diff --git a/core/Azure.Mcp.Core/tests/Azure.Mcp.Core.UnitTests/Helpers/LiveTestSettingsTests.cs b/core/Azure.Mcp.Core/tests/Azure.Mcp.Core.UnitTests/Helpers/LiveTestSettingsTests.cs
new file mode 100644
index 0000000000..7ef3202ab7
--- /dev/null
+++ b/core/Azure.Mcp.Core/tests/Azure.Mcp.Core.UnitTests/Helpers/LiveTestSettingsTests.cs
@@ -0,0 +1,66 @@
+// Copyright (c) Microsoft Corporation.
+// Licensed under the MIT License.
+
+using System.Text.Json;
+using System.Text.Json.Serialization;
+using Azure.Mcp.Tests.Helpers;
+using Xunit;
+
+namespace Azure.Mcp.Core.UnitTests.Helpers;
+
+public class LiveTestSettingsTests
+{
+    [Fact]
+    public void JsonDeserialization_WithInvalidTestMode_ThrowsJsonException()
+    {
+        // Arrange - Create JSON with an invalid TestMode value
+        var json = """{"TestMode": "InvalidMode", "TenantId": "test-tenant"}""";
+
+        // Act & Assert - Verify JsonException is thrown
+        var exception = Assert.Throws<JsonException>(() =>
+            JsonSerializer.Deserialize<LiveTestSettingsProxy>(json, new JsonSerializerOptions()
+            {
+                PropertyNameCaseInsensitive = true,
+                Converters = { new JsonStringEnumConverter() }
+            }));
+
+        // Verify the error message mentions TestMode
+        Assert.Contains("TestMode", exception.Message);
+    }
+
+    [Theory]
+    [InlineData("Live", TestMode.Live)]
+    [InlineData("Record", TestMode.Record)]
+    [InlineData("Playback", TestMode.Playback)]
+    [InlineData("live", TestMode.Live)]  // Test case-insensitive
+    [InlineData("record", TestMode.Record)]
+    [InlineData("playback", TestMode.Playback)]
+    public void JsonDeserialization_WithValidTestMode_LoadsSuccessfully(string testModeValue, TestMode expectedMode)
+    {
+        // Arrange - Create JSON with valid TestMode value
+        var json = $$$"""{"TestMode": "{{{testModeValue}}}", "TenantId": "test-tenant", "SubscriptionId": "test-subscription"}""";
+
+        // Act - Deserialize the JSON
+        var settings = JsonSerializer.Deserialize<LiveTestSettingsProxy>(json, new JsonSerializerOptions()
+        {
+            PropertyNameCaseInsensitive = true,
+            Converters = { new JsonStringEnumConverter() }
+        });
+
+        // Assert - Verify the settings were loaded correctly
+        Assert.NotNull(settings);
+        Assert.Equal(expectedMode, settings.TestMode);
+        Assert.Equal("test-tenant", settings.TenantId);
+        Assert.Equal("test-subscription", settings.SubscriptionId);
+    }
+
+    /// <summary>
+    /// Proxy class for testing LiveTestSettings JSON deserialization without file I/O
+    /// </summary>
+    private class LiveTestSettingsProxy
+    {
+        public TestMode TestMode { get; set; } = TestMode.Live;
+        public string TenantId { get; set; } = string.Empty;
+        public string SubscriptionId { get; set; } = string.Empty;
+    }
+}
diff --git a/core/Azure.Mcp.Core/tests/Azure.Mcp.Tests/Client/Helpers/LiveTestSettings.cs b/core/Azure.Mcp.Core/tests/Azure.Mcp.Tests/Client/Helpers/LiveTestSettings.cs
index ef350bae80..842f5bc20d 100644
--- a/core/Azure.Mcp.Core/tests/Azure.Mcp.Tests/Client/Helpers/LiveTestSettings.cs
+++ b/core/Azure.Mcp.Core/tests/Azure.Mcp.Tests/Client/Helpers/LiveTestSettings.cs
@@ -53,16 +53,26 @@ public static bool TryLoadTestSettings([NotNullWhen(true)] out LiveTestSettings?
         {
             var json = File.ReadAllText(path);
 
-            settings = JsonSerializer.Deserialize<LiveTestSettings>(json, new JsonSerializerOptions()
+            try
             {
-                PropertyNameCaseInsensitive = true,
-                Converters = { new JsonStringEnumConverter() }
-            });
+                settings = JsonSerializer.Deserialize<LiveTestSettings>(json, new JsonSerializerOptions()
+                {
+                    PropertyNameCaseInsensitive = true,
+                    Converters = { new JsonStringEnumConverter() }
+                });
 
-            if (settings != null)
+                if (settings != null)
+                {
+                    settings.SettingsDirectory = Path.GetDirectoryName(path) ?? string.Empty;
+                    return true;
+                }
+            }
+            catch (JsonException ex) when (ex.Message.Contains("TestMode"))
             {
-                settings.SettingsDirectory = Path.GetDirectoryName(path) ?? string.Empty;
-                return true;
+                var validValues = string.Join(", ", Enum.GetNames<TestMode>());
+                throw new InvalidOperationException(
+                    $"Invalid TestMode value in {TestSettingsFileName}. Valid values are: {validValues}. " +
+                    $"Error details: {ex.Message}", ex);
             }
         }