diff --git a/kagenti-operator/GETTING_STARTED.md b/kagenti-operator/GETTING_STARTED.md
index 96ce99c6..c495f856 100644
--- a/kagenti-operator/GETTING_STARTED.md
+++ b/kagenti-operator/GETTING_STARTED.md
@@ -170,8 +170,8 @@ spec:
 ### Deleting an AgentRuntime
 
 When you delete the AgentRuntime CR, the controller performs a graceful cleanup:
-- Preserves the `kagenti.io/type` label (so AgentCard discovery continues)
-- Updates the config hash to defaults-only (triggers a rollback to default sidecar configuration)
+- Removes the `kagenti.io/type` label from the workload metadata and PodTemplateSpec
+- Removes the `kagenti.io/config-hash` annotation from the PodTemplateSpec (triggers a rolling update so existing injected pods are replaced)
 - Removes the `app.kubernetes.io/managed-by` label
 
 ```bash
diff --git a/kagenti-operator/docs/architecture.md b/kagenti-operator/docs/architecture.md
index 4b3096ad..2e646deb 100644
--- a/kagenti-operator/docs/architecture.md
+++ b/kagenti-operator/docs/architecture.md
@@ -72,7 +72,7 @@ The Kagenti Operator is a Kubernetes controller that implements the [Operator Pa
 - Computes config hash from 3-layer merged configuration (cluster defaults → namespace defaults → CR overrides)
 - Discovers linked skills by reading the `kagenti.io/skills` annotation from target workloads when the `skillDiscovery` feature gate is enabled
 - Triggers rolling updates when configuration changes
-- On CR deletion: preserves type label, updates config-hash to defaults-only, removes managed-by label
+- On CR deletion: removes type label, managed-by label and config-hash annotation (causing the workload to lose sidecars)
 - Coordinates with the AuthBridge mutating webhook (in-process) which injects sidecars at Pod CREATE time
 
 ### Supporting Components
@@ -194,8 +194,8 @@ The AgentRuntime Controller reconciles AgentRuntime CRs by resolving the target
 ```
 1. Fetch AgentRuntime CR
 2. Handle deletion (if marked for deletion):
-   a. Preserve kagenti.io/type label on workload
-   b. Update config-hash to defaults-only (triggers rollback)
+   a. Remove kagenti.io/type label from workload metadata and PodTemplateSpec
+   b. Remove kagenti.io/config-hash annotation from PodTemplateSpec (triggers rolling update)
    c. Remove managed-by label
    d. Remove finalizer
 3. Ensure kagenti.io/cleanup finalizer is present
diff --git a/kagenti-operator/docs/controller-webhook-interaction.md b/kagenti-operator/docs/controller-webhook-interaction.md
index db0f9542..519c04db 100644
--- a/kagenti-operator/docs/controller-webhook-interaction.md
+++ b/kagenti-operator/docs/controller-webhook-interaction.md
@@ -116,9 +116,9 @@ sequenceDiagram
 
     Note over Ctrl: Finalizer kagenti.io/cleanup is present
 
-    Ctrl->>API: Patch Deployment:<br/>- Preserve kagenti.io/type label<br/>- Update config-hash to defaults-only<br/>- Remove managed-by label
+    Ctrl->>API: Patch Deployment:<br/>- Remove kagenti.io/type label<br/>- Remove kagenti.io/config-hash annotation<br/>- Remove managed-by label
     API-->>K8s: PodTemplateSpec changed → rolling update
-    Note over K8s: New Pods get sidecars with default config only
+    Note over K8s: New Pods lack the type label — webhook skips injection
 
     Ctrl->>API: Remove finalizer from AgentRuntime CR
     API->>API: CR garbage collected
diff --git a/kagenti-operator/internal/controller/agentruntime_controller.go b/kagenti-operator/internal/controller/agentruntime_controller.go
index 27a146e8..19b5b62c 100644
--- a/kagenti-operator/internal/controller/agentruntime_controller.go
+++ b/kagenti-operator/internal/controller/agentruntime_controller.go
@@ -656,7 +656,9 @@ func isPodOwnedByWorkload(pod *corev1.Pod, workloadName string) bool {
 }
 
 // handleDeletion runs finalizer logic when an AgentRuntime is deleted.
-// It preserves the kagenti.io/type label and updates the config-hash to defaults-only.
+// It removes the kagenti.io/type label and kagenti.io/config-hash annotation so that
+// the next rolling update creates pods without sidecars, returning the workload to its
+// pre-AR state.
 func (r *AgentRuntimeReconciler) handleDeletion(ctx context.Context, rt *agentv1alpha1.AgentRuntime) (ctrl.Result, error) {
 	logger := log.FromContext(ctx)
 
