diff --git a/mcp-watcher/README.md b/mcp-watcher/README.md
index 22e6bf5..fceecde 100644
--- a/mcp-watcher/README.md
+++ b/mcp-watcher/README.md
@@ -49,7 +49,7 @@ won't compete with the default `~/.ping-agent` for inbox reads):
 ```bash
 mkdir -p ~/.claude-sandbox
 echo sandbox > ~/.claude-sandbox/ping-agent
-CLAUDE_HOME=~/.claude-sandbox \
+CLAUDE_CONFIG_DIR=~/.claude-sandbox \
   claude --dangerously-load-development-channels server:agent-watcher
 ```
 
diff --git a/mcp-watcher/install.sh b/mcp-watcher/install.sh
index e0f7ebe..b918151 100755
--- a/mcp-watcher/install.sh
+++ b/mcp-watcher/install.sh
@@ -106,7 +106,7 @@ Then start Claude Code with the development flag (research preview):
 
 To use a sandbox identity instead of the default ~/.ping-agent:
 
-  CLAUDE_HOME=~/.claude-sandbox claude --dangerously-load-development-channels server:agent-watcher
+  CLAUDE_CONFIG_DIR=~/.claude-sandbox claude --dangerously-load-development-channels server:agent-watcher
 
 (Drop a 'ping-agent' file in ~/.claude-sandbox containing the sandbox name first.)
 
diff --git a/mcp-watcher/src/identity.ts b/mcp-watcher/src/identity.ts
index d5c65e4..a8fcdd9 100644
--- a/mcp-watcher/src/identity.ts
+++ b/mcp-watcher/src/identity.ts
@@ -19,8 +19,11 @@ export interface ResolvedIdentity {
  * Resolve this process's agent identity.
  * Layers, first match wins:
  *   1. PING_AGENT_IDENTITY env var
- *   2. $CLAUDE_HOME/ping-agent (if CLAUDE_HOME is set and file exists)
- *   3. ~/.ping-agent
+ *   2. $CLAUDE_CONFIG_DIR/ping-agent (the env var Claude Code actually reads;
+ *      verified by `strings` on the binary, 2026-05-06 sandbox spike).
+ *   3. $CLAUDE_HOME/ping-agent (kept for compat with anyone setting the
+ *      previously-documented variable).
+ *   4. ~/.ping-agent
  *
  * Throws if no layer resolves.
  */
@@ -30,9 +33,10 @@ export function resolveIdentity(env: NodeJS.ProcessEnv = process.env): ResolvedI
     return { agent: envId, source: "PING_AGENT_IDENTITY env var" };
   }
 
-  const claudeHome = (env.CLAUDE_HOME ?? "").trim();
-  if (claudeHome) {
-    const f = join(claudeHome, "ping-agent");
+  for (const varName of ["CLAUDE_CONFIG_DIR", "CLAUDE_HOME"]) {
+    const dir = (env[varName] ?? "").trim();
+    if (!dir) continue;
+    const f = join(dir, "ping-agent");
     if (existsSync(f)) {
       const name = readFileSync(f, "utf8").trim();
       if (name) {
@@ -52,6 +56,6 @@ export function resolveIdentity(env: NodeJS.ProcessEnv = process.env): ResolvedI
 
   throw new Error(
     `agent-watcher-mcp: no identity resolved. Set PING_AGENT_IDENTITY, ` +
-      `$CLAUDE_HOME/ping-agent, or ${defaultFile}.`,
+      `$CLAUDE_CONFIG_DIR/ping-agent (or $CLAUDE_HOME/ping-agent), or ${defaultFile}.`,
   );
 }
diff --git a/mcp-watcher/test/identity.test.ts b/mcp-watcher/test/identity.test.ts
index 32fe44e..fee9400 100644
--- a/mcp-watcher/test/identity.test.ts
+++ b/mcp-watcher/test/identity.test.ts
@@ -23,20 +23,49 @@ describe("resolveIdentity", () => {
     expect(r.source).toMatch(/env/i);
   });
 
-  it("uses $CLAUDE_HOME/ping-agent next", () => {
+  it("uses $CLAUDE_CONFIG_DIR/ping-agent next", () => {
     writeFileSync(join(dir, ".ping-agent"), "default-agent\n");
-    const claudeHome = join(dir, "claude-sandbox");
+    const sandbox = join(dir, "claude-sandbox");
+    mkdirSync(sandbox);
+    writeFileSync(join(sandbox, "ping-agent"), "sandbox\n");
+    const r = resolveIdentity({
+      HOME: dir,
+      CLAUDE_CONFIG_DIR: sandbox,
+      PING_AGENT_IDENTITY: "",
+    });
+    expect(r.agent).toBe("sandbox");
+    expect(r.source).toContain(sandbox);
+  });
+
+  it("falls back to $CLAUDE_HOME/ping-agent when CLAUDE_CONFIG_DIR is unset", () => {
+    writeFileSync(join(dir, ".ping-agent"), "default-agent\n");
+    const claudeHome = join(dir, "claude-old");
     mkdirSync(claudeHome);
-    writeFileSync(join(claudeHome, "ping-agent"), "sandbox\n");
+    writeFileSync(join(claudeHome, "ping-agent"), "compat\n");
     const r = resolveIdentity({
       HOME: dir,
       CLAUDE_HOME: claudeHome,
       PING_AGENT_IDENTITY: "",
     });
-    expect(r.agent).toBe("sandbox");
+    expect(r.agent).toBe("compat");
     expect(r.source).toContain(claudeHome);
   });
 
+  it("CLAUDE_CONFIG_DIR takes precedence over CLAUDE_HOME", () => {
+    const sandbox = join(dir, "claude-sandbox");
+    const old = join(dir, "claude-old");
+    mkdirSync(sandbox);
+    mkdirSync(old);
+    writeFileSync(join(sandbox, "ping-agent"), "new\n");
+    writeFileSync(join(old, "ping-agent"), "old\n");
+    const r = resolveIdentity({
+      HOME: dir,
+      CLAUDE_CONFIG_DIR: sandbox,
+      CLAUDE_HOME: old,
+    });
+    expect(r.agent).toBe("new");
+  });
+
   it("falls through to ~/.ping-agent", () => {
     writeFileSync(join(dir, ".ping-agent"), "bob\n");
     const r = resolveIdentity({ HOME: dir });
@@ -48,12 +77,12 @@ describe("resolveIdentity", () => {
     expect(() => resolveIdentity({ HOME: dir })).toThrow(/no identity/);
   });
 
-  it("ignores empty CLAUDE_HOME/ping-agent and falls through", () => {
+  it("ignores empty CLAUDE_CONFIG_DIR/ping-agent and falls through", () => {
     writeFileSync(join(dir, ".ping-agent"), "bob\n");
-    const claudeHome = join(dir, "claude-sandbox");
-    mkdirSync(claudeHome);
-    writeFileSync(join(claudeHome, "ping-agent"), "");
-    const r = resolveIdentity({ HOME: dir, CLAUDE_HOME: claudeHome });
+    const sandbox = join(dir, "claude-sandbox");
+    mkdirSync(sandbox);
+    writeFileSync(join(sandbox, "ping-agent"), "");
+    const r = resolveIdentity({ HOME: dir, CLAUDE_CONFIG_DIR: sandbox });
     expect(r.agent).toBe("bob");
   });