diff --git a/packages/opencode/src/mcp/oauth-callback.ts b/packages/opencode/src/mcp/oauth-callback.ts
index bb3b56f2e95..57cab5a271a 100644
--- a/packages/opencode/src/mcp/oauth-callback.ts
+++ b/packages/opencode/src/mcp/oauth-callback.ts
@@ -1,5 +1,5 @@
 import { Log } from "../util/log"
-import { OAUTH_CALLBACK_PORT, OAUTH_CALLBACK_PATH } from "./oauth-provider"
+import { OAUTH_CALLBACK_PATH, OAUTH_CALLBACK_PORT } from "./oauth-provider"
 
 const log = Log.create({ service: "mcp.oauth-callback" })
 
@@ -161,7 +161,7 @@ export namespace McpOAuthCallback {
   export async function isPortInUse(): Promise<boolean> {
     return new Promise((resolve) => {
       Bun.connect({
-        hostname: "127.0.0.1",
+        hostname: "localhost",
         port: OAUTH_CALLBACK_PORT,
         socket: {
           open(socket) {
diff --git a/packages/opencode/src/mcp/oauth-provider.ts b/packages/opencode/src/mcp/oauth-provider.ts
index 35ead25e8be..c7961a164d8 100644
--- a/packages/opencode/src/mcp/oauth-provider.ts
+++ b/packages/opencode/src/mcp/oauth-provider.ts
@@ -1,12 +1,12 @@
 import type { OAuthClientProvider } from "@modelcontextprotocol/sdk/client/auth.js"
 import type {
-  OAuthClientMetadata,
-  OAuthTokens,
   OAuthClientInformation,
   OAuthClientInformationFull,
+  OAuthClientMetadata,
+  OAuthTokens,
 } from "@modelcontextprotocol/sdk/shared/auth.js"
-import { McpAuth } from "./auth"
 import { Log } from "../util/log"
+import { McpAuth } from "./auth"
 
 const log = Log.create({ service: "mcp.oauth" })
 
@@ -32,7 +32,7 @@ export class McpOAuthProvider implements OAuthClientProvider {
   ) {}
 
   get redirectUrl(): string {
-    return `http://127.0.0.1:${OAUTH_CALLBACK_PORT}${OAUTH_CALLBACK_PATH}`
+    return `http://localhost:${OAUTH_CALLBACK_PORT}${OAUTH_CALLBACK_PATH}`
   }
 
   get clientMetadata(): OAuthClientMetadata {
@@ -121,9 +121,45 @@ export class McpOAuthProvider implements OAuthClientProvider {
     log.info("saved oauth tokens", { mcpName: this.mcpName })
   }
 
+  async validateResourceURL(serverUrl: string | URL, resource?: string): Promise<URL | undefined> {
+    // For Azure AD, disable resource parameter to use scope-based authentication (v2.0)
+    // Azure AD v2.0 doesn't allow both resource and scope parameters
+    const url = new URL(typeof serverUrl === "string" ? serverUrl : serverUrl.toString())
+    if (url.hostname === "login.microsoftonline.com") {
+      log.info("azure ad detected, disabling resource parameter", { mcpName: this.mcpName })
+      return undefined
+    }
+    // For other providers, use the resource if provided
+    return resource ? new URL(resource) : undefined
+  }
+
+  addClientAuthentication = (_headers: Headers, params: URLSearchParams, url: string | URL, _metadata?: any): Promise<void> => {
+    // For Azure AD token endpoint, ensure client_id is in the request body
+    // and remove resource parameter if present
+    return (async () => {
+      const endpoint = new URL(typeof url === "string" ? url : url.toString())
+      if (endpoint.hostname === "login.microsoftonline.com") {
+        // Ensure client_id is in the request body for public clients
+        if (this.config.clientId && !params.has("client_id")) {
+          params.set("client_id", this.config.clientId)
+          log.info("added client_id to token request", { mcpName: this.mcpName })
+        }
+        // Remove resource parameter - v2.0 uses scope only
+        params.delete("resource")
+        log.info("removed resource parameter from token request", { mcpName: this.mcpName })
+      }
+    })()
+  }
+  
   async redirectToAuthorization(authorizationUrl: URL): Promise<void> {
-    log.info("redirecting to authorization", { mcpName: this.mcpName, url: authorizationUrl.toString() })
-    await this.callbacks.onRedirect(authorizationUrl)
+    const url = new URL(authorizationUrl.toString())
+
+    if (url.hostname === "login.microsoftonline.com") {
+      url.searchParams.delete("resource")
+    }
+
+    log.info("redirecting to authorization", { mcpName: this.mcpName, url: url.toString() })
+    await this.callbacks.onRedirect(url)
   }
 
   async saveCodeVerifier(codeVerifier: string): Promise<void> {
@@ -151,4 +187,5 @@ export class McpOAuthProvider implements OAuthClientProvider {
   }
 }
 
-export { OAUTH_CALLBACK_PORT, OAUTH_CALLBACK_PATH }
+export { OAUTH_CALLBACK_PATH, OAUTH_CALLBACK_PORT }
+
diff --git a/packages/opencode/test/mcp/oauth-resource.test.ts b/packages/opencode/test/mcp/oauth-resource.test.ts
new file mode 100644
index 00000000000..ab6e93c1c4b
--- /dev/null
+++ b/packages/opencode/test/mcp/oauth-resource.test.ts
@@ -0,0 +1,30 @@
+import { expect, test } from "bun:test"
+
+import { McpOAuthProvider } from "../../src/mcp/oauth-provider"
+
+test("McpOAuthProvider omits resource for login.microsoftonline.com", async () => {
+  let captured: URL | undefined
+
+  const provider = new McpOAuthProvider(
+    "test",
+    "http://localhost:3000",
+    {},
+    {
+      onRedirect: async (url) => {
+        captured = url
+      },
+    },
+  )
+
+  const url = new URL(
+    "https://login.microsoftonline.com/tenant/oauth2/v2.0/authorize?client_id=x&resource=http%3A%2F%2Flocalhost%3A5533%2F&scope=openid",
+  )
+
+  await provider.redirectToAuthorization(url)
+
+  expect(captured).toBeDefined()
+  expect(captured!.hostname).toBe("login.microsoftonline.com")
+  expect(captured!.searchParams.get("resource")).toBeNull()
+  expect(captured!.searchParams.get("client_id")).toBe("x")
+  expect(captured!.searchParams.get("scope")).toBe("openid")
+})