diff --git a/.changeset/patch-fix-cli-proxy-latest-tag-alias.md b/.changeset/patch-fix-cli-proxy-latest-tag-alias.md
new file mode 100644
index 00000000000..c09907a737a
--- /dev/null
+++ b/.changeset/patch-fix-cli-proxy-latest-tag-alias.md
@@ -0,0 +1,5 @@
+---
+"gh-aw": patch
+---
+
+Fix fleet-wide smoke-test outage caused by a Docker image tag mismatch: `download_docker_images.sh` now aliases every pulled image under the mutable `:latest` tag in addition to its version-pinned tag, so `docker compose up -d --pull never` can resolve `ghcr.io/github/gh-aw-firewall/cli-proxy` (and other AWF images) regardless of which tag they are referenced by.
diff --git a/actions/setup/sh/download_docker_images.sh b/actions/setup/sh/download_docker_images.sh
index 48213a0c522..5d06e692dab 100755
--- a/actions/setup/sh/download_docker_images.sh
+++ b/actions/setup/sh/download_docker_images.sh
@@ -15,6 +15,13 @@ set +o histexpand
 # When images include a digest pin (e.g. image:tag@sha256:abc), the script
 # ensures the tag alias (image:tag) is created after pulling so that tools
 # referencing images by tag (such as AWF with --skip-pull) can find them.
+#
+# The script also aliases the image as "image:latest" so that any downstream
+# tool that references the image via the mutable ":latest" tag (regardless of
+# which versioned tag was actually pulled) can still resolve it locally under
+# --pull-never/--skip-pull semantics. This guards against tag mismatches
+# between the version-pinned tag written here and a ":latest" reference used
+# elsewhere (see gh-aw#50681).
 
 set -euo pipefail
 
@@ -30,14 +37,37 @@ docker_pull_with_retry() {
     if timeout 5m docker pull --quiet "$image" 2>&1; then
       echo "Successfully pulled $image"
 
-      # When pulling with a digest pin (image:tag@sha256:...), Docker may not
-      # create the tag alias automatically. Ensure the tag exists so that
-      # downstream tools (e.g. AWF --skip-pull) can find the image by tag.
+      # When pulling with a digest pin, Docker may not create a digest-free
+      # alias automatically. Preserve the original base reference and add back
+      # its implicit ":latest" or explicit tag alias so downstream tools can
+      # resolve the image locally under --pull-never/--skip-pull semantics.
+      local tag_ref="$image"
+      local base_ref="$image"
       if [[ "$image" == *"@sha256:"* ]]; then
-        local tag_ref="${image%%@sha256:*}"
-        if [[ "$tag_ref" == *":"* ]]; then
-          echo "Tagging digest-pinned image as $tag_ref"
-          docker tag "$image" "$tag_ref"
+        base_ref="${image%%@sha256:*}"
+        tag_ref="$base_ref"
+        if [[ "$base_ref" == *":"* ]]; then
+          echo "Tagging digest-pinned image as $base_ref"
+          docker tag "$image" "$base_ref"
+        else
+          local latest_ref="${base_ref}:latest"
+          echo "Tagging digest-pinned image as $latest_ref"
+          docker tag "$image" "$latest_ref"
+          tag_ref="$latest_ref"
+        fi
+      fi
+
+      # Only AWF images need a mutable ":latest" alias for local compose
+      # stacks, and only when the requested reference was version-pinned. This
+      # avoids races when unrelated repositories are pulled concurrently with
+      # multiple distinct tags.
+      if [[ "$base_ref" == ghcr.io/github/gh-aw-* && "$tag_ref" == *":"* ]]; then
+        local repo_ref="${tag_ref%%:*}"
+        local tag_part="${tag_ref##*:}"
+        if [[ "$tag_part" != "latest" ]]; then
+          local latest_ref="${repo_ref}:latest"
+          echo "Aliasing $tag_ref as $latest_ref"
+          docker tag "$tag_ref" "$latest_ref"
         fi
       fi
 
diff --git a/actions/setup/sh/download_docker_images_test.sh b/actions/setup/sh/download_docker_images_test.sh
index 1416e370b25..f9eb1946877 100755
--- a/actions/setup/sh/download_docker_images_test.sh
+++ b/actions/setup/sh/download_docker_images_test.sh
@@ -50,10 +50,66 @@ else
 fi
 echo ""
 
