diff --git a/server/src/__tests__/config-file.test.ts b/server/src/__tests__/config-file.test.ts
new file mode 100644
index 0000000000..9d5b2701ca
--- /dev/null
+++ b/server/src/__tests__/config-file.test.ts
@@ -0,0 +1,92 @@
+import fs from "node:fs";
+import os from "node:os";
+import path from "node:path";
+import { afterEach, beforeEach, describe, expect, it } from "vitest";
+import { readConfigFile } from "../config-file.js";
+
+const ORIGINAL_PAPERCLIP_CONFIG = process.env.PAPERCLIP_CONFIG;
+
+function writeConfig(configPath: string, value: unknown): void {
+  fs.writeFileSync(configPath, `${JSON.stringify(value, null, 2)}\n`);
+}
+
+function escapeRegExp(value: string): string {
+  return value.replace(/[.*+?^${}()|[\]\\]/g, "\\$&");
+}
+
+function minimalConfig(): unknown {
+  return {
+    $meta: {
+      version: 1,
+      updatedAt: "2026-07-05T00:00:00.000Z",
+      source: "configure",
+    },
+    database: {
+      mode: "embedded-postgres",
+    },
+    logging: {
+      mode: "file",
+    },
+    server: {},
+  };
+}
+
+describe("readConfigFile", () => {
+  let tempDir: string;
+  let configPath: string;
+
+  beforeEach(() => {
+    tempDir = fs.mkdtempSync(path.join(os.tmpdir(), "paperclip-config-file-test-"));
+    configPath = path.join(tempDir, "config.json");
+    process.env.PAPERCLIP_CONFIG = configPath;
+  });
+
+  afterEach(() => {
+    if (ORIGINAL_PAPERCLIP_CONFIG === undefined) {
+      delete process.env.PAPERCLIP_CONFIG;
+    } else {
+      process.env.PAPERCLIP_CONFIG = ORIGINAL_PAPERCLIP_CONFIG;
+    }
+
+    fs.rmSync(tempDir, { recursive: true, force: true });
+  });
+
+  it("returns null when the config file does not exist", () => {
+    expect(readConfigFile()).toBeNull();
+  });
+
+  it("throws a path-specific error when the config file is invalid JSON", () => {
+    fs.writeFileSync(configPath, "{");
+
+    expect(() => readConfigFile()).toThrow(
+      new RegExp(`Invalid Paperclip config at ${escapeRegExp(configPath)}: failed to read or parse JSON`),
+    );
+  });
+
+  it("throws a field-specific error when the config file fails schema validation", () => {
+    const config = minimalConfig();
+    if (typeof config === "object" && config !== null) {
+      (config as { $meta: { source: string } }).$meta.source = "edited-by-hand";
+    }
+
+    writeConfig(configPath, config);
+
+    expect(() => readConfigFile()).toThrow(/Invalid Paperclip config .* \$meta\.source:/);
+  });
+
+  it("parses a valid config file", () => {
+    writeConfig(configPath, minimalConfig());
+
+    expect(readConfigFile()).toMatchObject({
+      $meta: {
+        source: "configure",
+      },
+      database: {
+        mode: "embedded-postgres",
+      },
+      logging: {
+        mode: "file",
+      },
+    });
+  });
+});
diff --git a/server/src/config-file.ts b/server/src/config-file.ts
index a25d4db58c..9c150f4a78 100644
--- a/server/src/config-file.ts
+++ b/server/src/config-file.ts
@@ -1,16 +1,37 @@
 import fs from "node:fs";
 import { paperclipConfigSchema, type PaperclipConfig } from "@paperclipai/shared";
+import { ZodError } from "zod";
 import { resolvePaperclipConfigPath } from "./paths.js";
 
+function formatConfigValidationError(error: ZodError): string {
+  return error.issues
+    .map((issue) => {
+      const issuePath = issue.path.length > 0 ? issue.path.join(".") : "<root>";
+      return `${issuePath}: ${issue.message}`;
+    })
+    .join("; ");
+}
+
 export function readConfigFile(): PaperclipConfig | null {
   const configPath = resolvePaperclipConfigPath();
 
   if (!fs.existsSync(configPath)) return null;
 
+  let raw: unknown;
+  try {
+    raw = JSON.parse(fs.readFileSync(configPath, "utf-8"));
+  } catch (error) {
+    const reason = error instanceof Error ? error.message : String(error);
+    throw new Error(`Invalid Paperclip config at ${configPath}: failed to read or parse JSON: ${reason}`);
+  }
+
   try {
-    const raw = JSON.parse(fs.readFileSync(configPath, "utf-8"));
     return paperclipConfigSchema.parse(raw);
-  } catch {
-    return null;
+  } catch (error) {
+    if (error instanceof ZodError) {
+      throw new Error(`Invalid Paperclip config at ${configPath}: ${formatConfigValidationError(error)}`);
+    }
+
+    throw error;
   }
 }