[BUG] Claude (Claude Code for VS Code extension) Stops Responding After 3-4 Compactifications

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 using claude code within a Claude tab in Cursor (using Claude Code for VS Code (CC4VSC) extension), Claude stops responding after 3-4 compactifications. If I'm in the middle of something important, that's extremely disruptive. When I click on a new Cursor tab, the LLM doesn't have the current activity from the last conversation. Now, I have created a custom /memory slash command which when Claude executes, summarizes the current conversation and adds it to a conversations.md file. However, I can't do that because... in the prior tab where all the conversation history is, I cannot run /memory. So, instead, I have to select all the text in the prior tab, save it to a md file, and then upload that same file in the new Cursor tab and have it review it to get its bearings.

What Should Happen?

Claude Code within Cursor (CC4VSC extension) should be able to do compactification an unlimited number of times without getting to a point where it stops responding. As a point of comparison, Claude Code CLI does not run into this issue. I have a running session that has lasted for several (3+ days) of heavy usage, with dozens or more of compactifications. NO issues. (well, there is one issue where after a compactification, Claude Code CLI didn't realize that it was in Plan mode, and just switched to Accept Edits On after the compactification and started making code changes without full context and that was a small mess to clean up... but that's a separate issue... )

Error Messages/Logs

I forget the message, but it was some random but consistent message, like "All your base belongs to us".

Steps to Reproduce

1. Start Claude Code session in Cursor
2. Have long conversation that triggers compactification
3. Continue conversation, trigger 2nd compactification
4. Continue, trigger 3rd compactification
5. Continue, trigger 4th compactification
6. Try to interact with Claude

Claude Model

Sonnet (default)

Is this a regression?

No, this never worked

Last Working Version

_No response_

Claude Code Version

2.0.53 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

This is a severely limiting feature of CC4VSC extension, so much so that I am likely to just continue using CC CLI. Coding with AI agent assistants is completely different that traditional coding practices, where you have to spend long session interacting iteratively with the AI agent.