AI
How Claude Code Works: Agentic Coding Explained
August 20268 min read
Claude Code is Anthropic's agentic coding tool that runs in your terminal, IDE, desktop app, web, or CI. It works by reading and editing real files, running shell commands, and searching your codebase through tools. It drives an agentic loop, planning an approach, acting with a tool, observing the result, and iterating until the task is done.
No. Autocomplete suggests the next line while you type. Claude Code is an agent that decides what to do, edits files, runs tests and commands, and checks the outcome across many files. It acts on your live repository rather than producing text you copy back yourself.
By default Claude Code asks for approval before running a command or writing a file. You can pre-approve trusted actions with allow rules and block sensitive ones with deny rules in its settings. Permissions can be set per user, per project, or managed centrally for a whole organization, so you control what runs without a prompt.
CLAUDE.md is a markdown file at your project root that Claude Code reads at the start of every session. You use it to record coding standards, architecture decisions, preferred libraries, and review checklists. It gives the agent persistent, project-specific guidance so it follows your conventions instead of guessing them each time.
MCP, the Model Context Protocol, is an open standard that connects Claude Code to external systems like issue trackers, databases, and design tools through MCP servers, so it can read and act on them directly. Subagents let it delegate a side task to a separate worker that runs in its own context and returns only a summary, keeping the main conversation focused.
Key Takeaway
Claude Code is Anthropic's command-line coding agent that runs in your terminal, IDE, or CI. It reads and edits files, runs shell commands, and searches your codebase through tools, driving an agentic loop that plans, acts, observes the result, and iterates. A permission model gates risky actions, while CLAUDE.md memory, MCP servers, and subagents extend what it can do.
You have probably seen Claude Code demos where someone types a plain-English request and watches files change, tests run, and a pull request appear. What is less obvious is the machinery underneath. Claude Code is not an autocomplete plugin that suggests the next line while you type. It is an agent: a program that decides what to do, does it with real tools, checks the outcome, and keeps going until the task is done.
This post explains how that actually works for a developer who has heard the name but wants the mechanics. We will cover what Claude Code is, the agentic loop and the tools it calls, the permission model that keeps it safe, how it uses project context, and where it fits in a real workflow.
Claude Code is an agentic coding tool from Anthropic that reads your codebase, edits files, runs commands, and connects to your development tools. It started as a terminal program, and the command line is still its natural home, but the same underlying engine now runs in IDE extensions for VS Code and JetBrains, a desktop app, and the web. Your project instructions, settings, and connected tools carry across every surface because they all talk to the same engine.
The key mental shift is that Claude Code operates on your real project, not a chat window copy of it. When you ask it to fix a failing test, it opens the actual files, runs the actual test command, reads the actual stack trace, and edits the actual source. It works across many files at once and understands how they relate, which is why it can trace a bug from the front end down to the database rather than reasoning about a single snippet in isolation.
Under the hood, Claude Code runs a loop. Given your request, it plans an approach, takes an action by calling a tool, observes the result of that action, and then decides the next step based on what it just learned. If a test fails, it reads the failure and tries a different fix. If a search returns nothing useful, it searches differently. This plan, act, observe, and iterate cycle is what makes it an agent rather than a one-shot text generator.
The actions are all tool calls, and the tools are deliberately close to what a human developer uses at a keyboard. It reads files on demand instead of loading everything at once. It edits files with targeted changes. It runs shell commands to build, test, lint, or inspect git history. It searches the codebase by pattern to find where something lives. Because these tools mirror ordinary developer moves, the loop stays legible: you can watch each step and see why it did what it did.
Ask Claude Code to plan before it edits. Plan mode has it read files and propose an approach without touching disk, so you can approve or correct the direction before any change lands.
Because the agent can run commands and rewrite files, it does not act unchecked. By default it pauses to ask before doing something consequential, and you decide how much to pre-approve. Permissions are expressed as allow and deny rules in settings, and you can tune them from a single quick approval up to a curated allowlist for a whole team. The point is that you stay in control of the blast radius while still letting the agent move quickly on the safe, repetitive parts.
Claude Code does not need the entire repository pasted into a prompt. It reads files on demand as the task requires, which keeps its working context focused. For persistent guidance, you add a CLAUDE.md file at your project root: it is read at the start of every session and is where you record coding standards, architecture decisions, preferred libraries, and review checklists. It also builds up auto memory as it works, saving learnings like build commands across sessions so it does not rediscover them each time.
Two features push its reach beyond your codebase. The Model Context Protocol, an open standard, lets it connect to external systems through MCP servers, so it can read a ticket in your issue tracker, pull data from a database, or act on a design tool directly instead of you copying content into chat. Subagents let it delegate a side task, such as exploring a large module, to a separate worker that runs in its own context and returns only a summary, keeping the main conversation clean.
Anything you allowlist, Claude Code can run without asking, and any MCP server you connect can reach whatever that server exposes. Grant broad permissions and third-party connections deliberately, not by habit.
Claude Code shines on the work that is well defined but tedious: writing tests for untested code, fixing lint errors across a project, refactoring to a modern pattern, or drafting a pull request from a set of changes. You get the most from it by being specific about the goal and about what success looks like, giving it a way to verify its own work, such as a test command, and reviewing its plan and its diffs before you accept them. Because it can run non-interactively, it also fits into CI, where it can review changed files or triage issues automatically.
Strip away the demos and Claude Code is a straightforward idea executed well: an agent that uses developer tools inside a plan, act, observe loop, fenced by a permission model and grounded in your project's own context. Treat it as a capable collaborator you direct and review, not a black box you trust blindly, and it earns its place across the terminal, the IDE, and CI.