diff --git a/openspec/changes/agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00/.openspec.yaml b/openspec/changes/agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00/.openspec.yaml
new file mode 100644
index 00000000..878dc315
--- /dev/null
+++ b/openspec/changes/agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00/.openspec.yaml
@@ -0,0 +1,2 @@
+schema: spec-driven
+created: 2026-08-07
diff --git a/openspec/changes/agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00/notes.md b/openspec/changes/agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00/notes.md
new file mode 100644
index 00000000..58c0927b
--- /dev/null
+++ b/openspec/changes/agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00/notes.md
@@ -0,0 +1,75 @@
+# agent-claude-credentials-source-not-cue-runtime-2026-08-07-13-00 (minimal / T1)
+
+Branch: `agent/claude/credentials-source-not-cue-runtime-2026-08-07-13-00`
+
+A nested `cue launch` of the profile already running destroyed its own runtime
+dir: 69 self-referential symlinks (`sessions/`, `projects/`, `history.jsonl`,
+`keybindings.json`, `.session-stats.json`, …), every one pointing at its own
+path, and a runtime that reported `Not logged in · Please run /login` until the
+next launch rewrote `.credentials.json`.
+
+## Cause
+
+`pickClaudeCredentialsSource()` returned `process.env.CLAUDE_CONFIG_DIR`
+unconditionally. cue points that variable at `<configDir>/runtime/<profile>/claude`
+when it launches an agent, so every process spawned inside a cue session
+inherits it — and a nested launch therefore ran with
+`credentialsSource === runtimeDir`.
+
+`materializeRuntime()` step 5 (`overlaySourceState`) symlinks every entry cue
+does not manage from `credentialsSource` into `tmpDir`. With source == the dir
+being rebuilt, each link was written as `<runtimeDir>/<name>`. Step 6 then
+renames `tmpDir` onto `runtimeDir` — and every link now points at its own new
+path. `.credentials.json` survived only because step 6 explicitly moves it from
+the old runtime.
+
+## Change
+
+One guard, as an exported pure helper matching the file's existing style
+(`isRuntimeAgent`, `runtimeAgentSubdir`, `runtimeDirFor`):
+
+- `isCueRuntimeDir(dir, runtimeRoot?)` — resolves both sides and tests for the
+  root itself or a `root + sep` prefix, so a sibling like `runtime-backup/`
+  stays usable.
+- `pickClaudeCredentialsSource()` — an explicit `CLAUDE_CONFIG_DIR` still wins
+  (that is how authmux hands cue a per-account config), but not when it is
+  cue's own runtime dir. Falling through reaches the existing `~/.claude` /
+  authmux ladder, i.e. a source outside the dir being rebuilt.
+
+## Verification
+
+- `bun run typecheck` — clean.
+- `bun run lint` — 6 warnings, all pre-existing (`ai.ts`, `evolve.ts`,
+  `shell.test.ts`, `runtime-materializer.ts`); zero in the touched files.
+- `bun test src/lib/runtime-install.test.ts` — 21 pass / 0 fail (8 new).
+- `bun test` (full), branch vs base in the same worktree and same shell:
+  - branch: 3033 pass / 33 fail / 3112 run
+  - base:   3024 pass / 34 fail / 3104 run
+  - Failing-set diff: **zero new failures**. The one name that differs
+    (`cue score > --all shows all profiles ranked`) passes 2/2 in isolation on
+    BOTH branch and base — full-suite flake, not something this change fixed.
+    Not claiming it as a fix.
+- Behavioural before/after on the real resolver, driven with the exact env a
+  nested launch inherits (`XDG_CONFIG_HOME=/tmp/probe-cfg`,
+  `CLAUDE_CONFIG_DIR=$XDG_CONFIG_HOME/cue/runtime/some+profile/claude`):
+  - before: `nested -> /tmp/probe-cfg/cue/runtime/some+profile/claude` (the
+    self-overlay that caused the 69 loops)
+  - after:  `nested -> /home/deadpool/.claude`
+  - both:   `authmux -> /home/deadpool/.claude-account2` (per-account dir still
+    wins, unchanged)
+
+## Notes
+
+Real-world trigger: cue #132 let nested non-TTY launches proceed past the
+picker instead of erroring out. That unmasked this — before #132 the nested
+launch died before it ever materialized.
+
+The damage on the live profile was repaired out-of-band by re-pointing all 69
+loops at their `~/.claude` counterparts; no data was lost, since the loops were
+symlinks and every target existed at the source.
+
+## Cleanup
+
+- [ ] Run: `gx branch finish --branch agent/claude/credentials-source-not-cue-runtime-2026-08-07-13-00 --base main --via-pr --gate-review --review-provider claude --wait-for-merge --cleanup`
+- [ ] Record PR URL + `MERGED` state in the completion handoff.
+- [ ] Confirm sandbox worktree is gone (`git worktree list`, `git branch -a`).
diff --git a/src/lib/runtime-install.test.ts b/src/lib/runtime-install.test.ts
index c8f63ff2..5582c859 100644
--- a/src/lib/runtime-install.test.ts
+++ b/src/lib/runtime-install.test.ts
@@ -1,5 +1,6 @@
 import { describe, test, expect } from "bun:test";
 import {
+  isCueRuntimeDir,
   isRuntimeAgent,
   runtimeAgentSubdir,
   runtimeDirFor,
@@ -68,3 +69,44 @@ describe("runtimeDirFor", () => {
     expect(result).toBe("/tmp/runtime/core+skill-writer/claude");
   });
 });
+
+describe("isCueRuntimeDir", () => {
+  const root = "/tmp/cfg/runtime";
+
+  test("true for a materialized profile runtime — what a nested launch inherits", () => {
+    expect(isCueRuntimeDir(runtimeDirFor("core", "claude-code", root), root)).toBe(true);
+  });
+
+  test("true for the runtime root itself", () => {
+    expect(isCueRuntimeDir(root, root)).toBe(true);
+  });
+
+  test("true for a codex runtime", () => {
+    expect(isCueRuntimeDir(runtimeDirFor("core", "codex", root), root)).toBe(true);
+  });
+
+  test("false for ~/.claude", () => {
+    expect(isCueRuntimeDir("/home/u/.claude", root)).toBe(false);
+  });
+
+  test("false for an authmux per-account config dir", () => {
+    expect(isCueRuntimeDir("/home/u/.claude-account2", root)).toBe(false);
+  });
+
+  // A path prefix is not a path component: `/tmp/cfg/runtime-backup` is a
+  // sibling of the runtime root, not inside it, and must stay usable as a
+  // credentials source.
+  test("false for a sibling whose name merely starts with the root", () => {
+    expect(isCueRuntimeDir("/tmp/cfg/runtime-backup/claude", root)).toBe(false);
+  });
+
+  test("normalizes traversal before comparing", () => {
+    expect(isCueRuntimeDir("/tmp/cfg/runtime/core/../core/claude", root)).toBe(true);
+    expect(isCueRuntimeDir("/tmp/cfg/runtime/../.claude", root)).toBe(false);
+  });
+
+  test("tolerates a trailing separator on either side", () => {
+    expect(isCueRuntimeDir("/tmp/cfg/runtime/core/claude/", root)).toBe(true);
+    expect(isCueRuntimeDir("/tmp/cfg/runtime/core/claude", `${root}/`)).toBe(true);
+  });
+});
diff --git a/src/lib/runtime-install.ts b/src/lib/runtime-install.ts
index 8366c3d6..3cd10405 100644
--- a/src/lib/runtime-install.ts
+++ b/src/lib/runtime-install.ts
@@ -8,7 +8,7 @@
 
