diff --git a/apps/api/src/api/workspace/workspaces.py b/apps/api/src/api/workspace/workspaces.py
index 575fbc0..7b263fa 100644
--- a/apps/api/src/api/workspace/workspaces.py
+++ b/apps/api/src/api/workspace/workspaces.py
@@ -10,6 +10,7 @@ from sqlalchemy.orm import selectinload
 
 from src.auth.dependencies import get_current_user_id, get_db_session
 from src.models import GitRepository
+from src.models import Project
 from src.models import ToolInstance
 from src.models import Workspace
 from src.services.shared.workspace_manager import WorkspaceHasInstancesError, WorkspaceManager
@@ -129,9 +130,12 @@ async def create_workspace_top_level(
     if not name:
         raise HTTPException(status_code=400, detail="Workspace name is required")
 
+    project = await session.get(Project, repo.project_id) if repo.project_id else None
     manager = WorkspaceManager()
     try:
-        workspace = await manager.create(repo, user_id, name, branch, session=session)
+        workspace = await manager.create(
+            repo, user_id, name, branch, session=session, project=project
+        )
         session.add(workspace)
         await session.commit()
     except HTTPException:
@@ -232,9 +236,12 @@ async def create_workspace(
     if not branch:
         raise HTTPException(status_code=400, detail="Branch is required")
 
+    project = await session.get(Project, project_id)
     manager = WorkspaceManager()
     try:
-        workspace = await manager.create(repo, user_id, name, branch, session=session)
+        workspace = await manager.create(
+            repo, user_id, name, branch, session=session, project=project
+        )
         session.add(workspace)
         await session.commit()
     except HTTPException:
diff --git a/apps/api/src/seeds/builtin_tool_types.py b/apps/api/src/seeds/builtin_tool_types.py
index 2afe1ef..c93d02f 100644
--- a/apps/api/src/seeds/builtin_tool_types.py
+++ b/apps/api/src/seeds/builtin_tool_types.py
@@ -102,9 +102,9 @@ services:
   opencode:
     image: node:20-slim
     container_name: {{TOOL_NAME}}
-    working_dir: /workspace
+    working_dir: /home/user/{{WORKSPACE_NAME}}
     volumes:
-      - {{REPO_PATH}}:/workspace
+      - {{REPO_PATH}}:/home/user/{{WORKSPACE_NAME}}
     ports:
       - "3000:3000"
     command: >
@@ -116,9 +116,8 @@ services:
              npm bin -g &&
              ls -la $(npm bin -g) || echo 'ERROR: global bin dir not found' &&
              echo 'export PATH=\"$(npm bin -g):\\$PATH\"' >> /root/.bashrc &&
-             echo 'cd /workspace' >> /root/.bashrc &&
+             echo 'cd /home/user/{{WORKSPACE_NAME}}' >> /root/.bashrc &&
              echo 'OpenCode installation complete' &&
-             cd /workspace &&
              exec tail -f /dev/null"
     stdin_open: true
     tty: true
diff --git a/apps/api/src/services/build/manifest_compiler.py b/apps/api/src/services/build/manifest_compiler.py
index c1b3546..0020bff 100644
--- a/apps/api/src/services/build/manifest_compiler.py
+++ b/apps/api/src/services/build/manifest_compiler.py
@@ -236,18 +236,16 @@ def compile_dockerfile(manifest: dict) -> str:
             lines.append(f"RUN chown -R {user['name']}:{user['name']} {dir_str}")
         lines.append("")
 
-    # Create the /workspace compatibility symlink only when the workspace name
-    # is known at image-build time. Otherwise the entrypoint creates it at
-    # runtime from the WORKSPACE_NAME environment variable.
+    # Ensure the project directory exists so the WORKDIR below succeeds. The
+    # compatibility /workspace symlink is no longer created for new images.
     workspace_target = f"{home_dir}/{workspace_name}"
-    if "{{WORKSPACE_NAME}}" not in workspace_name:
+    workspace_is_placeholder = "{{WORKSPACE_NAME}}" in workspace_name
+    if not workspace_is_placeholder:
         lines.append(f"RUN mkdir -p {workspace_target}")
         if user:
             lines.append(
-                f"RUN ln -sfn {workspace_target} /workspace && chown -R {user['name']}:{user['name']} {home_dir}"
+                f"RUN chown -R {user['name']}:{user['name']} {home_dir}"
             )
-        else:
-            lines.append(f"RUN ln -sfn {workspace_target} /workspace")
         lines.append("")
 
     # Entrypoint for startup scripts
@@ -260,18 +258,21 @@ def compile_dockerfile(manifest: dict) -> str:
         lines.append("")
 
     # Do not switch to the runtime user in the Dockerfile. The entrypoint
-    # starts as root so it can create the /workspace compatibility symlink
-    # (which lives under /) and fix mount ownership, then it drops privileges
+    # starts as root so it can fix mount ownership, then it drops privileges
     # to the container user before exec-ing the real command.
 
