diff --git a/server/src/agents/lifecycle.rs b/server/src/agents/lifecycle.rs
index 0bd173fb..dbe4162f 100644
--- a/server/src/agents/lifecycle.rs
+++ b/server/src/agents/lifecycle.rs
@@ -230,6 +230,45 @@ pub fn reject_story_from_qa(story_id: &str, notes: &str) -> Result<(), String> {
     .map_err(|e| e.to_string())
 }
 
+/// Transition a story to the `Blocked` stage via the state machine.
+///
+/// Builds a `PipelineEvent::Block { reason }`, validates the transition, and
+/// writes the resulting `Stage::Blocked` to the CRDT.  Returns `Err` on
+/// `TransitionError` — callers must NOT fall back to direct register writes.
+pub fn transition_to_blocked(story_id: &str, reason: &str) -> Result<(), String> {
+    let transform = fields_to_clear_transform(&["blocked"]);
+    apply_transition(
+        story_id,
+        PipelineEvent::Block {
+            reason: reason.to_string(),
+        },
+        transform.as_ref().map(|f| f.as_ref()),
+    )
+    .map(|_| ())
+    .map_err(|e| e.to_string())
+}
+
+/// Transition a story out of `Blocked` back to `Coding` via the state machine.
+///
+/// Builds a `PipelineEvent::Unblock`, validates the transition, writes the
+/// resulting `Stage::Coding` to the CRDT, and resets `retry_count` to 0.
+/// Returns `Err` on `TransitionError` — callers must NOT fall back to direct
+/// register writes.
+pub fn transition_to_unblocked(story_id: &str) -> Result<(), String> {
+    let transform = fields_to_clear_transform(&["blocked", "merge_failure", "retry_count"]);
+    apply_transition(
+        story_id,
+        PipelineEvent::Unblock,
+        transform.as_ref().map(|f| f.as_ref()),
+    )
+    .map(|_| ())
+    .map_err(|e| e.to_string())?;
+
+    // Reset the retry counter in the CRDT so the story gets a fresh budget.
+    crate::crdt_state::set_retry_count(story_id, 0);
+    Ok(())
+}
+
 /// Map a (current stage, target stage name) pair to the appropriate PipelineEvent.
 fn map_stage_move_to_event(
     from: &Stage,
@@ -261,6 +300,7 @@ fn map_stage_move_to_event(
             merge_commit: GitSha("manual".to_string()),
         }),
         (Stage::Coding | Stage::Qa | Stage::Backlog, "done") => Ok(PipelineEvent::Close),
+        (Stage::Blocked { .. }, "current") => Ok(PipelineEvent::Unblock),
         (
             Stage::Archived {
                 reason: ArchiveReason::Blocked { .. },
@@ -345,6 +385,7 @@ fn stage_to_name(s: &Stage) -> &'static str {
         Stage::Upcoming => "upcoming",
         Stage::Backlog => "backlog",
         Stage::Coding => "current",
+        Stage::Blocked { .. } => "blocked",
         Stage::Qa => "qa",
         Stage::Merge { .. } => "merge",
         Stage::Done { .. } => "done",
@@ -452,6 +493,68 @@ mod tests {
         assert_eq!(item_type_from_id("99999"), "story");
     }
 
+    // ── Story 866: block/unblock round-trip regression test ──────────────────
+
+    /// Regression test (story 866): block a story via the new state-machine path,
+    /// verify it lands in `Stage::Blocked`, then unblock and verify it returns
+    /// to `Stage::Coding`.
+    #[test]
+    fn block_unblock_round_trip_via_state_machine() {
+        crate::db::ensure_content_store();
+        crate::db::write_item_with_content(
+            "99866_story_block_test",
+            "2_current",
+            "---\nname: Block Round Trip\n---\n# Story\n",
+        );
+
+        // Verify starting state is Coding.
+        let item = crate::pipeline_state::read_typed("99866_story_block_test")
+            .expect("read should succeed")
+            .expect("item should exist");
+        assert_eq!(
+            item.stage.dir_name(),
+            "2_current",
+            "should start in 2_current"
+        );
+
+        // Block via the state machine.
+        transition_to_blocked("99866_story_block_test", "retry limit exceeded")
+            .expect("transition_to_blocked should succeed");
+
+        // Verify the CRDT now shows Stage::Blocked.
+        let item = crate::pipeline_state::read_typed("99866_story_block_test")
+            .expect("read should succeed")
+            .expect("item should exist after block");
+        assert_eq!(
+            item.stage.dir_name(),
+            "2_blocked",
+            "should be in 2_blocked after transition_to_blocked"
+        );
+        assert!(item.stage.is_blocked(), "is_blocked() should return true");
+        assert!(
+            matches!(item.stage, Stage::Blocked { .. }),
+            "stage should be Stage::Blocked variant"
+        );
+
+        // Unblock via the state machine.
+        transition_to_unblocked("99866_story_block_test")
+            .expect("transition_to_unblocked should succeed");
+
+        // Verify the story returned to Coding.
+        let item = crate::pipeline_state::read_typed("99866_story_block_test")
+            .expect("read should succeed")
+            .expect("item should exist after unblock");
+        assert_eq!(
+            item.stage.dir_name(),
+            "2_current",
+            "should return to 2_current after unblock"
+        );
+        assert!(
+            matches!(item.stage, Stage::Coding),
+            "stage should be Stage::Coding after unblock"
+        );
+    }
+
     // ── feature_branch_has_unmerged_changes tests ────────────────────────────
 
