diff --git a/openhands/llm/fn_call_converter.py b/openhands/llm/fn_call_converter.py
index 7de8824516..826b278dc4 100644
--- a/openhands/llm/fn_call_converter.py
+++ b/openhands/llm/fn_call_converter.py
@@ -421,16 +421,12 @@ def convert_tool_call_to_string(tool_call: dict) -> str:
             f'Failed to parse arguments as JSON. Arguments: {tool_call["function"]["arguments"]}'
         ) from e
     for param_name, param_value in args.items():
-        is_multiline = isinstance(param_value, str) and '\n' in param_value
+        # Don't add extra newlines - keep parameter value as-is
         ret += f'<parameter={param_name}>'
-        if is_multiline:
-            ret += '\n'
         if isinstance(param_value, list) or isinstance(param_value, dict):
             ret += json.dumps(param_value)
         else:
             ret += f'{param_value}'
-        if is_multiline:
-            ret += '\n'
         ret += '</parameter>\n'
     ret += '</function>'
     return ret
diff --git a/tests/unit/llm/test_llm_fncall_converter.py b/tests/unit/llm/test_llm_fncall_converter.py
index ff4b7961ef..b4270f89b0 100644
--- a/tests/unit/llm/test_llm_fncall_converter.py
+++ b/tests/unit/llm/test_llm_fncall_converter.py
@@ -701,6 +701,8 @@ NON_FNCALL_RESPONSE_MESSAGE = {
 </function>""",
         ),
         # Test case with indented code block to verify indentation is preserved
+        # Note: multiline parameter values should NOT have extra newlines before/after
+        # to prevent newline accumulation across multiple LLM response cycles
         (
             [
                 {
@@ -716,16 +718,12 @@ NON_FNCALL_RESPONSE_MESSAGE = {
             """<function=str_replace_editor>
 <parameter=command>str_replace</parameter>
 <parameter=path>/test/file.py</parameter>
-<parameter=old_str>
-def example():
-    pass
-</parameter>
-<parameter=new_str>
-def example():
+<parameter=old_str>def example():
+    pass</parameter>
+<parameter=new_str>def example():
     # This is indented
     print("hello")
-    return True
-</parameter>
+    return True</parameter>
 </function>""",
         ),
         # Test case with list parameter value