-    # Set WORKDIR to the configured home directory unless runtime.working_dir
-    # explicitly overrides it.
+    # Set WORKDIR to the project directory unless runtime.working_dir
+    # explicitly overrides it. When the workspace name is a runtime
+    # placeholder, the Dockerfile cannot know the literal directory, so fall
+    # back to the home directory; compose supplies the exact working_dir.
     runtime = manifest.get("runtime", {})
     working_dir = runtime.get("working_dir")
     if working_dir:
         lines.append(f"WORKDIR {expand_container_path(working_dir, home_dir)}")
-    else:
+    elif workspace_is_placeholder:
         lines.append(f"WORKDIR {home_dir}")
+    else:
+        lines.append(f"WORKDIR {workspace_target}")
     lines.append("")
 
     # Entrypoint and CMD
@@ -290,8 +291,8 @@ def compile_entrypoint(manifest: dict) -> str:
 
     Injects a permission-fixer preamble that runs as root (or via sudo) before
     any user-defined startup script. It chowns the home directory and a safe
-    subset of mount parents to the container user, creates the /workspace
-    compatibility symlink, and avoids recursive chown of large repo subtrees.
+    subset of mount parents to the container user, ensures the project
+    directory exists, and avoids recursive chown of large repo subtrees.
 
     Args:
         manifest: Fully resolved manifest JSON.
@@ -346,7 +347,7 @@ def compile_entrypoint(manifest: dict) -> str:
         lines.append('mkdir -p "$HOME_DIR"')
         lines.append('fix_owner "$HOME_DIR"')
         lines.append("")
-        lines.append("# Ensure workspace target exists and is owned by the container user")
+        lines.append("# Ensure project directory exists and is owned by the container user")
         lines.append('mkdir -p "$WORKSPACE_TARGET"')
         lines.append('fix_owner "$WORKSPACE_TARGET"')
         lines.append("")
@@ -355,16 +356,6 @@ def compile_entrypoint(manifest: dict) -> str:
         lines.append('    rm -rf "${HOME_DIR}/{{WORKSPACE_NAME}}"')
         lines.append('fi')
         lines.append("")
-        lines.append("# Create /workspace compatibility symlink")
-        lines.append("# / is owned by root, so we need root or passwordless sudo.")
-        lines.append('if [ "$(id -u)" = "0" ]; then')
-        lines.append('    ln -sfn "$WORKSPACE_TARGET" /workspace')
-        lines.append('elif [ -n "$SUDO" ]; then')
-        lines.append('    sudo ln -sfn "$WORKSPACE_TARGET" /workspace')
-        lines.append('else')
-        lines.append('    ln -sfn "$WORKSPACE_TARGET" /workspace 2>/dev/null || true')
-        lines.append('fi')
-        lines.append("")
         lines.append("# Fix ownership of declared mount targets (top-level only)")
         for mount in manifest.get("mounts", []):
             target = mount.get("target")
@@ -442,11 +433,13 @@ def compile_compose(manifest: dict, variables: dict[str, Any]) -> str:
         service["working_dir"] = expand_container_path(
             runtime["working_dir"], home_dir
         )
+    else:
+        service["working_dir"] = f"{home_dir}/{workspace_name}"
 
     # The entrypoint starts as root (Dockerfile does not set USER) so it can
-    # create the /workspace compatibility symlink and fix mount ownership. It
-    # drops privileges to the container user internally before exec-ing the
-    # real command, so do not set compose-level user override here.
+    # fix mount ownership. It drops privileges to the container user internally
+    # before exec-ing the real command, so do not set compose-level user
+    # override here.
     if user:
         service["user"] = "0:0"
 
@@ -460,8 +453,8 @@ def compile_compose(manifest: dict, variables: dict[str, Any]) -> str:
     if env:
         service["environment"] = dict(env)
 
