diff --git a/src/main/daemon/daemon-scrollback-budget.test.ts b/src/main/daemon/daemon-scrollback-budget.test.ts
new file mode 100644
index 00000000000..864bde04d5a
--- /dev/null
+++ b/src/main/daemon/daemon-scrollback-budget.test.ts
@@ -0,0 +1,69 @@
+import { describe, expect, it } from 'vitest'
+import {
+  computeSessionScrollbackRows,
+  DAEMON_SCROLLBACK_BUDGET_ROWS,
+  DAEMON_SCROLLBACK_FULL_ROWS,
+  DAEMON_SCROLLBACK_MIN_ROWS
+} from './daemon-scrollback-budget'
+
+describe('computeSessionScrollbackRows', () => {
+  it('keeps full depth while the budget is not binding', () => {
+    expect(computeSessionScrollbackRows(1, { budgetRows: 100_000 })).toBe(
+      DAEMON_SCROLLBACK_FULL_ROWS
+    )
+    expect(computeSessionScrollbackRows(20, { budgetRows: 100_000 })).toBe(
+      DAEMON_SCROLLBACK_FULL_ROWS
+    )
+  })
+
+  it('splits the budget evenly once it binds', () => {
+    expect(computeSessionScrollbackRows(40, { budgetRows: 100_000 })).toBe(2500)
+    expect(computeSessionScrollbackRows(50, { budgetRows: 100_000 })).toBe(2000)
+  })
+
+  it('never drops below the floor', () => {
+    expect(computeSessionScrollbackRows(10_000, { budgetRows: 100_000 })).toBe(
+      DAEMON_SCROLLBACK_MIN_ROWS
+    )
+  })
+
+  it('holds total retained rows within the budget until the floor binds', () => {
+    for (const sessions of [30, 60, 120, 200]) {
+      const total = computeSessionScrollbackRows(sessions, { budgetRows: 100_000 }) * sessions
+      expect(total).toBeLessThanOrEqual(100_000)
+    }
+  })
+
+  it('lets the floor override the budget, trading bounded growth for a usable restore', () => {
+    // Past ~200 sessions the even split would fall below MIN_ROWS, which reads as data loss on
+    // reattach. Growth past that point is deliberate but shallow: 500 rows, not 5000.
+    const perSession = computeSessionScrollbackRows(1000, { budgetRows: 100_000 })
+    expect(perSession).toBe(DAEMON_SCROLLBACK_MIN_ROWS)
+    expect(perSession * 1000).toBeGreaterThan(100_000)
+    expect(perSession * 1000).toBeLessThan(DAEMON_SCROLLBACK_FULL_ROWS * 1000)
+  })
+
+  it('caps the session count that broke the Windows host well below its old retention', () => {
+    // 100+ live terminals previously retained 100 x 5000 = 500k rows (~1 GB of grid).
+    const perSession = computeSessionScrollbackRows(100)
+    expect(perSession).toBeLessThan(DAEMON_SCROLLBACK_FULL_ROWS)
+    expect(perSession * 100).toBeLessThanOrEqual(DAEMON_SCROLLBACK_BUDGET_ROWS)
+  })
+
+  it('treats a degenerate session count as a single session', () => {
+    expect(computeSessionScrollbackRows(0)).toBe(DAEMON_SCROLLBACK_FULL_ROWS)
+    expect(computeSessionScrollbackRows(Number.NaN)).toBe(DAEMON_SCROLLBACK_FULL_ROWS)
+  })
+
+  it('accepts an env override and ignores an unusable one', () => {
+    const env = { ORCA_DAEMON_SCROLLBACK_BUDGET_ROWS: '20000' } as NodeJS.ProcessEnv
+    expect(computeSessionScrollbackRows(10, { env })).toBe(2000)
+    // Why: an unparseable or non-positive override must not disable the budget — unbounded is the bug.
