diff --git a/packages/coding-agent/CHANGELOG.md b/packages/coding-agent/CHANGELOG.md
index 739a7353..95525d0c 100644
--- a/packages/coding-agent/CHANGELOG.md
+++ b/packages/coding-agent/CHANGELOG.md
@@ -9,6 +9,7 @@
 
 ### Fixed
 
+- Fixed prompt template argument parsing to split unquoted multiline input on newlines ([#4553](https://github.com/earendil-works/pi/issues/4553)).
 - Fixed `--resume` session listing to cap in-flight session metadata loads and avoid OOM on large session histories ([#4583](https://github.com/earendil-works/pi/issues/4583)).
 - Fixed interactive error messages to render with trailing spacing so reload errors do not run into resource listings ([#4510](https://github.com/earendil-works/pi/issues/4510)).
 - Fixed nested code fences in the Termux setup documentation so the example AGENTS.md renders correctly ([#4503](https://github.com/earendil-works/pi/issues/4503)).
diff --git a/packages/coding-agent/src/core/prompt-templates.ts b/packages/coding-agent/src/core/prompt-templates.ts
index 8527f911..45e779a1 100644
--- a/packages/coding-agent/src/core/prompt-templates.ts
+++ b/packages/coding-agent/src/core/prompt-templates.ts
@@ -37,7 +37,7 @@ export function parseCommandArgs(argsString: string): string[] {
 			}
 		} else if (char === '"' || char === "'") {
 			inQuote = char;
-		} else if (char === " " || char === "\t") {
+		} else if (/\s/.test(char)) {
 			if (current) {
 				args.push(current);
 				current = "";
@@ -282,9 +282,11 @@ export function loadPromptTemplates(options: LoadPromptTemplatesOptions): Prompt
 export function expandPromptTemplate(text: string, templates: PromptTemplate[]): string {
 	if (!text.startsWith("/")) return text;
 
-	const spaceIndex = text.indexOf(" ");
-	const templateName = spaceIndex === -1 ? text.slice(1) : text.slice(1, spaceIndex);
-	const argsString = spaceIndex === -1 ? "" : text.slice(spaceIndex + 1);
+	const match = text.match(/^\/([^\s]+)(?:\s+([\s\S]*))?$/);
+	if (!match) return text;
+
+	const templateName = match[1];
+	const argsString = match[2] ?? "";
 
 	const template = templates.find((t) => t.name === templateName);
 	if (template) {
diff --git a/packages/coding-agent/test/prompt-templates.test.ts b/packages/coding-agent/test/prompt-templates.test.ts
index 67be0da4..10cecaca 100644
--- a/packages/coding-agent/test/prompt-templates.test.ts
+++ b/packages/coding-agent/test/prompt-templates.test.ts
@@ -13,7 +13,12 @@ import { tmpdir } from "os";
 import { join } from "path";
 import { afterAll, describe, expect, test } from "vitest";
 import { getAgentDir } from "../src/config.js";
-import { loadPromptTemplates, parseCommandArgs, substituteArgs } from "../src/core/prompt-templates.js";
+import {
+	expandPromptTemplate,
+	loadPromptTemplates,
+	parseCommandArgs,
+	substituteArgs,
+} from "../src/core/prompt-templates.js";
 
 // ============================================================================
 // substituteArgs
@@ -335,10 +340,25 @@ describe("parseCommandArgs", () => {
 		expect(parseCommandArgs("日本語 🎉 café")).toEqual(["日本語", "🎉", "café"]);
 	});
 
-	test("should handle newlines in arguments", () => {
+	test("should handle newlines in quoted arguments", () => {
 		expect(parseCommandArgs('"line1\nline2" second')).toEqual(["line1\nline2", "second"]);
 	});
 
+	test("should treat unquoted newlines as separators", () => {
+		expect(parseCommandArgs("label-2\n\nHere is some description #2.")).toEqual([
+			"label-2",
+			"Here",
+			"is",
+			"some",
+			"description",
+			"#2.",
+		]);
+	});
+
+	test("should collapse mixed unquoted whitespace", () => {
+		expect(parseCommandArgs("a\n\n\tb  c")).toEqual(["a", "b", "c"]);
+	});
+
 	test("should handle escaped quotes inside quoted strings", () => {
 		// Note: This implementation doesn't handle escaped quotes - backslash is literal
 		expect(parseCommandArgs('"quoted \\"text\\""')).toEqual(["quoted \\text\\"]);
@@ -357,6 +377,40 @@ describe("parseCommandArgs", () => {
 // Integration
 // ============================================================================
 
+describe("expandPromptTemplate", () => {
+	test("should split template arguments on unquoted newlines", () => {
+		const result = expandPromptTemplate("/arg-test label-2\n\nHere is some description #2.", [
+			{
+				name: "arg-test",
+				description: "test",
+				content: `- arg1: $1\n- rest: \${@:2}`,
+				sourceInfo: { path: "/tmp/arg-test.md", source: "local", scope: "temporary", origin: "top-level" },
+				filePath: "/tmp/arg-test.md",
+			},
+		]);
+
+		expect(result).toBe("- arg1: label-2\n- rest: Here is some description #2.");
+	});
+
+	test("should support template command separated from args by newline", () => {
+		const result = expandPromptTemplate("/arg-test\nlabel-2", [
+			{
+				name: "arg-test",
+				description: "test",
+				content: "arg1: $1",
+				sourceInfo: { path: "/tmp/arg-test.md", source: "local", scope: "temporary", origin: "top-level" },
+				filePath: "/tmp/arg-test.md",
+			},
+		]);
+
+		expect(result).toBe("arg1: label-2");
+	});
+});
+
+// ============================================================================
+// Integration
+// ============================================================================
+
 describe("parseCommandArgs + substituteArgs integration", () => {
 	test("should parse and substitute together correctly", () => {
 		const input = 'Button "onClick handler" "disabled support"';