diff --git a/shell_hook.sh b/shell_hook.sh
index 9edade6..8335573 100755
--- a/shell_hook.sh
+++ b/shell_hook.sh
@@ -34,58 +34,61 @@ TOOL_FOLDER=".luca"
 # It is designed to be idempotent and prevent PATH duplication.
 # When navigating to subdirectories of a project, it keeps the project's tool path in PATH.
 update_path() {
-  # Look for the active tools directory in the current location
-  local tool_bin_dir="$(pwd)/$TOOL_FOLDER/tools"
-  local current_pwd="$(pwd)"
+  # Walk up the directory tree to find the nearest ancestor with .luca/tools.
+  # This allows navigating directly into a project subdirectory and still
+  # picking up the project's tools without having to visit the root first.
+  # Stop at $HOME (exclusive): $HOME/.luca/tools is the global Luca installation
+  # and must not be treated as a project-specific tools directory.
+  local tool_bin_dir=""
+  local dir="$(pwd)"
+  while [ "$dir" != "/" ] && [ "$dir" != "$HOME" ]; do
+    if [ -d "$dir/$TOOL_FOLDER/tools" ]; then
+      tool_bin_dir="$dir/$TOOL_FOLDER/tools"
+      break
+    fi
+    dir="$(dirname "$dir")"
+  done
+
+  # Always clean up stale .luca/tools entries from PATH first.
+  # Keep only the entry that matches the one we just resolved (if any).
+  if [[ ":$PATH:" == *"/$TOOL_FOLDER/tools:"* ]]; then
+    local p
+    local new_path=""
+    local current_path="$PATH"
+
+    while [ -n "$current_path" ]; do
+      p="${current_path%%:*}"
+
+      if [ "$current_path" = "$p" ]; then
+        current_path=""
+      else
+        current_path="${current_path#*:}"
+      fi
 
-  # Only proceed if the tool directory exists in the current directory
-  if [ -d "$tool_bin_dir" ]; then
-    # Check if tool_bin_dir is already in PATH to avoid duplicates
+      if [[ "$p" == *"/$TOOL_FOLDER/tools" ]]; then
+        # Keep only the entry for the currently active project
+        if [ "$p" = "$tool_bin_dir" ]; then
+          new_path="${new_path:+$new_path:}$p"
+        fi
+      else
+        new_path="${new_path:+$new_path:}$p"
+      fi
+    done
+    export PATH="$new_path"
+  fi
+
+  # Add the resolved tool_bin_dir if it isn't already in PATH
+  if [ -n "$tool_bin_dir" ]; then
     case ":$PATH:" in
-      *":$tool_bin_dir:"*) 
+      *":$tool_bin_dir:"*)
         # Already in PATH, do nothing (idempotent behavior)
-        return 0
         ;;
       *)
-        # Not in PATH, add it to the front for priority
         export PATH="$tool_bin_dir:$PATH"
         # Optional: Uncomment the line below for debugging
         # echo "$TOOL_NAME: Added $tool_bin_dir to PATH"
         ;;
     esac
-  else
-    # Current directory doesn't have .luca/tools
-    # Check if there are any .luca/tools entries in PATH that should be cleaned up
-    if [[ ":$PATH:" == *"/$TOOL_FOLDER/tools:"* ]]; then
-      local p
-      local new_path=""
-      local current_path="$PATH"
-      
-      while [ -n "$current_path" ]; do
-        p="${current_path%%:*}"
-        
-        if [ "$current_path" = "$p" ]; then
-            current_path=""
-        else
-            current_path="${current_path#*:}"
-        fi
-
-        if [[ "$p" == *"/$TOOL_FOLDER/tools" ]]; then
-          # This is a tool directory entry - check if we should keep it
-          # Get the project root (parent of .luca/tools)
-          local project_root="${p%/$TOOL_FOLDER/tools}"
-          # Keep this entry if current directory is the project root or a subdirectory of it
-          if [[ "$current_pwd" == "$project_root" || "$current_pwd" == "$project_root/"* ]]; then
-            new_path="${new_path:+$new_path:}$p"
-          fi
-          # Otherwise, skip this entry (effectively removing it from PATH)
-        else
-          # Not a tool directory, keep it in PATH
-          new_path="${new_path:+$new_path:}$p"
-        fi
-      done
-      export PATH="$new_path"
-    fi
   fi
 }
 
diff --git a/tests/shell_hook.bats b/tests/shell_hook.bats
index 2c0bff6..b2e6ba4 100644
--- a/tests/shell_hook.bats
+++ b/tests/shell_hook.bats
@@ -86,7 +86,7 @@ setup() {
     refute_output --partial "$project_a/.luca/tools"
 }
 
