diff --git a/src/config/config-watcher.ts b/src/config/config-watcher.ts
new file mode 100644
index 0000000..82b4d14
--- /dev/null
+++ b/src/config/config-watcher.ts
@@ -0,0 +1,111 @@
+/**
+ * Reliable watcher for the user-level config file (~/.champ/config.yaml).
+ *
+ * Issue #129: the previous implementation relied on
+ * vscode.workspace.createFileSystemWatcher with a RelativePattern rooted at
+ * os.homedir(). Watching a path OUTSIDE the active workspace via
+ * FileSystemWatcher is unreliable on Linux (microsoft/vscode out-of-workspace
+ * watching), so edits made from a terminal/external tool were frequently
+ * missed — the provider kept a stale config until a full window restart.
+ *
+ * This combines two signals, both debounced:
+ *   - An injected native watcher (the VS Code FileSystemWatcher fast path),
+ *     which fires immediately for in-VS-Code edits.
+ *   - A content signal poller: it stats the file's mtime every pollIntervalMs
+ *     and schedules a reload only when the mtime actually changes. This is
+ *     platform-independent and catches edits made outside the workspace.
+ *
+ * The poller is self-contained and dependency-injected so it is unit-testable
+ * with a fake clock and a fake stat() — no VS Code API required.
+ */
+
+export interface ConfigWatcherDeps {
+  /** Absolute path of the config file to watch. */
+  path: string;
+  /** Debounced callback invoked when the config file changes. */
+  onChange: () => void;
+  /** Debounce window in ms before onChange fires. Default 300. */
+  debounceMs?: number;
+  /** Poll interval in ms. Default 2000. */
+  pollIntervalMs?: number;
+  /** Injectable clock for tests. */
+  now: () => number;
+  setIntervalFn: (cb: () => void, ms: number) => ReturnType<typeof setInterval>;
+  clearIntervalFn: (id: ReturnType<typeof setInterval>) => void;
+  setTimeoutFn: (cb: () => void, ms: number) => ReturnType<typeof setTimeout>;
+  clearTimeoutFn: (id: ReturnType<typeof setTimeout>) => void;
+  /** Stat the file's mtime. Return null when the file is missing. */
+  stat: (path: string) => Promise<{ mtimeMs: number } | null>;
+}
+
+export class ConfigWatcher {
+  private readonly debounceMs: number;
+  private readonly pollIntervalMs: number;
+  private intervalId: ReturnType<typeof setInterval> | undefined;
+  private debounceTimer: ReturnType<typeof setTimeout> | undefined;
+  /** Last observed mtime (null until baseline established). */
+  private lastMtimeMs: number | null = null;
+  private disposed = false;
+
+  constructor(private readonly deps: ConfigWatcherDeps) {
+    this.debounceMs = deps.debounceMs ?? 300;
+    this.pollIntervalMs = deps.pollIntervalMs ?? 2000;
+  }
+
+  start(): void {
+    if (this.intervalId !== undefined) return;
+    this.intervalId = this.deps.setIntervalFn(() => {
+      void this.poll();
+    }, this.pollIntervalMs);
+  }
+
+  dispose(): void {
+    this.disposed = true;
+    if (this.intervalId !== undefined) {
+      this.deps.clearIntervalFn(this.intervalId);
+      this.intervalId = undefined;
+    }
+    if (this.debounceTimer !== undefined) {
+      this.deps.clearTimeoutFn(this.debounceTimer);
+      this.debounceTimer = undefined;
+    }
+  }
+
+  /** Called when the native watcher (or any caller) reports a change. */
+  signalChanged(): void {
+    this.scheduleReload();
+  }
+
+  private async poll(): Promise<void> {
+    let mtime: number | null;
+    try {
+      const stat = await this.deps.stat(this.deps.path);
+      mtime = stat ? stat.mtimeMs : null;
+    } catch {
+      // stat failure is treated as "missing" — surface a reload once.
+      mtime = null;
+    }
+
+    // First observation establishes the baseline without firing.
