diff --git a/CLAUDE.md b/CLAUDE.md
index d253eed..5e1a99d 100644
--- a/CLAUDE.md
+++ b/CLAUDE.md
@@ -59,7 +59,7 @@ Async SQLAlchemy + aiosqlite. `MemoryStore`: schema init (+ lightweight SQLite `
 - **`/compact`**: soft-compact tool dumps → model summary (no tools) → **new** session seeded with summary message.
 - Events: text_delta, assistant_message, tool_call/result, max_rounds, **error** (`retryable`/`source`), **cancelled** (`reason`), **usage** (`TokenUsage`).
 - Usage: API `usage` from completions (stream with `include_usage`); **char≈token fallback** (~4 chars/token) when omitted; `ChatAgent.session_usage` / `last_turn_usage`; CLI end-of-turn + `/status` (marks `(est)` / `(api+est)`).
-- Config ``[agent]``: `system_prompt`, `max_tool_result_chars`, `parallel_tools`, `confirm_destructive`, `path_denylist`, `max_context_chars`.
+- Config ``[agent]``: `system_prompt`, `max_tool_result_chars`, `parallel_tools`, `confirm_destructive`, `path_denylist`, `max_context_tokens` (default 200k est. tokens).
 
 ### Tools (`tools/`)
 
diff --git a/src/plyngent/agent/budget.py b/src/plyngent/agent/budget.py
index 0397200..04b3c7a 100644
--- a/src/plyngent/agent/budget.py
+++ b/src/plyngent/agent/budget.py
@@ -16,10 +16,14 @@ if TYPE_CHECKING:
     from plyngent.lmproto.openai_compatible.model import AnyChatMessage
 
 DEFAULT_TOOL_RESULT_MAX_CHARS = 32_000
-DEFAULT_CONTEXT_MAX_CHARS = 200_000
+# Soft context budget in estimated tokens (~4 chars/token); not a hard model limit.
+DEFAULT_CONTEXT_MAX_TOKENS = 200_000
 DEFAULT_OLD_TOOL_RESULT_CHARS = 800
 DEFAULT_RECENT_TOOL_RESULTS = 4
 
+# Backward-compat alias (older code/docs may still import this name).
+DEFAULT_CONTEXT_MAX_CHARS = DEFAULT_CONTEXT_MAX_TOKENS * 4
+
 
 def truncate_tool_result(text: str, max_chars: int = DEFAULT_TOOL_RESULT_MAX_CHARS) -> str:
     """Cap tool output so huge dumps do not flood model context."""
@@ -59,6 +63,13 @@ def estimate_messages_chars(messages: Sequence[AnyChatMessage]) -> int:
     return sum(estimate_message_chars(m) for m in messages)
 
 
+def estimate_messages_tokens(messages: Sequence[AnyChatMessage]) -> int:
+    """Char-based token estimate for soft context budget checks."""
+    from plyngent.agent.usage import chars_to_tokens
+
+    return chars_to_tokens(estimate_messages_chars(messages))
+
+
 def _shrink_tool(message: ToolChatMessage, max_chars: int) -> ToolChatMessage:
     if len(message.content) <= max_chars:
         return message
@@ -96,7 +107,7 @@ def _shrink_largest(
     messages: list[AnyChatMessage],
     tool_indices: Sequence[int],
     *,
-    max_chars: int,
+    max_tokens: int,
     shrink_cap: int,
 ) -> None:
     def tool_len(i: int) -> int:
@@ -104,7 +115,7 @@ def _shrink_largest(
         return len(msg.content) if isinstance(msg, ToolChatMessage) else 0
 
     for idx in sorted(tool_indices, key=tool_len, reverse=True):
-        if estimate_messages_chars(messages) <= max_chars:
+        if estimate_messages_tokens(messages) <= max_tokens:
             return
         tool_msg = messages[idx]
         if isinstance(tool_msg, ToolChatMessage):
@@ -114,17 +125,20 @@ def _shrink_largest(
 def compact_messages_for_request(
     messages: Sequence[AnyChatMessage],
     *,
-    max_chars: int = DEFAULT_CONTEXT_MAX_CHARS,
+    max_tokens: int = DEFAULT_CONTEXT_MAX_TOKENS,
     old_tool_result_chars: int = DEFAULT_OLD_TOOL_RESULT_CHARS,
     keep_recent_tool_results: int = DEFAULT_RECENT_TOOL_RESULTS,
+    # Deprecated alias: treated as token budget if max_tokens not overridden via callers.
+    max_chars: int | None = None,
 ) -> list[AnyChatMessage]:
     """Return a request-time copy with older tool dumps shrunk if over budget.
 
