diff --git a/Sources/GrammarGem/App/AppState.swift b/Sources/GrammarGem/App/AppState.swift
index d69dc53..f3eb745 100644
--- a/Sources/GrammarGem/App/AppState.swift
+++ b/Sources/GrammarGem/App/AppState.swift
@@ -180,6 +180,10 @@ final class AppState: ObservableObject {
             aiHandler: { [weak self] (req: LocalEngineServer.AIRequest) async -> LocalEngineServer.AIOutcome in
                 guard let self else { return .error("GrammarGem is shutting down.") }
                 return await self.handleServerAI(req)
+            },
+            aiStreamHandler: { [weak self] (req, onChunk) -> LocalEngineServer.AIOutcome in
+                guard let self else { return .error("GrammarGem is shutting down.") }
+                return await self.handleServerAIStream(req, onChunk: onChunk)
             })
         server.start()
         localServer = server
@@ -198,6 +202,24 @@ final class AppState: ObservableObject {
         }
     }
 
+    /// Streaming variant for the extension: yields tokens as they generate.
+    private func handleServerAIStream(_ req: LocalEngineServer.AIRequest,
+                                      onChunk: @escaping (String) -> Void) async -> LocalEngineServer.AIOutcome {
+        if case .denied(let reason) = gate.authorizeAI(req.action) { return .error(reason) }
+        guard ai.isReady else { return .error(AIEngineError.modelNotReady.localizedDescription) }
+        var accumulated = ""
+        do {
+            for try await chunk in ai.runStreaming(req.action, on: req.text, protectedTerms: dictionary.entries) {
+                accumulated += chunk
+                onChunk(chunk)
+            }
+            gate.recordAIActionUsed()
+            return .ok(accumulated)
+        } catch {
+            return .error(error.localizedDescription)
+        }
+    }
+
     // MARK: - Hotkey handling
 
     /// (Re)register the global hotkeys from the current preferences.
diff --git a/Sources/GrammarGem/System/LocalEngineServer.swift b/Sources/GrammarGem/System/LocalEngineServer.swift
index f6da35a..eb087f6 100644
--- a/Sources/GrammarGem/System/LocalEngineServer.swift
+++ b/Sources/GrammarGem/System/LocalEngineServer.swift
@@ -36,22 +36,28 @@ final class LocalEngineServer {
     enum AIOutcome { case ok(String); case error(String) }
     /// AI action: runs the gate + model, returns the result or a user-facing error.
     typealias AIHandler = (AIRequest) async -> AIOutcome
+    /// Streaming AI action: runs the gate + model, invoking `onChunk` per token as it
+    /// generates, then returns the final outcome (full text, or an error message).
+    typealias AIStreamHandler = (AIRequest, @escaping (String) -> Void) async -> AIOutcome
 
     private let port: UInt16
     private let token: String
     private let grammarHandler: GrammarHandler
     private let aiHandler: AIHandler
+    private let aiStreamHandler: AIStreamHandler
 
     private var listener: NWListener?
     private let queue = DispatchQueue(label: "com.grammargem.localserver")
 
     init(port: UInt16, token: String,
          grammarHandler: @escaping GrammarHandler,
-         aiHandler: @escaping AIHandler) {
+         aiHandler: @escaping AIHandler,
+         aiStreamHandler: @escaping AIStreamHandler) {
         self.port = port
         self.token = token
         self.grammarHandler = grammarHandler
         self.aiHandler = aiHandler
+        self.aiStreamHandler = aiStreamHandler
     }
 
     /// A stable per-install token, persisted so the extension can be paired once.
@@ -145,6 +151,23 @@ final class LocalEngineServer {
             case .error(let msg): sendJSON(conn, status: 422, ErrorResponse(error: msg))
             }
 
+        case ("POST", "/v1/ai/stream"):
+            guard let req = decodeAI(request.body) else {
+                sendJSON(conn, status: 400, ErrorResponse(error: "bad request")); return
+            }
+            // Newline-delimited JSON frames: {"chunk":"…"} per token, then a final
+            // {"done":true} or {"error":"…"}. The 200 header goes out before tokens,
+            // so an entitlement/readiness failure surfaces as a closing error frame.
+            beginStream(conn)
+            let outcome = await aiStreamHandler(req) { [weak self] chunk in
+                self?.streamFrame(conn, ["chunk": chunk])
+            }
+            switch outcome {
+            case .ok: streamFrame(conn, ["done": true])
+            case .error(let msg): streamFrame(conn, ["error": msg])
+            }
+            endStream(conn)
+
         default:
             sendJSON(conn, status: 404, ErrorResponse(error: "not found"))
         }
@@ -201,6 +224,28 @@ final class LocalEngineServer {
         send(conn, status: status, body: body)
     }
 
+    // MARK: - Streaming responses (newline-delimited JSON, no Content-Length)
+
+    private func beginStream(_ conn: NWConnection) {
+        var head = "HTTP/1.1 200 OK\r\n"
+        head += "Content-Type: application/x-ndjson\r\n"
+        head += "Cache-Control: no-cache\r\n"
+        head += "Access-Control-Allow-Origin: *\r\n"
+        head += "Access-Control-Allow-Headers: Content-Type, X-GrammarGem-Token\r\n"
+        head += "Connection: close\r\n\r\n"
+        conn.send(content: Data(head.utf8), completion: .contentProcessed { _ in })
+    }
+
+    private func streamFrame(_ conn: NWConnection, _ object: [String: Any]) {
+        guard var data = try? JSONSerialization.data(withJSONObject: object) else { return }
+        data.append(0x0A) // newline delimiter
+        conn.send(content: data, completion: .contentProcessed { _ in })
+    }
+
+    private func endStream(_ conn: NWConnection) {
+        conn.send(content: nil, completion: .contentProcessed { _ in conn.cancel() })
+    }
+
     private func send(_ conn: NWConnection, status: Int, body: Data) {
         var head = "HTTP/1.1 \(status) \(Self.reason(status))\r\n"
         head += "Content-Type: application/json\r\n"