Zed IDE bypassPermissions mode causes severe hallucination in sub-agents

Description

The Zed IDE agent_servers configuration option "default_mode": "bypassPermissions" causes severe and uncontrollable hallucination in ACP sub-agents when using Claude Code through Zed.

Setting That Causes the Issue

In Zed's settings.json:

"agent_servers": {
    "claude": {
        "default_mode": "bypassPermissions"
    }
}

Observed Behavior

• Sub-agents hallucinate extensively (fabricating database results, file contents, configuration values, etc.)
• No amount of prompt-level guardrails, system instructions, or memory-based warnings could mitigate the hallucinations
• The issue persisted for approximately one week before the root cause was identified

Resolution

Removing the bypassPermissions setting resolved the issue:

"agent_servers": {
    "claude": {}
}

Impact

This is a significant footgun because:

1. The setting sounds like it only affects permission prompts, but it appears to fundamentally change sub-agent behavior
2. It took significant debugging effort to isolate — the connection between a permissions setting and hallucination is not intuitive
3. Users may enable this for convenience without realizing the downstream effects on agent reliability

Suggestion

Consider documenting the behavioral side effects of bypassPermissions, or investigating whether the permission bypass path inadvertently changes how sub-agents process context/constraints.

Environment

• Zed IDE (latest as of Feb 2026)
• Claude Code CLI
• macOS