diff --git a/headroom/cli/init.py b/headroom/cli/init.py
index 037b6754d..8abc98b12 100644
--- a/headroom/cli/init.py
+++ b/headroom/cli/init.py
@@ -38,6 +38,7 @@ from headroom.install.runtime import (
 )
 from headroom.install.state import load_manifest, save_manifest
 from headroom.install.supervisors import start_supervisor
+from headroom.providers.claude import TOOL_SEARCH_DEFAULT, TOOL_SEARCH_ENV
 from headroom.providers.codex.install import codex_uses_chatgpt_auth
 
 from .main import main
@@ -161,6 +162,12 @@ def _ensure_claude_hooks(path: Path, profile: str, port: int) -> None:
     payload = _json_file(path)
     env_map = dict(payload.get("env") or {}) if isinstance(payload.get("env"), dict) else {}
     env_map["ANTHROPIC_BASE_URL"] = f"http://127.0.0.1:{port}"
+    # GH #746: with a custom ANTHROPIC_BASE_URL and ENABLE_TOOL_SEARCH unset,
+    # Claude Code stops deferring MCP/system tool schemas and materializes them
+    # all into its context window — overflowing it (breaks sub-agent spawns,
+    # forces constant compaction). Keep deferral on; respect a user-set value.
+    # Shares the TOOL_SEARCH_* constants with `wrap` and `install`.
+    env_map.setdefault(TOOL_SEARCH_ENV, TOOL_SEARCH_DEFAULT)
     payload["env"] = env_map
 
     hooks = dict(payload.get("hooks") or {}) if isinstance(payload.get("hooks"), dict) else {}
diff --git a/headroom/cli/wrap.py b/headroom/cli/wrap.py
index aafc34575..9113afae6 100644
--- a/headroom/cli/wrap.py
+++ b/headroom/cli/wrap.py
@@ -50,7 +50,13 @@ from headroom.copilot_auth import (
     resolve_subscription_bearer_token_details,
 )
 from headroom.providers.aider import build_launch_env as _build_aider_launch_env
-from headroom.providers.claude import proxy_base_url as _claude_proxy_base_url
+from headroom.providers.claude import (
+    TOOL_SEARCH_DEFAULT,
+    TOOL_SEARCH_ENV,
+)
+from headroom.providers.claude import (
+    proxy_base_url as _claude_proxy_base_url,
+)
 from headroom.providers.codex import build_launch_env as _build_codex_launch_env
 from headroom.providers.codex.install import codex_uses_chatgpt_auth
 from headroom.providers.codex.threads import retag_to_headroom, retag_to_native
@@ -121,9 +127,10 @@ _WRAP_PROXY_TIMEOUT_ML_MODULES = ("torch", "sentence_transformers", "spacy")
 # when we launch Claude Code keeps deferral on. Default to "true" — defer the
 # MCP/system tools for maximum context savings, matching native first-party
 # behaviour (core built-ins like Read/Edit/Bash are never deferred by Claude
-# Code, so the agent loop is unaffected).
-_TOOL_SEARCH_ENV = "ENABLE_TOOL_SEARCH"
-_TOOL_SEARCH_DEFAULT = "true"
+# Code, so the agent loop is unaffected). The key/default are shared with
+# `init` and `install` via the Claude provider package to prevent drift.
+_TOOL_SEARCH_ENV = TOOL_SEARCH_ENV
+_TOOL_SEARCH_DEFAULT = TOOL_SEARCH_DEFAULT
 _AGENT_SAVINGS_WRAP_AGENTS = {"claude", "codex", "cursor"}
 _DEFAULT_AGENT_SAVINGS_PROFILE = "agent-90"
 
@@ -2519,7 +2526,7 @@ def _marker_pid_reused(marker: Path, pid: int) -> bool:
         return False
     src = rec.get("start_src")
     recorded = rec.get("start_time")
-    if not isinstance(src, str) or not isinstance(recorded, (int, float)):
+    if not isinstance(src, str) or not isinstance(recorded, int | float):
         return False  # legacy / identity-less marker — can't tell
     ident = _proc_identity(pid)
     if ident is None or ident[0] != src:
diff --git a/headroom/providers/claude/__init__.py b/headroom/providers/claude/__init__.py
index 0ea0c7e39..cdff9c83c 100644
--- a/headroom/providers/claude/__init__.py
+++ b/headroom/providers/claude/__init__.py
@@ -1,5 +1,15 @@
 """Claude-specific provider helpers."""
 
