Hey, this is a known issue. We saw the same thing with a few users last week.
Most of the time it’s caused by MCP servers or third-party API key settings that block the connection. Try this:
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Cursor Settings > Tools & MCP: If you have any MCP servers connected (especially Perplexity, Figma, or custom ones), temporarily disable all of them.
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Cursor Settings > Models: Make sure “Override OpenAI Base URL” is turned off. If you added any third-party API keys (OpenAI or Anthropic), temporarily disable those too.
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Sign out and sign back in (Cursor Settings > Sign Out, then Sign In).
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Open a new chat in a different project folder to test.
This worked for other users with the exact same issue:
- Trouble connecting to the model provider for all Anthropic and Open AI models
- Cursor completely unusable - "Provider Error" on all models
If that doesn’t help, try launching Cursor from Terminal with cursor --disable-extensions to rule out extension conflicts.
Let me know how it goes.