diff --git a/src/fastmcp/client/client.py b/src/fastmcp/client/client.py
index 000b99c00..acb13c748 100644
--- a/src/fastmcp/client/client.py
+++ b/src/fastmcp/client/client.py
@@ -1,9 +1,10 @@
 import datetime
-from contextlib import AbstractAsyncContextManager
+from contextlib import AsyncExitStack
 from pathlib import Path
 from typing import Any, cast
 
 import mcp.types
+from exceptiongroup import catch
 from mcp import ClientSession
 from pydantic import AnyUrl
 
@@ -14,8 +15,9 @@ from fastmcp.client.roots import (
     create_roots_callback,
 )
 from fastmcp.client.sampling import SamplingHandler, create_sampling_callback
-from fastmcp.exceptions import ClientError
+from fastmcp.exceptions import ToolError
 from fastmcp.server import FastMCP
+from fastmcp.utilities.exceptions import get_catch_handlers
 
 from .transports import ClientTransport, SessionKwargs, infer_transport
 
@@ -49,7 +51,7 @@ class Client:
     ):
         self.transport = infer_transport(transport)
         self._session: ClientSession | None = None
-        self._session_cm: AbstractAsyncContextManager[ClientSession] | None = None
+        self._exit_stack: AsyncExitStack | None = None
         self._nesting_counter: int = 0
 
         self._session_kwargs: SessionKwargs = {
@@ -91,9 +93,23 @@ class Client:
 
     async def __aenter__(self):
         if self._nesting_counter == 0:
-            # create new session
-            self._session_cm = self.transport.connect_session(**self._session_kwargs)
-            self._session = await self._session_cm.__aenter__()
+            # Create exit stack to manage both context managers
+            stack = AsyncExitStack()
+            await stack.__aenter__()
+
+            # Add the exception handling context
+            stack.enter_context(catch(get_catch_handlers()))
+
+            # the above catch will only apply once this __aenter__ finishes so
+            # we need to wrap the session creation in a new context in case it
+            # raises errors itself
+            with catch(get_catch_handlers()):
+                # Create and enter the transport session using the exit stack
+                session_cm = self.transport.connect_session(**self._session_kwargs)
+                self._session = await stack.enter_async_context(session_cm)
+
+            # Store the stack for cleanup in __aexit__
+            self._exit_stack = stack
 
         self._nesting_counter += 1
         return self
@@ -101,10 +117,14 @@ class Client:
     async def __aexit__(self, exc_type, exc_val, exc_tb):
         self._nesting_counter -= 1
 
-        if self._nesting_counter == 0 and self._session_cm is not None:
-            await self._session_cm.__aexit__(exc_type, exc_val, exc_tb)
-            self._session_cm = None
-            self._session = None
+        if self._nesting_counter == 0:
+            # Exit the stack which will handle cleaning up the session
+            if self._exit_stack is not None:
+                try:
+                    await self._exit_stack.__aexit__(exc_type, exc_val, exc_tb)
+                finally:
+                    self._exit_stack = None
+                    self._session = None
 
     # --- MCP Client Methods ---
 
@@ -424,5 +444,5 @@ class Client:
         result = await self.call_tool_mcp(name=name, arguments=arguments or {})
         if result.isError:
             msg = cast(mcp.types.TextContent, result.content[0]).text
-            raise ClientError(msg)
+            raise ToolError(msg)
         return result.content
diff --git a/src/fastmcp/client/transports.py b/src/fastmcp/client/transports.py
index 00d9e5b65..f201a1c6b 100644
--- a/src/fastmcp/client/transports.py
+++ b/src/fastmcp/client/transports.py
@@ -10,8 +10,7 @@ from collections.abc import AsyncIterator
 from pathlib import Path
 from typing import Any, TypedDict
 
-from exceptiongroup import BaseExceptionGroup, catch
-from mcp import ClientSession, McpError, StdioServerParameters
+from mcp import ClientSession, StdioServerParameters
 from mcp.client.session import (
     ListRootsFnT,
     LoggingFnT,
@@ -26,7 +25,6 @@ from mcp.shared.memory import create_connected_server_and_client_session
 from pydantic import AnyUrl
 from typing_extensions import Unpack
 
