diff --git a/apps/server/src/lib/app-spec-format.ts b/apps/server/src/lib/app-spec-format.ts
index 2894bbc4..0941fa4c 100644
--- a/apps/server/src/lib/app-spec-format.ts
+++ b/apps/server/src/lib/app-spec-format.ts
@@ -11,9 +11,13 @@ export { specOutputSchema } from '@automaker/types';
 
 /**
  * Escape special XML characters
+ * Handles undefined/null values by converting them to empty strings
  */
-function escapeXml(str: string): string {
-  return str
+function escapeXml(str: string | undefined | null): string {
+  if (str === undefined || str === null) {
+    return '';
+  }
+  return String(str)
     .replace(/&/g, '&')
     .replace(/</g, '&lt;')
     .replace(/>/g, '&gt;')
diff --git a/apps/server/src/routes/app-spec/generate-spec.ts b/apps/server/src/routes/app-spec/generate-spec.ts
index d79ffc5f..f519aca5 100644
--- a/apps/server/src/routes/app-spec/generate-spec.ts
+++ b/apps/server/src/routes/app-spec/generate-spec.ts
@@ -201,19 +201,26 @@ Your entire response should be valid JSON starting with { and ending with }. No
       xmlContent = responseText.substring(xmlStart, xmlEnd + '</project_specification>'.length);
       logger.info(`Extracted XML content: ${xmlContent.length} chars (from position ${xmlStart})`);
     } else {
-      // No valid XML structure found in the response text
-      // This happens when structured output was expected but not received, and the agent
-      // output conversational text instead of XML (e.g., "The project directory appears to be empty...")
-      // We should NOT save this conversational text as it's not a valid spec
-      logger.error('❌ Response does not contain valid <project_specification> XML structure');
-      logger.error(
-        'This typically happens when structured output failed and the agent produced conversational text instead of XML'
-      );
-      throw new Error(
-        'Failed to generate spec: No valid XML structure found in response. ' +
-          'The response contained conversational text but no <project_specification> tags. ' +
-          'Please try again.'
-      );
+      // No XML found, try JSON extraction
+      logger.warn('⚠️ No XML tags found, attempting JSON extraction...');
+      const extractedJson = extractJson<SpecOutput>(responseText, { logger });
+
+      if (extractedJson) {
+        logger.info('✅ Successfully extracted JSON from response text');
+        xmlContent = specToXml(extractedJson);
+        logger.info(`✅ Converted extracted JSON to XML: ${xmlContent.length} chars`);
+      } else {
+        // Neither XML nor valid JSON found
+        logger.error('❌ Response does not contain valid XML or JSON structure');
+        logger.error(
+          'This typically happens when structured output failed and the agent produced conversational text instead of structured output'
+        );
+        throw new Error(
+          'Failed to generate spec: No valid XML or JSON structure found in response. ' +
+            'The response contained conversational text but no <project_specification> tags or valid JSON. ' +
+            'Please try again.'
+        );
+      }
     }
   }