diff --git a/src/glmt/glmt-proxy.ts b/src/glmt/glmt-proxy.ts
index d1170f6e..1a07d163 100644
--- a/src/glmt/glmt-proxy.ts
+++ b/src/glmt/glmt-proxy.ts
@@ -29,6 +29,15 @@ interface GlmtProxyConfig {
   timeout?: number;
 }
 
+/**
+ * Configuration for retry behavior on rate limit errors
+ */
+interface RetryConfig {
+  maxRetries: number;
+  baseDelay: number;
+  enabled: boolean;
+}
+
 interface ThinkingConfig {
   thinking: boolean;
   effort: string;
@@ -79,6 +88,8 @@ export class GlmtProxy {
   private port: number | null;
   private verbose: boolean;
   private timeout: number;
+  private retryConfig: RetryConfig;
+  private httpsAgent: https.Agent;
 
   constructor(config: GlmtProxyConfig = {}) {
     this.transformer = new GlmtTransformer({
@@ -93,6 +104,21 @@ export class GlmtProxy {
     this.port = null;
     this.verbose = config.verbose || false;
     this.timeout = config.timeout || 120000; // 120s default
+
+    // Retry configuration for handling 429 rate limit errors
+    this.retryConfig = {
+      maxRetries: parseInt(process.env.GLMT_MAX_RETRIES || '3', 10),
+      baseDelay: parseInt(process.env.GLMT_RETRY_BASE_DELAY || '1000', 10),
+      enabled: process.env.GLMT_DISABLE_RETRY !== '1',
+    };
+
+    // Connection pooling for better performance
+    this.httpsAgent = new https.Agent({
+      keepAlive: true,
+      maxSockets: 5,
+      maxFreeSockets: 2,
+      timeout: this.timeout,
+    });
   }
 
   /**
@@ -249,8 +275,8 @@ export class GlmtProxy {
 
     this.log(`Transformed request, thinking: ${thinkingConfig.thinking}`);
 
-    // Forward to Z.AI
-    const openaiResponse = (await this.forwardToUpstream(
+    // Forward to Z.AI with retry on rate limit
+    const openaiResponse = (await this.forwardWithRetry(
       openaiRequest as unknown as OpenAIRequest,
       {}
     )) as OpenAIResponse;
@@ -309,8 +335,8 @@ export class GlmtProxy {
 
     this.log('Starting SSE stream to Claude CLI (socket buffering disabled)');
 
-    // Forward and stream
-    await this.forwardAndStreamUpstream(
+    // Forward and stream with retry on rate limit
+    await this.forwardAndStreamWithRetry(
       openaiRequest as unknown as OpenAIRequest,
       {},
       res,
@@ -342,6 +368,146 @@ export class GlmtProxy {
     });
   }
 
