@@ -282,6 +282,12 @@ CBM_TEST_BINARY="$WATCHDOG_BINARY" bash "$ROOT/tests/test_worker_watchdog.sh"
 echo "=== Step 5c: worker error-response transport regression ==="
 bash "$ROOT/tests/test_worker_error_response.sh"
 
+# Step 5d: a hook client facing a daemon BUILD CONFLICT must surface a stdout
+# systemMessage (stderr is invisible to the hook caller). Needs the TEST_SEAMS
+# binary from step 5's build (CBM_TEST_HOOK_CLIENT_BUILD forces the conflict).
+echo "=== Step 5d: hook daemon-conflict notice regression (#1388) ==="
+bash "$ROOT/tests/test_hook_conflict_notice.sh"
+
 # Step 6: security-strings URL allow-list regression. The MSYS2 CLANG64 toolchain
 # bakes its package-tracker URL into the static Windows .exe; the binary string
 # audit must allow-list it (Windows-only — Linux smoke never saw it).
 
@@ -1493,6 +1493,24 @@ static void main_hook_report_absent_daemon(const char *hook_dialect) {
     }
 }
 
+/* #1388: a version-conflicted daemon is an actionable broken state, unlike a
+ * merely absent one - and stdout is the only hook channel Claude Code
+ * surfaces, so stderr-only reporting reads as eternal silence in-session.
+ * Emit a throttled systemMessage with restart guidance (the misleading
+ * "no daemon is running" text pointed at `daemon start`, which cannot heal a
+ * build conflict). */
+static void main_hook_report_conflicted_daemon(const char *hook_dialect) {
+    if (hook_dialect || !main_hook_absent_notice_due()) {
+        return;
+    }
+    (void)fputs("{\"systemMessage\":\"codebase-memory-mcp: graph augmentation is skipped: the "
+                "active CBM daemon runs a different build than this binary (usually an update "
+                "was installed while the old daemon kept running). Run `codebase-memory-mcp "
+                "daemon stop`, then retry - the next command starts a matching daemon.\"}",
+                stdout);
+    (void)fflush(stdout);
+}
+
 static int main_run_hook_frontend(cbm_daemon_runtime_client_t *client, const char *hook_event,
                                   const char *hook_dialect) {
     char *input = cbm_hook_augment_read_stdin();
@@ -2148,6 +2166,18 @@ int main(int argc, char **argv) {
         return result == 0 ? EXIT_SUCCESS : EXIT_FAILURE;
     }
 
+#ifdef CBM_ENABLE_TEST_SEAMS
+    /* #1388 test seam: let one binary present a foreign build fingerprint as a
+     * hook client, so the daemon-conflict reporting path is testable without
+     * building a second binary. */
+    static char seam_hook_build[CBM_DAEMON_BUILD_FINGERPRINT_SIZE];
+    const char *seam_forced_build = cbm_safe_getenv("CBM_TEST_HOOK_CLIENT_BUILD", seam_hook_build,
+                                                    sizeof(seam_hook_build), NULL);
+    if (role == CBM_DAEMON_PROCESS_HOOK_CLIENT && seam_forced_build && seam_forced_build[0]) {
+        identity.build_fingerprint = seam_hook_build;
+    }
+#endif
+
     cbm_version_cohort_manager_t *client_cohort_manager = cbm_version_cohort_manager_new(endpoint);
     cbm_version_cohort_lease_t *client_cohort_lease = NULL;
     cbm_daemon_conflict_t client_cohort_conflict;
@@ -2169,6 +2199,10 @@ int main(int argc, char **argv) {
         }
         (void)fprintf(stderr, "codebase-memory-mcp: %s\n",
                       formatted ? message : "client exact-build admission failed");
+        if (role == CBM_DAEMON_PROCESS_HOOK_CLIENT &&
+            client_cohort_status == CBM_VERSION_COHORT_CONFLICT) {
+            main_hook_report_conflicted_daemon(hook_dialect);
+        }
         (void)main_version_cohort_close(&client_cohort_lease, &client_cohort_manager);
         cbm_daemon_ipc_endpoint_free(endpoint);
         return role == CBM_DAEMON_PROCESS_HOOK_CLIENT ? EXIT_SUCCESS : EXIT_FAILURE;
@@ -2181,7 +2215,16 @@ int main(int argc, char **argv) {
             endpoint, &identity, MAIN_HOOK_CONNECT_TIMEOUT_MS, &hook_connect);
         cbm_daemon_ipc_endpoint_free(endpoint);
         if (!hook_client) {
-            main_hook_report_absent_daemon(hook_dialect);
+            if (hook_connect.status == CBM_DAEMON_RUNTIME_CONNECT_CONFLICT) {
+                char conflict_detail[CBM_DAEMON_CONFLICT_MESSAGE_SIZE];
+                if (cbm_daemon_conflict_format(&hook_connect.conflict, conflict_detail,
+                                               sizeof(conflict_detail))) {
+                    (void)fprintf(stderr, "codebase-memory-mcp: %s\n", conflict_detail);
+                }
+                main_hook_report_conflicted_daemon(hook_dialect);
+            } else {
+                main_hook_report_absent_daemon(hook_dialect);
+            }
             (void)main_version_cohort_close(&client_cohort_lease, &client_cohort_manager);
             return EXIT_SUCCESS;
         }
 