 import { existsSync } from "node:fs";
 import { readFile } from "node:fs/promises";
-import { join, resolve } from "node:path";
+import { join, resolve, sep } from "node:path";
 import { homedir } from "node:os";
 
 import type { AgentKind, ResolvedProfile } from "../../profiles/_types";
@@ -89,8 +89,34 @@ export async function readUserAgentMemory(agent: RuntimeAgent): Promise<string>
   }
 }
 
+/**
+ * True when `dir` sits inside cue's own runtime tree
+ * (`<configDir>/runtime/<profile>/<agent>`).
+ *
+ * Exists to keep that tree out of {@link pickClaudeCredentialsSource}. cue
+ * points `CLAUDE_CONFIG_DIR` at the runtime dir when it launches an agent, so
+ * every process spawned inside a cue session inherits it — and a nested launch
+ * that took it as the credentials SOURCE would overlay a runtime dir onto
+ * itself: `overlaySourceState()` links each unmanaged entry to
+ * `<runtimeDir>/<name>`, then the atomic tmp→runtimeDir rename leaves every one
+ * of those links pointing at its own path. Observed 2026-08-07 on a live
+ * profile: 69 self-referential symlinks (`sessions/`, `projects/`,
+ * `history.jsonl`, …), all unreadable, and a runtime that reported "Not logged
+ * in" until the next launch rewrote `.credentials.json`.
+ */
+export function isCueRuntimeDir(dir: string, runtimeRoot = join(configDir(), "runtime")): boolean {
+  const target = resolve(dir);
+  const root = resolve(runtimeRoot);
+  return target === root || target.startsWith(root + sep);
+}
+
 export async function pickClaudeCredentialsSource(): Promise<string> {
-  if (process.env.CLAUDE_CONFIG_DIR) return process.env.CLAUDE_CONFIG_DIR;
+  // An explicit CLAUDE_CONFIG_DIR wins — that is how authmux hands cue a
+  // per-account config — but not when it is cue's own runtime dir, which is
+  // what a nested launch inherits. Falling through to the real config keeps
+  // the overlay sourced from outside the dir being rebuilt.
+  const envConfigDir = process.env.CLAUDE_CONFIG_DIR;
+  if (envConfigDir && !isCueRuntimeDir(envConfigDir)) return envConfigDir;
 
   const homeClaude = join(homedir(), ".claude");
   if (existsSync(join(homeClaude, ".credentials.json"))) return homeClaude;