diff --git a/eng/common/mcp/azure-sdk-mcp.ps1 b/eng/common/mcp/azure-sdk-mcp.ps1
index b90d85b8cd..6a3c23ee6e 100755
--- a/eng/common/mcp/azure-sdk-mcp.ps1
+++ b/eng/common/mcp/azure-sdk-mcp.ps1
@@ -138,9 +138,34 @@ if (-not (Test-Path $toolInstallDirectory)) {
 }
 $exeName = Split-Path $tempExe -Leaf
 $exeDestination = Join-Path $toolInstallDirectory $exeName
-Copy-Item -Path $tempExe -Destination $exeDestination -Force
 
-log "Package $package is installed at $exeDestination"
+# Try to copy the new version
+$updateSucceeded = $false
+try {
+    Copy-Item -Path $tempExe -Destination $exeDestination -Force
+    $updateSucceeded = $true
+}
+catch {
+    if ($Run -and (Test-Path $exeDestination)) {
+        # In MCP mode and the executable exists, warn and fall back to the existing installed version
+        log -warn "Could not update '$exeDestination': $($_.Exception.Message)"
+        log -warn "Falling back to the currently installed version."
+    }
+    else {
+        # In update-only mode or the executable does not exist, exit with error
+        log -err "Could not install or update '$exeDestination': $($_.Exception.Message)"
+        exit 1
+    }
+}
+
+# Clean up temp directory
+if (Test-Path $tempInstallDirectory) {
+    Remove-Item -Path $tempInstallDirectory -Recurse -Force -ErrorAction SilentlyContinue
+}
+
+if ($updateSucceeded) {
+    log "Executable $package is installed at $exeDestination"
+}
 if (!$UpdatePathInProfile) {
     log -warn "To add the tool to PATH for new shell sessions, re-run with -UpdatePathInProfile to modify the shell profile file."
 }