[BUG] Claude Process Wrapper is not used when Use Terminal is Enabled

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?

When both 'Caude Process Wrapper' and 'Use Terminal' are set, the process wrapper is ignored, and the terminal calls 'claude' directly. However, when 'User Terminal is disabled, it calls the wrapper which in turn is configured to launch claude.

I use the wrapper to cd into a parent project directory so a single .claude is used to coordinate all the configuration across multiple 'project' folders in my VS code's workspace, and can confirm that the directory is correct when not using terminal, but uses the child folder when 'User Terminal' is enabled.

What Should Happen?

Claude should honour the process wrapper and run that in the terminal to launch claude.

Error Messages/Logs

Steps to Reproduce

1. Write a wrapper that simply changes to a different directory
2. make that wrapper executable
3. paste full path of that wrapper into the 'Claude Process Wrapper' in the Claude Code Extention settings.
4. Open a file in VS Code that is in a different base project directory than what your wrapper changes to.
5. Launch Claude Code
6. Confirm that the directory is the one that the wrapper changes to in the Claude session by querying pwd
7. Enable 'Use Terminal' in the Claude Code Extension settings - make sure the settings get saves/are sync'ed
8. Editing the same file as before, launch Claude Code
9. Confirm that it opens in the terminal this time
10. Confirm that the directory that got open is the base project directory for the selected file being edited by prompting for pwd

Claude Model

Sonnet (default)

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

claude cli: 2.0.41 , Claude Code Extension: 2.0.37

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_