-    # Expose the workspace/repo name so the entrypoint can finalize the
-    # /workspace compatibility symlink at container startup.
+    # Expose the project name so the entrypoint can create the project
+    # directory at container startup.
     if "environment" not in service:
         service["environment"] = {}
     service["environment"]["WORKSPACE_NAME"] = workspace_name
diff --git a/apps/api/src/services/git/clone.py b/apps/api/src/services/git/clone.py
index 362d149..ef440b2 100644
--- a/apps/api/src/services/git/clone.py
+++ b/apps/api/src/services/git/clone.py
@@ -2,17 +2,27 @@
 
 import logging
 import os
+import re
 import subprocess
 from pathlib import Path
 
 logger = logging.getLogger(__name__)
 
 
+def _slugify_directory_name(name: str) -> str:
+    """Return a filesystem-safe, lowercase directory slug."""
+    slug = name.lower().strip()
+    slug = re.sub(r"[^a-z0-9_-]+", "-", slug)
+    slug = re.sub(r"-+", "-", slug).strip("-")
+    return slug or "project"
+
+
 def clone_repository(
     remote_url: str,
     ssh_key_path: str | None,
     instance_dir: str,
     branch: str = "main",
+    project_name: str | None = None,
 ) -> str:
     """Clone a git repository into the instance directory.
 
@@ -21,11 +31,14 @@ def clone_repository(
         ssh_key_path: Path to SSH private key for authentication (optional)
         instance_dir: Path to instance directory
         branch: Branch to clone (default: main)
+        project_name: Optional project name used as the clone directory name
+            instead of the generic ``repo-clone``.
 
     Returns:
         Path to the cloned repository
     """
-    clone_path = Path(instance_dir) / "repo-clone"
+    clone_name = _slugify_directory_name(project_name) if project_name else "repo-clone"
+    clone_path = Path(instance_dir) / clone_name
     clone_path.mkdir(parents=True, exist_ok=True)
 
     env = os.environ.copy()
@@ -84,13 +97,15 @@ def check_dirty_state(clone_path: str) -> tuple[bool, list[str]]:
     return is_dirty, changed_files
 
 
-def remove_clone_directory(instance_dir: str) -> None:
+def remove_clone_directory(instance_dir: str, project_name: str | None = None) -> None:
     """Remove the cloned repository from the instance directory.
 
     Args:
         instance_dir: Path to instance directory
+        project_name: Optional project name used as the clone directory name.
     """
-    clone_path = Path(instance_dir) / "repo-clone"
+    clone_name = _slugify_directory_name(project_name) if project_name else "repo-clone"
+    clone_path = Path(instance_dir) / clone_name
     if clone_path.exists():
         import shutil
         shutil.rmtree(clone_path)
diff --git a/apps/api/src/services/shared/workspace_manager.py b/apps/api/src/services/shared/workspace_manager.py
index 1d41ace..abfce23 100644
--- a/apps/api/src/services/shared/workspace_manager.py
+++ b/apps/api/src/services/shared/workspace_manager.py
@@ -5,6 +5,7 @@ from __future__ import annotations
 import contextlib
 import logging
 import os
+import re
 import shutil
 import stat
 import uuid
@@ -17,12 +18,12 @@ from sqlalchemy import select
 from src.models import Workspace
 from src.services.git.git_service import GitService
 from src.services.shared.ssh_keys import _get_fernet
-from src.utils.git_url_parser import extract_base_repo_url
 
 if TYPE_CHECKING:
     from sqlalchemy.ext.asyncio import AsyncSession
 
     from src.models import GitRepository
+    from src.models import Project
     from src.models import ToolInstance
 
 logger = logging.getLogger(__name__)
@@ -49,30 +50,36 @@ class WorkspaceManager:
     BASE_PATH = "/data/working-copies"
 
     @staticmethod
-    def _repo_directory_name(repo: "GitRepository") -> str:
-        """Return the directory name git would create for a standard clone.
+    def _directory_slug(name: str) -> str:
+        """Return a filesystem-safe, lowercase directory slug."""
+        slug = name.lower().strip()
+        slug = re.sub(r"[^a-z0-9_-]+", "-", slug)
+        slug = re.sub(r"-+", "-", slug).strip("-")
+        return slug or "project"
 
-        Prefers the name parsed from the remote URL and falls back to the
-        user-provided repository name when no remote URL is available.
+    @staticmethod
+    def _repo_directory_name(project_name: str) -> str:
+        """Return the project-name directory for a workspace clone.
+
+        New workspaces are cloned under ``/data/working-copies/{workspace_id}/{project_name}/``
+        so that the in-container mount target and terminal cwd can match
+        ``/home/user/{project_name}``.
         """
-        if repo.remote_url:
-            base_url = extract_base_repo_url(repo.remote_url) or repo.remote_url
-            name = base_url.rstrip("/").split("/")[-1]
-            if name.endswith(".git"):
-                name = name[:-4]
-            if name:
-                return name
-        return repo.name
+        return WorkspaceManager._directory_slug(project_name)
 
-    def _workspace_path(self, workspace_id: uuid.UUID, repo: "GitRepository") -> str:
+    def _workspace_path(
+        self,
+        workspace_id: uuid.UUID,
+        project_name: str,
+    ) -> str:
         """Return the filesystem path for a workspace.
 
