chore(main): release 0.39.0 (#724 )

🤖 I have created a release *beep* *boop* --- ## [0.39.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.38.0...v0.39.0) (2026-05-29) ### Features * **deps:** update Claude Agent SDK to 0.3.156 ([#722](https://github.com/agentclientprotocol/claude-agent-acp/issues/722)) ([3fb6db4](3fb6db4e5e)) --- This PR was generated with [Release Please](https://github.com/googleapis/release-please). See [documentation](https://github.com/googleapis/release-please#release-please). Co-authored-by: acp-release-bot[bot] <246668977+acp-release-bot[bot]@users.noreply.github.com>
feat(deps): update Claude Agent SDK to 0.3.156 (#722 )
2026-10-27 12:40:32 +00:00 · 2026-05-29 12:12:17 +02:00 · 2026-05-29 10:10:32 +00:00 · 2026-05-29 12:06:08 +02:00 · 2026-05-28 22:08:38 +02:00 · 2026-05-28 22:05:59 +02:00
20 changed files with 2455 additions and 601 deletions
--- a/.github/dependabot.yml
+++ b/.github/dependabot.yml
@@ -11,13 +11,6 @@ updates:
      interval: "daily"
    allow:
      - dependency-type: "all"
-    ignore:
-      # Pinned to match the peer range of @anthropic-ai/claude-agent-sdk;
-      # newer minors break type compatibility between the two installed copies.
-      - dependency-name: "@anthropic-ai/sdk"
-        update-types:
-          - "version-update:semver-minor"
-          - "version-update:semver-major"
    groups:
      minor:
        update-types:
--- a/.github/workflows/publish.yml
+++ b/.github/workflows/publish.yml
@@ -16,7 +16,7 @@ jobs:
      # Generating a GitHub token, so that PRs and tags created by
      # the release-please-action can trigger actions workflows.
      - name: Generate GitHub token
-        uses: actions/create-github-app-token@1b10c78c7865c340bc4f6099eb2f838309f1e8c3
+        uses: actions/create-github-app-token@bcd2ba49218906704ab6c1aa796996da409d3eb1
        id: generate-token
        with:
          # GitHub App ID secret name
--- a/.release-please-manifest.json
+++ b/.release-please-manifest.json
@@ -1,3 +1,3 @@
 {
-  ".": "0.33.1"
+  ".": "0.39.0"
 }
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,89 @@
 # Changelog

+## [0.39.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.38.0...v0.39.0) (2026-05-29)
+
+
+### Features
+
+* **deps:** update Claude Agent SDK to 0.3.156 ([#722](https://github.com/agentclientprotocol/claude-agent-acp/issues/722)) ([3fb6db4](https://github.com/agentclientprotocol/claude-agent-acp/commit/3fb6db4e5ee5bd1f431cf5d2ce5331ce983f9597))
+
+## [0.38.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.37.0...v0.38.0) (2026-05-28)
+
+
+### Features
+
+* **deps:** bump to @anthropic-ai/claude-agent-sdk 0.3.154 (Opus 4.8) ([#716](https://github.com/agentclientprotocol/claude-agent-acp/issues/716)) ([a172885](https://github.com/agentclientprotocol/claude-agent-acp/commit/a172885c80fc32c108a8501268a543641088f543))
+* Support Opus 4.8 ([#718](https://github.com/agentclientprotocol/claude-agent-acp/issues/718)) ([98b54a0](https://github.com/agentclientprotocol/claude-agent-acp/commit/98b54a02c267cdef619becceccf6ef519fbf8f6f))
+
+
+### Bug Fixes
+
+* Remove hide Claude auth flag handling ([#707](https://github.com/agentclientprotocol/claude-agent-acp/issues/707)) ([7ed1daf](https://github.com/agentclientprotocol/claude-agent-acp/commit/7ed1daf7b42088ad149e9bf742f764752b82d093))
+
+## [0.37.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.36.1...v0.37.0) (2026-05-21)
+
+
+### Features
+
+* add 'Default' option to effort level config ([#701](https://github.com/agentclientprotocol/claude-agent-acp/issues/701)) ([9e259d1](https://github.com/agentclientprotocol/claude-agent-acp/commit/9e259d128aa58dbb8107e53362781ca4e8ee071e))
+* **deps:** bump the claude-agent-sdk to 0.3.146 ([#700](https://github.com/agentclientprotocol/claude-agent-acp/issues/700)) ([72875b2](https://github.com/agentclientprotocol/claude-agent-acp/commit/72875b248c7b90a89638de2f1709eec9e2153e7e))
+* **deps:** bump the minor group with 13 updates ([#689](https://github.com/agentclientprotocol/claude-agent-acp/issues/689)) ([f66bc31](https://github.com/agentclientprotocol/claude-agent-acp/commit/f66bc31ae4bea73b48eeeb7f1db90c7d69cc0dac))
+* Emit tool calls for memory recall events ([#703](https://github.com/agentclientprotocol/claude-agent-acp/issues/703)) ([a0bfb98](https://github.com/agentclientprotocol/claude-agent-acp/commit/a0bfb98ba73eaf37e9c071e886c054f90a5d5629)), closes [#650](https://github.com/agentclientprotocol/claude-agent-acp/issues/650)
+
+
+### Bug Fixes
+
+* Avoid cross-version model alias matches ([#702](https://github.com/agentclientprotocol/claude-agent-acp/issues/702)) ([e1e1c69](https://github.com/agentclientprotocol/claude-agent-acp/commit/e1e1c69029ef08579c841e6fbdffb32a5b94df06))
+* Avoid redundant initial model sync ([#704](https://github.com/agentclientprotocol/claude-agent-acp/issues/704)) ([b275f6f](https://github.com/agentclientprotocol/claude-agent-acp/commit/b275f6ff7f0f2e21adedbd8e63a6fc3d63cbbb8d)), closes [#646](https://github.com/agentclientprotocol/claude-agent-acp/issues/646)
+* Don't expose /clear in commands ([#705](https://github.com/agentclientprotocol/claude-agent-acp/issues/705)) ([cfce130](https://github.com/agentclientprotocol/claude-agent-acp/commit/cfce1307076e93f43a3ed8cc0134f9bb14a0f2d6))
+* emit  "cancelled" instead of "end_turn" when the session was interrupted. ([#694](https://github.com/agentclientprotocol/claude-agent-acp/issues/694)) ([2414a6f](https://github.com/agentclientprotocol/claude-agent-acp/commit/2414a6f98bec5bf50f3a13af528aa38d5a0fc974))
+* Recover prompt stream after a failed turn ([#706](https://github.com/agentclientprotocol/claude-agent-acp/issues/706)) ([2711f50](https://github.com/agentclientprotocol/claude-agent-acp/commit/2711f506d5799f0ae25160de311a4459ffb46c49)), closes [#654](https://github.com/agentclientprotocol/claude-agent-acp/issues/654)
+
+## [0.36.1](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.36.0...v0.36.1) (2026-05-18)
+
+
+### Bug Fixes
+
+* flaky authentication bypass for gateway ([#686](https://github.com/agentclientprotocol/claude-agent-acp/issues/686)) ([db852dc](https://github.com/agentclientprotocol/claude-agent-acp/commit/db852dcf7c8e3b461fabb1bdcf0c80a27d1da77d))
+
+## [0.36.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.35.0...v0.36.0) (2026-05-18)
+
+
+### Features
+
+* Add experimental session delete support ([#682](https://github.com/agentclientprotocol/claude-agent-acp/issues/682)) ([2162d5a](https://github.com/agentclientprotocol/claude-agent-acp/commit/2162d5af62d493a82381bd88bc8fc67d376e358b))
+* Support experimental additionalDirectories field ([#684](https://github.com/agentclientprotocol/claude-agent-acp/issues/684)) ([f37e9a0](https://github.com/agentclientprotocol/claude-agent-acp/commit/f37e9a0d47d8d201d98b2177083664a6781895cc))
+
+## [0.35.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.34.1...v0.35.0) (2026-05-16)
+
+
+### Features
+
+* **deps:** bump actions/create-github-app-token from 3.1.1 to 3.2.0 ([#669](https://github.com/agentclientprotocol/claude-agent-acp/issues/669)) ([47df1f2](https://github.com/agentclientprotocol/claude-agent-acp/commit/47df1f2a0be57ddb8873ae8e341f748471c7bc53))
+* **deps:** bump hono from 4.12.18 to 4.12.19 in the minor group ([#671](https://github.com/agentclientprotocol/claude-agent-acp/issues/671)) ([5d7165d](https://github.com/agentclientprotocol/claude-agent-acp/commit/5d7165d96158da2ddf3087676cdb0a19d1ff57aa))
+* **deps:** update to claude-agent-sdk 0.3.143 ([#664](https://github.com/agentclientprotocol/claude-agent-acp/issues/664)) ([27ca2e5](https://github.com/agentclientprotocol/claude-agent-acp/commit/27ca2e5d40917887671cc4c39a854fd8f92c01e6))
+* Use SDK settings resolution for defaults ([#677](https://github.com/agentclientprotocol/claude-agent-acp/issues/677)) ([eb1259c](https://github.com/agentclientprotocol/claude-agent-acp/commit/eb1259cf88375ca3c20a219ab99f12f5488fb360))
+
+
+### Bug Fixes
+
+* Add task hooks for plan state updates ([#676](https://github.com/agentclientprotocol/claude-agent-acp/issues/676)) ([5ff7d50](https://github.com/agentclientprotocol/claude-agent-acp/commit/5ff7d50f0ec7f34a7d9d901223aed73e2dbcce68))
+* render local-command-stdout messages instead of dropping them ([#649](https://github.com/agentclientprotocol/claude-agent-acp/issues/649)) ([3b9b7d5](https://github.com/agentclientprotocol/claude-agent-acp/commit/3b9b7d5a56defd925eb2038fa97b6484ad951587))
+
+## [0.34.1](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.34.0...v0.34.1) (2026-05-16)
+
+
+### Bug Fixes
+
+* load credential error for bedrock gateway ([#667](https://github.com/agentclientprotocol/claude-agent-acp/issues/667)) ([8d76be3](https://github.com/agentclientprotocol/claude-agent-acp/commit/8d76be356a3e74c58a7c93c3c201cca6a317d784))
+
+## [0.34.0](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.33.1...v0.34.0) (2026-05-15)
+
+
+### Features
+
+* add bedrock gateway authentication ([#665](https://github.com/agentclientprotocol/claude-agent-acp/issues/665)) ([002c63a](https://github.com/agentclientprotocol/claude-agent-acp/commit/002c63a78b844c168d3dfc744cf408362a6adf97))
+
 ## [0.33.1](https://github.com/agentclientprotocol/claude-agent-acp/compare/v0.33.0...v0.33.1) (2026-05-07)


--- a/package-lock.json
+++ b/package-lock.json
--- a/package.json
+++ b/package.json
@@ -3,7 +3,7 @@
  "publishConfig": {
    "access": "public"
  },
-  "version": "0.33.1",
+  "version": "0.39.0",
  "description": "An ACP-compatible coding agent powered by the Claude Agent SDK (TypeScript)",
  "main": "dist/lib.js",
  "types": "dist/lib.d.ts",
@@ -60,22 +60,22 @@
  "author": "Zed Industries",
  "license": "Apache-2.0",
  "dependencies": {
-    "@agentclientprotocol/sdk": "0.21.0",
-    "@anthropic-ai/claude-agent-sdk": "0.2.132",
+    "@agentclientprotocol/sdk": "0.22.1",
+    "@anthropic-ai/claude-agent-sdk": "0.3.156",
    "zod": "^3.25.0 || ^4.0.0"
  },
  "devDependencies": {
-    "@anthropic-ai/sdk": "0.89.0",
+    "@anthropic-ai/sdk": "0.100.0",
    "@eslint/js": "10.0.1",
-    "@types/node": "25.6.0",
-    "@typescript-eslint/eslint-plugin": "8.59.2",
-    "@typescript-eslint/parser": "8.59.2",
-    "eslint": "10.3.0",
+    "@types/node": "25.9.1",
+    "@typescript-eslint/eslint-plugin": "8.60.0",
+    "@typescript-eslint/parser": "8.60.0",
+    "eslint": "10.4.0",
    "eslint-config-prettier": "10.1.8",
    "globals": "17.6.0",
    "prettier": "3.8.3",
    "ts-node": "10.9.2",
    "typescript": "6.0.3",
-    "vitest": "4.1.5"
+    "vitest": "4.1.7"
  }
 }
--- a/src/acp-agent.ts
+++ b/src/acp-agent.ts
@@ -17,6 +17,7 @@ import {
  ndJsonStream,
  NewSessionRequest,
  NewSessionResponse,
+  PermissionOption,
  PromptRequest,
  PromptResponse,
  ReadTextFileRequest,
@@ -36,6 +37,8 @@ import {
  SetSessionModeResponse,
  CloseSessionRequest,
  CloseSessionResponse,
+  DeleteSessionRequest,
+  DeleteSessionResponse,
  TerminalHandle,
  TerminalOutputResponse,
  WriteTextFileRequest,
@@ -44,6 +47,7 @@ import {
 } from "@agentclientprotocol/sdk";
 import {
  CanUseTool,
+  deleteSession,
  getSessionMessages,
  listSessions,
  McpServerConfig,
@@ -69,10 +73,16 @@ import * as path from "node:path";
 import packageJson from "../package.json" with { type: "json" };
 import { SettingsManager } from "./settings.js";
 import {
+  applyTaskCreate,
+  applyTaskUpdate,
  ClaudePlanEntry,
  createPostToolUseHook,
+  createTaskHook,
+  parseTaskCreateOutput,
  planEntries,
  registerHookCallback,
+  TaskState,
+  taskStateToPlanEntries,
  toolInfoFromToolUse,
  toolUpdateFromDiffToolResponse,
  toolUpdateFromToolResult,
@@ -152,6 +162,9 @@ type Session = {
   *  DEFAULT_CONTEXT_WINDOW, refreshed from each result's modelUsage, and
   *  invalidated when the user switches the session's model. */
  contextWindowSize: number;
+  /** Accumulated task list for the session, keyed by task ID. Task IDs are
+   *  per-session, so this state must not be shared across sessions. */
+  taskState: TaskState;
 };

 /** Compute a stable fingerprint of the session-defining params so we can
@@ -232,6 +245,8 @@ type GatewayAuthMeta = {
  };
 };

+type GatewayAuthRequest = AuthenticateRequest & { _meta?: GatewayAuthMeta };
+
 /**
 * Extra metadata that the agent provides for each tool_call / tool_update update.
 */
@@ -476,7 +491,7 @@ export class ClaudeAcpAgent implements Agent {
  backgroundTerminals: { [key: string]: BackgroundTerminal } = {};
  clientCapabilities?: ClientCapabilities;
  logger: Logger;
-  gatewayAuthMeta?: GatewayAuthMeta;
+  gatewayAuthRequest?: GatewayAuthRequest;

  constructor(client: AgentSideConnection, logger?: Logger) {
    this.sessions = {};
@@ -503,6 +518,17 @@ export class ClaudeAcpAgent implements Agent {
      },
    };