-from fastmcp.exceptions import ClientError
 from fastmcp.server import FastMCP as FastMCPServer
 
 
@@ -418,26 +416,12 @@ class FastMCPTransport(ClientTransport):
     async def connect_session(
         self, **session_kwargs: Unpack[SessionKwargs]
     ) -> AsyncIterator[ClientSession]:
-        def exception_handler(excgroup: BaseExceptionGroup):
-            for exc in excgroup.exceptions:
-                if isinstance(exc, BaseExceptionGroup):
-                    exception_handler(exc)
-                raise exc
-
-        def mcperror_handler(excgroup: BaseExceptionGroup):
-            for exc in excgroup.exceptions:
-                if isinstance(exc, BaseExceptionGroup):
-                    mcperror_handler(exc)
-                raise ClientError(exc)
-
-        # backport of 3.11's except* syntax
-        with catch({McpError: mcperror_handler, Exception: exception_handler}):
-            # create_connected_server_and_client_session manages the session lifecycle itself
-            async with create_connected_server_and_client_session(
-                server=self._fastmcp._mcp_server,
-                **session_kwargs,
-            ) as session:
-                yield session
+        # create_connected_server_and_client_session manages the session lifecycle itself
+        async with create_connected_server_and_client_session(
+            server=self._fastmcp._mcp_server,
+            **session_kwargs,
+        ) as session:
+            yield session
 
     def __repr__(self) -> str:
         return f"<FastMCP(server='{self._fastmcp.name}')>"
diff --git a/src/fastmcp/settings.py b/src/fastmcp/settings.py
index b8748b0d2..34209f5b0 100644
--- a/src/fastmcp/settings.py
+++ b/src/fastmcp/settings.py
@@ -1,6 +1,7 @@
 from __future__ import annotations as _annotations
 
-from typing import TYPE_CHECKING, Literal
+import inspect
+from typing import TYPE_CHECKING, Annotated, Literal
 
 from mcp.server.auth.settings import AuthSettings
 from pydantic import Field, model_validator
@@ -28,16 +29,37 @@ class Settings(BaseSettings):
 
     test_mode: bool = False
     log_level: LOG_LEVEL = "INFO"
-    tool_attempt_parse_json_args: bool = Field(
-        default=False,
-        description="""
-        Note: this enables a legacy behavior. If True, will attempt to parse
-        stringified JSON lists and objects strings in tool arguments before
-        passing them to the tool. This is an old behavior that can create
-        unexpected type coercion issues, but may be helpful for less powerful
-        LLMs that stringify JSON instead of passing actual lists and objects.
-        Defaults to False.""",
-    )
+    client_raise_first_exceptiongroup_error: Annotated[
+        bool,
+        Field(
+            default=True,
+            description=inspect.cleandoc(
+                """
+                Many MCP components operate in anyio taskgroups, and raise
+                ExceptionGroups instead of exceptions. If this setting is True, FastMCP Clients
+                will `raise` the first error in any ExceptionGroup instead of raising
+                the ExceptionGroup as a whole. This is useful for debugging, but may
+                mask other errors.
+                """
+            ),
+        ),
+    ] = True
+    tool_attempt_parse_json_args: Annotated[
+        bool,
+        Field(
+            default=False,
+            description=inspect.cleandoc(
+                """
+                Note: this enables a legacy behavior. If True, will attempt to parse
+                stringified JSON lists and objects strings in tool arguments before
+                passing them to the tool. This is an old behavior that can create
+                unexpected type coercion issues, but may be helpful for less powerful
+                LLMs that stringify JSON instead of passing actual lists and objects.
+                Defaults to False.
+                """
+            ),
+        ),
+    ] = False
 
     @model_validator(mode="after")
     def setup_logging(self) -> Self:
@@ -64,7 +86,10 @@ class ServerSettings(BaseSettings):
         nested_model_default_partial_update=True,
     )
 
