[BUG] Toolbar button behavior changed in v2.0 - no longer opens CLI in terminal - this is a bug or regression

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?

Summary

The Claude Code toolbar button (sparkle icon) behavior was changed in version 2.0 without warning or configuration option. Previously, clicking this button would launch claude in the integrated terminal (CLI mode). Now it exclusively opens the native extension in the sidebar panel. This breaking change disrupts established workflows with no opt-out mechanism.

Current Behavior

After upgrading to Claude Code 2.0 (released September 28-29, 2025), the toolbar button only opens the native extension panel in the sidebar. Users who prefer the CLI terminal workflow have no way to access it via the toolbar button.

Before v2.0:

• Click sparkle button → Opens claude CLI in integrated terminal

After v2.0:

• Click sparkle button → Opens native extension in sidebar panel
• No configuration option to restore previous behavior

Expected Behavior

Users should have access to both interfaces through dedicated toolbar buttons, allowing them to choose their preferred workflow.

Impact

This affects developers who:

• Work across multiple editors (VSCode, Cursor, Windsurf) and prefer consistent CLI behavior
• Run multiple Claude Code instances simultaneously in different terminal tabs
• Have muscle memory and established workflows built around the CLI interface
• Prefer keyboard-driven terminal workflows over GUI panels
• Use the CLI for automation scripts or custom integrations

Steps to Reproduce

1. Install Claude Code v2.0
2. Click the Claude Code toolbar button (sparkle icon)
3. Observe that it opens the extension panel instead of launching claude in the terminal
4. Attempt to find a setting to change this behavior → None exists

Proposed Resolution Options

Option 1: Separate Toolbar Buttons (Preferred)

Add two distinct toolbar buttons so users can choose their interface:

• Button 1: "Claude Code (CLI)" - Opens claude in integrated terminal (original behavior)
• Icon: Terminal/CLI icon or modified sparkle with terminal indicator
• Command: claude-code.openCLI

• Button 2: "Claude Code (Extension)" - Opens native extension panel (new v2.0 behavior)
• Icon: Current sparkle icon or panel indicator
• Command: claude-code.openExtension

Benefits:

• ✅ No breaking changes - both workflows coexist
• ✅ Clear visual distinction between interfaces
• ✅ Users can add/remove buttons via toolbar customization
• ✅ Supports different workflows without configuration complexity

Option 2: Configuration Setting (Alternative)

Add a setting to control the default button behavior:

{
"claudeCode.toolbarButton.action": "terminal" // or "extension"
}

Benefits:

• ✅ Maintains single button in toolbar
• ✅ User choice respected via settings
• ❌ Requires configuration step
• ❌ Less discoverable than separate buttons

Option 3: Context Menu (Minimal)

Right-click the toolbar button to show:

• "Open in Terminal (CLI)"
• "Open in Panel (Extension)"

Benefits:

• ✅ Single button footprint
• ❌ Less discoverable
• ❌ Extra click required

Why This Matters

This is a regression, not a feature request. The original button behavior was removed without:

• Migration documentation
• Configuration option to maintain existing workflow
• Deprecation warning in earlier versions

Breaking changes should always provide users a path to maintain their existing workflows, especially when those workflows are core to how developers use the tool daily.

Environment

• Claude Code Version: 2.0.0+
• Editor: VSCode / Windsurf / Cursor
• OS: macOS / Windows / Linux

Related Issues

• #8384 - Option to run Claude Code in Terminal Panel
• #1278 - Cannot disable vscode extension when using vscode terminal

Additional Context

The 2.0 release notes mention "New native VS Code extension" but don't indicate this would completely replace the CLI button functionality. Many users discovered this breaking change only after upgrading, with no clear path back to their preferred workflow.

What Should Happen?

Expected Behavior

Users should have access to both interfaces through dedicated toolbar buttons, allowing them to choose their preferred workflow.

Error Messages/Logs

Steps to Reproduce

1. Install Claude Code v2.0 or higher
2. Click the Claude Code toolbar button (sparkle icon)
3. Observe that it opens the extension panel instead of launching claude in the terminal
4. Attempt to find a setting to change this behavior → None exists

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

1.0.126

Claude Code Version

2.0.1 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Cursor

Additional Information

_No response_