diff --git a/codex-rs/exec-server/src/environment.rs b/codex-rs/exec-server/src/environment.rs
index 5372de9fdf..2336941ee2 100644
--- a/codex-rs/exec-server/src/environment.rs
+++ b/codex-rs/exec-server/src/environment.rs
@@ -4,22 +4,57 @@ use crate::ExecServerEvent;
 use crate::ExecProcess;
 use crate::ExecutorEnvironment;
 use crate::RemoteExecServerConnectArgs;
+use crate::protocol::EXEC_EXITED_METHOD;
+use crate::protocol::EXEC_OUTPUT_DELTA_METHOD;
+use crate::protocol::ExecExitedNotification;
+use crate::protocol::ExecOutputDeltaNotification;
 use crate::protocol::ExecParams;
 use crate::protocol::ExecResponse;
 use crate::protocol::ReadParams;
 use crate::protocol::ReadResponse;
+use crate::protocol::TerminateParams;
 use crate::protocol::TerminateResponse;
+use crate::protocol::WriteParams;
 use crate::protocol::WriteResponse;
+use crate::rpc::RpcNotificationSender;
+use crate::rpc::RpcServerOutboundMessage;
+use crate::server::ExecServerHandler;
 use crate::fs;
 use crate::fs::ExecutorFileSystem;
 use async_trait::async_trait;
+use serde_json::Value;
 use std::sync::Arc;
 use tokio::sync::broadcast;
+use tokio::sync::mpsc;
+use tokio::sync::Mutex;
 use tokio::sync::OnceCell;
 
-#[derive(Clone, Default)]
+#[derive(Clone)]
 struct LocalExecProcess {
-    client: Arc<OnceCell<ExecServerClient>>,
+    handler: Arc<ExecServerHandler>,
+    events_tx: broadcast::Sender<ExecServerEvent>,
+    outgoing_rx: Arc<Mutex<Option<mpsc::Receiver<RpcServerOutboundMessage>>>>,
+    reader_task_started: Arc<OnceCell<()>>,
+}
+
+impl Default for LocalExecProcess {
+    fn default() -> Self {
+        let (outgoing_tx, outgoing_rx) = mpsc::channel(256);
+        let handler = Arc::new(ExecServerHandler::new(RpcNotificationSender::new(outgoing_tx)));
+        let (_initialize_response) = handler
+            .initialize()
+            .expect("new local exec process should initialize once");
+        handler
+            .initialized()
+            .expect("new local exec process should accept initialized notification");
+
+        Self {
+            handler,
+            events_tx: broadcast::channel(256).0,
+            outgoing_rx: Arc::new(Mutex::new(Some(outgoing_rx))),
+            reader_task_started: Arc::new(OnceCell::new()),
+        }
+    }
 }
 
 #[derive(Clone)]
@@ -106,11 +141,13 @@ impl ExecutorEnvironment for Environment {
 #[async_trait]
 impl ExecProcess for LocalExecProcess {
     async fn start(&self, params: ExecParams) -> Result<ExecResponse, ExecServerError> {
-        self.client().await?.start(params).await
+        self.ensure_reader_task().await;
+        self.handler.exec(params).await.map_err(local_server_error)
     }
 
     async fn read(&self, params: ReadParams) -> Result<ReadResponse, ExecServerError> {
-        self.client().await?.read(params).await
+        self.ensure_reader_task().await;
+        self.handler.exec_read(params).await.map_err(local_server_error)
     }
 
     async fn write(
@@ -118,30 +155,77 @@ impl ExecProcess for LocalExecProcess {
         process_id: &str,
         chunk: Vec<u8>,
     ) -> Result<WriteResponse, ExecServerError> {
-        self.client().await?.write(process_id, chunk).await
+        self.ensure_reader_task().await;
+        self.handler
+            .exec_write(WriteParams {
+                process_id: process_id.to_string(),
+                chunk: chunk.into(),
+            })
+            .await
+            .map_err(local_server_error)
     }
 
     async fn terminate(&self, process_id: &str) -> Result<TerminateResponse, ExecServerError> {
-        self.client().await?.terminate(process_id).await
+        self.ensure_reader_task().await;
+        self.handler
+            .terminate(TerminateParams {
+                process_id: process_id.to_string(),
+            })
+            .await
+            .map_err(local_server_error)
     }
 
     fn subscribe_events(&self) -> broadcast::Receiver<ExecServerEvent> {
-        if let Some(client) = self.client.get() {
-            client.event_receiver()
-        } else {
-            let (_tx, rx) = broadcast::channel(1);
-            rx
-        }
+        self.events_tx.subscribe()
     }
 }
 
 impl LocalExecProcess {
-    async fn client(&self) -> Result<&ExecServerClient, ExecServerError> {
-        self.client
-            .get_or_try_init(|| async {
-                ExecServerClient::connect_in_process(Default::default()).await
+    async fn ensure_reader_task(&self) {
+        let _ = self
+            .reader_task_started
+            .get_or_init(|| async {
+                let mut outgoing_rx = self.outgoing_rx.lock().await;
+                let Some(mut outgoing_rx) = outgoing_rx.take() else {
+                    return;
+                };
+                let events_tx = self.events_tx.clone();
+                tokio::spawn(async move {
+                    while let Some(message) = outgoing_rx.recv().await {
+                        if let RpcServerOutboundMessage::Notification(notification) = message {
+                            match notification.method.as_str() {
+                                EXEC_OUTPUT_DELTA_METHOD => {
+                                    if let Ok(params) = serde_json::from_value::<
+                                        ExecOutputDeltaNotification,
+                                    >(
+                                        notification.params.unwrap_or(Value::Null)
+                                    ) {
+                                        let _ = events_tx.send(ExecServerEvent::OutputDelta(params));
+                                    }
+                                }
+                                EXEC_EXITED_METHOD => {
+                                    if let Ok(params) =
+                                        serde_json::from_value::<ExecExitedNotification>(
+                                            notification.params.unwrap_or(Value::Null),
+                                        )
+                                    {
+                                        let _ = events_tx.send(ExecServerEvent::Exited(params));
+                                    }
+                                }
+                                _ => {}
+                            }
+                        }
+                    }
+                });
             })
-            .await
+            .await;
+    }
+}
+
+fn local_server_error(error: codex_app_server_protocol::JSONRPCErrorError) -> ExecServerError {
+    ExecServerError::Server {
+        code: error.code,
+        message: error.message,
     }
 }