diff --git a/tests/test_setup.py b/tests/test_setup.py
index 5e39fed..7730d7e 100644
--- a/tests/test_setup.py
+++ b/tests/test_setup.py
@@ -69,3 +69,22 @@ def test_settings_apply_runtime_config_updates_module_globals():
             os.environ.pop("UNRAID_API_KEY", None)
         else:
             os.environ["UNRAID_API_KEY"] = original_env_key
+
+
+def test_run_server_does_not_exit_when_creds_missing(monkeypatch):
+    """Server should not sys.exit(1) when credentials are absent."""
+    import unraid_mcp.config.settings as settings_mod
+
+    monkeypatch.setattr(settings_mod, "UNRAID_API_URL", None)
+    monkeypatch.setattr(settings_mod, "UNRAID_API_KEY", None)
+
+    # Patch the actual mcp.run so we don't spin up a real server
+    from unraid_mcp import server as server_mod
+
+    with patch.object(server_mod, "mcp") as mock_mcp:
+        mock_mcp.run.side_effect = SystemExit(0)
+        try:
+            server_mod.run_server()
+        except SystemExit as e:
+            # Only the mocked mcp.run exit (code 0) is acceptable
+            assert e.code == 0, f"Unexpected sys.exit({e.code}) — server crashed on missing creds"
diff --git a/unraid_mcp/server.py b/unraid_mcp/server.py
index adac5cb..9c151c7 100644
--- a/unraid_mcp/server.py
+++ b/unraid_mcp/server.py
@@ -80,11 +80,10 @@ def run_server() -> None:
     # Validate required configuration before anything else
     is_valid, missing = validate_required_config()
     if not is_valid:
-        logger.critical(
-            f"Missing required configuration: {', '.join(missing)}. "
-            "Set these environment variables or add them to your .env file."
+        logger.warning(
+            f"Missing configuration: {', '.join(missing)}. "
+            "Server will prompt for credentials on first tool call via elicitation."
         )
-        sys.exit(1)
 
     # Log configuration (delegated to shared function)
     from .config.logging import log_configuration_status