@@ -669,12 +671,6 @@ func (r *AgentRuntimeReconciler) handleDeletion(ctx context.Context, rt *agentv1
 	ref := rt.Spec.TargetRef
 	acc, ok := newRuntimePodTemplateAccessor(ref.Kind)
 	if ok {
-		defaultsHash, err := ComputeDefaultsOnlyHash(ctx, r.Client, rt.Namespace)
-		if err != nil {
-			logger.V(1).Info("Failed to compute defaults-only hash, using empty", "error", err)
-			defaultsHash = ""
-		}
-
 		key := types.NamespacedName{Name: ref.Name, Namespace: rt.Namespace}
 		updateErr := retry.RetryOnConflict(retry.DefaultRetry, func() error {
 			if err := r.Get(ctx, key, acc.obj); err != nil {
@@ -684,21 +680,31 @@ func (r *AgentRuntimeReconciler) handleDeletion(ctx context.Context, rt *agentv1
 				return err
 			}
 
-			// Preserve kagenti.io/type label (workload stays classified)
-			// Update config-hash to defaults-only
-			podAnnotations := acc.getPodAnnotations(acc.obj)
-			if podAnnotations == nil {
-				podAnnotations = make(map[string]string)
-			}
-			podAnnotations[AnnotationConfigHash] = defaultsHash
-			acc.setPodAnnotations(acc.obj, podAnnotations)
-
-			// Remove managed-by label from workload metadata
+			// Remove kagenti.io/type and kagenti.io/managed-by from workload metadata.
 			workloadLabels := acc.obj.GetLabels()
+			delete(workloadLabels, LabelAgentType)
 			delete(workloadLabels, LabelManagedBy)
 			acc.obj.SetLabels(workloadLabels)
 
-			logger.Info("Updated workload to defaults-only config on AgentRuntime deletion",
+			// Remove skills annotation from workload metadata.
+			workloadAnnotations := acc.obj.GetAnnotations()
+			delete(workloadAnnotations, AnnotationSkills)
+			acc.obj.SetAnnotations(workloadAnnotations)
+
+			// Remove kagenti.io/type from PodTemplateSpec pod labels so future pods
+			// are not presented to the webhook with the type label.
+			podLabels := acc.getPodLabels(acc.obj)
+			delete(podLabels, LabelAgentType)
+			acc.setPodLabels(acc.obj, podLabels)
+
+			// Remove kagenti.io/config-hash from PodTemplateSpec pod annotations.
+			// This triggers the rolling update that replaces existing injected pods,
+			// and leaves the workload annotation-clean for any future AR.
+			podAnnotations := acc.getPodAnnotations(acc.obj)
+			delete(podAnnotations, AnnotationConfigHash)
+			acc.setPodAnnotations(acc.obj, podAnnotations)
+
+			logger.Info("Removed kagenti labels and config-hash from workload on AgentRuntime deletion",
 				"workload", ref.Name, "kind", ref.Kind)
 			return r.Update(ctx, acc.obj)
 		})
diff --git a/kagenti-operator/internal/controller/agentruntime_controller_test.go b/kagenti-operator/internal/controller/agentruntime_controller_test.go
index 66f8b7ae..3ae6c0aa 100644
--- a/kagenti-operator/internal/controller/agentruntime_controller_test.go
+++ b/kagenti-operator/internal/controller/agentruntime_controller_test.go
@@ -378,7 +378,7 @@ var _ = Describe("AgentRuntime Controller", func() {
 			_ = k8sClient.Delete(ctx, dep)
 		})
 
-		It("should preserve type label, remove managed-by, and update config-hash on deletion", func() {
+		It("should remove type label and config-hash, and remove managed-by on deletion", func() {
 			r := newReconciler()
 
 			// Reconcile to add finalizer + apply config
@@ -389,11 +389,12 @@ var _ = Describe("AgentRuntime Controller", func() {
 				NamespacedName: types.NamespacedName{Name: "del-rt", Namespace: namespace},
 			})
 
