diff --git a/apps/ui/src/components/views/settings-view/terminal/terminal-section.tsx b/apps/ui/src/components/views/settings-view/terminal/terminal-section.tsx
index 67e4cad1..e7092000 100644
--- a/apps/ui/src/components/views/settings-view/terminal/terminal-section.tsx
+++ b/apps/ui/src/components/views/settings-view/terminal/terminal-section.tsx
@@ -181,7 +181,7 @@ export function TerminalSection() {
               <SelectValue />
             </SelectTrigger>
             <SelectContent>
-              <SelectItem value="newTab">New Tab (named after branch)</SelectItem>
+              <SelectItem value="newTab">New Tab</SelectItem>
               <SelectItem value="split">Split Current Tab</SelectItem>
             </SelectContent>
           </Select>
diff --git a/apps/ui/src/components/views/terminal-view.tsx b/apps/ui/src/components/views/terminal-view.tsx
index 0f7d65b0..88075747 100644
--- a/apps/ui/src/components/views/terminal-view.tsx
+++ b/apps/ui/src/components/views/terminal-view.tsx
@@ -596,22 +596,27 @@ export function TerminalView() {
           pendingTerminalCreatedRef.current = true;
 
           if (openMode === 'newTab') {
-            // Create a new tab named after the branch
-            const newTabId = addTerminalTab(pending.branchName);
+            // Create a new tab with default naming
+            const newTabId = addTerminalTab();
 
-            // Set the tab's layout to the new terminal
+            // Set the tab's layout to the new terminal with branch name for display in header
             useAppStore
               .getState()
               .setTerminalTabLayout(
                 newTabId,
-                { type: 'terminal', sessionId: data.data.id, size: 100 },
+                {
+                  type: 'terminal',
+                  sessionId: data.data.id,
+                  size: 100,
+                  branchName: pending.branchName,
+                },
                 data.data.id
               );
             toast.success(`Opened terminal for ${pending.branchName}`);
           } else {
-            // Split mode: add to current tab layout
-            addTerminalToLayout(data.data.id);
-            toast.success(`Opened terminal in ${pending.cwd.split('/').pop() || pending.cwd}`);
+            // Split mode: add to current tab layout with branch name
+            addTerminalToLayout(data.data.id, 'horizontal', undefined, pending.branchName);
+            toast.success(`Opened terminal for ${pending.branchName}`);
           }
 
           // Mark this session as new for running initial command
@@ -789,6 +794,7 @@ export function TerminalView() {
               sessionId,
               size: persisted.size,
               fontSize: persisted.fontSize,
+              branchName: persisted.branchName,
             };
           }
 
@@ -1347,6 +1353,7 @@ export function TerminalView() {
             onCommandRan={() => handleCommandRan(content.sessionId)}
             isMaximized={terminalState.maximizedSessionId === content.sessionId}
             onToggleMaximize={() => toggleTerminalMaximized(content.sessionId)}
+            branchName={content.branchName}
           />
         </TerminalErrorBoundary>
       );
diff --git a/apps/ui/src/components/views/terminal-view/terminal-panel.tsx b/apps/ui/src/components/views/terminal-view/terminal-panel.tsx
index 88f02591..ce6359c8 100644
--- a/apps/ui/src/components/views/terminal-view/terminal-panel.tsx
+++ b/apps/ui/src/components/views/terminal-view/terminal-panel.tsx
@@ -21,6 +21,7 @@ import {
   Maximize2,
   Minimize2,
   ArrowDown,
+  GitBranch,
 } from 'lucide-react';
 import { Button } from '@/components/ui/button';
 import { Spinner } from '@/components/ui/spinner';
@@ -94,6 +95,7 @@ interface TerminalPanelProps {
   onCommandRan?: () => void; // Callback when the initial command has been sent
   isMaximized?: boolean;
   onToggleMaximize?: () => void;
+  branchName?: string; // Branch name to display in header (from "Open in Terminal" action)
 }
 
