diff --git a/ballerina/Ballerina.toml b/ballerina/Ballerina.toml
index 4d9807f..49db0da 100644
--- a/ballerina/Ballerina.toml
+++ b/ballerina/Ballerina.toml
@@ -1,7 +1,7 @@
 [package]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 authors = ["Ballerina"]
 keywords = ["mcp"]
 repository = "https://github.com/ballerina-platform/module-ballerina-mcp"
@@ -15,5 +15,5 @@ graalvmCompatible = true
 [[platform.java21.dependency]]
 groupId = "io.ballerina.stdlib."
 artifactId = "mcp-native"
-version = "1.0.0"
-path = "../native/build/libs/mcp-native-1.0.0.jar"
+version = "1.0.1"
+path = "../native/build/libs/mcp-native-1.0.1.jar"
diff --git a/ballerina/CompilerPlugin.toml b/ballerina/CompilerPlugin.toml
index 242e3b3..3e06f65 100644
--- a/ballerina/CompilerPlugin.toml
+++ b/ballerina/CompilerPlugin.toml
@@ -3,7 +3,7 @@ id = "mcp-compiler-plugin"
 class = "io.ballerina.stdlib.mcp.plugin.McpCompilerPlugin"
 
 [[dependency]]
-path = "../compiler-plugin/build/libs/mcp-compiler-plugin-1.0.0.jar"
+path = "../compiler-plugin/build/libs/mcp-compiler-plugin-1.0.1.jar"
 
 [[dependency]]
 path = "../compiler-plugin/build/libs/ballerina-to-openapi-2.3.0.jar"
diff --git a/ballerina/Dependencies.toml b/ballerina/Dependencies.toml
index cabf323..5bf7414 100644
--- a/ballerina/Dependencies.toml
+++ b/ballerina/Dependencies.toml
@@ -229,7 +229,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
diff --git a/ballerina/dispatcher_service.bal b/ballerina/dispatcher_service.bal
index 5d0f709..f0d657d 100644
--- a/ballerina/dispatcher_service.bal
+++ b/ballerina/dispatcher_service.bal
@@ -318,13 +318,18 @@ isolated function getDispatcherService(http:HttpServiceConfig httpServiceConfig)
             return error DispatcherError("MCP Service is not attached");
         }
 
-        private isolated function executeOnCallTool(CallToolParams params, Session? session) returns CallToolResult|Error {
+        private isolated function executeOnCallTool(CallToolParams params, Session? session)
+                returns CallToolResult|Error {
             Service|AdvancedService mcpService = check getMcpServiceFromDispatcher(self);
             if mcpService is AdvancedService {
                 return invokeOnCallTool(mcpService, params.cloneReadOnly(), session);
             }
             if mcpService is Service {
-                return callToolForRemoteFunctions(mcpService, params.cloneReadOnly(), session);
+                CallToolResult|error result = callToolForRemoteFunctions(mcpService, params.cloneReadOnly(), session);
+                if result is error {
+                    return error DispatcherError(result.message());
+                }
+                return result;
             }
             return error DispatcherError("MCP Service is not attached");
         }
diff --git a/ballerina/native_listener_helper.bal b/ballerina/native_listener_helper.bal
index 8f6fd22..0e61e54 100644
--- a/ballerina/native_listener_helper.bal
+++ b/ballerina/native_listener_helper.bal
@@ -32,7 +32,7 @@ isolated function listToolsForRemoteFunctions(Service 'service, typedesc<ListToo
 } external;
 
 isolated function callToolForRemoteFunctions(Service 'service, CallToolParams params, Session? session,
-        typedesc<CallToolResult> t = <>) returns t|Error = @java:Method {
+        typedesc<CallToolResult> t = <>) returns t|error = @java:Method {
     'class: "io.ballerina.stdlib.mcp.McpServiceMethodHelper"
 } external;
 
