Cursor 2.0 Agent Mode loops and fails to act! Underperforms

Bug Reports
1

Where does the bug appear (feature/product)?

Bug Report

Describe the Bug

Agent mode in Cursor IDE v2.0 repeatedly loops, asks for folder path, then continues thinking indefinitely and fails to make the requested code change. Overall agent behavior is worse than v1.7. Separately, the new UI for active/terminal tabs removed the previous ability to attach a terminal/document to an editor/context as a shared resource; now terminals must be attached per message, which is far less usable.

Steps to Reproduce

  1. Open Cursor IDE v2.0.
    2. Start agent mode / create an agent message asking for a code change. Example prompt: “Hide the submit button on src/components/MyForm.js and commit the change.”
    3. Wait for agent to search through the workspace:
    • Observe agent spends ~1–2 minutes searching.
    • When it reports “I couldn’t find the folder. Can you please paste the path?” paste the absolute path to the folder (e.g. /home/james/projects/my-app/src/components).
    4. Watch agent behavior after path provided:
    • Agent enters repeated “thinking/searching” states (long pauses) multiple times.
    • After several cycles it eventually responds “I have found the solution what would you like me to do?” instead of applying the change or offering a concrete patch/PR.
    5. For terminal UI regression:
    • Try to attach a single terminal instance to the editor/session so the agent can run commands as needed across messages.
    • Observe you must attach a terminal per message or per chart, which is far more limited and breaks prior workflows.

Expected Behavior

  1. Agent mode should locate the specified file/folder reliably when given a correct path and perform requested edits (e.g. “hide the button”).
    2. Agent should not enter repeated “thinking/searching” loops asking for the same information multiple times.
    3. The UI should allow attaching a terminal / documents / rules to the editor/context so multiple messages or the whole session can reuse them (as in v1.7), or at least provide a clear, ergonomic alternative.

Operating System

MacOS

Current Cursor Version (Menu → About Cursor → Copy)

Version: 1.7.54
VSCode Version: 1.99.3
Commit: 5c17eb2968a37f66bc6662f48d6356a100b67be0
Date: 2025-10-21T19:07:38.476Z
Electron: 34.5.8
Chromium: 132.0.6834.210
Node.js: 20.19.1
V8: 13.2.152.41-electron.0
OS: Darwin x64 24.6.0

For AI issues: which model did you use?

Auto

Does this stop you from using Cursor

Yes - Cursor is unusable