diff --git a/packages/opencode/src/provider/transform.ts b/packages/opencode/src/provider/transform.ts
index 08b2f4922104..d0dda821bef8 100644
--- a/packages/opencode/src/provider/transform.ts
+++ b/packages/opencode/src/provider/transform.ts
@@ -1281,6 +1281,10 @@ export function schema(model: Provider.Model, schema: JSONSchema7): JSONSchema7
   }
   */
 
+  if (model.api.npm === "@ai-sdk/openai-compatible") {
+    schema = inlineLocalRefs(schema)
+  }
+
   if (model.providerID === "moonshotai" || model.api.id.toLowerCase().includes("kimi")) {
     const sanitizeMoonshot = (obj: unknown): unknown => {
       if (obj === null || typeof obj !== "object") return obj
@@ -1381,4 +1385,66 @@ export function schema(model: Provider.Model, schema: JSONSchema7): JSONSchema7
   return schema
 }
 
+function inlineLocalRefs(schema: JSONSchema7): JSONSchema7 {
+  const visit = (node: unknown, stack: Set<string>): unknown => {
+    if (Array.isArray(node)) return node.map((item) => visit(item, stack))
+    if (!isSchemaObject(node)) return node
+
+    const ref = typeof node.$ref === "string" ? node.$ref : undefined
+    if (ref?.startsWith("#/")) {
+      if (stack.has(ref)) return localRefSiblings(node)
+
+      const target = resolveLocalRef(schema, ref)
+      if (target !== undefined) {
+        const nextStack = new Set(stack).add(ref)
+        const expanded = visit(target, nextStack)
+        const siblings = localRefSiblings(node)
+        const resolved = isSchemaObject(expanded) ? mergeDeep(expanded, siblings) : siblings
+        return visit(resolved, nextStack)
+      }
+      return localRefSiblings(node)
+    }
+
+    return Object.fromEntries(
+      Object.entries(node)
+        .filter(([key]) => key !== "$defs" && key !== "definitions")
+        .map(([key, value]) => [key, visit(value, stack)]),
+    )
+  }
+
+  const result = visit(schema, new Set())
+  if (isSchemaObject(result)) return result as JSONSchema7
+  return schema
+}
+
+function localRefSiblings(node: Record<string, unknown>) {
+  return Object.fromEntries(
+    Object.entries(node)
+      .filter(([key]) => key !== "$ref")
+      .map(([key, value]) => [key, cloneSchemaValue(value)]),
+  )
+}
+
+function cloneSchemaValue(node: unknown): unknown {
+  if (Array.isArray(node)) return node.map(cloneSchemaValue)
+  if (!isSchemaObject(node)) return node
+  return Object.fromEntries(Object.entries(node).map(([key, value]) => [key, cloneSchemaValue(value)]))
+}
+
+function resolveLocalRef(root: JSONSchema7, ref: string) {
+  return ref
+    .slice(2)
+    .split("/")
+    .map((part) => part.replace(/~1/g, "/").replace(/~0/g, "~"))
+    .reduce<unknown>((node, key) => {
+      if (isSchemaObject(node)) return node[key]
+      if (Array.isArray(node)) return node[Number(key)]
+      return undefined
+    }, root)
+}
+
+function isSchemaObject(node: unknown): node is Record<string, unknown> {
+  return node !== null && typeof node === "object" && !Array.isArray(node)
+}
+
 export * as ProviderTransform from "./transform"
diff --git a/packages/opencode/test/provider/transform.test.ts b/packages/opencode/test/provider/transform.test.ts
index 2bce1585608c..be573a1740bb 100644
--- a/packages/opencode/test/provider/transform.test.ts
+++ b/packages/opencode/test/provider/transform.test.ts
@@ -925,6 +925,90 @@ describe("ProviderTransform.schema - gemini non-object properties removal", () =
   })
 })
 
+describe("ProviderTransform.schema - openai-compatible local refs", () => {
+  const model = {
+    providerID: "fireworks",
+    api: {
+      id: "accounts/fireworks/models/deepseek-v4-flash",
+      npm: "@ai-sdk/openai-compatible",
+    },
+  } as any
+
+  function hasRef(node: unknown): boolean {
+    if (node === null || typeof node !== "object") return false
+    if (Array.isArray(node)) return node.some(hasRef)
+    return Object.entries(node).some(([key, value]) => key === "$ref" || hasRef(value))
+  }
+
+  test("inlines local refs in MCP tool schemas", () => {
+    const result = ProviderTransform.schema(model, {
+      type: "object",
+      properties: {
+        operations: {
+          type: "array",
+          items: {
+            anyOf: [
+              {
+                type: "object",
+                properties: {
+                  asset_id: {
+                    $ref: "#/$defs/AssetId",
+                    description: "The Canva asset id to edit.",
+                  },
+                },
+                required: ["asset_id"],
+              },
+            ],
+          },
+        },
+      },
+      $defs: {
+        AssetId: {
+          type: "string",
+          minLength: 1,
+        },
+      },
+    } as any) as any
+
+    expect(result.properties.operations.items.anyOf[0].properties.asset_id).toEqual({
+      type: "string",
+      minLength: 1,
+      description: "The Canva asset id to edit.",
+    })
+    expect(result.$defs).toBeUndefined()
+    expect(hasRef(result)).toBe(false)
+  })
+
+  test("replaces recursive local refs with permissive schemas", () => {
+    const result = ProviderTransform.schema(model, {
+      type: "object",
+      properties: {
+        operation: {
+          $ref: "#/$defs/Operation",
+        },
+      },
+      $defs: {
+        Operation: {
+          type: "object",
+          properties: {
+            name: { type: "string" },
+            child: { $ref: "#/$defs/Operation" },
+          },
+        },
+      },
+    } as any) as any
+
+    expect(result.properties.operation).toEqual({
+      type: "object",
+      properties: {
+        name: { type: "string" },
+        child: {},
+      },
+    })
+    expect(hasRef(result)).toBe(false)
+  })
+})
+
 describe("ProviderTransform.schema - moonshot $ref siblings", () => {
   const moonshotModel = {
     providerID: "moonshotai",