diff --git a/ballerina/streamable_http.bal b/ballerina/streamable_http.bal
index 8f792dc..a8e09a1 100644
--- a/ballerina/streamable_http.bal
+++ b/ballerina/streamable_http.bal
@@ -199,7 +199,13 @@ isolated class StreamableHttpClientTransport {
             returns JsonRpcMessage|StreamableHttpTransportError {
         do {
             json payload = check response.getJsonPayload();
-            return check payload.cloneWithType();
+            JsonRpcMessage|http:ErrorPayload result = check payload.cloneWithType();
+            if result is JsonRpcMessage {
+                return result;
+            }
+            return error HttpClientError(
+                string `Received error response from server: ${result.toJsonString()}`
+            );
         } on fail error e {
             return error ResponseParsingError(
                 string `Unable to parse JSON response: ${e.message()}`
diff --git a/ballerina/types.bal b/ballerina/types.bal
index b3a9434..582743d 100644
--- a/ballerina/types.bal
+++ b/ballerina/types.bal
@@ -17,7 +17,7 @@
 import ballerina/http;
 
 # Refers to any valid JSON-RPC object that can be decoded off the wire, or encoded to be sent.
-public type JsonRpcMessage JsonRpcRequest|JsonRpcNotification|JsonRpcResponse;
+public type JsonRpcMessage JsonRpcRequest|JsonRpcNotification|JsonRpcError|JsonRpcResponse;
 
 public const LATEST_PROTOCOL_VERSION = "2025-03-26";
 public const SUPPORTED_PROTOCOL_VERSIONS = [
@@ -143,7 +143,7 @@ public const NOT_ACCEPTABLE = -32001;
 public const UNSUPPORTED_MEDIA_TYPE = -32002;
 
 # A response to a request that indicates an error occurred.
-public type JsonRpcError record {
+public type JsonRpcError record {|
     # The JSON-RPC protocol version
     JSONRPC_VERSION jsonrpc;
     # Identifier of the request
@@ -157,7 +157,7 @@ public type JsonRpcError record {
         # Additional information about the error. The value of this member is defined by the sender (e.g. detailed error information, nested errors etc.).
         anydata data?;
     } 'error;
-};
+|};
 