-from .runtime import DEFAULT_API_URL, proxy_base_url
+from .runtime import (
+    DEFAULT_API_URL,
+    TOOL_SEARCH_DEFAULT,
+    TOOL_SEARCH_ENV,
+    proxy_base_url,
+)
 
-__all__ = ["DEFAULT_API_URL", "proxy_base_url"]
+__all__ = [
+    "DEFAULT_API_URL",
+    "TOOL_SEARCH_DEFAULT",
+    "TOOL_SEARCH_ENV",
+    "proxy_base_url",
+]
diff --git a/headroom/providers/claude/install.py b/headroom/providers/claude/install.py
index 30b6928c2..fcce25c4d 100644
--- a/headroom/providers/claude/install.py
+++ b/headroom/providers/claude/install.py
@@ -8,13 +8,23 @@ from pathlib import Path
 from headroom.install.models import ConfigScope, DeploymentManifest, ManagedMutation, ToolTarget
 from headroom.install.paths import claude_settings_path
 
-from .runtime import proxy_base_url
+from .runtime import TOOL_SEARCH_DEFAULT, TOOL_SEARCH_ENV, proxy_base_url
 
 
 def build_install_env(*, port: int, backend: str) -> dict[str, str]:
     """Build the persistent install environment for Claude."""
     del backend
-    return {"ANTHROPIC_BASE_URL": proxy_base_url(port)}
+    # TOOL_SEARCH_ENV keeps Claude Code deferring MCP/system tool schemas behind
+    # the server-side Tool Search Tool when pointed at the proxy's custom
+    # ANTHROPIC_BASE_URL; without it Claude Code materializes every schema into
+    # its context window (GH #746) — breaking sub-agents and forcing compaction.
+    # The install env is headroom-managed and reverted on uninstall, so it is
+    # authoritative — unlike `init`, it always writes the default rather than
+    # deferring to a pre-existing user value.
+    return {
+        "ANTHROPIC_BASE_URL": proxy_base_url(port),
+        TOOL_SEARCH_ENV: TOOL_SEARCH_DEFAULT,
+    }
 
 
 def apply_provider_scope(manifest: DeploymentManifest) -> ManagedMutation | None:
diff --git a/headroom/providers/claude/runtime.py b/headroom/providers/claude/runtime.py
index 0039bcb98..45b65781c 100644
--- a/headroom/providers/claude/runtime.py
+++ b/headroom/providers/claude/runtime.py
@@ -4,6 +4,14 @@ from __future__ import annotations
 
 DEFAULT_API_URL = "https://api.anthropic.com"
 
+# GH #746: Claude Code stops deferring MCP/system tool schemas (materializing
+# every one into its context window) when ANTHROPIC_BASE_URL is a custom host
+# and ENABLE_TOOL_SEARCH is unset. Every place that points Claude Code at the
+# proxy must keep deferral on, so the env key and its default live here as the
+# single source of truth shared by `wrap`, `init`, and `install`.
+TOOL_SEARCH_ENV = "ENABLE_TOOL_SEARCH"
+TOOL_SEARCH_DEFAULT = "true"
+
 
 def proxy_base_url(port: int) -> str:
     """Return the local proxy base URL used by Claude integrations."""
diff --git a/tests/test_cli/test_init_cli.py b/tests/test_cli/test_init_cli.py
index 9df842824..f94d293fd 100644
--- a/tests/test_cli/test_init_cli.py
+++ b/tests/test_cli/test_init_cli.py
@@ -424,7 +424,11 @@ def test_ensure_claude_hooks_rewrites_existing_entries(monkeypatch, tmp_path: Pa
     init_cli._ensure_claude_hooks(settings_path, "init-local-demo", 9001)
 
