Claude Code 2.1.277 added AGENTS.md support, but only as a fallback — if a CLAUDE.md exists anywhere at or above the working directory, Claude Code ignores AGENTS.md and keeps reading CLAUDE.md only.
The Project instructions setting in /config controls this, with four values: claude-md-or-agents-md (default), claude-md-and-agents-md, claude-md, and managed-only.
Fix a repo that has both files by switching /config to claude-md-and-agents-md, or by adding a one-line @AGENTS.md import inside CLAUDE.md — not a symlink, which the docs warn against.