diff --git a/libs/utils/package.json b/libs/utils/package.json
new file mode 100644
index 00000000..3be9294e
--- /dev/null
+++ b/libs/utils/package.json
@@ -0,0 +1,21 @@
+{
+  "name": "@automaker/utils",
+  "version": "1.0.0",
+  "description": "Shared utility functions for AutoMaker",
+  "main": "dist/index.js",
+  "types": "dist/index.d.ts",
+  "scripts": {
+    "build": "tsc",
+    "watch": "tsc --watch"
+  },
+  "keywords": ["automaker", "utils"],
+  "author": "",
+  "license": "MIT",
+  "dependencies": {
+    "@automaker/types": "^1.0.0"
+  },
+  "devDependencies": {
+    "@types/node": "^22.10.5",
+    "typescript": "^5.7.3"
+  }
+}
diff --git a/libs/utils/src/conversation-utils.ts b/libs/utils/src/conversation-utils.ts
new file mode 100644
index 00000000..ae08a2cb
--- /dev/null
+++ b/libs/utils/src/conversation-utils.ts
@@ -0,0 +1,97 @@
+/**
+ * Conversation history utilities for processing message history
+ *
+ * Provides standardized conversation history handling:
+ * - Extract text from content (string or array format)
+ * - Normalize content blocks to array format
+ * - Format history as plain text for CLI-based providers
+ * - Convert history to Claude SDK message format
+ */
+
+import type { ConversationMessage } from '@automaker/types';
+
+/**
+ * Extract plain text from message content (handles both string and array formats)
+ *
+ * @param content - Message content (string or array of content blocks)
+ * @returns Extracted text content
+ */
+export function extractTextFromContent(
+  content: string | Array<{ type: string; text?: string; source?: object }>
+): string {
+  if (typeof content === "string") {
+    return content;
+  }
+
+  // Extract text blocks only
+  return content
+    .filter((block) => block.type === "text")
+    .map((block) => block.text || "")
+    .join("\n");
+}
+
+/**
+ * Normalize message content to array format
+ *
+ * @param content - Message content (string or array)
+ * @returns Content as array of blocks
+ */
+export function normalizeContentBlocks(
+  content: string | Array<{ type: string; text?: string; source?: object }>
+): Array<{ type: string; text?: string; source?: object }> {
+  if (Array.isArray(content)) {
+    return content;
+  }
+  return [{ type: "text", text: content }];
+}
+
+/**
+ * Format conversation history as plain text for CLI-based providers
+ *
+ * @param history - Array of conversation messages
+ * @returns Formatted text with role labels
+ */
+export function formatHistoryAsText(history: ConversationMessage[]): string {
+  if (history.length === 0) {
+    return "";
+  }
+
+  let historyText = "Previous conversation:\n\n";
+
+  for (const msg of history) {
+    const contentText = extractTextFromContent(msg.content);
+    const role = msg.role === "user" ? "User" : "Assistant";
+    historyText += `${role}: ${contentText}\n\n`;
+  }
+
+  historyText += "---\n\n";
+  return historyText;
+}
+
+/**
+ * Convert conversation history to Claude SDK message format
+ *
+ * @param history - Array of conversation messages
+ * @returns Array of Claude SDK formatted messages
+ */
+export function convertHistoryToMessages(
+  history: ConversationMessage[]
+): Array<{
+  type: "user" | "assistant";
+  session_id: string;
+  message: {
+    role: "user" | "assistant";
+    content: Array<{ type: string; text?: string; source?: object }>;
+  };
+  parent_tool_use_id: null;
+}> {
+  return history.map((historyMsg) => ({
+    type: historyMsg.role,
+    session_id: "",
+    message: {
+      role: historyMsg.role,
+      content: normalizeContentBlocks(historyMsg.content),
+    },