 # This request is sent from the client to the server when it first connects, asking it to begin initialization.
 type InitializeRequest record {|
diff --git a/ballerina/utils.bal b/ballerina/utils.bal
index a25a94d..55793f9 100644
--- a/ballerina/utils.bal
+++ b/ballerina/utils.bal
@@ -70,5 +70,8 @@ isolated function extractResultFromMessage(JsonRpcMessage message) returns Serve
     if message is JsonRpcResponse {
         return message.result;
     }
+    if message is JsonRpcError {
+        return error ServerResponseError(string `Received JSON-RPC error from server: ${message.toJsonString()}`);
+    }
     return error InvalidMessageTypeError("Received message from server is not a valid JsonRpcResponse.");
 }
diff --git a/examples/clients/mcp-crypto-client/Ballerina.toml b/examples/clients/mcp-crypto-client/Ballerina.toml
index 26e1f2f..1bc6f4f 100644
--- a/examples/clients/mcp-crypto-client/Ballerina.toml
+++ b/examples/clients/mcp-crypto-client/Ballerina.toml
@@ -10,5 +10,5 @@ observabilityIncluded = true
 [[dependency]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 repository = "local"
diff --git a/examples/clients/mcp-crypto-client/Dependencies.toml b/examples/clients/mcp-crypto-client/Dependencies.toml
index 948cec4..2b64268 100644
--- a/examples/clients/mcp-crypto-client/Dependencies.toml
+++ b/examples/clients/mcp-crypto-client/Dependencies.toml
@@ -50,7 +50,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "data.jsondata"
-version = "1.1.2"
+version = "1.1.3"
 dependencies = [
 	{org = "ballerina", name = "jballerina.java"},
 	{org = "ballerina", name = "lang.object"}
@@ -116,7 +116,7 @@ version = "0.0.0"
 [[package]]
 org = "ballerina"
 name = "jwt"
-version = "2.15.0"
+version = "2.15.1"
 dependencies = [
 	{org = "ballerina", name = "cache"},
 	{org = "ballerina", name = "crypto"},
@@ -205,7 +205,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "log"
-version = "2.13.0"
+version = "2.14.0"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -219,7 +219,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -278,7 +278,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "os"
-version = "1.10.0"
+version = "1.10.1"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"}
diff --git a/examples/clients/mcp-shopping-client/Ballerina.toml b/examples/clients/mcp-shopping-client/Ballerina.toml
index 4cfe606..7321ea2 100644
--- a/examples/clients/mcp-shopping-client/Ballerina.toml
+++ b/examples/clients/mcp-shopping-client/Ballerina.toml
@@ -10,5 +10,5 @@ observabilityIncluded = true
 [[dependency]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 repository = "local"
diff --git a/examples/clients/mcp-shopping-client/Dependencies.toml b/examples/clients/mcp-shopping-client/Dependencies.toml
index 79bc441..2a6c34e 100644
--- a/examples/clients/mcp-shopping-client/Dependencies.toml
+++ b/examples/clients/mcp-shopping-client/Dependencies.toml
@@ -50,7 +50,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "data.jsondata"
-version = "1.1.2"
+version = "1.1.3"
 dependencies = [
 	{org = "ballerina", name = "jballerina.java"},
 	{org = "ballerina", name = "lang.object"}
@@ -116,7 +116,7 @@ version = "0.0.0"
 [[package]]
 org = "ballerina"
 name = "jwt"
-version = "2.15.0"
+version = "2.15.1"
 dependencies = [
 	{org = "ballerina", name = "cache"},
 	{org = "ballerina", name = "crypto"},
@@ -205,7 +205,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "log"
-version = "2.13.0"
+version = "2.14.0"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -219,7 +219,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -278,7 +278,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "os"
-version = "1.10.0"
+version = "1.10.1"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"}
diff --git a/examples/clients/mcp-weather-client/Ballerina.toml b/examples/clients/mcp-weather-client/Ballerina.toml
index 9f9bd68..268ef67 100644
--- a/examples/clients/mcp-weather-client/Ballerina.toml
+++ b/examples/clients/mcp-weather-client/Ballerina.toml
@@ -10,5 +10,5 @@ observabilityIncluded = true
 [[dependency]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 repository = "local"
diff --git a/examples/clients/mcp-weather-client/Dependencies.toml b/examples/clients/mcp-weather-client/Dependencies.toml
index af5e226..0cc0189 100644
--- a/examples/clients/mcp-weather-client/Dependencies.toml
+++ b/examples/clients/mcp-weather-client/Dependencies.toml
@@ -50,7 +50,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "data.jsondata"
-version = "1.1.2"
+version = "1.1.3"
 dependencies = [
 	{org = "ballerina", name = "jballerina.java"},
 	{org = "ballerina", name = "lang.object"}
@@ -116,7 +116,7 @@ version = "0.0.0"
 [[package]]
 org = "ballerina"
 name = "jwt"
-version = "2.15.0"
+version = "2.15.1"
 dependencies = [
 	{org = "ballerina", name = "cache"},
 	{org = "ballerina", name = "crypto"},
@@ -205,7 +205,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "log"
-version = "2.13.0"
+version = "2.14.0"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -219,7 +219,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -278,7 +278,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "os"
-version = "1.10.0"
+version = "1.10.1"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"}
diff --git a/examples/servers/mcp-crypto-server/Ballerina.toml b/examples/servers/mcp-crypto-server/Ballerina.toml
index 988b7eb..ff4eec0 100644
--- a/examples/servers/mcp-crypto-server/Ballerina.toml
+++ b/examples/servers/mcp-crypto-server/Ballerina.toml
@@ -10,5 +10,5 @@ observabilityIncluded = true
 [[dependency]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 repository = "local"
diff --git a/examples/servers/mcp-crypto-server/Dependencies.toml b/examples/servers/mcp-crypto-server/Dependencies.toml
index 77e3950..7a95f88 100644
--- a/examples/servers/mcp-crypto-server/Dependencies.toml
+++ b/examples/servers/mcp-crypto-server/Dependencies.toml
@@ -53,7 +53,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "data.jsondata"
-version = "1.1.2"
+version = "1.1.3"
 dependencies = [
 	{org = "ballerina", name = "jballerina.java"},
 	{org = "ballerina", name = "lang.object"}
@@ -116,7 +116,7 @@ version = "0.0.0"
 [[package]]
 org = "ballerina"
 name = "jwt"
-version = "2.15.0"
+version = "2.15.1"
 dependencies = [
 	{org = "ballerina", name = "cache"},
 	{org = "ballerina", name = "crypto"},
@@ -208,7 +208,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "log"
-version = "2.13.0"
+version = "2.14.0"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -222,7 +222,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -282,7 +282,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "os"
-version = "1.10.0"
+version = "1.10.1"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"}
diff --git a/examples/servers/mcp-shopping-server/Ballerina.toml b/examples/servers/mcp-shopping-server/Ballerina.toml
index cba1a57..070a019 100644
--- a/examples/servers/mcp-shopping-server/Ballerina.toml
+++ b/examples/servers/mcp-shopping-server/Ballerina.toml
@@ -10,5 +10,5 @@ observabilityIncluded = true
 [[dependency]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 repository = "local"
diff --git a/examples/servers/mcp-shopping-server/Dependencies.toml b/examples/servers/mcp-shopping-server/Dependencies.toml
index 350cf3f..e70e416 100644
--- a/examples/servers/mcp-shopping-server/Dependencies.toml
+++ b/examples/servers/mcp-shopping-server/Dependencies.toml
@@ -50,7 +50,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "data.jsondata"
-version = "1.1.2"
+version = "1.1.3"
 dependencies = [
 	{org = "ballerina", name = "jballerina.java"},
 	{org = "ballerina", name = "lang.object"}
@@ -113,7 +113,7 @@ version = "0.0.0"
 [[package]]
 org = "ballerina"
 name = "jwt"
-version = "2.15.0"
+version = "2.15.1"
 dependencies = [
 	{org = "ballerina", name = "cache"},
 	{org = "ballerina", name = "crypto"},
@@ -202,7 +202,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "log"
-version = "2.13.0"
+version = "2.14.0"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -216,7 +216,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -275,7 +275,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "os"
-version = "1.10.0"
+version = "1.10.1"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"}
diff --git a/examples/servers/mcp-weather-server/Ballerina.toml b/examples/servers/mcp-weather-server/Ballerina.toml
index f8dd752..fb2b05c 100644
--- a/examples/servers/mcp-weather-server/Ballerina.toml
+++ b/examples/servers/mcp-weather-server/Ballerina.toml
@@ -10,5 +10,5 @@ observabilityIncluded = true
 [[dependency]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 repository = "local"
diff --git a/examples/servers/mcp-weather-server/Dependencies.toml b/examples/servers/mcp-weather-server/Dependencies.toml
index 7de09f7..219ab66 100644
--- a/examples/servers/mcp-weather-server/Dependencies.toml
+++ b/examples/servers/mcp-weather-server/Dependencies.toml
@@ -50,7 +50,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "data.jsondata"
-version = "1.1.2"
+version = "1.1.3"
 dependencies = [
 	{org = "ballerina", name = "jballerina.java"},
 	{org = "ballerina", name = "lang.object"}
@@ -113,7 +113,7 @@ version = "0.0.0"
 [[package]]
 org = "ballerina"
 name = "jwt"
-version = "2.15.0"
+version = "2.15.1"
 dependencies = [
 	{org = "ballerina", name = "cache"},
 	{org = "ballerina", name = "crypto"},
@@ -202,7 +202,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "log"
-version = "2.13.0"
+version = "2.14.0"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -216,7 +216,7 @@ modules = [
 [[package]]
 org = "ballerina"
 name = "mcp"
-version = "1.0.0"
+version = "1.0.1"
 dependencies = [
 	{org = "ballerina", name = "http"},
 	{org = "ballerina", name = "jballerina.java"},
@@ -276,7 +276,7 @@ dependencies = [
 [[package]]
 org = "ballerina"
 name = "os"
-version = "1.10.0"
+version = "1.10.1"
 dependencies = [
 	{org = "ballerina", name = "io"},
 	{org = "ballerina", name = "jballerina.java"}
diff --git a/gradle.properties b/gradle.properties
index 3f5383e..31c4d22 100644
--- a/gradle.properties
+++ b/gradle.properties
@@ -1,6 +1,6 @@
 org.gradle.caching=true
 group=io.ballerina.stdlib
-version=1.0.1-SNAPSHOT
+version=1.0.2-SNAPSHOT
 ballerinaLangVersion=2201.12.0
 
