diff --git a/tests/test_server_attachments_on_create.py b/tests/test_server_attachments_on_create.py
index 47155a72..05bc0ee4 100644
--- a/tests/test_server_attachments_on_create.py
+++ b/tests/test_server_attachments_on_create.py
@@ -776,3 +776,44 @@ class TestInitialWorkerFailureState:
         assert events, "init worker never emitted"
         assert all(e.get("state") != "error" for e in events)
         assert all(e.get("type") != "error" for e in events)
+
+
+def test_retry_closure_sanitizes_error_display(monkeypatch):
+    """The retry (_run) closure sanitizes the exception text before on_error, so
+    a credential-bearing base-URL in a backend error can't cross into the
+    dashboard SSE.  It deliberately does NOT route through ensure_error_recorded
+    (the reused-session stale-flag hazard — #865); the display-sanitize half of
+    that hygiene is fixed at the site.  Driven via the capture pattern: patch the
+    dispatcher to hand back the run closure, then run it inline as the owner."""
+    import threading
+    from types import SimpleNamespace
+
+    from turnstone.core import session_worker
+    from turnstone.server import _interactive_dispatch_retry
+
+    ui = _FakeUI(ws_id="ws-retry")
+
+    def _boom(_msg):
+        raise RuntimeError("cannot reach https://user:pass@host:8000/v1 for model=x")
+
+    ws = SimpleNamespace(
+        id="ws-retry", session=SimpleNamespace(send=_boom), ui=ui, worker_thread=None
+    )
+    captured: dict = {}
+
+    def _capture(_ws, *, enqueue, run, thread_name=None, **_kw):
+        captured["run"] = run
+        return True
+
+    monkeypatch.setattr(session_worker, "send", _capture)
+    _interactive_dispatch_retry(ws, "retry this")
+    assert "run" in captured, "retry did not dispatch through session_worker.send"
+    # The owner guard reads ws.worker_thread is the executing thread; run the
+    # captured closure inline as that owner.
+    ws.worker_thread = threading.current_thread()
+    captured["run"]()
+
+    errors = [e["message"] for e in ui.events if e.get("type") == "error"]
+    assert errors, "retry closure emitted no on_error"
+    assert all("user:pass" not in m for m in errors), errors  # credential redacted
+    assert any("REDACTED" in m for m in errors)  # the sanitizer ran, not a no-op
diff --git a/turnstone/server.py b/turnstone/server.py
index ed8b03fe..1f732f53 100644
--- a/turnstone/server.py
+++ b/turnstone/server.py
@@ -727,13 +727,18 @@ def _interactive_dispatch_retry(ws: Workstream, user_msg: str) -> None:
             # REUSED session a pre-try raise after a prior errored turn finds
             # _has_persisted_error stale-True (it is session-lifetime — cleared
             # only by _emit_state idle/running, not per-turn), so the recorder
-            # would no-op and swallow the fresh error.  The raw-exc UI leak, the
-            # double state emit, and the pre-try no-persist (the coordinator can
-            # then read a STALE last_error on a reused-session retry) are known,
-            # match the /send and coord-send sibling closures, and are tracked in
-            # #865's per-turn error-signal redesign.
+            # would no-op and swallow the fresh error.  The DISPLAY string is
+            # sanitized inline (a credential-bearing base-URL in the exception
+            # text must not cross into the dashboard SSE, the confidentiality
+            # floor _record_fatal_error also enforces); the double state emit and
+            # the pre-try no-persist (a reused-session retry can then have the
+            # coordinator read a STALE last_error) still need the per-turn
+            # error-signal redesign and are tracked in #865, matching the /send
+            # and coord-send sibling closures.
             if ws.worker_thread is me:
-                ui.on_error(f"Error: {exc}")
+                from turnstone.core.memory import sanitize_error_text
+
+                ui.on_error(f"Error: {sanitize_error_text(str(exc))}")
                 ui.on_stream_end()
                 ui.on_state_change("error")