diff --git a/bin/helpers/utils.js b/bin/helpers/utils.js
index a356a5b8..2cc7f133 100644
--- a/bin/helpers/utils.js
+++ b/bin/helpers/utils.js
@@ -491,10 +491,20 @@ exports.setNodeVersion = (bsConfig, args) => {
 }
 
 // specs can be passed from bstack configuration file
+// True when the spec list for this run comes from BROWSERSTACK_RERUN_TESTS rather than
+// the user's config/CLI args. Shared by setUserSpecs and getNumberOfSpecFiles so the two
+// cannot drift apart — getNumberOfSpecFiles rewrites specs only for runs setUserSpecs
+// actually sourced from the re-run env.
+exports.isReRunSpecsSession = () => {
+  return o11yHelpers.isBrowserstackInfra()
+    && o11yHelpers.isTestObservabilitySession()
+    && o11yHelpers.shouldReRunObservabilityTests();
+}
+
 // specs can be passed via command line args as a string
 // command line args takes precedence over config
 exports.setUserSpecs = (bsConfig, args) => {
-  if(o11yHelpers.isBrowserstackInfra() && o11yHelpers.isTestObservabilitySession() && o11yHelpers.shouldReRunObservabilityTests()) {
+  if(this.isReRunSpecsSession()) {
     // BROWSERSTACK_RERUN_TESTS arrives comma+space separated (e.g. "a.ts, b.ts"); normalise
     // like the other spec sources below, else sanitizeSpecsPattern builds "{a.ts, b.ts}" whose
     // space-prefixed brace alternatives never match and the failed-spec filter collapses.
@@ -1232,6 +1242,16 @@ exports.getNumberOfSpecFiles = (bsConfig, args, cypressConfig, turboScaleSession
     files = files.map((x) => { return x.replaceAll("\\", "/") })
     // setting specs for turboScale as we don't have patched API for turboscale so we will rely on info from CLI
     bsConfig.run_settings.specs = files;
+  } else if (this.isReRunSpecsSession() && files.length) {
+    // BROWSERSTACK_RERUN_TESTS arrives as bare filenames ("a.ts,b.ts"). run_settings is
+    // forwarded to the remote machines verbatim, and a bare filename does not resolve
+    // against the project root there, so Cypress exits having run no spec at all. The
+    // glob above already resolved them against cypressProjectDir — persist those
+    // project-relative paths so the remote receives something it can resolve.
+    bsConfig.run_settings.specs = files
+      .map((file) => path.relative(bsConfig.run_settings.cypressProjectDir, file).replaceAll("\\", "/"))
+      .join(",");
+    logger.debug(`Re-run specs resolved to project-relative paths: ${bsConfig.run_settings.specs}`);
   }
   return files;
   } catch (err) {
diff --git a/test/unit/bin/helpers/utils.js b/test/unit/bin/helpers/utils.js
index 2705d770..480cb5f4 100644
--- a/test/unit/bin/helpers/utils.js
+++ b/test/unit/bin/helpers/utils.js
@@ -2327,6 +2327,76 @@ describe('utils', () => {
   });
 
   describe('getNumberOfSpecFiles', () => {
+    context('when re-running observability failed tests (SDK-7124)', () => {
+      let rerunStubs = [];
+      const specPattern = `cypress/e2e/**/*.+(${constant.specFileTypes.join('|')})`;
+
+      const stubGlob = () => {
+        const globStub = sinon.stub(glob, 'sync');
+        globStub.withArgs(specPattern).returns([
+          'cypress/e2e/FlightOffer/FO-E2E-02.ts',
+          'cypress/e2e/FlightOffer/FO-E2E-05.ts',
+          'cypress/e2e/FlightOffer/FO-E2E-09.ts',
+        ]);
+        globStub.withArgs('{FO-E2E-02.ts,FO-E2E-05.ts}').returns([
+          'cypress/e2e/FlightOffer/FO-E2E-02.ts',
+          'cypress/e2e/FlightOffer/FO-E2E-05.ts',
+        ]);
+        return globStub;
+      };
+
+      const buildConfig = (specs) => ({
+        run_settings: {
+          cypressTestSuiteType: CYPRESS_V10_AND_ABOVE_TYPE,
+          specs: specs,
+          cypressProjectDir: '/repo',
+        },
+      });
+
+      beforeEach(() => {
+        rerunStubs.push(sinon.stub(o11yHelpers, 'isBrowserstackInfra').returns(true));
+        rerunStubs.push(sinon.stub(o11yHelpers, 'isTestObservabilitySession').returns(true));
+        rerunStubs.push(sinon.stub(o11yHelpers, 'shouldReRunObservabilityTests').returns(true));
+      });
+
+      afterEach(() => {
+        rerunStubs.forEach((s) => s.restore());
+        rerunStubs = [];
+        if (glob.sync.restore) glob.sync.restore();
+      });
+
+      it('rewrites the bare rerun filenames to project-relative paths for the remote machines', () => {
+        stubGlob();
+        // shape setUserSpecs leaves behind for a rerun: bare filenames, comma separated
+        let bsConfig = buildConfig('FO-E2E-02.ts,FO-E2E-05.ts');
+
+        const result = utils.getNumberOfSpecFiles(bsConfig, {}, {});
+
+        expect(result.length).to.eql(2);
+        // run_settings is forwarded to the remote verbatim, so it must carry resolvable paths
+        expect(bsConfig.run_settings.specs).to.be.eq(
+          'cypress/e2e/FlightOffer/FO-E2E-02.ts,cypress/e2e/FlightOffer/FO-E2E-05.ts'
+        );
+      });
+
+      it('leaves specs untouched when this is not a rerun session', () => {
+        rerunStubs.forEach((s) => s.restore());
+        rerunStubs = [];
+        sinon.stub(o11yHelpers, 'isBrowserstackInfra').returns(false);
+        sinon.stub(o11yHelpers, 'isTestObservabilitySession').returns(false);
+        sinon.stub(o11yHelpers, 'shouldReRunObservabilityTests').returns(false);
+        rerunStubs.push(o11yHelpers.isBrowserstackInfra);
+        rerunStubs.push(o11yHelpers.isTestObservabilitySession);
+        rerunStubs.push(o11yHelpers.shouldReRunObservabilityTests);
+        stubGlob();
+        let bsConfig = buildConfig('FO-E2E-02.ts,FO-E2E-05.ts');
+
+        utils.getNumberOfSpecFiles(bsConfig, {}, {});
+
+        expect(bsConfig.run_settings.specs).to.be.eq('FO-E2E-02.ts,FO-E2E-05.ts');
+      });
+    });
+
     it('should return files matching with run_settings.specs and under default folder if cypress v <= 9 and no integration/testFiles patterm provided', () => {
       let globStub = sinon.stub(glob, 'sync')
       globStub.withArgs('cypress/integration/foo*.js')