+    for (const raw of ['nonsense', '0', '-5']) {
+      const bad = { ORCA_DAEMON_SCROLLBACK_BUDGET_ROWS: raw } as NodeJS.ProcessEnv
+      expect(computeSessionScrollbackRows(100, { env: bad })).toBe(
+        computeSessionScrollbackRows(100, { budgetRows: DAEMON_SCROLLBACK_BUDGET_ROWS })
+      )
+    }
+  })
+})
diff --git a/src/main/daemon/daemon-scrollback-budget.ts b/src/main/daemon/daemon-scrollback-budget.ts
new file mode 100644
index 00000000000..81025d9623c
--- /dev/null
+++ b/src/main/daemon/daemon-scrollback-budget.ts
@@ -0,0 +1,43 @@
+const DAEMON_SCROLLBACK_ENV_VAR = 'ORCA_DAEMON_SCROLLBACK_BUDGET_ROWS'
+
+/** Depth a session retains while the daemon is under budget; matches HeadlessEmulator's default. */
+export const DAEMON_SCROLLBACK_FULL_ROWS = 5000
+// Why: below this a reattach loses the command that produced the visible screen, which reads as data loss
+// rather than degradation. Bounded growth past the floor is preferable to an unusable restore.
+export const DAEMON_SCROLLBACK_MIN_ROWS = 500
+// Why: retained rows are the daemon's dominant heap term (an xterm row is ~2 KB at typical widths), and
+// session count is unbounded — a host owning 100+ terminals retained ~1 GB of grid and was OOM-killed,
+// taking its sessions with it. ~128k rows caps the grid near 256 MB, which is ~25 sessions at full depth.
+export const DAEMON_SCROLLBACK_BUDGET_ROWS = 128_000
+
+function parseBudgetOverrideRows(value: string | undefined): number | undefined {
+  if (value === undefined) {
+    return undefined
+  }
+  const parsed = Number(value.trim())
+  // Why: ignore an unparseable or non-positive override rather than disabling the budget entirely —
+  // an unbounded daemon is the failure this module exists to prevent.
+  if (!Number.isFinite(parsed) || parsed <= 0) {
+    return undefined
+  }
+  return Math.floor(parsed)
+}
+
+/**
+ * Rows each live session may retain so the daemon's total stays within the budget. Full depth until the
+ * budget binds, then an even split down to the floor. Pure so the tiers are unit-testable without a daemon.
+ */
+export function computeSessionScrollbackRows(
+  liveSessionCount: number,
+  options: { budgetRows?: number; env?: NodeJS.ProcessEnv } = {}
+): number {
+  const budgetRows =
+    options.budgetRows ??
+    parseBudgetOverrideRows((options.env ?? process.env)[DAEMON_SCROLLBACK_ENV_VAR]) ??
+    DAEMON_SCROLLBACK_BUDGET_ROWS
+  if (!Number.isFinite(liveSessionCount) || liveSessionCount <= 1) {
+    return DAEMON_SCROLLBACK_FULL_ROWS
+  }
+  const evenShare = Math.floor(budgetRows / liveSessionCount)
+  return Math.min(DAEMON_SCROLLBACK_FULL_ROWS, Math.max(DAEMON_SCROLLBACK_MIN_ROWS, evenShare))
+}
diff --git a/src/main/daemon/headless-emulator-modes.ts b/src/main/daemon/headless-emulator-modes.ts
new file mode 100644
index 00000000000..bf65d527a3c
--- /dev/null
+++ b/src/main/daemon/headless-emulator-modes.ts
@@ -0,0 +1,32 @@
+import type { Terminal } from '@xterm/headless'
+import type { TerminalMouseModeMirror } from './terminal-mouse-mode-mirror'
+import type { TerminalModes } from './types'
+
+type TerminalWithKittyKeyboard = Terminal & {
+  // Why: kitty keyboard flags aren't on the public IModes; read the core service the CSI u handlers mutate.
