diff --git a/openspec/changes/update-agent-file-name/proposal.md b/openspec/changes/update-agent-file-name/proposal.md
new file mode 100644
index 00000000..365d6553
--- /dev/null
+++ b/openspec/changes/update-agent-file-name/proposal.md
@@ -0,0 +1,29 @@
+# Update Agent Instruction File Name
+
+## Problem
+The agent instructions live in `openspec/README.md`, which clashes with conventional project README usage and creates confusion for tooling and contributors.
+
+## Solution
+Rename the agent instruction file to `openspec/AGENTS.md` and update OpenSpec tooling to use the new filename:
+- `openspec init` generates `AGENTS.md` instead of `README.md`
+- Templates and code reference `AGENTS.md`
+- Specifications and documentation are updated accordingly
+
+## Benefits
+- Clear separation from project documentation
+- Consistent naming with other agent instruction files
+- Simplifies tooling and project onboarding
+
+## Implementation
+- Rename instruction file and template
+- Update CLI commands (`init`, `update`) to read/write `AGENTS.md`
+- Adjust specs and documentation to reference the new path
+
+## Risks
+- Existing projects may still rely on `README.md`
+- Tooling may miss lingering references to the old filename
+
+## Success Metrics
+- `openspec init` creates `openspec/AGENTS.md`
+- `openspec update` refreshes `AGENTS.md`
+- All specs reference `openspec/AGENTS.md`
diff --git a/openspec/changes/update-agent-file-name/specs/cli-init/spec.md b/openspec/changes/update-agent-file-name/specs/cli-init/spec.md
new file mode 100644
index 00000000..76a23758
--- /dev/null
+++ b/openspec/changes/update-agent-file-name/specs/cli-init/spec.md
@@ -0,0 +1,36 @@
+## MODIFIED Requirements
+
+### Requirement: Directory Creation
+The command SHALL create the complete OpenSpec directory structure with all required directories and files.
+
+#### Scenario: Creating OpenSpec structure
+- **WHEN** `openspec init` is executed
+- **THEN** create the following directory structure:
+```
+openspec/
+├── project.md
+├── AGENTS.md
+├── specs/
+└── changes/
+    └── archive/
+```
+
+### Requirement: File Generation
+The command SHALL generate required template files with appropriate content for immediate use.
+
+#### Scenario: Generating template files
+- **WHEN** initializing OpenSpec
+- **THEN** generate `AGENTS.md` containing complete OpenSpec instructions for AI assistants
+- **AND** generate `project.md` with project context template
+
+### Requirement: AI Tool Configuration Details
+
+#### Scenario: Creating new CLAUDE.md
+- **WHEN** CLAUDE.md does not exist
+- **THEN** create new file with OpenSpec content wrapped in markers including reference to `@openspec/AGENTS.md`
+
+### Requirement: Success Output
+
+#### Scenario: Displaying success message
+- **WHEN** initialization completes successfully
+- **THEN** include prompt: "Please explain the OpenSpec workflow from openspec/AGENTS.md and how I should work with you on this project"
diff --git a/openspec/changes/update-agent-file-name/specs/cli-update/spec.md b/openspec/changes/update-agent-file-name/specs/cli-update/spec.md
new file mode 100644
index 00000000..32f7e284
--- /dev/null
+++ b/openspec/changes/update-agent-file-name/specs/cli-update/spec.md
@@ -0,0 +1,22 @@
+## MODIFIED Requirements
+
+### Requirement: Update Behavior
+The update command SHALL update OpenSpec instruction files to the latest templates in a team-friendly manner.
+
+#### Scenario: Running update command
+- **WHEN** a user runs `openspec update`
+- **THEN** replace `openspec/AGENTS.md` with the latest template
+
+### Requirement: File Handling
+The update command SHALL handle file updates in a predictable and safe manner.
+
+#### Scenario: Updating files
+- **WHEN** updating files
+- **THEN** completely replace `openspec/AGENTS.md` with the latest template
+
+### Requirement: Core Files Always Updated
+The update command SHALL always update the core OpenSpec files and display an ASCII-safe success message.
+
+#### Scenario: Successful update
+- **WHEN** the update completes successfully
+- **THEN** replace `openspec/AGENTS.md` with the latest template
diff --git a/openspec/changes/update-agent-file-name/specs/openspec-conventions/spec.md b/openspec/changes/update-agent-file-name/specs/openspec-conventions/spec.md
new file mode 100644
index 00000000..9844b70d
--- /dev/null
+++ b/openspec/changes/update-agent-file-name/specs/openspec-conventions/spec.md
@@ -0,0 +1,27 @@
+## MODIFIED Requirements
+
+### Requirement: Project Structure
+An OpenSpec project SHALL maintain a consistent directory structure for specifications and changes.
+
+#### Scenario: Initializing project structure
+- **WHEN** an OpenSpec project is initialized
+- **THEN** it SHALL have this structure:
+```
+openspec/
+├── project.md              # Project-specific context
+├── AGENTS.md               # AI assistant instructions
+├── specs/                  # Current deployed capabilities
+│   └── [capability]/       # Single, focused capability
+│       ├── spec.md         # WHAT and WHY
+│       └── design.md       # HOW (optional, for established patterns)
+└── changes/                # Proposed changes
+    ├── [change-name]/      # Descriptive change identifier
+    │   ├── proposal.md     # Why, what, and impact
+    │   ├── tasks.md        # Implementation checklist
+    │   ├── design.md       # Technical decisions (optional)
+    │   └── specs/          # Complete future state
+    │       └── [capability]/
+    │           └── spec.md # Clean markdown (no diff syntax)
+    └── archive/            # Completed changes
+        └── YYYY-MM-DD-[name]/
+```
diff --git a/openspec/changes/update-agent-file-name/tasks.md b/openspec/changes/update-agent-file-name/tasks.md
new file mode 100644
index 00000000..43fb206d
--- /dev/null
+++ b/openspec/changes/update-agent-file-name/tasks.md
@@ -0,0 +1,22 @@
+# Update Agent Instruction File Name - Tasks
+
+## 1. Rename Instruction File
+- [ ] Rename `openspec/README.md` to `openspec/AGENTS.md`
+- [ ] Update root references to new path
+
+## 2. Update Templates
+- [ ] Rename `src/core/templates/readme-template.ts` to `agents-template.ts`
+- [ ] Update exported constant from `readmeTemplate` to `agentsTemplate`
+
+## 3. Adjust CLI Commands
+- [ ] Modify `openspec init` to generate `AGENTS.md`
+- [ ] Update `openspec update` to refresh `AGENTS.md`
+- [ ] Ensure CLAUDE.md markers link to `@openspec/AGENTS.md`
+
+## 4. Update Specifications
+- [ ] Modify `cli-init` spec to reference `AGENTS.md`
+- [ ] Modify `cli-update` spec to reference `AGENTS.md`
+- [ ] Modify `openspec-conventions` spec to include `AGENTS.md` in project structure
+
+## 5. Validation
+- [ ] `pnpm test`