+    const gatewayBedrockAuthMethod: AuthMethod = {
+      id: "gateway-bedrock",
+      name: "Custom model gateway",
+      description: "Use a custom gateway to authenticate and access models",
+      _meta: {
+        gateway: {
+          protocol: "bedrock",
+        },
+      },
+    };
+
    const supportsTerminalAuth = request.clientCapabilities?.auth?.terminal === true;
    const supportsMetaTerminalAuth = request.clientCapabilities?._meta?.["terminal-auth"] === true;

@@ -602,10 +628,12 @@ export class ClaudeAcpAgent implements Agent {
        },
        loadSession: true,
        sessionCapabilities: {
+          additionalDirectories: {},
+          close: {},
+          delete: {},
          fork: {},
          list: {},
          resume: {},
-          close: {},
        },
      },
      agentInfo: {
@@ -613,7 +641,10 @@ export class ClaudeAcpAgent implements Agent {
        title: "Claude Agent",
        version: packageJson.version,
      },
-      authMethods: [...terminalAuthMethods, ...(supportsGatewayAuth ? [gatewayAuthMethod] : [])],
+      authMethods: [
+        ...terminalAuthMethods,
+        ...(supportsGatewayAuth ? [gatewayAuthMethod, gatewayBedrockAuthMethod] : []),
+      ],
    };
  }

@@ -634,6 +665,7 @@ export class ClaudeAcpAgent implements Agent {
      {
        cwd: params.cwd,
        mcpServers: params.mcpServers ?? [],
+        additionalDirectories: params.additionalDirectories,
        _meta: params._meta,
      },
      {
@@ -690,8 +722,8 @@ export class ClaudeAcpAgent implements Agent {
  }

  async authenticate(_params: AuthenticateRequest): Promise<void> {
-    if (_params.methodId === "gateway") {
-      this.gatewayAuthMeta = _params._meta as GatewayAuthMeta | undefined;
+    if (_params.methodId === "gateway" || _params.methodId === "gateway-bedrock") {
+      this.gatewayAuthRequest = _params as GatewayAuthRequest;
      return;
    }
    throw new Error("Method not implemented.");
@@ -721,6 +753,13 @@ export class ClaudeAcpAgent implements Agent {
    // forward it to clients as structured `data`, sparing them from
    // pattern-matching on the human-readable message text.
    let lastAssistantError: SDKAssistantMessageError | undefined;
+    // Tracks whether we're inside a compaction. The SDK emits the terminal
+    // `status` (compact_result success/failed) twice for a single failed
+    // compaction, and the two messages are indistinguishable — so we report the
+    // outcome only while a compaction is in progress, then clear this. A fresh
+    // `compacting` status sets it again, so every distinct compaction (e.g.
+    // repeated auto-compactions in a long turn) is still shown.
+    let compactionInProgress = false;

    const userMessage = promptToClaude(params);

@@ -749,6 +788,7 @@ export class ClaudeAcpAgent implements Agent {

    session.promptRunning = true;
    let handedOff = false;
+    let errored = false;
    let stopReason: StopReason = "end_turn";

    try {
@@ -779,6 +819,7 @@ export class ClaudeAcpAgent implements Agent {
                break;
              case "status": {
                if (message.status === "compacting") {
+                  compactionInProgress = true;
                  await this.client.sessionUpdate({
                    sessionId: message.session_id,
                    update: {
@@ -786,6 +827,28 @@ export class ClaudeAcpAgent implements Agent {
                      content: { type: "text", text: "Compacting..." },
                    },
                  });
+                } else if (message.compact_result === "success" && compactionInProgress) {
+                  // The SDK signals manual `/compact` completion with a status
+                  // message carrying `compact_result`, not the `compact_boundary`
+                  // message (which only fires when there's content to compact).
+                  compactionInProgress = false;
+                  await this.client.sessionUpdate({
+                    sessionId: message.session_id,
+                    update: {
+                      sessionUpdate: "agent_message_chunk",
+                      content: { type: "text", text: "\n\nCompacting completed." },
+                    },
+                  });
+                } else if (message.compact_result === "failed" && compactionInProgress) {
+                  compactionInProgress = false;
+                  const reason = message.compact_error ? `: ${message.compact_error}` : ".";
+                  await this.client.sessionUpdate({
+                    sessionId: message.session_id,
+                    update: {
+                      sessionUpdate: "agent_message_chunk",
+                      content: { type: "text", text: `\n\nCompacting failed${reason}` },
+                    },
+                  });
                }
                break;
              }
@@ -801,6 +864,10 @@ export class ClaudeAcpAgent implements Agent {
                // The alternative (no update) leaves the client showing e.g.
                // "944k/1m" right after the user sees "Compacting completed",
                // which is confusing and wrong.
+                //
+                // The "Compacting completed." text is emitted from the `status`
+                // handler (keyed on `compact_result`), not here, so the failure
+                // path gets a message too.
                lastAssistantTotalUsage = 0;
                lastAssistantUsage = null;
                await this.client.sessionUpdate({
@@ -811,13 +878,6 @@ export class ClaudeAcpAgent implements Agent {
                    size: session.contextWindowSize,
                  },
                });
-                await this.client.sessionUpdate({
-                  sessionId: message.session_id,
-                  update: {
-                    sessionUpdate: "agent_message_chunk",
-                    content: { type: "text", text: "\n\nCompacting completed." },
-                  },
-                });
                break;
              }
              case "local_command_output": {
@@ -832,10 +892,53 @@ export class ClaudeAcpAgent implements Agent {
              }
              case "session_state_changed": {
                if (message.state === "idle") {
+                  if (session.cancelled) {
+                    stopReason = "cancelled";
+                  }
                  return { stopReason, usage: sessionUsage(session) };
                }
                break;
              }
+              case "memory_recall": {
+                const isSynthesis = message.mode === "synthesize";
+                const locations = isSynthesis
+                  ? []
+                  : message.memories.map((m) => ({ path: m.path }));
+                const content = isSynthesis
+                  ? message.memories
+                      .filter(
+                        (m): m is (typeof message.memories)[number] & { content: string } =>
+                          typeof m.content === "string",
+                      )
+                      .map((m) => ({
+                        type: "content" as const,
+                        content: { type: "text" as const, text: m.content },
+                      }))
+                  : [];
+                const count = message.memories.length;
+                const title = isSynthesis
+                  ? "Recalled synthesized memory"
+                  : `Recalled ${count} ${count === 1 ? "memory" : "memories"}`;
+                await this.client.sessionUpdate({
+                  sessionId: message.session_id,
+                  update: {
+                    sessionUpdate: "tool_call",
+                    toolCallId: message.uuid,
+                    title,
+                    kind: "read",
+                    status: "completed",
+                    ...(locations.length > 0 && { locations }),
+                    ...(content.length > 0 && { content }),
+                    _meta: {
+                      claudeCode: {
+                        toolName: "memory_recall",
+                        toolResponse: { mode: message.mode },
+                      },
+                    } satisfies ToolUpdateMeta,
+                  },
+                });
+                break;
+              }
              case "hook_started":
              case "hook_progress":
              case "hook_response":
@@ -846,10 +949,11 @@ export class ClaudeAcpAgent implements Agent {
              case "task_updated":
              case "elicitation_complete":
              case "plugin_install":
-              case "memory_recall":
              case "notification":
              case "api_retry":
              case "mirror_error":
+              case "permission_denied":
+              case "thinking_tokens":
                // Todo: process via status api: https://docs.claude.com/en/docs/claude-code/hooks#hook-output
                break;
              default:
@@ -1040,6 +1144,7 @@ export class ClaudeAcpAgent implements Agent {
              {
                clientCapabilities: this.clientCapabilities,
                cwd: session.cwd,
+                taskState: session.taskState,
              },
            )) {
              await this.client.sessionUpdate(notification);
@@ -1088,13 +1193,37 @@ export class ClaudeAcpAgent implements Agent {
              }
            }

-            // Slash commands like /compact can generate invalid output... doesn't match
-            // their own docs: https://docs.anthropic.com/en/docs/claude-code/sdk/sdk-slash-commands#%2Fcompact-compact-conversation-history
+            // Strip <command-*>/<local-command-stdout> markers and render any
+            // remaining prose. Skill bodies and built-in slash commands (e.g.
+            // /usage, /status, /model) arrive wrapped in these tags; pure-marker
+            // payloads (e.g. /compact's malformed output) strip to null and are
+            // skipped. Mirrors the replay path at replaySessionHistory.
            if (
+              message.message.role !== "system" &&
              typeof message.message.content === "string" &&
              message.message.content.includes("<local-command-stdout>")
            ) {
-              this.logger.log(message.message.content);
+              const stripped = stripLocalCommandMetadata(message.message.content);
+              if (typeof stripped === "string") {
+                for (const notification of toAcpNotifications(
+                  stripped,
+                  message.message.role,
+                  params.sessionId,
+                  this.toolUseCache,
+                  this.client,
+                  this.logger,
+                  {
+                    clientCapabilities: this.clientCapabilities,
+                    parentToolUseId: message.parent_tool_use_id,
+                    cwd: session.cwd,
+                    taskState: session.taskState,
+                  },
+                )) {
+                  await this.client.sessionUpdate(notification);
+                }
+              } else {
+                this.logger.log(message.message.content);
+              }
              break;
            }

@@ -1115,6 +1244,9 @@ export class ClaudeAcpAgent implements Agent {
            ) {
              break;
            }
+            if (message.message.role === "system") {
+              break;
+            }

            if (
              message.type === "assistant" &&
@@ -1146,6 +1278,7 @@ export class ClaudeAcpAgent implements Agent {
                clientCapabilities: this.clientCapabilities,
                parentToolUseId: message.parent_tool_use_id,
                cwd: session.cwd,
+                taskState: session.taskState,
              },
            )) {
              await this.client.sessionUpdate(notification);
@@ -1165,6 +1298,34 @@ export class ClaudeAcpAgent implements Agent {
      }
      throw new Error("Session did not end in result");
    } catch (error) {
+      errored = true;
+      // A failed turn typically leaves a trailing `session_state_changed: idle`
+      // (and possibly more) in the query iterator. If we don't drain it here,
+      // the next prompt's first `query.next()` consumes that stale idle and
+      // short-circuits to end_turn with zero usage
+      // Bounded so a misbehaving SDK can't hang the next prompt indefinitely.
+      try {
+        await session.query.interrupt();
+        const MAX_DRAIN = 100;
+        for (let i = 0; i < MAX_DRAIN; i++) {
+          const { value: m, done } = await session.query.next();
+          if (done || !m) break;
+          if (m.type === "system" && m.subtype === "session_state_changed" && m.state === "idle") {
+            break;
+          }
+          if (i === MAX_DRAIN - 1) {
+            this.logger.error(
+              `Session ${params.sessionId}: drained ${MAX_DRAIN} messages after error without observing idle`,
+            );
+          }
+        }
+      } catch (drainErr) {
+        this.logger.error(
+          `Session ${params.sessionId}: failed to drain query after prompt error:`,
+          drainErr,
+        );
+      }
+
      if (error instanceof RequestError || !(error instanceof Error)) {
        throw error;
      }
@@ -1189,10 +1350,19 @@ export class ClaudeAcpAgent implements Agent {
    } finally {
      if (!handedOff) {
        session.promptRunning = false;
-        // This usually should not happen, but in case the loop finishes
-        // without claude sending all message replays, we resolve the
-        // next pending prompt call to ensure no prompts get stuck.
-        if (session.pendingMessages.size > 0) {
+        if (errored) {
+          // The query stream was just drained — handing pending prompts off
+          // onto it would let them race with the recovery. Cancel them so
+          // each waiting prompt() returns stopReason: "cancelled" and the
+          // client can decide whether to retry.
+          for (const pending of session.pendingMessages.values()) {
+            pending.resolve(true);
+          }
+          session.pendingMessages.clear();
+        } else if (session.pendingMessages.size > 0) {
+          // This usually should not happen, but in case the loop finishes
+          // without claude sending all message replays, we resolve the
+          // next pending prompt call to ensure no prompts get stuck.
          const next = [...session.pendingMessages.entries()].sort(
            (a, b) => a[1].order - b[1].order,
          )[0];
@@ -1245,6 +1415,16 @@ export class ClaudeAcpAgent implements Agent {
    return {};
  }

+  async unstable_deleteSession(params: DeleteSessionRequest): Promise<DeleteSessionResponse> {
+    // Tear down any active in-memory state first so the on-disk file isn't
+    // recreated by an outstanding query writing to it.
+    if (this.sessions[params.sessionId]) {
+      await this.teardownSession(params.sessionId);
+    }
+    await deleteSession(params.sessionId);
+    return {};
+  }
+
  async unstable_setSessionModel(
    params: SetSessionModelRequest,
  ): Promise<SetSessionModelResponse | void> {
@@ -1399,6 +1579,7 @@ export class ClaudeAcpAgent implements Agent {
          registerHooks: false,
          clientCapabilities: this.clientCapabilities,
          cwd: this.sessions[sessionId]?.cwd,
+          taskState: this.sessions[sessionId]?.taskState,
        },
      )) {
        await this.client.sessionUpdate(notification);
@@ -1429,7 +1610,7 @@ export class ClaudeAcpAgent implements Agent {
      }

      if (toolName === "ExitPlanMode") {
-        const optionsAll = [
+        const optionsAll: PermissionOption[] = [
          { kind: "allow_always", name: 'Yes, and use "auto" mode', optionId: "auto" },
          {
            kind: "allow_always",
@@ -1673,7 +1854,7 @@ export class ClaudeAcpAgent implements Agent {
        typeof newEffortOpt?.currentValue === "string" ? newEffortOpt.currentValue : undefined;
      if (newEffort !== currentEffort) {
        await session.query.applyFlagSettings({
-          effortLevel: newEffort as Settings["effortLevel"],
+          effortLevel: toSdkEffortLevel(newEffort),
        });
      }

@@ -1698,7 +1879,7 @@ export class ClaudeAcpAgent implements Agent {
      );
      if (configId === "effort") {
        await session.query.applyFlagSettings({
-          effortLevel: value as Settings["effortLevel"],
+          effortLevel: toSdkEffortLevel(value),
        });
      }
    }
@@ -1708,6 +1889,7 @@ export class ClaudeAcpAgent implements Agent {
    sessionId: string;
    cwd: string;
    mcpServers?: NewSessionRequest["mcpServers"];
+    additionalDirectories?: NewSessionRequest["additionalDirectories"];
    _meta?: NewSessionRequest["_meta"];
  }): Promise<NewSessionResponse> {
    const existingSession = this.sessions[params.sessionId];
@@ -1732,6 +1914,7 @@ export class ClaudeAcpAgent implements Agent {
      {
        cwd: params.cwd,
        mcpServers: params.mcpServers ?? [],
+        additionalDirectories: params.additionalDirectories,
        _meta: params._meta,
      },
      {
@@ -1781,7 +1964,7 @@ export class ClaudeAcpAgent implements Agent {
              ? Object.fromEntries(server.headers.map((e) => [e.name, e.value]))
              : undefined,
          };
-        } else {
+        } else if (!("type" in server)) {
          // Stdio type MCP server (with or without explicit type field)
          mcpServers[server.name] = {
            type: "stdio",
@@ -1845,6 +2028,11 @@ export class ClaudeAcpAgent implements Agent {

    const abortController = userProvidedOptions?.abortController || new AbortController();

