diff --git a/frontend/src/components/features/chat/chat-interface.tsx b/frontend/src/components/features/chat/chat-interface.tsx
index 040cd8f522..91f07fc611 100644
--- a/frontend/src/components/features/chat/chat-interface.tsx
+++ b/frontend/src/components/features/chat/chat-interface.tsx
@@ -68,6 +68,7 @@ export function ChatInterface() {
   const conversationWebSocket = useConversationWebSocket();
   const { send } = useSendMessage();
   const storeEvents = useEventStore((state) => state.events);
+  const uiEvents = useEventStore((state) => state.uiEvents);
   const { setOptimisticUserMessage, getOptimisticUserMessage } =
     useOptimisticUserMessageStore();
   const { t } = useTranslation();
@@ -121,11 +122,13 @@ export function ChatInterface() {
     .filter(isActionOrObservation)
     .filter(shouldRenderEvent);
 
-  // Filter V1 events
-  const v1Events = storeEvents.filter(isV1Event).filter(shouldRenderV1Event);
+  // Filter V1 events - use uiEvents for rendering (actions replaced by observations)
+  const v1UiEvents = uiEvents.filter(isV1Event).filter(shouldRenderV1Event);
+  // Keep full v1 events for lookups (includes both actions and observations)
+  const v1FullEvents = storeEvents.filter(isV1Event);
 
   // Combined events count for tracking
-  const totalEvents = v0Events.length || v1Events.length;
+  const totalEvents = v0Events.length || v1UiEvents.length;
 
   // Check if there are any substantive agent actions (not just system messages)
   const hasSubstantiveAgentActions = React.useMemo(
@@ -223,7 +226,7 @@ export function ChatInterface() {
   };
 
   const v0UserEventsExist = hasUserEvent(v0Events);
-  const v1UserEventsExist = hasV1UserEvent(v1Events);
+  const v1UserEventsExist = hasV1UserEvent(v1FullEvents);
   const userEventsExist = v0UserEventsExist || v1UserEventsExist;
 
   return (
@@ -267,7 +270,7 @@ export function ChatInterface() {
           )}
 
           {!conversationWebSocket?.isLoadingHistory && v1UserEventsExist && (
-            <V1Messages messages={v1Events} />
+            <V1Messages messages={v1UiEvents} allEvents={v1FullEvents} />
           )}
         </div>
 
diff --git a/frontend/src/components/v1/chat/event-content-helpers/should-render-event.ts b/frontend/src/components/v1/chat/event-content-helpers/should-render-event.ts
index 8acef2da03..a5fdc62252 100644
--- a/frontend/src/components/v1/chat/event-content-helpers/should-render-event.ts
+++ b/frontend/src/components/v1/chat/event-content-helpers/should-render-event.ts
@@ -7,17 +7,6 @@ import {
   isConversationStateUpdateEvent,
 } from "#/types/v1/type-guards";
 
-// V1 events that should not be rendered
-const NO_RENDER_ACTION_TYPES = [
-  "ThinkAction",
-  // Add more action types that should not be rendered
-];
-
-const NO_RENDER_OBSERVATION_TYPES = [
-  "ThinkObservation",
-  // Add more observation types that should not be rendered
-];
-
 export const shouldRenderEvent = (event: OpenHandsEvent) => {
   // Explicitly exclude system events that should not be rendered in chat
   if (isConversationStateUpdateEvent(event)) {
@@ -34,18 +23,12 @@ export const shouldRenderEvent = (event: OpenHandsEvent) => {
       return false;
     }
 
-    return !NO_RENDER_ACTION_TYPES.includes(actionType);
+    return true;
   }
 
-  // Render observation events (with filtering)
+  // Render observation events
   if (isObservationEvent(event)) {
-    // For V1, observation is an object with kind property
-    const observationType = event.observation.kind;
-
-    // Note: ObservationEvent source is always "environment", not "user"
-    // So no need to check for user source here
-
-    return !NO_RENDER_OBSERVATION_TYPES.includes(observationType);
+    return true;
   }
 
