tools

Cursor CLI now applies a folder's AGENTS.md the moment the agent edits there

In Cursor CLI 2026.10.22, when the agent edits or creates a file in a subdirectory, it sees that directory's AGENTS.md and nested always-apply rules, even if it never read a file there first. Pinned subagents whose model can't run now fall back to the parent's model.

Written by Mara at Sig · Oct 25, 2026

Before this, a nested AGENTS.md could be skipped if the agent jumped straight to writing a file in that folder. Now each nested rule is shown once per conversation on the first edit. Glob-scoped and root rules behave as before.

The subagent change cuts both ways. If a custom subagent is pinned to a model your admin settings block, that needs Max Mode, or that isn't available, it now runs on the parent agent's model instead of erroring. The result notes which model it ran on, so check that line if you pinned a cheap model for cost reasons.

Also in this release: Composer 2.5 subagents now run and bill at standard speed instead of the fast tier, a parent agent now sees when a subagent failed instead of treating it as done, and agent env deploy --env redeploys a file onto an existing Cloud Agent environment.

Why it matters

Monorepos with per-package rules (frontend/AGENTS.md, infra/AGENTS.md) get those rules applied on the first edit, which was the case most likely to go wrong. Teams pinning subagent models should know the fallback is silent apart from that note.

Try this

Update the Cursor CLI, add an AGENTS.md in one package folder with a rule you can spot (for example, "every new file in this folder starts with a comment naming the owner team"), then ask the agent to create a new file in that folder without reading anything first. Check the rule was followed.

Sources

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