+    parent_tool_use_id: null,
+  }));
+}
diff --git a/libs/utils/src/error-handler.ts b/libs/utils/src/error-handler.ts
new file mode 100644
index 00000000..ad5314e1
--- /dev/null
+++ b/libs/utils/src/error-handler.ts
@@ -0,0 +1,110 @@
+/**
+ * Error handling utilities for standardized error classification
+ *
+ * Provides utilities for:
+ * - Detecting abort/cancellation errors
+ * - Detecting authentication errors
+ * - Classifying errors by type
+ * - Generating user-friendly error messages
+ */
+
+import type { ErrorType, ErrorInfo } from '@automaker/types';
+
+/**
+ * Check if an error is an abort/cancellation error
+ *
+ * @param error - The error to check
+ * @returns True if the error is an abort error
+ */
+export function isAbortError(error: unknown): boolean {
+  return (
+    error instanceof Error &&
+    (error.name === "AbortError" || error.message.includes("abort"))
+  );
+}
+
+/**
+ * Check if an error is a user-initiated cancellation
+ *
+ * @param errorMessage - The error message to check
+ * @returns True if the error is a user-initiated cancellation
+ */
+export function isCancellationError(errorMessage: string): boolean {
+  const lowerMessage = errorMessage.toLowerCase();
+  return (
+    lowerMessage.includes("cancelled") ||
+    lowerMessage.includes("canceled") ||
+    lowerMessage.includes("stopped") ||
+    lowerMessage.includes("aborted")
+  );
+}
+
+/**
+ * Check if an error is an authentication/API key error
+ *
+ * @param errorMessage - The error message to check
+ * @returns True if the error is authentication-related
+ */
+export function isAuthenticationError(errorMessage: string): boolean {
+  return (
+    errorMessage.includes("Authentication failed") ||
+    errorMessage.includes("Invalid API key") ||
+    errorMessage.includes("authentication_failed") ||
+    errorMessage.includes("Fix external API key")
+  );
+}
+
+/**
+ * Classify an error into a specific type
+ *
+ * @param error - The error to classify
+ * @returns Classified error information
+ */
+export function classifyError(error: unknown): ErrorInfo {
+  const message = error instanceof Error ? error.message : String(error || "Unknown error");
+  const isAbort = isAbortError(error);
+  const isAuth = isAuthenticationError(message);
+  const isCancellation = isCancellationError(message);
+
+  let type: ErrorType;
+  if (isAuth) {
+    type = "authentication";
+  } else if (isAbort) {
+    type = "abort";
+  } else if (isCancellation) {
+    type = "cancellation";
+  } else if (error instanceof Error) {
+    type = "execution";
+  } else {
+    type = "unknown";
+  }
+
+  return {
+    type,
+    message,
+    isAbort,
+    isAuth,
+    isCancellation,
+    originalError: error,
+  };
+}
+
+/**
+ * Get a user-friendly error message
+ *
+ * @param error - The error to convert
+ * @returns User-friendly error message
+ */
+export function getUserFriendlyErrorMessage(error: unknown): string {
+  const info = classifyError(error);
+
+  if (info.isAbort) {
+    return "Operation was cancelled";
+  }
+
+  if (info.isAuth) {
+    return "Authentication failed. Please check your API key.";
+  }
+
+  return info.message;
+}
diff --git a/libs/utils/src/fs-utils.ts b/libs/utils/src/fs-utils.ts
new file mode 100644
index 00000000..5b67124a
--- /dev/null
+++ b/libs/utils/src/fs-utils.ts
@@ -0,0 +1,67 @@
+/**
+ * File system utilities that handle symlinks safely
+ */
+
+import fs from "fs/promises";
+import path from "path";
+
+/**
+ * Create a directory, handling symlinks safely to avoid ELOOP errors.
+ * If the path already exists as a directory or symlink, returns success.
