diff --git a/.changeset/petite-news-build.md b/.changeset/petite-news-build.md
new file mode 100644
index 00000000..5e9a8bb4
--- /dev/null
+++ b/.changeset/petite-news-build.md
@@ -0,0 +1,8 @@
+---
+"task-master-ai": patch
+---
+
+Fix MCP server compatibility with Cursor IDE's latest update by upgrading to fastmcp v3.20.1 with Zod v4 support
+
+- This resolves connection failures where the MCP server was unable to establish proper capability negotiation.
+- Issue typically included wording like: `Server does not support completions`
diff --git a/apps/mcp/package.json b/apps/mcp/package.json
index cfd0eeb9..45c5b932 100644
--- a/apps/mcp/package.json
+++ b/apps/mcp/package.json
@@ -24,7 +24,7 @@
 	"dependencies": {
 		"@tm/core": "*",
 		"zod": "^4.1.11",
-		"fastmcp": "^3.19.2"
+		"fastmcp": "^3.23.0"
 	},
 	"devDependencies": {
 		"@biomejs/biome": "^1.9.4",
diff --git a/apps/mcp/src/tools/autopilot/abort.tool.ts b/apps/mcp/src/tools/autopilot/abort.tool.ts
index 2ce6d54f..1da290d8 100644
--- a/apps/mcp/src/tools/autopilot/abort.tool.ts
+++ b/apps/mcp/src/tools/autopilot/abort.tool.ts
@@ -3,9 +3,7 @@
  * Abort a running TDD workflow and clean up state
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/commit.tool.ts b/apps/mcp/src/tools/autopilot/commit.tool.ts
index bcfbc5cc..babd94a2 100644
--- a/apps/mcp/src/tools/autopilot/commit.tool.ts
+++ b/apps/mcp/src/tools/autopilot/commit.tool.ts
@@ -3,9 +3,7 @@
  * Create a git commit with automatic staging and message generation
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/complete.tool.ts b/apps/mcp/src/tools/autopilot/complete.tool.ts
index 8089dce5..5b4d1023 100644
--- a/apps/mcp/src/tools/autopilot/complete.tool.ts
+++ b/apps/mcp/src/tools/autopilot/complete.tool.ts
@@ -3,9 +3,7 @@
  * Complete the current TDD phase with test result validation
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/finalize.tool.ts b/apps/mcp/src/tools/autopilot/finalize.tool.ts
index 09d0d67a..4fb94f41 100644
--- a/apps/mcp/src/tools/autopilot/finalize.tool.ts
+++ b/apps/mcp/src/tools/autopilot/finalize.tool.ts
@@ -3,9 +3,7 @@
  * Finalize and complete the workflow with working tree validation
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/next.tool.ts b/apps/mcp/src/tools/autopilot/next.tool.ts
index e9a2093a..821c95e2 100644
--- a/apps/mcp/src/tools/autopilot/next.tool.ts
+++ b/apps/mcp/src/tools/autopilot/next.tool.ts
@@ -3,9 +3,7 @@
  * Get the next action to perform in the TDD workflow
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/resume.tool.ts b/apps/mcp/src/tools/autopilot/resume.tool.ts
index fe3055fd..1a65ad3a 100644
--- a/apps/mcp/src/tools/autopilot/resume.tool.ts
+++ b/apps/mcp/src/tools/autopilot/resume.tool.ts
@@ -3,9 +3,7 @@
  * Resume a previously started TDD workflow from saved state
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/start.tool.ts b/apps/mcp/src/tools/autopilot/start.tool.ts
index e0dabdda..81df8b9f 100644
--- a/apps/mcp/src/tools/autopilot/start.tool.ts
+++ b/apps/mcp/src/tools/autopilot/start.tool.ts
@@ -3,9 +3,7 @@
  * Initialize and start a new TDD workflow for a task
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/autopilot/status.tool.ts b/apps/mcp/src/tools/autopilot/status.tool.ts
index 0d19ad01..f12d6e10 100644
--- a/apps/mcp/src/tools/autopilot/status.tool.ts
+++ b/apps/mcp/src/tools/autopilot/status.tool.ts
@@ -3,9 +3,7 @@
  * Get comprehensive workflow status and progress information
