diff --git a/src/mcp/shared/session.py b/src/mcp/shared/session.py
index 243eef5ae..c89626750 100644
--- a/src/mcp/shared/session.py
+++ b/src/mcp/shared/session.py
@@ -428,6 +428,24 @@ async def _handle_session_message(message: SessionMessage) -> None:
                 async for message in self._read_stream:
                     if isinstance(message, Exception):
                         await self._handle_incoming(message)
+                        
+                        # Fix #1401: Propagate exception to all pending requests
+                        # This prevents waiters from hanging when the transport fails
+                        error_data = (
+                            message.to_error_data()
+                            if isinstance(message, MCPError)
+                            else ErrorData(code=0, message=str(message))
+                        )
+
+                        # We must send an error to every individual waiter
+                        for req_id, stream in list(self._response_streams.items()):
+                            try:
+                                # Send a response with the correct ID
+                                await stream.send(JSONRPCError(jsonrpc="2.0", id=req_id, error=error_data))
+                            finally:
+                                # Ensure we clean up the stream so finally block doesn't double-handle
+                                self._response_streams.pop(req_id, None)
+                                await stream.aclose()
                         continue
 
                     await _handle_session_message(message)