-    Does not mutate the original history (full results stay for persistence/UI).
-    ``max_chars < 1`` disables compacting.
+    Budget is in **estimated tokens** (char/4). Does not mutate the original history.
+    ``max_tokens < 1`` disables compacting.
     """
+    budget = max_tokens if max_chars is None else max_chars
     out: list[AnyChatMessage] = list(messages)
-    if max_chars < 1 or estimate_messages_chars(out) <= max_chars:
+    if budget < 1 or estimate_messages_tokens(out) <= budget:
         return out
 
     indices = _tool_indices(out)
@@ -133,13 +147,13 @@ def compact_messages_for_request(
 
     protect = _protect_indices(indices, keep_recent_tool_results)
     _shrink_except(out, indices, protect, old_tool_result_chars)
-    if estimate_messages_chars(out) <= max_chars:
+    if estimate_messages_tokens(out) <= budget:
         return out
 
     _shrink_largest(
         out,
         indices,
-        max_chars=max_chars,
+        max_tokens=budget,
         shrink_cap=max(64, old_tool_result_chars // 2),
     )
     return out
diff --git a/src/plyngent/agent/chat.py b/src/plyngent/agent/chat.py
index ec79948..972c099 100644
--- a/src/plyngent/agent/chat.py
+++ b/src/plyngent/agent/chat.py
@@ -4,7 +4,7 @@ from typing import TYPE_CHECKING
 
 from plyngent.lmproto.openai_compatible.model import SystemChatMessage, UserChatMessage
 
-from .budget import DEFAULT_CONTEXT_MAX_CHARS, DEFAULT_TOOL_RESULT_MAX_CHARS
+from .budget import DEFAULT_CONTEXT_MAX_TOKENS, DEFAULT_TOOL_RESULT_MAX_CHARS
 from .events import UsageEvent
 from .loop import DEFAULT_MAX_ROUNDS, run_chat_loop
 from .usage import TokenUsage
@@ -37,7 +37,7 @@ class ChatAgent:
     system_prompt: str | None
     max_tool_result_chars: int
     parallel_tools: bool
-    max_context_chars: int
+    max_context_tokens: int
     messages: list[AnyChatMessage]
     pending_retry_text: str | None
     session_usage: TokenUsage
@@ -59,7 +59,7 @@ class ChatAgent:
         system_prompt: str | None = None,
         max_tool_result_chars: int = DEFAULT_TOOL_RESULT_MAX_CHARS,
         parallel_tools: bool = True,
-        max_context_chars: int = DEFAULT_CONTEXT_MAX_CHARS,
+        max_context_tokens: int = DEFAULT_CONTEXT_MAX_TOKENS,
     ) -> None:
         self.client = client
         self.model = model
@@ -73,7 +73,7 @@ class ChatAgent:
         self.system_prompt = system_prompt
         self.max_tool_result_chars = max_tool_result_chars
         self.parallel_tools = parallel_tools
-        self.max_context_chars = max_context_chars
+        self.max_context_tokens = max_context_tokens
         self.messages = list(messages) if messages is not None else []
         self.pending_retry_text = None
         self.session_usage = TokenUsage()
@@ -135,7 +135,7 @@ class ChatAgent:
                 stream=self.stream,
                 max_tool_result_chars=self.max_tool_result_chars,
                 parallel_tools=self.parallel_tools,
-                max_context_chars=self.max_context_chars,
+                max_context_tokens=self.max_context_tokens,
             ):
                 if isinstance(event, UsageEvent):
                     turn_usage = turn_usage.add(event.usage)
diff --git a/src/plyngent/agent/compact.py b/src/plyngent/agent/compact.py
index 77bba6a..4f5084d 100644
--- a/src/plyngent/agent/compact.py
+++ b/src/plyngent/agent/compact.py
@@ -13,7 +13,7 @@ from plyngent.lmproto.openai_compatible.model import (
     UserChatMessage,
 )
 
