diff --git a/packages/web/src/hooks/useWebSocket.ts b/packages/web/src/hooks/useWebSocket.ts
index 08abe14a..171ad162 100644
--- a/packages/web/src/hooks/useWebSocket.ts
+++ b/packages/web/src/hooks/useWebSocket.ts
@@ -8,6 +8,7 @@ import { useSettingsStore } from '../stores/settingsStore';
 import type { ServerEvent, ClientEvent, ActiveCallInfo, Activity } from '@backspace/shared';
 import { resolveAssetUrl, normalizeUserAssets, normalizeMessageAssets } from '../utils/assetUrls';
 import { broadcastVoiceStatus, broadcastDeafenViaLiveKit } from '../utils/voice';
+import { sortDmChannels } from '../utils/dmSorting';
 import { registerSelfId } from '../utils/identity';
 import { getActiveRoom } from './useLiveKit';
 import { useUIStore } from '../stores/uiStore';
@@ -561,8 +562,8 @@ function handleEvent(origin: string, event: ServerEvent): void {
             const updatedDms = currentDmChannels.map(dm =>
               dm.id === existingDm.id ? { ...dm, lastMessage: event.message } : dm,
             );
-            updatedDms.sort((a, b) => (b.lastMessage?.createdAt ?? b.createdAt) - (a.lastMessage?.createdAt ?? a.createdAt));
-            setDms(updatedDms);
+            const { unreadChannels, currentChannelId } = useChatStore.getState();
+            setDms(sortDmChannels(updatedDms, unreadChannels, currentChannelId));
             break;
           }
         }
@@ -582,12 +583,8 @@ function handleEvent(origin: string, event: ServerEvent): void {
             ? { ...dm, lastMessage: event.message }
             : dm
         );
-        updatedDms.sort((a, b) => {
-          const aTime = a.lastMessage?.createdAt ?? a.createdAt;
-          const bTime = b.lastMessage?.createdAt ?? b.createdAt;
-          return bTime - aTime;
-        });
-        setDms(updatedDms);
+        const { unreadChannels: unread, currentChannelId: curCh } = useChatStore.getState();
+        setDms(sortDmChannels(updatedDms, unread, curCh));
       }
       {
         const { currentChannelId, markChannelUnread } = useChatStore.getState();
diff --git a/packages/web/src/stores/chatStore.ts b/packages/web/src/stores/chatStore.ts
index 657568ee..d95cb43a 100644
--- a/packages/web/src/stores/chatStore.ts
+++ b/packages/web/src/stores/chatStore.ts
@@ -4,6 +4,7 @@ import { wsSend } from '../hooks/useWebSocket';
 import { isDmChannel, getChannelOrigin, getApiForOrigin, useSpaceStore } from './spaceStore';
 import { useAuthStore } from './authStore';
 import { normalizeMessageAssets } from '../utils/assetUrls';
+import { sortDmChannels } from '../utils/dmSorting';
 
 const MAX_MESSAGES_PER_CHANNEL = 200;
 const MAX_CACHED_CHANNELS = 20;
@@ -285,12 +286,7 @@ export const useChatStore = create<ChatState>((set, get) => ({
             ? { ...dm, lastMessage: { id: tempId, dmChannelId: channelId, userId: currentUser.id, content, createdAt: Date.now() } }
             : dm
         );
-        updatedDms.sort((a, b) => {
-          const aTime = a.lastMessage?.createdAt ?? a.createdAt;
-          const bTime = b.lastMessage?.createdAt ?? b.createdAt;
-          return bTime - aTime;
-        });
-        setDmChannels(updatedDms);
+        setDmChannels(sortDmChannels(updatedDms, get().unreadChannels, get().currentChannelId));
       }
     }
 
@@ -589,6 +585,13 @@ export const useChatStore = create<ChatState>((set, get) => ({
     }
 
     set({ readStates: rsMap, unreadChannels: unread });
+
+    // Re-sort DM list now that unread state is known (handles initial load
+    // where populateFromReady runs before read states are processed)
+    const { dmChannels, setDmChannels } = useSpaceStore.getState();
+    if (dmChannels.length > 0) {
+      setDmChannels(sortDmChannels(dmChannels, unread, currentChannelId));
+    }
   },
 
   markChannelUnread: (channelId: string) => {
@@ -652,6 +655,12 @@ export const useChatStore = create<ChatState>((set, get) => ({
       return { readStates: newReadStates, unreadChannels: newUnread };
     });
 
+    // Re-sort DM list when a DM is marked as read (moves from unread to read group)
+    if (isDmChannel(channelId)) {
+      const { dmChannels, setDmChannels } = useSpaceStore.getState();
+      setDmChannels(sortDmChannels(dmChannels, get().unreadChannels, channelId));
+    }
+
     // Send to the correct instance
     const origin = getChannelOrigin(channelId);
     wsSend({ type: 'channel_ack', channelId, messageId }, origin);
diff --git a/packages/web/src/stores/spaceStore.ts b/packages/web/src/stores/spaceStore.ts
index c09eeba7..27284a83 100644
--- a/packages/web/src/stores/spaceStore.ts
+++ b/packages/web/src/stores/spaceStore.ts
@@ -3,6 +3,7 @@ import type { Space, Channel, ChannelCategory, MemberWithUser, SpaceWithChannels
 import { api, BackspaceApiClient } from '../api/client';
 import { resolveAssetUrl, normalizeUserAssets } from '../utils/assetUrls';
 import { isSelf } from '../utils/identity';
+import { sortDmChannels } from '../utils/dmSorting';
 import { useAuthStore } from './authStore';
 import { useChatStore } from './chatStore';
 
@@ -670,9 +671,15 @@ export const useSpaceStore = create<SpaceState>((set, get) => ({
     });
     const mergedDms = [...existingDmsFromOtherOrigins, ...incomingDms];
 
+    // Sort DMs using unread-first ordering. On initial load, unreadChannels may
+    // still be empty (read states are processed after populateFromReady); the
+    // safety-net re-sort in setReadStates handles that case.
+    const { unreadChannels, currentChannelId } = useChatStore.getState();
+    const sortedDms = sortDmChannels(mergedDms, unreadChannels, currentChannelId);
+
     const update: Partial<SpaceState> = {
       spaces: mergedSpaces,
-      dmChannels: mergedDms,
+      dmChannels: sortedDms,
       channelToSpaceMap,
       channelLastMessageIds,
       spacePermissions,