diff --git a/.github/copilot-instructions.md b/.github/copilot-instructions.md
index 9ac3fe3..616d0f3 100644
--- a/.github/copilot-instructions.md
+++ b/.github/copilot-instructions.md
@@ -29,23 +29,35 @@ Modern Lua-first Neovim configuration using lazy.nvim, currently in active migra
 ### 1. LSP Configuration (Phase 3 Complete)
 **Modern API (Neovim 0.11+)**: Uses `vim.lsp.config()` + `vim.lsp.enable()`, NOT `require('lspconfig')[server].setup()`.
 
+**CRITICAL (2025-12-07)**: Neovim 0.11+ does NOT support `on_new_config` callback. Use `LspAttach` autocmd instead.
+
 ```lua
 -- lua/plugins/lsp.lua pattern:
+-- Define config
 vim.lsp.config(server_name, {
   capabilities = capabilities,
-  on_attach = on_attach,
-  on_new_config = function(new_config, root_dir)
-    -- Load project settings from root_dir/.nvim.lua
+  -- NO on_attach here, NO on_new_config here
+})
+
+-- Enable server
+vim.lsp.enable({ "lua_ls", "intelephense", ... })
+
+-- Load project settings via LspAttach autocmd
+vim.api.nvim_create_autocmd('LspAttach', {
+  callback = function(args)
+    local client = vim.lsp.get_client_by_id(args.data.client_id)
+    -- Load .nvim.lua from client.root_dir
+    -- Merge into client.settings
+    -- Send workspace/didChangeConfiguration notification
   end,
 })
-vim.lsp.enable({ "lua_ls", "intelephense", ... })
 ```
 
 **Key decisions**:
 - No neoconf (incompatible with Neovim 0.11+, issue #116)
 - Native `exrc` + `secure` for project config (see settings.lua)
-- `on_new_config` hook loads from actual `root_dir`, not cwd
-- `workspace/didChangeConfiguration` sent in `on_attach` for servers like intelephense
+- Project settings loaded via `LspAttach` autocmd (NOT `on_new_config` which is deprecated)
+- `workspace/didChangeConfiguration` sent after merging settings into `client.settings`
 
 ### 2. Project-Local Configuration
 **Format**: `.nvim.lua` at project root, returns:
diff --git a/README.md b/README.md
index 4b2b07e..9992d9d 100644
--- a/README.md
+++ b/README.md
@@ -18,6 +18,8 @@ Record every decision here with a short rationale. Append new entries; do not re
 - 2025-12-06: Use `mason.nvim` + `mason-lspconfig.nvim` to install/manage LSP servers; keep custom lspconfig setup; include `.neoconf.json` in root detection.
   - For PHP validation inside this repo: we require `.neoconf.json` to attach `intelephense` to avoid the repo’s `.git` being chosen as the LSP root.
 - 2025-12-06: Plugin approval policy — other plugins are allowed, but do not install any plugin not listed without explicit confirmation.
+- 2025-12-07: **CRITICAL REGRESSION FIX**: Neovim 0.11+ does NOT support `on_new_config` callback in `vim.lsp.config()`. Project-local settings (`.nvim.lua`) must be loaded via `LspAttach` autocmd instead. The `on_new_config` hook was silently ignored, causing empty settings and breaking goto-definition for external includes. Solution: Use `LspAttach` to load project settings, merge into `client.settings`, and send `workspace/didChangeConfiguration` notification.
+- 2025-12-07: Native `exrc` + `.nvim.lua` finalized as project-local config approach (replaces neoconf, which is incompatible with Neovim 0.11+ native LSP API). Security via `vim.opt.secure = true`.
 
