diff --git a/src/proxy/proxy-daemon-entry.ts b/src/proxy/proxy-daemon-entry.ts
index 8f3b7e24..abf06ce2 100644
--- a/src/proxy/proxy-daemon-entry.ts
+++ b/src/proxy/proxy-daemon-entry.ts
@@ -1,3 +1,4 @@
+import * as fs from 'fs';
 import { resolveOpenAICompatProfileConfig } from './profile-router';
 import { OPENAI_COMPAT_PROXY_DEFAULT_PORT } from './proxy-daemon-paths';
 import { startOpenAICompatProxyServer } from './server/proxy-server';
@@ -9,6 +10,7 @@ interface RuntimeOptions {
   profileName: string;
   settingsPath: string;
   authToken: string;
+  authTokenFile: string;
   insecure: boolean;
 }
 
@@ -18,6 +20,7 @@ function parseArgs(argv: string[]): RuntimeOptions {
   let profileName = '';
   let settingsPath = '';
   let authToken = '';
+  let authTokenFile = '';
   let insecure = false;
 
   for (let i = 0; i < argv.length; i++) {
@@ -42,16 +45,36 @@ function parseArgs(argv: string[]): RuntimeOptions {
       authToken = argv[++i] || '';
       continue;
     }
+    if (arg === '--auth-token-file' && argv[i + 1]) {
+      authTokenFile = argv[++i] || '';
+      continue;
+    }
     if (arg === '--insecure') {
       insecure = true;
     }
   }
 
-  return { port, host, profileName, settingsPath, authToken, insecure };
+  return { port, host, profileName, settingsPath, authToken, authTokenFile, insecure };
+}
+
+function readAuthToken(options: RuntimeOptions): string {
+  if (options.authTokenFile) {
+    try {
+      const token = fs.readFileSync(options.authTokenFile, 'utf8').trim();
+      fs.unlinkSync(options.authTokenFile);
+      return token;
+    } catch (error) {
+      throw new Error(`Failed to read local proxy auth token file: ${(error as Error).message}`);
+    }
+  }
+
+  return options.authToken;
 }
 
 function startRuntime(options: RuntimeOptions): void {
-  if (!options.authToken.trim()) {
+  const authToken = readAuthToken(options);
+
+  if (!authToken.trim()) {
     throw new Error('Missing local proxy auth token');
   }
 
@@ -71,7 +94,7 @@ function startRuntime(options: RuntimeOptions): void {
     profile,
     host: options.host,
     port: options.port,
-    authToken: options.authToken,
+    authToken,
     insecure: options.insecure,
   });
   server.once('error', (error) => {
diff --git a/src/proxy/proxy-daemon-state.ts b/src/proxy/proxy-daemon-state.ts
index 8ca7bc05..0ed9b046 100644
--- a/src/proxy/proxy-daemon-state.ts
+++ b/src/proxy/proxy-daemon-state.ts
@@ -1,3 +1,4 @@
+import * as crypto from 'crypto';
 import * as fs from 'fs';
 import * as path from 'path';
 import {
@@ -20,7 +21,40 @@ export interface OpenAICompatProxySession {
 }
 
 function ensureProxyDir(): void {
-  fs.mkdirSync(getOpenAICompatProxyDir(), { recursive: true });
+  const proxyDir = getOpenAICompatProxyDir();
+  fs.mkdirSync(proxyDir, { recursive: true, mode: 0o700 });
+  fs.chmodSync(proxyDir, 0o700);
+}
+
+function encodeProfileFileKey(profileName: string): string {
+  return encodeURIComponent(profileName);
+}
+
+export function writeOpenAICompatProxyAuthTokenFile(
+  profileName: string,
+  authToken: string
+): string {
+  ensureProxyDir();
+  const tokenPath = path.join(
+    getOpenAICompatProxyDir(),
+    `.${encodeProfileFileKey(profileName)}.${crypto.randomBytes(8).toString('hex')}.token`
+  );
+  const fd = fs.openSync(tokenPath, 'wx', 0o600);
+  try {
+    fs.writeFileSync(fd, authToken, 'utf8');
+  } finally {
+    fs.closeSync(fd);
+  }
+  fs.chmodSync(tokenPath, 0o600);
+  return tokenPath;
+}
+
+export function removeOpenAICompatProxyAuthTokenFile(tokenPath: string): void {
+  try {
+    fs.unlinkSync(tokenPath);
+  } catch {
+    // Best-effort cleanup.
+  }
 }
 
 function readPid(pidPath: string): number | null {
@@ -43,7 +77,11 @@ export function getLegacyOpenAICompatProxyPid(): number | null {
 
 export function writeOpenAICompatProxyPid(profileName: string, pid: number): void {
   ensureProxyDir();
-  fs.writeFileSync(getOpenAICompatProxyPidPath(profileName), String(pid), 'utf8');
+  fs.writeFileSync(getOpenAICompatProxyPidPath(profileName), String(pid), {
+    encoding: 'utf8',
+    mode: 0o600,
+  });
+  fs.chmodSync(getOpenAICompatProxyPidPath(profileName), 0o600);
 }
 