+    // Per-session task state. Created here (rather than in the session record
+    // below) so the TaskCreated/TaskCompleted hook callbacks can close over
+    // the same Map that the streaming message handler will read from.
+    const taskState: TaskState = new Map();
+
    const options: Options = {
      systemPrompt,
      settingSources: ["user", "project", "local"],
@@ -1864,7 +2052,7 @@ export class ClaudeAcpAgent implements Agent {
      env: {
        ...process.env,
        ...userProvidedOptions?.env,
-        ...createEnvForGateway(this.gatewayAuthMeta),
+        ...createEnvForGateway(this.gatewayAuthRequest),
        // Opt-in to session state events like when the agent is idle
        CLAUDE_CODE_EMIT_SESSION_STATE_EVENTS: "1",
      },
@@ -1905,14 +2093,58 @@ export class ClaudeAcpAgent implements Agent {
            ],
          },
        ],
+        TaskCreated: [
+          ...(userProvidedOptions?.hooks?.TaskCreated || []),
+          {
+            hooks: [
+              createTaskHook({
+                taskState,
+                onChange: async () => {
+                  await this.client.sessionUpdate({
+                    sessionId,
+                    update: {
+                      sessionUpdate: "plan",
+                      entries: taskStateToPlanEntries(taskState),
+                    },
+                  });
+                },
+              }),
+            ],
+          },
+        ],
+        TaskCompleted: [
+          ...(userProvidedOptions?.hooks?.TaskCompleted || []),
+          {
+            hooks: [
+              createTaskHook({
+                taskState,
+                onChange: async () => {
+                  await this.client.sessionUpdate({
+                    sessionId,
+                    update: {
+                      sessionUpdate: "plan",
+                      entries: taskStateToPlanEntries(taskState),
+                    },
+                  });
+                },
+              }),
+            ],
+          },
+        ],
      },
      ...creationOpts,
      abortController,
    };

+    // Prefer the official ACP `additionalDirectories` field. Fall back to the
+    // legacy `_meta.additionalRoots` extension for clients that haven't been
+    // updated yet. Either source is merged with directories supplied via
+    // `_meta.claudeCode.options.additionalDirectories` (SDK pass-through).
+    const acpAdditionalDirectories =
+      params.additionalDirectories ?? sessionMeta?.additionalRoots ?? [];
    options.additionalDirectories = [
      ...(userProvidedOptions?.additionalDirectories ?? []),
-      ...(sessionMeta?.additionalRoots ?? []),
+      ...acpAdditionalDirectories,
    ];

    if (creationOpts?.resume === undefined || creationOpts?.forkSession) {
@@ -1948,7 +2180,7 @@ export class ClaudeAcpAgent implements Agent {
    if (
      shouldHideClaudeAuth() &&
      initializationResult.account.subscriptionType &&
-      !this.gatewayAuthMeta
+      !this.gatewayAuthRequest
    ) {
      throw RequestError.authRequired(
        undefined,
@@ -1966,7 +2198,13 @@ export class ClaudeAcpAgent implements Agent {
      ? applyAvailableModelsAllowlist(initializationResult.models, settingsAvailableModels)
      : initializationResult.models;

-    const models = await getAvailableModels(q, allowedModels, settingsManager, this.logger);
+    const models = await getAvailableModels(
+      q,
+      allowedModels,
+      initializationResult.models,
+      settingsManager,
+      this.logger,
+    );

    // Gate `auto` (and future model-specific modes) on the resolved model's
    // `ModelInfo`. See `buildAvailableModes` for the canonical SDK signal.
@@ -2017,7 +2255,11 @@ export class ClaudeAcpAgent implements Agent {

    // Apply the initial effort level to the SDK so it matches the UI default
    const initialEffort = configOptions.find((o) => o.id === "effort");
-    if (initialEffort && typeof initialEffort.currentValue === "string") {
+    if (
+      initialEffort &&
+      typeof initialEffort.currentValue === "string" &&
+      initialEffort.currentValue !== "default"
+    ) {
      await q.applyFlagSettings({
        effortLevel: initialEffort.currentValue as Settings["effortLevel"],
      });
@@ -2047,6 +2289,7 @@ export class ClaudeAcpAgent implements Agent {
      emitRawSDKMessages: sessionMeta?.claudeCode?.emitRawSDKMessages ?? false,
      contextWindowSize:
        inferContextWindowFromModel(models.currentModelId) ?? DEFAULT_CONTEXT_WINDOW,
+      taskState,
    };

    return {
@@ -2137,16 +2380,26 @@ function snapshotFromUsage(usage: {
  };
 }

-function createEnvForGateway(gatewayMeta?: GatewayAuthMeta) {
-  if (!gatewayMeta) {
+function createEnvForGateway(request?: GatewayAuthRequest) {
+  if (!request?._meta) {
    return {};
  }
+  const customHeaders = Object.entries(request._meta.gateway.headers)
+    .map(([key, value]) => `${key}: ${value}`)
+    .join("\n");
+
+  if (request.methodId === "gateway-bedrock") {
+    return {
+      CLAUDE_CODE_USE_BEDROCK: "1",
+      AWS_BEARER_TOKEN_BEDROCK: " ", // Must be non-empty to bypass pass configuration check
+      ANTHROPIC_BEDROCK_BASE_URL: request._meta.gateway.baseUrl,
+      ANTHROPIC_CUSTOM_HEADERS: customHeaders,
+    };
+  }
  return {
-    ANTHROPIC_BASE_URL: gatewayMeta.gateway.baseUrl,
-    ANTHROPIC_CUSTOM_HEADERS: Object.entries(gatewayMeta.gateway.headers)
-      .map(([key, value]) => `${key}: ${value}`)
-      .join("\n"),
-    ANTHROPIC_AUTH_TOKEN: "", // Must be specified to bypass claude login requirement
+    ANTHROPIC_BASE_URL: request._meta.gateway.baseUrl,
+    ANTHROPIC_CUSTOM_HEADERS: customHeaders,
+    ANTHROPIC_AUTH_TOKEN: " ", // Must be specified to bypass claude login requirement
  };
 }

@@ -2202,6 +2455,16 @@ function buildAvailableModes(modelInfo: ModelInfo | undefined): SessionModeState
  return modes;
 }

+// Translate a UI effort value into the flag-layer payload. The SDK
+// shallow-merges `applyFlagSettings`, drops `undefined` during JSON transport,
+// and only clears a key when an explicit `null` is sent — see
+// `applyFlagSettings` in @anthropic-ai/claude-agent-sdk. Mapping both the
+// `"default"` sentinel and `undefined` (effort option absent for the model) to
+// `null` ensures any previously-applied flag is actually cleared.
+function toSdkEffortLevel(value: string | undefined): Settings["effortLevel"] | null {
+  return value === undefined || value === "default" ? null : (value as Settings["effortLevel"]);
+}
+
 function buildConfigOptions(
  modes: SessionModeState,
  models: SessionModelState,
@@ -2244,25 +2507,20 @@ function buildConfigOptions(
    : [];

  if (supportedLevels.length > 0) {
-    const effortOptions = supportedLevels.map((level) => ({
-      value: level,
-      name: level
-        .split(/[_-]/)
-        .map((part) => (part ? part.charAt(0).toUpperCase() + part.slice(1) : part))
-        .join(" "),
-    }));
+    const effortOptions = [
+      { value: "default", name: "Default" },
+      ...supportedLevels.map((level) => ({
+        value: level,
+        name: level
+          .split(/[_-]/)
+          .map((part) => (part ? part.charAt(0).toUpperCase() + part.slice(1) : part))
+          .join(" "),
+      })),
+    ];

-    // Keep the current level if valid, otherwise prefer xhigh (Claude Code's
-    // recommended default for capable models), then high (the API default).
-    const includes = (l: string) => (supportedLevels as string[]).includes(l);
+    const includes = (l: string) => l === "default" || (supportedLevels as string[]).includes(l);
    const validEffort =
-      currentEffortLevel && includes(currentEffortLevel)
-        ? currentEffortLevel
-        : includes("xhigh")
-          ? "xhigh"
-          : includes("high")
-            ? "high"
-            : supportedLevels[0];
+      currentEffortLevel && includes(currentEffortLevel) ? currentEffortLevel : "default";

    options.push({
      id: "effort",
@@ -2282,6 +2540,27 @@ function buildConfigOptions(
 // but the SDK model list uses IDs like "claude-opus-4-6-1m".
 const MODEL_CONTEXT_HINT_PATTERN = /\[(\d+m)\]$/i;

+// Captures a model family version such as `4-6` or `4.7` so we can keep
+// `claude-opus-4-6` from being copied onto the SDK's `opus` alias when that
+// alias currently resolves to a different family version (e.g. Opus 4.7).
+const MODEL_FAMILY_VERSION_PATTERN = /\b(\d+)[-.](\d+)\b/;
+
+function extractModelFamilyVersion(s: string): string | null {
+  const match = s.match(MODEL_FAMILY_VERSION_PATTERN);
+  return match ? `${match[1]}.${match[2]}` : null;
+}
+
+function modelVersionsCompatible(preference: string, candidate: ModelInfo): boolean {
+  const preferred = extractModelFamilyVersion(preference);
+  if (!preferred) return true;
+  const candidateVersion =
+    extractModelFamilyVersion(candidate.value) ??
+    extractModelFamilyVersion(candidate.displayName) ??
+    extractModelFamilyVersion(candidate.description);
+  if (!candidateVersion) return true;
+  return preferred === candidateVersion;
+}
+
 function tokenizeModelPreference(model: string): { tokens: string[]; contextHint?: string } {
  const lower = model.trim().toLowerCase();
  const contextHint = lower.match(MODEL_CONTEXT_HINT_PATTERN)?.[1]?.toLowerCase();
@@ -2328,6 +2607,7 @@ function resolveModelPreference(models: ModelInfo[], preference: string): ModelI

  // Substring match
  const includesMatch = models.find((model) => {
+    if (!modelVersionsCompatible(trimmed, model)) return false;
    const value = model.value.toLowerCase();
    const display = model.displayName.toLowerCase();
    return value.includes(lower) || display.includes(lower) || lower.includes(value);
@@ -2341,6 +2621,7 @@ function resolveModelPreference(models: ModelInfo[], preference: string): ModelI
  let bestMatch: ModelInfo | null = null;
  let bestScore = 0;
  for (const model of models) {
+    if (!modelVersionsCompatible(trimmed, model)) continue;
    const score = scoreModelMatch(model, tokens, contextHint);
    if (0 < score && (!bestMatch || bestScore < score)) {
      bestMatch = model;
@@ -2416,12 +2697,14 @@ function applyAvailableModelsAllowlist(sdkModels: ModelInfo[], allowlist: string
 async function getAvailableModels(
  query: Query,
  models: ModelInfo[],
+  sdkModels: ModelInfo[],
  settingsManager: SettingsManager,
  logger: Logger,
 ): Promise<SessionModelState> {
  const settings = settingsManager.getSettings();

  let currentModel = models[0];
+  let resolvedFromInput: string | undefined;

  // Model priority (highest to lowest):
  // 1. ANTHROPIC_MODEL environment variable
@@ -2431,15 +2714,33 @@ async function getAvailableModels(
    const match = resolveModelPreference(models, process.env.ANTHROPIC_MODEL);
    if (match) {
      currentModel = match;
+      resolvedFromInput = process.env.ANTHROPIC_MODEL;
    }
-  } else {
+  } else if (typeof settings.model === "string") {
    const match = resolveSettingsModel(models, settings.model, logger);
    if (match) {
      currentModel = match;
+      resolvedFromInput = settings.model;
    }
  }

-  await query.setModel(currentModel.value);
+  // Skip the setModel round-trip when we can prove the SDK has already landed
+  // on the same model. Two cases qualify:
+  //  (a) No override applied — currentModel stayed at models[0]; the SDK is on
+  //      its own default and we have nothing to sync.
+  //  (b) The resolver returned the user's input verbatim AND that value exists
+  //      in the SDK's original model list — meaning no fuzzy match or
+  //      allowlist rewrite was involved, and the SDK (which reads the same
+  //      ANTHROPIC_MODEL / settings.json) will have arrived at the same entry.
+  // Anything else (fuzzy match, allowlist-synthesized value, alias) gets a
+  // setModel call so we don't drift from the user's intended pin.
+  const sdkSawSameValue = sdkModels.some((m) => m.value === currentModel.value);
+  const skipSetModel =
+    resolvedFromInput === undefined ||
+    (currentModel.value === resolvedFromInput && sdkSawSameValue);
+  if (!skipSetModel) {
+    await query.setModel(currentModel.value);
+  }

  return {
    availableModels: models.map((model) => ({
@@ -2453,6 +2754,7 @@ async function getAvailableModels(

 function getAvailableSlashCommands(commands: SlashCommand[]): AvailableCommand[] {
  const UNSUPPORTED_COMMANDS = [
+    "clear",
    "cost",
    "keybindings-help",
    "login",
@@ -2596,8 +2898,10 @@ export function toAcpNotifications(
    clientCapabilities?: ClientCapabilities;
    parentToolUseId?: string | null;
    cwd?: string;
+    taskState?: TaskState;
  },
 ): SessionNotification[] {
+  const taskState = options?.taskState ?? new Map();
  const registerHooks = options?.registerHooks !== false;
  const supportsTerminalOutput = options?.clientCapabilities?._meta?.["terminal_output"] === true;
  if (typeof content === "string") {
@@ -2671,6 +2975,15 @@ export function toAcpNotifications(
              entries: planEntries(chunk.input as { todos: ClaudePlanEntry[] }),
            };
          }
+        } else if (
+          chunk.name === "TaskCreate" ||
+          chunk.name === "TaskUpdate" ||
+          chunk.name === "TaskList" ||
+          chunk.name === "TaskGet"
+        ) {
+          // Task* tool_use is suppressed; the plan update is emitted at
+          // tool_result time once we have the task ID (for TaskCreate) and
+          // confirmation that the change took effect.
        } else {
          // Only register hooks on first encounter to avoid double-firing
          if (registerHooks && !alreadyCached) {
@@ -2775,7 +3088,36 @@ export function toAcpNotifications(
          break;
        }

