Claude Code reads AGENTS.md only when telemetry is on

Claude Code 2.1.277 now supports AGENTS.md, but only when telemetry is enabled. Without telemetry, the file remains unread. The loading plugin, named agents-md, defaults to off and checks a remote feature flag called tengu_agents_md_mod, which is also set to off by default. If the flag cannot be fetched, the plugin is unavailable, and the markdown file is ignored.

To test this behavior, a directory containing an AGENTS.md file with a single word was created and used with Claude Code. Despite telemetry being off, the system still attempted to fetch the flag and never read the local AGENTS.md file. The issue highlights that third-party gateways like Bedrock and Vertex also experience this problem, as they cannot resolve the flag to true.

CLAUDE.md files with @path imports do not rely on the flag and should therefore load the AGENTS.md file regardless of telemetry settings. Enabling telemetry only introduces an extra file in the repository, which defeats the purpose of AGENTS.md support. The feature appears to silently skip reading local files, leaving users unaware of what was missed.

The silence is particularly problematic for those who rely on a single instruction file for multiple agents, as they may incorrectly assume the model is not following their instructions. Anthropic's announcement of the feature as available, despite its inability to function without telemetry, has led to confusion and wasted effort by users trying to troubleshoot model behavior.

A more transparent approach, such as providing a visible message when the flag cannot be fetched or reverting to documented behavior, would be beneficial. Until such improvements are made, using a one-line CLAUDE.md file with instructions and a symlink for skills might be a more reliable alternative.