     payload = json.loads(settings_path.read_text(encoding="utf-8"))
-    assert payload["env"] == {"KEEP": "1", "ANTHROPIC_BASE_URL": "http://127.0.0.1:9001"}
+    assert payload["env"] == {
+        "KEEP": "1",
+        "ANTHROPIC_BASE_URL": "http://127.0.0.1:9001",
+        "ENABLE_TOOL_SEARCH": "true",
+    }
     session_entries = payload["hooks"]["SessionStart"]
     assert session_entries[0] == "not-a-dict"
     assert session_entries[1] == {"hooks": "not-a-list"}
diff --git a/tests/test_cli/test_init_enable_tool_search.py b/tests/test_cli/test_init_enable_tool_search.py
new file mode 100644
index 000000000..de65e56ed
--- /dev/null
+++ b/tests/test_cli/test_init_enable_tool_search.py
@@ -0,0 +1,42 @@
+"""`headroom init claude` must set ENABLE_TOOL_SEARCH (GH #746).
+
+Claude Code disables on-demand tool loading when ANTHROPIC_BASE_URL is a custom
+host and ENABLE_TOOL_SEARCH is unset, materializing all MCP/system tool schemas
+into the context window — which breaks sub-agent spawns and forces compaction.
+`headroom wrap claude` already sets it; `init` (and the persistent install) must
+too, otherwise init-wired users silently get eager tools.
+"""
+
+from __future__ import annotations
+
+import json
+from pathlib import Path
+
+from headroom.cli import init as init_cli
+from headroom.providers.claude import install as claude_install
+
+
+def test_ensure_claude_hooks_sets_enable_tool_search(tmp_path: Path) -> None:
+    settings = tmp_path / "settings.json"
+    init_cli._ensure_claude_hooks(settings, profile="init-user", port=8787)
+
+    env = json.loads(settings.read_text(encoding="utf-8"))["env"]
+    assert env["ANTHROPIC_BASE_URL"] == "http://127.0.0.1:8787"
+    assert env["ENABLE_TOOL_SEARCH"] == "true"
+
+
+def test_ensure_claude_hooks_respects_user_tool_search_value(tmp_path: Path) -> None:
+    settings = tmp_path / "settings.json"
+    settings.write_text(
+        json.dumps({"env": {"ENABLE_TOOL_SEARCH": "auto"}}) + "\n", encoding="utf-8"
+    )
+    init_cli._ensure_claude_hooks(settings, profile="init-user", port=8787)
+
+    env = json.loads(settings.read_text(encoding="utf-8"))["env"]
+    assert env["ENABLE_TOOL_SEARCH"] == "auto"  # setdefault preserves the user's choice
+
+
+def test_build_install_env_includes_enable_tool_search() -> None:
+    env = claude_install.build_install_env(port=8787, backend="anthropic")
+    assert env["ENABLE_TOOL_SEARCH"] == "true"
+    assert env["ANTHROPIC_BASE_URL"].endswith(":8787")
diff --git a/tests/test_install/test_providers.py b/tests/test_install/test_providers.py
index a4182a29d..f02da01c5 100644
--- a/tests/test_install/test_providers.py
+++ b/tests/test_install/test_providers.py
@@ -382,7 +382,10 @@ def test_claude_build_install_env_returns_proxy_base_url() -> None:
     env = build_claude_install_env(port=5566, backend="ignored")
 
     # Assert
-    assert env == {"ANTHROPIC_BASE_URL": "http://127.0.0.1:5566"}
+    assert env == {
+        "ANTHROPIC_BASE_URL": "http://127.0.0.1:5566",
+        "ENABLE_TOOL_SEARCH": "true",
+    }
 
 
 def test_copilot_build_install_env_uses_provider_type_specific_proxy_urls() -> None: