Hey, thanks for the report. This is a known issue. The .cursor/rules/ directory currently only recognizes files with the .mdc extension, even though the docs mention .md support.
Workaround: rename your rule files from .md to .mdc. The content format is the same. Frontmatter with --- separators at the top, then the rule markdown content.
Related reports:
- Project Rules: Documented RULE.md folder format not working only undocumented mdc format works Project Rules: Documented RULE.md folder format not working, only undocumented .mdc format works
- New Cursor Rules directory format not working New Cursor Rules directory format not working
The team is aware of the mismatch. For now, .mdc is the reliable option.