     fn init_git_repo(repo: &std::path::Path) {
diff --git a/server/src/agents/pool/auto_assign/merge.rs b/server/src/agents/pool/auto_assign/merge.rs
index 98fadb98..9f508437 100644
--- a/server/src/agents/pool/auto_assign/merge.rs
+++ b/server/src/agents/pool/auto_assign/merge.rs
@@ -119,34 +119,21 @@ impl AgentPool {
             }
 
             // AC6: Detect empty-diff stories before starting the merge pipeline.
-            // If the worktree has no commits on the feature branch, write a
-            // merge_failure and block the story immediately — no merge job needed.
+            // If the worktree has no commits on the feature branch, block the
+            // story immediately via the state machine — no merge job needed.
             if let Some(wt_path) = worktree::find_worktree_path(project_root, story_id)
                 && !crate::agents::gates::worktree_has_committed_work(&wt_path)
             {
-                slog_warn!(
-                    "[auto-assign] Story '{story_id}' in 4_merge/ has no commits \
-                     on feature branch. Writing merge_failure and blocking."
-                );
                 let empty_diff_reason = "Feature branch has no code changes — the coder agent \
                      did not produce any commits.";
-                if let Some(contents) = crate::db::read_content(story_id) {
-                    let updated = crate::io::story_metadata::write_merge_failure_in_content(
-                        &contents,
-                        empty_diff_reason,
-                    );
-                    let blocked = crate::io::story_metadata::write_blocked_in_content(&updated);
-                    crate::db::write_content(story_id, &blocked);
-                    crate::db::write_item_with_content(story_id, "4_merge", &blocked);
-                } else {
-                    let story_path = project_root
-                        .join(".huskies/work/4_merge")
-                        .join(format!("{story_id}.md"));
-                    let _ = crate::io::story_metadata::write_merge_failure(
-                        &story_path,
-                        empty_diff_reason,
-                    );
-                    let _ = crate::io::story_metadata::write_blocked(&story_path);
+                slog_warn!(
+                    "[auto-assign] Story '{story_id}' in 4_merge/ has no commits \
+                     on feature branch. Blocking via state machine."
+                );
+                if let Err(e) =
+                    crate::agents::lifecycle::transition_to_blocked(story_id, empty_diff_reason)
+                {
+                    slog_error!("[auto-assign] Failed to transition '{story_id}' to Blocked: {e}");
                 }
                 let _ = self
                     .watcher_tx
diff --git a/server/src/agents/pool/auto_assign/story_checks.rs b/server/src/agents/pool/auto_assign/story_checks.rs
index b5a4270a..151cc9ed 100644
--- a/server/src/agents/pool/auto_assign/story_checks.rs
+++ b/server/src/agents/pool/auto_assign/story_checks.rs
@@ -34,8 +34,16 @@ pub(super) fn has_review_hold(project_root: &Path, _stage_dir: &str, story_id: &
         .unwrap_or(false)
 }
 
-/// Return `true` if the story file has `blocked: true` in its front matter.
+/// Return `true` if the story is blocked — either via the typed `Stage::Blocked`
+/// variant or the legacy `blocked: true` front-matter field.
 pub(super) fn is_story_blocked(project_root: &Path, _stage_dir: &str, story_id: &str) -> bool {
+    // Check the typed stage first (authoritative after story 866).
+    if let Ok(Some(item)) = crate::pipeline_state::read_typed(story_id)
+        && item.stage.is_blocked()
+    {
+        return true;
+    }
+    // Legacy fallback: check front-matter field for backward compatibility.
     use crate::io::story_metadata::parse_front_matter;
     let contents = match read_story_contents(project_root, story_id) {
         Some(c) => c,
diff --git a/server/src/agents/pool/auto_assign/watchdog/tests/limits_tests.rs b/server/src/agents/pool/auto_assign/watchdog/tests/limits_tests.rs
index 55e776cc..b3aa0092 100644
--- a/server/src/agents/pool/auto_assign/watchdog/tests/limits_tests.rs
+++ b/server/src/agents/pool/auto_assign/watchdog/tests/limits_tests.rs
@@ -267,12 +267,13 @@ max_turns = 10
     let found = pool.run_watchdog_pass(Some(root));
     assert!(found >= 1, "watchdog should detect the over-limit agent");
 
