diff --git a/yarn-project/end-to-end/src/test-wallet/wallet_worker_script.ts b/yarn-project/end-to-end/src/test-wallet/wallet_worker_script.ts
index 820c1c402e95..a532bbabdbd1 100644
--- a/yarn-project/end-to-end/src/test-wallet/wallet_worker_script.ts
+++ b/yarn-project/end-to-end/src/test-wallet/wallet_worker_script.ts
@@ -1,43 +1,60 @@
 import { createAztecNodeClient } from '@aztec/aztec.js/node';
+import type { SendOptions } from '@aztec/aztec.js/wallet';
 import { jsonStringify } from '@aztec/foundation/json-rpc';
-import type { ApiSchema } from '@aztec/foundation/schemas';
+import { createLogger } from '@aztec/foundation/log';
+import type { ApiSchema, Fr } from '@aztec/foundation/schemas';
 import { parseWithOptionals, schemaHasMethod } from '@aztec/foundation/schemas';
 import { NodeListener, TransportServer } from '@aztec/foundation/transport';
+import { ExecutionPayload, Tx } from '@aztec/stdlib/tx';
 
 import { workerData } from 'worker_threads';
 
 import { TestWallet } from './test_wallet.js';
 import { WorkerWalletSchema } from './worker_wallet_schema.js';
 
-const { nodeUrl, pxeConfig } = workerData as { nodeUrl: string; pxeConfig?: Record<string, unknown> };
+const logger = createLogger('e2e:test-wallet:worker');
 
-const node = createAztecNodeClient(nodeUrl);
-const wallet = await TestWallet.create(node, pxeConfig);
+try {
+  const { nodeUrl, pxeConfig } = workerData as { nodeUrl: string; pxeConfig?: Record<string, unknown> };
 
-/** Handlers for methods that need custom implementation (not direct wallet passthrough). */
-const handlers: Record<string, (...args: any[]) => Promise<any>> = {
-  proveTx: async (exec, opts) => {
-    const provenTx = await wallet.proveTx(exec, opts);
-    // ProvenTx has non-serializable fields (node proxy, etc.) — extract only Tx-compatible fields
-    const { data, chonkProof, contractClassLogFields, publicFunctionCalldata } = provenTx;
-    return { data, chonkProof, contractClassLogFields, publicFunctionCalldata };
-  },
-  registerAccount: async (secret, salt) => {
-    const manager = await wallet.createSchnorrAccount(secret, salt);
-    return manager.address;
-  },
-};
+  logger.info('Initializing worker wallet', { nodeUrl });
+  const node = createAztecNodeClient(nodeUrl);
+  const wallet = await TestWallet.create(node, pxeConfig);
+  logger.info('Worker wallet initialized');
 
-const schema = WorkerWalletSchema as ApiSchema;
-const listener = new NodeListener();
-const server = new TransportServer<{ fn: string; args: string }>(listener, async msg => {
-  if (!schemaHasMethod(schema, msg.fn)) {
-    throw new Error(`Unknown method: ${msg.fn}`);
-  }
-  const jsonParams = JSON.parse(msg.args) as unknown[];
-  const args = await parseWithOptionals(jsonParams, schema[msg.fn].parameters());
-  const handler = handlers[msg.fn];
-  const result = handler ? await handler(...args) : await (wallet as any)[msg.fn](...args);
-  return jsonStringify(result);
-});
-server.start();
+  const customMethods = {
+    proveTx: async (exec: ExecutionPayload, opts: Omit<SendOptions, 'wait'>) => {
+      const provenTx = await wallet.proveTx(exec, opts);
+      return new Tx(
+        provenTx.getTxHash(),
+        provenTx.data,
+        provenTx.chonkProof,
+        provenTx.contractClassLogFields,
+        provenTx.publicFunctionCalldata,
+      );
+    },
+    registerAccount: async (secret: Fr, salt: Fr) => {
+      const manager = await wallet.createSchnorrAccount(secret, salt);
+      return manager.address;
+    },
+  };
+
+  const schema = WorkerWalletSchema as ApiSchema;
+  const listener = new NodeListener();
+  const server = new TransportServer<{ fn: string; args: string }>(listener, async msg => {
+    if (!schemaHasMethod(schema, msg.fn)) {
+      throw new Error(`Unknown method: ${msg.fn}`);
+    }
+    const jsonParams = JSON.parse(msg.args) as unknown[];
+    const args: any[] = await parseWithOptionals(jsonParams, schema[msg.fn].parameters());
+    // we have to erase the fn type in order to be able to spread ...args
+    const handler: ((...args: any[]) => Promise<any>) | undefined =
+      msg.fn in customMethods ? customMethods[msg.fn as keyof typeof customMethods] : undefined;
+    const result = handler ? await handler(...args) : await (wallet as any)[msg.fn](...args);
+    return jsonStringify(result);
+  });
+  server.start();
+} catch (err: unknown) {
+  logger.error('Worker wallet initialization failed', { error: err instanceof Error ? err.stack : String(err) });
+  process.exit(1);
+}
diff --git a/yarn-project/end-to-end/src/test-wallet/worker_wallet.ts b/yarn-project/end-to-end/src/test-wallet/worker_wallet.ts
index 3296e6758816..ca4cd97644c1 100644
--- a/yarn-project/end-to-end/src/test-wallet/worker_wallet.ts
+++ b/yarn-project/end-to-end/src/test-wallet/worker_wallet.ts
@@ -19,7 +19,10 @@ import type {
 import type { ChainInfo } from '@aztec/entrypoints/interfaces';
 import type { Fr } from '@aztec/foundation/curves/bn254';
 import { jsonStringify } from '@aztec/foundation/json-rpc';
+import { createLogger } from '@aztec/foundation/log';
+import { promiseWithResolvers } from '@aztec/foundation/promise';
 import type { ApiSchema } from '@aztec/foundation/schemas';
+import { sleep } from '@aztec/foundation/sleep';
 import { NodeConnector, TransportClient } from '@aztec/foundation/transport';
 import type { PXEConfig } from '@aztec/pxe/config';
 import type { ContractArtifact, EventMetadataDefinition, FunctionCall } from '@aztec/stdlib/abi';
@@ -35,6 +38,10 @@ import { WorkerWalletSchema } from './worker_wallet_schema.js';
 
