diff --git a/packages/mcp/src/index.ts b/packages/mcp/src/index.ts
index 34109b8..663f46a 100644
--- a/packages/mcp/src/index.ts
+++ b/packages/mcp/src/index.ts
@@ -16,6 +16,7 @@ const config: ApiConfig = {
   apiKey: process.env.AGENTGATE_API_KEY ?? '',
   approvalWaitMs: Number(process.env.AGENTGATE_APPROVAL_WAIT_MS ?? 0) || 0,
   approvalPollMs: Number(process.env.AGENTGATE_APPROVAL_POLL_MS ?? 2000) || 2000,
+  guardrailFailOpen: /^(1|true|yes)$/i.test(process.env.AGENTGATE_GUARDRAIL_FAIL_OPEN ?? ''),
 };
 
 const server = new Server(
diff --git a/packages/mcp/src/tools.test.ts b/packages/mcp/src/tools.test.ts
index 67c9072..578b455 100644
--- a/packages/mcp/src/tools.test.ts
+++ b/packages/mcp/src/tools.test.ts
@@ -33,6 +33,14 @@ describe('guardrailBlockResult', () => {
     expect(guardrailBlockResult({ decision: 'allow' })).toBeNull();
     expect(guardrailBlockResult(null)).toBeNull();
   });
+
+  it('returns an isError block for an error verdict (guardrail failing closed)', () => {
+    const r = guardrailBlockResult({ decision: 'error', reason: 'guardrail unavailable: boom' });
+    expect(r?.isError).toBe(true);
+    const text = JSON.stringify(r);
+    expect(text).toContain('blocked');
+    expect(text).toContain('guardrail unavailable');
+  });
 });
 
 describe('buildListParams', () => {
@@ -568,9 +576,19 @@ describe('authorizeTool (MCP guardrail, #14)', () => {
     expect(verdict?.requestId).toBe('req-9');
   });
 
-  it('fails OPEN (returns null) on a network/auth error', async () => {
+  it('fails CLOSED by default on a network/auth error (returns an error verdict)', async () => {
+    fetchMock.mockResolvedValue({ ok: false, status: 500, text: () => Promise.resolve('') });
+    const verdict = await authorizeTool(config, 'file.read', {});
+    expect(verdict?.decision).toBe('error');
+    // and that verdict blocks the tool call
+    const blocked = guardrailBlockResult(verdict);
+    expect(blocked?.isError).toBe(true);
+  });
+
+  it('fails OPEN (returns null) when guardrailFailOpen is set', async () => {
     fetchMock.mockResolvedValue({ ok: false, status: 500, text: () => Promise.resolve('') });
-    expect(await authorizeTool(config, 'file.read', {})).toBeNull();
+    const openCfg: ApiConfig = { ...config, guardrailFailOpen: true };
+    expect(await authorizeTool(openCfg, 'file.read', {})).toBeNull();
   });
 });
 
diff --git a/packages/mcp/src/tools.ts b/packages/mcp/src/tools.ts
index c8b35cb..34b3f21 100644
--- a/packages/mcp/src/tools.ts
+++ b/packages/mcp/src/tools.ts
@@ -213,7 +213,8 @@ export function formatError(error: unknown): ToolResult {
 /**
  * Map a guardrail verdict to a blocking tool result, or null when the call is
  * allowed (the caller then runs the tool). A `deny` is a synchronous error
- * result; `requires_approval` is a (non-error) pending result. Issue #14.
+ * result; `requires_approval` is a (non-error) pending result; `error` (the gate
+ * failing closed, see authorizeTool) is a blocking error result. Issue #14.
  */
 export function guardrailBlockResult(
   verdict: { decision: string; requestId?: string; reason?: string | null } | null,
@@ -236,6 +237,16 @@ export function guardrailBlockResult(
       message: 'Tool call requires approval and was routed to AgentGate.',
     });
   }
+  if (verdict?.decision === 'error') {
+    return {
+      ...formatResult({
+        status: 'blocked',
+        reason: verdict.reason ?? null,
+        message: 'Tool call blocked: AgentGate guardrail unavailable (failing closed).',
+      }),
+      isError: true,
+    };
+  }
   return null;
 }
 
@@ -465,10 +476,14 @@ export async function handleGetAuditActors(
 /**
  * Ask the server whether a tool call is allowed for this MCP server's identity
  * (issue #14). The server keys the guardrail on the verified agent bound to the
- * api key. Returns the verdict (allow / requires_approval / deny), or null to
- * fail-open (allow) on a network/auth error.
- * ponytail: fail-open on error; add an AGENTGATE_GUARDRAIL_STRICT flag if a
- * deployment needs the gate to fail closed.
+ * api key. Returns the verdict (allow / requires_approval / deny).
+ *
+ * On a network/auth error the gate FAILS CLOSED by default: it returns an
+ * `error` verdict that `guardrailBlockResult` turns into a blocking result, so
+ * a down/unreachable AgentGate can't silently wave every tool call through.
+ * Set AGENTGATE_GUARDRAIL_FAIL_OPEN=1 (config.guardrailFailOpen) to restore the
+ * old fail-open behaviour (returns null → allow) for deployments where the
+ * guardrail is advisory rather than enforcing.
  */
 export async function authorizeTool(
   config: ApiConfig,
@@ -481,8 +496,13 @@ export async function authorizeTool(
       params: args,
     })) as { decision: string; status?: string; requestId?: string; reason?: string | null };
   } catch (err) {
-    console.error(`[guardrail] authorize failed for ${toolName}, allowing:`, err);
-    return null;
+    if (config.guardrailFailOpen) {
+      console.error(`[guardrail] authorize failed for ${toolName}, failing OPEN (AGENTGATE_GUARDRAIL_FAIL_OPEN):`, err);
+      return null;
+    }
+    const reason = err instanceof Error ? err.message : String(err);
+    console.error(`[guardrail] authorize failed for ${toolName}, failing CLOSED:`, err);
+    return { decision: "error", reason: `guardrail unavailable: ${reason}` };
   }
 }
 
diff --git a/packages/mcp/src/types.ts b/packages/mcp/src/types.ts
index 19c230d..24113fc 100644
--- a/packages/mcp/src/types.ts
+++ b/packages/mcp/src/types.ts
@@ -76,6 +76,9 @@ export interface ApiConfig {
   approvalWaitMs?: number;
   /** Poll interval (ms) while waiting for an approval decision. */
   approvalPollMs?: number;
+  /** When the guardrail authorize call errors, allow the tool through instead of
+   *  blocking it. Default false (fail closed). Set via AGENTGATE_GUARDRAIL_FAIL_OPEN. */
+  guardrailFailOpen?: boolean;
 }
 
 export interface ApiErrorResponse {