+  _core?: { coreService?: { kittyKeyboard?: { flags?: number } } }
+}
+
+export function readKittyKeyboardFlags(terminal: Terminal): number {
+  const flags = (terminal as TerminalWithKittyKeyboard)._core?.coreService?.kittyKeyboard?.flags
+  return typeof flags === 'number' ? flags : 0
+}
+
+/** Mode state a snapshot must carry so a restored pane behaves like the live one. */
+export function readTerminalModes(
+  terminal: Terminal,
+  mouseModes: TerminalMouseModeMirror
+): TerminalModes {
+  const buffer = terminal.buffer.active
+  const mouseTrackingMode = mouseModes.mouseTrackingMode
+  return {
+    bracketedPaste: terminal.modes.bracketedPasteMode,
+    mouseTracking: mouseTrackingMode !== 'none',
+    mouseTrackingMode,
+    sgrMouseMode: mouseModes.sgrMouseMode,
+    sgrMousePixelsMode: mouseModes.sgrMousePixelsMode,
+    applicationCursor: buffer.type === 'normal' ? terminal.modes.applicationCursorKeysMode : false,
+    alternateScreen: buffer.type === 'alternate',
+    kittyKeyboardFlags: readKittyKeyboardFlags(terminal)
+  }
+}
diff --git a/src/main/daemon/headless-emulator.ts b/src/main/daemon/headless-emulator.ts
index ca8bb6c331f..4137ffa3e57 100644
--- a/src/main/daemon/headless-emulator.ts
+++ b/src/main/daemon/headless-emulator.ts
@@ -10,6 +10,7 @@ import {
 import { advancePartialEscapeTail } from '../../shared/terminal-partial-escape-tail'
 import type { TerminalViewAttributes } from '../../shared/terminal-view-attributes'
 import { collectHeadlessOscLinkRanges } from './headless-osc-link-ranges'
+import { readTerminalModes } from './headless-emulator-modes'
 import { buildRehydrateSequences } from './terminal-mode-rehydrate-sequences'
 import { TerminalMouseModeMirror } from './terminal-mouse-mode-mirror'
 import { TerminalOscCwdTitleScanner } from './terminal-osc-cwd-title-scanner'
@@ -330,30 +331,24 @@ export class HeadlessEmulator {
     this.terminal.clear()
   }
 
+  // Why: xterm trims the normal buffer on assignment, so lowering this frees retained rows immediately.
+  setRetainedScrollbackRows(rows: number): void {
+    if (this.disposed || !Number.isFinite(rows) || rows < 0) {
+      return
+    }
+    const next = Math.floor(rows)
+    if (this.terminal.options.scrollback === next) {
+      return
+    }
+    this.terminal.options.scrollback = next
+  }
+
   dispose(): void {
     this.disposed = true
     this.terminal.dispose()
   }
 
   private getModes(): TerminalModes {
-    const buffer = this.terminal.buffer.active
-    const mouseTrackingMode = this.mouseModes.mouseTrackingMode
-    return {
-      bracketedPaste: this.terminal.modes.bracketedPasteMode,
-      mouseTracking: mouseTrackingMode !== 'none',
-      mouseTrackingMode,
-      sgrMouseMode: this.mouseModes.sgrMouseMode,
-      sgrMousePixelsMode: this.mouseModes.sgrMousePixelsMode,
-      applicationCursor:
-        buffer.type === 'normal' ? this.terminal.modes.applicationCursorKeysMode : false,
-      alternateScreen: buffer.type === 'alternate',
-      kittyKeyboardFlags: this.getKittyKeyboardFlags()
-    }
-  }
-
-  private getKittyKeyboardFlags(): number {
-    const flags = (this.terminal as TerminalWithSynchronousWrite)._core?.coreService?.kittyKeyboard
-      ?.flags
-    return typeof flags === 'number' ? flags : 0
+    return readTerminalModes(this.terminal, this.mouseModes)
   }
 }
diff --git a/src/main/daemon/session.ts b/src/main/daemon/session.ts