+ */
+export async function mkdirSafe(dirPath: string): Promise<void> {
+  const resolvedPath = path.resolve(dirPath);
+
+  // Check if path already exists using lstat (doesn't follow symlinks)
+  try {
+    const stats = await fs.lstat(resolvedPath);
+    // Path exists - if it's a directory or symlink, consider it success
+    if (stats.isDirectory() || stats.isSymbolicLink()) {
+      return;
+    }
+    // It's a file - can't create directory
+    throw new Error(`Path exists and is not a directory: ${resolvedPath}`);
+  } catch (error: any) {
+    // ENOENT means path doesn't exist - we should create it
+    if (error.code !== "ENOENT") {
+      // Some other error (could be ELOOP in parent path)
+      // If it's ELOOP, the path involves symlinks - don't try to create
+      if (error.code === "ELOOP") {
+        console.warn(`[fs-utils] Symlink loop detected at ${resolvedPath}, skipping mkdir`);
+        return;
+      }
+      throw error;
+    }
+  }
+
+  // Path doesn't exist, create it
+  try {
+    await fs.mkdir(resolvedPath, { recursive: true });
+  } catch (error: any) {
+    // Handle race conditions and symlink issues
+    if (error.code === "EEXIST" || error.code === "ELOOP") {
+      return;
+    }
+    throw error;
+  }
+}
+
+/**
+ * Check if a path exists, handling symlinks safely.
+ * Returns true if the path exists as a file, directory, or symlink.
+ */
+export async function existsSafe(filePath: string): Promise<boolean> {
+  try {
+    await fs.lstat(filePath);
+    return true;
+  } catch (error: any) {
+    if (error.code === "ENOENT") {
+      return false;
+    }
+    // ELOOP or other errors - path exists but is problematic
+    if (error.code === "ELOOP") {
+      return true; // Symlink exists, even if looping
+    }
+    throw error;
+  }
+}
diff --git a/libs/utils/src/image-handler.ts b/libs/utils/src/image-handler.ts
new file mode 100644
index 00000000..d99ca452
--- /dev/null
+++ b/libs/utils/src/image-handler.ts
@@ -0,0 +1,114 @@
+/**
+ * Image handling utilities for processing image files
+ *
+ * Provides utilities for:
+ * - MIME type detection based on file extensions
+ * - Base64 encoding of image files
+ * - Content block generation for Claude SDK format
+ * - Path resolution (relative/absolute)
+ */
+
+import fs from "fs/promises";
+import path from "path";
+import type { ImageData, ImageContentBlock } from '@automaker/types';
+
+/**
+ * MIME type mapping for image file extensions
+ */
+const IMAGE_MIME_TYPES: Record<string, string> = {
+  ".jpg": "image/jpeg",
+  ".jpeg": "image/jpeg",
+  ".png": "image/png",
+  ".gif": "image/gif",
+  ".webp": "image/webp",
+} as const;
+
+/**
+ * Get MIME type for an image file based on extension
+ *
+ * @param imagePath - Path to the image file
+ * @returns MIME type string (defaults to "image/png" for unknown extensions)
+ */
+export function getMimeTypeForImage(imagePath: string): string {
+  const ext = path.extname(imagePath).toLowerCase();
+  return IMAGE_MIME_TYPES[ext] || "image/png";
+}
+
+/**
+ * Read an image file and convert to base64 with metadata
+ *
+ * @param imagePath - Path to the image file
+ * @returns Promise resolving to image data with base64 encoding
+ * @throws Error if file cannot be read
+ */
+export async function readImageAsBase64(imagePath: string): Promise<ImageData> {
+  const imageBuffer = await fs.readFile(imagePath);
+  const base64Data = imageBuffer.toString("base64");
+  const mimeType = getMimeTypeForImage(imagePath);
+
+  return {
+    base64: base64Data,
+    mimeType,
+    filename: path.basename(imagePath),
+    originalPath: imagePath,
+  };
+}
+
+/**
+ * Convert image paths to content blocks (Claude SDK format)
+ * Handles both relative and absolute paths
+ *
+ * @param imagePaths - Array of image file paths
