diff --git a/packages/mcp-server/CURSOR_SETUP.md b/packages/mcp-server/CURSOR_SETUP.md
new file mode 100644
index 0000000..37c6a84
--- /dev/null
+++ b/packages/mcp-server/CURSOR_SETUP.md
@@ -0,0 +1,145 @@
+# Cursor MCP Setup Guide
+
+This guide shows how to integrate the dev-agent MCP server with Cursor IDE.
+
+## Prerequisites
+
+1. Build the MCP server:
+   ```bash
+   cd /path/to/dev-agent
+   pnpm install
+   pnpm build
+   ```
+
+2. Ensure the repository is indexed:
+   ```bash
+   pnpm dev scan
+   ```
+
+## Configuration
+
+### 1. Locate Cursor's MCP Config
+
+The MCP configuration file is located at:
+- **macOS**: `~/Library/Application Support/Cursor/User/globalStorage/mcp.json`
+- **Linux**: `~/.config/Cursor/User/globalStorage/mcp.json`
+- **Windows**: `%APPDATA%\Cursor\User\globalStorage\mcp.json`
+
+### 2. Add dev-agent MCP Server
+
+Create or update the `mcp.json` file with the following configuration:
+
+```json
+{
+  "mcpServers": {
+    "dev-agent": {
+      "command": "node",
+      "args": [
+        "/absolute/path/to/dev-agent/packages/mcp-server/dist/bin/dev-agent-mcp.js"
+      ],
+      "env": {
+        "REPOSITORY_PATH": "/absolute/path/to/your/repository",
+        "LOG_LEVEL": "info"
+      }
+    }
+  }
+}
+```
+
+**Important:** Replace the paths with your actual absolute paths.
+
+### 3. Restart Cursor
+
+After updating the configuration, restart Cursor to load the MCP server.
+
+## Verification
+
+1. Open Cursor
+2. Try using the `dev_search` tool in a chat:
+   ```
+   Search for "authentication middleware" in the codebase
+   ```
+
+3. The MCP server should respond with semantic search results
+
+## Available Tools
+
+### `dev_search`
+
+Semantic code search across your repository.
+
+**Parameters:**
+- `query` (required): Natural language search query
+- `format` (optional): `compact` (default) or `verbose`
+- `limit` (optional): Number of results (1-50, default: 10)
+- `scoreThreshold` (optional): Minimum relevance score (0-1, default: 0)
+
+**Example:**
+```
+dev_search:
+  query: "user authentication logic"
+  format: compact
+  limit: 5
+```
+
+## Troubleshooting
+
+### Server Not Starting
+
+1. Check Cursor's logs (Help > Show Logs)
+2. Verify the paths in `mcp.json` are absolute and correct
+3. Ensure the server builds successfully: `pnpm build`
+4. Test the server manually:
+   ```bash
+   echo '{"jsonrpc":"2.0","id":1,"method":"initialize","params":{"protocolVersion":"1.0","capabilities":{},"clientInfo":{"name":"test","version":"1.0"}}}' | \
+     node /path/to/dev-agent/packages/mcp-server/dist/bin/dev-agent-mcp.js
+   ```
+
+### Repository Not Indexed
+
+If searches return no results:
+```bash
+cd /path/to/your/repository
+/path/to/dev-agent/packages/cli/dist/index.js scan
+```
+
+### Logs
+
+Set `LOG_LEVEL` to `debug` in the env section of `mcp.json` for more verbose logging:
+```json
+"env": {
+  "REPOSITORY_PATH": "/path/to/repo",
+  "LOG_LEVEL": "debug"
+}
+```
+
+## Multiple Repositories
+
+To use dev-agent with multiple repositories, add multiple server configurations:
+
+```json
+{
+  "mcpServers": {
+    "dev-agent-project-a": {
+      "command": "node",
+      "args": ["/path/to/dev-agent/packages/mcp-server/dist/bin/dev-agent-mcp.js"],
+      "env": {
+        "REPOSITORY_PATH": "/path/to/project-a"
+      }
+    },
+    "dev-agent-project-b": {
+      "command": "node",
+      "args": ["/path/to/dev-agent/packages/mcp-server/dist/bin/dev-agent-mcp.js"],
+      "env": {
+        "REPOSITORY_PATH": "/path/to/project-b"
+      }
+    }
+  }
+}
+```
+
+## Next Steps
+
+- See [README.md](./README.md) for general MCP server documentation
+- See [../../docs/WORKFLOW.md](../../docs/WORKFLOW.md) for the dev-agent workflow
+
diff --git a/packages/mcp-server/bin/dev-agent-mcp.ts b/packages/mcp-server/bin/dev-agent-mcp.ts
new file mode 100644
index 0000000..5fcb169
--- /dev/null
+++ b/packages/mcp-server/bin/dev-agent-mcp.ts
@@ -0,0 +1,68 @@
+#!/usr/bin/env node
+/**
+ * dev-agent MCP Server Entry Point
+ * Starts the MCP server with stdio transport for AI tools (Claude, Cursor, etc.)
+ */
+
+import { RepositoryIndexer } from '@lytics/dev-agent-core';
+import { SearchAdapter } from '../src/adapters/built-in/search-adapter';
+import { MCPServer } from '../src/server/mcp-server';
+
+// Get config from environment
+const repositoryPath = process.env.REPOSITORY_PATH || process.cwd();
+const vectorStorePath =
+  process.env.VECTOR_STORE_PATH || `${repositoryPath}/.dev-agent/vectors.lance`;
+const logLevel = (process.env.LOG_LEVEL as 'debug' | 'info' | 'warn' | 'error') || 'info';
+
+async function main() {
+  try {
+    // Initialize repository indexer
+    const indexer = new RepositoryIndexer({
+      repositoryPath,
+      vectorStorePath,
+    });
+
+    await indexer.initialize();
+
+    // Create and register adapters
+    const searchAdapter = new SearchAdapter({
+      repositoryIndexer: indexer,
+      defaultFormat: 'compact',
+      defaultLimit: 10,
+    });
+
+    // Create MCP server
+    const server = new MCPServer({
+      serverInfo: {
+        name: 'dev-agent',
+        version: '0.1.0',
+      },
+      config: {
+        repositoryPath,
+        logLevel,
+      },
+      transport: 'stdio',
+      adapters: [searchAdapter],
+    });
+
+    // Handle graceful shutdown
+    const shutdown = async () => {
+      await server.stop();
+      await indexer.close();
+      process.exit(0);
+    };
+
+    process.on('SIGINT', shutdown);
+    process.on('SIGTERM', shutdown);
+
+    // Start server
+    await server.start();
+
+    // Keep process alive (server runs until stdin closes or signal received)
+  } catch (error) {
+    console.error('Failed to start MCP server:', error);
+    process.exit(1);
+  }
+}
+
+main();
diff --git a/packages/mcp-server/package.json b/packages/mcp-server/package.json
index b35d48a..fccd0da 100644
--- a/packages/mcp-server/package.json
+++ b/packages/mcp-server/package.json
@@ -6,7 +6,7 @@
   "main": "./dist/index.js",
   "types": "./dist/index.d.ts",
   "bin": {
-    "dev-agent-mcp": "./dist/index.js"
+    "dev-agent-mcp": "./dist/bin/dev-agent-mcp.js"
   },
   "scripts": {
     "build": "tsc",
diff --git a/packages/mcp-server/src/server/mcp-server.ts b/packages/mcp-server/src/server/mcp-server.ts
index e4e0ebf..4931cbe 100644
--- a/packages/mcp-server/src/server/mcp-server.ts
+++ b/packages/mcp-server/src/server/mcp-server.ts
@@ -12,11 +12,9 @@ import type {
   ErrorCode,
   InitializeResult,
   JSONRPCRequest,
-  JSONRPCResponse,
   MCPMethod,
   ServerCapabilities,
   ServerInfo,
-  ToolCall,
 } from './protocol/types';
 import { StdioTransport } from './transport/stdio-transport';
 import type { Transport, TransportMessage } from './transport/transport';
@@ -32,9 +30,10 @@ export interface MCPServerConfig {
 export class MCPServer {
   private registry: AdapterRegistry;
   private transport: Transport;
-  private logger = new ConsoleLogger('[MCP Server]');
+  private logger = new ConsoleLogger('[MCP Server]', 'debug'); // Enable debug logging
   private config: Config;
   private serverInfo: ServerInfo;
+  private clientProtocolVersion?: string;
 