@@ -0,0 +1,58 @@
+#!/usr/bin/env bash
+# #1388: a hook client that cannot join because the active daemon runs a
+# DIFFERENT build must say so on stdout (systemMessage) - stdout is the only
+# hook channel Claude Code surfaces, so stderr-only reporting reads as eternal
+# silence in-session. Requires a TEST_SEAMS=1 binary (scripts/test.sh step 5
+# builds one): CBM_TEST_HOOK_CLIENT_BUILD forces the client fingerprint.
+set -euo pipefail
+
+ROOT="$(cd "$(dirname "${BASH_SOURCE[0]}")/.." && pwd)"
+BINARY="${ROOT}/build/c/codebase-memory-mcp"
+if [[ ! -x "${BINARY}" && -x "${BINARY}.exe" ]]; then
+  BINARY="${BINARY}.exe"
+fi
+if [[ ! -x "${BINARY}" ]]; then
+  echo "missing binary: ${BINARY}" >&2
+  exit 2
+fi
+
+tmpdir="$(mktemp -d)"
+cleanup() {
+  CBM_CACHE_DIR="${tmpdir}/cache" "${BINARY}" daemon stop >/dev/null 2>&1 || true
+  rm -rf "${tmpdir}"
+}
+trap cleanup EXIT
+
+CBM_CACHE_DIR="${tmpdir}/cache" "${BINARY}" daemon start >/dev/null 2>&1
+payload='{"session_id":"probe","hook_event_name":"PreToolUse","tool_name":"Grep","tool_input":{"pattern":"x","path":"/tmp"},"cwd":"/tmp"}'
+forced_build="$(printf 'f%.0s' $(seq 1 64))"
+
+set +e
+out="$(printf '%s' "${payload}" | CBM_CACHE_DIR="${tmpdir}/cache" \
+  CBM_TEST_HOOK_CLIENT_BUILD="${forced_build}" \
+  "${BINARY}" hook-augment 2>"${tmpdir}/probe.err")"
+rc=$?
+set -e
+
+if [[ ${rc} -ne 0 ]]; then
+  echo "hook-augment must fail open (exit 0); got ${rc}" >&2
+  cat "${tmpdir}/probe.err" >&2
+  exit 1
+fi
+if ! grep -q "conflicting CBM process" "${tmpdir}/probe.err"; then
+  echo "seam did not produce a build conflict - is this a TEST_SEAMS=1 binary?" >&2
+  cat "${tmpdir}/probe.err" >&2
+  exit 2
+fi
+if ! printf '%s' "${out}" | grep -q "systemMessage"; then
+  echo "conflicted daemon must surface a stdout systemMessage to the hook caller (#1388)" >&2
+  echo "stdout was: ${out}" >&2
+  exit 1
+fi
+if ! printf '%s' "${out}" | grep -q "daemon stop"; then
+  echo "the systemMessage must carry the daemon-restart guidance (#1388)" >&2
+  echo "stdout was: ${out}" >&2
+  exit 1
+fi
+
+echo "ok: daemon build conflicts reach the hook caller as a systemMessage"