diff --git a/.changeset/brave-moons-refuse.md b/.changeset/brave-moons-refuse.md
new file mode 100644
index 0000000000..8c2a8c7397
--- /dev/null
+++ b/.changeset/brave-moons-refuse.md
@@ -0,0 +1,5 @@
+---
+"claude-dev": patch
+---
+
+Remove the non-functional "Use compact prompt" toggle from LM Studio provider settings
diff --git a/apps/vscode/proto/cline/state.proto b/apps/vscode/proto/cline/state.proto
index 435dbb811b..4af1edbf47 100644
--- a/apps/vscode/proto/cline/state.proto
+++ b/apps/vscode/proto/cline/state.proto
@@ -112,6 +112,8 @@ message Secrets {
 // in src/shared/storage/state-keys.ts and use the scripts/generate-state-proto.mjs
 // script to regenerate this list.
 message Settings {
+  reserved 150; // was custom_prompt (removed - compact prompt setting no longer supported)
+  reserved "custom_prompt";
   optional string lite_llm_base_url = 1;
   optional bool lite_llm_use_prompt_cache = 2;
   optional string anthropic_base_url = 4;
@@ -254,7 +256,6 @@ message Settings {
   optional string preferred_language = 145;
   optional PlanActMode mode = 147;
   optional FocusChainSettings focus_chain_settings = 149;
-  optional string custom_prompt = 150;
   optional bool hooks_enabled = 152;
   optional bool subagents_enabled = 153;
   optional bool background_edit_enabled = 155;
@@ -392,7 +393,8 @@ message UpdateSettingsRequest {
   reserved 38; // was skills_enabled (removed - now always enabled)
   reserved 43; // was lazy_teammate_mode_enabled (removed)
   reserved 12; // was terminal_output_line_limit (removed; SDK command output limits are character-based)
-  reserved "native_tool_call_enabled", "cline_web_tools_enabled", "enable_parallel_tool_calling", "double_check_completion_enabled";
+  reserved 19; // was custom_prompt (removed - compact prompt setting no longer supported)
+  reserved "native_tool_call_enabled", "cline_web_tools_enabled", "enable_parallel_tool_calling", "double_check_completion_enabled", "custom_prompt";
 
   Metadata metadata = 1;
   optional ModelsApiConfiguration api_configuration = 2;
@@ -409,7 +411,6 @@ message UpdateSettingsRequest {
   reserved 16; // was strict_plan_mode_enabled (removed)
   optional FocusChainSettings focus_chain_settings = 17;
   optional bool use_auto_condense = 18;
-  optional string custom_prompt = 19;
   optional BrowserSettingsUpdate browser_settings = 20;
   optional string default_terminal_profile = 21;
   optional bool yolo_mode_toggled = 22;
diff --git a/apps/vscode/scripts/generate-state-proto.mjs b/apps/vscode/scripts/generate-state-proto.mjs
index 32875fb0c2..f70ad0a1b6 100644
--- a/apps/vscode/scripts/generate-state-proto.mjs
+++ b/apps/vscode/scripts/generate-state-proto.mjs
@@ -297,28 +297,86 @@ function parseProtoMessageFieldNumbers(protoContent, messageName) {
 }
 
