diff --git a/packages/mcp-hmr/mcp_hmr.py b/packages/mcp-hmr/mcp_hmr.py
index 745b003..4c5b198 100644
--- a/packages/mcp-hmr/mcp_hmr.py
+++ b/packages/mcp-hmr/mcp_hmr.py
@@ -9,6 +9,52 @@
 __all__ = "mcp_server", "run_with_hmr"
 
 
+def _resolve_watch_path(module_or_path: str) -> str:
+    """Resolve a stable watch directory for hot reload.
+
+    Why this exists:
+        `AsyncReloader` expects a non-empty, valid path to watch. In mcp-hmr 0.0.3.2
+        the watcher was initialized with an empty string, which can result in no
+        files being watched (or errors) depending on the platform / watcher backend.
+
+    Strategy:
+        - If the target is a file path, watch its parent directory.
+        - If the target is an importable module, watch the directory containing the
+          module's file (or package __init__.py).
+        - Fall back to the current working directory.
+    """
+    # path:attr target
+    p = Path(module_or_path)
+    if p.is_file():
+        return str(p.resolve().parent)
+
+    # Some callers may provide a directory path directly; watch it as-is.
+    if p.is_dir():
+        return str(p.resolve())
+
+    # module:attr target
+    try:
+        spec = find_spec(module_or_path)
+    except (ImportError, ModuleNotFoundError, TypeError, ValueError):
+        spec = None
+
+    if spec is not None:
+        # For built-in / frozen modules, spec.origin can be strings like "built-in".
+        # Use has_location to ensure origin is a real filesystem location.
+        if getattr(spec, "has_location", False) and spec.origin:
+            origin_path = Path(spec.origin)
+            if origin_path.is_file():
+                # For packages, origin points at __init__.py; for modules, origin is the .py file.
+                return str(origin_path.resolve().parent)
+
+        # Namespace packages may have no origin; use their search location.
+        locations = list(spec.submodule_search_locations or ())
+        if locations:
+            return str(Path(locations[0]).resolve())
+
+    return str(Path.cwd())
+
+
 def mcp_server(target: str):
     module, attr = target.rsplit(":", 1)
 
@@ -80,7 +126,7 @@ async def main():
 
     class Reloader(AsyncReloader):
         def __init__(self):
-            super().__init__("")
+            super().__init__(_resolve_watch_path(module))
             self.error_filter.exclude_filenames.add(__file__)
 
         async def __aenter__(self):