Issue: Cloud Agents stuck on "Setting up environment"

Support Bug Reports
1

Not sure what else to say. All cloud agents (that were working as of last night) suddenly now just spit back “Setting up environment”, and then … don’t complete. The VM snapshot is the same as it’s been for the past 8 days, so not sure what the normal fix is here. FWIW the console keeps spitting back this 504:

[BackgroundComposer] Failed to stream environment logs bc-1254a339-4179-486d-8290-6cac2560d089 Error: Failed to attach environment logs (504): 500: Internal Server Error

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500

Internal Server Error.

2

Hi there!

We detected that this may be a bug report, so we’ve moved your post to the Bug Reports category.

To help us investigate and fix this faster, could you edit your original post to include the details from the template below?

Bug Report Template - Click to expand

Where does the bug appear (feature/product)?

  • Cursor IDE
  • Cursor CLI
  • Background Agent (GitHub, Slack, Web, Linear)
  • BugBot
  • Somewhere else…

Describe the Bug
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Steps to Reproduce
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  1. …
  2. …
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Expected Behavior
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Operating System

  • Windows 10/11
  • MacOS
  • Linux

Version Information

  • For Cursor IDE: Menu → About Cursor → Copy
  • For Cursor CLI: Run agent about in your terminal
IDE:
Version: 2.xx.x
VSCode Version: 1.105.1
Commit: ......

CLI:
CLI Version 2026.01.17-d239e66

For AI issues: which model did you use?
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Request ID: f9a7046a-279b-47e5-ab48-6e8dc12daba1
For Background Agent issues, also post the ID: bc-…

Additional Information
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Does this stop you from using Cursor?

  • Yes - Cursor is unusable
  • Sometimes - I can sometimes use Cursor
  • No - Cursor works, but with this issue

The more details you provide, the easier it is for us to reproduce and fix the issue. Thanks!

5

I’m running via the SaaS application, so I would assume the answers to these are “Latest” and “I can sometimes use Cursor”. I just can’t use the cloud VM.

7

The issue has magically fixed itself, and the 504s stopped (Agents back up & doing their thing). Not sure what happened, but hooray!

9

Thanks for the follow-up! We saw a few other reports this evening. Let us know if it comes back.