-        Layout: /data/working-copies/{workspace_id}/{repo_name}/
+        Layout: /data/working-copies/{workspace_id}/{project_name}/
         The workspace_id prevents collisions between workspaces, and the
-        repo_name matches the directory git clone naturally creates.
+        project_name becomes the in-container directory name.
         """
         return os.path.join(
-            self.BASE_PATH, str(workspace_id), self._repo_directory_name(repo)
+            self.BASE_PATH, str(workspace_id), self._repo_directory_name(project_name)
         )
 
     async def create(
@@ -82,6 +89,7 @@ class WorkspaceManager:
         name: str,
         branch: str = "main",
         session: AsyncSession | None = None,
+        project: "Project | None" = None,
     ) -> Workspace:
         """Clone repo to workspace path and create DB record.
 
@@ -91,6 +99,8 @@ class WorkspaceManager:
             name: The workspace name (unique per repo).
             branch: The branch to clone (default: "main").
             session: Database session for loading SSH keys.
+            project: Optional project for naming the clone directory. Fetched
+                from the repo relationship if not provided.
 
         Returns:
             The created Workspace record.
@@ -101,7 +111,13 @@ class WorkspaceManager:
         if not repo.remote_url:
             raise ValueError("Repository has no remote URL")
 
-        repo_dir_name = self._repo_directory_name(repo)
+        if project is None and repo.project_id is not None and session is not None:
+            from src.models import Project
+
+            project = await session.get(Project, repo.project_id)
+        project_name = project.name if project else repo.name
+
+        repo_dir_name = self._repo_directory_name(project_name)
         workspace_id = uuid.uuid4()
         parent_path = os.path.join(self.BASE_PATH, str(workspace_id))
         expected_path = os.path.join(parent_path, repo_dir_name)
@@ -346,11 +362,18 @@ class WorkspaceManager:
                 return workspace
 
         from src.models import GitRepository
+        from src.models import Project
 
         repo = await session.get(GitRepository, instance.repository_id)
         if repo is None:
             raise RuntimeError(f"Repository {instance.repository_id} not found")
 
+        project = (
+            await session.get(Project, instance.project_id)
+            if instance.project_id
+            else None
+        )
+
         base_name = (
             f"{instance.name}-migrated"
             if instance.clone_mode == "clone"
@@ -364,7 +387,7 @@ class WorkspaceManager:
 
         if instance.clone_mode == "clone":
             workspace = await self._migrate_clone_into_workspace(
-                instance, repo, session, name
+                instance, repo, session, name, project=project
             )
         else:
             workspace = await self.create(
@@ -373,6 +396,7 @@ class WorkspaceManager:
                 name=name,
                 branch=instance.branch or "main",
                 session=session,
+                project=project,
             )
 
         instance.workspace_id = workspace.id
@@ -409,6 +433,7 @@ class WorkspaceManager:
         repo: "GitRepository",
         session: AsyncSession,
         name: str,
+        project: "Project | None" = None,
     ) -> Workspace:
         """Move an existing clone-mode repo into a new workspace path."""
         import shutil
@@ -423,7 +448,8 @@ class WorkspaceManager:
 
         workspace_id = uuid.uuid4()
         parent_path = os.path.join(self.BASE_PATH, str(workspace_id))
-        repo_dir_name = self._repo_directory_name(repo)
+        project_name = project.name if project else repo.name
+        repo_dir_name = self._repo_directory_name(project_name)
         target_path = os.path.join(parent_path, repo_dir_name)
 
         os.makedirs(parent_path, exist_ok=True)
@@ -433,8 +459,8 @@ class WorkspaceManager:
         if os.path.exists(target_path):
             shutil.rmtree(target_path, ignore_errors=True)
 
-        # Move the existing clone into the repo-named subdirectory so the
-        # workspace path matches the natural git clone layout.
+        # Move the existing clone into the project-named subdirectory so the
+        # workspace path matches the new in-container layout.
         shutil.move(clone_path, target_path)
         self._make_world_writable(target_path)
 
diff --git a/apps/api/src/services/tool/instance_service.py b/apps/api/src/services/tool/instance_service.py
index 78766f1..4849185 100644
--- a/apps/api/src/services/tool/instance_service.py
+++ b/apps/api/src/services/tool/instance_service.py
@@ -5,6 +5,7 @@ import contextlib
 import glob as glob_module
 import logging
 import os
+import re
 import shutil
 import subprocess
 import uuid
@@ -81,29 +82,27 @@ logger = logging.getLogger(__name__)
 _event_bus = InstanceEventBus()
 