-			// Get hash before deletion
+			// Confirm labels and hash are set before deletion
 			depBefore := &appsv1.Deployment{}
 			Expect(k8sClient.Get(ctx, types.NamespacedName{Name: "del-deploy", Namespace: namespace}, depBefore)).To(Succeed())
-			hashBefore := depBefore.Spec.Template.Annotations[AnnotationConfigHash]
-			Expect(hashBefore).NotTo(BeEmpty())
+			Expect(depBefore.Spec.Template.Annotations[AnnotationConfigHash]).NotTo(BeEmpty())
+			Expect(depBefore.Labels[LabelAgentType]).NotTo(BeEmpty())
+			Expect(depBefore.Spec.Template.Labels[LabelAgentType]).NotTo(BeEmpty())
 
 			// Delete the AgentRuntime
 			Expect(k8sClient.Delete(ctx, rt)).To(Succeed())
@@ -408,16 +409,15 @@ var _ = Describe("AgentRuntime Controller", func() {
 			depAfter := &appsv1.Deployment{}
 			Expect(k8sClient.Get(ctx, types.NamespacedName{Name: "del-deploy", Namespace: namespace}, depAfter)).To(Succeed())
 
-			// Type label preserved
-			Expect(depAfter.Labels[LabelAgentType]).To(Equal("agent"))
-			Expect(depAfter.Spec.Template.Labels[LabelAgentType]).To(Equal("agent"))
+			// kagenti.io/type removed from both workload metadata and PodTemplateSpec
+			Expect(depAfter.Labels).NotTo(HaveKey(LabelAgentType))
+			Expect(depAfter.Spec.Template.Labels).NotTo(HaveKey(LabelAgentType))
 
-			// Managed-by removed
+			// kagenti.io/managed-by removed
 			Expect(depAfter.Labels).NotTo(HaveKey(LabelManagedBy))
 
-			// Config-hash updated to defaults-only (different from before)
-			hashAfter := depAfter.Spec.Template.Annotations[AnnotationConfigHash]
-			Expect(hashAfter).NotTo(Equal(hashBefore), "config-hash should change to defaults-only on deletion")
+			// kagenti.io/config-hash removed from PodTemplateSpec
+			Expect(depAfter.Spec.Template.Annotations).NotTo(HaveKey(AnnotationConfigHash))
 
 			// Finalizer removed — AgentRuntime should be gone
 			deletedRT := &agentv1alpha1.AgentRuntime{}
diff --git a/kagenti-operator/test/e2e/e2e_test.go b/kagenti-operator/test/e2e/e2e_test.go
index 7e380e0c..7bdb93d0 100644
--- a/kagenti-operator/test/e2e/e2e_test.go
+++ b/kagenti-operator/test/e2e/e2e_test.go
@@ -1117,8 +1117,6 @@ rules:
 	SetDefaultEventuallyPollingInterval(time.Second)
 
 	Context("Agent lifecycle", Ordered, func() {
-		var initialConfigHash string
-
 		It("should apply labels and config-hash to target Deployment", func() {
 			By("deploying the agent target workload")
 			_, err := utils.KubectlApplyStdin(runtimeTargetDeploymentFixture(), agentRuntimeTestNamespace)
@@ -1162,7 +1160,6 @@ rules:
 				g.Expect(err).NotTo(HaveOccurred())
 				g.Expect(hash).NotTo(BeEmpty())
 				g.Expect(hash).To(HaveLen(64))
-				initialConfigHash = hash
 			}).Should(Succeed())
 
 			By("verifying AgentCard is auto-created by AgentCardSync")
@@ -1224,9 +1221,6 @@ rules:
 			}, 30*time.Second, 5*time.Second).Should(Succeed())
 		})
 
-		// Note: the AgentCard auto-created by AgentCardSync (runtime-agent-target-deployment-card)
-		// persists after AgentRuntime deletion because kagenti.io/type=agent is preserved on the
-		// Deployment and AgentCardSync owns the card independently of the AgentRuntime lifecycle.
 		It("should clean up on deletion", func() {
 			By("deleting the AgentRuntime CR")
 			cmd := exec.Command("kubectl", "delete", "agentruntime", "test-agent-runtime",
@@ -1248,12 +1242,20 @@ rules:
 			_, err = utils.Run(cmd)
 			Expect(err).NotTo(HaveOccurred())
 
