diff --git a/dotnet/src/Microsoft.Agents.AI.Tools.Shell/ShellSession.cs b/dotnet/src/Microsoft.Agents.AI.Tools.Shell/ShellSession.cs
index 9e85c645436..4a62bf400b4 100644
--- a/dotnet/src/Microsoft.Agents.AI.Tools.Shell/ShellSession.cs
+++ b/dotnet/src/Microsoft.Agents.AI.Tools.Shell/ShellSession.cs
@@ -573,6 +573,9 @@ private string BuildScript(string command, string sentinel)
             return
                 "& {" +
                 " $__af_rc = 0;" +
+                // $LASTEXITCODE persists across commands and cmdlets do not update it.
+                // Clear it so any value after invocation belongs to this command.
+                " $global:LASTEXITCODE = $null;" +
                 " try {" +
                 $"   $__af_cmd = [System.Text.Encoding]::UTF8.GetString([Convert]::FromBase64String('{encoded}'));" +
                 // Force the user command's success output through the same
@@ -588,9 +591,11 @@ private string BuildScript(string command, string sentinel)
                 "       [Console]::WriteLine(($_ | Out-String).TrimEnd());" +
                 "     }" +
                 "   };" +
+                // Capture the pipeline status before flushing overwrites it.
+                "   $__af_ok = $?;" +
                 "   [Console]::Out.Flush();" +
                 "   if ($LASTEXITCODE -ne $null) { $__af_rc = $LASTEXITCODE }" +
-                "   elseif (-not $?) { $__af_rc = 1 }" +
+                "   elseif (-not $__af_ok) { $__af_rc = 1 }" +
                 " } catch {" +
                 "   [Console]::Error.WriteLine($_.ToString());" +
                 "   $__af_rc = 1" +
diff --git a/dotnet/tests/Microsoft.Agents.AI.Tools.Shell.UnitTests/LocalShellExecutorTests.cs b/dotnet/tests/Microsoft.Agents.AI.Tools.Shell.UnitTests/LocalShellExecutorTests.cs
index 247033fa1d6..ae6400c295d 100644
--- a/dotnet/tests/Microsoft.Agents.AI.Tools.Shell.UnitTests/LocalShellExecutorTests.cs
+++ b/dotnet/tests/Microsoft.Agents.AI.Tools.Shell.UnitTests/LocalShellExecutorTests.cs
@@ -313,6 +313,37 @@ public async Task Persistent_CarriesEnvironment_AcrossCallsAsync()
         Assert.Contains("persisted-value", read.Stdout, StringComparison.Ordinal);
     }
 
+    [Fact]
+    public async Task Persistent_PowerShell_DoesNotInheritPreviousExitCodeAsync()
+    {
+        if (!RuntimeInformation.IsOSPlatform(OSPlatform.Windows))
+        {
+            return;
+        }
+
+        // Arrange
+        await using var shell = new LocalShellExecutor(new()
+        {
+            Mode = ShellMode.Persistent,
+            Shell = "powershell.exe",
+            Timeout = TimeSpan.FromSeconds(20),
+        });
+
+        // Act
+        var firstFailure = await shell.RunAsync("cmd /c exit 3");
+        var succeeding = await shell.RunAsync("Write-Output ok");
+        var repeatedFailure = await shell.RunAsync("cmd /c exit 3");
+        var readback = await shell.RunAsync("Write-Output $LASTEXITCODE");
+
+        // Assert
+        Assert.Equal(3, firstFailure.ExitCode);
+        Assert.Equal(0, succeeding.ExitCode);
+        Assert.Contains("ok", succeeding.Stdout, StringComparison.Ordinal);
+        Assert.Equal(3, repeatedFailure.ExitCode);
+        Assert.Equal(0, readback.ExitCode);
+        Assert.Empty(readback.Stdout.Trim());
+    }
+
     [Fact]
     public async Task Persistent_Timeout_ReturnsExitCode124Async()
     {