 /**
- * Load field number mappings from existing proto file
+ * Parse `reserved` statements from an existing proto message definition so they
+ * survive regeneration (removed fields must keep their numbers/names reserved).
+ */
+function parseProtoMessageReservedStatements(protoContent, messageName) {
+	const messageRegex = new RegExp(`message\\s+${messageName}\\s*\\{([^}]*(?:\\{[^}]*\\}[^}]*)*)\\}`, "s")
+	const match = protoContent.match(messageRegex)
+
+	if (!match) {
+		return []
+	}
+
+	return [...match[1].matchAll(/^[ \t]*(reserved\b[^\n]*)$/gm)].map((m) => m[1].trim())
+}
+
+/**
+ * Extract the set of field numbers covered by `reserved` statements
+ * (single numbers, comma lists, and `N to M` ranges; name reservations are ignored).
+ */
+function parseReservedFieldNumbers(reservedStatements) {
+	const reservedNumbers = new Set()
+
+	for (const statement of reservedStatements) {
+		// Strip the keyword, trailing semicolon, and any comment
+		const body = statement
+			.replace(/^reserved\b/, "")
+			.replace(/;.*$/, "")
+			.trim()
+
+		// Name reservations (quoted) carry no numbers
+		if (body.includes('"') || body.includes("'")) {
+			continue
+		}
+
+		for (const part of body.split(",")) {
+			const rangeMatch = part.trim().match(/^(\d+)\s+to\s+(\d+|max)$/)
+			if (rangeMatch) {
+				const start = Number.parseInt(rangeMatch[1], 10)
+				// "to max" reserves everything upward; represent with Infinity
+				const end = rangeMatch[2] === "max" ? Number.POSITIVE_INFINITY : Number.parseInt(rangeMatch[2], 10)
+				if (end === Number.POSITIVE_INFINITY) {
+					throw new Error(`"reserved ${part.trim()}" leaves no field numbers available for new fields`)
+				}
+				for (let n = start; n <= end; n++) {
+					reservedNumbers.add(n)
+				}
+			} else if (/^\d+$/.test(part.trim())) {
+				reservedNumbers.add(Number.parseInt(part.trim(), 10))
+			}
+		}
+	}
+
+	return reservedNumbers
+}
+
+/**
+ * Load field number mappings and reserved statements from existing proto file
  */
 async function loadFieldNumbersFromProto() {
 	try {
 		const protoContent = await fs.readFile(STATE_PROTO_PATH, "utf-8")
 		const secrets = parseProtoMessageFieldNumbers(protoContent, "Secrets")
 		const settings = parseProtoMessageFieldNumbers(protoContent, "Settings")
+		const secretsReserved = parseProtoMessageReservedStatements(protoContent, "Secrets")
+		const settingsReserved = parseProtoMessageReservedStatements(protoContent, "Settings")
 
 		console.log(`  Found ${Object.keys(secrets).length} existing Secrets fields`)
 		console.log(`  Found ${Object.keys(settings).length} existing Settings fields`)
 
-		return { Secrets: secrets, Settings: settings }
+		return { Secrets: secrets, Settings: settings, SecretsReserved: secretsReserved, SettingsReserved: settingsReserved }
 	} catch {
 		// Proto file doesn't exist, start fresh
-		return { Secrets: {}, Settings: {} }
+		return { Secrets: {}, Settings: {}, SecretsReserved: [], SettingsReserved: [] }
 	}
 }
 
 /**
- * Assign field numbers, preserving existing assignments and adding new ones
+ * Assign field numbers, preserving existing assignments and adding new ones.
+ * Reserved numbers are never handed out to new fields.
  */
-function assignFieldNumbers(fields, existingNumbers, startNumber = 1) {
+function assignFieldNumbers(fields, existingNumbers, startNumber = 1, reservedNumbers = new Set()) {
 	const result = {}
 	let nextNumber = startNumber
 
@@ -347,13 +405,21 @@ function assignFieldNumbers(fields, existingNumbers, startNumber = 1) {
 
 		const existingFieldNumber = normalizedFieldNumber ?? rawFieldNumber
 		if (existingFieldNumber !== undefined) {
+			if (reservedNumbers.has(existingFieldNumber)) {
+				throw new Error(
+					`Field "${field.name}" uses number ${existingFieldNumber}, which is also covered by a reserved statement. Remove the field or the reservation.`,
+				)
+			}
 			result[field.name] = existingFieldNumber
 		}
 	}
 
-	// Assign new numbers for new fields
+	// Assign new numbers for new fields, skipping reserved numbers
 	for (const field of fields) {
 		if (result[field.name] === undefined) {
+			while (reservedNumbers.has(nextNumber)) {
+				nextNumber++
+			}
 			result[field.name] = nextNumber++
 		}
 	}
@@ -364,9 +430,14 @@ function assignFieldNumbers(fields, existingNumbers, startNumber = 1) {
 /**
  * Generate proto message definition
  */
-function generateProtoMessage(messageName, fields, fieldNumbers) {
+function generateProtoMessage(messageName, fields, fieldNumbers, reservedStatements = []) {
 	const lines = [`message ${messageName} {`]
 
+	// Re-emit reserved statements so removed field numbers/names stay reserved
+	for (const statement of reservedStatements) {
+		lines.push(`  ${statement}`)
+	}
+
 	// Sort fields by field number for consistent output
 	const sortedFields = [...fields].sort((a, b) => fieldNumbers[a.name] - fieldNumbers[b.name])
 
@@ -385,13 +456,13 @@ function generateProtoMessage(messageName, fields, fieldNumbers) {
 /**
  * Generate Secrets message from SECRETS_KEYS
  */
-function generateSecretsMessage(secretsKeys, fieldNumbers) {
+function generateSecretsMessage(secretsKeys, fieldNumbers, reservedStatements) {
 	const fields = secretsKeys.map((key) => ({
 		name: key,
 		protoType: "string",
 	}))
 