-        if (toolUse.name !== "TodoWrite") {
+        if (
+          toolUse.name === "TaskCreate" ||
+          toolUse.name === "TaskUpdate" ||
+          toolUse.name === "TaskList" ||
+          toolUse.name === "TaskGet"
+        ) {
+          // Headless/SDK sessions emit Task* tools instead of TodoWrite.
+          // TaskCreate / TaskUpdate mutate the accumulated task list; TaskList
+          // and TaskGet are read-only so we just suppress their tool_call /
+          // tool_result events. The plan update is emitted as a snapshot of
+          // the accumulated state, mirroring the legacy TodoWrite behavior.
+          const isError = "is_error" in chunk && chunk.is_error;
+          if (!isError) {
+            if (toolUse.name === "TaskCreate") {
+              applyTaskCreate(
+                taskState,
+                toolUse.input as Parameters<typeof applyTaskCreate>[1],
+                parseTaskCreateOutput(chunk.content),
+              );
+            } else if (toolUse.name === "TaskUpdate") {
+              applyTaskUpdate(taskState, toolUse.input as Parameters<typeof applyTaskUpdate>[1]);
+            }
+          }
+          if (!isError && (toolUse.name === "TaskCreate" || toolUse.name === "TaskUpdate")) {
+            update = {
+              sessionUpdate: "plan",
+              entries: taskStateToPlanEntries(taskState),
+            };
+          }
+        } else if (toolUse.name !== "TodoWrite") {
          const { _meta: toolMeta, ...toolUpdate } = toolUpdateFromToolResult(
            chunk,
            toolUseCache[chunk.tool_use_id],
@@ -2830,6 +3172,7 @@ export function toAcpNotifications(
      case "compaction":
      case "compaction_delta":
      case "advisor_tool_result":
+      case "mid_conv_system":
        break;

      default:
@@ -2862,6 +3205,7 @@ export function streamEventToAcpNotifications(
  options?: {
    clientCapabilities?: ClientCapabilities;
    cwd?: string;
+    taskState?: TaskState;
  },
 ): SessionNotification[] {
  const event = message.event;
@@ -2878,6 +3222,7 @@ export function streamEventToAcpNotifications(
          clientCapabilities: options?.clientCapabilities,
          parentToolUseId: message.parent_tool_use_id,
          cwd: options?.cwd,
+          taskState: options?.taskState,
        },
      );
    case "content_block_delta":
@@ -2892,9 +3237,14 @@ export function streamEventToAcpNotifications(
          clientCapabilities: options?.clientCapabilities,
          parentToolUseId: message.parent_tool_use_id,
          cwd: options?.cwd,
+          taskState: options?.taskState,
        },
      );
-    // No content
+    // No content. `ping` is a Messages-API keep-alive event that the SDK's
+    // `BetaRawMessageStreamEvent` union doesn't include even though the
+    // wire format emits it; the `as never` cast lets us no-op it here
+    // instead of letting it fall through to `unreachable`.
+    case "ping" as never:
    case "message_start":
    case "message_delta":
    case "message_stop":
--- a/src/index.ts
+++ b/src/index.ts
@@ -1,7 +1,6 @@
 #!/usr/bin/env node

-// Load managed settings and apply environment variables
-import { loadManagedSettings, applyEnvironmentSettings } from "./utils.js";
+import { resolveSettings } from "@anthropic-ai/claude-agent-sdk";
 import { claudeCliPath, runAcp } from "./acp-agent.js";

 if (process.argv.includes("--cli")) {
@@ -35,9 +34,13 @@ if (process.argv.includes("--cli")) {
    process.exit(1);
  });
 } else {
-  const managedSettings = loadManagedSettings();
-  if (managedSettings) {
-    applyEnvironmentSettings(managedSettings);
+  // Apply env vars from the managed-policy tier before any SDK call so the
+  // SDK subprocess inherits them. Going through resolveSettings (vs. a raw
+  // read of managed-settings.json) also picks up MDM sources on macOS and
+  // HKLM/HKCU on Windows.
+  const policy = await resolveSettings({ settingSources: [] });
+  for (const [key, value] of Object.entries(policy.effective.env ?? {})) {
+    process.env[key] = value;
  }

  // stdout is used to send messages to the client
--- a/src/lib.ts
+++ b/src/lib.ts
@@ -10,25 +10,14 @@ export {
  type NewSessionMeta,
  type SDKMessageFilter,
 } from "./acp-agent.js";
-export {
-  loadManagedSettings,
-  applyEnvironmentSettings,
-  nodeToWebReadable,
-  nodeToWebWritable,
-  Pushable,
-  unreachable,
-} from "./utils.js";
+export { nodeToWebReadable, nodeToWebWritable, Pushable, unreachable } from "./utils.js";
 export {
  toolInfoFromToolUse,
  toDisplayPath,
  planEntries,
  toolUpdateFromToolResult,
 } from "./tools.js";
-export {
-  SettingsManager,
-  type ClaudeCodeSettings,
-  type SettingsManagerOptions,
-} from "./settings.js";
+export { SettingsManager, type SettingsManagerOptions } from "./settings.js";

 // Export types
 export type { ClaudePlanEntry } from "./tools.js";
--- a/src/settings.ts
+++ b/src/settings.ts
@@ -1,5 +1,12 @@
 import * as fs from "node:fs";
 import * as path from "node:path";
+// resolveSettings and filterEscalatingDefaultMode are marked @alpha in the
+// SDK; API may shift in a future release.
+import {
+  filterEscalatingDefaultMode,
+  resolveSettings,
+  type Settings,
+} from "@anthropic-ai/claude-agent-sdk";
 import { CLAUDE_CONFIG_DIR } from "./acp-agent.js";

 /**
@@ -14,52 +21,10 @@ import { CLAUDE_CONFIG_DIR } from "./acp-agent.js";
 * Docs: https://code.claude.com/docs/en/iam#tool-specific-permission-rules
 */

-export interface PermissionSettings {
-  defaultMode?: string;
-}
-
-export interface ClaudeCodeSettings {
-  permissions?: PermissionSettings;
-  env?: Record<string, string>;
-  model?: string;
-  effortLevel?: string;
-  availableModels?: string[];
-}
-
-/**
- * Reads and parses a JSON settings file, returning an empty object if not found or invalid.
- * Silently ignores missing files (ENOENT) but logs warnings for other errors
- * (malformed JSON, permission errors, etc.) to aid debugging.
- */
-async function loadSettingsFile(
-  filePath: string | null,
-  logger?: { error: (...args: any[]) => void },
-): Promise<ClaudeCodeSettings> {
-  if (!filePath) {
-    return {};
-  }
-
-  try {
-    const content = await fs.promises.readFile(filePath, "utf-8");
-    return JSON.parse(content) as ClaudeCodeSettings;
-  } catch (error) {
-    if (error instanceof Error && "code" in error && error.code === "ENOENT") {
-      return {};
-    }
-    logger?.error(`Failed to load settings from ${filePath}:`, error);
-    return {};
-  }
-}
-
-/**
- * Gets the enterprise settings path based on the current platform
- */
-export function getManagedSettingsPath(): string {
+function getManagedSettingsPath(): string {
  switch (process.platform) {
    case "darwin":
      return "/Library/Application Support/ClaudeCode/managed-settings.json";
-    case "linux":
-      return "/etc/claude-code/managed-settings.json";
    case "win32":
      return "C:\\Program Files\\ClaudeCode\\managed-settings.json";
    default:
@@ -73,23 +38,17 @@ export interface SettingsManagerOptions {
 }

 /**
- * Manages Claude Code settings from multiple sources with proper precedence.
+ * Manages Claude Code settings using the SDK's `resolveSettings` merge engine
+ * so the values we see match what `query()` would observe.
 *
- * Settings are loaded from (in order of increasing precedence):
- * 1. User settings (~/.claude/settings.json)
- * 2. Project settings (<cwd>/.claude/settings.json)
- * 3. Local project settings (<cwd>/.claude/settings.local.json)
- * 4. Enterprise managed settings (platform-specific path)
- *
- * The manager watches all settings files for changes and automatically reloads.
+ * Watches the user/project/local/managed settings files for changes and
+ * re-resolves through the SDK on update. Escalating `permissions.defaultMode`
+ * values from repo-committed sources are filtered out via
+ * `filterEscalatingDefaultMode`, matching the CLI's trust policy.
 */
 export class SettingsManager {
  private cwd: string;
-  private userSettings: ClaudeCodeSettings = {};
-  private projectSettings: ClaudeCodeSettings = {};
-  private localSettings: ClaudeCodeSettings = {};
-  private enterpriseSettings: ClaudeCodeSettings = {};
-  private mergedSettings: ClaudeCodeSettings = {};
+  private effective: Settings = {};
  private watchers: fs.FSWatcher[] = [];
  private onChange?: () => void;
  private logger: { log: (...args: any[]) => void; error: (...args: any[]) => void };
@@ -127,107 +86,37 @@ export class SettingsManager {
  }

  /**
-   * Returns the path to the user settings file
+   * Paths the SDK reads when resolving settings for this cwd. Watching the
+   * containing directories means we pick up file creation as well as edits.
   */
-  private getUserSettingsPath(): string {
-    return path.join(CLAUDE_CONFIG_DIR, "settings.json");
+  private getWatchedPaths(): string[] {
+    return [
+      path.join(CLAUDE_CONFIG_DIR, "settings.json"),
+      path.join(this.cwd, ".claude", "settings.json"),
+      path.join(this.cwd, ".claude", "settings.local.json"),
+      getManagedSettingsPath(),
+    ];
  }

  /**
-   * Returns the path to the project settings file
-   */
-  private getProjectSettingsPath(): string {
-    return path.join(this.cwd, ".claude", "settings.json");
-  }
-
-  /**
-   * Returns the path to the local project settings file
-   */
-  private getLocalSettingsPath(): string {
-    return path.join(this.cwd, ".claude", "settings.local.json");
-  }
-
-  /**
-   * Loads settings from all sources
+   * Resolves the effective settings via the SDK and applies the CLI's trust
+   * filter for escalating `permissions.defaultMode` values.
   */
  private async loadAllSettings(): Promise<void> {
-    const [userSettings, projectSettings, localSettings, enterpriseSettings] = await Promise.all([
-      loadSettingsFile(this.getUserSettingsPath(), this.logger),
-      loadSettingsFile(this.getProjectSettingsPath(), this.logger),
-      loadSettingsFile(this.getLocalSettingsPath(), this.logger),
-      loadSettingsFile(getManagedSettingsPath(), this.logger),
-    ]);
-
-    this.userSettings = userSettings;
-    this.projectSettings = projectSettings;
-    this.localSettings = localSettings;
-    this.enterpriseSettings = enterpriseSettings;
-
-    this.mergeSettings();
-  }
-
-  /**
-   * Merges all settings sources with proper precedence.
-   * For permissions, rules from all sources are combined.
-   * Deny rules always take precedence during permission checks.
-   */
-  private mergeSettings(): void {
-    const allSettings = [
-      this.userSettings,
-      this.projectSettings,
-      this.localSettings,
-      this.enterpriseSettings,
-    ];
-
-    const merged: ClaudeCodeSettings = {};
-
-    for (const settings of allSettings) {
-      if (settings.env) {
-        merged.env = { ...merged.env, ...settings.env };
-      }
-
-      if (settings.model) {
-        merged.model = settings.model;
-      }
-
-      if (settings.effortLevel !== undefined) {
-        merged.effortLevel = settings.effortLevel;
-      }
-
-      if (settings.availableModels !== undefined) {
-        // Per Claude Code docs: "When `availableModels` is set at multiple
-        // levels, such as user settings and project settings, arrays are
-        // merged and deduplicated."
-        // https://code.claude.com/docs/en/model-config#merge-behavior
-        const combined = [...(merged.availableModels ?? []), ...settings.availableModels];
-        merged.availableModels = Array.from(new Set(combined));
-      }
-
-      if (settings.permissions?.defaultMode !== undefined) {
-        merged.permissions = {
-          ...merged.permissions,
-          defaultMode: settings.permissions.defaultMode,
-        };
-      }
+    try {
+      const resolved = await resolveSettings({ cwd: this.cwd });
+      this.effective = filterEscalatingDefaultMode(resolved);
+    } catch (error) {
+      this.logger.error("Failed to resolve settings:", error);
+      this.effective = {};
    }
-
-    this.mergedSettings = merged;
  }

  /**
   * Sets up file watchers for all settings files
   */
  private setupWatchers(): void {
-    const paths = [
-      this.getUserSettingsPath(),
-      this.getProjectSettingsPath(),
-      this.getLocalSettingsPath(),
-      getManagedSettingsPath(),
-    ];
-
-    for (const filePath of paths) {
-      if (!filePath) continue;
-
+    for (const filePath of this.getWatchedPaths()) {
      try {
        const dir = path.dirname(filePath);
        const filename = path.basename(filePath);
@@ -278,8 +167,8 @@ export class SettingsManager {
  /**
   * Returns the current merged settings
   */
-  getSettings(): ClaudeCodeSettings {
-    return this.mergedSettings;
+  getSettings(): Settings {
+    return this.effective;
  }

  /**
--- a/src/tests/.claude/commands/say-hello.md
+++ b/src/tests/.claude/commands/say-hello.md
@@ -3,4 +3,4 @@ description: Say hello
 argument-hint: name
 ---

-Respond with "Hello $1" and nothing else.
+Respond with "Hello $ARGUMENTS" and nothing else.
--- a/src/tests/acp-agent-settings.test.ts
+++ b/src/tests/acp-agent-settings.test.ts
@@ -126,6 +126,31 @@ describe("ClaudeAcpAgent settings", () => {
    expect(response.modes.currentModeId).toBe("acceptEdits");
  });

+  it("drops escalating defaultMode when it comes from project-tier settings", async () => {
+    // bypassPermissions in .claude/settings.json (a repo-committed tier) is
+    // filtered by the SDK's trust policy and clamps to 'default'.
+    const projectDir = path.join(tempDir, "project");
+    await fs.promises.mkdir(path.join(projectDir, ".claude"), { recursive: true });
+    await fs.promises.writeFile(
+      path.join(projectDir, ".claude", "settings.json"),
+      JSON.stringify({ permissions: { defaultMode: "bypassPermissions" } }),
+    );
+
+    const { getCapturedOptions } = mockQuery();
+
+    const { ClaudeAcpAgent } = await import("../acp-agent.js");
+    const agent: ClaudeAcpAgentType = new ClaudeAcpAgent(createMockClient());
+
+    const response = await (agent as any).createSession({
+      cwd: projectDir,
+      mcpServers: [],
+      _meta: { disableBuiltInTools: true },
+    });
+
+    expect(getCapturedOptions().permissionMode).toBe("default");
+    expect(response.modes.currentModeId).toBe("default");
+  });
+
  it("defaults to 'default' when no permissions.defaultMode is set", async () => {
    const projectDir = path.join(tempDir, "project");
    await fs.promises.mkdir(projectDir, { recursive: true });
@@ -197,7 +222,9 @@ describe("ClaudeAcpAgent settings", () => {
    });

