Claude Code extension times out on startup in VS Code (subprocess initialization)

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?

Issue

VS Code extension times out during startup with:

What Should Happen?

it should work

Error Messages/Logs

Error: Subprocess initialization did not complete within 60000ms — check authentication and network connectivity

Steps to Reproduce

Works Fine

• Claude in terminal ✓
• Claude in VS Code terminal ✓
• Claude Code desktop app ✓

Broken

• Claude Code VS Code extension ✗

Troubleshooting Done

• Cleared cache (~/.claude/cache, ~/.claude.json)
• Restarted VS Code multiple times
• Disabled all extensions
• Reinstalled Claude Code extension
• Removed conflicting openclaudeCode settings
• Tested in different directories

System Info

• OS: Windows 11 (10.0.26200)
• Extension: anthropic.claude-code-2.1.114-win32-x64
• Python: 3.14

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.100

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Windows Terminal

Additional Information

_No response_