diff --git a/.env.vault-mapping b/.env.vault-mapping
index 9deff9a..821a815 100644
--- a/.env.vault-mapping
+++ b/.env.vault-mapping
@@ -3,6 +3,10 @@
 #
 # Generated for task-mcp OpenBao integration
 # Date: 2026-01-24
+# Updated: 2026-01-29 for Sentry integration (CF-536)
+
+# Sentry error tracking DSN
+kv:kv:secret/sentry/backend-node:dsn=SENTRY_DSN
 
 # LLM API Key (for embeddings)
 kv:kv:litellm/master_key:value=LLM_API_KEY
diff --git a/src/index.ts b/src/index.ts
index 847a681..84e504d 100644
--- a/src/index.ts
+++ b/src/index.ts
@@ -13,22 +13,15 @@
 import dotenv from 'dotenv';
 import { fileURLToPath } from 'url';
 import { dirname, join } from 'path';
-import * as Sentry from '@sentry/node';
 
 const __filename = fileURLToPath(import.meta.url);
 const __dirname = dirname(__filename);
 const envPath = join(__dirname, '..', '.env');
 const result = dotenv.config({ path: envPath, override: true });
 
-// Initialize Sentry for error tracking
-if (process.env.SENTRY_DSN) {
-  Sentry.init({
-    dsn: process.env.SENTRY_DSN,
-    environment: process.env.SENTRY_ENVIRONMENT || 'production',
-    tracesSampleRate: parseFloat(process.env.SENTRY_API_TRACE_RATE || '0.1'),
-    integrations: [Sentry.postgresIntegration()],
-  });
-}
+// Initialize Sentry for error tracking (with MCP-aware filtering and PII scrubbing)
+import { initSentry } from './sentry.js';
+initSentry(process.env.SENTRY_ENVIRONMENT || 'production');
 
 // Log environment loading status (goes to MCP server logs)
 if (result.error) {
diff --git a/src/sentry.ts b/src/sentry.ts
new file mode 100644
index 0000000..02802ad
--- /dev/null
+++ b/src/sentry.ts
@@ -0,0 +1,115 @@
+/**
+ * Sentry SDK integration for MCP servers.
+ *
+ * Provides error tracking and performance monitoring for MCP protocol tools
+ * while filtering out normal error responses (isError: true).
+ *
+ * Usage:
+ *   import { initSentry } from "./sentry.js";
+ *
+ *   initSentry(process.env.ENVIRONMENT || "development");
+ */
+
+import * as Sentry from "@sentry/node";
+import { nodeProfilingIntegration } from "@sentry/profiling-node";
+
+export function initSentry(environment: string = "development"): void {
+  const dsn = process.env.SENTRY_DSN || "";
+
+  if (!dsn) {
+    console.error("SENTRY_DSN not set, Sentry disabled");
+    return;
+  }
+
+  Sentry.init({
+    dsn,
+    environment,
+    tracesSampleRate: parseFloat(process.env.SENTRY_TRACE_SAMPLE_RATE || "0.1"),
+    profilesSampleRate: parseFloat(
+      process.env.SENTRY_PROFILE_SAMPLE_RATE || "0.01"
+    ),
+    integrations: [
+      nodeProfilingIntegration(),
+      new Sentry.Integrations.Http({ tracing: true }),
+      new Sentry.Integrations.Postgres({ recordStatementAsSpans: true }),
+    ],
+    beforeSend(event, hint) {
+      // MCP protocol: Don't send normal error responses (isError: true)
+      const originalException = hint.originalException as any;
+      if (originalException?.isError === true) {
+        return null; // This is a normal MCP error response, not an exception
+      }
+
+      // Strip PII from headers
+      if (event.request?.headers) {
+        const headers = { ...event.request.headers };
+        delete headers.Authorization;
+        delete headers.Cookie;
+        delete headers["X-API-Key"];
+        event.request.headers = headers;
+      }
+
+      // Redact sensitive data in request body
+      if (event.request?.data) {
+        let dataStr = JSON.stringify(event.request.data);
+        // Redact API keys
+        dataStr = dataStr.replace(
+          /(api[_-]?key|token|secret)["']?\s*[:=]\s*["']?[\w-]+/gi,
+          "$1=REDACTED"
+        );
+        // Redact emails
+        dataStr = dataStr.replace(
+          /\b[A-Za-z0-9._%+-]+@[A-Za-z0-9.-]+\.[A-Z|a-z]{2,}\b/g,
+          "EMAIL_REDACTED"
+        );
+        try {
+          event.request.data = JSON.parse(dataStr);
+        } catch {
+          event.request.data = dataStr;
+        }
+      }
+
+      return event;
+    },
+    maxBreadcrumbs: 30,
+    attachStacktrace: true,
+    release: process.env.APP_VERSION || "unknown",
+    sendDefaultPii: false, // Never send PII automatically
+  });
+
+  console.log(
+    `✅ Sentry initialized: ${environment} - ${process.env.APP_VERSION || "unknown"}`
+  );
+}
+
+/**
+ * Wrap MCP tool handler with Sentry transaction tracking.
+ *
+ * Usage:
+ *   const result = await withSentryTransaction("tool_name", async () => {
+ *     return await performToolOperation();
+ *   });
+ */
+export async function withSentryTransaction<T>(
+  toolName: string,
+  handler: () => Promise<T>
+): Promise<T> {
+  return Sentry.startActiveSpan(
+    { name: `tool_${toolName}`, op: "mcp.tool" },
+    async (span) => {
+      try {
+        const result = await handler();
+        span.setStatus("ok");
+        return result;
+      } catch (error: any) {
+        // Capture exception to Sentry (unless it's a normal MCP error)
+        if (!error.isError) {
+          Sentry.captureException(error);
+        }
+        span.recordException(error);
+        span.setStatus("error");
+        throw error;
+      }
+    }
+  );
+}