-from .budget import DEFAULT_CONTEXT_MAX_CHARS, compact_messages_for_request
+from .budget import DEFAULT_CONTEXT_MAX_TOKENS, compact_messages_for_request
 
 if TYPE_CHECKING:
     from collections.abc import Sequence
@@ -67,10 +67,10 @@ def format_transcript(messages: Sequence[AnyChatMessage]) -> str:
 def soft_compact_transcript(
     messages: Sequence[AnyChatMessage],
     *,
-    max_chars: int = DEFAULT_CONTEXT_MAX_CHARS,
+    max_tokens: int = DEFAULT_CONTEXT_MAX_TOKENS,
 ) -> str:
     """Soft-compact tool dumps then format as transcript text."""
-    compacted = compact_messages_for_request(messages, max_chars=max_chars)
+    compacted = compact_messages_for_request(messages, max_tokens=max_tokens)
     return format_transcript(compacted)
 
 
@@ -79,14 +79,14 @@ async def summarize_messages(
     messages: Sequence[AnyChatMessage],
     *,
     model: str,
-    max_context_chars: int = DEFAULT_CONTEXT_MAX_CHARS,
+    max_context_tokens: int = DEFAULT_CONTEXT_MAX_TOKENS,
     temperature: float | None = 0.2,
 ) -> str:
     """Soft-compact history and ask the model for a dense summary (no tools)."""
     if not messages:
         msg = "nothing to compact"
         raise ValueError(msg)
-    transcript = soft_compact_transcript(messages, max_chars=max_context_chars)
+    transcript = soft_compact_transcript(messages, max_tokens=max_context_tokens)
     if not transcript.strip():
         msg = "nothing to compact"
         raise ValueError(msg)
diff --git a/src/plyngent/agent/loop.py b/src/plyngent/agent/loop.py
index 3ddeaba..8364e2a 100644
--- a/src/plyngent/agent/loop.py
+++ b/src/plyngent/agent/loop.py
@@ -20,7 +20,7 @@ from plyngent.lmproto.openai_compatible.model import (
 from plyngent.typedef import Unset  # noqa: TC001
 
 from .budget import (
-    DEFAULT_CONTEXT_MAX_CHARS,
+    DEFAULT_CONTEXT_MAX_TOKENS,
     DEFAULT_TOOL_RESULT_MAX_CHARS,
     compact_messages_for_request,
     truncate_tool_result,
@@ -225,14 +225,14 @@ async def run_chat_loop(
     stream: bool = True,
     max_tool_result_chars: int = DEFAULT_TOOL_RESULT_MAX_CHARS,
     parallel_tools: bool = True,
-    max_context_chars: int = DEFAULT_CONTEXT_MAX_CHARS,
+    max_context_tokens: int = DEFAULT_CONTEXT_MAX_TOKENS,
 ) -> AsyncIterator[AgentEvent]:
     """Multi-round chat/tool loop; mutates ``messages`` in place and yields events.
 
     When ``stream=True``, uses ``chat_completions(..., stream=True)`` and yields
     text deltas as chunks arrive; tool calls are merged from stream deltas.
     Multiple tool calls in one round run in parallel when ``parallel_tools``.
-    Request payloads may shrink older tool results when over ``max_context_chars``.
+    Request payloads may shrink older tool results when over ``max_context_tokens``.
     """
     tool_items: Sequence[AnyToolItem] | None = None
     if tools is not None and len(tools) > 0:
@@ -246,7 +246,7 @@ async def run_chat_loop(
             rounds_used += 1
             request_messages = compact_messages_for_request(
                 messages,
-                max_chars=max_context_chars,
+                max_tokens=max_context_tokens,
             )
             param = ChatCompletionsParam(
                 messages=request_messages,
diff --git a/src/plyngent/cli/editor.py b/src/plyngent/cli/editor.py
index 71e9452..0dc7e3b 100644
--- a/src/plyngent/cli/editor.py
+++ b/src/plyngent/cli/editor.py
@@ -28,7 +28,7 @@ _MINIMAL_CONFIG = """\
 # parallel_tools = true
 # confirm_destructive = true
 # path_denylist = ["/secrets/", ".ssh/"]
-# max_context_chars = 200000
+# max_context_tokens = 200000
 
