[BUG] MCP edit_file $-stripping regression after latest Claude Desktop update

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: The edit_file MCP tool is stripping $ characters after today's app update, breaking targeted file edits in active filesystem MCP sessions.
Error observed: "The $-stripping is new behavior"
Impact: The tool is falling back to reading files via bash, checking allowed directories, and rewriting entire files through write_file instead of making targeted edits. Each operation requires multiple extra steps burning significantly more tokens per file operation.
Workaround in use: Single write_file preferred over edit_file. If edit_file unavoidable, hex-escape $ as \x24.
User impact: Max plan subscriber running long-running research workflows with frequent file updates. Token overhead from workaround is substantial and ongoing.

What Should Happen?

MCP should be working as normal it only changed after this last update and its having to create workarounds as stated in the bug description.

Ta
Chad

Error Messages/Logs

Description of bug:
After the Claude Desktop app update on April 22, 2026, the MCP edit_file tool is stripping $ characters, breaking targeted file edits in active filesystem MCP sessions.
Error observed:
"The $-stripping is new behavior"
Steps to reproduce:

Connect filesystem MCP to a local folder
Run a task that requires edit_file with any $ character in the content
Tool fails with $-stripping error

Observed behavior:
Tool falls back to reading files via bash, checking allowed directories, then rewriting entire files through write_file instead of making targeted edits. Multiple extra steps required per operation.
Expected behavior:
edit_file should make targeted edits without stripping $ characters.
Workaround:
Use single write_file instead of edit_file. If edit_file unavoidable, hex-escape $ as \x24.
Impact:
Significant token overhead — full file rewrites instead of targeted edits. Ongoing cost impact for Max plan subscribers running long-running workflows with frequent file updates.
Additional note:
The /feedback command in the Claude Desktop app is also not working.

Steps to Reproduce

Description of bug:
After the Claude Desktop app update on April 22, 2026, the MCP edit_file tool is stripping $ characters, breaking targeted file edits in active filesystem MCP sessions.
Error observed:
"The $-stripping is new behavior"
Steps to reproduce:

Connect filesystem MCP to a local folder
Run a task that requires edit_file with any $ character in the content
Tool fails with $-stripping error

Observed behavior:
Tool falls back to reading files via bash, checking allowed directories, then rewriting entire files through write_file instead of making targeted edits. Multiple extra steps required per operation.
Expected behavior:
edit_file should make targeted edits without stripping $ characters.
Workaround:
Use single write_file instead of edit_file. If edit_file unavoidable, hex-escape $ as \x24.
Impact:
Significant token overhead — full file rewrites instead of targeted edits. Ongoing cost impact for Max plan subscribers running long-running workflows with frequent file updates.
Additional note:
The /feedback command in the Claude Desktop app is also not working.

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

Claude 1.3883.0 (93ff6c) 2026-04-21T17:24:01.000Z

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_