    // Bad model is ignored at the usage site; falls back to the first SDK model.
-    expect(setModelSpy).toHaveBeenCalledWith("claude-sonnet-4-6");
+    // No setModel call is needed because no override was applied — the SDK is
+    // already on its own default.
+    expect(setModelSpy).not.toHaveBeenCalled();
    expect(response.models.currentModelId).toBe("claude-sonnet-4-6");
  });

@@ -553,6 +580,68 @@ describe("ClaudeAcpAgent settings", () => {
      expect(setModelSpy).toHaveBeenCalledWith("claude-haiku-4-5");
      expect(response.models.currentModelId).toBe("claude-haiku-4-5");
    });
+
+    it("does not inherit display info across mismatched model family versions", async () => {
+      // https://github.com/agentclientprotocol/claude-agent-acp/issues/639:
+      // when the SDK's `opus` alias resolves to Opus 4.7, an allowlist entry
+      // of `claude-opus-4-6` (or `claude-opus-4-6[1m]`) used to substring-match
+      // `opus` and inherit the "Opus 4.7" display info. With version-aware
+      // matching, these entries fall back to showing their literal ID rather
+      // than a misleading newer name.
+      await fs.promises.writeFile(
+        path.join(tempDir, "settings.json"),
+        JSON.stringify({
+          availableModels: [
+            "claude-opus-4-6",
+            "claude-opus-4-6[1m]",
+            "claude-opus-4-7",
+            "claude-opus-4-7[1m]",
+          ],
+        }),
+      );
+
+      const projectDir = path.join(tempDir, "project");
+      await fs.promises.mkdir(projectDir, { recursive: true });
+
+      mockQueryWithModels([
+        { value: "default", displayName: "Default", description: "Default model" },
+        {
+          value: "opus",
+          displayName: "Opus 4.7",
+          description: "Claude Opus 4.7 — complex tasks, higher cost",
+        },
+        {
+          value: "opus[1m]",
+          displayName: "Opus 4.7 (1M context)",
+          description: "Opus 4.7 with 1M context",
+        },
+      ]);
+
+      const { ClaudeAcpAgent } = await import("../acp-agent.js");
+      const agent: ClaudeAcpAgentType = new ClaudeAcpAgent(createMockClient());
+
+      const response = await (agent as any).createSession({
+        cwd: projectDir,
+        mcpServers: [],
+        _meta: { disableBuiltInTools: true },
+      });
+
+      const modelOption = response.configOptions.find((o: any) => o.id === "model");
+      const byValue: Record<string, { name: string; description?: string }> = {};
+      for (const opt of modelOption.options) {
+        byValue[opt.value] = { name: opt.name, description: opt.description };
+      }
+
+      // 4-6 entries must NOT inherit the 4.7 SDK alias display info.
+      expect(byValue["claude-opus-4-6"].name).toBe("claude-opus-4-6");
+      expect(byValue["claude-opus-4-6"].description).toBe("");
+      expect(byValue["claude-opus-4-6[1m]"].name).toBe("claude-opus-4-6[1m]");
+      expect(byValue["claude-opus-4-6[1m]"].description).toBe("");
+
+      // 4-7 entries continue to inherit display info from a 4.7 SDK alias.
+      expect(byValue["claude-opus-4-7"].name).toBe("Opus 4.7");
+      expect(byValue["claude-opus-4-7[1m]"].name).toMatch(/Opus 4\.7/);
+    });
  });

  it("resolves model aliases like opus[1m] to the correct model", async () => {
@@ -600,4 +689,94 @@ describe("ClaudeAcpAgent settings", () => {
    expect(setModelSpy).toHaveBeenCalledWith("claude-opus-4-6-1m");
    expect(response.models.currentModelId).toBe("claude-opus-4-6-1m");
  });
+
+  it("skips the initial setModel when the resolved value matches the SDK's model list verbatim", async () => {
+    // Covers the launcher case from PR #646: the launcher bakes the model into
+    // ANTHROPIC_MODEL, the SDK already starts on that model, and a second
+    // setModel call would be a redundant round-trip (and on some launcher
+    // setups, more fragile than launch-time selection).
+    const originalEnv = process.env.ANTHROPIC_MODEL;
+    process.env.ANTHROPIC_MODEL = "claude-opus-4-6";
+
+    const projectDir = path.join(tempDir, "project");
+    await fs.promises.mkdir(projectDir, { recursive: true });
+
+    const setModelSpy = vi.fn();
+    querySpy.mockImplementation(() => {
+      return {
+        initializationResult: async () => ({
+          models: [
+            { value: "default", displayName: "Default", description: "" },
+            { value: "claude-sonnet-4-6", displayName: "Claude Sonnet 4.6", description: "" },
+            { value: "claude-opus-4-6", displayName: "Claude Opus 4.6", description: "" },
+          ],
+        }),
+        setModel: setModelSpy,
+        supportedCommands: async () => [],
+      } as any;
+    });
+
+    try {
+      const { ClaudeAcpAgent } = await import("../acp-agent.js");
+      const agent: ClaudeAcpAgentType = new ClaudeAcpAgent(createMockClient());
+
+      const response = await (agent as any).createSession({
+        cwd: projectDir,
+        mcpServers: [],
+        _meta: { disableBuiltInTools: true },
+      });
+
+      expect(setModelSpy).not.toHaveBeenCalled();
+      expect(response.models.currentModelId).toBe("claude-opus-4-6");
+    } finally {
+      if (originalEnv === undefined) {
+        delete process.env.ANTHROPIC_MODEL;
+      } else {
+        process.env.ANTHROPIC_MODEL = originalEnv;
+      }
+    }
+  });
+
+  it("still calls setModel when the allowlist synthesizes a value the SDK has not surfaced", async () => {
+    // The allowlist may rewrite a model's `value` to the user's literal ID
+    // (e.g., `claude-haiku-4-5`) even when the SDK only exposed an alias
+    // (`haiku`). In that case the SDK has not independently arrived at the
+    // user's preferred ID, so we must sync via setModel.
+    await fs.promises.writeFile(
+      path.join(tempDir, "settings.json"),
+      JSON.stringify({
+        availableModels: ["claude-haiku-4-5"],
+        model: "claude-haiku-4-5",
+      }),
+    );
+
+    const projectDir = path.join(tempDir, "project");
+    await fs.promises.mkdir(projectDir, { recursive: true });
+
+    const setModelSpy = vi.fn();
+    querySpy.mockImplementation(() => {
+      return {
+        initializationResult: async () => ({
+          models: [
+            { value: "default", displayName: "Default", description: "" },
+            { value: "haiku", displayName: "Haiku", description: "Fast" },
+          ],
+        }),
+        setModel: setModelSpy,
+        supportedCommands: async () => [],
+      } as any;
+    });
+
+    const { ClaudeAcpAgent } = await import("../acp-agent.js");
+    const agent: ClaudeAcpAgentType = new ClaudeAcpAgent(createMockClient());
+
+    const response = await (agent as any).createSession({
+      cwd: projectDir,
+      mcpServers: [],
+      _meta: { disableBuiltInTools: true },
+    });
+
+    expect(setModelSpy).toHaveBeenCalledWith("claude-haiku-4-5");
+    expect(response.models.currentModelId).toBe("claude-haiku-4-5");
+  });
 });
--- a/src/tests/acp-agent.test.ts
+++ b/src/tests/acp-agent.test.ts
@@ -1,4 +1,4 @@
-import { describe, it, expect, beforeAll, afterAll, vi } from "vitest";
+import { describe, it, expect, beforeAll, beforeEach, afterAll, vi } from "vitest";
 import { spawn, spawnSync } from "child_process";
 import {
  Agent,
@@ -32,11 +32,20 @@ import {
  ClaudeAcpAgent,
  claudeCliPath,
  describeAlwaysAllow,
+  streamEventToAcpNotifications,
  type SDKMessageFilter,
 } from "../acp-agent.js";
 import { Pushable } from "../utils.js";
-import { query, SDKAssistantMessage } from "@anthropic-ai/claude-agent-sdk";
+import { deleteSession, query, SDKAssistantMessage } from "@anthropic-ai/claude-agent-sdk";
 import { randomUUID } from "crypto";
+
+vi.mock("@anthropic-ai/claude-agent-sdk", async (importOriginal) => {
+  const actual = await importOriginal<typeof import("@anthropic-ai/claude-agent-sdk")>();
+  return {
+    ...actual,
+    deleteSession: vi.fn(),
+  };
+});
 import type {
  BetaToolResultBlockParam,
  BetaToolSearchToolResultBlockParam,
@@ -230,13 +239,15 @@ describe.skipIf(!process.env.RUN_INTEGRATION_TESTS)("ACP subprocess integration"
      name: "compact",
    });

-    // Send something
-    await connection.prompt({
-      prompt: [{ type: "text", text: "Hi" }],
-      sessionId: newSessionResponse.sessionId,
-    });
-    // Clear response
-    client.takeReceivedText();
+    // Build up enough conversation that there's something to compact. The SDK
+    // refuses to compact a conversation with too few message groups.
+    for (let i = 0; i < 6; i++) {
+      await connection.prompt({
+        prompt: [{ type: "text", text: `Reply with just the number ${i}.` }],
+        sessionId: newSessionResponse.sessionId,
+      });
+      client.takeReceivedText();
+    }

    await connection.prompt({
      prompt: [
@@ -249,7 +260,7 @@ describe.skipIf(!process.env.RUN_INTEGRATION_TESTS)("ACP subprocess integration"
    });

    expect(client.takeReceivedText()).toContain("Compacting...\n\nCompacting completed.");
-  }, 30000);
+  }, 60000);
 });

 describe("tool conversions", () => {
@@ -639,6 +650,8 @@ describe("tool conversions", () => {
        ],
        stop_reason: null,
        stop_sequence: null,
+        stop_details: null,
+        diagnostics: null,
        usage: {
          input_tokens: 6,
          cache_creation_input_tokens: 326,
@@ -652,6 +665,7 @@ describe("tool conversions", () => {
          server_tool_use: null,
          inference_geo: null,
          iterations: null,
+          output_tokens_details: null,
          speed: null,
        },
        context_management: null,
@@ -1533,6 +1547,7 @@ describe("stop reason propagation", () => {
      abortController: new AbortController(),
      emitRawSDKMessages: false,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };
  }

@@ -1676,6 +1691,7 @@ describe("stop reason propagation", () => {
      nextPendingOrder: 0,
      emitRawSDKMessages: false,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };

    const response = await agent.prompt({
@@ -1834,6 +1850,7 @@ describe("session/close", () => {
      abortController: new AbortController(),
      emitRawSDKMessages: false,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };
    return agent.sessions[sessionId]!;
  }
@@ -1883,6 +1900,94 @@ describe("session/close", () => {
  });
 });

+describe("session/delete", () => {
+  function createMockAgent() {
+    const mockClient = {
+      sessionUpdate: async () => {},
+    } as unknown as AgentSideConnection;
+    return new ClaudeAcpAgent(mockClient, { log: () => {}, error: () => {} });
+  }
+
+  function injectSession(agent: ClaudeAcpAgent, sessionId: string) {
+    function* empty() {}
+    const gen = Object.assign(empty(), { interrupt: vi.fn(), close: vi.fn() });
+    agent.sessions[sessionId] = {
+      query: gen as any,
+      input: new Pushable(),
+      cancelled: false,
+      cwd: "/test",
+      sessionFingerprint: JSON.stringify({ cwd: "/test", mcpServers: [] }),
+      modes: { currentModeId: "default", availableModes: [] },
+      models: { currentModelId: "default", availableModels: [] },
+      modelInfos: [],
+      settingsManager: { dispose: vi.fn() } as any,
+      accumulatedUsage: {
+        inputTokens: 0,
+        outputTokens: 0,
+        cachedReadTokens: 0,
+        cachedWriteTokens: 0,
+      },
+      configOptions: [],
+      promptRunning: false,
+      pendingMessages: new Map(),
+      nextPendingOrder: 0,
+      abortController: new AbortController(),
+      emitRawSDKMessages: false,
+      contextWindowSize: 200000,
+      taskState: new Map(),
+    };
+    return agent.sessions[sessionId]!;
+  }
+
+  beforeEach(() => {
+    vi.mocked(deleteSession).mockReset();
+    vi.mocked(deleteSession).mockResolvedValue(undefined);
+  });
+
+  it("tears down the active session and deletes it from disk", async () => {
+    const agent = createMockAgent();
+    const session = injectSession(agent, "session-1");
+
+    const result = await agent.unstable_deleteSession({ sessionId: "session-1" });
+
+    expect(result).toEqual({});
+    expect(agent.sessions["session-1"]).toBeUndefined();
+    expect(session.query.interrupt).toHaveBeenCalled();
+    expect(session.settingsManager.dispose).toHaveBeenCalled();
+    expect(session.abortController.signal.aborted).toBe(true);
+    expect(deleteSession).toHaveBeenCalledWith("session-1");
+  });
+
+  it("deletes a session from disk that is not currently active", async () => {
+    const agent = createMockAgent();
+
+    const result = await agent.unstable_deleteSession({ sessionId: "not-active" });
+
+    expect(result).toEqual({});
+    expect(deleteSession).toHaveBeenCalledWith("not-active");
+  });
+
+  it("propagates errors from the SDK delete call", async () => {
+    const agent = createMockAgent();
+    vi.mocked(deleteSession).mockRejectedValueOnce(new Error("Session not found on disk"));
+
+    await expect(agent.unstable_deleteSession({ sessionId: "missing" })).rejects.toThrow(
+      "Session not found on disk",
+    );
+  });
+
+  it("does not affect other sessions when deleting one", async () => {
+    const agent = createMockAgent();
+    injectSession(agent, "session-a");
+    injectSession(agent, "session-b");
+
+    await agent.unstable_deleteSession({ sessionId: "session-a" });
+
+    expect(agent.sessions["session-a"]).toBeUndefined();
+    expect(agent.sessions["session-b"]).toBeDefined();
+  });
+});
+
 describe("getOrCreateSession param change detection", () => {
  function createMockAgent() {
    const mockClient = {
@@ -1930,6 +2035,7 @@ describe("getOrCreateSession param change detection", () => {
      abortController: new AbortController(),
      emitRawSDKMessages: false,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };
    return agent.sessions[sessionId]!;
  }
@@ -2164,6 +2270,7 @@ describe("usage_update computation", () => {
      abortController: new AbortController(),
      emitRawSDKMessages: false,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };
  }

@@ -3063,6 +3170,7 @@ describe("emitRawSDKMessages", () => {
      abortController: new AbortController(),
      emitRawSDKMessages,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };
  }

@@ -3290,6 +3398,7 @@ describe("result origin handling", () => {
      abortController: new AbortController(),
      emitRawSDKMessages: false,
      contextWindowSize: 200000,
+      taskState: new Map(),
    };
  }

