diff --git a/CHANGELOG.md b/CHANGELOG.md
index a4071d67..afe8ed59 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -8,6 +8,11 @@
   Windows) instead of plaintext files, when using CLI >= 2.29.0. Falls back to file storage on
   Linux, older CLIs, or if the keyring write fails. Controlled via the `coder.useKeyring` setting.
 
+### Fixed
+
+- Fixed CLI binary downloads failing when servers or proxies compress responses unexpectedly.
+- Clarified CLI download progress notification wording.
+
 ## [v1.13.0](https://github.com/coder/vscode-coder/releases/tag/v1.13.0) 2026-03-03
 
 ### Added
diff --git a/src/core/cliManager.ts b/src/core/cliManager.ts
index a1d4f1ae..6f918eb0 100644
--- a/src/core/cliManager.ts
+++ b/src/core/cliManager.ts
@@ -362,7 +362,6 @@ export class CliManager {
 				binSource,
 				writeStream,
 				{
-					"Accept-Encoding": "gzip",
 					"If-None-Match": `"${etag}"`,
 				},
 				onProgress,
@@ -474,17 +473,22 @@ export class CliManager {
 			signal: controller.signal,
 			baseURL: baseUrl,
 			responseType: "stream",
-			headers,
-			decompress: true,
+			headers: {
+				...headers,
+				"Accept-Encoding": "identity",
+			},
+			decompress: false,
 			// Ignore all errors so we can catch a 404!
 			validateStatus: () => true,
 		});
 		this.output.info("Got status code", resp.status);
 
 		if (resp.status === 200) {
-			const rawContentLength = resp.headers["content-length"] as unknown;
+			const rawContentLength = (resp.headers["content-length"] ??
+				resp.headers["x-original-content-length"]) as unknown;
 			const contentLength = Number.parseInt(
 				typeof rawContentLength === "string" ? rawContentLength : "",
+				10,
 			);
 			if (Number.isNaN(contentLength)) {
 				this.output.warn(
@@ -501,7 +505,7 @@ export class CliManager {
 			const completed = await vscode.window.withProgress<boolean>(
 				{
 					location: vscode.ProgressLocation.Notification,
-					title: `Downloading ${baseUrl}`,
+					title: `Downloading Coder CLI for ${baseUrl}`,
 					cancellable: true,
 				},
 				async (progress, token) => {
diff --git a/test/unit/core/cliManager.test.ts b/test/unit/core/cliManager.test.ts
index 243ebfc4..2d386244 100644
--- a/test/unit/core/cliManager.test.ts
+++ b/test/unit/core/cliManager.test.ts
@@ -378,7 +378,7 @@ describe("CliManager", () => {
 				expect.objectContaining({
 					responseType: "stream",
 					headers: expect.objectContaining({
-						"Accept-Encoding": "gzip",
+						"Accept-Encoding": "identity",
 						"If-None-Match": '""',
 					}),
 				}),
@@ -393,7 +393,7 @@ describe("CliManager", () => {
 				"/custom/path",
 				expect.objectContaining({
 					responseType: "stream",
-					decompress: true,
+					decompress: false,
 					validateStatus: expect.any(Function),
 				}),
 			);
@@ -528,10 +528,33 @@ describe("CliManager", () => {
 
 		it("handles missing content-length", async () => {
 			withSuccessfulDownload({ headers: {} });
+			mockProgress.clearProgressReports();
 			const result = await manager.fetchBinary(mockApi, "test");
 			expectPathsEqual(result, BINARY_PATH);
 			expect(memfs.existsSync(BINARY_PATH)).toBe(true);
-		});
+			// Without any content-length header, increment should be undefined.
+			const reports = mockProgress.getProgressReports();
+			expect(reports).not.toHaveLength(0);
+			for (const report of reports) {
+				expect(report).toMatchObject({ increment: undefined });
+			}
+		});
+
+		it.each(["content-length", "x-original-content-length"])(
+			"reports progress with %s header",
+			async (header) => {
+				withSuccessfulDownload({ headers: { [header]: "1024" } });
+				mockProgress.clearProgressReports();
+				const result = await manager.fetchBinary(mockApi, "test");
+				expectPathsEqual(result, BINARY_PATH);
+				expect(memfs.existsSync(BINARY_PATH)).toBe(true);
+				const reports = mockProgress.getProgressReports();
+				expect(reports).not.toHaveLength(0);
+				for (const report of reports) {
+					expect(report).toMatchObject({ increment: expect.any(Number) });
+				}
+			},
+		);
 	});
 
 	describe("Download Progress Tracking", () => {
@@ -543,7 +566,9 @@ describe("CliManager", () => {
 			withSuccessfulDownload();
 			await manager.fetchBinary(mockApi, "test");
 			expect(vscode.window.withProgress).toHaveBeenCalledWith(
-				expect.objectContaining({ title: `Downloading ${TEST_URL}` }),
+				expect.objectContaining({
+					title: `Downloading Coder CLI for ${TEST_URL}`,
+				}),
 				expect.any(Function),
 			);
 		});