diff --git a/src/lib/credentials.test.ts b/src/lib/credentials.test.ts
index 447d9d3..ad93031 100644
--- a/src/lib/credentials.test.ts
+++ b/src/lib/credentials.test.ts
@@ -216,15 +216,21 @@ describe('ensureRestrictiveMode', () => {
       spawnSync: spawn,
     });
 
-    expect(spawn).toHaveBeenCalledWith(
-      'icacls',
-      [credentialsPath, '/inheritance:r', '/grant:r', 'alice:F'],
-      {
-        shell: false,
-        stdio: 'ignore',
-        windowsHide: true,
-      },
-    );
+    // First call: /reset re-enables inheritance from the parent directory so the
+    // owner can always access the file (fixes EPERM on Microsoft Account / domain
+    // account machines where USERNAME does not resolve to the file-owner SID).
+    expect(spawn).toHaveBeenNthCalledWith(1, 'icacls', [credentialsPath, '/reset'], {
+      shell: false,
+      stdio: 'ignore',
+      windowsHide: true,
+    });
+    // Second call: /grant:r adds an explicit Full Control entry as belt-and-suspenders.
+    expect(spawn).toHaveBeenNthCalledWith(2, 'icacls', [credentialsPath, '/grant:r', 'alice:F'], {
+      shell: false,
+      stdio: 'ignore',
+      windowsHide: true,
+    });
+    expect(spawn).toHaveBeenCalledTimes(2);
   });
 
   it('warns on Windows when credentials ACL tightening cannot run', () => {
diff --git a/src/lib/credentials.ts b/src/lib/credentials.ts
index c67944b..efe8525 100644
--- a/src/lib/credentials.ts
+++ b/src/lib/credentials.ts
@@ -231,7 +231,21 @@ function ensureWindowsRestrictiveAcl(path: string, options: RestrictiveModeOptio
   }
 
   const run = options.spawnSync ?? spawnSync;
-  const result = run('icacls', [path, '/inheritance:r', '/grant:r', `${username}:F`], {
+
+  // Reset to re-enable inheritance from the parent directory first.
+  // Using /inheritance:r (the previous approach) strips all inherited ACEs and
+  // relies solely on the USERNAME-based grant — on Windows the env USERNAME may
+  // not resolve to the same SID that owns the file (e.g. Microsoft Account /
+  // domain account mismatches), which leaves the file unreadable by anyone.
+  // /reset restores inherited ACEs so the owner can always access the file, then
+  // the explicit /grant:r adds a belt-and-suspenders Full-Control entry.
+  run('icacls', [path, '/reset'], {
+    shell: false,
+    stdio: 'ignore',
+    windowsHide: true,
+  });
+
+  const result = run('icacls', [path, '/grant:r', `${username}:F`], {
     shell: false,
     stdio: 'ignore',
     windowsHide: true,