-    // With max_retries=1, the first violation blocks immediately.
-    let updated = crate::db::read_content(story_id)
-        .expect("story content must still exist after watchdog termination");
-    assert!(
-        updated.contains("blocked: true"),
-        "story must be marked `blocked: true` after limit termination with max_retries=1 — got:\n{updated}"
+    // With max_retries=1, the first violation blocks immediately via the state machine.
+    let item = crate::crdt_state::read_item(story_id)
+        .expect("story must be in CRDT after watchdog termination");
+    assert_eq!(
+        item.stage, "2_blocked",
+        "story stage must be 2_blocked after limit termination with max_retries=1 — got: {}",
+        item.stage
     );
 
     // Sanity: the agent itself is also Failed with the right reason.
@@ -407,11 +408,12 @@ max_turns = 10
     let event = rx.try_recv().expect("watchdog must emit an Error event");
     assert!(matches!(event, AgentEvent::Error { .. }));
 
-    // With max_retries=1, the story is blocked.
-    let updated = crate::db::read_content(story_id).unwrap();
-    assert!(
-        updated.contains("blocked: true"),
-        "story must be blocked after per-session overrun with max_retries=1"
+    // With max_retries=1, the story is blocked via the state machine.
+    let item = crate::crdt_state::read_item(story_id)
+        .expect("story must be in CRDT after per-session overrun");
+    assert_eq!(
+        item.stage, "2_blocked",
+        "story stage must be 2_blocked after per-session overrun with max_retries=1"
     );
 }
 
@@ -470,9 +472,9 @@ max_turns = 10
             Some(1),
             "after session 1, retry_count should be 1 in CRDT"
         );
-        let content = crate::db::read_content(story_id).unwrap();
-        assert!(
-            !content.contains("blocked: true"),
+        assert_ne!(
+            item.stage.as_str(),
+            "2_blocked",
             "story should NOT be blocked after session 1"
         );
     }
@@ -490,9 +492,9 @@ max_turns = 10
             Some(2),
             "after session 2, retry_count should be 2 in CRDT"
         );
-        let content = crate::db::read_content(story_id).unwrap();
-        assert!(
-            !content.contains("blocked: true"),
+        assert_ne!(
+            item.stage.as_str(),
+            "2_blocked",
             "story should NOT be blocked after session 2"
         );
     }
@@ -504,16 +506,18 @@ max_turns = 10
         pool.inject_test_agent_with_session(story_id, "coder-1", AgentStatus::Running, "session-3");
         pool.run_watchdog_pass(Some(root));
 
-        let content = crate::db::read_content(story_id).unwrap();
-        assert!(
-            content.contains("blocked: true"),
-            "story must be blocked after session 3 (retry_count=3 >= max_retries=3) — got:\n{content}"
-        );
         let item = crate::crdt_state::read_item(story_id).expect("story must be in CRDT");
+        assert_eq!(
+            item.stage, "2_blocked",
+            "story must be blocked after session 3 (retry_count=3 >= max_retries=3) — got: {}",
+            item.stage
+        );
+        // retry_count resets to 0 on stage transition (Bug 780) — the fact
+        // that the story reached 2_blocked proves the retry limit was hit.
         assert_eq!(
             item.retry_count,
-            Some(3),
-            "retry_count should be 3 in CRDT after session 3"
+            Some(0),
+            "retry_count should reset to 0 after stage transition to blocked"
         );
     }
 }
diff --git a/server/src/agents/pool/pipeline/advance/helpers.rs b/server/src/agents/pool/pipeline/advance/helpers.rs
index 9f65d223..e0c0933b 100644
--- a/server/src/agents/pool/pipeline/advance/helpers.rs
+++ b/server/src/agents/pool/pipeline/advance/helpers.rs
@@ -104,8 +104,6 @@ pub(crate) fn should_block_story(
     max_retries: u32,
     stage_label: &str,
 ) -> Option<String> {
-    use crate::io::story_metadata::write_blocked_in_content;
-
     if max_retries == 0 {
         return None;
     }
@@ -119,23 +117,16 @@ pub(crate) fn should_block_story(
     }
 