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/tasks/get-task.tool.ts b/apps/mcp/src/tools/tasks/get-task.tool.ts
index 68a78465..c3e79a3a 100644
--- a/apps/mcp/src/tools/tasks/get-task.tool.ts
+++ b/apps/mcp/src/tools/tasks/get-task.tool.ts
@@ -3,9 +3,7 @@
  * Get detailed information about a specific task by ID
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/apps/mcp/src/tools/tasks/get-tasks.tool.ts b/apps/mcp/src/tools/tasks/get-tasks.tool.ts
index 1344e723..64222d20 100644
--- a/apps/mcp/src/tools/tasks/get-tasks.tool.ts
+++ b/apps/mcp/src/tools/tasks/get-tasks.tool.ts
@@ -3,9 +3,7 @@
  * Get all tasks from Task Master with optional filtering
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot
diff --git a/mcp-server/src/tools/add-dependency.js b/mcp-server/src/tools/add-dependency.js
index 32352657..d922a3ef 100644
--- a/mcp-server/src/tools/add-dependency.js
+++ b/mcp-server/src/tools/add-dependency.js
@@ -3,9 +3,7 @@
  * Tool for adding a dependency to a task
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/add-subtask.js b/mcp-server/src/tools/add-subtask.js
index b87f3700..62ddffe8 100644
--- a/mcp-server/src/tools/add-subtask.js
+++ b/mcp-server/src/tools/add-subtask.js
@@ -3,9 +3,7 @@
  * Tool for adding subtasks to existing tasks
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/add-tag.js b/mcp-server/src/tools/add-tag.js
index dfb06ae1..886d1a25 100644
--- a/mcp-server/src/tools/add-tag.js
+++ b/mcp-server/src/tools/add-tag.js
@@ -3,9 +3,7 @@
  * Tool to create a new tag
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/add-task.js b/mcp-server/src/tools/add-task.js
index 0d2d1586..3ad43a94 100644
--- a/mcp-server/src/tools/add-task.js
+++ b/mcp-server/src/tools/add-task.js
@@ -3,9 +3,7 @@
  * Tool to add a new task using AI
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/analyze.js b/mcp-server/src/tools/analyze.js
index d1aaf790..871c90da 100644
--- a/mcp-server/src/tools/analyze.js
+++ b/mcp-server/src/tools/analyze.js
@@ -3,9 +3,7 @@
  * Tool for analyzing task complexity and generating recommendations
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import path from 'path';
 import fs from 'fs'; // Import fs for directory check/creation
 import {
diff --git a/mcp-server/src/tools/clear-subtasks.js b/mcp-server/src/tools/clear-subtasks.js
index 56131c4a..6a0d0bff 100644
--- a/mcp-server/src/tools/clear-subtasks.js
+++ b/mcp-server/src/tools/clear-subtasks.js
@@ -3,9 +3,7 @@
  * Tool for clearing subtasks from parent tasks
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/complexity-report.js b/mcp-server/src/tools/complexity-report.js
index 8501ced7..0dfa401a 100644
--- a/mcp-server/src/tools/complexity-report.js
+++ b/mcp-server/src/tools/complexity-report.js
@@ -3,9 +3,7 @@
  * Tool for displaying the complexity analysis report
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/copy-tag.js b/mcp-server/src/tools/copy-tag.js
index f58b75b3..395d2bce 100644
--- a/mcp-server/src/tools/copy-tag.js
+++ b/mcp-server/src/tools/copy-tag.js
@@ -3,9 +3,7 @@
  * Tool to copy an existing tag to a new tag
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/delete-tag.js b/mcp-server/src/tools/delete-tag.js
index e3b7b1ff..24813a35 100644
--- a/mcp-server/src/tools/delete-tag.js
+++ b/mcp-server/src/tools/delete-tag.js
@@ -3,9 +3,7 @@
  * Tool to delete an existing tag
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/expand-all.js b/mcp-server/src/tools/expand-all.js
index 49bbef2b..ee52607a 100644
--- a/mcp-server/src/tools/expand-all.js
