diff --git a/design/src/auth.ts b/design/src/auth.ts
index a6bdc0cb4..c3d8d7e5e 100644
--- a/design/src/auth.ts
+++ b/design/src/auth.ts
@@ -5,21 +5,78 @@
  * 1. ~/.gstack/openai.json → { "api_key": "sk-..." }
  * 2. OPENAI_API_KEY environment variable
  * 3. null (caller handles guided setup or fallback)
+ *
+ * When OPENAI_API_KEY is in use AND its value matches an OPENAI_API_KEY entry
+ * in the current directory's .env / .env.<NODE_ENV> / .env.local, we disclose
+ * the source on stderr before the run. Catches the silent-billing surface
+ * reported in #1248: design generation inside someone else's project would
+ * silently bill their OpenAI account if their .env was loaded into the shell.
  */
 
 import fs from "fs";
 import path from "path";
 
-const CONFIG_PATH = path.join(process.env.HOME || "~", ".gstack", "openai.json");
+type ApiKeySource = "config" | "env";
 
-export function resolveApiKey(): string | null {
+export interface ApiKeyResolution {
+  key: string;
+  source: ApiKeySource;
+  envFile?: string;
+  warning?: string;
+}
+
+function configPath(): string {
+  return path.join(process.env.HOME || "~", ".gstack", "openai.json");
+}
+
+function readEnvValue(filePath: string, key: string): string | null {
+  let content: string;
+  try {
+    content = fs.readFileSync(filePath, "utf-8");
+  } catch {
+    return null;
+  }
+
+  for (const line of content.split(/\r?\n/)) {
+    const match = line.match(new RegExp(`^\\s*(?:export\\s+)?${key}\\s*=\\s*(.*)\\s*$`));
+    if (!match) continue;
+
+    let value = match[1].trim();
+    if (
+      (value.startsWith('"') && value.endsWith('"')) ||
+      (value.startsWith("'") && value.endsWith("'"))
+    ) {
+      value = value.slice(1, -1);
+    }
+    return value;
+  }
+
+  return null;
+}
+
+function matchingCwdEnvFile(key: string, value: string): string | null {
+  const candidates = [".env"];
+  const nodeEnv = process.env.NODE_ENV;
+  if (nodeEnv) candidates.push(`.env.${nodeEnv}`);
+  candidates.push(".env.local");
+
+  for (const fileName of candidates) {
+    const fileValue = readEnvValue(path.join(process.cwd(), fileName), key);
+    if (fileValue === value) return fileName;
+  }
+
+  return null;
+}
+
+export function resolveApiKeyInfo(): ApiKeyResolution | null {
   // 1. Check ~/.gstack/openai.json
   try {
-    if (fs.existsSync(CONFIG_PATH)) {
-      const content = fs.readFileSync(CONFIG_PATH, "utf-8");
+    const authPath = configPath();
+    if (fs.existsSync(authPath)) {
+      const content = fs.readFileSync(authPath, "utf-8");
       const config = JSON.parse(content);
       if (config.api_key && typeof config.api_key === "string") {
-        return config.api_key;
+        return { key: config.api_key, source: "config" };
       }
     }
   } catch {
@@ -28,28 +85,42 @@ export function resolveApiKey(): string | null {
 
   // 2. Check environment variable
   if (process.env.OPENAI_API_KEY) {
-    return process.env.OPENAI_API_KEY;
+    const envFile = matchingCwdEnvFile("OPENAI_API_KEY", process.env.OPENAI_API_KEY);
+    const warning = envFile
+      ? `Warning: OPENAI_API_KEY matches ${envFile} in the current directory. Design generation may bill that project's OpenAI account. Run $D setup to store a gstack-specific key in ~/.gstack/openai.json.`
+      : undefined;
+    return { key: process.env.OPENAI_API_KEY, source: "env", envFile: envFile ?? undefined, warning };
   }
 
