[BUG] Constantly hitting the "conversation is too long" error message with new chats despite only 16k/200k (8%) tokens used

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?

I am continuously hitting a conversation limit every single new conversation I start within my project. I have tried to split the project instructions into smaller more consolidated stand alone projects (with instructions being as few as 80 lines to the max of 320 lines) and still I am hit with the conversation is too long message every time I try to edit files or start chats. I went into Fin AI agent for help and it too found this issue to be very strange. I have disconnected any tools etc to try to reduce conversation size but it did not work.

I tried to run /doctor and even just /bug within code but neither of the lines worked and I let Fin know this as well to which it directed me to Github.

What is the resolution? I am currently at a hard stop with my work until I figure this out. This is as frustrating as it sounds.

What Should Happen?

I should be able to work within my chats without issue.

Error Messages/Logs

This conversation is too long to continue. Start a new chat, or remove some tools to free up space.

Claude couldn't finish this response. Try again in a moment.

Steps to Reproduce

I am not sure how to add steps here. Max out (even though I haven't) your tokens I guess.

Claude Model

Sonnet (default)

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

1.6608.2

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

<img width="1186" height="752" alt="Image" src="https://github.com/user-attachments/assets/c6099210-4631-459c-aa89-f3b34192682c" />
<img width="1383" height="838" alt="Image" src="https://github.com/user-attachments/assets/267f814f-2e2f-4c21-b91d-e22561086d81" />