-    log_level: LOG_LEVEL = Field(default_factory=lambda: Settings().log_level)
+    log_level: Annotated[
+        LOG_LEVEL,
+        Field(default_factory=lambda: Settings().log_level),
+    ]
 
     # HTTP settings
     host: str = "127.0.0.1"
@@ -83,10 +108,13 @@ class ServerSettings(BaseSettings):
     # prompt settings
     on_duplicate_prompts: DuplicateBehavior = "warn"
 
-    dependencies: list[str] = Field(
-        default_factory=list,
-        description="List of dependencies to install in the server environment",
-    )
+    dependencies: Annotated[
+        list[str],
+        Field(
+            default_factory=list,
+            description="List of dependencies to install in the server environment",
+        ),
+    ] = []
 
     # cache settings (for checking mounted servers)
     cache_expiration_seconds: float = 0
@@ -100,16 +128,4 @@ class ServerSettings(BaseSettings):
     )
 
 
-class ClientSettings(BaseSettings):
-    """FastMCP client settings."""
-
-    model_config = SettingsConfigDict(
-        env_prefix="FASTMCP_CLIENT_",
-        env_file=".env",
-        extra="ignore",
-    )
-
-    log_level: LOG_LEVEL = Field(default_factory=lambda: Settings().log_level)
-
-
 settings = Settings()
diff --git a/src/fastmcp/utilities/exceptions.py b/src/fastmcp/utilities/exceptions.py
new file mode 100644
index 000000000..eaba30ee6
--- /dev/null
+++ b/src/fastmcp/utilities/exceptions.py
@@ -0,0 +1,39 @@
+from collections.abc import Callable, Iterable, Mapping
+from typing import Any
+
+from exceptiongroup import BaseExceptionGroup
+
+import fastmcp
+
+
+def iter_exc(group: BaseExceptionGroup):
+    for exc in group.exceptions:
+        if isinstance(exc, BaseExceptionGroup):
+            yield from iter_exc(exc)
+        else:
+            yield exc
+
+
+def _exception_handler(group: BaseExceptionGroup):
+    for leaf in iter_exc(group):
+        raise leaf
+
+
+# this catch handler is used to catch taskgroup exception groups and raise the
+# first exception. This allows more sane debugging.
+catch_handlers: Mapping[
+    type[BaseException] | Iterable[type[BaseException]],
+    Callable[[BaseExceptionGroup[Any]], Any],
+] = {
+    Exception: _exception_handler,
+}
+
+
+def get_catch_handlers() -> Mapping[
+    type[BaseException] | Iterable[type[BaseException]],
+    Callable[[BaseExceptionGroup[Any]], Any],
+]:
+    if fastmcp.settings.settings.client_raise_first_exceptiongroup_error:
+        return catch_handlers
+    else:
+        return {}
diff --git a/tests/server/test_openapi.py b/tests/server/test_openapi.py
index c763c8797..e92d33b48 100644
--- a/tests/server/test_openapi.py
+++ b/tests/server/test_openapi.py
@@ -15,7 +15,7 @@ from pydantic.networks import AnyUrl
 
 from fastmcp import FastMCP
 from fastmcp.client import Client
-from fastmcp.exceptions import ClientError
+from fastmcp.exceptions import ToolError
 from fastmcp.server.openapi import (
     FastMCPOpenAPI,
     OpenAPIResource,
@@ -1029,7 +1029,7 @@ async def test_none_path_parameters_rejected(
     # Create a client and try to call a tool with a None path parameter
     async with Client(mcp_server) as client:
         # get_user has a required path parameter user_id
-        with pytest.raises(ClientError, match="Missing required path parameters"):
+        with pytest.raises(ToolError, match="Missing required path parameters"):
             await client.call_tool(
                 "update_user_name_users__user_id__name_patch",
                 {
diff --git a/tests/server/test_proxy.py b/tests/server/test_proxy.py
index aef2c0583..31a1c74d4 100644
--- a/tests/server/test_proxy.py
+++ b/tests/server/test_proxy.py
@@ -4,11 +4,12 @@ from typing import Any
 import mcp.types
 import pytest
 from dirty_equals import Contains
+from mcp import McpError
 
 from fastmcp import FastMCP
 from fastmcp.client import Client
 from fastmcp.client.transports import FastMCPTransport
-from fastmcp.exceptions import ClientError
+from fastmcp.exceptions import ToolError
 from fastmcp.server.proxy import FastMCPProxy
 
