How Claude Code Works

• Claude Code functions as an AI coding assistant by employing an "agentic loop" that continuously gathers context, takes actions, and verifies outcomes until a prompt is fully resolved.
• It manages a dynamic "context window" and utilizes "tools" to interact with the environment, execute code, and perform tasks beyond simple text generation.
• Users can guide Claude Code through its process and configure "permission modes" for actions like file editing or command execution, but caution is advised with elevated permissions due to the risk of errors.

• Claude Code operates through an agentic loop: it receives a prompt, gathers context, interacts with a model to determine text or tool calls, executes actions (e.g., editing files, running commands), and then verifies results, repeating the loop if necessary.
• Users can actively intervene during the loop to add context, interrupt, or steer the model to achieve desired goals.
• Claude Code manages a context window that stores conversation history, file content, and command outputs; when this limit is reached, it automatically compacts the conversation by summarizing or removing older content.
• Tools are essential for agents, enabling Claude Code to execute specific code (like a read file or search web tool) rather than being limited to text-only input and output.
• Semantic searching is used by Claude Code to intelligently determine when and which tool to call based on the current task and context.
• Claude Code offers different permission modes: Default requires explicit approval for edits/commands, Auto Accept allows edits without asking but still prompts for commands, and Plan mode uses read-only tools to generate an action plan.
• Exercising caution with permission modes is important, as giving Claude Code free reign to run commands can make errors harder to catch before they occur.

agent — An AI system designed to perceive its environment, make decisions, and take actions to achieve specific goals, often involving tools and continuous learning. agentic loop — A cyclical process where an AI assistant continuously gathers information, takes actions, and verifies outcomes to achieve a specified goal. context window — The limited amount of recent information (conversation, file content, command outputs) that an AI model can store and refer back to during an interaction. tools — Specific functions or capabilities that an AI agent can call and execute, such as reading a file, searching the web, or running a shell command, to perform real-world actions. semantic searching — A method used by AI to understand the meaning and intent behind queries or context, enabling it to intelligently decide which tool to call or action to take. permission modes — Configurable settings that control whether an AI assistant needs explicit user approval before executing actions like editing files or running shell commands. shell command — A command line instruction executed within a terminal or command-line interface, which an AI assistant might run to interact with the operating system.

We know that Claude Code is different from usual child applications. But how does it work? Claude Code is best explained through the agentic loop. You enter a prompt into Claude Code. Claude Code will then gather context required to complete your prompt. It does so by interacting with the model which will return text or a tool call that Claude Code can execute. Then it takes action. For example, editing a file or running a command. Finally, it verifies those results and determines if they achieve what your prompt set out to do in the first place. If they do, then Claude finishes and waits for the next prompt. And if they don't, Claude goes back and runs the loop again until the results are complete and verifiable. Throughout this loop, you're able to add context, interrupt it, or steer the model to help guide it towards your end goal. Claude has a context window which determines how much of your conversation, file content, command outputs, and more it can store and look back on. Once you reach that limit, Claude Code compacts your conversation, which automatically determines what it can take out of the context window and what it can summarize in order to bring the context window back down. Tools are the backbone of how agents work. Currently, most AI assistants are simply input text and output text. Nothing in between. Tools let Claude Code and other agents determine when to execute code to get closer to a task. This could be read file tool or search web tool for example. Claude Code uses semantic searching to determine when to call a tool and get the output of it. Claude Code also has permission modes. Default behavior is that it has to ask explicit permission before editing a file or running a shell command. You can use shift and tab to toggle between different modes. Auto accept edits files without asking but still ask for commands. Plan mode uses readonly tools to help compile a plan of action before starting. It's worth being cautious when skipping permissions. Giving Claude code free reign to run commands means a mistake could be harder to catch before it even happens. Claw code works by combining different agentic concepts. an agentic loop, a manage context window, tools, and configurable permissions into your terminal. It can read your codebase, take action, and verify its own work. And that makes it fundamentally different from a chat window.