-	return generateProtoMessage("Secrets", fields, fieldNumbers)
+	return generateProtoMessage("Secrets", fields, fieldNumbers, reservedStatements)
 }
 
 /**
@@ -430,17 +501,28 @@ async function main() {
 	// Load existing field numbers from proto file
 	const existingFieldNumbers = await loadFieldNumbersFromProto()
 
-	// Assign field numbers (preserving existing, adding new ones)
+	// Assign field numbers (preserving existing, adding new ones, never reusing reserved ones)
 	const secretsFieldNumbers = assignFieldNumbers(
 		secretsKeys.map((k) => ({ name: k })),
 		existingFieldNumbers.Secrets,
 		1,
+		parseReservedFieldNumbers(existingFieldNumbers.SecretsReserved),
+	)
+	const settingsFieldNumbers = assignFieldNumbers(
+		settingsFields,
+		existingFieldNumbers.Settings,
+		1,
+		parseReservedFieldNumbers(existingFieldNumbers.SettingsReserved),
 	)
-	const settingsFieldNumbers = assignFieldNumbers(settingsFields, existingFieldNumbers.Settings, 1)
 
 	// Generate messages
-	const secretsMessage = generateSecretsMessage(secretsKeys, secretsFieldNumbers)
-	const settingsMessage = generateProtoMessage("Settings", settingsFields, settingsFieldNumbers)
+	const secretsMessage = generateSecretsMessage(secretsKeys, secretsFieldNumbers, existingFieldNumbers.SecretsReserved)
+	const settingsMessage = generateProtoMessage(
+		"Settings",
+		settingsFields,
+		settingsFieldNumbers,
+		existingFieldNumbers.SettingsReserved,
+	)
 
 	// Read existing proto file
 	let protoContent = await fs.readFile(STATE_PROTO_PATH, "utf-8")
diff --git a/apps/vscode/src/core/api/index.ts b/apps/vscode/src/core/api/index.ts
index 5f13dcd24d..cc443c9916 100644
--- a/apps/vscode/src/core/api/index.ts
+++ b/apps/vscode/src/core/api/index.ts
@@ -19,5 +19,4 @@ export interface ApiProviderInfo {
 	providerId: string
 	model: ApiHandlerModel
 	mode: Mode
-	customPrompt?: string // "compact"
 }
diff --git a/apps/vscode/src/core/controller/state/getStateToPostToWebview.ts b/apps/vscode/src/core/controller/state/getStateToPostToWebview.ts
index 65889e71e4..e6fc131be6 100644
--- a/apps/vscode/src/core/controller/state/getStateToPostToWebview.ts
+++ b/apps/vscode/src/core/controller/state/getStateToPostToWebview.ts
@@ -63,7 +63,6 @@ export async function getStateToPostToWebview(controller: {
 	const isNewUser = stateManager.getGlobalStateKey("isNewUser")
 	const welcomeViewCompleted = !!stateManager.getGlobalStateKey("welcomeViewCompleted")
 
-	const customPrompt = stateManager.getGlobalSettingsKey("customPrompt")
 	const mcpResponsesCollapsed = stateManager.getGlobalStateKey("mcpResponsesCollapsed")
 	const maxConsecutiveMistakes = stateManager.getGlobalSettingsKey("maxConsecutiveMistakes")
 	const favoritedModelIds = stateManager.getGlobalStateKey("favoritedModelIds")
@@ -152,7 +151,6 @@ export async function getStateToPostToWebview(controller: {
 		onboardingModels,
 		mcpResponsesCollapsed,
 		maxConsecutiveMistakes,
-		customPrompt,
 		taskHistory: processedTaskHistory,
 		shouldShowAnnouncement,
 		favoritedModelIds,
diff --git a/apps/vscode/src/core/controller/state/updateSettings.ts b/apps/vscode/src/core/controller/state/updateSettings.ts
index b118cb22b5..57824bd226 100644
--- a/apps/vscode/src/core/controller/state/updateSettings.ts
+++ b/apps/vscode/src/core/controller/state/updateSettings.ts
@@ -188,12 +188,6 @@ export async function updateSettings(controller: Controller, request: UpdateSett
 			setCompactionStrategyGlobally(strategy)
 		}
 