 # [providers.example]
 # preset = "openai-compatible"
diff --git a/src/plyngent/cli/repl.py b/src/plyngent/cli/repl.py
index c43fe33..0263ccc 100644
--- a/src/plyngent/cli/repl.py
+++ b/src/plyngent/cli/repl.py
@@ -54,25 +54,23 @@ _CONTENT_PREVIEW = 200
 
 
 def _cmd_status(state: ReplState) -> None:
-    from plyngent.agent.budget import estimate_messages_chars
+    from plyngent.agent.budget import estimate_messages_chars, estimate_messages_tokens
 
     pending = state.agent.pending_retry_text
     pending_disp = "yes" if pending else "no"
     ctx_chars = estimate_messages_chars(state.agent.messages)
-    ctx_budget = state.agent.max_context_chars
-    from plyngent.agent.usage import chars_to_tokens
-
+    ctx_tokens = estimate_messages_tokens(state.agent.messages)
+    ctx_budget = state.agent.max_context_tokens
     session_u = state.agent.session_usage
     last_u = state.agent.last_turn_usage
-    ctx_est_tokens = chars_to_tokens(ctx_chars)
     click.echo(
         f"provider={state.provider_name}  model={state.model}\n"
         f"session={state.session_id}  messages={len(state.agent.messages)}  "
         f"pending_retry={pending_disp}\n"
         f"tools={'on' if state.tools_enabled else 'off'}  "
         f"rounds={state.max_rounds}  stream={'on' if state.agent.stream else 'off'}\n"
-        f"context_chars={ctx_chars}/{ctx_budget}  "
-        f"context_tokens~={ctx_est_tokens} (est)  "
+        f"context_tokens~={ctx_tokens}/{ctx_budget} (est)  "
+        f"context_chars={ctx_chars}  "
         f"tool_result_max={state.agent.max_tool_result_chars}\n"
         f"usage_session={session_u.format_line()}\n"
         f"usage_last_turn={last_u.format_line()}\n"
diff --git a/src/plyngent/cli/state.py b/src/plyngent/cli/state.py
index fcbc686..023c4d7 100644
--- a/src/plyngent/cli/state.py
+++ b/src/plyngent/cli/state.py
@@ -78,7 +78,7 @@ class ReplState:
             system_prompt=system_prompt,
             max_tool_result_chars=agent_cfg.max_tool_result_chars,
             parallel_tools=agent_cfg.parallel_tools,
-            max_context_chars=agent_cfg.max_context_chars,
+            max_context_tokens=agent_cfg.max_context_tokens,
         )
 
     def rebuild_client(self) -> None:
@@ -174,7 +174,7 @@ class ReplState:
             self.client,
             messages,
             model=self.model,
-            max_context_chars=self.agent.max_context_chars,
+            max_context_tokens=self.agent.max_context_tokens,
         )
         session_name = name or f"compact-from-{old_id}"
         await self.new_session(name=session_name)
diff --git a/src/plyngent/config/models.py b/src/plyngent/config/models.py
index ef4ad6f..c8a03b6 100644
--- a/src/plyngent/config/models.py
+++ b/src/plyngent/config/models.py
@@ -18,7 +18,7 @@ class AgentConfig(Struct, omit_defaults=True):
     parallel_tools: bool = True
     confirm_destructive: bool = True
     path_denylist: list[str] = field(default_factory=list)
-    max_context_chars: int = 200_000
+    max_context_tokens: int = 200_000
 
 
 class ModelConfig(Struct, omit_defaults=True):
diff --git a/tests/test_agent/test_compact.py b/tests/test_agent/test_compact.py
index d152779..dea3ad4 100644
--- a/tests/test_agent/test_compact.py
+++ b/tests/test_agent/test_compact.py
@@ -6,7 +6,7 @@ from msgspec import UNSET
 
 from plyngent.agent.budget import (
     compact_messages_for_request,
-    estimate_messages_chars,
+    estimate_messages_tokens,
     truncate_tool_result,
 )
 from plyngent.agent.loop import run_chat_loop
@@ -75,7 +75,7 @@ def test_compact_shrinks_old_tool_results() -> None:
 
     compacted = compact_messages_for_request(
         messages,
-        max_chars=estimate_messages_chars(messages) - 1,
+        max_tokens=max(1, estimate_messages_tokens(messages) - 1),
         old_tool_result_chars=40,
         keep_recent_tool_results=1,
     )
@@ -90,11 +90,11 @@ def test_compact_shrinks_old_tool_results() -> None:
     assert compacted[5].content == "NEW" * 50
 