 // Type for xterm Terminal - we'll use any since we're dynamically importing
@@ -124,6 +126,7 @@ export function TerminalPanel({
   onCommandRan,
   isMaximized = false,
   onToggleMaximize,
+  branchName,
 }: TerminalPanelProps) {
   const terminalRef = useRef<HTMLDivElement>(null);
   const containerRef = useRef<HTMLDivElement>(null);
@@ -1776,6 +1779,13 @@ export function TerminalPanel({
         <div className="flex items-center gap-1.5 flex-1 min-w-0">
           <Terminal className="h-3 w-3 shrink-0 text-muted-foreground" />
           <span className="text-xs truncate text-foreground">{shellName}</span>
+          {/* Branch name indicator - show when terminal was opened from worktree */}
+          {branchName && (
+            <span className="flex items-center gap-1 text-[10px] px-1.5 py-0.5 rounded bg-brand-500/10 text-brand-500 shrink-0">
+              <GitBranch className="h-2.5 w-2.5 shrink-0" />
+              <span>{branchName}</span>
+            </span>
+          )}
           {/* Font size indicator - only show when not default */}
           {fontSize !== DEFAULT_FONT_SIZE && (
             <button
diff --git a/apps/ui/src/hooks/use-settings-sync.ts b/apps/ui/src/hooks/use-settings-sync.ts
index 349c4ac7..70db19e9 100644
--- a/apps/ui/src/hooks/use-settings-sync.ts
+++ b/apps/ui/src/hooks/use-settings-sync.ts
@@ -36,6 +36,7 @@ const SETTINGS_FIELDS_TO_SYNC = [
   'fontFamilySans',
   'fontFamilyMono',
   'terminalFontFamily', // Maps to terminalState.fontFamily
+  'openTerminalMode', // Maps to terminalState.openTerminalMode
   'sidebarOpen',
   'chatHistoryOpen',
   'maxConcurrency',
@@ -101,6 +102,9 @@ function getSettingsFieldValue(
   if (field === 'terminalFontFamily') {
     return appState.terminalState.fontFamily;
   }
+  if (field === 'openTerminalMode') {
+    return appState.terminalState.openTerminalMode;
+  }
   return appState[field as keyof typeof appState];
 }
 
@@ -128,6 +132,9 @@ function hasSettingsFieldChanged(
   if (field === 'terminalFontFamily') {
     return newState.terminalState.fontFamily !== prevState.terminalState.fontFamily;
   }
+  if (field === 'openTerminalMode') {
+    return newState.terminalState.openTerminalMode !== prevState.terminalState.openTerminalMode;
+  }
   const key = field as keyof typeof newState;
   return newState[key] !== prevState[key];
 }
@@ -571,11 +578,16 @@ export async function refreshSettingsFromServer(): Promise<boolean> {
       worktreePanelCollapsed: serverSettings.worktreePanelCollapsed ?? false,
       lastProjectDir: serverSettings.lastProjectDir ?? '',
       recentFolders: serverSettings.recentFolders ?? [],
-      // Terminal font (nested in terminalState)
-      ...(serverSettings.terminalFontFamily && {
+      // Terminal settings (nested in terminalState)
+      ...((serverSettings.terminalFontFamily || serverSettings.openTerminalMode) && {
         terminalState: {
           ...currentAppState.terminalState,
-          fontFamily: serverSettings.terminalFontFamily,
+          ...(serverSettings.terminalFontFamily && {
+            fontFamily: serverSettings.terminalFontFamily,
+          }),
+          ...(serverSettings.openTerminalMode && {
+            openTerminalMode: serverSettings.openTerminalMode,
+          }),
         },
       }),
     });
diff --git a/apps/ui/src/lib/http-api-client.ts b/apps/ui/src/lib/http-api-client.ts
index f1d02e9a..2943f3e2 100644
--- a/apps/ui/src/lib/http-api-client.ts
+++ b/apps/ui/src/lib/http-api-client.ts
@@ -1805,8 +1805,6 @@ export class HttpApiClient implements ElectronAPI {
       this.post('/api/worktree/switch-branch', { worktreePath, branchName }),
     openInEditor: (worktreePath: string, editorCommand?: string) =>
       this.post('/api/worktree/open-in-editor', { worktreePath, editorCommand }),
-    openInTerminal: (worktreePath: string) =>
-      this.post('/api/worktree/open-in-terminal', { worktreePath }),
     getDefaultEditor: () => this.get('/api/worktree/default-editor'),
     getAvailableEditors: () => this.get('/api/worktree/available-editors'),
     refreshEditors: () => this.post('/api/worktree/refresh-editors', {}),
diff --git a/apps/ui/src/store/app-store.ts b/apps/ui/src/store/app-store.ts
index c67a0d6f..e94cb9b6 100644
--- a/apps/ui/src/store/app-store.ts
+++ b/apps/ui/src/store/app-store.ts
@@ -500,7 +500,7 @@ export interface ProjectAnalysis {
 