-		// Update custom prompt choice
-		if (request.customPrompt !== undefined) {
-			const value = request.customPrompt === "compact" ? "compact" : undefined
-			controller.stateManager.setGlobalState("customPrompt", value)
-		}
-
 		// Update browser settings
 		if (request.browserSettings !== undefined) {
 			// Get current browser settings to preserve fields not in the request
diff --git a/apps/vscode/src/core/controller/state/updateSettingsCli.ts b/apps/vscode/src/core/controller/state/updateSettingsCli.ts
index 35270c69fa..544ef66883 100644
--- a/apps/vscode/src/core/controller/state/updateSettingsCli.ts
+++ b/apps/vscode/src/core/controller/state/updateSettingsCli.ts
@@ -37,7 +37,6 @@ export async function updateSettingsCli(controller: Controller, request: UpdateS
 			planModeReasoningEffort,
 			actModeReasoningEffort,
 			mode,
-			customPrompt,
 			planModeApiProvider,
 			actModeApiProvider,
 			// Fields requiring special logic (telemetry, merging, etc.)
@@ -96,10 +95,6 @@ export async function updateSettingsCli(controller: Controller, request: UpdateS
 			controller.stateManager.setGlobalState("mode", converted)
 		}
 
-		if (customPrompt === "compact") {
-			controller.stateManager.setGlobalState("customPrompt", "compact")
-		}
-
 		if (planModeApiProvider !== undefined) {
 			const converted = convertProtoToApiProvider(planModeApiProvider)
 			controller.stateManager.setGlobalState("planModeApiProvider", converted)
diff --git a/apps/vscode/src/core/controller/state/updateTaskSettings.ts b/apps/vscode/src/core/controller/state/updateTaskSettings.ts
index 08889f3acd..a1c98271f7 100644
--- a/apps/vscode/src/core/controller/state/updateTaskSettings.ts
+++ b/apps/vscode/src/core/controller/state/updateTaskSettings.ts
@@ -37,7 +37,6 @@ export async function updateTaskSettings(controller: Controller, request: Update
 				planModeReasoningEffort,
 				actModeReasoningEffort,
 				mode,
-				customPrompt,
 				planModeApiProvider,
 				actModeApiProvider,
 				// Fields requiring special logic
@@ -87,10 +86,6 @@ export async function updateTaskSettings(controller: Controller, request: Update
 				controller.stateManager.setTaskSettings(taskId, "mode", converted)
 			}
 