 type WorkerMsg = { fn: string; args: string };
 
+const log = createLogger('e2e:test-wallet:worker-wallet');
+
+const WORKER_READY_TIMEOUT_MS = 120_000;
+
 /**
  * Wallet implementation that offloads all work to a worker thread.
  * Implements the Wallet interface by proxying calls over a transport layer
@@ -53,8 +60,18 @@ export class WorkerWallet implements Wallet {
    * @returns A WorkerWallet ready to use.
    */
   static async create(nodeUrl: string, pxeConfig?: Partial<PXEConfig>): Promise<WorkerWallet> {
-    const worker = new Worker(new URL('./wallet_worker_script.js', import.meta.url), {
+    // replace stc/ with dest/ so the wallet works in Jest tests
+    const workerUrl = new URL('./wallet_worker_script.js', import.meta.url);
+    workerUrl.pathname = workerUrl.pathname.replace('/src/', '/dest/');
+    // remove JEST_WORKER_ID so the worker uses pino-pretty transport instead of Jest's raw output.
+    const { JEST_WORKER_ID: _, ...parentEnv } = process.env;
+    const worker = new Worker(workerUrl, {
       workerData: { nodeUrl, pxeConfig },
+      env: {
+        ...parentEnv,
+        ...(process.stderr.isTTY || process.env.FORCE_COLOR ? { FORCE_COLOR: '1' } : {}),
+        LOG_LEVEL: process.env.WORKER_LOG_LEVEL ?? 'warning',
+      },
     });
 
     const connector = new NodeConnector(worker);
@@ -62,8 +79,39 @@ export class WorkerWallet implements Wallet {
     await client.open();
 
     const wallet = new WorkerWallet(worker, client);
-    // Warmup / readiness check — blocks until the worker has finished creating the TestWallet.
-    await wallet.getChainInfo();
+
+    const { promise: workerDied, reject: rejectWorkerDied } = promiseWithResolvers<void>();
+    // reject if the worker exits or errors before the warmup completes.
+    const onError = (err: Error): void => {
+      worker.off('exit', onExit!);
+      rejectWorkerDied(new Error(`Worker wallet thread error: ${err.message}`));
+    };
+
+    const onExit = (code: number): void => {
+      worker.off('error', onError!);
+      rejectWorkerDied(new Error(`Worker wallet thread exited with code ${code} before becoming ready`));
+    };
+
+    worker.once('error', onError);
+    worker.once('exit', onExit);
+
+    const timeout = sleep(WORKER_READY_TIMEOUT_MS).then(() => {
+      throw new Error(`Worker wallet creation timed out after ${WORKER_READY_TIMEOUT_MS / 1000}s`);
+    });
+
+    try {
+      // wait for worker wallet to start
+      await Promise.race([wallet.getChainInfo(), workerDied, timeout]);
+    } catch (err) {
+      log.error('Worker wallet creation failed, cleaning up', { error: String(err) });
+      client.close();
+      await worker.terminate();
+      throw err;
+    } finally {
+      worker.off('error', onError);
+      worker.off('exit', onExit);
+    }
+
     return wallet;
   }
 
diff --git a/yarn-project/foundation/src/transport/transport_client.ts b/yarn-project/foundation/src/transport/transport_client.ts
index e1aa0260e811..fb2b98f86ddf 100644
--- a/yarn-project/foundation/src/transport/transport_client.ts
+++ b/yarn-project/foundation/src/transport/transport_client.ts
@@ -91,7 +91,7 @@ export class TransportClient<Payload> extends EventEmitter {
     }
     const msgId = this.msgId++;
     const msg = { msgId, payload };
-    log.debug(format(`->`, msg));
+    log.trace(format(`->`, msg));
     return new Promise<any>((resolve, reject) => {
       this.pendingRequests.push({ resolve, reject, msgId });
       this.socket!.send(msg, transfer).catch(reject);
@@ -111,7 +111,7 @@ export class TransportClient<Payload> extends EventEmitter {
       this.close();
       return;
     }
-    log.debug(format(`<-`, msg));
+    log.trace(format(`<-`, msg));
     if (isEventMessage(msg)) {
       this.emit('event_msg', msg.payload);
       return;