+++ b/mcp-server/src/tools/expand-all.js
@@ -3,9 +3,7 @@
  * Tool for expanding all pending tasks with subtasks
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/expand-task.js b/mcp-server/src/tools/expand-task.js
index 4b0f7af3..b6cd5b1f 100644
--- a/mcp-server/src/tools/expand-task.js
+++ b/mcp-server/src/tools/expand-task.js
@@ -3,9 +3,7 @@
  * Tool to expand a task into subtasks
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/fix-dependencies.js b/mcp-server/src/tools/fix-dependencies.js
index 7b9e2627..92586355 100644
--- a/mcp-server/src/tools/fix-dependencies.js
+++ b/mcp-server/src/tools/fix-dependencies.js
@@ -3,9 +3,7 @@
  * Tool for automatically fixing invalid task dependencies
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/generate.js b/mcp-server/src/tools/generate.js
index 5a932aa4..aab34355 100644
--- a/mcp-server/src/tools/generate.js
+++ b/mcp-server/src/tools/generate.js
@@ -3,9 +3,7 @@
  * Tool to generate individual task files from tasks.json
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/get-operation-status.js b/mcp-server/src/tools/get-operation-status.js
index 0c982001..7713c612 100644
--- a/mcp-server/src/tools/get-operation-status.js
+++ b/mcp-server/src/tools/get-operation-status.js
@@ -1,7 +1,5 @@
 // mcp-server/src/tools/get-operation-status.js
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import { createErrorResponse, createContentResponse } from './utils.js'; // Assuming these utils exist
 
 /**
diff --git a/mcp-server/src/tools/initialize-project.js b/mcp-server/src/tools/initialize-project.js
index fe0d8488..6bf380d6 100644
--- a/mcp-server/src/tools/initialize-project.js
+++ b/mcp-server/src/tools/initialize-project.js
@@ -1,6 +1,4 @@
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/list-tags.js b/mcp-server/src/tools/list-tags.js
index cef82456..4e12d5f6 100644
--- a/mcp-server/src/tools/list-tags.js
+++ b/mcp-server/src/tools/list-tags.js
@@ -3,9 +3,7 @@
  * Tool to list all available tags
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/models.js b/mcp-server/src/tools/models.js
index 388c73a3..f921d3de 100644
--- a/mcp-server/src/tools/models.js
+++ b/mcp-server/src/tools/models.js
@@ -3,9 +3,7 @@
  * MCP tool for managing AI model configurations
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/move-task.js b/mcp-server/src/tools/move-task.js
index 25743242..dd944342 100644
--- a/mcp-server/src/tools/move-task.js
+++ b/mcp-server/src/tools/move-task.js
@@ -3,9 +3,7 @@
  * Tool for moving tasks or subtasks to a new position
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/next-task.js b/mcp-server/src/tools/next-task.js
index 85e99b2a..b5453b08 100644
--- a/mcp-server/src/tools/next-task.js
+++ b/mcp-server/src/tools/next-task.js
@@ -3,9 +3,7 @@
  * Tool to find the next task to work on based on dependencies and status
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/parse-prd.js b/mcp-server/src/tools/parse-prd.js
index fbd1d806..ebfabd1b 100644
--- a/mcp-server/src/tools/parse-prd.js
+++ b/mcp-server/src/tools/parse-prd.js
@@ -3,9 +3,7 @@
  * Tool to parse PRD document and generate tasks
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	withNormalizedProjectRoot,
diff --git a/mcp-server/src/tools/remove-dependency.js b/mcp-server/src/tools/remove-dependency.js
index acb24526..84c57462 100644
--- a/mcp-server/src/tools/remove-dependency.js
+++ b/mcp-server/src/tools/remove-dependency.js
@@ -3,9 +3,7 @@
  * Tool for removing a dependency from a task