-			By("verifying kagenti.io/type label is preserved")
+			By("verifying kagenti.io/type label is removed from workload metadata")
 			Eventually(func(g Gomega) {
 				typeLabel, err := utils.KubectlGetJsonpath("deployment", "runtime-agent-target",
 					agentRuntimeTestNamespace, "{.metadata.labels['kagenti\\.io/type']}")
 				g.Expect(err).NotTo(HaveOccurred())
-				g.Expect(typeLabel).To(Equal("agent"))
+				g.Expect(typeLabel).To(BeEmpty())
+			}).Should(Succeed())
+
+			By("verifying kagenti.io/type label is removed from PodTemplateSpec")
+			Eventually(func(g Gomega) {
+				typeLabel, err := utils.KubectlGetJsonpath("deployment", "runtime-agent-target",
+					agentRuntimeTestNamespace, "{.spec.template.metadata.labels['kagenti\\.io/type']}")
+				g.Expect(err).NotTo(HaveOccurred())
+				g.Expect(typeLabel).To(BeEmpty())
 			}).Should(Succeed())
 
 			By("verifying managed-by label is removed")
@@ -1264,15 +1266,13 @@ rules:
 				g.Expect(managedBy).To(BeEmpty())
 			}).Should(Succeed())
 
-			By("verifying config-hash changed to defaults-only hash")
+			By("verifying config-hash annotation is removed from PodTemplateSpec")
 			Eventually(func(g Gomega) {
 				hash, err := utils.KubectlGetJsonpath("deployment", "runtime-agent-target",
 					agentRuntimeTestNamespace,
 					"{.spec.template.metadata.annotations['kagenti\\.io/config-hash']}")
 				g.Expect(err).NotTo(HaveOccurred())
-				g.Expect(hash).NotTo(BeEmpty())
-				g.Expect(hash).To(HaveLen(64))
-				g.Expect(hash).NotTo(Equal(initialConfigHash))
+				g.Expect(hash).To(BeEmpty())
 			}).Should(Succeed())
 		})
 	})
@@ -1476,7 +1476,6 @@ var _ = Describe("Combined AgentRuntime + AgentCard + Auth Bridge E2E", Ordered,
 	const controllerDeployment = "kagenti-operator-controller-manager"
 
 	var origArgs []string
-	var initialConfigHash string
 
 	BeforeAll(func() {
 		By("ensuring mlflow-operator ClusterRole exists for ServiceAccount informer")
@@ -1704,7 +1703,6 @@ rules:
 				"{.spec.template.metadata.annotations['kagenti\\.io/config-hash']}")
 			g.Expect(err).NotTo(HaveOccurred())
 			g.Expect(hash).To(HaveLen(64))
-			initialConfigHash = hash
 		}).Should(Succeed())
 	})
 
@@ -1840,7 +1838,7 @@ rules:
 		}).Should(Succeed())
 	})
 
-	It("should clean up on AgentRuntime deletion and maintain injection", func() {
+	It("should clean up on AgentRuntime deletion and stop injection", func() {
 		By("deleting the AgentRuntime CR")
 		cmd := exec.Command("kubectl", "delete", "agentruntime", "combined-agent",
 			"-n", combinedTestNamespace)
@@ -1861,12 +1859,20 @@ rules:
 		_, err = utils.Run(cmd)
 		Expect(err).NotTo(HaveOccurred())
 
-		By("verifying kagenti.io/type=agent label preserved")
+		By("verifying kagenti.io/type label removed from workload metadata")
 		Eventually(func(g Gomega) {
 			typeLabel, err := utils.KubectlGetJsonpath("deployment", "combined-agent",
 				combinedTestNamespace, "{.metadata.labels['kagenti\\.io/type']}")
 			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(typeLabel).To(Equal("agent"))
+			g.Expect(typeLabel).To(BeEmpty())
+		}).Should(Succeed())
+
+		By("verifying kagenti.io/type label removed from PodTemplateSpec")
+		Eventually(func(g Gomega) {
+			typeLabel, err := utils.KubectlGetJsonpath("deployment", "combined-agent",
+				combinedTestNamespace, "{.spec.template.metadata.labels['kagenti\\.io/type']}")
+			g.Expect(err).NotTo(HaveOccurred())
+			g.Expect(typeLabel).To(BeEmpty())
 		}).Should(Succeed())
 
 		By("verifying managed-by label removed")
@@ -1877,14 +1883,13 @@ rules:
 			g.Expect(managedBy).To(BeEmpty())
 		}).Should(Succeed())
 
-		By("verifying config-hash changed from initial")
+		By("verifying config-hash annotation removed from PodTemplateSpec")
 		Eventually(func(g Gomega) {
 			hash, err := utils.KubectlGetJsonpath("deployment", "combined-agent",
 				combinedTestNamespace,
 				"{.spec.template.metadata.annotations['kagenti\\.io/config-hash']}")
 			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(hash).To(HaveLen(64))
-			g.Expect(hash).NotTo(Equal(initialConfigHash))
+			g.Expect(hash).To(BeEmpty())
 		}).Should(Succeed())
 