+  /**
+   * Sleep for specified milliseconds
+   */
+  private sleep(ms: number): Promise<void> {
+    return new Promise((resolve) => setTimeout(resolve, ms));
+  }
+
+  /**
+   * Calculate retry delay with exponential backoff and jitter
+   * Honors Retry-After header if provided
+   */
+  private calculateRetryDelay(attempt: number, retryAfterHeader?: string): number {
+    // Honor Retry-After header if present and valid
+    if (retryAfterHeader) {
+      const retryAfter = parseInt(retryAfterHeader, 10);
+      if (!isNaN(retryAfter) && retryAfter > 0) {
+        return retryAfter * 1000; // Convert seconds to ms
+      }
+    }
+    // Exponential backoff: 2^attempt * baseDelay + random jitter (0-500ms)
+    const exponentialDelay = Math.pow(2, attempt) * this.retryConfig.baseDelay;
+    const jitter = Math.random() * 500;
+    return exponentialDelay + jitter;
+  }
+
+  /**
+   * Check if error is retryable (429 rate limit)
+   * Returns retryable status and optional Retry-After value
+   */
+  private isRetryableError(error: Error): { retryable: boolean; retryAfter?: string } {
+    const message = error.message;
+    if (message.includes('429') || message.toLowerCase().includes('rate limit')) {
+      // Try to extract Retry-After from error message
+      const retryAfterMatch = message.match(/retry-after:\s*(\d+)/i);
+      return {
+        retryable: true,
+        retryAfter: retryAfterMatch?.[1],
+      };
+    }
+    return { retryable: false };
+  }
+
+  /**
+   * Forward request with retry logic for rate limit errors
+   */
+  private async forwardWithRetry(
+    openaiRequest: OpenAIRequest,
+    headers: Record<string, string | undefined>
+  ): Promise<unknown> {
+    if (!this.retryConfig.enabled) {
+      return this.forwardToUpstream(openaiRequest, headers);
+    }
+
+    let lastError: Error | null = null;
+
+    for (let attempt = 0; attempt <= this.retryConfig.maxRetries; attempt++) {
+      try {
+        return await this.forwardToUpstream(openaiRequest, headers);
+      } catch (error) {
+        const err = error as Error;
+        const { retryable, retryAfter } = this.isRetryableError(err);
+
+        if (!retryable || attempt >= this.retryConfig.maxRetries) {
+          throw err;
+        }
+
+        lastError = err;
+        const delay = this.calculateRetryDelay(attempt, retryAfter);
+
+        console.error(
+          `[glmt-proxy] Rate limited, retry ${attempt + 1}/${this.retryConfig.maxRetries} after ${Math.round(delay)}ms`
+        );
+
+        await this.sleep(delay);
+      }
+    }
+
+    throw lastError ?? new Error('Retry failed');
+  }
+
+  /**
+   * Forward streaming request with retry logic for rate limit errors
+   * Only retries if headers haven't been sent yet
+   */
+  private async forwardAndStreamWithRetry(
+    openaiRequest: OpenAIRequest,
+    headers: Record<string, string | undefined>,
+    clientRes: http.ServerResponse,
+    thinkingConfig: ThinkingConfig,
+    startTime: number
+  ): Promise<void> {
+    if (!this.retryConfig.enabled) {
+      return this.forwardAndStreamUpstream(
+        openaiRequest,
+        headers,
+        clientRes,
+        thinkingConfig,
+        startTime
+      );
+    }
+
+    let lastError: Error | null = null;
+
+    for (let attempt = 0; attempt <= this.retryConfig.maxRetries; attempt++) {
+      try {
+        return await this.forwardAndStreamUpstream(
+          openaiRequest,
+          headers,
+          clientRes,
+          thinkingConfig,
+          startTime
+        );
+      } catch (error) {
+        const err = error as Error;
+
+        // Don't retry if headers already sent (streaming started)
+        if (clientRes.headersSent) {
+          throw err;
+        }
+
+        const { retryable, retryAfter } = this.isRetryableError(err);
+
+        if (!retryable || attempt >= this.retryConfig.maxRetries) {
+          throw err;
+        }
+
+        lastError = err;
+        const delay = this.calculateRetryDelay(attempt, retryAfter);
+
+        console.error(
+          `[glmt-proxy] Rate limited, retry ${attempt + 1}/${this.retryConfig.maxRetries} after ${Math.round(delay)}ms`
+        );
+
+        await this.sleep(delay);
+      }
+    }
+
+    throw lastError ?? new Error('Retry failed');
+  }
+
   /**
    * Forward request to Z.AI upstream
    */
@@ -362,6 +528,7 @@ export class GlmtProxy {
         port: url.port || 443,
         path: url.pathname || '/api/coding/paas/v4/chat/completions',
         method: 'POST',
+        agent: this.httpsAgent,
         headers: {
           'Content-Type': 'application/json',
           'Content-Length': Buffer.byteLength(requestBody),
@@ -438,6 +605,7 @@ export class GlmtProxy {
         port: url.port || 443,
         path: url.pathname || '/api/coding/paas/v4/chat/completions',
         method: 'POST',
+        agent: this.httpsAgent,
         headers: {
           'Content-Type': 'application/json',
           'Content-Length': Buffer.byteLength(requestBody),
@@ -537,6 +705,10 @@ export class GlmtProxy {
       this.log('Stopping proxy server');
       this.server.close();
     }
+    // Destroy connection pool
+    if (this.httpsAgent) {
+      this.httpsAgent.destroy();
+    }
   }
 
