).toContain("1 permission denial");
+      expect(logged[0]).toContain("Bash(bun)");
+    });
+  });
+
+  describe("ignored message types", () => {
+    test("skips stream_event messages", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "stream_event",
+        event: {},
+        parent_tool_use_id: null,
+        uuid: "00000000-0000-0000-0000-000000000020",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged).toHaveLength(0);
+    });
+
+    test("skips tool_progress messages", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "tool_progress",
+        tool_use_id: "tu_1",
+        tool_name: "Bash",
+        parent_tool_use_id: null,
+        elapsed_time_seconds: 5,
+        uuid: "00000000-0000-0000-0000-000000000021",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged).toHaveLength(0);
+    });
+
+    test("skips system status messages", () => {
+      const formatter = createCiOutputFormatter();
+      formatter({
+        type: "system",
+        subtype: "status",
+        status: "ready",
+        uuid: "00000000-0000-0000-0000-000000000022",
+        session_id: "test",
+      } as unknown as SDKMessage);
+      expect(logged).toHaveLength(0);
+    });
+  });
+});