diff --git a/openhands/agenthub/dummy_agent/agent.py b/openhands/agenthub/dummy_agent/agent.py
index f7a654bf75b4..b420a3d5d8ae 100644
--- a/openhands/agenthub/dummy_agent/agent.py
+++ b/openhands/agenthub/dummy_agent/agent.py
@@ -22,7 +22,6 @@
     CmdOutputObservation,
     FileReadObservation,
     FileWriteObservation,
-    NullObservation,
     Observation,
 )
 from openhands.events.serialization.event import event_to_dict
@@ -109,7 +108,7 @@ def __init__(self, llm: LLM, config: AgentConfig):
             },
             {
                 'action': AgentRejectAction(),
-                'observations': [NullObservation('')],
+                'observations': [AgentStateChangedObservation('', AgentState.REJECTED)],
             },
             {
                 'action': AgentFinishAction(
diff --git a/openhands/core/cli.py b/openhands/core/cli.py
index 1e31537155ac..34186cd5fc8a 100644
--- a/openhands/core/cli.py
+++ b/openhands/core/cli.py
@@ -29,7 +29,6 @@
     AgentStateChangedObservation,
     CmdOutputObservation,
     FileEditObservation,
-    NullObservation,
 )
 
 
@@ -143,19 +142,18 @@ async def on_event_async(event: Event):
                 AgentState.FINISHED,
             ]:
                 await prompt_for_next_task()
-        if (
-            isinstance(event, NullObservation)
-            and controller.state.agent_state == AgentState.AWAITING_USER_CONFIRMATION
-        ):
-            user_confirmed = await prompt_for_user_confirmation()
-            if user_confirmed:
-                event_stream.add_event(
-                    ChangeAgentStateAction(AgentState.USER_CONFIRMED), EventSource.USER
-                )
-            else:
-                event_stream.add_event(
-                    ChangeAgentStateAction(AgentState.USER_REJECTED), EventSource.USER
-                )
+            if event.agent_state == AgentState.AWAITING_USER_CONFIRMATION:
+                user_confirmed = await prompt_for_user_confirmation()
+                if user_confirmed:
+                    event_stream.add_event(
+                        ChangeAgentStateAction(AgentState.USER_CONFIRMED),
+                        EventSource.USER,
+                    )
+                else:
+                    event_stream.add_event(
+                        ChangeAgentStateAction(AgentState.USER_REJECTED),
+                        EventSource.USER,
+                    )
 
     def on_event(event: Event) -> None:
         loop.create_task(on_event_async(event))
diff --git a/openhands/events/utils.py b/openhands/events/utils.py
index bf710edcd7bd..cfc2dd804c3a 100644
--- a/openhands/events/utils.py
+++ b/openhands/events/utils.py
@@ -10,7 +10,9 @@
 
 
 def get_pairs_from_events(events: list[Event]) -> list[tuple[Action, Observation]]:
-    """Return the history as a list of tuples (action, observation)."""
+    """Return the history as a list of tuples (action, observation).
+
+    This function is a compatibility function for evals reading and visualization working with old histories."""
     tuples: list[tuple[Action, Observation]] = []
     action_map: dict[int, Action] = {}
     observation_map: dict[int, Observation] = {}
diff --git a/openhands/runtime/base.py b/openhands/runtime/base.py
index 983fc67fa898..8cdd17e18ead 100644
--- a/openhands/runtime/base.py
+++ b/openhands/runtime/base.py
@@ -254,6 +254,9 @@ async def _handle_action(self, event: Action) -> None:
 
         # this might be unnecessary, since source should be set by the event stream when we're here
         source = event.source if event.source else EventSource.AGENT
+        if isinstance(observation, NullObservation):
+            # don't add null observations to the event stream
+            return
         self.event_stream.add_event(observation, source)  # type: ignore[arg-type]
 
     def clone_repo(