     if new_count >= max_retries {
+        let reason =
+            format!("Retry limit exceeded ({new_count}/{max_retries}) at {stage_label} stage");
         slog_warn!(
             "[pipeline] Story '{story_id}' reached retry limit ({new_count}/{max_retries}) \
              at {stage_label} stage. Marking as blocked."
         );
-        if let Some(contents) = crate::db::read_content(story_id) {
-            let blocked = write_blocked_in_content(&contents);
-            crate::db::write_content(story_id, &blocked);
-            let stage = crate::pipeline_state::read_typed(story_id)
-                .ok()
-                .flatten()
-                .map(|i| i.stage.dir_name().to_string())
-                .unwrap_or_else(|| "2_current".to_string());
-            crate::db::write_item_with_content(story_id, &stage, &blocked);
+        if let Err(e) = crate::agents::lifecycle::transition_to_blocked(story_id, &reason) {
+            slog_error!("[pipeline] Failed to transition '{story_id}' to Blocked: {e}");
         }
-        Some(format!(
-            "Retry limit exceeded ({new_count}/{max_retries}) at {stage_label} stage"
-        ))
+        Some(reason)
     } else {
         slog!(
             "[pipeline] Story '{story_id}' retry {new_count}/{max_retries} at {stage_label} stage."
diff --git a/server/src/agents/pool/pipeline/merge/runner.rs b/server/src/agents/pool/pipeline/merge/runner.rs
index 0b847472..d13dfffa 100644
--- a/server/src/agents/pool/pipeline/merge/runner.rs
+++ b/server/src/agents/pool/pipeline/merge/runner.rs
@@ -114,19 +114,20 @@ impl AgentPool {
                     Err(e) => e.clone(),
                 };
                 let is_no_commits = reason.contains("no commits to merge");
-                if let Some(contents) = crate::db::read_content(&sid) {
-                    let with_failure = crate::io::story_metadata::write_merge_failure_in_content(
-                        &contents, &reason,
-                    );
-                    let updated = if is_no_commits {
-                        crate::io::story_metadata::write_blocked_in_content(&with_failure)
-                    } else {
-                        with_failure
-                    };
-                    crate::db::write_content(&sid, &updated);
-                    crate::db::write_item_with_content(&sid, "4_merge", &updated);
+                if !is_no_commits {
+                    // Write merge_failure to content for non-blocking failures.
+                    if let Some(contents) = crate::db::read_content(&sid) {
+                        let updated = crate::io::story_metadata::write_merge_failure_in_content(
+                            &contents, &reason,
+                        );
+                        crate::db::write_content(&sid, &updated);
+                        crate::db::write_item_with_content(&sid, "4_merge", &updated);
+                    }
                 }
                 if is_no_commits {
+                    if let Err(e) = crate::agents::lifecycle::transition_to_blocked(&sid, &reason) {
+                        crate::slog_error!("[merge] Failed to transition '{sid}' to Blocked: {e}");
+                    }
                     let _ = pool
                         .watcher_tx
                         .send(crate::io::watcher::WatcherEvent::StoryBlocked {
diff --git a/server/src/chat/commands/unblock.rs b/server/src/chat/commands/unblock.rs
index 8ff9a34c..58839383 100644
--- a/server/src/chat/commands/unblock.rs
+++ b/server/src/chat/commands/unblock.rs
@@ -44,8 +44,13 @@ pub(crate) fn unblock_by_number(project_root: &Path, story_number: &str) -> Stri
     unblock_by_story_id(&story_id)
 }
 
-/// Unblock a story using the content store (DB-backed).
+/// Unblock a story via the typed state machine.
+///
+/// Checks whether the story is in `Stage::Blocked` (new path) or has legacy
+/// `blocked: true` / `merge_failure` front-matter, then routes through
+/// [`crate::agents::lifecycle::transition_to_unblocked`].
 fn unblock_by_story_id(story_id: &str) -> String {
+    // Read content for the story name and legacy field checks.
     let contents = match crate::db::read_content(story_id) {
         Some(c) => c,
         None => return format!("Failed to read story content for **{story_id}**"),
@@ -57,34 +62,51 @@ fn unblock_by_story_id(story_id: &str) -> String {
     };
 
     let story_name = meta.name.as_deref().unwrap_or(story_id).to_string();
+
+    // Check if the story is blocked via the typed stage or legacy front-matter.
+    let typed_blocked = crate::pipeline_state::read_typed(story_id)
+        .ok()
+        .flatten()
+        .is_some_and(|item| item.stage.is_blocked());
     let has_blocked = meta.blocked == Some(true);
     let has_merge_failure = meta.merge_failure.is_some();
 
-    if !has_blocked && !has_merge_failure {
+    if !typed_blocked && !has_blocked && !has_merge_failure {
         return format!("**{story_name}** ({story_id}) is not blocked. Nothing to unblock.");
     }
 