 export function removeOpenAICompatProxyPid(profileName: string): void {
@@ -80,11 +118,12 @@ export function readLegacyOpenAICompatProxySession(): OpenAICompatProxySession |
 
 export function writeOpenAICompatProxySession(session: OpenAICompatProxySession): void {
   ensureProxyDir();
-  fs.writeFileSync(
-    getOpenAICompatProxySessionPath(session.profileName),
-    JSON.stringify(session, null, 2) + '\n',
-    'utf8'
-  );
+  const sessionPath = getOpenAICompatProxySessionPath(session.profileName);
+  fs.writeFileSync(sessionPath, JSON.stringify(session, null, 2) + '\n', {
+    encoding: 'utf8',
+    mode: 0o600,
+  });
+  fs.chmodSync(sessionPath, 0o600);
 }
 
 export function removeOpenAICompatProxySession(profileName: string): void {
diff --git a/src/proxy/proxy-daemon.ts b/src/proxy/proxy-daemon.ts
index a96caf85..22dac996 100644
--- a/src/proxy/proxy-daemon.ts
+++ b/src/proxy/proxy-daemon.ts
@@ -19,10 +19,12 @@ import {
   readOpenAICompatProxySession,
   removeLegacyOpenAICompatProxyPid,
   removeLegacyOpenAICompatProxySession,
+  removeOpenAICompatProxyAuthTokenFile,
   removeOpenAICompatProxyPid,
   removeOpenAICompatProxySession,
   resolveOpenAICompatProxyEntrypointCandidates,
   type OpenAICompatProxySession,
+  writeOpenAICompatProxyAuthTokenFile,
   writeOpenAICompatProxyPid,
   writeOpenAICompatProxySession,
 } from './proxy-daemon-state';
@@ -82,7 +84,8 @@ function generateProxyAuthToken(): string {
 
 async function withOpenAICompatProxyLock<T>(operation: () => Promise<T>): Promise<T> {
   const proxyDir = getOpenAICompatProxyDir();
-  await fs.promises.mkdir(proxyDir, { recursive: true });
+  await fs.promises.mkdir(proxyDir, { recursive: true, mode: 0o700 });
+  await fs.promises.chmod(proxyDir, 0o700);
 
   let release: (() => Promise<void>) | undefined;
   try {
@@ -543,6 +546,7 @@ export async function startOpenAICompatProxy(
         let timeout: NodeJS.Timeout | null = null;
         let stderr = '';
         const authToken = generateProxyAuthToken();
+        const authTokenFile = writeOpenAICompatProxyAuthTokenFile(profile.profileName, authToken);
         const commitState = () => {
           if (proc.pid) {
             writeOpenAICompatProxyPid(profile.profileName, proc.pid);
@@ -563,9 +567,12 @@ export async function startOpenAICompatProxy(
           if (resolved) return;
           resolved = true;
           if (timeout) clearTimeout(timeout);
-          if (!result.success && persistState) {
-            removeOpenAICompatProxyPid(profile.profileName);
-            removeOpenAICompatProxySession(profile.profileName);
+          if (!result.success) {
+            removeOpenAICompatProxyAuthTokenFile(authTokenFile);
+            if (persistState) {
+              removeOpenAICompatProxyPid(profile.profileName);
+              removeOpenAICompatProxySession(profile.profileName);
+            }
           }
           resolve(result);
         };
@@ -582,8 +589,8 @@ export async function startOpenAICompatProxy(
             profile.profileName,
             '--settings-path',
             profile.settingsPath,
-            '--auth-token',
-            authToken,
+            '--auth-token-file',
+            authTokenFile,
             ...(options.insecure ? ['--insecure'] : []),
             '--ccs-openai-proxy-daemon',
           ],
diff --git a/tests/integration/proxy/daemon-lifecycle.test.ts b/tests/integration/proxy/daemon-lifecycle.test.ts
index 6fc5e15f..c19d09bb 100644
--- a/tests/integration/proxy/daemon-lifecycle.test.ts
+++ b/tests/integration/proxy/daemon-lifecycle.test.ts
@@ -1,4 +1,5 @@
 import { afterEach, beforeEach, describe, expect, it } from 'bun:test';
+import { execFileSync } from 'child_process';
 import * as fs from 'fs';
 import * as os from 'os';
 import * as path from 'path';
@@ -71,6 +72,27 @@ async function getPortOutsideOpenAICompatAdaptiveRange(): Promise<number> {
   throw new Error('No stale proxy fixture port found outside the adaptive range');
 }
 