   /**
diff --git a/tests/unit/glmt/retry-logic.test.ts b/tests/unit/glmt/retry-logic.test.ts
new file mode 100644
index 00000000..ab289fd1
--- /dev/null
+++ b/tests/unit/glmt/retry-logic.test.ts
@@ -0,0 +1,276 @@
+/**
+ * GLMT Retry Logic Unit Tests
+ *
+ * Tests for exponential backoff retry behavior on 429 rate limit errors
+ */
+
+import { describe, it, expect, beforeEach, afterEach } from 'bun:test';
+
+// Store original env vars
+const originalEnv = { ...process.env };
+
+// Reset env before each test
+beforeEach(() => {
+  delete process.env.GLMT_MAX_RETRIES;
+  delete process.env.GLMT_RETRY_BASE_DELAY;
+  delete process.env.GLMT_DISABLE_RETRY;
+});
+
+afterEach(() => {
+  // Restore original env
+  Object.keys(process.env).forEach((key) => {
+    if (key.startsWith('GLMT_')) {
+      delete process.env[key];
+    }
+  });
+  Object.assign(process.env, originalEnv);
+});
+
+// Helper to create proxy instance with specific config
+async function createTestableProxy(config: {
+  maxRetries?: number;
+  baseDelay?: number;
+  enabled?: boolean;
+} = {}) {
+  // Set env vars before import
+  if (config.maxRetries !== undefined) {
+    process.env.GLMT_MAX_RETRIES = String(config.maxRetries);
+  }
+  if (config.baseDelay !== undefined) {
+    process.env.GLMT_RETRY_BASE_DELAY = String(config.baseDelay);
+  }
+  if (config.enabled === false) {
+    process.env.GLMT_DISABLE_RETRY = '1';
+  }
+
+  // Dynamic import to pick up env changes
+  const module = await import('../../../src/glmt/glmt-proxy');
+  return new module.GlmtProxy({ verbose: false });
+}
+
+describe('GLMT Retry Logic', () => {
+  describe('RetryConfig initialization', () => {
+    it('should use default values when env vars not set', async () => {
+      const proxy = await createTestableProxy();
+      // Access private via type assertion for testing
+      const config = (proxy as unknown as { retryConfig: { maxRetries: number; baseDelay: number; enabled: boolean } }).retryConfig;
+      expect(config.maxRetries).toBe(3);
+      expect(config.baseDelay).toBe(1000);
+      expect(config.enabled).toBe(true);
+    });
+
+    it('should respect GLMT_MAX_RETRIES env var', async () => {
+      const proxy = await createTestableProxy({ maxRetries: 5 });
+      const config = (proxy as unknown as { retryConfig: { maxRetries: number } }).retryConfig;
+      expect(config.maxRetries).toBe(5);
+    });
+
+    it('should respect GLMT_RETRY_BASE_DELAY env var', async () => {
+      const proxy = await createTestableProxy({ baseDelay: 2000 });
+      const config = (proxy as unknown as { retryConfig: { baseDelay: number } }).retryConfig;
+      expect(config.baseDelay).toBe(2000);
+    });
+
+    it('should disable retry when GLMT_DISABLE_RETRY=1', async () => {
+      const proxy = await createTestableProxy({ enabled: false });
+      const config = (proxy as unknown as { retryConfig: { enabled: boolean } }).retryConfig;
+      expect(config.enabled).toBe(false);
+    });
+  });
+
+  describe('calculateRetryDelay', () => {
+    it('should calculate exponential delay with jitter', async () => {
+      const proxy = await createTestableProxy({ baseDelay: 1000 });
+      const calcDelay = (proxy as unknown as { calculateRetryDelay: (attempt: number, retryAfter?: string) => number }).calculateRetryDelay.bind(proxy);
+
+      // Attempt 0: 2^0 * 1000 = 1000 + jitter (0-500)
+      const delay0 = calcDelay(0);
+      expect(delay0).toBeGreaterThanOrEqual(1000);
+      expect(delay0).toBeLessThan(1500);
+
+      // Attempt 1: 2^1 * 1000 = 2000 + jitter (0-500)
+      const delay1 = calcDelay(1);
+      expect(delay1).toBeGreaterThanOrEqual(2000);
+      expect(delay1).toBeLessThan(2500);
+
+      // Attempt 2: 2^2 * 1000 = 4000 + jitter (0-500)
+      const delay2 = calcDelay(2);
+      expect(delay2).toBeGreaterThanOrEqual(4000);
+      expect(delay2).toBeLessThan(4500);
+    });
+
+    it('should honor Retry-After header in seconds', async () => {