-    let mut updated = contents;
-    if has_blocked {
-        updated = clear_front_matter_field_in_content(&updated, "blocked");
-    }
-    if has_merge_failure {
-        updated = clear_front_matter_field_in_content(&updated, "merge_failure");
-    }
-    // retry_count lives in the CRDT; clear any stale copy from front-matter.
-    updated = clear_front_matter_field_in_content(&updated, "retry_count");
+    // Route through the state machine.
+    match crate::agents::lifecycle::transition_to_unblocked(story_id) {
+        Ok(()) => {}
+        Err(e) => {
+            // If the typed transition fails (e.g. legacy Archived item),
+            // fall back to clearing front-matter fields directly.
+            crate::slog_warn!(
+                "[unblock] State-machine transition failed for '{story_id}': {e}. \
+                 Falling back to front-matter cleanup."
+            );
+            let mut updated = contents;
+            if has_blocked {
+                updated = clear_front_matter_field_in_content(&updated, "blocked");
+            }
+            if has_merge_failure {
+                updated = clear_front_matter_field_in_content(&updated, "merge_failure");
+            }
+            updated = clear_front_matter_field_in_content(&updated, "retry_count");
 
-    crate::db::write_content(story_id, &updated);
-    let stage = crate::pipeline_state::read_typed(story_id)
-        .ok()
-        .flatten()
-        .map(|i| i.stage.dir_name().to_string())
-        .unwrap_or_else(|| "2_current".to_string());
-    crate::db::write_item_with_content(story_id, &stage, &updated);
-    crate::crdt_state::set_retry_count(story_id, 0);
+            crate::db::write_content(story_id, &updated);
+            let stage = crate::pipeline_state::read_typed(story_id)
+                .ok()
+                .flatten()
+                .map(|i| i.stage.dir_name().to_string())
+                .unwrap_or_else(|| "2_current".to_string());
+            crate::db::write_item_with_content(story_id, &stage, &updated);
+            crate::crdt_state::set_retry_count(story_id, 0);
+        }
+    }
 
     let mut cleared = Vec::new();
-    if has_blocked {
+    if typed_blocked || has_blocked {
         cleared.push("blocked");
     }
     if has_merge_failure {
diff --git a/server/src/chat/transport/matrix/delete.rs b/server/src/chat/transport/matrix/delete.rs
index 3778b68e..a3d316e9 100644
--- a/server/src/chat/transport/matrix/delete.rs
+++ b/server/src/chat/transport/matrix/delete.rs
@@ -109,6 +109,7 @@ fn stage_display_name(stage: &str) -> &str {
         Some(Stage::Upcoming) => "upcoming",
         Some(Stage::Backlog) => "backlog",
         Some(Stage::Coding) => "in-progress",
+        Some(Stage::Blocked { .. }) => "blocked",
         Some(Stage::Qa) => "QA",
         Some(Stage::Merge { .. }) => "merge",
         Some(Stage::Done { .. }) => "done",
diff --git a/server/src/http/mcp/story_tools/epic.rs b/server/src/http/mcp/story_tools/epic.rs
index eef71365..a2540541 100644
--- a/server/src/http/mcp/story_tools/epic.rs
+++ b/server/src/http/mcp/story_tools/epic.rs
@@ -145,6 +145,7 @@ pub(crate) fn tool_show_epic(args: &Value, _ctx: &AppContext) -> Result<String,
                 Stage::Done { .. } => "done",
                 Stage::Archived { .. } => "archived",
                 Stage::Frozen { .. } => "frozen",
+                Stage::Blocked { .. } => "blocked",
             };
             member_items.push(json!({
                 "story_id": sid,
diff --git a/server/src/http/workflow/pipeline.rs b/server/src/http/workflow/pipeline.rs
index 7a1b77cc..231a6eed 100644
--- a/server/src/http/workflow/pipeline.rs
+++ b/server/src/http/workflow/pipeline.rs
@@ -146,6 +146,7 @@ pub fn load_pipeline_state(ctx: &AppContext) -> Result<PipelineState, String> {
             Stage::Upcoming => state.backlog.push(story), // upcoming shown with backlog
             Stage::Backlog => state.backlog.push(story),
             Stage::Coding => state.current.push(story),
+            Stage::Blocked { .. } => state.current.push(story), // blocked shown with current
             Stage::Qa => state.qa.push(story),
             Stage::Merge { .. } => state.merge.push(story),
             Stage::Done { .. } => state.done.push(story),
diff --git a/server/src/io/story_metadata/fields.rs b/server/src/io/story_metadata/fields.rs
index fa1fbc3f..25ec8f3b 100644
--- a/server/src/io/story_metadata/fields.rs
+++ b/server/src/io/story_metadata/fields.rs
@@ -115,18 +115,6 @@ pub fn write_review_hold(path: &Path) -> Result<(), String> {
     Ok(())
 }
 
-/// Write `blocked: true` to the YAML front matter of a story file.
-///
-/// Used to mark stories that have exceeded the retry limit and should not
-/// be auto-assigned again.
-pub fn write_blocked(path: &Path) -> Result<(), String> {
-    let contents =
-        fs::read_to_string(path).map_err(|e| format!("Failed to read story file: {e}"))?;
-    let updated = set_front_matter_field(&contents, "blocked", "true");
-    fs::write(path, &updated).map_err(|e| format!("Failed to write story file: {e}"))?;
-    Ok(())
-}
-
 /// Write or update `depends_on:` field in the YAML front matter of a story file.
 ///
 /// Serialises `deps` as an inline YAML sequence, e.g. `[477, 478]`.
@@ -162,11 +150,6 @@ pub fn write_rejection_notes_to_content(contents: &str, notes: &str) -> String {
     format!("{contents}{section}")
 }
 
-/// Write `blocked: true` to story content (pure function).
-pub fn write_blocked_in_content(contents: &str) -> String {
-    set_front_matter_field(contents, "blocked", "true")
-}
-
 /// Write or update `merge_failure` in story content (pure function).
 pub fn write_merge_failure_in_content(contents: &str, reason: &str) -> String {
     let escaped = reason
diff --git a/server/src/io/story_metadata/mod.rs b/server/src/io/story_metadata/mod.rs
index a1575663..eadef1ff 100644
--- a/server/src/io/story_metadata/mod.rs
+++ b/server/src/io/story_metadata/mod.rs
@@ -14,8 +14,8 @@ mod types;
 pub use deps::{check_archived_deps, check_archived_deps_from_list, check_unmet_deps};
 pub use fields::{
     clear_front_matter_field, clear_front_matter_field_in_content, set_front_matter_field,
-    write_blocked, write_blocked_in_content, write_depends_on, write_depends_on_in_content,
-    write_merge_failure, write_merge_failure_in_content, write_mergemaster_attempted_in_content,
+    write_depends_on, write_depends_on_in_content, write_merge_failure,
+    write_merge_failure_in_content, write_mergemaster_attempted_in_content,
     write_rejection_notes_to_content, write_review_hold, write_review_hold_in_content,
 };
 pub use parser::{
diff --git a/server/src/io/watcher/mod.rs b/server/src/io/watcher/mod.rs
index cd849dd1..ace0e16d 100644
--- a/server/src/io/watcher/mod.rs
+++ b/server/src/io/watcher/mod.rs
@@ -52,6 +52,7 @@ pub fn stage_metadata(stage: &str, item_id: &str) -> Option<(&'static str, Strin
         Stage::Upcoming => ("create", format!("huskies: triage {item_id}")),
         Stage::Backlog => ("create", format!("huskies: create {item_id}")),
         Stage::Coding => ("start", format!("huskies: start {item_id}")),
+        Stage::Blocked { .. } => ("block", format!("huskies: block {item_id}")),
         Stage::Qa => ("qa", format!("huskies: queue {item_id} for QA")),
         Stage::Merge { .. } => ("merge", format!("huskies: queue {item_id} for merge")),
         Stage::Done { .. } => ("done", format!("huskies: done {item_id}")),
diff --git a/server/src/pipeline_state/projection.rs b/server/src/pipeline_state/projection.rs
index f8eb96c4..8ed5dfcf 100644
--- a/server/src/pipeline_state/projection.rs
+++ b/server/src/pipeline_state/projection.rs
@@ -72,6 +72,9 @@ pub fn project_stage(view: &PipelineItemView) -> Result<Stage, ProjectionError>
     match view.stage.as_str() {
         "0_upcoming" => Ok(Stage::Upcoming),
         "1_backlog" => Ok(Stage::Backlog),
+        "2_blocked" => Ok(Stage::Blocked {
+            reason: String::new(),
+        }),
         "2_current" => Ok(Stage::Coding),
         "3_qa" => Ok(Stage::Qa),
         "4_merge" => {
@@ -147,10 +150,11 @@ impl PipelineItem {
         let dir = stage_dir_name(&self.stage);
         let blocked = matches!(
             self.stage,
-            Stage::Archived {
-                reason: ArchiveReason::Blocked { .. },
-                ..
-            }
+            Stage::Blocked { .. }
+                | Stage::Archived {
+                    reason: ArchiveReason::Blocked { .. },
+                    ..
+                }
         );
         // Frozen stories map to "7_frozen"; they are not "blocked" in the CRDT sense.
         (dir, blocked)
@@ -302,6 +306,26 @@ mod tests {
         }
     }
 