 
+def _slugify_directory_name(name: str) -> str:
+    """Return a filesystem-safe, lowercase directory slug."""
+    slug = name.lower().strip()
+    slug = re.sub(r"[^a-z0-9_-]+", "-", slug)
+    slug = re.sub(r"-+", "-", slug).strip("-")
+    return slug or "project"
+
+
 def _get_repository_mount_name(
+    project: Project,
     repo: GitRepository,
     workspace: "Workspace | None" = None,
 ) -> str:
     """Return the directory name the repository should appear under in the container.
 
-    When a workspace exists, the on-disk layout is
-    ``/data/working-copies/{workspace_id}/{repo_name}/``, so the repo-named
-    directory is already available as the basename of ``workspace.path``. For
-    legacy repo-only instances we fall back to parsing the remote URL like a
-    standard ``git clone`` would, then to the user-provided repository name.
+    The in-container layout is now ``/home/user/{project_name}/`` so that the
+    terminal starts directly in the project directory. The workspace path is
+    ignored for naming purposes; it only provides the source directory to
+    mount.
     """
-    if workspace is not None and workspace.path:
-        return os.path.basename(os.path.normpath(workspace.path))
-
-    if repo.remote_url:
-        base_url = extract_base_repo_url(repo.remote_url) or repo.remote_url
-        name = base_url.rstrip("/").split("/")[-1]
-        if name.endswith(".git"):
-            name = name[:-4]
-        if name:
-            return name
-    return repo.name
+    return _slugify_directory_name(project.name)
 
 
 def _chown_path(path: str, uid: int, gid: int) -> None:
@@ -271,10 +270,11 @@ def clone_git_repo(
     remote_url: str,
     branch: str | None,
     clone_parent: str,
+    project_name: str | None = None,
 ) -> str:
     """Clone or pull a git repository.
 
-    Returns the path to the cloned repo (repo-clone directory).
+    Returns the path to the cloned repo directory.
     """
     import hashlib
 
@@ -286,7 +286,13 @@ def clone_git_repo(
     ).hexdigest()[:12]
     repo_name = remote_url.split("/")[-1].replace(".git", "") or "repo"
     clone_dir = os.path.join(clone_parent, "git-mounts", f"{repo_name}-{url_hash}")
-    repo_path = os.path.join(clone_dir, "repo-clone")
+    repo_path = clone_repository(
+        remote_url,
+        None,  # No SSH key for now - can be added later
+        clone_dir,
+        branch or "main",
+        project_name=project_name,
+    )
 
     if not os.path.exists(repo_path):
         try:
@@ -296,6 +302,7 @@ def clone_git_repo(
                 None,  # No SSH key for now - can be added later
                 clone_dir,
                 branch or "main",
+                project_name=project_name,
             )
             logger.debug("Cloned git mount repository %s to %s", remote_url, repo_path)
         except Exception as exc:
@@ -443,7 +450,8 @@ async def resolve_single_git_mount(
         logger.warning("Git mount skipped: no instance_dir provided for cloning")
         return []
 
-    # Clone or pull the repository
+    # Clone or pull the repository. Git mounts are auxiliary, so they keep
+    # using the repository URL basename rather than the project name.
     try:
         repo_path = await asyncio.to_thread(
             clone_git_repo, remote_url, branch, instance_dir
@@ -1020,9 +1028,10 @@ async def prepare_manifest_instance(
     workspace: Workspace | None = None
     if instance.workspace_id:
         workspace = await session.get(Workspace, instance.workspace_id)
+    project = await session.get(Project, instance.project_id) if instance.project_id else None
     repo_name = (
-        _get_repository_mount_name(repo, workspace)
-        if repo
+        _get_repository_mount_name(project, repo, workspace)
+        if project and repo
         else os.path.basename(os.path.normpath(repo_path))
     )
     variables = {
@@ -1186,7 +1195,7 @@ async def create_tool_instance(
         )
 
         home_dir = tool_type.home_directory or "/home/user"
-        mount_name = _get_repository_mount_name(repo, workspace)
+        mount_name = _get_repository_mount_name(project, repo, workspace)
         workspace_target = f"{home_dir}/{mount_name}"
 
         compose_content = f"""version: "3.8"\nservices:
@@ -1223,7 +1232,7 @@ async def create_tool_instance(
 