   // Render message events (user and assistant messages)
diff --git a/frontend/src/components/v1/chat/event-message-components/index.ts b/frontend/src/components/v1/chat/event-message-components/index.ts
index 1f705a1f7a..3672255101 100644
--- a/frontend/src/components/v1/chat/event-message-components/index.ts
+++ b/frontend/src/components/v1/chat/event-message-components/index.ts
@@ -3,3 +3,4 @@ export { ObservationPairEventMessage } from "./observation-pair-event-message";
 export { ErrorEventMessage } from "./error-event-message";
 export { FinishEventMessage } from "./finish-event-message";
 export { GenericEventMessageWrapper } from "./generic-event-message-wrapper";
+export { ThoughtEventMessage } from "./thought-event-message";
diff --git a/frontend/src/components/v1/chat/event-message-components/thought-event-message.tsx b/frontend/src/components/v1/chat/event-message-components/thought-event-message.tsx
new file mode 100644
index 0000000000..9d6dfdcea1
--- /dev/null
+++ b/frontend/src/components/v1/chat/event-message-components/thought-event-message.tsx
@@ -0,0 +1,32 @@
+import React from "react";
+import { ActionEvent } from "#/types/v1/core";
+import { ChatMessage } from "../../../features/chat/chat-message";
+
+interface ThoughtEventMessageProps {
+  event: ActionEvent;
+  actions?: Array<{
+    icon: React.ReactNode;
+    onClick: () => void;
+    tooltip?: string;
+  }>;
+}
+
+export function ThoughtEventMessage({
+  event,
+  actions,
+}: ThoughtEventMessageProps) {
+  // Extract thought content from the action event
+  const thoughtContent = event.thought
+    .filter((t) => t.type === "text")
+    .map((t) => t.text)
+    .join("\n");
+
+  // If there's no thought content, don't render anything
+  if (!thoughtContent) {
+    return null;
+  }
+
+  return (
+    <ChatMessage type="agent" message={thoughtContent} actions={actions} />
+  );
+}
diff --git a/frontend/src/components/v1/chat/event-message.tsx b/frontend/src/components/v1/chat/event-message.tsx
index cc5463f080..dbe327b31b 100644
--- a/frontend/src/components/v1/chat/event-message.tsx
+++ b/frontend/src/components/v1/chat/event-message.tsx
@@ -14,13 +14,13 @@ import {
   ErrorEventMessage,
   UserAssistantEventMessage,
   FinishEventMessage,
-  ObservationPairEventMessage,
   GenericEventMessageWrapper,
+  ThoughtEventMessage,
 } from "./event-message-components";
 
 interface EventMessageProps {
   event: OpenHandsEvent;
-  hasObservationPair: boolean;
+  messages: OpenHandsEvent[];
   isLastMessage: boolean;
   microagentStatus?: MicroagentStatus | null;
   microagentConversationId?: string;
@@ -36,7 +36,7 @@ interface EventMessageProps {
 /* eslint-disable react/jsx-props-no-spreading */
 export function EventMessage({
   event,
-  hasObservationPair,
+  messages,
   isLastMessage,
   microagentStatus,
   microagentConversationId,
@@ -69,19 +69,6 @@ export function EventMessage({
     return <ErrorEventMessage event={event} {...commonProps} />;
   }
 
-  // Observation pairs with actions
-  if (hasObservationPair && isActionEvent(event)) {
-    return (
-      <ObservationPairEventMessage
-        event={event}
-        microagentStatus={microagentStatus}
-        microagentConversationId={microagentConversationId}
-        microagentPRUrl={microagentPRUrl}
-        actions={actions}
-      />
-    );
-  }
-
   // Finish actions
   if (isActionEvent(event) && event.action.kind === "FinishAction") {
     return (
@@ -92,6 +79,39 @@ export function EventMessage({
     );
   }
 
