A monorepo team keeps every package's conventions in one root `AGENTS.md`, so all of it enters context in every conversation. Where else may an `AGENTS.md` file be placed?

The principle — AGENTS.md is plain markdown with no frontmatter, and Cursor reads it from the project root and from subdirectories.

Why the key is correct — A file placed in a package folder applies when you work on files in that folder or below it, and its instructions combine with those of its parents. In a monorepo that means a package's conventions travel with the package rather than riding along in every unrelated conversation.

Why the others are wrong — The root-only reading pushes teams into one enormous file whose every line is injected into context on each request. AGENTS.md also sits outside the rules folder, which holds .mdc files with frontmatter. And it is a project file, so a home-directory copy is the wrong place for it.

Remember this — Put instructions next to the code they govern.

Sources — Cursor's Rules documentation.