-			if (customPrompt === "compact") {
-				controller.stateManager.setTaskSettings(taskId, "customPrompt", "compact")
-			}
-
 			if (planModeApiProvider !== undefined) {
 				const converted = convertProtoToApiProvider(planModeApiProvider)
 				controller.stateManager.setTaskSettings(taskId, "planModeApiProvider", converted)
diff --git a/apps/vscode/src/core/controller/task/newTask.ts b/apps/vscode/src/core/controller/task/newTask.ts
index 7431a5d752..0e53825843 100644
--- a/apps/vscode/src/core/controller/task/newTask.ts
+++ b/apps/vscode/src/core/controller/task/newTask.ts
@@ -60,9 +60,6 @@ export async function newTask(controller: Controller, request: NewTaskRequest):
 			...(request.taskSettings?.mode !== undefined && {
 				mode: convertPlanActMode(request.taskSettings.mode),
 			}),
-			...(request.taskSettings?.customPrompt === "compact" && {
-				customPrompt: "compact",
-			}),
 			...(request.taskSettings?.planModeApiProvider !== undefined && {
 				planModeApiProvider: convertProtoToApiProvider(request.taskSettings.planModeApiProvider),
 			}),
diff --git a/apps/vscode/src/shared/ExtensionMessage.ts b/apps/vscode/src/shared/ExtensionMessage.ts
index 26c0434349..28ac65cdcb 100644
--- a/apps/vscode/src/shared/ExtensionMessage.ts
+++ b/apps/vscode/src/shared/ExtensionMessage.ts
@@ -117,7 +117,6 @@ export interface ExtensionState {
 	compactionStrategy?: string
 	subagentsEnabled?: boolean
 	worktreesEnabled?: ClineFeatureSetting
-	customPrompt?: string
 	favoritedModelIds: string[]
 	// NEW: Add workspace information
 	workspaceRoots: WorkspaceRoot[]
diff --git a/apps/vscode/src/shared/storage/state-keys.ts b/apps/vscode/src/shared/storage/state-keys.ts
index f8045b1462..aa1ec1112a 100644
--- a/apps/vscode/src/shared/storage/state-keys.ts
+++ b/apps/vscode/src/shared/storage/state-keys.ts
@@ -282,7 +282,6 @@ const USER_SETTINGS_FIELDS = {
 	preferredLanguage: { default: "English" as string },
 	mode: { default: "act" as Mode },
 	focusChainSettings: { default: DEFAULT_FOCUS_CHAIN_SETTINGS as FocusChainSettings },
-	customPrompt: { default: undefined as "compact" | undefined },
 	backgroundEditEnabled: { default: false as boolean },
 	optOutOfRemoteConfig: { default: false as boolean },
 	showFeatureTips: { default: true as boolean },
diff --git a/apps/vscode/webview-ui/src/components/settings/UseCustomPromptCheckbox.tsx b/apps/vscode/webview-ui/src/components/settings/UseCustomPromptCheckbox.tsx
deleted file mode 100644
index eac4d5c7f7..0000000000
--- a/apps/vscode/webview-ui/src/components/settings/UseCustomPromptCheckbox.tsx
+++ /dev/null
@@ -1,38 +0,0 @@
-import { VSCodeCheckbox } from "@vscode/webview-ui-toolkit/react"
-import React, { useCallback, useState } from "react"
-import { useExtensionState } from "@/context/ExtensionStateContext"
-import { updateSetting } from "./utils/settingsHandlers"
-
-interface CustomPromptCheckboxProps {
-	providerId: string
-}
-
-/**
- * Checkbox to enable or disable the use of a compact prompt for local models providers.
- */
-const UseCustomPromptCheckbox: React.FC<CustomPromptCheckboxProps> = ({ providerId }) => {
-	const { customPrompt } = useExtensionState()
-	const [isCompactPromptEnabled, setIsCompactPromptEnabled] = useState<boolean>(customPrompt === "compact")
-
-	const toggleCompactPrompt = useCallback((isChecked: boolean) => {
-		setIsCompactPromptEnabled(isChecked)
-		updateSetting("customPrompt", isChecked ? "compact" : "")
-	}, [])
-
-	return (
-		<div id={providerId}>
-			<VSCodeCheckbox checked={isCompactPromptEnabled} onChange={() => toggleCompactPrompt(!isCompactPromptEnabled)}>
-				Use compact prompt
-			</VSCodeCheckbox>
-			<div className="text-xs text-description">
-				A system prompt optimized for smaller context window (e.g. 8k or less).
-				<div className="text-error flex align-middle">
-					<i className="codicon codicon-x" />
-					Does not support Mcp and Focus Chain
-				</div>
-			</div>
-		</div>
-	)
-}
-
-export default UseCustomPromptCheckbox
diff --git a/apps/vscode/webview-ui/src/components/settings/providers/LMStudioProvider.tsx b/apps/vscode/webview-ui/src/components/settings/providers/LMStudioProvider.tsx
index bcaddb2ccb..f7404fc981 100644
--- a/apps/vscode/webview-ui/src/components/settings/providers/LMStudioProvider.tsx
+++ b/apps/vscode/webview-ui/src/components/settings/providers/LMStudioProvider.tsx
@@ -3,7 +3,6 @@ import type { Mode } from "@shared/storage/types"
 import { VSCodeDropdown, VSCodeLink, VSCodeOption, VSCodeTextField } from "@vscode/webview-ui-toolkit/react"
 import { useCallback, useEffect, useMemo, useState } from "react"
 import { useInterval } from "react-use"
-import UseCustomPromptCheckbox from "@/components/settings/UseCustomPromptCheckbox"
 import { useExtensionState } from "@/context/ExtensionStateContext"
 import { useProviderConfig } from "@/hooks/useProviderConfig"
 import { useProviderModelSelection } from "@/hooks/useProviderModelSelection"
@@ -194,8 +193,6 @@ export const LMStudioProvider = ({ currentMode }: LMStudioProviderProps) => {
 				value={String(currentLoadedContext ?? lmStudioMaxTokens ?? "0")}
 			/>
 
-			<UseCustomPromptCheckbox providerId="lmstudio" />
-
 			<div className="text-xs text-description">
 				LM Studio allows you to run models locally on your computer. For instructions on how to get started, see their
 				<VSCodeLink href="https://lmstudio.ai/docs" style={{ display: "inline", fontSize: "inherit" }}>
diff --git a/apps/vscode/webview-ui/src/context/ExtensionStateContext.tsx b/apps/vscode/webview-ui/src/context/ExtensionStateContext.tsx
index bb945e0cc7..ad6542486d 100644
--- a/apps/vscode/webview-ui/src/context/ExtensionStateContext.tsx
+++ b/apps/vscode/webview-ui/src/context/ExtensionStateContext.tsx
@@ -299,7 +299,6 @@ export const ExtensionStateContextProvider: React.FC<{
 		onboardingModels: undefined,
 		mcpResponsesCollapsed: false, // Default value (expanded), will be overwritten by extension state
 		yoloModeToggled: false,
-		customPrompt: undefined,
 		useAutoCondense: false,
 		compactionStrategy: "basic",
 		subagentsEnabled: false,