+    if (this.lastMtimeMs === null) {
+      this.lastMtimeMs = mtime;
+      return;
+    }
+
+    if (mtime !== this.lastMtimeMs) {
+      this.lastMtimeMs = mtime;
+      this.scheduleReload();
+    }
+  }
+
+  private scheduleReload(): void {
+    if (this.disposed) return;
+    if (this.debounceTimer !== undefined) {
+      this.deps.clearTimeoutFn(this.debounceTimer);
+    }
+    this.debounceTimer = this.deps.setTimeoutFn(() => {
+      this.debounceTimer = undefined;
+      this.deps.onChange();
+    }, this.debounceMs);
+  }
+}
diff --git a/src/extension.ts b/src/extension.ts
index 5c628dd..60d11d0 100644
--- a/src/extension.ts
+++ b/src/extension.ts
@@ -47,6 +47,7 @@ import {
   resolveLayered,
   type ChampConfig,
 } from "./config/config-loader";
+import { ConfigWatcher } from "./config/config-watcher";
 import { SkillRegistry } from "./skills/skill-registry";
 import { SkillLoader } from "./skills/skill-loader";
 import { VariableResolver } from "./skills/variable-resolver";
@@ -4182,30 +4183,54 @@ export async function activate(
     }),
   );
 
-  // Watch ~/.champ/config.yaml for live reload. Created, changed, or
-  // deleted — any triggers a provider reload. Since #126, config comes only
-  // from the user-level file, so no workspace folder is watched.
+  // Watch ~/.champ/config.yaml for live reload. Since #126 config comes only
+  // from the user-level file. Issue #129: FileSystemWatcher rooted at the
+  // home dir is unreliable for out-of-workspace files on Linux, so the
+  // native watcher is the fast path and a mtime poller is the reliable
+  // fallback — either signal triggers the same debounced loadProvider().
   {
-    const yamlWatchers: vscode.FileSystemWatcher[] = [];
-    const watchedRoots = [os.homedir()];
-    let configReloadTimer: ReturnType<typeof setTimeout> | undefined;
-    const debouncedReload = () => {
-      if (configReloadTimer) clearTimeout(configReloadTimer);
-      configReloadTimer = setTimeout(() => {
-        configReloadTimer = undefined;
-        void loadProvider();
-      }, 300);
-    };
-    for (const root of watchedRoots) {
-      const w = vscode.workspace.createFileSystemWatcher(
-        new vscode.RelativePattern(root, ".champ/config.yaml"),
-      );
-      w.onDidChange(debouncedReload);
-      w.onDidCreate(debouncedReload);
-      w.onDidDelete(debouncedReload);
-      yamlWatchers.push(w);
-    }
-    context.subscriptions.push(...yamlWatchers);
+    const configPath = path.join(os.homedir(), ".champ", "config.yaml");
+    const watcher = new ConfigWatcher({
+      path: configPath,
+      onChange: () => void loadProvider(),
+      now: () => Date.now(),
+      setIntervalFn: (cb, ms) => {
+        const id = setInterval(cb, ms);
+        context.subscriptions.push({
+          dispose: () => clearInterval(id),
+        });
+        return id;
+      },
+      clearIntervalFn: (id) => clearInterval(id),
+      setTimeoutFn: (cb, ms) => {
+        const id = setTimeout(cb, ms);
+        context.subscriptions.push({
+          dispose: () => clearTimeout(id),
+        });
+        return id;
+      },
+      clearTimeoutFn: (id) => clearTimeout(id),
+      stat: async (p) => {
+        try {
+          const st = await vscode.workspace.fs.stat(vscode.Uri.file(p));
+          return { mtimeMs: st.mtime };
+        } catch {
+          return null;
+        }
+      },
+    });
+    context.subscriptions.push({ dispose: () => watcher.dispose() });
+
+    // Fast path: native watcher for in-VS-Code / same-machine edits.
+    const native = vscode.workspace.createFileSystemWatcher(
+      new vscode.RelativePattern(os.homedir(), ".champ/config.yaml"),
+    );
+    native.onDidChange(() => watcher.signalChanged());
+    native.onDidCreate(() => watcher.signalChanged());
+    native.onDidDelete(() => watcher.signalChanged());
+    context.subscriptions.push(native);
+
+    watcher.start();
   }
 
   // ---- Team Builder and Rules Editor commands -------------------------
diff --git a/test/unit/config/config-watcher.test.ts b/test/unit/config/config-watcher.test.ts
new file mode 100644
index 0000000..31e5410
--- /dev/null
+++ b/test/unit/config/config-watcher.test.ts
@@ -0,0 +1,151 @@
+import { describe, it, expect, vi, beforeEach, afterEach } from "vitest";
+import { ConfigWatcher } from "@/config/config-watcher";
+
+interface FakeClock {
+  now: number;
+  intervals: Array<() => void>;
