diff --git a/backend/app/services/report_agent.py b/backend/app/services/report_agent.py
index cba2a30..e76dcd5 100644
--- a/backend/app/services/report_agent.py
+++ b/backend/app/services/report_agent.py
@@ -20,6 +20,7 @@
 
 from ..config import Config
 from ..utils.llm_client import LLMClient
+from ..utils.llm_sanitizer import extract_json_block
 from ..utils.logger import get_logger
 from .zep_tools import (
     ZepToolsService, 
@@ -1080,10 +1081,16 @@ def _parse_tool_calls(self, response: str) -> List[Dict[str, Any]]:
         tool_calls = []
 
         # Format 1: XML-style (standard format)
-        xml_pattern = r'<tool_call>\s*(\{.*?\})\s*</tool_call>'
+        # Capture the full <tool_call> body, then pull the balanced {...} object
+        # out of it. A lazy `\{.*?\}` would stop at the first '}', dropping any
+        # tool call whose `parameters` is a non-empty nested object.
+        xml_pattern = r'<tool_call>(.*?)</tool_call>'
         for match in re.finditer(xml_pattern, response, re.DOTALL):
+            json_str = extract_json_block(match.group(1))
+            if not json_str:
+                continue
             try:
-                call_data = json.loads(match.group(1))
+                call_data = json.loads(json_str)
                 tool_calls.append(call_data)
             except json.JSONDecodeError:
                 pass
diff --git a/backend/tests/test_report_agent_tool_parsing.py b/backend/tests/test_report_agent_tool_parsing.py
index 5f534ed..420158c 100644
--- a/backend/tests/test_report_agent_tool_parsing.py
+++ b/backend/tests/test_report_agent_tool_parsing.py
@@ -42,6 +42,39 @@ def test_parse_xml_tool_call(agent):
     assert calls == [{"name": "quick_search"}]
 
 
+def test_parse_xml_tool_call_with_nested_parameters(agent):
+    # Guard: a non-empty nested `parameters` object must survive. (This already
+    # worked -- the </tool_call> anchor backtracks the old lazy regex to the
+    # outer brace -- kept so the balanced-extraction rewrite doesn't regress it.)
+    response = '<tool_call>{"name": "insight_forge", "parameters": {"query": "pricing"}}</tool_call>'
+    calls = agent._parse_tool_calls(response)
+    assert calls == [{"name": "insight_forge", "parameters": {"query": "pricing"}}]
+
+
+def test_parse_xml_tool_call_with_leading_text_in_tag(agent):
+    # Model prefixes the JSON with prose inside the tag. The old
+    # `<tool_call>\s*(\{...\})` regex required the object to start right after the
+    # tag and dropped this; balanced extraction scans past the prose.
+    response = '<tool_call>\nHere you go: {"name": "quick_search", "parameters": {"q": "x"}}</tool_call>'
+    calls = agent._parse_tool_calls(response)
+    assert calls == [{"name": "quick_search", "parameters": {"q": "x"}}]
+
+
+def test_parse_xml_tool_call_with_trailing_text_in_tag(agent):
+    # A trailing note after the JSON inside the tag. The old regex required the
+    # object to end right before </tool_call> and dropped this entirely.
+    response = '<tool_call>{"name": "insight_forge", "parameters": {"query": "p"}}\nNote: done</tool_call>'
+    calls = agent._parse_tool_calls(response)
+    assert calls == [{"name": "insight_forge", "parameters": {"query": "p"}}]
+
+
+def test_parse_xml_tool_call_with_fenced_json_in_tag(agent):
+    # Some models wrap the call in a ```json fence inside the tag.
+    response = '<tool_call>```json\n{"name": "quick_search", "parameters": {"q": 1}}\n```</tool_call>'
+    calls = agent._parse_tool_calls(response)
+    assert calls == [{"name": "quick_search", "parameters": {"q": 1}}]
+
+
 def test_parse_bare_json_with_nested_parameters(agent):
     response = '{"name": "insight_forge", "parameters": {"query": "pricing"}}'
     calls = agent._parse_tool_calls(response)