diff --git a/packages/coding-agent/CHANGELOG.md b/packages/coding-agent/CHANGELOG.md
index 09cd6821..831e363a 100644
--- a/packages/coding-agent/CHANGELOG.md
+++ b/packages/coding-agent/CHANGELOG.md
@@ -11,6 +11,10 @@
 - Built-in tools now work like custom tools in extensions. To get built-in tool definitions, import `readToolDefinition` / `createReadToolDefinition()` and the equivalent `bash`, `edit`, `write`, `grep`, `find`, and `ls` exports from `@mariozechner/pi-coding-agent`.
 - Cleaned up `buildSystemPrompt()` so built-in tool snippets and tool-local guidelines come from built-in `ToolDefinition` metadata, while cross-tool and global prompt rules stay in system prompt construction.
 
+### Fixed
+
+- Fixed `pi update` for git packages to skip destructive reset, clean, and reinstall steps when the fetched target already matches the local checkout ([#2503](https://github.com/badlogic/pi-mono/issues/2503))
+
 ## [0.61.1] - 2026-03-20
 
 ### New Features
diff --git a/packages/coding-agent/src/core/package-manager.ts b/packages/coding-agent/src/core/package-manager.ts
index cacd5e1c..e67b0492 100644
--- a/packages/coding-agent/src/core/package-manager.ts
+++ b/packages/coding-agent/src/core/package-manager.ts
@@ -1278,6 +1278,23 @@ export class DefaultPackageManager implements PackageManager {
 		return match[1];
 	}
 
+	private async getLocalGitUpdateTarget(installedPath: string): Promise<{ ref: string; head: string }> {
+		try {
+			const head = await this.runCommandCapture("git", ["rev-parse", "@{upstream}"], {
+				cwd: installedPath,
+				timeoutMs: NETWORK_TIMEOUT_MS,
+			});
+			return { ref: "@{upstream}", head };
+		} catch {
+			await this.runCommand("git", ["remote", "set-head", "origin", "-a"], { cwd: installedPath }).catch(() => {});
+			const head = await this.runCommandCapture("git", ["rev-parse", "origin/HEAD"], {
+				cwd: installedPath,
+				timeoutMs: NETWORK_TIMEOUT_MS,
+			});
+			return { ref: "origin/HEAD", head };
+		}
+	}
+
 	private async getGitUpstreamRef(installedPath: string): Promise<string | undefined> {
 		try {
 			const upstream = await this.runCommandCapture("git", ["rev-parse", "--abbrev-ref", "@{upstream}"], {
@@ -1463,14 +1480,17 @@ export class DefaultPackageManager implements PackageManager {
 		// Fetch latest from remote (handles force-push by getting new history)
 		await this.runCommand("git", ["fetch", "--prune", "origin"], { cwd: targetDir });
 
-		// Reset to tracking branch. Fall back to origin/HEAD when no upstream is configured.
-		try {
-			await this.runCommand("git", ["reset", "--hard", "@{upstream}"], { cwd: targetDir });
-		} catch {
-			await this.runCommand("git", ["remote", "set-head", "origin", "-a"], { cwd: targetDir }).catch(() => {});
-			await this.runCommand("git", ["reset", "--hard", "origin/HEAD"], { cwd: targetDir });
+		const localHead = await this.runCommandCapture("git", ["rev-parse", "HEAD"], {
+			cwd: targetDir,
+			timeoutMs: NETWORK_TIMEOUT_MS,
+		});
+		const target = await this.getLocalGitUpdateTarget(targetDir);
+		if (localHead.trim() === target.head.trim()) {
+			return;
 		}
 
+		await this.runCommand("git", ["reset", "--hard", target.ref], { cwd: targetDir });
+
 		// Clean untracked files (extensions should be pristine)
 		await this.runCommand("git", ["clean", "-fdx"], { cwd: targetDir });
 
diff --git a/packages/coding-agent/test/git-update.test.ts b/packages/coding-agent/test/git-update.test.ts
index c8c2cd68..2f59f9ee 100644
--- a/packages/coding-agent/test/git-update.test.ts
+++ b/packages/coding-agent/test/git-update.test.ts
@@ -107,6 +107,45 @@ describe("DefaultPackageManager git update", () => {
 	}
 
 	describe("normal updates (no force-push)", () => {
+		it("should skip reset, clean, and install when already up to date", async () => {
+			mkdirSync(remoteDir, { recursive: true });
+			git(["init"], remoteDir);
+			git(["config", "--local", "user.email", "test@test.com"], remoteDir);
+			git(["config", "--local", "user.name", "Test"], remoteDir);
+			writeFileSync(join(remoteDir, "package.json"), JSON.stringify({ name: "test-extension", version: "1.0.0" }));
+			createCommit(remoteDir, "extension.ts", "// v1", "Initial commit");
+
+			mkdirSync(join(agentDir, "git", "github.com", "test"), { recursive: true });
+			git(["clone", remoteDir, installedDir], tempDir);
+			settingsManager.setPackages([gitSource]);
+
+			const executedCommands: string[] = [];
+			const managerWithInternals = packageManager as unknown as {
+				runCommand: (command: string, args: string[], options?: { cwd?: string }) => Promise<void>;
+			};
+			managerWithInternals.runCommand = async (command, args, options) => {
+				executedCommands.push(`${command} ${args.join(" ")}`);
+				if (command === "npm") {
+					return;
+				}
+				const result = spawnSync(command, args, {
+					cwd: options?.cwd,
+					encoding: "utf-8",
+				});
+				if (result.status !== 0) {
+					throw new Error(`Command failed: ${command} ${args.join(" ")}\n${result.stderr}`);
+				}
+			};
+
+			await packageManager.update();
+
+			expect(executedCommands).toContain("git fetch --prune origin");
+			expect(executedCommands).not.toContain("git reset --hard @{upstream}");
+			expect(executedCommands).not.toContain("git reset --hard origin/HEAD");
+			expect(executedCommands).not.toContain("git clean -fdx");
+			expect(executedCommands).not.toContain("npm install");
+		});
+
 		it("should update to latest commit when remote has new commits", async () => {
 			setupRemoteAndInstall();
 			expect(getFileContent(installedDir, "extension.ts")).toBe("// v1");
@@ -269,6 +308,7 @@ describe("DefaultPackageManager git update", () => {
 			const executedCommands: string[] = [];
 			const managerWithInternals = packageManager as unknown as {
 				runCommand: (command: string, args: string[], options?: { cwd?: string }) => Promise<void>;
+				runCommandCapture: (command: string, args: string[], options?: { cwd?: string }) => Promise<string>;
 			};
 			managerWithInternals.runCommand = async (command, args) => {
 				executedCommands.push(`${command} ${args.join(" ")}`);
@@ -276,6 +316,15 @@ describe("DefaultPackageManager git update", () => {
 					writeFileSync(extensionFile, "// fresh");
 				}
 			};
+			managerWithInternals.runCommandCapture = async (_command, args) => {
+				if (args[0] === "rev-parse" && args[1] === "HEAD") {
+					return "local-head";
+				}
+				if (args[0] === "rev-parse" && args[1] === "@{upstream}") {
+					return "remote-head";
+				}
+				return "";
+			};
 
 			await packageManager.resolveExtensionSources([gitSource], { temporary: true });