diff --git a/libs/git-utils/src/diff.ts b/libs/git-utils/src/diff.ts
index 96609cfa..f052f48d 100644
--- a/libs/git-utils/src/diff.ts
+++ b/libs/git-utils/src/diff.ts
@@ -24,6 +24,24 @@ function isBinaryFile(filePath: string): boolean {
   return BINARY_EXTENSIONS.has(ext);
 }
 
+/**
+ * Create a synthetic diff for a new file with the given content lines
+ * This helper reduces duplication in diff generation logic
+ */
+function createNewFileDiff(relativePath: string, mode: string, contentLines: string[]): string {
+  const lineCount = contentLines.length;
+  const addedLines = contentLines.map((line) => `+${line}`).join('\n');
+
+  return `diff --git a/${relativePath} b/${relativePath}
+new file mode ${mode}
+index 0000000..0000000
+--- /dev/null
++++ b/${relativePath}
+@@ -0,0 +${lineCount === 1 ? '1' : `1,${lineCount}`} @@
+${addedLines}
+`;
+}
+
 /**
  * Generate a synthetic unified diff for an untracked (new) file
  * This is needed because `git diff HEAD` doesn't include untracked files
@@ -44,18 +62,19 @@ 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 createNewFileDiff(relativePath, '040000', ['[Directory]']);
+    }
+
     if (stats.size > MAX_SYNTHETIC_DIFF_SIZE) {
       const sizeKB = Math.round(stats.size / 1024);
-      return `diff --git a/${relativePath} b/${relativePath}
-new file mode 100644
-index 0000000..0000000
---- /dev/null
-+++ b/${relativePath}
-@@ -0,0 +1 @@
-+[File too large to display: ${sizeKB}KB]
-`;
+      return createNewFileDiff(relativePath, '100644', [
+        `[File too large to display: ${sizeKB}KB]`,
+      ]);
     }
 
     // Read file content
@@ -90,14 +109,7 @@ ${addedLines}`;
     // Log the error for debugging
     logger.error(`Failed to generate synthetic diff for ${fullPath}:`, error);
     // Return a placeholder diff
-    return `diff --git a/${relativePath} b/${relativePath}
-new file mode 100644
-index 0000000..0000000
---- /dev/null
-+++ b/${relativePath}
-@@ -0,0 +1 @@
-+[Unable to read file content]
-`;
+    return createNewFileDiff(relativePath, '100644', ['[Unable to read file content]']);
   }
 }
 
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', () => {