   return null;
 }
 
+export function resolveApiKey(): string | null {
+  return resolveApiKeyInfo()?.key ?? null;
+}
+
+export function describeApiKeySource(resolution: ApiKeyResolution): string {
+  if (resolution.source === "config") return "~/.gstack/openai.json";
+  if (resolution.envFile) return `OPENAI_API_KEY environment variable (matches ${resolution.envFile} in current directory)`;
+  return "OPENAI_API_KEY environment variable";
+}
+
 /**
  * Save an API key to ~/.gstack/openai.json with 0600 permissions.
  */
 export function saveApiKey(key: string): void {
-  const dir = path.dirname(CONFIG_PATH);
+  const dir = path.dirname(configPath());
   fs.mkdirSync(dir, { recursive: true });
-  fs.writeFileSync(CONFIG_PATH, JSON.stringify({ api_key: key }, null, 2));
-  fs.chmodSync(CONFIG_PATH, 0o600);
+  fs.writeFileSync(configPath(), JSON.stringify({ api_key: key }, null, 2));
+  fs.chmodSync(configPath(), 0o600);
 }
 
 /**
  * Get API key or exit with setup instructions.
  */
 export function requireApiKey(): string {
-  const key = resolveApiKey();
-  if (!key) {
+  const resolution = resolveApiKeyInfo();
+  if (!resolution) {
     console.error("No OpenAI API key found.");
     console.error("");
     console.error("Run: $D setup");
@@ -59,5 +130,7 @@ export function requireApiKey(): string {
     console.error("Get a key at: https://platform.openai.com/api-keys");
     process.exit(1);
   }
-  return key;
+  console.error(`Using OpenAI key from ${describeApiKeySource(resolution)}.`);
+  if (resolution.warning) console.error(resolution.warning);
+  return resolution.key;
 }
diff --git a/design/src/cli.ts b/design/src/cli.ts
index 481eb29d4..7432c3c2c 100644
--- a/design/src/cli.ts
+++ b/design/src/cli.ts
@@ -60,7 +60,8 @@ function printUsage(): void {
     console.log(`  ${name.padEnd(12)} ${info.description}`);
     console.log(`  ${"".padEnd(12)} ${info.usage}`);
   }
-  console.log("\nAuth: ~/.gstack/openai.json or OPENAI_API_KEY env var");
+  console.log("\nAuth: ~/.gstack/openai.json, then OPENAI_API_KEY env var");
+  console.log("If OPENAI_API_KEY matches a current-directory .env file, the source is reported before billing.");
   console.log("Setup: $D setup");
 }
 