 
-def test_compact_disabled_when_max_chars_zero() -> None:
+def test_compact_disabled_when_max_tokens_zero() -> None:
     messages: list[AnyChatMessage] = [
         ToolChatMessage(content="x" * 500, tool_call_id="1"),
     ]
-    out = compact_messages_for_request(messages, max_chars=0)
+    out = compact_messages_for_request(messages, max_tokens=0)
     assert out[0] is messages[0] or (
         isinstance(out[0], ToolChatMessage) and out[0].content == "x" * 500
     )
@@ -211,7 +211,7 @@ async def test_loop_sends_compacted_request_not_history() -> None:
             history,
             model="m",
             stream=False,
-            max_context_chars=200,
+            max_context_tokens=50,
             max_tool_result_chars=50,
         )
     ]
diff --git a/tests/test_agent/test_compact_summarize.py b/tests/test_agent/test_compact_summarize.py
index c9a9db4..dca01db 100644
--- a/tests/test_agent/test_compact_summarize.py
+++ b/tests/test_agent/test_compact_summarize.py
@@ -43,7 +43,7 @@ def test_soft_compact_transcript_shrinks_tools() -> None:
         ToolChatMessage(content=big, tool_call_id="1"),
         ToolChatMessage(content="recent", tool_call_id="2"),
     ]
-    out = soft_compact_transcript(messages, max_chars=500)
+    out = soft_compact_transcript(messages, max_tokens=100)
     assert "truncated" in out or len(out) < len(big) + 50
     assert "recent" in out
 
diff --git a/tests/test_cli/test_repl_commands.py b/tests/test_cli/test_repl_commands.py
index bf1e5bd..481262d 100644
--- a/tests/test_cli/test_repl_commands.py
+++ b/tests/test_cli/test_repl_commands.py
@@ -142,7 +142,7 @@ async def test_rounds(state: ReplState) -> None:
     assert state.agent.max_rounds == 40
 
 
-async def test_status_shows_context_chars(
+async def test_status_shows_context_tokens(
     state: ReplState, capsys: pytest.CaptureFixture[str]
 ) -> None:
     from plyngent.lmproto.openai_compatible.model import UserChatMessage
@@ -150,6 +150,7 @@ async def test_status_shows_context_chars(
     state.agent.messages = [UserChatMessage(content="hello")]
     assert await handle_slash(state, "/status") is True
     out = capsys.readouterr().out
+    assert "context_tokens~=" in out
     assert "context_chars=" in out
     assert "tool_result_max=" in out
     assert str(state.workspace) in out
diff --git a/tests/test_config/test_agent_section.py b/tests/test_config/test_agent_section.py
index 9032bae..4f4f07d 100644
--- a/tests/test_config/test_agent_section.py
+++ b/tests/test_config/test_agent_section.py
@@ -17,7 +17,7 @@ def test_agent_section_defaults(tmp_path: Path) -> None:
     assert store.agent_config.parallel_tools is True
     assert store.agent_config.confirm_destructive is True
     assert store.agent_config.path_denylist == []
-    assert store.agent_config.max_context_chars == 200_000
+    assert store.agent_config.max_context_tokens == 200_000
 
 
 def test_agent_section_parse(tmp_path: Path) -> None:
@@ -30,7 +30,7 @@ max_tool_result_chars = 100
 parallel_tools = false
 confirm_destructive = false
 path_denylist = ["/secrets/", ".ssh/"]
-max_context_chars = 5000
+max_context_tokens = 5000
 """,
         encoding="utf-8",
     )
@@ -40,4 +40,5 @@ max_context_chars = 5000
     assert store.agent_config.parallel_tools is False
     assert store.agent_config.confirm_destructive is False
     assert store.agent_config.path_denylist == ["/secrets/", ".ssh/"]
-    assert store.agent_config.max_context_chars == 5000
+    assert store.agent_config.max_context_tokens == 5000
+