-@test "update_path: keeps .luca/tools entry when in subdirectory of project" {
+@test "update_path: keeps .luca/tools entry when navigating into a project subdirectory" {
     local project="$BATS_TEST_TMPDIR/myproject"
     local subdir="$project/src/lib"
     mkdir -p "$project/.luca/tools" "$subdir"
@@ -105,6 +105,97 @@ setup() {
     assert_output --partial "$project/.luca/tools"
 }
 
+@test "update_path: adds .luca/tools when entering a project subdirectory directly" {
+    local project="$BATS_TEST_TMPDIR/myproject"
+    local subdir="$project/src/lib"
+    mkdir -p "$project/.luca/tools" "$subdir"
+
+    run bash -c "
+        export HOME='$TEST_HOME'
+        export SHELL=/bin/bash
+        source '$REPO_ROOT/shell_hook.sh'
+        # Navigate directly into a subdir without visiting the project root first
+        cd '$subdir'
+        update_path
+        echo \"\$PATH\"
+    "
+
+    assert_output --partial "$project/.luca/tools"
+}
+
+@test "update_path: replaces entry when switching between two projects with .luca/tools" {
+    local project_a="$BATS_TEST_TMPDIR/project_a"
+    local project_b="$BATS_TEST_TMPDIR/project_b"
+    mkdir -p "$project_a/.luca/tools" "$project_b/.luca/tools"
+
+    run bash -c "
+        export HOME='$TEST_HOME'
+        export SHELL=/bin/bash
+        source '$REPO_ROOT/shell_hook.sh'
+        cd '$project_a' && update_path
+        cd '$project_b' && update_path
+        echo \"\$PATH\"
+    "
+
+    assert_output --partial "$project_b/.luca/tools"
+    refute_output --partial "$project_a/.luca/tools"
+}
+
+@test "update_path: switching back to first project removes second project entry" {
+    local project_a="$BATS_TEST_TMPDIR/project_a"
+    local project_b="$BATS_TEST_TMPDIR/project_b"
+    mkdir -p "$project_a/.luca/tools" "$project_b/.luca/tools"
+
+    run bash -c "
+        export HOME='$TEST_HOME'
+        export SHELL=/bin/bash
+        source '$REPO_ROOT/shell_hook.sh'
+        cd '$project_a' && update_path
+        cd '$project_b' && update_path
+        cd '$project_a' && update_path
+        echo \"\$PATH\"
+    "
+
+    assert_output --partial "$project_a/.luca/tools"
+    refute_output --partial "$project_b/.luca/tools"
+}
+
+@test "update_path: does not add HOME/.luca/tools when in a non-project directory under HOME" {
+    # $HOME/.luca/tools is always present (global Luca installation) and must be ignored
+    mkdir -p "$TEST_HOME/.luca/tools"
+    local plain_dir="$TEST_HOME/documents"
+    mkdir -p "$plain_dir"
+
+    run bash -c "
+        export HOME='$TEST_HOME'
+        export SHELL=/bin/bash
+        source '$REPO_ROOT/shell_hook.sh'
+        cd '$plain_dir'
+        update_path
+        echo \"\$PATH\"
+    "
+
+    refute_output --partial "$TEST_HOME/.luca/tools"
+}
+
+@test "update_path: project inside HOME is found but HOME/.luca/tools is not added" {
+    mkdir -p "$TEST_HOME/.luca/tools"
+    local project="$TEST_HOME/projects/myapp"
+    mkdir -p "$project/.luca/tools" "$project/src"
+
+    run bash -c "
+        export HOME='$TEST_HOME'
+        export SHELL=/bin/bash
+        source '$REPO_ROOT/shell_hook.sh'
+        cd '$project/src'
+        update_path
+        echo \"\$PATH\"
+    "
+
+    assert_output --partial "$project/.luca/tools"
+    refute_output --partial "$TEST_HOME/.luca/tools"
+}
+
 @test "update_path: non-luca PATH entries are never removed" {
     local empty_dir="$BATS_TEST_TMPDIR/empty"
     mkdir -p "$empty_dir"