diff --git a/.github/workflows/tests_mcp.yml b/.github/workflows/tests_mcp.yml
index 1beebe5249d9c..753bb7412eba5 100644
--- a/.github/workflows/tests_mcp.yml
+++ b/.github/workflows/tests_mcp.yml
@@ -23,7 +23,6 @@ env:
   # Force terminal colors. @see https://www.npmjs.com/package/colors
   FORCE_COLOR: 1
   ELECTRON_SKIP_BINARY_DOWNLOAD: 1
-  DEBUG_GIT_COMMIT_INFO: 1
 
 jobs:
   test_mcp:
diff --git a/.github/workflows/tests_primary.yml b/.github/workflows/tests_primary.yml
index 2cb96d9ad6148..304870c65d179 100644
--- a/.github/workflows/tests_primary.yml
+++ b/.github/workflows/tests_primary.yml
@@ -25,7 +25,6 @@ env:
   # Force terminal colors. @see https://www.npmjs.com/package/colors
   FORCE_COLOR: 1
   ELECTRON_SKIP_BINARY_DOWNLOAD: 1
-  DEBUG_GIT_COMMIT_INFO: 1
 
 jobs:
   test_linux:
@@ -177,7 +176,6 @@ jobs:
     runs-on: ubuntu-latest
     env:
       PWTEST_BOT_NAME: "vscode-extension"
-      DEBUG_GIT_COMMIT_INFO: ""
     steps:
     - uses: actions/checkout@v5
     - uses: actions/setup-node@v5
diff --git a/packages/playwright/src/mcp/test/streams.ts b/packages/playwright/src/mcp/test/streams.ts
index f78eb82e3fe07..4513411016650 100644
--- a/packages/playwright/src/mcp/test/streams.ts
+++ b/packages/playwright/src/mcp/test/streams.ts
@@ -16,20 +16,24 @@
 
 import { Writable } from 'stream';
 
+import { stripAnsiEscapes } from '../../util';
+
 import type { ProgressCallback } from '../sdk/server';
 
 export class StringWriteStream extends Writable {
   private _progress: ProgressCallback;
+  private _prefix: string;
 
-  constructor(progress: ProgressCallback) {
+  constructor(progress: ProgressCallback, stdio: 'stdout' | 'stderr') {
     super();
     this._progress = progress;
+    this._prefix = stdio === 'stdout' ? '' : '[err] ';
   }
 
   override _write(chunk: any, encoding: any, callback: any) {
-    const text = chunk.toString();
+    const text = stripAnsiEscapes(chunk.toString());
     // Progress wraps these as individual messages.
-    this._progress({ message: text.endsWith('\n') ? text.slice(0, -1) : text });
+    this._progress({ message: `${this._prefix}${text.endsWith('\n') ? text.slice(0, -1) : text}` });
     callback();
   }
 }
diff --git a/packages/playwright/src/mcp/test/testContext.ts b/packages/playwright/src/mcp/test/testContext.ts
index 60a2d16b8f250..d71a41ff48bc1 100644
--- a/packages/playwright/src/mcp/test/testContext.ts
+++ b/packages/playwright/src/mcp/test/testContext.ts
@@ -138,45 +138,93 @@ export class TestContext {
   }
 
   async runSeedTest(seedFile: string, projectName: string, progress: ProgressCallback) {
-    const { screen } = this.createScreen(progress);
+    await this.runWithGlobalSetup(async (testRunner, reporter) => {
+      const result = await testRunner.runTests(reporter, {
+        headed: !this.options?.headless,
+        locations: ['/' + escapeRegExp(seedFile) + '/'],
+        projects: [projectName],
+        timeout: 0,
+        workers: 1,
+        pauseAtEnd: true,
+        disableConfigReporters: true,
+        failOnLoadErrors: true,
+      });
+      // Ideally, we should check that page was indeed created and browser mcp has kicked in.
+      // However, that is handled in the upper layer, so hard to check here.
+      if (result.status === 'passed' && !reporter.suite?.allTests().length)
+        throw new Error('seed test not found.');
+
+      if (result.status !== 'passed')
+        throw new Error('Errors while running the seed test.');
+    }, progress);
+  }
+
+  async runWithGlobalSetup(
+    callback: (testRunner: TestRunner, reporter: ListReporter) => Promise<void>,
+    progress: ProgressCallback): Promise<void> {
+    const { screen, claimStdio, releaseStdio } = createScreen(progress);
     const configDir = this.configLocation.configDir;
-    const reporter = new ListReporter({ configDir, screen });
     const testRunner = await this.createTestRunner();
 
