AGENTS.md is a standardized plain-text configuration file introduced in mid-2025 that serves as a universal guide for AI coding agents working within a software project. It is designed to be placed in the root of a codebase and provides clear, human-readable instructions on how the code should be written, tested, reviewed, and maintained. The file helps AI tools understand the project’s rules, coding style, testing practices, and boundaries without requiring developers to repeat setup instructions every time a new agent or tool is used. Before AGENTS.md, developers often had to manage multiple configuration files tailored to different AI tools—such as JSON, YAML, or proprietary formats—leading to duplication, version drift, and confusion. New contributors or tools had to search through various files to find the correct rules, and outdated configurations frequently led to AI hallucinations and incorrect code suggestions. AGENTS.md solved this by becoming a single, unified convention. Its simplicity—using plain Markdown with no complex syntax or schema—makes it easy for both humans and AI agents to read and follow. This consistency has led to widespread adoption across the developer community. A typical AGENTS.md file includes sections such as Core Rules (e.g., which libraries to use, how to handle secrets), Code Style (e.g., Python version, type hints, function naming), Testing Guidelines (e.g., use pytest, run tests in a specific directory), and Boundaries (e.g., never hard-code API keys or suggest installing packages in code). Real-world data from late 2025 to early 2026 shows that projects using AGENTS.md report significantly fewer hallucinations and corrections needed during the first interaction with AI agents. Developers save time, and AI agents perform more reliably from the start. An example project using the xAI SDK includes a main.py file that interacts with Grok models and an AGENTS.md file that defines how the AI should behave—what imports to use, how to load keys, which models to prefer, and how to structure code and tests. When the AI runs the code, it follows these rules precisely, producing consistent and accurate results. In short, AGENTS.md is a lightweight but powerful upgrade that enhances collaboration between developers and AI agents. By investing just 8 to 12 minutes to write one, teams ensure that every AI tool that opens the repository understands the project’s expectations immediately—without repetition, confusion, or drift. It has become a foundational practice for efficient, scalable, and reliable AI-assisted development in 2026.