+    #[test]
+    fn project_blocked_item() {
+        let view = PipelineItemView {
+            story_id: "42_story_test".to_string(),
+            stage: "2_blocked".to_string(),
+            name: Some("Test".to_string()),
+            agent: None,
+            retry_count: None,
+            blocked: None,
+            depends_on: None,
+            claimed_by: None,
+            claimed_at: None,
+            merged_at: None,
+            qa_mode: None,
+            mergemaster_attempted: None,
+        };
+        let item = PipelineItem::try_from(&view).unwrap();
+        assert!(matches!(item.stage, Stage::Blocked { .. }));
+    }
+
     #[test]
     fn project_archived_blocked_item() {
         let view = PipelineItemView {
@@ -385,6 +409,13 @@ mod tests {
             (Stage::Upcoming, "0_upcoming", false),
             (Stage::Backlog, "1_backlog", false),
             (Stage::Coding, "2_current", false),
+            (
+                Stage::Blocked {
+                    reason: "stuck".into(),
+                },
+                "2_blocked",
+                true,
+            ),
             (Stage::Qa, "3_qa", false),
             (
                 Stage::Merge {
diff --git a/server/src/pipeline_state/tests.rs b/server/src/pipeline_state/tests.rs
index 0447b6ea..3e4a4fd9 100644
--- a/server/src/pipeline_state/tests.rs
+++ b/server/src/pipeline_state/tests.rs
@@ -172,13 +172,7 @@ fn block_from_any_active_stage() {
                 reason: "stuck".into(),
             },
         );
-        assert!(matches!(
-            result,
-            Ok(Stage::Archived {
-                reason: ArchiveReason::Blocked { .. },
-                ..
-            })
-        ));
+        assert!(matches!(result, Ok(Stage::Blocked { .. })));
     }
 
     let m = Stage::Merge {
@@ -191,17 +185,20 @@ fn block_from_any_active_stage() {
             reason: "stuck".into(),
         },
     );
-    assert!(matches!(
-        result,
-        Ok(Stage::Archived {
-            reason: ArchiveReason::Blocked { .. },
-            ..
-        })
-    ));
+    assert!(matches!(result, Ok(Stage::Blocked { .. })));
 }
 
 #[test]
-fn unblock_returns_to_backlog() {
+fn unblock_returns_to_coding() {
+    let s = Stage::Blocked {
+        reason: "test".into(),
+    };
+    let result = transition(s, PipelineEvent::Unblock).unwrap();
+    assert!(matches!(result, Stage::Coding));
+}
+
+#[test]
+fn legacy_unblock_archived_blocked_returns_to_backlog() {
     let s = Stage::Archived {
         archived_at: chrono::Utc::now(),
         reason: ArchiveReason::Blocked {
diff --git a/server/src/pipeline_state/transition.rs b/server/src/pipeline_state/transition.rs
index a258edb6..f9be223b 100644
--- a/server/src/pipeline_state/transition.rs
+++ b/server/src/pipeline_state/transition.rs
@@ -160,14 +160,11 @@ pub fn transition(state: Stage, event: PipelineEvent) -> Result<Stage, Transitio
             reason: ArchiveReason::Completed,
         }),
 
-        // ── Stuck states (any active → Archived) ───────────────────────
+        // ── Block: any active → Blocked ──────────────────────────────
         (Backlog, Block { reason })
         | (Coding, Block { reason })
         | (Qa, Block { reason })
-        | (Merge { .. }, Block { reason }) => Ok(Archived {
-            archived_at: now,
-            reason: ArchiveReason::Blocked { reason },
-        }),
+        | (Merge { .. }, Block { reason }) => Ok(Blocked { reason }),
 
         (Backlog, ReviewHold { reason })
         | (Coding, ReviewHold { reason })
@@ -221,7 +218,10 @@ pub fn transition(state: Stage, event: PipelineEvent) -> Result<Stage, Transitio
             merge_commit: GitSha("closed".to_string()),
         }),
 