 ballerinaGradlePluginVersion=2.3.0
diff --git a/native/src/main/java/io/ballerina/stdlib/mcp/McpServiceMethodHelper.java b/native/src/main/java/io/ballerina/stdlib/mcp/McpServiceMethodHelper.java
index ff7f037..0a28374 100644
--- a/native/src/main/java/io/ballerina/stdlib/mcp/McpServiceMethodHelper.java
+++ b/native/src/main/java/io/ballerina/stdlib/mcp/McpServiceMethodHelper.java
@@ -27,8 +27,10 @@
 import io.ballerina.runtime.api.types.RemoteMethodType;
 import io.ballerina.runtime.api.types.ServiceType;
 import io.ballerina.runtime.api.types.Type;
+import io.ballerina.runtime.api.types.TypeTags;
 import io.ballerina.runtime.api.types.UnionType;
 import io.ballerina.runtime.api.values.BArray;
+import io.ballerina.runtime.api.values.BError;
 import io.ballerina.runtime.api.values.BMap;
 import io.ballerina.runtime.api.values.BObject;
 import io.ballerina.runtime.api.values.BString;
@@ -138,8 +140,14 @@ public static Object callToolForRemoteFunctions(Environment env, BObject mcpServ
                     .createError("RemoteMethodType with name '" + toolName.getValue() + "' not found");
         }
 
