diff --git a/llama_stack/providers/inline/agents/meta_reference/agent_instance.py b/llama_stack/providers/inline/agents/meta_reference/agent_instance.py
index be7a6bf3c..34a9db630 100644
--- a/llama_stack/providers/inline/agents/meta_reference/agent_instance.py
+++ b/llama_stack/providers/inline/agents/meta_reference/agent_instance.py
@@ -540,7 +540,8 @@ class ChatAgent(ShieldRunnerMixin):
 
         output_attachments = []
 
-        n_iter = 0
+        n_iter = await self.storage.get_num_infer_iters_in_turn(session_id, turn_id) or 0
+
         # Build a map of custom tools to their definitions for faster lookup
         client_tools = {}
         for tool in self.agent_config.client_tools:
@@ -627,6 +628,9 @@ class ChatAgent(ShieldRunnerMixin):
                 )
                 span.set_attribute("output", output_attr)
 
+            n_iter += 1
+            await self.storage.set_num_infer_iters_in_turn(session_id, turn_id, n_iter)
+
             stop_reason = stop_reason or StopReason.out_of_tokens
 
             # If tool calls are parsed successfully,
@@ -662,6 +666,9 @@ class ChatAgent(ShieldRunnerMixin):
 
             if n_iter >= self.agent_config.max_infer_iters:
                 log.info("Done with MAX iterations, exiting.")
+                # NOTE: mark end_of_turn to indicate to client that we are done with the turn
+                # Do not continue the tool call loop after this point
+                message.stop_reason = StopReason.end_of_turn
                 yield message
                 break
 
@@ -711,6 +718,9 @@ class ChatAgent(ShieldRunnerMixin):
 
                 # If tool is a client tool, yield CompletionMessage and return
                 if tool_call.tool_name in client_tools:
+                    # NOTE: mark end_of_message to indicate to client that it may
+                    # call the tool and continue the conversation with the tool's response.
+                    message.stop_reason = StopReason.end_of_message
                     await self.storage.set_in_progress_tool_call_step(
                         session_id,
                         turn_id,
@@ -796,8 +806,6 @@ class ChatAgent(ShieldRunnerMixin):
 
                 input_messages = input_messages + [message, result_message]
 
-            n_iter += 1
-
     async def _get_tool_defs(
         self, toolgroups_for_turn: Optional[List[AgentToolGroup]] = None
     ) -> Tuple[List[ToolDefinition], Dict[str, str]]:
diff --git a/llama_stack/providers/inline/agents/meta_reference/persistence.py b/llama_stack/providers/inline/agents/meta_reference/persistence.py
index 9a2663567..2c04305fd 100644
--- a/llama_stack/providers/inline/agents/meta_reference/persistence.py
+++ b/llama_stack/providers/inline/agents/meta_reference/persistence.py
@@ -105,3 +105,15 @@ class AgentPersistence:
             key=f"in_progress_tool_call_step:{self.agent_id}:{session_id}:{turn_id}",
         )
         return ToolExecutionStep(**json.loads(value)) if value else None
+
+    async def set_num_infer_iters_in_turn(self, session_id: str, turn_id: str, num_infer_iters: int):
+        await self.kvstore.set(
+            key=f"num_infer_iters_in_turn:{self.agent_id}:{session_id}:{turn_id}",
+            value=str(num_infer_iters),
+        )
+
+    async def get_num_infer_iters_in_turn(self, session_id: str, turn_id: str) -> Optional[int]:
+        value = await self.kvstore.get(
+            key=f"num_infer_iters_in_turn:{self.agent_id}:{session_id}:{turn_id}",
+        )
+        return int(value) if value else None
diff --git a/tests/client-sdk/agents/test_agents.py b/tests/client-sdk/agents/test_agents.py
index 201dcc1d4..4d808da23 100644
--- a/tests/client-sdk/agents/test_agents.py
+++ b/tests/client-sdk/agents/test_agents.py
@@ -278,6 +278,33 @@ def test_custom_tool(llama_stack_client, agent_config):
     assert "get_boiling_point" in logs_str
 
 
+def test_custom_tool_infinite_loop(llama_stack_client, agent_config):
+    client_tool = get_boiling_point
+    agent_config = {
+        **agent_config,
+        "instructions": "You are a helpful assistant Always respond with tool calls no matter what. ",
+        "client_tools": [client_tool.get_tool_definition()],
+        "max_infer_iters": 5,
+    }
+
+    agent = Agent(llama_stack_client, agent_config, client_tools=(client_tool,))
+    session_id = agent.create_session(f"test-session-{uuid4()}")
+
+    response = agent.create_turn(
+        messages=[
+            {
+                "role": "user",
+                "content": "Get the boiling point of polyjuice with a tool call.",
+            },
+        ],
+        session_id=session_id,
+        stream=False,
+    )
+
+    num_tool_calls = sum([1 if step.step_type == "tool_execution" else 0 for step in response.steps])
+    assert num_tool_calls <= 5
+
+
 def test_tool_choice(llama_stack_client, agent_config):
     def run_agent(tool_choice):
         client_tool = get_boiling_point