What shipped in 2.1.277
Claude Code 2.1.277 adds built-in AGENTS.md support for repository instructions. In the default mode, a project that has no project-level CLAUDE.md instruction file can supply AGENTS.md instead, and Claude Code exposes the choice under Project instructions in /config. Anthropic's release notes say the feature is not yet available on Bedrock, Vertex or Foundry.
Fallback means CLAUDE.md still has precedence
Anthropic implemented the feature as a built-in agents-md module rather than replacing its existing instruction system. The default mode is claude-md-or-agents-md: if Claude Code finds a CLAUDE.md, .claude/CLAUDE.md or CLAUDE.local.md on the project path, the AGENTS.md fallback stands down. Users can also choose Claude-only instructions, load CLAUDE.md and AGENTS.md together, or keep only organisation-managed instructions.
Nested instructions work, with documented gaps
The built-in can walk AGENTS.md files down a repository and attach a nested file when Claude reads beneath that directory, closely matching Claude Code's own nested CLAUDE.md behaviour. Anthropic also documents differences that remain: AGENTS.md is not attached through every IDE, @-mention or non-text Read path that can trigger CLAUDE.md, added directories do not contribute AGENTS.md, and /memory does not manage these files. The change therefore improves compatibility without making the two instruction systems identical.
Why the compatibility change matters
AGENTS.md is already used by several coding-agent tools as repository-scoped guidance. Claude Code's fallback lets teams keep baseline build, test and codebase instructions in one shared file instead of duplicating them solely for Claude, while preserving CLAUDE.md for Claude-specific behaviour when a project needs it. The release does not standardise agent skills, MCP configuration or other tool-specific settings, so the practical gain is narrower: project instructions now have a common path across more coding agents.