+ * @param workDir - Optional working directory for resolving relative paths
+ * @returns Promise resolving to array of image content blocks
+ */
+export async function convertImagesToContentBlocks(
+  imagePaths: string[],
+  workDir?: string
+): Promise<ImageContentBlock[]> {
+  const blocks: ImageContentBlock[] = [];
+
+  for (const imagePath of imagePaths) {
+    try {
+      // Resolve to absolute path if needed
+      const absolutePath = workDir && !path.isAbsolute(imagePath)
+        ? path.join(workDir, imagePath)
+        : imagePath;
+
+      const imageData = await readImageAsBase64(absolutePath);
+
+      blocks.push({
+        type: "image",
+        source: {
+          type: "base64",
+          media_type: imageData.mimeType,
+          data: imageData.base64,
+        },
+      });
+    } catch (error) {
+      console.error(`[ImageHandler] Failed to load image ${imagePath}:`, error);
+      // Continue processing other images
+    }
+  }
+
+  return blocks;
+}
+
+/**
+ * Build a list of image paths for text prompts
+ * Formats image paths as a bulleted list for inclusion in text prompts
+ *
+ * @param imagePaths - Array of image file paths
+ * @returns Formatted string with image paths, or empty string if no images
+ */
+export function formatImagePathsForPrompt(imagePaths: string[]): string {
+  if (imagePaths.length === 0) {
+    return "";
+  }
+
+  let text = "\n\nAttached images:\n";
+  for (const imagePath of imagePaths) {
+    text += `- ${imagePath}\n`;
+  }
+  return text;
+}
diff --git a/libs/utils/src/index.ts b/libs/utils/src/index.ts
new file mode 100644
index 00000000..694b999b
--- /dev/null
+++ b/libs/utils/src/index.ts
@@ -0,0 +1,50 @@
+/**
+ * @automaker/utils
+ * Shared utility functions for AutoMaker
+ */
+
+// Error handling
+export {
+  isAbortError,
+  isCancellationError,
+  isAuthenticationError,
+  classifyError,
+  getUserFriendlyErrorMessage,
+} from './error-handler';
+
+// Conversation utilities
+export {
+  extractTextFromContent,
+  normalizeContentBlocks,
+  formatHistoryAsText,
+  convertHistoryToMessages,
+} from './conversation-utils';
+
+// Image handling
+export {
+  getMimeTypeForImage,
+  readImageAsBase64,
+  convertImagesToContentBlocks,
+  formatImagePathsForPrompt,
+} from './image-handler';
+
+// Prompt building
+export {
+  buildPromptWithImages,
+  type PromptContent,
+  type PromptWithImages,
+} from './prompt-builder';
+
+// Logger
+export {
+  createLogger,
+  getLogLevel,
+  setLogLevel,
+  LogLevel,
+} from './logger';
+
+// File system utilities
+export {
+  mkdirSafe,
+  existsSafe,
+} from './fs-utils';
diff --git a/libs/utils/src/logger.ts b/libs/utils/src/logger.ts
new file mode 100644
index 00000000..44a82543
--- /dev/null
+++ b/libs/utils/src/logger.ts
@@ -0,0 +1,74 @@
+/**
+ * Simple logger utility with log levels
+ * Configure via LOG_LEVEL environment variable: error, warn, info, debug
+ * Defaults to 'info' if not set
+ */
+
+export enum LogLevel {
+  ERROR = 0,
+  WARN = 1,
+  INFO = 2,
+  DEBUG = 3,
+}
+
+const LOG_LEVEL_NAMES: Record<string, LogLevel> = {
+  error: LogLevel.ERROR,
+  warn: LogLevel.WARN,
+  info: LogLevel.INFO,
+  debug: LogLevel.DEBUG,
+};
+
+let currentLogLevel: LogLevel = LogLevel.INFO;
+
+// Initialize log level from environment variable
+const envLogLevel = process.env.LOG_LEVEL?.toLowerCase();
+if (envLogLevel && LOG_LEVEL_NAMES[envLogLevel] !== undefined) {
+  currentLogLevel = LOG_LEVEL_NAMES[envLogLevel];
+}
+
+/**
+ * Create a logger instance with a context prefix
+ */
+export function createLogger(context: string) {
+  const prefix = `[${context}]`;
+
+  return {
+    error: (...args: unknown[]): void => {
+      if (currentLogLevel >= LogLevel.ERROR) {
+        console.error(prefix, ...args);
+      }
+    },
+
+    warn: (...args: unknown[]): void => {
+      if (currentLogLevel >= LogLevel.WARN) {