         # Manifest templates use WORKSPACE_PATH; REPO_PATH is retained as a
         # deprecated alias for backward compatibility with older templates.
-        mount_name = _get_repository_mount_name(repo, workspace)
+        mount_name = _get_repository_mount_name(project, repo, workspace)
         variables = {
             "IMAGE_TAG": image_tag,
             "INSTANCE_NAME": instance_name.lower(),
@@ -1252,7 +1261,7 @@ async def create_tool_instance(
             "TOOL_PORT": tool_port,
             "USER_ID": str(user_id),
             "PROJECT_ID": str(project_id),
-            "WORKSPACE_NAME": _get_repository_mount_name(repo, workspace),
+            "WORKSPACE_NAME": _get_repository_mount_name(project, repo, workspace),
             "HOME_DIRECTORY": tool_type.home_directory or "/home/user",
         }
         compose_content = render_compose_template(tool_type.compose_template, variables)
@@ -1574,6 +1583,10 @@ async def start_tool_instance(
     else:
         # ── LEGACY FLOW ──────────────────────────────────────────
         if instance.clone_mode == "clone" and not instance.workspace_id:
+            clone_project = await session.get(Project, instance.project_id) if instance.project_id else None
+            clone_name = _slugify_directory_name(clone_project.name) if clone_project else "repo-clone"
+            repo_path = os.path.join(instance_dir, clone_name)
+
             repo = await session.get(GitRepository, instance.repository_id)
             if repo and repo.ssh_key_id:
                 ssh_key = await session.get(SSHKey, repo.ssh_key_id)
@@ -1599,6 +1612,13 @@ async def start_tool_instance(
                             exc,
                         )
 
+            # Ensure the legacy compose mounts the project-named clone directory.
+            extra_volumes.append({
+                "source": repo_path,
+                "target": f"{home_dir}/{clone_name}",
+                "type": "bind",
+            })
+
         if port_override or start_command or working_directory or extra_volumes:
             modify_compose_file(
                 instance.compose_path,
@@ -2104,7 +2124,11 @@ async def delete_tool_instance(
             os.path.dirname(instance.compose_path) if instance.compose_path else None
         )
         if instance_dir:
-            clone_path = os.path.join(instance_dir, "repo-clone")
+            clone_project = await session.get(Project, instance.project_id) if instance.project_id else None
+            clone_name = _slugify_directory_name(clone_project.name) if clone_project else "repo-clone"
+            clone_path = os.path.join(instance_dir, clone_name)
+            if not os.path.exists(clone_path):
+                clone_path = os.path.join(instance_dir, "repo-clone")
             if os.path.exists(clone_path):
                 is_dirty, changed_files = check_dirty_state(clone_path)
                 if is_dirty:
diff --git a/apps/api/tests/integration/test_workspaces_api.py b/apps/api/tests/integration/test_workspaces_api.py
index 07e8eec..fc18f0c 100644
--- a/apps/api/tests/integration/test_workspaces_api.py
+++ b/apps/api/tests/integration/test_workspaces_api.py
@@ -5,6 +5,7 @@ import uuid
 from unittest.mock import MagicMock, patch
 
 import pytest
+from fastapi import HTTPException
 from fastapi.testclient import TestClient
 from sqlalchemy.ext.asyncio import AsyncSession
 
@@ -165,7 +166,9 @@ class TestCreateWorkspace:
         asyncio.run(_commit())
 
         with patch.object(
-            WorkspaceManager, "create", side_effect=Exception("duplicate")
+            WorkspaceManager,
+            "create",
+            side_effect=HTTPException(status_code=409, detail="duplicate"),
         ):
             response = authenticated_client.post(
                 f"/projects/{test_repo.project_id}/repositories/{test_repo.id}/workspaces",
diff --git a/apps/api/tests/unit/test_instance_service.py b/apps/api/tests/unit/test_instance_service.py
index d6ec2f5..79b1c8c 100644
--- a/apps/api/tests/unit/test_instance_service.py
+++ b/apps/api/tests/unit/test_instance_service.py
@@ -53,37 +53,17 @@ class TestModifyComposeFile:
 class TestGetRepositoryMountName:
     """Tests for _get_repository_mount_name."""
 
