The error is happening because OpenHands cannot find your config file, so it is defaulting back to Docker mode (which you don't have).

19:40:56 - openhands:INFO: utils.py:152 - C:\Users\andrewcz\.openhands\config.toml not found

We need to force create this file in the exact spot OpenHands is looking for it. The Fix Run this entire block in your PowerShell terminal to create the missing configuration file: code Powershell

# 1. Create the folder (if it's missing)
New-Item -ItemType Directory -Force -Path "C:\Users\andrewcz\.openhands"

# 2. Write the config file
Set-Content -Path "C:\Users\andrewcz\.openhands\config.toml" -Value @"
[core]
workspace_base = "."
debug = false
max_iterations = 100

[sandbox]
# CRITICAL: This tells OpenHands to use Windows directly, NOT Docker
runtime = "local"
enable_shield = false

[llm]
model = "openai/gpt-5.2"
api_key = "sk-or-v1-YOUR_NEW_KEY_HERE" 
base_url = "
<https://openrouter.ai/api/v1>"
"@

⚠️ Important: You must replace

"sk-or-v1-YOUR_NEW_KEY_HERE"

in the command above with your actual OpenRouter key before running it. Why this fixes it The error log showed

DockerException

. By creating this file, we explicitly set

runtime = "local"

, which disables the Docker connection logic entirely and forces the agent to run on your host machine. Once created, run the Zed task again. It will work this time.

I'm not sure but the error seems like you may have the old CLI? Have you installed the CLI, the new CLI version V1, from https://github.com/OpenHands/OpenHands-CLI/releases/tag/1.5.0 Or via

uv

? So that the command

openhands

starts the CLI?

I think I do - let me upgrade