 USERS = [
@@ -109,7 +110,7 @@ class TestTools:
         assert proxy_result[0].text == "3"
 
     async def test_error_tool_raises_error(self, proxy_server):
-        with pytest.raises(ClientError, match=""):
+        with pytest.raises(ToolError, match=""):
             async with Client(proxy_server) as client:
                 await client.call_tool("error_tool", {})
 
@@ -147,9 +148,7 @@ class TestResources:
         assert json.loads(result[0].text) == USERS
 
     async def test_read_resource_returns_none_if_not_found(self, proxy_server):
-        with pytest.raises(
-            ClientError, match="Unknown resource: resource://nonexistent"
-        ):
+        with pytest.raises(McpError, match="Unknown resource: resource://nonexistent"):
             async with Client(proxy_server) as client:
                 await client.read_resource("resource://nonexistent")
 
diff --git a/tests/server/test_server.py b/tests/server/test_server.py
index f60959674..4a7180b41 100644
--- a/tests/server/test_server.py
+++ b/tests/server/test_server.py
@@ -1,6 +1,7 @@
 from typing import Annotated
 
 import pytest
+from mcp import McpError
 from mcp.types import (
     TextContent,
     TextResourceContents,
@@ -8,7 +9,7 @@ from mcp.types import (
 from pydantic import Field
 
 from fastmcp import Client, FastMCP
-from fastmcp.exceptions import ClientError, NotFoundError
+from fastmcp.exceptions import NotFoundError
 
 
 class TestCreateServer:
@@ -296,7 +297,7 @@ class TestResourceDecorator:
     async def test_no_resources_before_decorator(self):
         mcp = FastMCP()
 
-        with pytest.raises(ClientError, match="Unknown resource"):
+        with pytest.raises(McpError, match="Unknown resource"):
             async with Client(mcp) as client:
                 await client.read_resource("resource://data")
 
diff --git a/tests/server/test_server_interactions.py b/tests/server/test_server_interactions.py
index b96b2bef0..1f9ef6f2b 100644
--- a/tests/server/test_server_interactions.py
+++ b/tests/server/test_server_interactions.py
@@ -8,6 +8,7 @@ from typing import Annotated, Literal
 
 import pydantic_core
 import pytest
+from mcp import McpError
 from mcp.types import (
     BlobResourceContents,
     ImageContent,
@@ -18,7 +19,7 @@ from pydantic import AnyUrl, Field
 
 from fastmcp import Client, Context, FastMCP
 from fastmcp.client.transports import FastMCPTransport
-from fastmcp.exceptions import ClientError
+from fastmcp.exceptions import ToolError
 from fastmcp.prompts.prompt import EmbeddedResource, PromptMessage
 from fastmcp.resources import FileResource, FunctionResource
 from fastmcp.utilities.types import Image
@@ -320,7 +321,7 @@ class TestToolParameters:
 
         async with Client(mcp) as client:
             with pytest.raises(
-                ClientError,
+                ToolError,
                 match="Error calling tool 'my_tool'",
             ):
                 await client.call_tool("my_tool", {"x": "not an int"})
@@ -365,7 +366,7 @@ class TestToolParameters:
             pass
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'analyze'"):
+            with pytest.raises(ToolError, match="Error calling tool 'analyze'"):
                 await client.call_tool("analyze", {"x": 0})
 
     async def test_default_field_validation(self):
@@ -376,7 +377,7 @@ class TestToolParameters:
             pass
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'analyze'"):
+            with pytest.raises(ToolError, match="Error calling tool 'analyze'"):
                 await client.call_tool("analyze", {"x": 0})
 