+  timeouts: Map<number, () => void>;
+  nextId: number;
+  step(ms: number): void;
+  setInterval(cb: () => void): ReturnType<typeof setInterval>;
+  clearInterval(id: ReturnType<typeof setInterval>): void;
+  setTimeout(cb: () => void, ms: number): ReturnType<typeof setTimeout>;
+  clearTimeout(id: ReturnType<typeof setTimeout>): void;
+}
+
+function makeClock(): FakeClock {
+  const clock: FakeClock = {
+    now: 0,
+    intervals: [],
+    timeouts: new Map(),
+    nextId: 1,
+    step(ms) {
+      clock.now += ms;
+      // run due timeouts that have elapsed (simple: fire all in order)
+      for (const [, cb] of [...clock.timeouts]) cb();
+      clock.timeouts.clear();
+    },
+    setInterval(cb) {
+      clock.intervals.push(cb);
+      return clock.nextId++;
+    },
+    clearInterval(id) {
+      // not needed for correctness of these tests
+    },
+    setTimeout(cb) {
+      const id = clock.nextId++;
+      clock.timeouts.set(id, cb);
+      return id;
+    },
+    clearTimeout(id) {
+      clock.timeouts.delete(id);
+    },
+  };
+  return clock;
+}
+
+function build(
+  onChange: () => void,
+  opts: { mtimeMs?: () => number; pollIntervalMs?: number } = {},
+) {
+  const clock = makeClock();
+  let curMtime = opts.mtimeMs ? opts.mtimeMs() : 1000;
+  const setMtime = (ms: number) => (curMtime = ms);
+  const w = new ConfigWatcher({
+    path: "/home/user/.champ/config.yaml",
+    onChange,
+    debounceMs: 300,
+    pollIntervalMs: opts.pollIntervalMs ?? 1000,
+    now: () => clock.now,
+    setIntervalFn: clock.setInterval,
+    clearIntervalFn: clock.clearInterval,
+    setTimeoutFn: clock.setTimeout,
+    clearTimeoutFn: clock.clearTimeout,
+    stat: async () => (curMtime === -1 ? null : { mtimeMs: curMtime }),
+  });
+  return { w, clock, setMtime };
+}
+
+describe("ConfigWatcher (#129 out-of-workspace config reload)", () => {
+  beforeEach(() => vi.useFakeTimers());
+  afterEach(() => vi.useRealTimers());
+
+  it("fires a baseline without onChange on first poll", async () => {
+    const onChange = vi.fn();
+    const { w, clock } = build(onChange);
+    w.start();
+    clock.intervals[0](); // first poll -> baseline only
+    await Promise.resolve();
+    expect(onChange).not.toHaveBeenCalled();
+    w.dispose();
+  });
+
+  it("calls onChange (debounced) exactly once when mtime changes", async () => {
+    const onChange = vi.fn();
+    const { w, clock, setMtime } = build(onChange);
+    w.start();
+    clock.intervals[0](); // baseline
+    await Promise.resolve();
+    expect(onChange).not.toHaveBeenCalled();
+
+    setMtime(2000);
+    clock.intervals[0](); // poll sees new mtime -> schedule debounce
+    await Promise.resolve();
+    expect(onChange).not.toHaveBeenCalled(); // debounce not elapsed yet
+    clock.step(400); // debounce elapses
+    expect(onChange).toHaveBeenCalledTimes(1);
+    w.dispose();
+  });
+
+  it("collapses rapid mtime changes into a single reload", async () => {
+    const onChange = vi.fn();
+    const { w, clock, setMtime } = build(onChange);
+    w.start();
+    clock.intervals[0](); // baseline
+    await Promise.resolve();
+
+    // several changes arrive inside the debounce window
+    setMtime(3000);
+    clock.intervals[0]();
+    await Promise.resolve();
+    setMtime(4000);
+    clock.intervals[0]();
+    await Promise.resolve();
+    clock.step(400);
+    expect(onChange).toHaveBeenCalledTimes(1);
+    w.dispose();
+  });
+
+  it("does not reload again when mtime is unchanged on subsequent polls", async () => {
+    const onChange = vi.fn();
+    const { w, clock, setMtime } = build(onChange);
+    w.start();
+    clock.intervals[0](); // baseline
+    setMtime(2000);
+    clock.intervals[0](); // change detected
+    await Promise.resolve();
+    clock.step(400);
+    expect(onChange).toHaveBeenCalledTimes(1);
+
+    clock.intervals[0](); // unchanged
+    await Promise.resolve();
+    clock.step(400);
+    expect(onChange).toHaveBeenCalledTimes(1); // still one
+    w.dispose();
+  });
+
+  it("treats a deleted file as a signal (missing -> reload once)", async () => {
+    const onChange = vi.fn();
+    const { w, clock, setMtime } = build(onChange);
+    w.start();
+    clock.intervals[0](); // baseline
+    await Promise.resolve();
+
+    setMtime(-1); // file deleted
+    clock.intervals[0]();
+    await Promise.resolve();
+    clock.step(400);
+    expect(onChange).toHaveBeenCalledTimes(1);
+    w.dispose();
+  });
+});