+      const proxy = await createTestableProxy();
+      const calcDelay = (proxy as unknown as { calculateRetryDelay: (attempt: number, retryAfter?: string) => number }).calculateRetryDelay.bind(proxy);
+
+      // Retry-After: 5 seconds → 5000ms
+      const delay = calcDelay(0, '5');
+      expect(delay).toBe(5000);
+    });
+
+    it('should ignore invalid Retry-After header and fallback to exponential', async () => {
+      const proxy = await createTestableProxy({ baseDelay: 1000 });
+      const calcDelay = (proxy as unknown as { calculateRetryDelay: (attempt: number, retryAfter?: string) => number }).calculateRetryDelay.bind(proxy);
+
+      // Invalid header falls back to exponential
+      const delay = calcDelay(0, 'invalid');
+      expect(delay).toBeGreaterThanOrEqual(1000);
+      expect(delay).toBeLessThan(1500);
+    });
+
+    it('should ignore zero or negative Retry-After', async () => {
+      const proxy = await createTestableProxy({ baseDelay: 1000 });
+      const calcDelay = (proxy as unknown as { calculateRetryDelay: (attempt: number, retryAfter?: string) => number }).calculateRetryDelay.bind(proxy);
+
+      const delay = calcDelay(0, '0');
+      expect(delay).toBeGreaterThanOrEqual(1000);
+      expect(delay).toBeLessThan(1500);
+    });
+  });
+
+  describe('isRetryableError', () => {
+    it('should return true for 429 status code', async () => {
+      const proxy = await createTestableProxy();
+      const isRetryable = (proxy as unknown as { isRetryableError: (error: Error) => { retryable: boolean; retryAfter?: string } }).isRetryableError.bind(proxy);
+
+      const result = isRetryable(new Error('Upstream error: 429 Too Many Requests'));
+      expect(result.retryable).toBe(true);
+    });
+
+    it('should return true for rate limit message', async () => {
+      const proxy = await createTestableProxy();
+      const isRetryable = (proxy as unknown as { isRetryableError: (error: Error) => { retryable: boolean; retryAfter?: string } }).isRetryableError.bind(proxy);
+
+      const result = isRetryable(new Error('Rate limit exceeded'));
+      expect(result.retryable).toBe(true);
+    });
+
+    it('should return false for non-retryable errors', async () => {
+      const proxy = await createTestableProxy();
+      const isRetryable = (proxy as unknown as { isRetryableError: (error: Error) => { retryable: boolean; retryAfter?: string } }).isRetryableError.bind(proxy);
+
+      expect(isRetryable(new Error('Connection refused')).retryable).toBe(false);
+      expect(isRetryable(new Error('Timeout')).retryable).toBe(false);
+      expect(isRetryable(new Error('500 Internal Server Error')).retryable).toBe(false);
+      expect(isRetryable(new Error('401 Unauthorized')).retryable).toBe(false);
+    });
+
+    it('should extract Retry-After from error message', async () => {
+      const proxy = await createTestableProxy();
+      const isRetryable = (proxy as unknown as { isRetryableError: (error: Error) => { retryable: boolean; retryAfter?: string } }).isRetryableError.bind(proxy);
+
+      const result = isRetryable(new Error('429 Too Many Requests, Retry-After: 10'));
+      expect(result.retryable).toBe(true);
+      expect(result.retryAfter).toBe('10');
+    });
+  });
+
+  describe('forwardWithRetry behavior', () => {
+    it('should succeed on first attempt without retry', async () => {
+      const proxy = await createTestableProxy();
+      let attempts = 0;
+
+      // Mock forwardToUpstream
+      (proxy as unknown as { forwardToUpstream: () => Promise<unknown> }).forwardToUpstream = async () => {
+        attempts++;
+        return { choices: [{ message: { content: 'success' } }] };
+      };
+
+      const forwardWithRetry = (proxy as unknown as { forwardWithRetry: (req: unknown, headers: unknown) => Promise<unknown> }).forwardWithRetry.bind(proxy);
+      const result = await forwardWithRetry({}, {});
+
