diff --git a/libs/git-utils/src/diff.ts b/libs/git-utils/src/diff.ts
index 96609cfa..a5388f39 100644
--- a/libs/git-utils/src/diff.ts
+++ b/libs/git-utils/src/diff.ts
@@ -44,8 +44,21 @@ Binary file ${relativePath} added
 `;
     }
 
-    // Get file stats to check size
+    // Get file stats to check size and type
     const stats = await secureFs.stat(fullPath);
+
+    // Check if it's a directory (can happen with untracked directories from git status)
+    if (stats.isDirectory()) {
+      return `diff --git a/${relativePath} b/${relativePath}
+new file mode 040000
+index 0000000..0000000
+--- /dev/null
++++ b/${relativePath}
+@@ -0,0 +1 @@
++[Directory]
+`;
+    }
+
     if (stats.size > MAX_SYNTHETIC_DIFF_SIZE) {
       const sizeKB = Math.round(stats.size / 1024);
       return `diff --git a/${relativePath} b/${relativePath}
diff --git a/libs/git-utils/tests/diff.test.ts b/libs/git-utils/tests/diff.test.ts
index 6212df1a..953d2763 100644
--- a/libs/git-utils/tests/diff.test.ts
+++ b/libs/git-utils/tests/diff.test.ts
@@ -117,6 +117,18 @@ describe('diff.ts', () => {
       expect(diff).toContain(`diff --git a/${fileName} b/${fileName}`);
       expect(diff).toContain('[Unable to read file content]');
     });
+
+    it('should handle directory path gracefully', async () => {
+      const dirName = 'some-directory';
+      const dirPath = path.join(tempDir, dirName);
+      await fs.mkdir(dirPath);
+
+      const diff = await generateSyntheticDiffForNewFile(tempDir, dirName);
+
+      expect(diff).toContain(`diff --git a/${dirName} b/${dirName}`);
+      expect(diff).toContain('new file mode 040000');
+      expect(diff).toContain('[Directory]');
+    });
   });
 
   describe('appendUntrackedFileDiffs', () => {