 		By("verifying AgentCard still exists")
@@ -1896,58 +1901,27 @@ rules:
 			g.Expect(name).To(Equal(cardName))
 		}).Should(Succeed())
 
-		By("getting current pod name")
-		var oldPodName string
-		Eventually(func(g Gomega) {
-			cmd := exec.Command("kubectl", "get", "pods",
-				"-l", "app.kubernetes.io/name=combined-agent",
-				"-n", combinedTestNamespace,
-				"-o", "jsonpath={.items[0].metadata.name}")
-			output, err := utils.Run(cmd)
-			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(output).NotTo(BeEmpty())
-			oldPodName = output
-		}).Should(Succeed())
-
-		By("deleting pod to verify re-injection")
-		cmd = exec.Command("kubectl", "delete", "pod", oldPodName, "-n", combinedTestNamespace)
-		_, err = utils.Run(cmd)
-		Expect(err).NotTo(HaveOccurred())
-
-		By("waiting for replacement pod with sidecars")
-		Eventually(func(g Gomega) {
-			cmd := exec.Command("kubectl", "get", "pods",
-				"-l", "app.kubernetes.io/name=combined-agent",
-				"-n", combinedTestNamespace,
-				"-o", "jsonpath={.items[0].metadata.name}")
-			output, err := utils.Run(cmd)
-			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(output).NotTo(BeEmpty())
-			g.Expect(output).NotTo(Equal(oldPodName), "new pod should have a different name")
-
-			phase, err := utils.KubectlGetJsonpath("pod", output, combinedTestNamespace, "{.status.phase}")
-			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(phase).To(Equal("Running"))
-		}, 3*time.Minute, 2*time.Second).Should(Succeed())
+		By("waiting for rolling update to complete after label removal")
+		Expect(utils.WaitForDeploymentReady("combined-agent", combinedTestNamespace, 3*time.Minute)).To(Succeed())
 
-		By("verifying replacement pod has sidecars (spiffe-helper bundled in envoy-proxy)")
+		By("verifying replacement pods have no sidecars")
 		Eventually(func(g Gomega) {
 			containers, err := utils.KubectlGetJsonpath("pod", "",
 				combinedTestNamespace,
 				"{.items[?(@.metadata.labels.app\\.kubernetes\\.io/name=='combined-agent')].spec.containers[*].name}")
 			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(containers).To(ContainSubstring("envoy-proxy"))
-			g.Expect(containers).NotTo(ContainSubstring("spiffe-helper"),
-				"spiffe-helper is bundled inside envoy-proxy, not a separate container")
+			g.Expect(containers).NotTo(ContainSubstring("envoy-proxy"),
+				"envoy-proxy should not be injected after AR deletion")
 		}).Should(Succeed())
 
-		By("verifying replacement pod has proxy-init")
+		By("verifying replacement pods have no init containers")
 		Eventually(func(g Gomega) {
 			initContainers, err := utils.KubectlGetJsonpath("pod", "",
 				combinedTestNamespace,
 				"{.items[?(@.metadata.labels.app\\.kubernetes\\.io/name=='combined-agent')].spec.initContainers[*].name}")
 			g.Expect(err).NotTo(HaveOccurred())
-			g.Expect(initContainers).To(ContainSubstring("proxy-init"))
+			g.Expect(initContainers).NotTo(ContainSubstring("proxy-init"),
+				"proxy-init should not be injected after AR deletion")
 		}).Should(Succeed())
 	})
 })
diff --git a/kagenti-operator/test/e2e/fixtures.go b/kagenti-operator/test/e2e/fixtures.go
index 9ce35247..2cd67eff 100644
--- a/kagenti-operator/test/e2e/fixtures.go
+++ b/kagenti-operator/test/e2e/fixtures.go
@@ -1137,7 +1137,6 @@ metadata:
   name: combined-agent
   namespace: ` + combinedTestNamespace + `
   labels:
-    kagenti.io/type: agent
     protocol.kagenti.io/a2a: ""
     app.kubernetes.io/name: combined-agent
 spec:
@@ -1145,12 +1144,10 @@ spec:
   selector:
     matchLabels:
       app.kubernetes.io/name: combined-agent
-      kagenti.io/type: agent
   template:
     metadata:
       labels:
         app.kubernetes.io/name: combined-agent
-        kagenti.io/type: agent
         protocol.kagenti.io/a2a: ""
     spec:
       serviceAccountName: combined-agent