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/remove-subtask.js b/mcp-server/src/tools/remove-subtask.js
index d0aef9d9..ae83e650 100644
--- a/mcp-server/src/tools/remove-subtask.js
+++ b/mcp-server/src/tools/remove-subtask.js
@@ -3,9 +3,7 @@
  * Tool for removing subtasks from parent tasks
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/remove-task.js b/mcp-server/src/tools/remove-task.js
index de10d4ef..93b2e8f6 100644
--- a/mcp-server/src/tools/remove-task.js
+++ b/mcp-server/src/tools/remove-task.js
@@ -3,9 +3,7 @@
  * Tool to remove a task by ID
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/rename-tag.js b/mcp-server/src/tools/rename-tag.js
index 5969fafc..e26ffcac 100644
--- a/mcp-server/src/tools/rename-tag.js
+++ b/mcp-server/src/tools/rename-tag.js
@@ -3,9 +3,7 @@
  * Tool to rename an existing tag
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/research.js b/mcp-server/src/tools/research.js
index 15d43bad..1fb61be9 100644
--- a/mcp-server/src/tools/research.js
+++ b/mcp-server/src/tools/research.js
@@ -3,9 +3,7 @@
  * Tool to perform AI-powered research queries with project context
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/response-language.js b/mcp-server/src/tools/response-language.js
index 2247f240..42a8ee06 100644
--- a/mcp-server/src/tools/response-language.js
+++ b/mcp-server/src/tools/response-language.js
@@ -1,6 +1,4 @@
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/rules.js b/mcp-server/src/tools/rules.js
index 6c243ca7..ff3fed7a 100644
--- a/mcp-server/src/tools/rules.js
+++ b/mcp-server/src/tools/rules.js
@@ -3,9 +3,7 @@
  * Tool to add or remove rules from a project (MCP server)
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/scope-down.js b/mcp-server/src/tools/scope-down.js
index 52bd1f44..a982497e 100644
--- a/mcp-server/src/tools/scope-down.js
+++ b/mcp-server/src/tools/scope-down.js
@@ -3,9 +3,7 @@
  * Tool to scope down task complexity
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/scope-up.js b/mcp-server/src/tools/scope-up.js
index 3827922d..358b7d1b 100644
--- a/mcp-server/src/tools/scope-up.js
+++ b/mcp-server/src/tools/scope-up.js
@@ -3,9 +3,7 @@
  * Tool to scope up task complexity
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/set-task-status.js b/mcp-server/src/tools/set-task-status.js
index aa25410f..ee293fed 100644
--- a/mcp-server/src/tools/set-task-status.js
+++ b/mcp-server/src/tools/set-task-status.js
@@ -3,9 +3,7 @@
  * Tool to set the status of a task
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/update-subtask.js b/mcp-server/src/tools/update-subtask.js
index 94921dc0..2624f4d1 100644
--- a/mcp-server/src/tools/update-subtask.js
+++ b/mcp-server/src/tools/update-subtask.js
@@ -3,9 +3,7 @@
  * Tool to append additional information to a specific subtask
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/update-task.js b/mcp-server/src/tools/update-task.js
index 92d37d5e..2fb1feb7 100644
--- a/mcp-server/src/tools/update-task.js
+++ b/mcp-server/src/tools/update-task.js
@@ -3,9 +3,7 @@
  * Tool to update a single task by ID with new information
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/update.js b/mcp-server/src/tools/update.js
index adc71d25..f81a3755 100644
--- a/mcp-server/src/tools/update.js
+++ b/mcp-server/src/tools/update.js
@@ -3,9 +3,7 @@
  * Tool to update tasks based on new context/prompt
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/mcp-server/src/tools/use-tag.js b/mcp-server/src/tools/use-tag.js
index 1173693d..c8133dac 100644