diff --git a/design/test/auth.test.ts b/design/test/auth.test.ts
new file mode 100644
index 000000000..4cb1058f1
--- /dev/null
+++ b/design/test/auth.test.ts
@@ -0,0 +1,133 @@
+/**
+ * Tests for $D OpenAI auth source reporting (#1278, closes #1248).
+ *
+ * Verifies that resolveApiKey + requireApiKey:
+ *   - prefer ~/.gstack/openai.json over OPENAI_API_KEY
+ *   - report when the env-var key matches a cwd .env / .env.local
+ *   - never echo the key itself to stderr (only the source label)
+ */
+
+import { afterEach, beforeEach, describe, expect, test } from "bun:test";
+import * as fs from "fs";
+import * as os from "os";
+import * as path from "path";
+import {
+  describeApiKeySource,
+  requireApiKey,
+  resolveApiKey,
+  resolveApiKeyInfo,
+  saveApiKey,
+} from "../src/auth";
+
+let tmpDir: string;
+let tmpHome: string;
+let originalHome: string | undefined;
+let originalKey: string | undefined;
+let originalNodeEnv: string | undefined;
+let originalCwd: string;
+
+beforeEach(() => {
+  tmpDir = fs.mkdtempSync(path.join(os.tmpdir(), "gstack-design-auth-"));
+  tmpHome = path.join(tmpDir, "home");
+  fs.mkdirSync(tmpHome, { recursive: true });
+
+  originalHome = process.env.HOME;
+  originalKey = process.env.OPENAI_API_KEY;
+  originalNodeEnv = process.env.NODE_ENV;
+  originalCwd = process.cwd();
+
+  process.env.HOME = tmpHome;
+  delete process.env.OPENAI_API_KEY;
+  delete process.env.NODE_ENV;
+  process.chdir(tmpDir);
+});
+
+afterEach(() => {
+  process.chdir(originalCwd);
+  if (originalHome === undefined) delete process.env.HOME;
+  else process.env.HOME = originalHome;
+  if (originalKey === undefined) delete process.env.OPENAI_API_KEY;
+  else process.env.OPENAI_API_KEY = originalKey;
+  if (originalNodeEnv === undefined) delete process.env.NODE_ENV;
+  else process.env.NODE_ENV = originalNodeEnv;
+  fs.rmSync(tmpDir, { recursive: true, force: true });
+});
+
+describe("resolveApiKeyInfo", () => {
+  test("uses ~/.gstack/openai.json before OPENAI_API_KEY", () => {
+    saveApiKey("sk-config");
+    process.env.OPENAI_API_KEY = "sk-env";
+
+    const resolution = resolveApiKeyInfo();
+
+    expect(resolution?.key).toBe("sk-config");
+    expect(resolution?.source).toBe("config");
+    expect(describeApiKeySource(resolution!)).toBe("~/.gstack/openai.json");
+    expect(resolveApiKey()).toBe("sk-config");
+  });
+
+  test("uses OPENAI_API_KEY when no config file exists", () => {
+    process.env.OPENAI_API_KEY = "sk-env";
+
+    const resolution = resolveApiKeyInfo();
+
+    expect(resolution?.key).toBe("sk-env");
+    expect(resolution?.source).toBe("env");
+    expect(resolution?.envFile).toBeUndefined();
+    expect(describeApiKeySource(resolution!)).toBe("OPENAI_API_KEY environment variable");
+  });
+
+  test("reports when OPENAI_API_KEY matches current-directory .env", () => {
+    fs.writeFileSync(path.join(tmpDir, ".env"), "OPENAI_API_KEY=sk-project\n");
+    process.env.OPENAI_API_KEY = "sk-project";
+
+    const resolution = resolveApiKeyInfo();
+
+    expect(resolution?.key).toBe("sk-project");
+    expect(resolution?.envFile).toBe(".env");
+    expect(describeApiKeySource(resolution!)).toBe("OPENAI_API_KEY environment variable (matches .env in current directory)");
+    expect(resolution?.warning).toContain("may bill that project's OpenAI account");
+  });
+
+  test("detects quoted and exported env-file values", () => {
+    fs.writeFileSync(path.join(tmpDir, ".env.local"), "export OPENAI_API_KEY=\"sk-local\"\n");
+    process.env.OPENAI_API_KEY = "sk-local";
+
+    const resolution = resolveApiKeyInfo();
+
+    expect(resolution?.envFile).toBe(".env.local");
+    expect(resolution?.warning).toContain(".env.local");
+  });
+
+  test("does not claim env-file source when values differ", () => {
+    fs.writeFileSync(path.join(tmpDir, ".env"), "OPENAI_API_KEY=sk-other\n");
+    process.env.OPENAI_API_KEY = "sk-shell";
+
+    const resolution = resolveApiKeyInfo();
+
+    expect(resolution?.key).toBe("sk-shell");
+    expect(resolution?.envFile).toBeUndefined();
+    expect(resolution?.warning).toBeUndefined();
+  });
+});
+
+describe("requireApiKey", () => {
+  test("prints source disclosure without leaking the key", () => {
+    process.env.OPENAI_API_KEY = "sk-secret-value";
+    const messages: string[] = [];
+    const originalError = console.error;
+    console.error = (...args: unknown[]) => {
+      messages.push(args.map(String).join(" "));
+    };
+
+    try {
+      expect(requireApiKey()).toBe("sk-secret-value");
+    } finally {
+      console.error = originalError;
+    }
+
+    const stderr = messages.join("\n");
+    expect(stderr).toContain("Using OpenAI key from OPENAI_API_KEY environment variable.");
+    expect(stderr).not.toContain("sk-secret-value");
+  });
+});