diff --git a/ccw/frontend/src/components/layout/AppShell.tsx b/ccw/frontend/src/components/layout/AppShell.tsx
index 1e139bfe..175e33b0 100644
--- a/ccw/frontend/src/components/layout/AppShell.tsx
+++ b/ccw/frontend/src/components/layout/AppShell.tsx
@@ -41,22 +41,42 @@ export function AppShell({
   const projectPath = useWorkflowStore((state) => state.projectPath);
   const location = useLocation();
 
-  // Initialize workspace from URL path parameter on mount
+  // Workspace initialization logic (URL > localStorage)
+  const [isWorkspaceInitialized, setWorkspaceInitialized] = useState(false);
+
   useEffect(() => {
-    // Only initialize if no workspace is currently set
-    if (projectPath) return;
-
-    // Read path from URL query parameter
-    const searchParams = new URLSearchParams(location.search);
-    const pathParam = searchParams.get('path');
-
-    if (pathParam) {
-      console.log('[AppShell] Initializing workspace from URL:', pathParam);
-      switchWorkspace(pathParam).catch((error) => {
-        console.error('[AppShell] Failed to initialize workspace:', error);
-      });
+    // This effect should only run once to decide the initial workspace.
+    if (isWorkspaceInitialized) {
+      return;
     }
-  }, [location.search, projectPath, switchWorkspace]);
+
+    const searchParams = new URLSearchParams(location.search);
+    const urlPath = searchParams.get('path');
+    const persistedPath = projectPath; // Path from rehydrated store
+
+    let pathFound = false;
+
+    // Priority 1: URL parameter.
+    if (urlPath) {
+      console.log('[AppShell] Initializing workspace from URL parameter:', urlPath);
+      switchWorkspace(urlPath).catch((error) => {
+        console.error('[AppShell] Failed to initialize from URL:', error);
+      });
+      pathFound = true;
+    }
+    // Priority 2: Rehydrated path from localStorage.
+    else if (persistedPath) {
+      console.log('[AppShell] Initializing workspace from persisted state:', persistedPath);
+      // The path is already in the store, but we need to trigger the data fetch.
+      switchWorkspace(persistedPath).catch((error) => {
+        console.error('[AppShell] Failed to re-initialize from persisted state:', error);
+      });
+      pathFound = true;
+    }
+
+    // Mark as initialized regardless of whether a path was found.
+    setWorkspaceInitialized(true);
+  }, [isWorkspaceInitialized, projectPath, location.search, switchWorkspace]);
 
   // Sidebar collapse state (persisted)
   const [sidebarCollapsed, setSidebarCollapsed] = useState(() => {
diff --git a/ccw/frontend/src/stores/workflowStore.ts b/ccw/frontend/src/stores/workflowStore.ts
index b0600b3a..2a136cbc 100644
--- a/ccw/frontend/src/stores/workflowStore.ts
+++ b/ccw/frontend/src/stores/workflowStore.ts
@@ -541,14 +541,10 @@ export const useWorkflowStore = create<WorkflowStore>()(
             if (state?.projectPath) {
               if (process.env.NODE_ENV === 'development') {
                 // eslint-disable-next-line no-console
-                console.log('[WorkflowStore] Found persisted projectPath, re-initializing workspace:', state.projectPath);
+                console.log('[WorkflowStore] Rehydrated with persisted projectPath:', state.projectPath);
               }
-              // Use setTimeout to ensure the store is fully initialized before calling switchWorkspace
-              setTimeout(() => {
-                if (state.switchWorkspace) {
-                  state.switchWorkspace(state.projectPath);
-                }
-              }, 0);
+              // The initialization logic is now handled by AppShell.tsx
+              // to correctly prioritize URL parameters over localStorage.
             }
           };
         },