[BUG] VS Code extension does not work in Cursor.

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

I just updated to the latest version and when i launch the extension in the sidebar, I get Error: Claude Code process exited with code 1 in red text with an x.

If I've sent a prompt before or after, it looks like claude is working, elucidating, etc, but it just does that forever.

It works just fine in CLI in cursor. It's only an issue with the extension.

What Should Happen?

It should not give an error and it should respond to prompts

Error Messages/Logs

Error: Claude Code process exited with code 1

Steps to Reproduce

1. Launch Cursor
2. Open Claude Code in side window
3. Wait, or send a prompt

Claude Model

None

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

v2.0.34

Platform

Other

Operating System

Windows

Terminal/Shell

Cursor

Additional Information

<img width="1364" height="408" alt="Image" src="https://github.com/user-attachments/assets/9404e37e-2dd3-44ab-afb0-dd80b9dd2e93" />