--- a/mcp-server/src/tools/use-tag.js
+++ b/mcp-server/src/tools/use-tag.js
@@ -3,9 +3,7 @@
  * Tool to switch to a different tag context
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	createErrorResponse,
 	handleApiResult,
diff --git a/mcp-server/src/tools/validate-dependencies.js b/mcp-server/src/tools/validate-dependencies.js
index 186d0c9e..4b96c12b 100644
--- a/mcp-server/src/tools/validate-dependencies.js
+++ b/mcp-server/src/tools/validate-dependencies.js
@@ -3,9 +3,7 @@
  * Tool for validating task dependencies
  */
 
-// TEMPORARY: Using zod/v3 for Draft-07 JSON Schema compatibility with FastMCP's zod-to-json-schema
-// TODO: Revert to 'zod' when MCP spec issue is resolved (see PR #1323)
-import { z } from 'zod/v3';
+import { z } from 'zod';
 import {
 	handleApiResult,
 	createErrorResponse,
diff --git a/package-lock.json b/package-lock.json
index 9f970274..9b63d1b8 100644
--- a/package-lock.json
+++ b/package-lock.json
@@ -47,7 +47,7 @@
 				"cors": "^2.8.5",
 				"dotenv": "^16.6.1",
 				"express": "^4.21.2",
-				"fastmcp": "^3.5.0",
+				"fastmcp": "^3.23.0",
 				"figlet": "^1.8.0",
 				"fs-extra": "^11.3.0",
 				"fuse.js": "^7.1.0",
@@ -756,7 +756,7 @@
 			"license": "MIT",
 			"dependencies": {
 				"@tm/core": "*",
-				"fastmcp": "^3.19.2",
+				"fastmcp": "^3.23.0",
 				"zod": "^4.1.11"
 			},
 			"devDependencies": {
@@ -14645,7 +14645,9 @@
 			}
 		},
 		"node_modules/fastmcp": {
-			"version": "3.18.0",
+			"version": "3.23.0",
+			"resolved": "https://registry.npmjs.org/fastmcp/-/fastmcp-3.23.0.tgz",
+			"integrity": "sha512-zojzKe0sgW5V8U6NVTLSd9DdSpFGvkpo6G/42n2qw7MFHqi46c4ZpQQ46m1JWnGM1/Uw+Cu7OeJRGe3/7P4k4g==",
 			"license": "MIT",
 			"dependencies": {
 				"@modelcontextprotocol/sdk": "^1.17.2",
@@ -14653,11 +14655,11 @@
 				"execa": "^9.6.0",
 				"file-type": "^21.0.0",
 				"fuse.js": "^7.1.0",
-				"mcp-proxy": "^5.5.4",
+				"mcp-proxy": "^5.10.0",
 				"strict-event-emitter-types": "^2.0.0",
 				"undici": "^7.13.0",
 				"uri-templates": "^0.2.0",
-				"xsschema": "0.3.5",
+				"xsschema": "0.4.0-beta.5",
 				"yargs": "^18.0.0",
 				"zod": "^3.25.76",
 				"zod-to-json-schema": "^3.24.6"
@@ -15078,7 +15080,9 @@
 			}
 		},
 		"node_modules/fastmcp/node_modules/xsschema": {
-			"version": "0.3.5",
+			"version": "0.4.0-beta.5",
+			"resolved": "https://registry.npmjs.org/xsschema/-/xsschema-0.4.0-beta.5.tgz",
+			"integrity": "sha512-73pYwf1hMy++7SnOkghJdgdPaGi+Y5I0SaO6rIlxb1ouV6tEyDbEcXP82kyr32KQVTlUbFj6qewi9eUVEiXm+g==",
 			"license": "MIT",
 			"peerDependencies": {
 				"@valibot/to-json-schema": "^1.0.0",
@@ -20088,7 +20092,9 @@
 			}
 		},
 		"node_modules/mcp-proxy": {
-			"version": "5.6.1",
+			"version": "5.11.0",
+			"resolved": "https://registry.npmjs.org/mcp-proxy/-/mcp-proxy-5.11.0.tgz",
+			"integrity": "sha512-g+MfBENT5PtbxwTKaUnb2dSIGSbMBY3chFPenjzoSib66o+yZL0llV0a7i+8+8aqWI3JlyUziB+Ryrb1IX0rKQ==",
 			"license": "MIT",
 			"bin": {
 				"mcp-proxy": "dist/bin/mcp-proxy.js"
@@ -28447,7 +28453,7 @@
 				"@tm/core": "*",
 				"boxen": "^8.0.1",
 				"chalk": "5.6.2",
-				"cli-table3": "0.6.5",
+				"cli-table3": "^0.6.5",
 				"ora": "^8.1.1"
 			},
 			"devDependencies": {
diff --git a/package.json b/package.json
index 04fc2a85..248fdd1f 100644
--- a/package.json
+++ b/package.json
@@ -85,7 +85,7 @@
 		"cors": "^2.8.5",
 		"dotenv": "^16.6.1",
 		"express": "^4.21.2",
-		"fastmcp": "^3.5.0",
+		"fastmcp": "^3.23.0",
 		"figlet": "^1.8.0",
 		"fs-extra": "^11.3.0",
 		"fuse.js": "^7.1.0",