-    const result = await testRunner.runTests(reporter, {
-      headed: !this.options?.headless,
-      locations: ['/' + escapeRegExp(seedFile) + '/'],
-      projects: [projectName],
-      timeout: 0,
-      workers: 1,
-      pauseAtEnd: true,
-      disableConfigReporters: true,
-      failOnLoadErrors: true,
-    });
+    claimStdio();
+    try {
+      const setupReporter = new ListReporter({ configDir, screen, includeTestId: true });
+      const { status } = await testRunner.runGlobalSetup([setupReporter]);
+      if (status !== 'passed')
+        throw new Error('Failed to run global setup');
+    } finally {
+      releaseStdio();
+    }
 
-    // Ideally, we should check that page was indeed created and browser mcp has kicked in.
-    // However, that is handled in the upper layer, so hard to check here.
-    if (result.status === 'passed' && !reporter.suite?.allTests().length)
-      throw new Error('seed test not found.');
+    try {
+      const reporter = new ListReporter({ configDir, screen, includeTestId: true });
+      return await callback(testRunner, reporter);
+    } finally {
+      claimStdio();
+      await testRunner.runGlobalTeardown().finally(() => {
+        releaseStdio();
+      });
+    }
+  }
 
-    if (result.status !== 'passed')
-      throw new Error('Errors while running the seed test.');
+  async close() {
   }
+}
 
-  createScreen(progress: ProgressCallback) {
-    const stream = new StringWriteStream(progress);
-    const screen = {
-      ...terminalScreen,
-      isTTY: false,
-      colors: noColors,
-      stdout: stream as unknown as NodeJS.WriteStream,
-      stderr: stream as unknown as NodeJS.WriteStream,
+export function createScreen(progress: ProgressCallback) {
+  const stdout = new StringWriteStream(progress, 'stdout');
+  const stderr = new StringWriteStream(progress, 'stderr');
+
+  const screen = {
+    ...terminalScreen,
+    isTTY: false,
+    colors: noColors,
+    stdout: stdout as unknown as NodeJS.WriteStream,
+    stderr: stderr as unknown as NodeJS.WriteStream,
+  };
+
+  /* eslint-disable no-restricted-properties */
+  const originalStdoutWrite = process.stdout.write;
+  const originalStderrWrite = process.stderr.write;
+
+  const claimStdio = () => {
+    process.stdout.write = (chunk: string | Buffer) => {
+      stdout.write(chunk);
+      return true;
     };
-    return { screen, stream };
-  }
+    process.stderr.write = (chunk: string | Buffer) => {
+      stderr.write(chunk);
+      return true;
+    };
+  };
 
-  async close() {
-  }
+  const releaseStdio = () => {
+    process.stdout.write = originalStdoutWrite;
+    process.stderr.write = originalStderrWrite;
+  };
+  /* eslint-enable no-restricted-properties */
+
+  return { screen, claimStdio, releaseStdio };
 }
 
 const bestPracticesMarkdown = `
diff --git a/packages/playwright/src/mcp/test/testTools.ts b/packages/playwright/src/mcp/test/testTools.ts
index a3c86ed080f98..7a4f0bda8dceb 100644
--- a/packages/playwright/src/mcp/test/testTools.ts
+++ b/packages/playwright/src/mcp/test/testTools.ts
@@ -15,9 +15,9 @@
  */
 
 import { z } from '../sdk/bundle';
-import ListReporter from '../../reporters/list';
 import ListModeReporter from '../../reporters/listModeReporter';
 import { defineTestTool } from './testTool';
+import { createScreen } from './testContext';
 
 export const listTests = defineTestTool({
   schema: {
@@ -29,7 +29,7 @@ export const listTests = defineTestTool({
   },
 
   handle: async (context, _, progress) => {
-    const { screen } = context.createScreen(progress);
+    const { screen } = createScreen(progress);
     const reporter = new ListModeReporter({ screen, includeTestId: true });
     const testRunner = await context.createTestRunner();
     await testRunner.listTests(reporter, {});
@@ -51,15 +51,13 @@ export const runTests = defineTestTool({
   },
 
   handle: async (context, params, progress) => {
-    const { screen } = context.createScreen(progress);
-    const configDir = context.configLocation.configDir;
-    const reporter = new ListReporter({ configDir, screen, includeTestId: true, prefixStdio: 'out' });
-    const testRunner = await context.createTestRunner();
-    await testRunner.runTests(reporter, {
-      locations: params.locations,
-      projects: params.projects,
-      disableConfigReporters: true,
-    });
+    await context.runWithGlobalSetup(async (testRunner, reporter) => {
+      await testRunner.runTests(reporter, {
+        locations: params.locations,
+        projects: params.projects,
+        disableConfigReporters: true,
+      });
+    }, progress);
 