   constructor(config: MCPServerConfig) {
     this.config = config.config;
@@ -105,17 +104,39 @@ export class MCPServer {
    * Handle incoming MCP message
    */
   private async handleMessage(message: TransportMessage): Promise<void> {
-    // Only handle requests (not notifications for now)
+    this.logger.debug('Raw message received', {
+      type: typeof message,
+      isRequest: JSONRPCHandler.isRequest(message),
+      preview: JSON.stringify(message).substring(0, 200),
+    });
+
+    // Handle notifications
     if (!JSONRPCHandler.isRequest(message)) {
-      this.logger.debug('Ignoring notification', { method: message.method });
+      const method = (message as { method: string }).method;
+      this.logger.info('Received notification', { method });
+
+      // The 'initialized' notification is sent by the client after receiving
+      // the initialize response. We acknowledge it but don't need to respond.
+      if (method === 'initialized') {
+        this.logger.info('Client initialized successfully');
+      }
+
       return;
     }
 
     const request = message as JSONRPCRequest;
+    this.logger.info('Received request', { method: request.method, id: request.id });
 
     try {
       const result = await this.routeRequest(request);
-      const response = JSONRPCHandler.createResponse(request.id!, result);
+      // request.id is guaranteed to be defined for requests (checked by isRequest)
+      const requestId = request.id ?? 0;
+      const response = JSONRPCHandler.createResponse(requestId, result);
+      this.logger.debug('Sending response', {
+        id: request.id,
+        method: request.method,
+        responsePreview: JSON.stringify(response).substring(0, 200),
+      });
       await this.transport.send(response);
     } catch (error) {
       this.logger.error('Request handling failed', {
@@ -124,7 +145,8 @@ export class MCPServer {
       });
 
