diff --git a/pkg/tools/shell.go b/pkg/tools/shell.go
index 2edd0accb..0a6f19190 100644
--- a/pkg/tools/shell.go
+++ b/pkg/tools/shell.go
@@ -339,12 +339,33 @@ func (t *ExecTool) guardCommand(command, cwd string) string {
 		matches := absolutePathPattern.FindAllString(cmd, -1)
 
 		for _, raw := range matches {
-			// Skip URL path components that look like they're from URLs.
+			// Skip URL path components that look like they're from web URLs.
 			// When a URL like "https://github.com" is parsed, the regex captures
 			// "//github.com" as a match (the path portion after "https:").
 			// These double-slash prefixes indicate URL paths, not file system paths.
+			// However, we must NOT skip file:// URIs as they could escape the sandbox.
+			// Only skip if preceded by a web URL scheme (http:, https:, ftp:, etc.).
 			if strings.HasPrefix(raw, "//") {
-				continue
+				// Check if this // path is preceded by a web URL scheme
+				// by looking for patterns like "http://", "https://", "ftp://" before the match
+				idx := strings.Index(cmd, raw)
+				if idx > 0 {
+					// Look for the scheme prefix (e.g., "https:") before the //
+					before := cmd[:idx]
+					// Check if it ends with a web URL scheme followed by colon
+					// Web schemes: http, https, ftp, ftps, sftp, ssh, git
+					webSchemes := []string{"http:", "https:", "ftp:", "ftps:", "sftp:", "ssh:", "git:"}
+					isWebURL := false
+					for _, scheme := range webSchemes {
+						if strings.HasSuffix(before, scheme) {
+							isWebURL = true
+							break
+						}
+					}
+					if isWebURL {
+						continue
+					}
+				}
 			}
 
 			p, err := filepath.Abs(raw)
diff --git a/pkg/tools/shell_test.go b/pkg/tools/shell_test.go
index cb5f1a305..153185b47 100644
--- a/pkg/tools/shell_test.go
+++ b/pkg/tools/shell_test.go
@@ -472,3 +472,46 @@ func TestShellTool_URLsNotBlocked(t *testing.T) {
 		}
 	}
 }
+
+// TestShellTool_FileURISandboxing verifies that file:// URIs that escape the
+// workspace are still blocked, even though other URLs are allowed (issue #1254).
+func TestShellTool_FileURISandboxing(t *testing.T) {
+	tmpDir := t.TempDir()
+	tool, err := NewExecTool(tmpDir, true)
+	if err != nil {
+		t.Fatalf("unable to configure exec tool: %s", err)
+	}
+
+	// These file:// URIs should be blocked if they reference paths outside the workspace.
+	// Unlike web URLs (http://, https://, ftp://), file:// URIs can be used to escape the sandbox.
+	blockedCommands := []string{
+		"cat file:///etc/passwd",
+		"cat file:///etc/hosts",
+		"cat file:///root/.ssh/id_rsa",
+	}
+
+	for _, cmd := range blockedCommands {
+		result := tool.Execute(context.Background(), map[string]any{"command": cmd})
+		if !result.IsError || !strings.Contains(result.ForLLM, "path outside working dir") {
+			t.Errorf("file:// URI outside workspace should be blocked: %s", cmd)
+		}
+	}
+
+	// These file:// URIs should be allowed if they reference paths inside the workspace.
+	// Create a test file inside the temp directory
+	testFile := filepath.Join(tmpDir, "test.txt")
+	if err := os.WriteFile(testFile, []byte("test content"), 0644); err != nil {
+		t.Fatalf("failed to create test file: %s", err)
+	}
+
+	allowedCommands := []string{
+		"cat file://" + testFile,
+	}
+
+	for _, cmd := range allowedCommands {
+		result := tool.Execute(context.Background(), map[string]any{"command": cmd})
+		if result.IsError && strings.Contains(result.ForLLM, "path outside working dir") {
+			t.Errorf("file:// URI inside workspace should be allowed: %s\n  error: %s", cmd, result.ForLLM)
+		}
+	}
+}