+        console.warn(prefix, ...args);
+      }
+    },
+
+    info: (...args: unknown[]): void => {
+      if (currentLogLevel >= LogLevel.INFO) {
+        console.log(prefix, ...args);
+      }
+    },
+
+    debug: (...args: unknown[]): void => {
+      if (currentLogLevel >= LogLevel.DEBUG) {
+        console.log(prefix, "[DEBUG]", ...args);
+      }
+    },
+  };
+}
+
+/**
+ * Get the current log level
+ */
+export function getLogLevel(): LogLevel {
+  return currentLogLevel;
+}
+
+/**
+ * Set the log level programmatically (useful for testing)
+ */
+export function setLogLevel(level: LogLevel): void {
+  currentLogLevel = level;
+}
diff --git a/libs/utils/src/prompt-builder.ts b/libs/utils/src/prompt-builder.ts
new file mode 100644
index 00000000..ee0065fc
--- /dev/null
+++ b/libs/utils/src/prompt-builder.ts
@@ -0,0 +1,79 @@
+/**
+ * Prompt building utilities for constructing prompts with images
+ *
+ * Provides standardized prompt building that:
+ * - Combines text prompts with image attachments
+ * - Handles content block array generation
+ * - Optionally includes image paths in text
+ * - Supports both vision and non-vision models
+ */
+
+import { convertImagesToContentBlocks, formatImagePathsForPrompt } from "./image-handler";
+
+/**
+ * Content that can be either simple text or structured blocks
+ */
+export type PromptContent = string | Array<{
+  type: string;
+  text?: string;
+  source?: object;
+}>;
+
+/**
+ * Result of building a prompt with optional images
+ */
+export interface PromptWithImages {
+  content: PromptContent;
+  hasImages: boolean;
+}
+
+/**
+ * Build a prompt with optional image attachments
+ *
+ * @param basePrompt - The text prompt
+ * @param imagePaths - Optional array of image file paths
+ * @param workDir - Optional working directory for resolving relative paths
+ * @param includeImagePaths - Whether to append image paths to the text (default: false)
+ * @returns Promise resolving to prompt content and metadata
+ */
+export async function buildPromptWithImages(
+  basePrompt: string,
+  imagePaths?: string[],
+  workDir?: string,
+  includeImagePaths: boolean = false
+): Promise<PromptWithImages> {
+  // No images - return plain text
+  if (!imagePaths || imagePaths.length === 0) {
+    return { content: basePrompt, hasImages: false };
+  }
+
+  // Build text content with optional image path listing
+  let textContent = basePrompt;
+  if (includeImagePaths) {
+    textContent += formatImagePathsForPrompt(imagePaths);
+  }
+
+  // Build content blocks array
+  const contentBlocks: Array<{
+    type: string;
+    text?: string;
+    source?: object;
+  }> = [];
+
+  // Add text block if we have text
+  if (textContent.trim()) {
+    contentBlocks.push({ type: "text", text: textContent });
+  }
+
+  // Add image blocks
+  const imageBlocks = await convertImagesToContentBlocks(imagePaths, workDir);
+  contentBlocks.push(...imageBlocks);
+
+  // Return appropriate format
+  const content: PromptContent =
+    contentBlocks.length > 1 || contentBlocks[0]?.type === "image"
+      ? contentBlocks
+      : textContent;
+
+  return { content, hasImages: true };
+}
diff --git a/libs/utils/tsconfig.json b/libs/utils/tsconfig.json
new file mode 100644
index 00000000..54e9774b
--- /dev/null
+++ b/libs/utils/tsconfig.json
@@ -0,0 +1,20 @@
+{
+  "compilerOptions": {
+    "target": "ES2020",
+    "module": "commonjs",
+    "lib": ["ES2020"],
+    "types": ["node"],
+    "declaration": true,
+    "declarationMap": true,
+    "outDir": "./dist",
+    "rootDir": "./src",
+    "strict": true,
+    "esModuleInterop": true,
+    "skipLibCheck": true,
+    "forceConsistentCasingInFileNames": true,
+    "resolveJsonModule": true,
+    "moduleResolution": "node"
+  },
+  "include": ["src/**/*"],
+  "exclude": ["node_modules", "dist"]
+}