 // Terminal panel layout types (recursive for splits)
 export type TerminalPanelContent =
-  | { type: 'terminal'; sessionId: string; size?: number; fontSize?: number }
+  | { type: 'terminal'; sessionId: string; size?: number; fontSize?: number; branchName?: string }
   | {
       type: 'split';
       id: string; // Stable ID for React key stability
@@ -538,7 +538,7 @@ export interface TerminalState {
 // Persisted terminal layout - now includes sessionIds for reconnection
 // Used to restore terminal layout structure when switching projects
 export type PersistedTerminalPanel =
-  | { type: 'terminal'; size?: number; fontSize?: number; sessionId?: string }
+  | { type: 'terminal'; size?: number; fontSize?: number; sessionId?: string; branchName?: string }
   | {
       type: 'split';
       id?: string; // Optional for backwards compatibility with older persisted layouts
@@ -576,6 +576,7 @@ export interface PersistedTerminalSettings {
   scrollbackLines: number;
   lineHeight: number;
   maxSessions: number;
+  openTerminalMode: 'newTab' | 'split';
 }
 
 /** State for worktree init script execution */
@@ -1217,7 +1218,8 @@ export interface AppActions {
   addTerminalToLayout: (
     sessionId: string,
     direction?: 'horizontal' | 'vertical',
-    targetSessionId?: string
+    targetSessionId?: string,
+    branchName?: string
   ) => void;
   removeTerminalFromLayout: (sessionId: string) => void;
   swapTerminals: (sessionId1: string, sessionId2: string) => void;
@@ -2676,12 +2678,13 @@ export const useAppStore = create<AppState & AppActions>()((set, get) => ({
     });
   },
 
-  addTerminalToLayout: (sessionId, direction = 'horizontal', targetSessionId) => {
+  addTerminalToLayout: (sessionId, direction = 'horizontal', targetSessionId, branchName) => {
     const current = get().terminalState;
     const newTerminal: TerminalPanelContent = {
       type: 'terminal',
       sessionId,
       size: 50,
+      branchName,
     };
 
     // If no tabs, create first tab
@@ -2694,7 +2697,7 @@ export const useAppStore = create<AppState & AppActions>()((set, get) => ({
             {
               id: newTabId,
               name: 'Terminal 1',
-              layout: { type: 'terminal', sessionId, size: 100 },
+              layout: { type: 'terminal', sessionId, size: 100, branchName },
             },
           ],
           activeTabId: newTabId,
@@ -3396,6 +3399,7 @@ export const useAppStore = create<AppState & AppActions>()((set, get) => ({
           size: panel.size,
           fontSize: panel.fontSize,
           sessionId: panel.sessionId, // Preserve for reconnection
+          branchName: panel.branchName, // Preserve branch name for display
         };
       }
       return {
diff --git a/libs/types/src/settings.ts b/libs/types/src/settings.ts
index a48504a8..7c0955ff 100644
--- a/libs/types/src/settings.ts
+++ b/libs/types/src/settings.ts
@@ -475,6 +475,10 @@ export interface GlobalSettings {
   /** Terminal font family (undefined = use default Menlo/Monaco) */
   terminalFontFamily?: string;
 
+  // Terminal Configuration
+  /** How to open terminals from "Open in Terminal" worktree action */
+  openTerminalMode?: 'newTab' | 'split';
+
   // UI State Preferences
   /** Whether sidebar is currently open */
   sidebarOpen: boolean;