+      expect(attempts).toBe(1);
+      expect((result as { choices: Array<{ message: { content: string } }> }).choices[0].message.content).toBe('success');
+    });
+
+    it('should retry on 429 and succeed eventually', async () => {
+      const proxy = await createTestableProxy({ baseDelay: 10 }); // Fast for tests
+      let attempts = 0;
+
+      (proxy as unknown as { forwardToUpstream: () => Promise<unknown> }).forwardToUpstream = async () => {
+        attempts++;
+        if (attempts < 3) {
+          throw new Error('Upstream error: 429 Too Many Requests');
+        }
+        return { choices: [{ message: { content: 'success after retry' } }] };
+      };
+
+      const forwardWithRetry = (proxy as unknown as { forwardWithRetry: (req: unknown, headers: unknown) => Promise<unknown> }).forwardWithRetry.bind(proxy);
+      const result = await forwardWithRetry({}, {});
+
+      expect(attempts).toBe(3);
+      expect((result as { choices: Array<{ message: { content: string } }> }).choices[0].message.content).toBe('success after retry');
+    });
+
+    it('should fail after max retries exhausted', async () => {
+      const proxy = await createTestableProxy({ maxRetries: 2, baseDelay: 10 });
+      let attempts = 0;
+
+      (proxy as unknown as { forwardToUpstream: () => Promise<unknown> }).forwardToUpstream = async () => {
+        attempts++;
+        throw new Error('Upstream error: 429 Too Many Requests');
+      };
+
+      const forwardWithRetry = (proxy as unknown as { forwardWithRetry: (req: unknown, headers: unknown) => Promise<unknown> }).forwardWithRetry.bind(proxy);
+
+      await expect(forwardWithRetry({}, {})).rejects.toThrow('429');
+      expect(attempts).toBe(3); // Initial + 2 retries
+    });
+
+    it('should not retry when disabled', async () => {
+      const proxy = await createTestableProxy({ enabled: false });
+      let attempts = 0;
+
+      (proxy as unknown as { forwardToUpstream: () => Promise<unknown> }).forwardToUpstream = async () => {
+        attempts++;
+        throw new Error('Upstream error: 429 Too Many Requests');
+      };
+
+      const forwardWithRetry = (proxy as unknown as { forwardWithRetry: (req: unknown, headers: unknown) => Promise<unknown> }).forwardWithRetry.bind(proxy);
+
+      await expect(forwardWithRetry({}, {})).rejects.toThrow('429');
+      expect(attempts).toBe(1);
+    });
+
+    it('should not retry non-429 errors', async () => {
+      const proxy = await createTestableProxy({ baseDelay: 10 });
+      let attempts = 0;
+
+      (proxy as unknown as { forwardToUpstream: () => Promise<unknown> }).forwardToUpstream = async () => {
+        attempts++;
+        throw new Error('Upstream error: 500 Internal Server Error');
+      };
+
+      const forwardWithRetry = (proxy as unknown as { forwardWithRetry: (req: unknown, headers: unknown) => Promise<unknown> }).forwardWithRetry.bind(proxy);
+
+      await expect(forwardWithRetry({}, {})).rejects.toThrow('500');
+      expect(attempts).toBe(1);
+    });
+  });
+
+  describe('connection pooling', () => {
+    it('should create https.Agent with keepAlive enabled', async () => {
+      const proxy = await createTestableProxy();
+      const agent = (proxy as unknown as { httpsAgent: { options?: { keepAlive?: boolean } } }).httpsAgent;
+
+      expect(agent).toBeDefined();
+      // Agent should have keepAlive behavior (internal property)
+      expect(agent.options?.keepAlive).toBe(true);
+    });
+
+    it('should destroy agent on stop', async () => {
+      const proxy = await createTestableProxy();
+      const agent = (proxy as unknown as { httpsAgent: { destroy: () => void; destroyed?: boolean } }).httpsAgent;
+
+      let destroyed = false;
+      const originalDestroy = agent.destroy.bind(agent);
+      agent.destroy = () => {
+        destroyed = true;
+        originalDestroy();
+      };
+
+      proxy.stop();
+      expect(destroyed).toBe(true);
+    });
+  });
+});