-        // ── Unblock: from Archived(Blocked) or Archived(MergeFailed) → Backlog
+        // ── Unblock: Blocked → Coding ─────────────────────────────────
+        (Blocked { .. }, Unblock) => Ok(Coding),
+
+        // ── Legacy unblock: Archived(Blocked|MergeFailed) → Backlog ──
         (
             Archived {
                 reason: ArchiveReason::Blocked { .. },
diff --git a/server/src/pipeline_state/types.rs b/server/src/pipeline_state/types.rs
index 009d6070..195118f1 100644
--- a/server/src/pipeline_state/types.rs
+++ b/server/src/pipeline_state/types.rs
@@ -47,7 +47,7 @@ impl fmt::Display for AgentName {
 /// after CRDT convergence. Notice what is NOT a field:
 ///   - `agent` — local execution state, not pipeline state
 ///   - `retry_count` — also local
-///   - `blocked` — folded into `Archived { reason: Blocked { .. } }`
+///   - `blocked` — now a first-class `Blocked { reason }` stage
 ///
 /// ## Canonical state machine (story 857)
 ///
@@ -61,7 +61,7 @@ impl fmt::Display for AgentName {
 /// | qa_pending      | `Qa`                              |
 /// | merge_pending   | `Merge { .. }`                    |
 /// | done            | `Done { .. }`                     |
-/// | blocked         | `Archived { Blocked { .. } }`     |
+/// | blocked         | `Blocked { .. }`                   |
 /// | merge_failure   | `Archived { MergeFailed { .. } }` |
 /// | archived        | `Archived { Completed }`          |
 /// | superseded      | `Archived { Superseded { .. } }`  |
@@ -95,6 +95,11 @@ pub enum Stage {
         merge_commit: GitSha,
     },
 
+    /// Story is blocked, awaiting human resolution or retry-limit review.
+    /// Unlike `Archived`, a blocked story is expected to return to active work
+    /// (via `Unblock → Coding`).
+    Blocked { reason: String },
+
     /// Out of the active flow. The reason explains why.
     Archived {
         archived_at: DateTime<Utc>,
@@ -149,14 +154,16 @@ impl Stage {
         stage_dir_name(self)
     }
 
-    /// Returns true if this is the Archived(Blocked) variant.
+    /// Returns true if this is the `Blocked` variant (or the legacy
+    /// `Archived(Blocked)` for backward-compatible reads).
     pub fn is_blocked(&self) -> bool {
         matches!(
             self,
-            Stage::Archived {
-                reason: ArchiveReason::Blocked { .. },
-                ..
-            }
+            Stage::Blocked { .. }
+                | Stage::Archived {
+                    reason: ArchiveReason::Blocked { .. },
+                    ..
+                }
         )
     }
 
@@ -172,6 +179,9 @@ impl Stage {
         match s {
             "0_upcoming" => Some(Stage::Upcoming),
             "1_backlog" => Some(Stage::Backlog),
+            "2_blocked" => Some(Stage::Blocked {
+                reason: String::new(),
+            }),
             "2_current" => Some(Stage::Coding),
             "3_qa" => Some(Stage::Qa),
             "4_merge" => Some(Stage::Merge {
@@ -269,6 +279,7 @@ pub fn stage_label(s: &Stage) -> &'static str {
         Stage::Qa => "Qa",
         Stage::Merge { .. } => "Merge",
         Stage::Done { .. } => "Done",
+        Stage::Blocked { .. } => "Blocked",
         Stage::Archived { .. } => "Archived",
         Stage::Frozen { .. } => "Frozen",
     }
@@ -280,6 +291,7 @@ pub fn stage_dir_name(s: &Stage) -> &'static str {
         Stage::Upcoming => "0_upcoming",
         Stage::Backlog => "1_backlog",
         Stage::Coding => "2_current",
+        Stage::Blocked { .. } => "2_blocked",
         Stage::Qa => "3_qa",
         Stage::Merge { .. } => "4_merge",
         Stage::Done { .. } => "5_done",
diff --git a/server/src/service/agents/mod.rs b/server/src/service/agents/mod.rs
index d385bea3..0ba0af32 100644
--- a/server/src/service/agents/mod.rs
+++ b/server/src/service/agents/mod.rs
@@ -205,6 +205,7 @@ pub fn get_work_item_content(
                 crate::pipeline_state::Stage::Upcoming => "upcoming",
                 crate::pipeline_state::Stage::Backlog => "backlog",
                 crate::pipeline_state::Stage::Coding => "current",
+                crate::pipeline_state::Stage::Blocked { .. } => "blocked",
                 crate::pipeline_state::Stage::Qa => "qa",
                 crate::pipeline_state::Stage::Merge { .. } => "merge",
                 crate::pipeline_state::Stage::Done { .. } => "done",
diff --git a/server/src/service/notifications/format.rs b/server/src/service/notifications/format.rs
index 93d79e78..73a8b0f6 100644
--- a/server/src/service/notifications/format.rs
+++ b/server/src/service/notifications/format.rs
@@ -13,6 +13,7 @@ pub fn stage_display_name(stage: &str) -> &'static str {
         Some(Stage::Upcoming) => "Upcoming",
         Some(Stage::Backlog) => "Backlog",
         Some(Stage::Coding) => "Current",
+        Some(Stage::Blocked { .. }) => "Blocked",
         Some(Stage::Qa) => "QA",
         Some(Stage::Merge { .. }) => "Merge",
         Some(Stage::Done { .. }) => "Done",