diff --git a/.changeset/fix-sse-terminated.md b/.changeset/fix-sse-terminated.md
new file mode 100644
index 000000000..7134a81ba
--- /dev/null
+++ b/.changeset/fix-sse-terminated.md
@@ -0,0 +1,5 @@
+---
+"@modelcontextprotocol/client": patch
+---
+
+Fix SSE stream graceful termination being incorrectly reported as an error. When a server closes an SSE connection gracefully (e.g., due to timeout), the client no longer reports "TypeError: terminated" via onerror. This reduces log noise while preserving reconnection behavior.
diff --git a/packages/client/src/client/streamableHttp.ts b/packages/client/src/client/streamableHttp.ts
index 91709a9a6..437b95918 100644
--- a/packages/client/src/client/streamableHttp.ts
+++ b/packages/client/src/client/streamableHttp.ts
@@ -392,8 +392,15 @@ export class StreamableHTTPClientTransport implements Transport {
                     );
                 }
             } catch (error) {
-                // Handle stream errors - likely a network disconnect
-                this.onerror?.(new Error(`SSE stream disconnected: ${error}`));
+                // Handle stream errors - check if this is a normal termination or an actual error
+                // "TypeError: terminated" occurs when the server closes the connection gracefully
+                // This is expected behavior for polling/timeout scenarios and should be handled quietly
+                const isGracefulTermination =
+                    error instanceof TypeError && (error.message === 'terminated' || error.message.includes('body stream'));
+
+                if (!isGracefulTermination) {
+                    this.onerror?.(new Error(`SSE stream disconnected: ${error}`));
+                }
 
                 // Attempt to reconnect if the stream disconnects unexpectedly and we aren't closing
                 // Reconnect if: already reconnectable (GET stream) OR received a priming event (POST stream with event ID)
diff --git a/test/integration/test/issues/issue-1211-sse-terminated.test.ts b/test/integration/test/issues/issue-1211-sse-terminated.test.ts
new file mode 100644
index 000000000..c55fbb1ba
--- /dev/null
+++ b/test/integration/test/issues/issue-1211-sse-terminated.test.ts
@@ -0,0 +1,107 @@
+/**
+ * Tests for SSE stream graceful termination handling
+ *
+ * Issue #1211: SSE stream disconnected: TypeError: terminated
+ * https://github.com/modelcontextprotocol/typescript-sdk/issues/1211
+ *
+ * This test verifies that graceful stream termination (TypeError: terminated)
+ * is handled quietly without reporting unnecessary errors.
+ */
+import { randomUUID } from 'node:crypto';
+import { createServer, type Server } from 'node:http';
+
+import { Client, StreamableHTTPClientTransport } from '@modelcontextprotocol/client';
+import { McpServer, StreamableHTTPServerTransport } from '@modelcontextprotocol/server';
+import { listenOnRandomPort } from '@modelcontextprotocol/test-helpers';
+
+describe('SSE Stream Graceful Termination (Issue #1211)', () => {
+    let server: Server;
+    let mcpServer: McpServer;
+    let serverTransport: StreamableHTTPServerTransport;
+    let client: Client;
+    let clientTransport: StreamableHTTPClientTransport;
+    let baseUrl: URL;
+
+    beforeEach(async () => {
+        server = createServer();
+        mcpServer = new McpServer(
+            { name: 'test-server', version: '1.0.0' },
+            {
+                capabilities: {}
+            }
+        );
+
+        serverTransport = new StreamableHTTPServerTransport({
+            sessionIdGenerator: () => randomUUID()
+        });
+
+        await mcpServer.connect(serverTransport);
+
+        server.on('request', async (req, res) => {
+            await serverTransport.handleRequest(req, res);
+        });
+
+        baseUrl = await listenOnRandomPort(server);
+    });
+
+    afterEach(async () => {
+        await client?.close().catch(() => {});
+        await mcpServer?.close().catch(() => {});
+        server?.close();
+    });
+
+    test('should not report error when server closes SSE stream gracefully', async () => {
+        const errors: Error[] = [];
+
+        clientTransport = new StreamableHTTPClientTransport(baseUrl);
+        client = new Client({ name: 'test-client', version: '1.0.0' }, { capabilities: {} });
+
+        // Track any errors
+        clientTransport.onerror = error => {
+            errors.push(error);
+        };
+
+        await client.connect(clientTransport);
+
+        // Verify connection is working
+        expect(client.getServerCapabilities()).toBeDefined();
+
+        // Close the server-side transport (simulating graceful termination)
+        await serverTransport.close();
+
+        // Give some time for any error events to propagate
+        await new Promise(resolve => setTimeout(resolve, 100));
+
+        // Should not have any "TypeError: terminated" errors reported
+        const terminatedErrors = errors.filter(e => e.message.includes('terminated') || e.message.includes('body stream'));
+
+        expect(terminatedErrors).toHaveLength(0);
+    });
+
+    test('should handle server shutdown without reporting termination errors', async () => {
+        const errors: Error[] = [];
+
+        clientTransport = new StreamableHTTPClientTransport(baseUrl);
+        client = new Client({ name: 'test-client', version: '1.0.0' }, { capabilities: {} });
+
+        clientTransport.onerror = error => {
+            errors.push(error);
+        };
+
+        await client.connect(clientTransport);
+
+        // Wait a bit to simulate some activity
+        await new Promise(resolve => setTimeout(resolve, 50));
+
+        // Close server abruptly
+        await serverTransport.close();
+        server.close();
+
+        await new Promise(resolve => setTimeout(resolve, 100));
+
+        // No terminated errors should be reported
+        const terminatedErrors = errors.filter(e => e.message.includes('terminated') || e.message.includes('body stream'));
+
+        expect(terminatedErrors).toHaveLength(0);
+    });
+});