+  // Action events - render thought + action (will be replaced by thought + observation)
+  if (isActionEvent(event)) {
+    return (
+      <>
+        <ThoughtEventMessage event={event} actions={actions} />
+        <GenericEventMessageWrapper
+          event={event}
+          isLastMessage={isLastMessage}
+        />
+      </>
+    );
+  }
+
+  // Observation events - find the corresponding action and render thought + observation
+  if (isObservationEvent(event)) {
+    // Find the action that this observation is responding to
+    const correspondingAction = messages.find(
+      (msg) => isActionEvent(msg) && msg.id === event.action_id,
+    );
+
+    return (
+      <>
+        {correspondingAction && isActionEvent(correspondingAction) && (
+          <ThoughtEventMessage event={correspondingAction} actions={actions} />
+        )}
+        <GenericEventMessageWrapper
+          event={event}
+          isLastMessage={isLastMessage}
+        />
+      </>
+    );
+  }
+
   // Message events (user and assistant messages)
   if (!isActionEvent(event) && !isObservationEvent(event)) {
     // This is a MessageEvent
@@ -104,7 +124,7 @@ export function EventMessage({
     );
   }
 
-  // Generic fallback for all other events (including observation events)
+  // Generic fallback for all other events
   return (
     <GenericEventMessageWrapper event={event} isLastMessage={isLastMessage} />
   );
diff --git a/frontend/src/components/v1/chat/messages.tsx b/frontend/src/components/v1/chat/messages.tsx
index d6cc018090..4c4b733e76 100644
--- a/frontend/src/components/v1/chat/messages.tsx
+++ b/frontend/src/components/v1/chat/messages.tsx
@@ -1,6 +1,5 @@
 import React from "react";
 import { OpenHandsEvent } from "#/types/v1/core";
-import { isActionEvent, isObservationEvent } from "#/types/v1/type-guards";
 import { EventMessage } from "./event-message";
 import { ChatMessage } from "../../features/chat/chat-message";
 import { useOptimisticUserMessageStore } from "#/stores/optimistic-user-message-store";
@@ -9,29 +8,16 @@ import { useOptimisticUserMessageStore } from "#/stores/optimistic-user-message-
 // import MemoryIcon from "#/icons/memory_icon.svg?react";
 
 interface MessagesProps {
-  messages: OpenHandsEvent[];
+  messages: OpenHandsEvent[]; // UI events (actions replaced by observations)
+  allEvents: OpenHandsEvent[]; // Full event history (for action lookup)
 }
 
 export const Messages: React.FC<MessagesProps> = React.memo(
-  ({ messages }) => {
+  ({ messages, allEvents }) => {
     const { getOptimisticUserMessage } = useOptimisticUserMessageStore();
 
     const optimisticUserMessage = getOptimisticUserMessage();
 
-    const actionHasObservationPair = React.useCallback(
-      (event: OpenHandsEvent): boolean => {
-        if (isActionEvent(event)) {
-          // Check if there's a corresponding observation event
-          return !!messages.some(
-            (msg) => isObservationEvent(msg) && msg.action_id === event.id,
-          );
-        }
-
-        return false;
-      },
-      [messages],
-    );
-
     // TODO: Implement microagent functionality for V1 if needed
     // For now, we'll skip microagent features
 
@@ -41,7 +27,7 @@ export const Messages: React.FC<MessagesProps> = React.memo(
           <EventMessage
             key={message.id}
             event={message}
-            hasObservationPair={actionHasObservationPair(message)}
+            messages={allEvents}
             isLastMessage={messages.length - 1 === index}
             isInLast10Actions={messages.length - 1 - index < 10}
             // Microagent props - not implemented yet for V1
diff --git a/frontend/src/utils/handle-event-for-ui.ts b/frontend/src/utils/handle-event-for-ui.ts
index dd47517e48..1d291192cc 100644
--- a/frontend/src/utils/handle-event-for-ui.ts
+++ b/frontend/src/utils/handle-event-for-ui.ts
@@ -2,7 +2,8 @@ import { OpenHandsEvent } from "#/types/v1/core";
 import { isObservationEvent } from "#/types/v1/type-guards";
 
 /**
- * Handles adding an event to the UI events array, with special logic for observation events
+ * Handles adding an event to the UI events array
+ * Replaces actions with observations when they arrive (so UI shows observation instead of action)
  */
 export const handleEventForUI = (
   event: OpenHandsEvent,