index d9c5553d3e8..28c68887e49 100644
--- a/src/main/daemon/session.ts
+++ b/src/main/daemon/session.ts
@@ -469,6 +469,13 @@ export class Session {
     return this.subprocess.confirmForegroundProcess?.() ?? this.subprocess.getForegroundProcess()
   }
 
+  setRetainedScrollbackRows(rows: number): void {
+    if (this._disposed) {
+      return
+    }
+    this.emulator.setRetainedScrollbackRows(rows)
+  }
+
   clearScrollback(): void {
     if (this._disposed) {
       return
diff --git a/src/main/daemon/terminal-host-scrollback-budget.test.ts b/src/main/daemon/terminal-host-scrollback-budget.test.ts
new file mode 100644
index 00000000000..232f638f612
--- /dev/null
+++ b/src/main/daemon/terminal-host-scrollback-budget.test.ts
@@ -0,0 +1,119 @@
+/**
+ * OOM regression: a daemon owning many terminals retained ~5000 rows per session with no aggregate
+ * bound, grew to ~1.9 GB, and was killed under system memory pressure — taking every session it owned
+ * with it. TerminalHost must re-split its row budget as the live session count changes.
+ */
+import { afterEach, beforeEach, describe, expect, it, vi } from 'vitest'
+import { TerminalHost } from './terminal-host'
+import type { SubprocessHandle } from './session'
+import { HeadlessEmulator } from './headless-emulator'
+import {
+  computeSessionScrollbackRows,
+  DAEMON_SCROLLBACK_FULL_ROWS
+} from './daemon-scrollback-budget'
+
+function createMockSubprocess(): SubprocessHandle & { _onExitCb: ((code: number) => void) | null } {
+  let onExitCb: ((code: number) => void) | null = null
+  return {
+    pid: 4242,
+    getForegroundProcess: vi.fn(() => null),
+    write: vi.fn(),
+    resize: vi.fn(),
+    kill: vi.fn(() => {
+      setTimeout(() => onExitCb?.(0), 1)
+    }),
+    forceKill: vi.fn(() => onExitCb?.(137)),
+    signal: vi.fn(),
+    onData() {},
+    onExit(cb) {
+      onExitCb = cb
+    },
+    dispose: vi.fn(),
+    get _onExitCb() {
+      return onExitCb
+    }
+  } as SubprocessHandle & { _onExitCb: ((code: number) => void) | null }
+}
+
+describe('TerminalHost scrollback budget', () => {
+  let host: TerminalHost
+  let subprocesses: ReturnType<typeof createMockSubprocess>[]
+  let applyRows: ReturnType<typeof vi.spyOn>
+
+  beforeEach(() => {
+    subprocesses = []
+    applyRows = vi.spyOn(HeadlessEmulator.prototype, 'setRetainedScrollbackRows')
+    host = new TerminalHost({
+      spawnSubprocess: () => {
+        const sub = createMockSubprocess()
+        subprocesses.push(sub)
+        return sub
+      }
+    })
+  })
+
+  afterEach(async () => {
+    await host.dispose()
+    applyRows.mockRestore()
+  })
+
+  async function create(sessionId: string): Promise<void> {
+    await host.createOrAttach({
+      sessionId,
+      cols: 80,
+      rows: 24,
+      streamClient: { onData: vi.fn(), onExit: vi.fn() }
+    })
+  }
+
+  function lastAppliedRows(): number {
+    const call = applyRows.mock.calls.at(-1)
+    return call?.[0] as number
+  }
+
+  it('leaves a lightly loaded daemon at full depth', async () => {
+    await create('a')
+    await create('b')
+    expect(lastAppliedRows()).toBe(DAEMON_SCROLLBACK_FULL_ROWS)
+  })
+
+  it('applies the budget to every live session, not just the new one', async () => {
+    for (let i = 0; i < 4; i++) {
+      await create(`session-${i}`)
+    }
+    // The final create re-applies to all four sessions.
+    const lastFour = applyRows.mock.calls.slice(-4)
+    expect(lastFour).toHaveLength(4)
+    for (const call of lastFour) {
+      expect(call[0]).toBe(computeSessionScrollbackRows(4))
+    }
+  })
+
+  it('reduces per-session depth as the session count grows past the budget', async () => {
+    const SESSIONS = 60
+    for (let i = 0; i < SESSIONS; i++) {
+      await create(`session-${i}`)
+    }
+    const applied = lastAppliedRows()
+    expect(applied).toBe(computeSessionScrollbackRows(SESSIONS))
+    expect(applied).toBeLessThan(DAEMON_SCROLLBACK_FULL_ROWS)
+  })
+
+  it('restores depth to survivors when sessions exit', async () => {
+    const SESSIONS = 60
+    for (let i = 0; i < SESSIONS; i++) {
+      await create(`session-${i}`)
+    }
+    const underLoad = lastAppliedRows()
+
+    // Drain back down to a handful of terminals.
+    for (let i = 0; i < SESSIONS - 2; i++) {
+      subprocesses[i]._onExitCb?.(0)
+    }
+
+    expect(host.listSessions()).toHaveLength(2)
+    const afterDrain = lastAppliedRows()
+    expect(afterDrain).toBeGreaterThan(underLoad)
+    expect(afterDrain).toBe(DAEMON_SCROLLBACK_FULL_ROWS)
+  })
+})
diff --git a/src/main/daemon/terminal-host.ts b/src/main/daemon/terminal-host.ts
index ae348a3854e..c4463d94e15 100644
--- a/src/main/daemon/terminal-host.ts
+++ b/src/main/daemon/terminal-host.ts
@@ -16,6 +16,7 @@ import { resolveTerminalHostSessionCwd } from './terminal-host-session-cwd'
 import { TerminalHostTombstones } from './terminal-host-tombstones'
 import { listLiveTerminalHostSessions } from './terminal-host-session-listing'
 import { createOrAttachTerminalSession } from './terminal-host-session-create'
+import { computeSessionScrollbackRows } from './daemon-scrollback-budget'
 import { isShellProcess } from '../../shared/agent-detection'
 
 export type { CreateOrAttachOptions, CreateOrAttachResult } from './terminal-host-create-contract'
@@ -57,7 +58,7 @@ export class TerminalHost {
         if (options.agentSessionGeneration && this.sessions.get(options.sessionId)?.isAlive) {
           throw new Error('agent_session_claim_unavailable')
         }
-        return await createOrAttachTerminalSession(options, {
+        const result = await createOrAttachTerminalSession(options, {
           sessions: this.sessions,
           sessionTeardown: this.sessionTeardown,
           killedTombstones: this.killedTombstones,
@@ -72,10 +73,21 @@ export class TerminalHost {
             this.reapSession(sessionId)
           }
         })
+        this.applyScrollbackBudget()
+        return result
       }
     })
   }
 
+  // Why: retained rows are O(sessions × depth) and session count is unbounded, so re-split the
+  // daemon's row budget whenever the count changes rather than letting every session hold full depth.
+  private applyScrollbackBudget(): void {
+    const rows = computeSessionScrollbackRows(this.sessions.size)
+    for (const session of this.sessions.values()) {
+      session.setRetainedScrollbackRows(rows)
+    }
+  }
+
   write(sessionId: string, data: string): void {
     this.getAliveSession(sessionId).write(data)
   }
@@ -122,6 +134,7 @@ export class TerminalHost {
     }
     session.dispose()
     this.sessions.delete(sessionId)
+    this.applyScrollbackBudget()
     this.onSessionReaped?.(sessionId)
   }