MCP tools not exposed to model after successful connection

Description

Claude Code reports successful MCP server connection ("Reconnected to terminator-mcp-agent") but the tools are not available to the model. When attempting to use any MCP tool, it fails with "No such tool available".

Environment

• Claude Code version: v2.0.73
• OS: Windows 11
• MCP Server: Custom stdio-based server (terminator-mcp-agent v0.24.6)

Steps to Reproduce

1. Configure MCP server in .claude.json:

"mcpServers": {
  "terminator-mcp-agent": {
    "type": "stdio",
    "command": "C:\Users\matt\AppData\Local\mediar\bin\terminator-mcp-agent.exe",
    "args": [],
    "env": {
      "LOG_LEVEL": "info"
    }
  }
}

1. Add permissions in .claude/settings.json:

{
  "permissions": {
    "allow": ["mcp__terminator-mcp-agent"]
  }
}

1. Start Claude Code with claude --dangerously-skip-permissions
2. Run /mcp - shows "Reconnected to terminator-mcp-agent"
3. Ask Claude to use any MCP tool

Expected Behavior

MCP tools should be available to the model after successful connection.

Actual Behavior

• /mcp command shows successful reconnection
• MCP server logs show "client initialized" confirming handshake
• When model tries to use tools: Error: No such tool available: mcp__terminator-mcp-agent__get_window_tree

Evidence from MCP Server Logs

2025-12-19T05:52:26.116497Z  INFO rmcp::handler::server: client initialized

The MCP server successfully initializes the client connection, but tools aren't exposed to the model.

Workaround

Using the MCP server via CLI works correctly - the issue is specifically with Claude Code's tool exposure:

terminator mcp exec -c terminator-mcp-agent.exe get_applications '{}'
# This works and returns data

Additional Context

• Tried restarting Claude Code multiple times
• Tried killing and reconnecting MCP server
• Verified binary works independently
• Same issue persists across multiple Claude Code sessions
• Computer restart did not resolve the issue