@@ -3411,3 +3520,394 @@ describe("result origin handling", () => {
    expect(response.stopReason).toBe("max_tokens");
  });
 });
+
+describe("memory_recall handling", () => {
+  function createMockAgentWithCapture() {
+    const updates: any[] = [];
+    const mockClient = {
+      sessionUpdate: async (notification: any) => {
+        updates.push(notification);
+      },
+    } as unknown as AgentSideConnection;
+    const agent = new ClaudeAcpAgent(mockClient, { log: () => {}, error: () => {} });
+    return { agent, updates };
+  }
+
+  function injectSession(agent: ClaudeAcpAgent, messages: any[]) {
+    const input = new Pushable<any>();
+    async function* messageGenerator() {
+      const iter = input[Symbol.asyncIterator]();
+      const { value: userMessage, done } = await iter.next();
+      if (!done && userMessage) {
+        yield {
+          type: "user",
+          message: userMessage.message,
+          parent_tool_use_id: null,
+          uuid: userMessage.uuid,
+          session_id: "test-session",
+          isReplay: true,
+        };
+      }
+      yield* messages;
+    }
+    agent.sessions["test-session"] = {
+      query: messageGenerator() as any,
+      input,
+      cancelled: false,
+      cwd: "/test",
+      sessionFingerprint: JSON.stringify({ cwd: "/test", mcpServers: [] }),
+      modes: { currentModeId: "default", availableModes: [] },
+      models: { currentModelId: "default", availableModels: [] },
+      modelInfos: [],
+      settingsManager: { dispose: vi.fn() } as any,
+      accumulatedUsage: {
+        inputTokens: 0,
+        outputTokens: 0,
+        cachedReadTokens: 0,
+        cachedWriteTokens: 0,
+      },
+      configOptions: [],
+      promptRunning: false,
+      pendingMessages: new Map(),
+      nextPendingOrder: 0,
+      abortController: new AbortController(),
+      emitRawSDKMessages: false,
+      contextWindowSize: 200000,
+      taskState: new Map(),
+    };
+  }
+
+  function createResult() {
+    return {
+      type: "result" as const,
+      subtype: "success" as const,
+      stop_reason: "end_turn",
+      is_error: false,
+      result: "",
+      errors: [],
+      duration_ms: 0,
+      duration_api_ms: 0,
+      num_turns: 1,
+      total_cost_usd: 0,
+      usage: {
+        input_tokens: 10,
+        output_tokens: 5,
+        cache_read_input_tokens: 0,
+        cache_creation_input_tokens: 0,
+      },
+      modelUsage: {},
+      permission_denials: [],
+      uuid: randomUUID(),
+      session_id: "test-session",
+    };
+  }
+
+  it("emits a synthetic tool_call for select mode with one location per memory", async () => {
+    const { agent, updates } = createMockAgentWithCapture();
+    const recallUuid = randomUUID();
+    injectSession(agent, [
+      {
+        type: "system",
+        subtype: "memory_recall",
+        mode: "select",
+        memories: [
+          { path: "/Users/test/.claude/memory/user_role.md", scope: "personal" },
+          { path: "/Users/test/.claude/memory/feedback_testing.md", scope: "personal" },
+          { path: "/Users/test/.claude/team/conventions.md", scope: "team" },
+        ],
+        uuid: recallUuid,
+        session_id: "test-session",
+      },
+      createResult(),
+      { type: "system", subtype: "session_state_changed", state: "idle" },
+    ]);
+
+    await agent.prompt({ sessionId: "test-session", prompt: [{ type: "text", text: "hi" }] });
+
+    const toolCall = updates.find((u: any) => u.update?.sessionUpdate === "tool_call");
+    expect(toolCall).toBeDefined();
+    expect(toolCall.update).toMatchObject({
+      sessionUpdate: "tool_call",
+      toolCallId: recallUuid,
+      title: "Recalled 3 memories",
+      kind: "read",
+      status: "completed",
+      locations: [
+        { path: "/Users/test/.claude/memory/user_role.md" },
+        { path: "/Users/test/.claude/memory/feedback_testing.md" },
+        { path: "/Users/test/.claude/team/conventions.md" },
+      ],
+      _meta: {
+        claudeCode: { toolName: "memory_recall", toolResponse: { mode: "select" } },
+      },
+    });
+    expect(toolCall.update.content).toBeUndefined();
+  });
+
+  it("uses singular 'memory' in title when exactly one entry", async () => {
+    const { agent, updates } = createMockAgentWithCapture();
+    injectSession(agent, [
+      {
+        type: "system",
+        subtype: "memory_recall",
+        mode: "select",
+        memories: [{ path: "/Users/test/.claude/memory/user_role.md", scope: "personal" }],
+        uuid: randomUUID(),
+        session_id: "test-session",
+      },
+      createResult(),
+      { type: "system", subtype: "session_state_changed", state: "idle" },
+    ]);
+
+    await agent.prompt({ sessionId: "test-session", prompt: [{ type: "text", text: "hi" }] });
+
+    const toolCall = updates.find((u: any) => u.update?.sessionUpdate === "tool_call");
+    expect(toolCall.update.title).toBe("Recalled 1 memory");
+  });
+
+  it("emits synthesis content and no locations for synthesize mode", async () => {
+    const { agent, updates } = createMockAgentWithCapture();
+    injectSession(agent, [
+      {
+        type: "system",
+        subtype: "memory_recall",
+        mode: "synthesize",
+        memories: [
+          {
+            path: "<synthesis:/Users/test/.claude/memory>",
+            scope: "personal",
+            content: "The user prefers terse responses and writes Go.",
+          },
+        ],
+        uuid: randomUUID(),
+        session_id: "test-session",
+      },
+      createResult(),
+      { type: "system", subtype: "session_state_changed", state: "idle" },
+    ]);
+
+    await agent.prompt({ sessionId: "test-session", prompt: [{ type: "text", text: "hi" }] });
+
+    const toolCall = updates.find((u: any) => u.update?.sessionUpdate === "tool_call");
+    expect(toolCall).toBeDefined();
+    expect(toolCall.update.title).toBe("Recalled synthesized memory");
+    expect(toolCall.update.locations).toBeUndefined();
+    expect(toolCall.update.content).toEqual([
+      {
+        type: "content",
+        content: { type: "text", text: "The user prefers terse responses and writes Go." },
+      },
+    ]);
+    expect(toolCall.update._meta.claudeCode.toolResponse).toEqual({ mode: "synthesize" });
+  });
+});
+
+describe("post-error recovery", () => {
+  function createMockAgent() {
+    const mockClient = {
+      sessionUpdate: async () => {},
+    } as unknown as AgentSideConnection;
+    return new ClaudeAcpAgent(mockClient, { log: () => {}, error: () => {} });
+  }
+
+  function createResultMessage(overrides: {
+    subtype: "success" | "error_during_execution";
+    stop_reason: string | null;
+    is_error: boolean;
+    result?: string;
+    errors?: string[];
+  }) {
+    return {
+      type: "result" as const,
+      subtype: overrides.subtype,
+      stop_reason: overrides.stop_reason,
+      is_error: overrides.is_error,
+      result: overrides.result ?? "",
+      errors: overrides.errors ?? [],
+      duration_ms: 0,
+      duration_api_ms: 0,
+      num_turns: 1,
+      total_cost_usd: 0,
+      usage: {
+        input_tokens: 10,
+        output_tokens: 5,
+        cache_read_input_tokens: 0,
+        cache_creation_input_tokens: 0,
+      },
+      modelUsage: {},
+      permission_denials: [],
+      uuid: randomUUID(),
+      session_id: "test-session",
+    };
+  }
+
+  // Two-turn generator: turn 1 yields the caller-supplied `firstTurn`
+  // messages (including a trailing idle that the drain must consume).
+  // Turn 2 yields a clean success + idle, used to verify the next prompt
+  // sees real messages rather than the stale idle.
+  function injectTwoTurnSession(agent: ClaudeAcpAgent, firstTurn: unknown[]) {
+    const input = new Pushable<any>();
+    const interrupt = vi.fn(async () => {});
+    const close = vi.fn();
+    async function* messageGenerator() {
+      const iter = input[Symbol.asyncIterator]();
+
+      const first = await iter.next();
+      if (!first.done && first.value) {
+        yield {
+          type: "user",
+          message: first.value.message,
+          parent_tool_use_id: null,
+          uuid: first.value.uuid,
+          session_id: "test-session",
+          isReplay: true,
+        };
+      }
+      yield* firstTurn;
+
+      const second = await iter.next();
+      if (!second.done && second.value) {
+        yield {
+          type: "user",
+          message: second.value.message,
+          parent_tool_use_id: null,
+          uuid: second.value.uuid,
+          session_id: "test-session",
+          isReplay: true,
+        };
+      }
+      yield createResultMessage({ subtype: "success", stop_reason: null, is_error: false });
+      yield { type: "system", subtype: "session_state_changed", state: "idle" };
+    }
+    const gen = Object.assign(messageGenerator(), { interrupt, close });
+    agent.sessions["test-session"] = {
+      query: gen as any,
+      input,
+      cancelled: false,
+      cwd: "/test",
+      sessionFingerprint: JSON.stringify({ cwd: "/test", mcpServers: [] }),
+      modes: { currentModeId: "default", availableModes: [] },
+      models: { currentModelId: "default", availableModels: [] },
+      modelInfos: [],
+      settingsManager: { dispose: vi.fn() } as any,
+      accumulatedUsage: {
+        inputTokens: 0,
+        outputTokens: 0,
+        cachedReadTokens: 0,
+        cachedWriteTokens: 0,
+      },
+      configOptions: [],
+      promptRunning: false,
+      pendingMessages: new Map(),
+      nextPendingOrder: 0,
+      abortController: new AbortController(),
+      emitRawSDKMessages: false,
+      contextWindowSize: 200000,
+      taskState: new Map(),
+    };
+    return { interrupt };
+  }
+
+  it("drains a failed turn's trailing idle so the next prompt is not short-circuited", async () => {
+    const agent = createMockAgent();
+    const { interrupt } = injectTwoTurnSession(agent, [
+      createResultMessage({
+        subtype: "success",
+        stop_reason: "end_turn",
+        is_error: true,
+        result: "boom",
+      }),
+      // Trailing idle from the failed turn. Without draining, the next
+      // prompt's first query.next() would consume this and short-circuit
+      // to end_turn with zero usage (issue #654).
+      { type: "system", subtype: "session_state_changed", state: "idle" },
+    ]);
+
+    await expect(
+      agent.prompt({
+        sessionId: "test-session",
+        prompt: [{ type: "text", text: "first" }],
+      }),
+    ).rejects.toThrow();
+
+    expect(interrupt).toHaveBeenCalled();
+
+    const second = await agent.prompt({
+      sessionId: "test-session",
+      prompt: [{ type: "text", text: "second" }],
+    });
+    expect(second.stopReason).toBe("end_turn");
+    expect(second.usage?.inputTokens).toBe(10);
+    expect(second.usage?.outputTokens).toBe(5);
+  });
+
+  it("cancels all queued pending prompts when a turn errors", async () => {
+    const agent = createMockAgent();
+    injectTwoTurnSession(agent, [
+      createResultMessage({
+        subtype: "success",
+        stop_reason: "end_turn",
+        is_error: true,
+        result: "boom",
+      }),
+      { type: "system", subtype: "session_state_changed", state: "idle" },
+    ]);
+
+    // Simulate two prompts already queued behind the running turn. Both
+    // resolvers should fire with `true` (cancelled) when the running
+    // prompt errors, and the map should be cleared.
+    const session = agent.sessions["test-session"];
+    let resolveA!: (cancelled: boolean) => void;
+    let resolveB!: (cancelled: boolean) => void;
+    const pendingA = new Promise<boolean>((r) => (resolveA = r));
+    const pendingB = new Promise<boolean>((r) => (resolveB = r));
+    session.pendingMessages.set("uuid-a", { resolve: resolveA, order: 0 });
+    session.pendingMessages.set("uuid-b", { resolve: resolveB, order: 1 });
+
+    await expect(
+      agent.prompt({
+        sessionId: "test-session",
+        prompt: [{ type: "text", text: "first" }],
+      }),
+    ).rejects.toThrow();
+
+    await expect(pendingA).resolves.toBe(true);
+    await expect(pendingB).resolves.toBe(true);
+    expect(session.pendingMessages.size).toBe(0);
+  });
+});
+
+describe("streamEventToAcpNotifications", () => {
+  it("treats `ping` keep-alive events as no-ops without logging to stderr", () => {
+    const errors: unknown[][] = [];
+    const logger = {
+      log: () => {},
+      error: (...args: unknown[]) => {
+        errors.push(args);
+      },
+    };
+    const pingMessage = {
+      type: "stream_event",
+      parent_tool_use_id: null,
+      uuid: randomUUID(),
+      session_id: "test-session",
+      // The SDK's typed `BetaRawMessageStreamEvent` union doesn't include
+      // `ping`, but the API emits it on the wire and the SDK passes it
+      // through. Cast through `unknown` to feed the realistic runtime shape.
+      event: { type: "ping" } as unknown,
+    } as Parameters<typeof streamEventToAcpNotifications>[0];
+
+    const result = streamEventToAcpNotifications(
+      pingMessage,
+      "test-session",
+      {},
+      { sessionUpdate: async () => {} } as unknown as Parameters<
+        typeof streamEventToAcpNotifications
+      >[3],
+      logger,
+    );
+
+    expect(result).toEqual([]);
+    expect(errors).toEqual([]);
+  });
+});
--- a/src/tests/additional-roots.test.ts
+++ b/src/tests/additional-roots.test.ts
@@ -76,4 +76,33 @@ describe("additionalRoots", () => {
    });
    expect(capturedOptions!.additionalDirectories).toEqual(["/workspace/shared", "", root]);
  });
+
+  it("prefers the official ACP additionalDirectories field over _meta.additionalRoots", async () => {
+    await agent.newSession({
+      cwd: "/test",
+      mcpServers: [],
+      additionalDirectories: ["/from/official"],
+      _meta: { additionalRoots: ["/from/meta"] },
+    });
+    expect(capturedOptions!.additionalDirectories).toEqual(["/from/official"]);
+  });
+
+  it("merges official ACP additionalDirectories with claudeCode SDK additionalDirectories", async () => {
+    await agent.newSession({
+      cwd: "/test",
+      mcpServers: [],
+      additionalDirectories: ["/from/official"],
+      _meta: { claudeCode: { options: { additionalDirectories: ["/from/sdk"] } } },
+    });
+    expect(capturedOptions!.additionalDirectories).toEqual(["/from/sdk", "/from/official"]);
+  });
+
+  it("falls back to _meta.additionalRoots when the official field is omitted", async () => {
+    await agent.newSession({
+      cwd: "/test",
+      mcpServers: [],
+      _meta: { additionalRoots: ["/from/meta"] },
+    });
+    expect(capturedOptions!.additionalDirectories).toEqual(["/from/meta"]);
+  });
 });
--- a/src/tests/authorization.test.ts
+++ b/src/tests/authorization.test.ts
@@ -15,7 +15,10 @@ const mockQuery = vi.hoisted(() =>
  })),
 );