     return { content: [] };
   },
@@ -80,19 +78,17 @@ export const debugTest = defineTestTool({
   },
 
   handle: async (context, params, progress) => {
-    const { screen } = context.createScreen(progress);
-    const configDir = context.configLocation.configDir;
-    const reporter = new ListReporter({ configDir, screen, includeTestId: true, prefixStdio: 'out' });
-    const testRunner = await context.createTestRunner();
-    await testRunner.runTests(reporter, {
-      headed: !context.options?.headless,
-      testIds: [params.test.id],
-      // For automatic recovery
-      timeout: 0,
-      workers: 1,
-      pauseOnError: true,
-      disableConfigReporters: true,
-    });
+    await context.runWithGlobalSetup(async (testRunner, reporter) => {
+      await testRunner.runTests(reporter, {
+        headed: !context.options?.headless,
+        testIds: [params.test.id],
+        // For automatic recovery
+        timeout: 0,
+        workers: 1,
+        pauseOnError: true,
+        disableConfigReporters: true,
+      });
+    }, progress);
 
     return { content: [] };
   },
diff --git a/packages/playwright/src/reporters/list.ts b/packages/playwright/src/reporters/list.ts
index 591883e3bf33b..b2b399e6eb0d6 100644
--- a/packages/playwright/src/reporters/list.ts
+++ b/packages/playwright/src/reporters/list.ts
@@ -38,12 +38,10 @@ class ListReporter extends TerminalReporter {
   private _stepIndex = new Map<TestStep, string>();
   private _needNewLine = false;
   private _printSteps: boolean;
-  private _prefixStdio?: string;
 
-  constructor(options?: ListReporterOptions & CommonReporterOptions & TerminalReporterOptions & { prefixStdio?: string }) {
+  constructor(options?: ListReporterOptions & CommonReporterOptions & TerminalReporterOptions) {
     super(options);
     this._printSteps = getAsBooleanFromENV('PLAYWRIGHT_LIST_PRINT_STEPS', options?.printSteps);
-    this._prefixStdio = options?.prefixStdio;
   }
 
   override onBegin(suite: Suite) {
@@ -164,10 +162,7 @@ class ListReporter extends TerminalReporter {
       return;
     const text = chunk.toString('utf-8');
     this._updateLineCountAndNewLineFlagForOutput(text);
-    if (this._prefixStdio)
-      stream.write(`[${stdio}] ${chunk}`);
-    else
-      stream.write(chunk);
+    stream.write(chunk);
   }
 
   override onTestEnd(test: TestCase, result: TestResult) {
diff --git a/tests/mcp/planner.spec.ts b/tests/mcp/planner.spec.ts
index 64684a56c2742..1917660b52bfd 100644
--- a/tests/mcp/planner.spec.ts
+++ b/tests/mcp/planner.spec.ts
@@ -183,6 +183,7 @@ test('planner_setup_page (loading error)', async ({ startClient }) => {
 });
 
 test('planner_setup_page (wrong test location)', async ({ startClient }) => {
+  await writeFiles({});
   const { client } = await startClient();
   expect(await client.callTool({
     name: 'planner_setup_page',
@@ -196,6 +197,7 @@ test('planner_setup_page (wrong test location)', async ({ startClient }) => {
 });
 
 test('planner_setup_page (no test location)', async ({ startClient }) => {
+  await writeFiles({});
   const { client } = await startClient();
   expect(await client.callTool({
     name: 'planner_setup_page',
diff --git a/tests/mcp/seed-default-project.spec.ts b/tests/mcp/seed-default-project.spec.ts
index c0acdef706d2e..beac69d682ec1 100644
--- a/tests/mcp/seed-default-project.spec.ts
+++ b/tests/mcp/seed-default-project.spec.ts
@@ -47,6 +47,23 @@ test('seed test runs in first top-level project by default', async ({ startClien
   expect(fs.existsSync(path.join(baseDir, 'third', 'seed.spec.ts'))).toBe(false);
 });
 
