diff --git a/server/src/handlers/graph.rs b/server/src/handlers/graph.rs
index 0e41ba5..b5361ef 100644
--- a/server/src/handlers/graph.rs
+++ b/server/src/handlers/graph.rs
@@ -409,30 +409,48 @@ impl McpTool for DeleteObservationsHandler {
     async fn execute(&self, args: Value, state: Arc<MemoryState>) -> crate::error::Result<String> {
         let req: DeleteObservationsTool =
             serde_json::from_value(args).map_err(|e| e.to_string())?;
-        let mut missing = Vec::new();
-        state.read_graph(|g| {
-            for d in &req.deletions {
-                if !g.entities.contains_key(&d.entity_name) {
-                    missing.push(d.entity_name.clone());
-                }
-            }
-        });
-
-        if !missing.is_empty() {
-            return Err(crate::error::AppError::Internal(format!(
-                "Error: Entities not found: {}. Please use the search_nodes or read_graph tools to verify the exact entity names.",
-                missing.join(", ")
-            )));
-        }
-
+        
+        let mut missing_entities = Vec::new();
+        let mut missing_observations = Vec::new();
+        
         state.modify_graph(|master| {
             for d in req.deletions {
                 if let Some(e) = master.entities.get_mut(&d.entity_name) {
-                    let to_rem: HashSet<_> = d.observations.into_iter().collect();
-                    e.observations.retain(|o| !to_rem.contains(o));
+                    for target in d.observations {
+                        let target_clean = target.trim();
+                        if target_clean.is_empty() { continue; }
+                        
+                        let initial_len = e.observations.len();
+                        e.observations.retain(|o| {
+                            let o_clean = o.trim();
+                            // Exact match OR substantial substring match (to forgive LLM whitespace/newline errors)
+                            !(o_clean == target_clean || (target_clean.len() >= 10 && o_clean.contains(target_clean)))
+                        });
+                        
+                        if e.observations.len() == initial_len {
+                            missing_observations.push(target);
+                        }
+                    }
+                } else {
+                    missing_entities.push(d.entity_name);
                 }
             }
         });
+
+        if !missing_entities.is_empty() {
+            return Err(crate::error::AppError::Internal(format!(
+                "Error: Entities not found: {}. Please use search_nodes to verify the exact entity names.",
+                missing_entities.join(", ")
+            )));
+        }
+        
+        if !missing_observations.is_empty() {
+            return Err(crate::error::AppError::Internal(format!(
+                "Error: Failed to find {} observation(s) to delete. Make sure you provide a sufficiently long exact substring match.",
+                missing_observations.len()
+            )));
+        }
+
         Ok("Observations deleted".to_string())
     }
 }