-vi.mock("@anthropic-ai/claude-agent-sdk", () => ({
+vi.mock("@anthropic-ai/claude-agent-sdk", async () => ({
+  ...(await vi.importActual<typeof import("@anthropic-ai/claude-agent-sdk")>(
+    "@anthropic-ai/claude-agent-sdk",
+  )),
  query: mockQuery,
 }));

@@ -53,6 +56,9 @@ describe("authorization", () => {
    expect(initializeResponse.authMethods).not.toContainEqual(
      expect.objectContaining({ id: "gateway" }),
    );
+    expect(initializeResponse.authMethods).not.toContainEqual(
+      expect.objectContaining({ id: "gateway-bedrock" }),
+    );
  });

  it("gateway auth offered when client advertises auth._meta.gateway capability", async () => {
@@ -65,11 +71,20 @@ describe("authorization", () => {
      } as any,
    });
    expect(initializeResponse.authMethods).toContainEqual(
-      expect.objectContaining({ id: "gateway" }),
+      expect.objectContaining({
+        id: "gateway",
+        _meta: { gateway: { protocol: "anthropic" } },
+      }),
+    );
+    expect(initializeResponse.authMethods).toContainEqual(
+      expect.objectContaining({
+        id: "gateway-bedrock",
+        _meta: { gateway: { protocol: "bedrock" } },
+      }),
    );
  });

-  it("uses gateway env after gateway auth", async () => {
+  it("uses gateway env after anthropic gateway auth", async () => {
    const [agent, mockQuery] = await createAgentMock();

    const initializeResponse = await agent.initialize({
@@ -105,7 +120,7 @@ describe("authorization", () => {
      expect.objectContaining({
        options: expect.objectContaining({
          env: expect.objectContaining({
-            ANTHROPIC_AUTH_TOKEN: "",
+            ANTHROPIC_AUTH_TOKEN: " ",
            ANTHROPIC_BASE_URL: "https://gateway.example",
            ANTHROPIC_CUSTOM_HEADERS: "x-api-key: test",
            userEnv: "userEnv",
@@ -115,6 +130,42 @@ describe("authorization", () => {
    );
  });

+  it("uses gateway env after gateway auth", async () => {
+    const [agent, mockQuery] = await createAgentMock();
+
+    await agent.initialize({
+      protocolVersion: 1,
+      clientCapabilities: {
+        auth: { terminal: true, _meta: { gateway: true } },
+      } as any,
+    });
+
+    await agent.authenticate({
+      methodId: "gateway-bedrock",
+      _meta: {
+        gateway: { baseUrl: "https://gateway.example", headers: { "custom-header": "test" } },
+      },
+    });
+
+    await agent.newSession({
+      cwd: "testRoot",
+      mcpServers: [],
+    });
+
+    expect(mockQuery).toHaveBeenCalledWith(
+      expect.objectContaining({
+        options: expect.objectContaining({
+          env: expect.objectContaining({
+            CLAUDE_CODE_USE_BEDROCK: "1",
+            AWS_BEARER_TOKEN_BEDROCK: " ",
+            ANTHROPIC_BEDROCK_BASE_URL: "https://gateway.example",
+            ANTHROPIC_CUSTOM_HEADERS: "custom-header: test",
+          }),
+        }),
+      }),
+    );
+  });
+
  it("hide claude authentication without terminal-auth", async () => {
    const [agent] = await createAgentMock();
    vi.stubGlobal("process", { ...process, argv: ["--hide-claude-auth"] });
--- a/src/tests/session-config-options.test.ts
+++ b/src/tests/session-config-options.test.ts
@@ -65,8 +65,9 @@ const MOCK_CONFIG_OPTIONS = [
    description: "Available effort levels for this model",
    type: "select",
    category: "effort",
-    currentValue: "high",
+    currentValue: "default",
    options: [
+      { value: "default", name: "Default" },
      { value: "low", name: "Low" },
      { value: "medium", name: "Medium" },
      { value: "high", name: "High" },
@@ -445,7 +446,7 @@ describe("session config options", () => {
        (o: any) => o.id === "effort",
      );
      expect(effortOption).toBeUndefined();
-      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: undefined });
+      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: null });
    });

    it("clamps effort in config_option_update when new model has different supported levels", async () => {
@@ -483,8 +484,8 @@ describe("session config options", () => {
        (o: any) => o.id === "effort",
      );
      expect(effortOption).toBeDefined();
-      expect(effortOption.currentValue).toBe("high");
-      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: "high" });
+      expect(effortOption.currentValue).toBe("default");
+      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: null });
    });

    it("preserves effort in config_option_update when new model supports same level", async () => {
@@ -557,6 +558,31 @@ describe("session config options", () => {
      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: "low" });
    });

+    it("calls applyFlagSettings with null effortLevel for 'default'", async () => {
+      // Set effort to a non-default value first
+      const session = (agent as unknown as { sessions: Record<string, any> }).sessions[SESSION_ID];
+      const effortOpt = session.configOptions.find((o: any) => o.id === "effort");
+      if (effortOpt) effortOpt.currentValue = "high";
+
+      await agent.setSessionConfigOption({
+        sessionId: SESSION_ID,
+        configId: "effort",
+        value: "default",
+      });
+
+      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: null });
+
+      // The SDK's applyFlagSettings travels over a JSON pipe and only clears a
+      // flag-layer key when an explicit `null` is sent — `undefined` is
+      // dropped during JSON.stringify, which would leave the previous effort
+      // override in place. Round-trip the call args through JSON to make sure
+      // the key actually reaches the SDK.
+      const calls = applyFlagSettingsSpy.mock.calls;
+      const lastCallArgs = calls[calls.length - 1]?.[0];
+      const serialized = JSON.parse(JSON.stringify(lastCallArgs));
+      expect(serialized).toHaveProperty("effortLevel", null);
+    });
+
    it("updates effort currentValue in returned configOptions", async () => {
      const response = await agent.setSessionConfigOption({
        sessionId: SESSION_ID,
@@ -663,7 +689,7 @@ describe("session config options", () => {
        value: "claude-sonnet-4-6",
      });

-      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: undefined });
+      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: null });
    });

    it("adds effort option when switching to a model that supports effort", async () => {
@@ -696,8 +722,8 @@ describe("session config options", () => {

      const effortOption = response.configOptions.find((o) => o.id === "effort");
      expect(effortOption).toBeDefined();
-      // No previous effort, so defaults to "high" (the API default)
-      expect(effortOption?.currentValue).toBe("high");
+      // No previous effort, so defaults to "default" (no effort override)
+      expect(effortOption?.currentValue).toBe("default");
    });

    it("clamps effort to valid value when new model has different supported levels", async () => {
@@ -731,10 +757,10 @@ describe("session config options", () => {

      const effortOption = response.configOptions.find((o) => o.id === "effort");
      expect(effortOption).toBeDefined();
-      // "max" is not in sonnet's levels, so should fall back to "high" (the API default)
-      expect(effortOption?.currentValue).toBe("high");
-      // SDK should be told about the clamped value
-      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: "high" });
+      // "max" is not in sonnet's levels, so should fall back to "default" (no effort override)
+      expect(effortOption?.currentValue).toBe("default");
+      // SDK should be told to clear the effort override
+      expect(applyFlagSettingsSpy).toHaveBeenCalledWith({ effortLevel: null });
    });

    it("preserves effort value when new model supports the same level", async () => {
--- a/src/tests/settings.test.ts
+++ b/src/tests/settings.test.ts
@@ -141,4 +141,66 @@ describe("SettingsManager", () => {
      expect(settings.permissions?.defaultMode).toBe("plan");
    });
  });
+
+  describe("escalating defaultMode trust filter", () => {
+    // The SDK's filterEscalatingDefaultMode drops escalating values
+    // (bypassPermissions / auto / acceptEdits) that came from a repo-committed
+    // tier (.claude/settings.json), preventing a checked-in file from
+    // silently escalating permissions. Local (.claude/settings.local.json)
+    // and user-tier sources are not committed by convention, so escalating
+    // values from those tiers are preserved.
+
+    it.each(["bypassPermissions", "auto", "acceptEdits"] as const)(
+      "drops %s when set in project-tier settings",
+      async (mode) => {
+        const claudeDir = path.join(tempDir, ".claude");
+        await fs.promises.mkdir(claudeDir, { recursive: true });
+
+        await fs.promises.writeFile(
+          path.join(claudeDir, "settings.json"),
+          JSON.stringify({ permissions: { defaultMode: mode } }),
+        );
+
+        settingsManager = new SettingsManager(tempDir);
+        await settingsManager.initialize();
+
+        expect(settingsManager.getSettings().permissions?.defaultMode).toBeUndefined();
+      },
+    );
+
+    it.each(["plan", "dontAsk"] as const)(
+      "preserves non-escalating %s from project-tier settings",
+      async (mode) => {
+        const claudeDir = path.join(tempDir, ".claude");
+        await fs.promises.mkdir(claudeDir, { recursive: true });
+
+        await fs.promises.writeFile(
+          path.join(claudeDir, "settings.json"),
+          JSON.stringify({ permissions: { defaultMode: mode } }),
+        );
+
+        settingsManager = new SettingsManager(tempDir);
+        await settingsManager.initialize();
+
+        expect(settingsManager.getSettings().permissions?.defaultMode).toBe(mode);
+      },
+    );
+
+    it("preserves escalating defaultMode when it comes from local-tier settings", async () => {
+      // settings.local.json is git-ignored by convention, so the trust
+      // filter does not apply.
+      const claudeDir = path.join(tempDir, ".claude");
+      await fs.promises.mkdir(claudeDir, { recursive: true });
+
+      await fs.promises.writeFile(
+        path.join(claudeDir, "settings.local.json"),
+        JSON.stringify({ permissions: { defaultMode: "acceptEdits" } }),
+      );
+
+      settingsManager = new SettingsManager(tempDir);
+      await settingsManager.initialize();
+
+      expect(settingsManager.getSettings().permissions?.defaultMode).toBe("acceptEdits");
+    });
+  });
 });
--- a/src/tests/tools.test.ts
+++ b/src/tests/tools.test.ts
@@ -14,8 +14,14 @@ import { toAcpNotifications, ToolUseCache, Logger } from "../acp-agent.js";
 import {
  toolUpdateFromToolResult,
  createPostToolUseHook,
+  createTaskHook,
  toolInfoFromToolUse,
  planEntries,
+  applyTaskCreate,
+  applyTaskUpdate,
+  parseTaskCreateOutput,
+  taskStateToPlanEntries,
+  TaskState,
 } from "../tools.js";