+test('respects provided seed test', async ({ startClient }) => {
+  await writeFiles({
+    'a.test.ts': `
+      import { test, expect } from '@playwright/test';
+      test('test', async ({ page }) => {});
+    `,
+  });
+
+  const { client } = await startClient();
+  expect(await client.callTool({
+    name: 'planner_setup_page',
+    arguments: {
+      seedFile: 'a.test.ts',
+    },
+  })).toHaveTextResponse(expect.stringContaining(`### Paused at end of test. ready for interaction`));
+});
+
 test('seed test runs in first top-level project with dependencies', async ({ startClient }) => {
   const baseDir = await writeFiles({
     'playwright.config.ts': `
diff --git a/tests/mcp/test-debug.spec.ts b/tests/mcp/test-debug.spec.ts
index 0c3b031ef239a..b0f1a875816e0 100644
--- a/tests/mcp/test-debug.spec.ts
+++ b/tests/mcp/test-debug.spec.ts
@@ -323,7 +323,7 @@ test('test_debug w/ console.log in test', async ({ startClient }) => {
     },
   })).toHaveTextResponse(expect.stringContaining(`
 Running 1 test using 1 worker
-[out] console.log
+console.log
 [err] console.error
 ### Paused on error:
 Error: expect(locator).toBeVisible() failed`));
diff --git a/tests/mcp/test-setup.spec.ts b/tests/mcp/test-setup.spec.ts
new file mode 100644
index 0000000000000..455b1fcb38b82
--- /dev/null
+++ b/tests/mcp/test-setup.spec.ts
@@ -0,0 +1,131 @@
+/**
+ * Copyright (c) Microsoft Corporation.
+ *
+ * Licensed under the Apache License, Version 2.0 (the "License");
+ * you may not use this file except in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ * http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing, software
+ * distributed under the License is distributed on an "AS IS" BASIS,
+ * WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+ * See the License for the specific language governing permissions and
+ * limitations under the License.
+ */
+
+import { test, expect, writeFiles } from './fixtures';
+
+test.use({ mcpServerType: 'test-mcp' });
+
+const workspace = {
+  'playwright.config.ts': `
+    module.exports = {
+      projects: [{ name: 'chromium' }],
+      webServer: {
+        command: 'node web-server.js',
+        stdout: 'pipe',
+        stderr: 'pipe',
+        wait: { stderr: /started/ }
+      },
+      globalSetup: 'global-setup.ts',
+      globalTeardown: 'global-teardown.ts',
+    };
+  `,
+  'web-server.js': `
+    console.log('web server started');
+    console.error('web server started');
+  `,
+  'global-setup.ts': `
+    module.exports = async () => {
+      console.log('global setup');
+      console.error('global setup');
+    };
+  `,
+  'global-teardown.ts': `
+    module.exports = async () => {
+      console.log('global teardown');
+      console.error('global teardown');
+    };
+  `,
+  'a.test.ts': `
+    import { test, expect } from '@playwright/test';
+    test('test', async ({ page }) => {
+      console.log('test');
+      console.error('test');
+    });
+  `
+};
+
+test('setup should run global setup and teardown', async ({ startClient }, { workerIndex }) => {
+  await writeFiles(workspace);
+  const { client } = await startClient();
+
+  // Call planner_setup_page without specifying a project - should use first top-level project
+  expect(await client.callTool({
+    name: 'planner_setup_page',
+    arguments: {
+      seedFile: 'a.test.ts',
+    },
+  })).toHaveTextResponse(expect.stringContaining(`[WebServer] web server started
+[err] [WebServer] web server started
+global setup
+[err] global setup
+
+Running 1 test using 1 worker
+test
+[err] test
+### Paused at end of test. ready for interaction`));
+});
+
+test('test_run should run global setup and teardown', async ({ startClient }) => {
+  await writeFiles(workspace);
+
+  const { client } = await startClient();
+  expect(await client.callTool({
+    name: 'test_run',
+    arguments: {
+      locations: ['a.test.ts'],
+      projects: ['chromium'],
+    },
+  })).toHaveTextResponse(`[WebServer] web server started
+[err] [WebServer] web server started
+global setup
+[err] global setup
+
+Running 1 test using 1 worker
+test
+[err] test
+  ok 1 [id=<ID>] [project=chromium] › a.test.ts:3:9 › test (XXms)
+  1 passed (XXms)
+global teardown
+[err] global teardown`);
+});
+
+test('test_debug should run global setup and teardown', async ({ startClient }) => {
+  await writeFiles(workspace);
+
+  const { client } = await startClient();
+  const listResult = await client.callTool({
+    name: 'test_list',
+  });
+  const [, id] = listResult.content[0].text.match(/\[id=([^\]]+)\]/);
+
+  expect(await client.callTool({
+    name: 'test_debug',
+    arguments: {
+      test: { id, title: 'pass' },
+    },
+  })).toHaveTextResponse(`[WebServer] web server started
+[err] [WebServer] web server started
+global setup
+[err] global setup
+
+Running 1 test using 1 worker
+test
+[err] test
+  ok 1 [id=<ID>] [project=chromium] › a.test.ts:3:9 › test (XXms)
+  1 passed (XXms)
+global teardown
+[err] global teardown`);
+});