-        Object[] args =
+        Object argsOrError =
                 buildArgsForMethod(method.get(), (BMap<?, ?>) params.get(fromString(ARGUMENTS_FIELD_NAME)), session);
+
+        if (argsOrError instanceof BError) {
+            return argsOrError;
+        }
+
+        Object[] args = (Object[]) argsOrError;
         Object result = env.getRuntime().callMethod(mcpService, toolName.getValue(), null, args);
 
         return createCallToolResult(typed, result);
@@ -195,7 +203,7 @@ private static BMap<BString, Object> createToolRecord(ArrayType toolsArrayType,
         return tool;
     }
 
-    private static Object[] buildArgsForMethod(RemoteMethodType method, BMap<?, ?> arguments, Object session) {
+    private static Object buildArgsForMethod(RemoteMethodType method, BMap<?, ?> arguments, Object session) {
         List<Parameter> params = List.of(method.getParameters());
         Object[] args = new Object[params.size()];
         for (int i = 0; i < params.size(); i++) {
@@ -205,15 +213,36 @@ private static Object[] buildArgsForMethod(RemoteMethodType method, BMap<?, ?> a
                 args[i] = session;
             } else {
                 String paramName = param.name;
-                args[i] = arguments == null ? null : arguments.get(fromString(paramName));
+                Object argValue = arguments == null ? null : arguments.get(fromString(paramName));
+
+                // Check if the parameter is required (non-optional) but the value is null
+                if (argValue == null && !isOptionalParameter(param)) {
+                    return ModuleUtils.createError(
+                            "Missing required argument '" + paramName + "' for parameter of type '"
+                            + param.type.getName() + "'");
+                }
+
+                args[i] = argValue;
             }
         }
         return args;
     }
 
+    private static boolean isOptionalParameter(Parameter param) {
+        Type paramType = param.type;
+
+        if (paramType instanceof UnionType unionType) {
+            return unionType.getMemberTypes().stream()
+                    .anyMatch(type -> type.getTag() == TypeTags.NULL_TAG);
+        }
+
+        return false;
+    }
+
     private static boolean isSessionParameter(Parameter param) {
         Type paramType = param.type;
-        return MCP_PACKAGE_NAME.equals(paramType.getPackage().getName())
+        return paramType.getPackage() != null
+                && MCP_PACKAGE_NAME.equals(paramType.getPackage().getName())
                 && SESSION_TYPE_NAME.equals(paramType.getName());
     }