 describe("rawOutput in tool call updates", () => {
@@ -1541,3 +1547,404 @@ describe("toAcpNotifications - TodoWrite with undefined input regression", () =>
    expect(planUpdates).toHaveLength(1);
  });
 });
+
+describe("parseTaskCreateOutput", () => {
+  it("parses JSON-string content", () => {
+    const parsed = parseTaskCreateOutput(JSON.stringify({ task: { id: "1", subject: "X" } }));
+    expect(parsed).toEqual({ task: { id: "1", subject: "X" } });
+  });
+
+  it("parses array-of-text-block content", () => {
+    const parsed = parseTaskCreateOutput([
+      { type: "text", text: JSON.stringify({ task: { id: "2", subject: "Y" } }) },
+    ]);
+    expect(parsed).toEqual({ task: { id: "2", subject: "Y" } });
+  });
+
+  it("returns undefined for non-JSON content", () => {
+    expect(parseTaskCreateOutput("not json")).toBeUndefined();
+    expect(parseTaskCreateOutput([{ type: "text", text: "not json" }])).toBeUndefined();
+  });
+
+  it("returns undefined when task.id is missing", () => {
+    expect(parseTaskCreateOutput(JSON.stringify({ task: { subject: "X" } }))).toBeUndefined();
+  });
+});
+
+describe("applyTaskCreate / applyTaskUpdate", () => {
+  it("creates an entry on TaskCreate when both input and output are present", () => {
+    const state: TaskState = new Map();
+    applyTaskCreate(
+      state,
+      { subject: "Write tests", description: "Cover Task* flow", activeForm: "Writing tests" },
+      { task: { id: "1", subject: "Write tests" } },
+    );
+    expect(state.get("1")).toEqual({
+      subject: "Write tests",
+      status: "pending",
+      activeForm: "Writing tests",
+      description: "Cover Task* flow",
+    });
+  });
+
+  it("is a no-op when the output has no task ID", () => {
+    const state: TaskState = new Map();
+    applyTaskCreate(state, { subject: "X", description: "Y" }, undefined);
+    expect(state.size).toBe(0);
+  });
+
+  it("updates fields by task ID and keeps insertion order in plan entries", () => {
+    const state: TaskState = new Map();
+    applyTaskCreate(state, { subject: "A", description: "" }, { task: { id: "1", subject: "A" } });
+    applyTaskCreate(state, { subject: "B", description: "" }, { task: { id: "2", subject: "B" } });
+    applyTaskUpdate(state, { taskId: "1", status: "in_progress" });
+    expect(taskStateToPlanEntries(state)).toEqual([
+      { content: "A", status: "in_progress", priority: "medium" },
+      { content: "B", status: "pending", priority: "medium" },
+    ]);
+  });
+
+  it("removes entries when status is 'deleted'", () => {
+    const state: TaskState = new Map();
+    applyTaskCreate(state, { subject: "A", description: "" }, { task: { id: "1", subject: "A" } });
+    applyTaskUpdate(state, { taskId: "1", status: "deleted" });
+    expect(state.size).toBe(0);
+  });
+
+  it("creates a placeholder entry when TaskUpdate carries a subject for an unseen task", () => {
+    const state: TaskState = new Map();
+    applyTaskUpdate(state, { taskId: "5", subject: "Late arrival", status: "in_progress" });
+    expect(state.get("5")).toEqual({
+      subject: "Late arrival",
+      status: "in_progress",
+      activeForm: undefined,
+      description: undefined,
+    });
+  });
+
+  it("skips TaskUpdate for an unseen task when no subject is available", () => {
+    const state: TaskState = new Map();
+    applyTaskUpdate(state, { taskId: "5", status: "in_progress" });
+    // Without a subject we'd render an empty-content plan entry, so the
+    // update is dropped instead of synthesizing a blank placeholder.
+    expect(state.has("5")).toBe(false);
+  });
+});
+
+describe("toAcpNotifications - Task* tools", () => {
+  const mockClient = {} as AgentSideConnection;
+  const mockLogger: Logger = { log: () => {}, error: () => {} };
+
+  it("suppresses tool_call for TaskCreate/TaskUpdate/TaskList/TaskGet on tool_use", () => {
+    const toolUseCache: ToolUseCache = {};
+    const taskState: TaskState = new Map();
+
+    const notifications = toAcpNotifications(
+      [
+        { type: "tool_use", id: "1", name: "TaskCreate", input: { subject: "A", description: "" } },
+        {
+          type: "tool_use",
+          id: "2",
+          name: "TaskUpdate",
+          input: { taskId: "1", status: "in_progress" },
+        },
+        { type: "tool_use", id: "3", name: "TaskList", input: {} },
+        { type: "tool_use", id: "4", name: "TaskGet", input: { taskId: "1" } },
+      ] as any,
+      "assistant",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    expect(notifications).toHaveLength(0);
+    expect(taskState.size).toBe(0);
+  });
+
+  it("emits a plan snapshot after a TaskCreate tool_result and accumulates state", () => {
+    const toolUseCache: ToolUseCache = {};
+    const taskState: TaskState = new Map();
+
+    toAcpNotifications(
+      [
+        {
+          type: "tool_use",
+          id: "1",
+          name: "TaskCreate",
+          input: { subject: "First", description: "" },
+        },
+      ] as any,
+      "assistant",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    const created = toAcpNotifications(
+      [
+        {
+          type: "tool_result",
+          tool_use_id: "1",
+          content: JSON.stringify({ task: { id: "1", subject: "First" } }),
+          is_error: false,
+        },
+      ] as any,
+      "user",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    expect(created).toHaveLength(1);
+    expect(created[0].update).toMatchObject({
+      sessionUpdate: "plan",
+      entries: [{ content: "First", status: "pending", priority: "medium" }],
+    });
+
+    // A second TaskCreate accumulates rather than replacing.
+    toAcpNotifications(
+      [
+        {
+          type: "tool_use",
+          id: "2",
+          name: "TaskCreate",
+          input: { subject: "Second", description: "" },
+        },
+      ] as any,
+      "assistant",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    const second = toAcpNotifications(
+      [
+        {
+          type: "tool_result",
+          tool_use_id: "2",
+          content: JSON.stringify({ task: { id: "2", subject: "Second" } }),
+          is_error: false,
+        },
+      ] as any,
+      "user",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    expect(second[0].update).toMatchObject({
+      sessionUpdate: "plan",
+      entries: [
+        { content: "First", status: "pending", priority: "medium" },
+        { content: "Second", status: "pending", priority: "medium" },
+      ],
+    });
+  });
+
+  it("emits a plan snapshot reflecting status changes after a TaskUpdate tool_result", () => {
+    const toolUseCache: ToolUseCache = {};
+    const taskState: TaskState = new Map([["1", { subject: "First", status: "pending" as const }]]);
+    toolUseCache["update-1"] = {
+      type: "tool_use",
+      id: "update-1",
+      name: "TaskUpdate",
+      input: { taskId: "1", status: "completed" },
+    };
+
+    const notifications = toAcpNotifications(
+      [
+        {
+          type: "tool_result",
+          tool_use_id: "update-1",
+          content: JSON.stringify({
+            success: true,
+            taskId: "1",
+            updatedFields: ["status"],
+          }),
+          is_error: false,
+        },
+      ] as any,
+      "user",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    expect(notifications).toHaveLength(1);
+    expect(notifications[0].update).toMatchObject({
+      sessionUpdate: "plan",
+      entries: [{ content: "First", status: "completed", priority: "medium" }],
+    });
+  });
+
+  it("suppresses TaskList and TaskGet tool_result without touching task state", () => {
+    const toolUseCache: ToolUseCache = {
+      "list-1": { type: "tool_use", id: "list-1", name: "TaskList", input: {} },
+      "get-1": { type: "tool_use", id: "get-1", name: "TaskGet", input: { taskId: "1" } },
+    };
+    const taskState: TaskState = new Map([
+      ["1", { subject: "Existing", status: "in_progress" as const }],
+    ]);
+
+    const notifications = toAcpNotifications(
+      [
+        { type: "tool_result", tool_use_id: "list-1", content: "...", is_error: false },
+        { type: "tool_result", tool_use_id: "get-1", content: "...", is_error: false },
+      ] as any,
+      "user",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    expect(notifications).toHaveLength(0);
+    expect(taskState.get("1")).toEqual({ subject: "Existing", status: "in_progress" });
+  });
+
+  it("does not apply TaskCreate/TaskUpdate when the tool_result reports an error", () => {
+    const toolUseCache: ToolUseCache = {
+      "create-1": {
+        type: "tool_use",
+        id: "create-1",
+        name: "TaskCreate",
+        input: { subject: "A", description: "" },
+      },
+    };
+    const taskState: TaskState = new Map();
+
+    const notifications = toAcpNotifications(
+      [
+        {
+          type: "tool_result",
+          tool_use_id: "create-1",
+          content: "task creation failed",
+          is_error: true,
+        },
+      ] as any,
+      "user",
+      "test-session",
+      toolUseCache,
+      mockClient,
+      mockLogger,
+      { taskState },
+    );
+
+    expect(notifications).toHaveLength(0);
+    expect(taskState.size).toBe(0);
+  });
+});
+
+describe("createTaskHook", () => {
+  it("registers a task on TaskCreated and fires onChange", async () => {
+    const taskState: TaskState = new Map();
+    let changes = 0;
+    const hook = createTaskHook({
+      taskState,
+      onChange: async () => {
+        changes++;
+      },
+    });
+
+    await hook(
+      {
+        hook_event_name: "TaskCreated",
+        task_id: "t-1",
+        task_subject: "Investigate flaky test",
+        task_description: "Repro and fix",
+      } as any,
+      undefined,
+      { signal: new AbortController().signal },
+    );
+
+    expect(taskState.get("t-1")).toEqual({
+      subject: "Investigate flaky test",
+      status: "pending",
+      description: "Repro and fix",
+    });
+    expect(changes).toBe(1);
+  });
+
+  it("does not clobber an existing entry on TaskCreated", async () => {
+    const taskState: TaskState = new Map([
+      ["t-1", { subject: "Investigate flaky test", status: "in_progress" as const }],
+    ]);
+    let changes = 0;
+    const hook = createTaskHook({
+      taskState,
+      onChange: async () => {
+        changes++;
+      },
+    });
+
+    await hook(
+      {
+        hook_event_name: "TaskCreated",
+        task_id: "t-1",
+        task_subject: "Investigate flaky test",
+      } as any,
+      undefined,
+      { signal: new AbortController().signal },
+    );
+
+    expect(taskState.get("t-1")?.status).toBe("in_progress");
+    expect(changes).toBe(0);
+  });
+
+  it("marks a task completed on TaskCompleted", async () => {
+    const taskState: TaskState = new Map([
+      ["t-1", { subject: "Investigate flaky test", status: "in_progress" as const }],
+    ]);
+    let changes = 0;
+    const hook = createTaskHook({
+      taskState,
+      onChange: async () => {
+        changes++;
+      },
+    });
+
+    await hook(
+      {
+        hook_event_name: "TaskCompleted",
+        task_id: "t-1",
+        task_subject: "Investigate flaky test",
+      } as any,
+      undefined,
+      { signal: new AbortController().signal },
+    );
+
+    expect(taskState.get("t-1")?.status).toBe("completed");
+    expect(changes).toBe(1);
+  });
+
+  it("is a no-op for unrelated hook events", async () => {
+    const taskState: TaskState = new Map();
+    let changes = 0;
+    const hook = createTaskHook({
+      taskState,
+      onChange: async () => {
+        changes++;
+      },
+    });
+
+    await hook({ hook_event_name: "PostToolUse", tool_name: "Read" } as any, undefined, {
+      signal: new AbortController().signal,
+    });
+
+    expect(taskState.size).toBe(0);
+    expect(changes).toBe(0);
+  });
+});
--- a/src/tools.ts
+++ b/src/tools.ts
@@ -14,6 +14,9 @@ import {
  FileWriteInput,
  GlobInput,
  GrepInput,
+  TaskCreateInput,
+  TaskCreateOutput,
+  TaskUpdateInput,
  TodoWriteInput,
  WebFetchInput,
  WebSearchInput,
@@ -367,6 +370,40 @@ export function toolInfoFromToolUse(
      };
    }

+    case "TaskCreate": {
+      const input = toolUse.input as TaskCreateInput | undefined;
+      return {
+        title: input?.subject ? `Create task: ${input.subject}` : "Create task",
+        kind: "think",
+        content: [],
+      };
+    }
+
+    case "TaskUpdate": {
+      const input = toolUse.input as TaskUpdateInput | undefined;
+      return {
+        title: input?.subject ? `Update task: ${input.subject}` : "Update task",
+        kind: "think",
+        content: [],
+      };
+    }
+
+    case "TaskList": {
+      return {
+        title: "List tasks",
+        kind: "think",
+        content: [],
+      };
+    }
+
+    case "TaskGet": {
+      return {
+        title: "Get task",
+        kind: "think",
+        content: [],
+      };
+    }
+
    case "ExitPlanMode": {
      const planInput = toolUse.input as { plan?: string } | undefined;
      return {
@@ -669,6 +706,103 @@ export function planEntries(input: { todos: ClaudePlanEntry[] } | undefined): Pl
  }));
 }

+/**
+ * Per-session task list accumulated from Task* tool calls (TaskCreate /
+ * TaskUpdate). The headless/SDK session emits these as incremental tool
+ * calls keyed by task ID, replacing the snapshot-style TodoWrite tool.
+ * Iteration order is insertion order (Map semantics), matching the order
+ * tasks are created.
+ */
+export type TaskEntry = {
+  subject: string;
+  status: "pending" | "in_progress" | "completed";
+  activeForm?: string;
+  description?: string;
+};
+export type TaskState = Map<string, TaskEntry>;
+
+/**
+ * Best-effort parse of a TaskCreate tool_result content into the structured
+ * TaskCreateOutput. The SDK delivers tool outputs either as a string or as
+ * an array of TextBlockParam-like blocks containing JSON text; try both.
+ */
+export function parseTaskCreateOutput(content: unknown): TaskCreateOutput | undefined {
+  const tryParse = (text: string): TaskCreateOutput | undefined => {
+    try {
+      const parsed = JSON.parse(text);
+      if (
+        parsed &&
+        typeof parsed === "object" &&
+        parsed.task &&
+        typeof parsed.task.id === "string"
+      ) {
+        return parsed as TaskCreateOutput;
+      }
+    } catch {
+      // ignore
+    }
+    return undefined;
+  };
+
+  if (typeof content === "string") {
+    return tryParse(content);
+  }
+  if (Array.isArray(content)) {
+    for (const block of content) {
+      if (block && typeof block === "object" && "type" in block && block.type === "text") {
+        const text = (block as { text?: unknown }).text;
+        if (typeof text === "string") {
+          const parsed = tryParse(text);
+          if (parsed) return parsed;
+        }
+      }
+    }
+  }
+  return undefined;
+}
+
+export function applyTaskCreate(
+  state: TaskState,
+  input: TaskCreateInput | undefined,
+  output: TaskCreateOutput | undefined,
+): void {
+  const taskId = output?.task?.id;
+  if (!taskId || !input) return;
+  state.set(taskId, {
+    subject: input.subject,
+    status: "pending",
+    activeForm: input.activeForm,
+    description: input.description,
+  });
+}
+
+export function applyTaskUpdate(state: TaskState, input: TaskUpdateInput | undefined): void {
+  if (!input?.taskId) return;
+  if (input.status === "deleted") {
+    state.delete(input.taskId);
+    return;
+  }
+  const existing = state.get(input.taskId);
+  // Without a subject from either the existing entry or the update payload,
+  // we'd produce a plan entry with empty `content` — drop the update.
+  const subject = input.subject ?? existing?.subject;
+  if (!subject) return;
+  state.set(input.taskId, {
+    subject,
+    status: input.status ?? existing?.status ?? "pending",
+    activeForm: input.activeForm ?? existing?.activeForm,
+    description: input.description ?? existing?.description,
+  });
+}
+
+export function taskStateToPlanEntries(state: TaskState): PlanEntry[] {
+  return Array.from(state.values()).map((task) => ({
+    content: task.subject,
+    status: task.status,
+    priority: "medium",
+  }));
+}
+
 export function markdownEscape(text: string): string {
  let escape = "```";
  for (const [m] of text.matchAll(/^```+/gm)) {
@@ -797,3 +931,38 @@ export const createPostToolUseHook =
    }
    return { continue: true };
  };
+
+/**
+ * Hook callback for `TaskCreated` / `TaskCompleted` events. The SDK fires
+ * these for both user-facing TaskCreate tool calls and subagent task
+ * creation, giving us `task_id` + `task_subject` without having to parse
+ * tool_result payloads.
+ *
+ * Populating `taskState` from the hook means a later `TaskUpdate` (which
+ * typically only carries `taskId` + `status`) finds an existing entry with
+ * a real subject, instead of synthesizing a placeholder with empty content.
+ */
+export const createTaskHook =
+  (options: { taskState: TaskState; onChange?: () => Promise<void> }): HookCallback =>
+  async (input): Promise<{ continue: boolean }> => {
+    const taskId =
+      "task_id" in input && typeof input.task_id === "string" ? input.task_id : undefined;
+    if (!taskId) return { continue: true };
+
+    if (input.hook_event_name === "TaskCreated") {
+      if (!input.task_subject) return { continue: true };
+      if (options.taskState.has(taskId)) return { continue: true };
+      options.taskState.set(taskId, {
+        subject: input.task_subject,
+        status: "pending",
+        description: input.task_description,
+      });
+      if (options.onChange) await options.onChange();
+    } else if (input.hook_event_name === "TaskCompleted") {
+      const existing = options.taskState.get(taskId);
+      if (!existing || existing.status === "completed") return { continue: true };
+      options.taskState.set(taskId, { ...existing, status: "completed" });
+      if (options.onChange) await options.onChange();
+    }
+    return { continue: true };
+  };
--- a/src/utils.ts
+++ b/src/utils.ts
@@ -2,9 +2,7 @@

 import { Readable, Writable } from "node:stream";
 import { WritableStream, ReadableStream } from "node:stream/web";
-import { readFileSync } from "node:fs";
 import { Logger } from "./acp-agent.js";
-import { ClaudeCodeSettings, getManagedSettingsPath } from "./settings.js";

 // Useful for bridging push-based and async-iterator-based code.
 export class Pushable<T> implements AsyncIterable<T> {
@@ -89,19 +87,3 @@ export function unreachable(value: never, logger: Logger = console) {
 export function sleep(time: number): Promise<void> {
  return new Promise((resolve) => setTimeout(resolve, time));
 }
-
-export function loadManagedSettings(): ClaudeCodeSettings | null {
-  try {
-    return JSON.parse(readFileSync(getManagedSettingsPath(), "utf8")) as ClaudeCodeSettings;
-  } catch {
-    return null;
-  }
-}
-
-export function applyEnvironmentSettings(settings: ClaudeCodeSettings): void {
-  if (settings.env) {
-    for (const [key, value] of Object.entries(settings.env)) {
-      process.env[key] = value;
-    }
-  }
-}