diff --git a/src/app_controller.py b/src/app_controller.py
index 146650b8..3e7d915e 100644
--- a/src/app_controller.py
+++ b/src/app_controller.py
@@ -3267,14 +3267,15 @@ class AppController:
   for d_name in discussions:
    discussions[d_name]["history"] = []
   # Reset project state so stale data from prior live_gui tests does not
-  # leak into the next session. Mirrors the default-project branch in
-  # __init__ (see lines 1743-1745).
-  reset_name = Path(self.active_project_path).stem if self.active_project_path else "unnamed"
-  self.project = project_manager.default_project(reset_name)
-  self.active_project_path = ""
+  # leak into the next session. We do NOT clear self.active_project_path
+  # because _do_project_switch calls _flush_to_project() which writes to
+  # self.active_project_path; an empty path would raise OSError and
+  # create an infinite re-switch loop. (See test_context_sim_live
+  # regression on 2026-06-08.)
+  self.project = project_manager.default_project(
+   Path(self.active_project_path).stem if self.active_project_path else "unnamed"
+  )
   self.project_paths = []
-  self.workspace_manager  = workspace_manager.WorkspaceManager(project_root=None)
-  self.workspace_profiles = self.workspace_manager.load_all_profiles()
   self.ai_status = "session reset"
   self.ai_response = ""
   self.ui_ai_input = ""
diff --git a/tests/test_handle_reset_session_clears_project.py b/tests/test_handle_reset_session_clears_project.py
index 0801e65f..f5606309 100644
--- a/tests/test_handle_reset_session_clears_project.py
+++ b/tests/test_handle_reset_session_clears_project.py
@@ -1,12 +1,18 @@
 """Red-phase test: _handle_reset_session must clear project state.
 
 Background: the live_gui session-scoped fixture is shared across all 48 live
-tests. Prior tests can leave stale `self.project`, `self.active_project_path`,
-and `self.project_paths` on the controller, which leaks into
-`test_full_live_workflow` and causes it to fail with "Project not switched".
+tests. Prior tests can leave stale `self.project` and `self.project_paths`
+on the controller, which leaks into `test_full_live_workflow` and causes
+it to fail with "Project not switched".
 
-The fix: `_handle_reset_session` should reset all three fields to a clean
-default (matching what `__init__` does for an empty/unset project).
+The fix: `_handle_reset_session` should reset `self.project` (to a fresh
+default dict) and `self.project_paths` (empty list).
+
+Note: `self.active_project_path` is INTENTIONALLY NOT cleared, because
+`_do_project_switch` calls `_flush_to_project()` which writes to
+`self.active_project_path`. An empty path would raise OSError and
+create an infinite re-switch loop. (See the regression discovered
+in test_context_sim_live on 2026-06-08.)
 
 This test uses a real AppController() (per the test_view_presets pattern),
 pollutes the state, then calls _handle_reset_session and asserts.
@@ -34,13 +40,18 @@ def controller(tmp_path):
  yield ctrl
 
 
-def test_handle_reset_session_clears_active_project_path(controller):
- """Active project path must be cleared or reset to a default."""
+def test_handle_reset_session_keeps_active_project_path(controller):
+ """Active project path is intentionally NOT cleared.
+
+ `_do_project_switch` writes to it via `_flush_to_project`; clearing it
+ causes OSError on the next project switch. (Regression: test_context_sim_live
+ on 2026-06-08.)
+ """
  assert controller.active_project_path.endswith("stale_project.toml")  # precondition
  controller._handle_reset_session()
- assert not controller.active_project_path.endswith("stale_project.toml"), (
-  f"_handle_reset_session did not clear active_project_path "
-  f"(still {controller.active_project_path!r})"
+ assert controller.active_project_path.endswith("stale_project.toml"), (
+  f"_handle_reset_session should NOT clear active_project_path "
+  f"(got {controller.active_project_path!r})"
  )
 
 
@@ -65,3 +76,4 @@ def test_handle_reset_session_resets_project_to_valid_default(controller):
  # And it must still be a usable project dict
  assert isinstance(controller.project, dict)
  assert "project" in controller.project
+