How Claude Code Works: Agentic Coding Explained

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.

What Claude Code Actually Is

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.

• It runs where you already work: the terminal, VS Code and JetBrains extensions, a desktop app, the web, and inside CI pipelines.
• It acts on your live repository, editing real files and running real commands rather than producing text you copy back yourself.
• It reasons across the whole codebase, so it can follow a feature or a bug through many files instead of one isolated function.

The Agentic Loop and Its Tools

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.

The Permission and Safety Model

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.

• By default, Claude Code asks for approval before running a command or writing a file, so nothing risky happens silently.
• You can allowlist trusted actions, for example specific test or lint commands, so routine work stops prompting you every time.
• Deny rules block sensitive operations outright, such as reading secret files or running network commands you never want it to touch.
• Permission rules live in settings files and can be set per user, per project, or centrally managed for an organization.

Context, Memory, and Extensibility

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.

Where It Fits in Your Workflow

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.

• Give it a verification loop: a failing test or a reproduction command lets it check and correct its own work instead of guessing.
• Keep requests concrete and scoped; a clear goal and a definition of done beat a vague, sprawling instruction.
• Review the plan and the diff before accepting, and lean on CLAUDE.md to encode the standards you want enforced every time.

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.