-    def test_prefers_remote_url_name_over_user_provided_name(self):
+    def test_uses_project_name(self):
+        project = MagicMock()
+        project.name = "My Project"
         repo = MagicMock()
-        repo.name = "src"
-        repo.remote_url = "git@git.example.com:acme/headquarter.git"
-        assert _get_repository_mount_name(repo) == "headquarter"
+        assert _get_repository_mount_name(project, repo) == "my-project"
 
-    def test_parses_browser_url_to_repo_name(self):
+    def test_slugifies_project_name(self):
+        project = MagicMock()
+        project.name = "Project v2.0!"
         repo = MagicMock()
-        repo.name = "src"
-        repo.remote_url = "https://github.com/acme/headquarter/tree/main"
-        assert _get_repository_mount_name(repo) == "headquarter"
-
-    def test_uses_workspace_path_basename_when_workspace_provided(self):
-        repo = MagicMock()
-        repo.name = "src"
-        repo.remote_url = "git@git.example.com:acme/headquarter.git"
-        workspace = MagicMock()
-        workspace.path = "/data/working-copies/uuid/headquarter"
-        assert _get_repository_mount_name(repo, workspace) == "headquarter"
-
-    def test_falls_back_to_repo_name_when_remote_url_missing(self):
-        repo = MagicMock()
-        repo.name = "my-cool-repo"
-        repo.remote_url = None
-        assert _get_repository_mount_name(repo) == "my-cool-repo"
-
-    def test_falls_back_to_repo_name_for_unparseable_url(self):
-        repo = MagicMock()
-        repo.name = "my-cool-repo"
-        repo.remote_url = ""
-        assert _get_repository_mount_name(repo) == "my-cool-repo"
+        assert _get_repository_mount_name(project, repo) == "project-v2-0"
 
 
 @pytest.mark.unit
@@ -277,6 +257,9 @@ async def test_prepare_manifest_instance_uses_workspace_path_basename():
 
     session = AsyncMock()
 
+    project = MagicMock()
+    project.name = "acme"
+
     async def session_get(model, obj_id):
         if model.__name__ == "ToolType":
             return tool_type
@@ -286,6 +269,8 @@ async def test_prepare_manifest_instance_uses_workspace_path_basename():
             return repo
         if model.__name__ == "Workspace":
             return workspace
+        if model.__name__ == "Project":
+            return project
         return None
 
     session.get.side_effect = session_get
@@ -324,5 +309,5 @@ async def test_prepare_manifest_instance_uses_workspace_path_basename():
     finally:
         instance_service.subprocess.run = original_run
 
-    assert "WORKSPACE_NAME: headquarter" in compose_content
-    assert "/data/working-copies/workspace-uuid/headquarter:/home/user/headquarter" in compose_content
+    assert "WORKSPACE_NAME: acme" in compose_content
+    assert "/data/working-copies/workspace-uuid/headquarter:/home/user/acme" in compose_content
diff --git a/apps/api/tests/unit/test_manifest_compiler.py b/apps/api/tests/unit/test_manifest_compiler.py
index 4ffc21a..7aedaff 100644
--- a/apps/api/tests/unit/test_manifest_compiler.py
+++ b/apps/api/tests/unit/test_manifest_compiler.py
@@ -78,20 +78,7 @@ class TestGetManifestHomeDir:
 class TestCompileDockerfileHomeDirectory:
     """Tests that compile_dockerfile honors manifest.home_directory."""
 
-    def test_env_home_and_workdir_use_home_directory(self) -> None:
-        manifest = {
-            "base_image": "ubuntu:24.04",
-            "interface_type": "terminal",
-            "home_directory": "/home/custom",
-            "user": {"name": "dev", "uid": 1000, "gid": 1000},
-        }
-        dockerfile = compile_dockerfile(manifest)
-
-        assert "ENV HOME=/home/custom" in dockerfile
-        assert "WORKDIR /home/custom" in dockerfile
-
-    def test_workspace_symlink_created(self) -> None:
-        """When workspace name is known at build time, create /workspace symlink."""
+    def test_env_home_and_workdir_use_project_directory(self) -> None:
         manifest = {
             "base_image": "ubuntu:24.04",
             "interface_type": "terminal",
@@ -101,12 +88,26 @@ class TestCompileDockerfileHomeDirectory:
         }
         dockerfile = compile_dockerfile(manifest)
 