       const jsonrpcError = error as { code: ErrorCode; message: string; data?: unknown };
-      const errorResponse = JSONRPCHandler.createErrorResponse(request.id, jsonrpcError);
+      const requestId = request.id ?? 0;
+      const errorResponse = JSONRPCHandler.createErrorResponse(requestId, jsonrpcError);
       await this.transport.send(errorResponse);
     }
   }
@@ -137,7 +159,7 @@ export class MCPServer {
 
     switch (method) {
       case 'initialize':
-        return this.handleInitialize();
+        return this.handleInitialize(request.params as { protocolVersion?: string });
 
       case 'tools/list':
         return this.handleToolsList();
@@ -161,7 +183,16 @@ export class MCPServer {
   /**
    * Handle initialize request
    */
-  private handleInitialize(): InitializeResult {
+  private handleInitialize(params?: { protocolVersion?: string }): InitializeResult {
+    // Store the client's protocol version and echo it back
+    // MCP uses date-based versioning (e.g., "2025-06-18")
+    this.clientProtocolVersion = params?.protocolVersion || '1.0';
+
+    this.logger.debug('Initialize request', {
+      clientProtocolVersion: this.clientProtocolVersion,
+      clientParams: params,
+    });
+
     const capabilities: ServerCapabilities = {
       tools: { supported: true },
       resources: { supported: false }, // Not yet implemented
@@ -169,7 +200,7 @@ export class MCPServer {
     };
 
     return {
-      protocolVersion: '1.0',
+      protocolVersion: this.clientProtocolVersion,
       capabilities,
       serverInfo: this.serverInfo,
     };
diff --git a/packages/mcp-server/src/server/transport/stdio-transport.ts b/packages/mcp-server/src/server/transport/stdio-transport.ts
index 56cd501..229da5a 100644
--- a/packages/mcp-server/src/server/transport/stdio-transport.ts
+++ b/packages/mcp-server/src/server/transport/stdio-transport.ts
@@ -20,9 +20,9 @@ export class StdioTransport extends Transport {
     }
 
     // Create readline interface for line-by-line input
+    // Note: We don't specify 'output' to avoid readline echoing input to stdout
     this.readline = readline.createInterface({
       input: process.stdin,
-      output: process.stdout,
       terminal: false,
     });
 
diff --git a/packages/mcp-server/src/utils/logger.ts b/packages/mcp-server/src/utils/logger.ts
index 72dc099..082fb06 100644
--- a/packages/mcp-server/src/utils/logger.ts
+++ b/packages/mcp-server/src/utils/logger.ts
@@ -5,20 +5,30 @@
 import type { Logger } from '../adapters/types';
 
 export class ConsoleLogger implements Logger {
-  constructor(private prefix = '[MCP]') {}
+  constructor(
+    private prefix = '[MCP]',
+    private minLevel: 'debug' | 'info' | 'warn' | 'error' = 'info'
+  ) {}
 
   debug(message: string, meta?: Record<string, unknown>): void {
-    if (process.env.DEBUG) {
-      console.debug(`${this.prefix} DEBUG:`, message, meta || '');
+    if (this.minLevel === 'debug') {
+      // MCP requires all logs on stderr (stdout is for JSON-RPC only)
+      console.error(`${this.prefix} DEBUG:`, message, meta || '');
     }
   }
 
   info(message: string, meta?: Record<string, unknown>): void {
-    console.info(`${this.prefix} INFO:`, message, meta ? JSON.stringify(meta) : '');
+    if (this.minLevel === 'debug' || this.minLevel === 'info') {
+      // MCP requires all logs on stderr (stdout is for JSON-RPC only)
+      console.error(`${this.prefix} INFO:`, message, meta ? JSON.stringify(meta) : '');
+    }
   }
 
   warn(message: string, meta?: Record<string, unknown>): void {
-    console.warn(`${this.prefix} WARN:`, message, meta ? JSON.stringify(meta) : '');
+    if (this.minLevel !== 'error') {
+      // MCP requires all logs on stderr (stdout is for JSON-RPC only)
+      console.error(`${this.prefix} WARN:`, message, meta ? JSON.stringify(meta) : '');
+    }
   }
 
   error(message: string | Error, meta?: Record<string, unknown>): void {
diff --git a/packages/mcp-server/tsconfig.json b/packages/mcp-server/tsconfig.json
index 4da598a..c97d7e9 100644
--- a/packages/mcp-server/tsconfig.json
+++ b/packages/mcp-server/tsconfig.json
@@ -2,12 +2,12 @@
   "extends": "../../tsconfig.json",
   "compilerOptions": {
     "outDir": "./dist",
-    "rootDir": "./src",
+    "rootDir": ".",
     "composite": true,
     "declaration": true,
     "declarationMap": true
   },
-  "include": ["src/**/*"],
+  "include": ["src/**/*", "bin/**/*"],
   "exclude": ["node_modules", "dist", "**/*.test.ts"],
   "references": [
     { "path": "../core" },