+function readProcessCommandLine(pid: number): string | null {
+  if (process.platform === 'linux') {
+    try {
+      const commandLine = fs.readFileSync(`/proc/${pid}/cmdline`, 'utf8');
+      return commandLine.split('\u0000').filter(Boolean).join(' ') || null;
+    } catch {
+      // Fall back to ps below for platforms without readable procfs entries.
+    }
+  }
+
+  try {
+    return (
+      execFileSync('ps', ['-ww', '-p', String(pid), '-o', 'command='], {
+        encoding: 'utf8',
+      }).trim() || null
+    );
+  } catch {
+    return null;
+  }
+}
+
 describe('openai proxy daemon lifecycle', () => {
   it('starts, reports status, serves health/models, and stops', async () => {
     const port = await getPort();
@@ -101,18 +123,42 @@ describe('openai proxy daemon lifecycle', () => {
     const started = await startOpenAICompatProxy(profile, { port });
     expect(started.success).toBe(true);
     expect(started.authToken).toBeTruthy();
+    const authToken = started.authToken;
+    if (!authToken) {
+      throw new Error('Expected proxy auth token');
+    }
 
     const status = await getOpenAICompatProxyStatus();
     expect(status.running).toBe(true);
     expect(status.profileName).toBe('hf');
-    expect(status.authToken).toBe(started.authToken);
+    expect(status.authToken).toBe(authToken);
+
+    const sessionPath = getOpenAICompatProxySessionPath('hf');
+    const proxyDir = path.dirname(sessionPath);
+    if (process.platform !== 'win32') {
+      expect(fs.statSync(proxyDir).mode & 0o777).toBe(0o700);
+      expect(fs.statSync(sessionPath).mode & 0o777).toBe(0o600);
+    }
+    expect(fs.readdirSync(proxyDir).some((entry) => entry.endsWith('.token'))).toBe(false);
+    if (started.pid) {
+      const commandLine = readProcessCommandLine(started.pid);
+      if (!commandLine) {
+        console.warn(
+          `Skipping daemon argv assertion: could not read command line for PID ${started.pid}`
+        );
+      } else {
+        expect(commandLine).toContain('--auth-token-file');
+        expect(commandLine).not.toContain(authToken);
+        expect(commandLine).not.toMatch(/(^|\s)--auth-token(?:\s|=|$)/);
+      }
+    }
 
     const health = await fetch(`http://127.0.0.1:${port}/health`);
     expect(health.status).toBe(200);
 
     const models = (await (
       await fetch(`http://127.0.0.1:${port}/v1/models`, {
-        headers: { 'x-api-key': started.authToken! },
+        headers: { 'x-api-key': authToken },
       })
     ).json()) as { data?: Array<{ id: string }> };
     expect(models.data?.map((entry) => entry.id)).toEqual(['qwen3-coder']);
diff --git a/tests/unit/proxy/proxy-daemon-state.test.ts b/tests/unit/proxy/proxy-daemon-state.test.ts
index c653b030..ba7d6444 100644
--- a/tests/unit/proxy/proxy-daemon-state.test.ts
+++ b/tests/unit/proxy/proxy-daemon-state.test.ts
@@ -3,11 +3,16 @@ import * as fs from 'fs';
 import * as os from 'os';
 import * as path from 'path';
 import {
+  getOpenAICompatProxyDir,
   getLegacyOpenAICompatProxySessionPath,
   getOpenAICompatProxyPidPath,
   getOpenAICompatProxySessionPath,
 } from '../../../src/proxy/proxy-daemon-paths';
-import { listOpenAICompatProxyProfileNames } from '../../../src/proxy/proxy-daemon-state';
+import {
+  listOpenAICompatProxyProfileNames,
+  removeOpenAICompatProxyAuthTokenFile,
+  writeOpenAICompatProxyAuthTokenFile,
+} from '../../../src/proxy/proxy-daemon-state';
 
 let originalCcsHome: string | undefined;
 let tempDir: string;
@@ -51,3 +56,24 @@ describe('listOpenAICompatProxyProfileNames', () => {
     expect(listOpenAICompatProxyProfileNames()).toEqual(['ccg']);
   });
 });
+
+describe('writeOpenAICompatProxyAuthTokenFile', () => {
+  it('writes a private token file under the CCS proxy dir and removes it', () => {
+    const authToken = 'proxy-token-regression-secret';
+    const tokenPath = writeOpenAICompatProxyAuthTokenFile('ccg', authToken);
+    const proxyDir = getOpenAICompatProxyDir();
+
+    expect(path.dirname(tokenPath)).toBe(proxyDir);
+    expect(tokenPath.startsWith(`${proxyDir}${path.sep}`)).toBe(true);
+    expect(fs.readFileSync(tokenPath, 'utf8')).toBe(authToken);
+
+    if (process.platform !== 'win32') {
+      expect(fs.statSync(proxyDir).mode & 0o777).toBe(0o700);
+      expect(fs.statSync(tokenPath).mode & 0o777).toBe(0o600);
+    }
+
+    removeOpenAICompatProxyAuthTokenFile(tokenPath);
+
+    expect(fs.existsSync(tokenPath)).toBe(false);
+  });
+});