diff --git a/libs/arcade-cli/arcade_cli/new.py b/libs/arcade-cli/arcade_cli/new.py
index ef8db64b..438503d1 100644
--- a/libs/arcade-cli/arcade_cli/new.py
+++ b/libs/arcade-cli/arcade_cli/new.py
@@ -26,7 +26,7 @@ ARCADE_TDK_MIN_VERSION = "3.0.0"
 ARCADE_TDK_MAX_VERSION = "4.0.0"
 ARCADE_SERVE_MIN_VERSION = "3.0.0"
 ARCADE_SERVE_MAX_VERSION = "4.0.0"
-ARCADE_MCP_SERVER_MIN_VERSION = "1.1.1"
+ARCADE_MCP_SERVER_MIN_VERSION = "1.3.2"
 ARCADE_MCP_SERVER_MAX_VERSION = "2.0.0"
 
 
diff --git a/libs/arcade-mcp-server/arcade_mcp_server/__main__.py b/libs/arcade-mcp-server/arcade_mcp_server/__main__.py
index ca9af2d4..12cebf6b 100644
--- a/libs/arcade-mcp-server/arcade_mcp_server/__main__.py
+++ b/libs/arcade-mcp-server/arcade_mcp_server/__main__.py
@@ -114,6 +114,7 @@ async def run_stdio_server(
     catalog: ToolCatalog,
     debug: bool = False,
     env_file: str | None = None,
+    settings: MCPSettings | None = None,
     **kwargs: Any,
 ) -> None:
     """Run MCP server with stdio transport."""
@@ -124,7 +125,11 @@ async def run_stdio_server(
     if env_file:
         load_dotenv(env_file)
         logger.debug(f"Loaded environment variables from --env-file={env_file}")
-    settings = MCPSettings.from_env()
+
+    # Use provided settings or load from environment
+    if settings is None:
+        settings = MCPSettings.from_env()
+
     if debug:
         settings.debug = True
         settings.middleware.enable_logging = True
diff --git a/libs/arcade-mcp-server/pyproject.toml b/libs/arcade-mcp-server/pyproject.toml
index 8c1e98bb..7e97cc8e 100644
--- a/libs/arcade-mcp-server/pyproject.toml
+++ b/libs/arcade-mcp-server/pyproject.toml
@@ -4,7 +4,7 @@ build-backend = "hatchling.build"
 
 [project]
 name = "arcade-mcp-server"
-version = "1.3.1"
+version = "1.3.2"
 description = "Model Context Protocol (MCP) server framework for Arcade.dev"
 readme = "README.md"
 authors = [{ name = "Arcade.dev" }]
diff --git a/pyproject.toml b/pyproject.toml
index 7d7510f6..c34a508c 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -1,6 +1,6 @@
 [project]
 name = "arcade-mcp"
-version = "1.2.0"
+version = "1.2.1"
 description = "Arcade.dev - Tool Calling platform for Agents"
 readme = "README.md"
 license = {file = "LICENSE"}
@@ -21,7 +21,7 @@ requires-python = ">=3.10"
 
 dependencies = [
     # CLI dependencies
-    "arcade-mcp-server>=1.3.0,<2.0.0",
+    "arcade-mcp-server>=1.3.2,<2.0.0",
     "arcade-core>=3.0.0,<4.0.0",
     "typer==0.10.0",
     "rich==13.9.4",
@@ -42,7 +42,7 @@ all = [
     "pytz>=2024.1",
     "python-dateutil>=2.8.2",
     # mcp
-    "arcade-mcp-server>=1.3.0,<2.0.0",
+    "arcade-mcp-server>=1.3.2,<2.0.0",
     # serve
     "arcade-serve>=3.0.0,<4.0.0",
     # tdk