     async def test_default_field_is_still_required_if_no_default_specified(self):
@@ -387,7 +388,7 @@ class TestToolParameters:
             pass
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'analyze'"):
+            with pytest.raises(ToolError, match="Error calling tool 'analyze'"):
                 await client.call_tool("analyze", {})
 
     async def test_literal_type_validation_error(self):
@@ -398,7 +399,7 @@ class TestToolParameters:
             pass
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'analyze'"):
+            with pytest.raises(ToolError, match="Error calling tool 'analyze'"):
                 await client.call_tool("analyze", {"x": "c"})
 
     async def test_literal_type_validation_success(self):
@@ -426,7 +427,7 @@ class TestToolParameters:
             return x.value
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'analyze'"):
+            with pytest.raises(ToolError, match="Error calling tool 'analyze'"):
                 await client.call_tool("analyze", {"x": "some-color"})
 
     async def test_enum_type_validation_success(self):
@@ -462,7 +463,7 @@ class TestToolParameters:
             assert isinstance(result[0], TextContent)
             assert result[0].text == "1.0"
 
-            with pytest.raises(ClientError, match="Error calling tool 'analyze'"):
+            with pytest.raises(ToolError, match="Error calling tool 'analyze'"):
                 await client.call_tool("analyze", {"x": "not a number"})
 
     async def test_path_type(self):
@@ -489,7 +490,7 @@ class TestToolParameters:
             return str(path)
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'send_path'"):
+            with pytest.raises(ToolError, match="Error calling tool 'send_path'"):
                 await client.call_tool("send_path", {"path": 1})
 
     async def test_uuid_type(self):
@@ -515,7 +516,7 @@ class TestToolParameters:
             return str(x)
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'send_uuid'"):
+            with pytest.raises(ToolError, match="Error calling tool 'send_uuid'"):
                 await client.call_tool("send_uuid", {"x": "not a uuid"})
 
     async def test_datetime_type(self):
@@ -554,7 +555,7 @@ class TestToolParameters:
             return x.isoformat()
 
         async with Client(mcp) as client:
-            with pytest.raises(ClientError, match="Error calling tool 'send_datetime'"):
+            with pytest.raises(ToolError, match="Error calling tool 'send_datetime'"):
                 await client.call_tool("send_datetime", {"x": "not a datetime"})
 
     async def test_date_type(self):
@@ -1230,7 +1231,7 @@ class TestPrompts:
     async def test_get_unknown_prompt(self):
         """Test error when getting unknown prompt."""
         mcp = FastMCP()
-        with pytest.raises(ClientError, match="Unknown prompt"):
+        with pytest.raises(McpError, match="Unknown prompt"):
             async with Client(mcp) as client:
                 await client.get_prompt("unknown")
 
@@ -1242,7 +1243,7 @@ class TestPrompts:
         def prompt_fn(name: str) -> str:
             return f"Hello, {name}!"
 
-        with pytest.raises(ClientError, match="Missing required arguments"):
+        with pytest.raises(McpError, match="Missing required arguments"):
             async with Client(mcp) as client:
                 await client.get_prompt("prompt_fn")
 
diff --git a/tests/tools/test_tool.py b/tests/tools/test_tool.py
index 5fe447055..89f1c4822 100644
--- a/tests/tools/test_tool.py
+++ b/tests/tools/test_tool.py
@@ -4,7 +4,7 @@ from pydantic import BaseModel
 
 from fastmcp import FastMCP, Image
 from fastmcp.client import Client
-from fastmcp.exceptions import ClientError
+from fastmcp.exceptions import ToolError
 from fastmcp.tools.tool import Tool
 from fastmcp.utilities.tests import temporary_settings
 
@@ -299,7 +299,7 @@ class TestLegacyToolJsonParsing:
 
         async with Client(mcp) as client:
             with pytest.raises(
-                ClientError,
+                ToolError,
                 match="Error calling tool 'process_list'",
             ):
                 await client.call_tool("process_list", {"items": "['a', 'b', 3]"})