-# Test 3: Already cached images (should be fast)
-echo -e "${YELLOW}Test 3: Already cached images${NC}"
+# Test 3: AWF digest-pinned images restore local aliases without retagging unrelated latest refs
+echo -e "${YELLOW}Test 3: Digest-pinned AWF alias handling${NC}"
+WORKDIR=$(mktemp -d)
+cleanup_mock_docker() {
+    rm -rf "$WORKDIR"
+}
+cat > "$WORKDIR/docker" <<'MOCK'
+#!/usr/bin/env bash
+set -euo pipefail
+printf '%s\n' "$*" >> "$DOCKER_LOG"
+case "$1" in
+  pull)
+    exit 0
+    ;;
+  tag)
+    exit 0
+    ;;
+  *)
+    echo "unexpected docker command: $*" >&2
+    exit 1
+    ;;
+esac
+MOCK
+chmod +x "$WORKDIR/docker"
+DOCKER_LOG="$WORKDIR/docker.log"
+export DOCKER_LOG
+NODE_DIGEST="$(printf 'a%.0s' {1..64})"
+CLI_PROXY_DIGEST="$(printf 'b%.0s' {1..64})"
+if PATH="$WORKDIR:$PATH" bash "$DOWNLOAD_SCRIPT" \
+    "ghcr.io/github/gh-aw-node@sha256:${NODE_DIGEST}" \
+    "ghcr.io/github/gh-aw-firewall/cli-proxy:0.27.44@sha256:${CLI_PROXY_DIGEST}" \
+    alpine:3.17 > /tmp/test3.log 2>&1; then
+    if grep -q 'tag ghcr.io/github/gh-aw-node@sha256:' "$DOCKER_LOG" \
+        && grep -q 'ghcr.io/github/gh-aw-node:latest' "$DOCKER_LOG" \
+        && grep -q 'tag ghcr.io/github/gh-aw-firewall/cli-proxy:0.27.44@sha256:' "$DOCKER_LOG" \
+        && grep -q 'ghcr.io/github/gh-aw-firewall/cli-proxy:0.27.44 ghcr.io/github/gh-aw-firewall/cli-proxy:latest' "$DOCKER_LOG"; then
+        echo -e "${GREEN}✓ PASS${NC}: AWF digest aliases restored correctly"
+    else
+        echo -e "${RED}✗ FAIL${NC}: Missing expected AWF alias commands"
+        cat "$DOCKER_LOG"
+        exit 1
+    fi
+    if grep -q 'alpine:3.17 alpine:latest' "$DOCKER_LOG"; then
+        echo -e "${RED}✗ FAIL${NC}: Unrelated image was incorrectly aliased to latest"
+        cat "$DOCKER_LOG"
+        exit 1
+    else
+        echo -e "${GREEN}✓ PASS${NC}: Unrelated repositories were not aliased to latest"
+    fi
+else
+    echo -e "${RED}✗ FAIL${NC}: Digest alias test failed"
+    cat /tmp/test3.log
+    exit 1
+fi
+echo ""
+
+# Test 4: Already cached images (should be fast)
+echo -e "${YELLOW}Test 4: Already cached images${NC}"
 START_TIME=$(date +%s)
-if bash "$DOWNLOAD_SCRIPT" alpine:3.19 alpine:3.18 > /tmp/test3.log 2>&1; then
+if bash "$DOWNLOAD_SCRIPT" alpine:3.19 alpine:3.18 > /tmp/test4.log 2>&1; then
     END_TIME=$(date +%s)
     DURATION=$((END_TIME - START_TIME))
     echo -e "${GREEN}✓ PASS${NC}: Cached images download succeeded (${DURATION}s)"
@@ -65,20 +121,20 @@ if bash "$DOWNLOAD_SCRIPT" alpine:3.19 alpine:3.18 > /tmp/test3.log 2>&1; then
     fi
 else
     echo -e "${RED}✗ FAIL${NC}: Cached images download failed"
-    cat /tmp/test3.log
+    cat /tmp/test4.log
     exit 1
 fi
 echo ""
 
-# Test 4: Invalid image (should fail gracefully)
-echo -e "${YELLOW}Test 4: Invalid image (expected to fail)${NC}"
-if bash "$DOWNLOAD_SCRIPT" "nonexistent-registry.invalid/fake-image:v999" > /tmp/test4.log 2>&1; then
+# Test 5: Invalid image (should fail gracefully)
+echo -e "${YELLOW}Test 5: Invalid image (expected to fail)${NC}"
+if bash "$DOWNLOAD_SCRIPT" "nonexistent-registry.invalid/fake-image:v999" > /tmp/test5.log 2>&1; then
     echo -e "${RED}✗ FAIL${NC}: Should have failed for invalid image"
     exit 1
 else
     echo -e "${GREEN}✓ PASS${NC}: Failed as expected for invalid image"
     # Check for expected error message
-    if grep -q "Failed to download" /tmp/test4.log; then
+    if grep -q "Failed to download" /tmp/test5.log; then
         echo -e "${GREEN}✓ PASS${NC}: Error message present"
     else
         echo -e "${YELLOW}⚠ WARNING${NC}: Expected error message format not found"
@@ -86,9 +142,9 @@ else
 fi
 echo ""
 
-# Test 5: Empty arguments (should handle gracefully)
-echo -e "${YELLOW}Test 5: No images provided${NC}"
-if bash "$DOWNLOAD_SCRIPT" > /tmp/test5.log 2>&1; then
+# Test 6: Empty arguments (should handle gracefully)
+echo -e "${YELLOW}Test 6: No images provided${NC}"
+if bash "$DOWNLOAD_SCRIPT" > /tmp/test6.log 2>&1; then
     echo -e "${GREEN}✓ PASS${NC}: Handled empty arguments gracefully"
 else
     # This might fail which is also acceptable behavior
@@ -102,3 +158,4 @@ echo "=========================================="
 
 # Cleanup
 rm -f /tmp/test*.log
+cleanup_mock_docker