-        assert "mkdir -p /home/custom" in dockerfile
-        assert "ln -sfn /home/custom/my-app /workspace" in dockerfile
+        assert "ENV HOME=/home/custom" in dockerfile
+        assert "WORKDIR /home/custom/my-app" in dockerfile
+
+    def test_project_directory_created(self) -> None:
+        """When workspace name is known at build time, create the project directory."""
+        manifest = {
+            "base_image": "ubuntu:24.04",
+            "interface_type": "terminal",
+            "home_directory": "/home/custom",
+            "workspace_name": "my-app",
+            "user": {"name": "dev", "uid": 1000, "gid": 1000},
+        }
+        dockerfile = compile_dockerfile(manifest)
+
+        assert "mkdir -p /home/custom/my-app" in dockerfile
+        assert "ln -sfn" not in dockerfile
 
     def test_runtime_workspace_not_baked_into_image(self) -> None:
         """When workspace name is a runtime placeholder, do not create literal
-        {{WORKSPACE_NAME}} directories or symlinks in the image."""
+        {{WORKSPACE_NAME}} directories in the image."""
         manifest = {
             "base_image": "ubuntu:24.04",
             "interface_type": "terminal",
@@ -118,6 +119,8 @@ class TestCompileDockerfileHomeDirectory:
 
         assert "{{WORKSPACE_NAME}}" not in dockerfile
         assert "ln -sfn" not in dockerfile
+        assert "WORKDIR /home/custom/{{WORKSPACE_NAME}}" not in dockerfile
+        assert "WORKDIR /home/custom\n" in dockerfile
 
     def test_runtime_working_dir_overrides_home_workdir(self) -> None:
         manifest = {
@@ -191,7 +194,7 @@ class TestCompileComposeHomeDirectory:
         compose = compile_compose(manifest, variables)
 
         assert "/host/repos/my-app:/opt/code:ro" in compose
-        assert "/home/custom/my-app" not in compose
+        assert "/host/repos/my-app:/home/custom/my-app" not in compose
 
     def test_workspace_name_substituted_in_mount_target(self) -> None:
         manifest = {
@@ -276,7 +279,7 @@ def test_compile_dockerfile_starts_as_root_and_drops_privileges() -> None:
 
 @pytest.mark.unit
 def test_compile_compose_runs_as_root() -> None:
-    """The compose service must start as root so the entrypoint can fix /workspace."""
+    """The compose service must start as root so the entrypoint can fix ownership."""
     manifest = {
         "base_image": "ubuntu:24.04",
         "interface_type": "terminal",
@@ -300,7 +303,7 @@ def test_compile_compose_runs_as_root() -> None:
 class TestCompileEntrypoint:
     """Tests for the generated permission-fixing entrypoint."""
 
-    def test_entrypoint_creates_home_and_workspace(self) -> None:
+    def test_entrypoint_creates_home_and_project_directory(self) -> None:
         manifest = {
             "base_image": "ubuntu:24.04",
             "interface_type": "terminal",
@@ -311,7 +314,7 @@ class TestCompileEntrypoint:
 
         assert 'mkdir -p "$HOME_DIR"' in entrypoint
         assert 'mkdir -p "$WORKSPACE_TARGET"' in entrypoint
-        assert 'ln -sfn "$WORKSPACE_TARGET" /workspace' in entrypoint
+        assert 'ln -sfn' not in entrypoint
         assert 'WORKSPACE_NAME="${WORKSPACE_NAME:-workspace}"' in entrypoint
 
     def test_entrypoint_removes_stale_placeholder_directory(self) -> None:
@@ -327,8 +330,8 @@ class TestCompileEntrypoint:
         assert 'if [ -d "${HOME_DIR}/{{WORKSPACE_NAME}}" ]; then' in entrypoint
         assert 'rm -rf "${HOME_DIR}/{{WORKSPACE_NAME}}"' in entrypoint
 
-    def test_entrypoint_uses_root_then_sudo_for_workspace_symlink(self) -> None:
-        """/workspace is under /, so root takes precedence; non-root falls back to sudo."""
+    def test_entrypoint_does_not_create_workspace_symlink(self) -> None:
+        """The /workspace compatibility symlink is no longer created."""
         manifest = {
             "base_image": "ubuntu:24.04",
             "interface_type": "terminal",
@@ -337,12 +340,7 @@ class TestCompileEntrypoint:
         }
         entrypoint = compile_entrypoint(manifest)
 
-        root_idx = entrypoint.find('if [ "$(id -u)" = "0" ]; then')
-        sudo_idx = entrypoint.find('elif [ -n "$SUDO" ]; then')
-        assert root_idx != -1
-        assert sudo_idx != -1
-        assert root_idx < sudo_idx
-        assert 'sudo ln -sfn "$WORKSPACE_TARGET" /workspace' in entrypoint
+        assert "/workspace" not in entrypoint
 
     def test_entrypoint_fixes_mount_owners(self) -> None:
         manifest = {