diff --git a/src/hooks/useSSEStream.ts b/src/hooks/useSSEStream.ts
new file mode 100644
index 0000000..9b16f45
--- /dev/null
+++ b/src/hooks/useSSEStream.ts
@@ -0,0 +1,225 @@
+import { useRef, useCallback } from 'react';
+import type { SSEEvent, TokenUsage, PermissionRequestEvent } from '@/types';
+
+interface ToolUseInfo {
+  id: string;
+  name: string;
+  input: unknown;
+}
+
+interface ToolResultInfo {
+  tool_use_id: string;
+  content: string;
+}
+
+export interface SSECallbacks {
+  onText: (accumulated: string) => void;
+  onToolUse: (tool: ToolUseInfo) => void;
+  onToolResult: (result: ToolResultInfo) => void;
+  onToolOutput: (data: string) => void;
+  onToolProgress: (toolName: string, elapsedSeconds: number) => void;
+  onStatus: (text: string | undefined) => void;
+  onResult: (usage: TokenUsage | null) => void;
+  onPermissionRequest: (data: PermissionRequestEvent) => void;
+  onToolTimeout: (toolName: string, elapsedSeconds: number) => void;
+  onError: (accumulated: string) => void;
+}
+
+/**
+ * Parse a single SSE line (after stripping "data: " prefix) and dispatch
+ * to the appropriate callback.  Returns the updated accumulated text.
+ */
+function handleSSEEvent(
+  event: SSEEvent,
+  accumulated: string,
+  callbacks: SSECallbacks,
+): string {
+  switch (event.type) {
+    case 'text': {
+      const next = accumulated + event.data;
+      callbacks.onText(next);
+      return next;
+    }
+
+    case 'tool_use': {
+      try {
+        const toolData = JSON.parse(event.data);
+        callbacks.onToolUse({
+          id: toolData.id,
+          name: toolData.name,
+          input: toolData.input,
+        });
+      } catch {
+        // skip malformed tool_use data
+      }
+      return accumulated;
+    }
+
+    case 'tool_result': {
+      try {
+        const resultData = JSON.parse(event.data);
+        callbacks.onToolResult({
+          tool_use_id: resultData.tool_use_id,
+          content: resultData.content,
+        });
+      } catch {
+        // skip malformed tool_result data
+      }
+      return accumulated;
+    }
+
+    case 'tool_output': {
+      try {
+        const parsed = JSON.parse(event.data);
+        if (parsed._progress) {
+          callbacks.onToolProgress(parsed.tool_name, Math.round(parsed.elapsed_time_seconds));
+          return accumulated;
+        }
+      } catch {
+        // Not JSON - raw stderr output, fall through
+      }
+      callbacks.onToolOutput(event.data);
+      return accumulated;
+    }
+
+    case 'status': {
+      try {
+        const statusData = JSON.parse(event.data);
+        if (statusData.session_id) {
+          callbacks.onStatus(`Connected (${statusData.model || 'claude'})`);
+        } else if (statusData.notification) {
+          callbacks.onStatus(statusData.message || statusData.title || undefined);
+        } else {
+          callbacks.onStatus(typeof event.data === 'string' ? event.data : undefined);
+        }
+      } catch {
+        callbacks.onStatus(event.data || undefined);
+      }
+      return accumulated;
+    }
+
+    case 'result': {
+      try {
+        const resultData = JSON.parse(event.data);
+        callbacks.onResult(resultData.usage || null);
+      } catch {
+        callbacks.onResult(null);
+      }
+      callbacks.onStatus(undefined);
+      return accumulated;
+    }
+
+    case 'permission_request': {
+      try {
+        const permData: PermissionRequestEvent = JSON.parse(event.data);
+        callbacks.onPermissionRequest(permData);
+      } catch {
+        // skip malformed permission_request data
+      }
+      return accumulated;
+    }
+
+    case 'tool_timeout': {
+      try {
+        const timeoutData = JSON.parse(event.data);
+        callbacks.onToolTimeout(timeoutData.tool_name, timeoutData.elapsed_seconds);
+      } catch {
+        // skip malformed timeout data
+      }
+      return accumulated;
+    }
+
+    case 'error': {
+      const next = accumulated + '\n\n**Error:** ' + event.data;
+      callbacks.onError(next);
+      return next;
+    }
+
+    case 'done': {
+      return accumulated;
+    }
+
+    default:
+      return accumulated;
+  }
+}
+
+/**
+ * Reads an SSE response body and dispatches parsed events through callbacks.
+ * Returns the final accumulated text and token usage.
+ */
+export async function consumeSSEStream(
+  reader: ReadableStreamDefaultReader<Uint8Array>,
+  callbacks: SSECallbacks,
+): Promise<{ accumulated: string; tokenUsage: TokenUsage | null }> {
+  const decoder = new TextDecoder();
+  let buffer = '';
+  let accumulated = '';
+  let tokenUsage: TokenUsage | null = null;
+
+  const wrappedCallbacks: SSECallbacks = {
+    ...callbacks,
+    onResult: (usage) => {
+      tokenUsage = usage;
+      callbacks.onResult(usage);
+    },
+  };
+
+  while (true) {
+    const { done, value } = await reader.read();
+    if (done) break;
+
+    buffer += decoder.decode(value, { stream: true });
+    const lines = buffer.split('\n');
+    buffer = lines.pop() || '';
+
+    for (const line of lines) {
+      if (!line.startsWith('data: ')) continue;
+
+      try {
+        const event: SSEEvent = JSON.parse(line.slice(6));
+        accumulated = handleSSEEvent(event, accumulated, wrappedCallbacks);
+      } catch {
+        // skip malformed SSE lines
+      }
+    }
+  }
+
+  return { accumulated, tokenUsage };
+}
+
+/**
+ * Hook that provides a stable consumeSSEStream function bound to the latest
+ * callbacks via a ref, avoiding stale closures.
+ */
+export function useSSEStream() {
+  const callbacksRef = useRef<SSECallbacks | null>(null);
+
+  const processStream = useCallback(
+    async (
+      reader: ReadableStreamDefaultReader<Uint8Array>,
+      callbacks: SSECallbacks,
+    ) => {
+      callbacksRef.current = callbacks;
+
+      // Proxy through ref so callers always hit the latest callbacks
+      const proxied: SSECallbacks = {
+        onText: (a) => callbacksRef.current?.onText(a),
+        onToolUse: (t) => callbacksRef.current?.onToolUse(t),
+        onToolResult: (r) => callbacksRef.current?.onToolResult(r),
+        onToolOutput: (d) => callbacksRef.current?.onToolOutput(d),
+        onToolProgress: (n, s) => callbacksRef.current?.onToolProgress(n, s),
+        onStatus: (t) => callbacksRef.current?.onStatus(t),
+        onResult: (u) => callbacksRef.current?.onResult(u),
+        onPermissionRequest: (d) => callbacksRef.current?.onPermissionRequest(d),
+        onToolTimeout: (n, s) => callbacksRef.current?.onToolTimeout(n, s),
+        onError: (a) => callbacksRef.current?.onError(a),
+      };
+
+      return consumeSSEStream(reader, proxied);
+    },
+    [],
+  );
+
+  return { processStream };
+}