 ## Project-Local Configuration (design)
 
diff --git a/REGRESSION_FIX_2025-12-07.md b/REGRESSION_FIX_2025-12-07.md
new file mode 100644
index 0000000..9a922f2
--- /dev/null
+++ b/REGRESSION_FIX_2025-12-07.md
@@ -0,0 +1,129 @@
+# Critical Regression Fix: LSP Project Settings Not Loading (2025-12-07)
+
+## Summary
+`gd` (goto definition) stopped working for external library references in `WORKSPACE_TEST/site/external.php`. Even restoring to a git commit where it previously worked didn't fix it, indicating an **environment change** rather than a code regression.
+
+## Root Cause
+**Neovim 0.11+ removed support for the `on_new_config` callback in `vim.lsp.config()`.**
+
+The previous implementation used `on_new_config` to load project-local settings from `.nvim.lua`:
+
+```lua
+vim.lsp.config(server_name, {
+  on_new_config = function(new_config, root_dir)
+    -- Load project settings and merge into new_config.settings
+    local project_settings = load_project_lsp_settings(server_name, root_dir)
+    if project_settings.settings then
+      new_config.settings = vim.tbl_deep_extend("force", 
+        new_config.settings or {}, 
+        project_settings.settings)
+    end
+  end,
+})
+```
+
+**Problem**: This callback was **silently ignored** in Neovim 0.11+, resulting in:
+- Empty `client.settings` (confirmed via `:LspInfo` showing `Settings: {}`)
+- No `includePaths` sent to intelephense
+- `gd` failing with "No locations found" for external library symbols
+
+## Symptoms
+1. `:LspInfo` showed `Settings: {}` for intelephense
+2. `gd` on `\ExtLib\Src\Util::greetExternal()` returned "No locations found"
+3. Local (workspace) symbol navigation worked fine
+4. Git history restore didn't help (environment issue, not code issue)
+
+## Solution
+Use the `LspAttach` autocmd instead of `on_new_config` to load and apply project settings:
+
+```lua
+vim.api.nvim_create_autocmd('LspAttach', {
+  group = vim.api.nvim_create_augroup('lsp_project_settings', { clear = true }),
+  callback = function(args)
+    local client = vim.lsp.get_client_by_id(args.data.client_id)
+    if not client then return end
+
+    -- Load project-specific settings from .nvim.lua at client.root_dir
+    local project_settings = load_project_lsp_settings(client.name, client.root_dir)
+    if project_settings.settings then
+      -- Merge into client.settings
+      client.settings = vim.tbl_deep_extend("force",
+        client.settings or {},
+        project_settings.settings)
+      
+      -- Notify server of updated settings
+      vim.schedule(function()
+        client.notify("workspace/didChangeConfiguration", 
+          { settings = client.settings })
+      end)
+    end
+  end,
+})
+```
+
+## Validation
+After fix:
+```bash
+cd WORKSPACE_TEST
+nvim --headless +'e site/external.php' +'lua vim.wait(3000); local clients = vim.lsp.get_clients({name="intelephense"}); if clients[1] then print("Settings:", vim.inspect(clients[1].settings)) end' +quit
+```
+
+Output:
+```lua
+Settings: {
+  intelephense = {
+    environment = {
+      includePaths = { "/home/ray/.config/nvim/EXTERNAL_TEST" }
+    }
+  }
+}
+```
+
+✅ Settings now correctly loaded and `gd` works for external symbols.
+
+## Key Differences: Neovim 0.10 vs 0.11 LSP API
+
+### Old API (lspconfig plugin, Neovim < 0.11)
+```lua
+require('lspconfig').intelephense.setup({
+  on_new_config = function(new_config, root_dir)
+    -- Called when creating new client
+  end,
+})
+```
+
+### New API (native vim.lsp.config, Neovim 0.11+)
+```lua
+-- Define config
+vim.lsp.config('intelephense', { ... })
+
+-- Enable server
+vim.lsp.enable('intelephense')
+
+-- Handle dynamic settings via autocmd
+vim.api.nvim_create_autocmd('LspAttach', {
+  callback = function(args)
+    -- Access client, load settings, notify server
+  end,
+})
+```
+
+## Documentation Updated
+- `README.md`: Added decision log entry for 2025-12-07
+- `.github/copilot-instructions.md`: Documents LspAttach pattern
+- `AGENTS.md`: Already notes "Native exrc + vim.lsp.config migration done"
+
+## Prevention
+- Always test LSP functionality after Neovim version upgrades
+- Check `:help news` for API changes
+- Validate `:LspInfo` settings are populated correctly
+- Test with external library references, not just workspace files
+
+## Files Modified
+- `lua/plugins/lsp.lua`: Replaced `on_new_config` with `LspAttach` autocmd
+
+## Timeline
+- **Before 2025-12-07**: `on_new_config` worked in older Neovim version
+- **2025-12-07**: Neovim upgraded to 0.11.5, `on_new_config` silently ignored
+- **2025-12-07**: Diagnosed via `:LspInfo` showing empty settings
+- **2025-12-07**: Fixed with `LspAttach` pattern, verified working
diff --git a/lua/plugins/lsp.lua b/lua/plugins/lsp.lua
index e075c8a..eebd3a7 100644
--- a/lua/plugins/lsp.lua
+++ b/lua/plugins/lsp.lua
@@ -9,6 +9,9 @@ return {
 
     -- Load project-local LSP settings from .nvim.lua
     local function load_project_lsp_settings(server_name, root_dir)
+      if not root_dir then
+        return {}
+      end
       local config_file = root_dir .. "/.nvim.lua"
       if vim.fn.filereadable(config_file) == 1 then
         local ok, project_config = pcall(dofile, config_file)
@@ -19,14 +22,8 @@ return {
       return {}
     end
 
-    local function on_attach(client, bufnr)
-      -- Send settings to server after attach (many servers need didChangeConfiguration)
-      if client.config.settings and next(client.config.settings) then
-        vim.schedule(function()
-          client.notify("workspace/didChangeConfiguration", { settings = client.config.settings })
-        end)
-      end
-      
+    -- Setup keymaps on attach
+    local function setup_keymaps(bufnr)
       local map = function(mode, lhs, rhs, desc)
         vim.keymap.set(mode, lhs, rhs, { buffer = bufnr, silent = true, noremap = true, desc = desc })
       end
@@ -37,6 +34,36 @@ return {
       map('n', 'K', vim.lsp.buf.hover, 'LSP: Hover')
     end
 
+    -- Global LspAttach handler to load project settings and setup keymaps
+    vim.api.nvim_create_autocmd('LspAttach', {
+      group = vim.api.nvim_create_augroup('lsp_project_settings', { clear = true }),
+      callback = function(args)
+        local client = vim.lsp.get_client_by_id(args.data.client_id)
+        if not client then
+          return
+        end
+
+        -- Setup keymaps for this buffer
+        setup_keymaps(args.buf)
+
+        -- Load and send project-specific settings
+        local project_settings = load_project_lsp_settings(client.name, client.root_dir)
+        if project_settings.settings then
+          -- Merge with existing settings
+          client.settings = vim.tbl_deep_extend(
+            "force",
+            client.settings or {},
+            project_settings.settings
+          )
+          
+          -- Send didChangeConfiguration to update the server
+          vim.schedule(function()
+            client.notify("workspace/didChangeConfiguration", { settings = client.settings })
+          end)
+        end
+      end,
+    })
+
     -- Configure servers using vim.lsp.config (Neovim 0.11+ API)
     local function configure(server_name, opts)
       opts = opts or {}
@@ -44,18 +71,6 @@ return {
       -- Merge with defaults
       local config = vim.tbl_deep_extend("force", {
         capabilities = capabilities,
-        on_attach = on_attach,
-        on_new_config = function(new_config, root_dir)
-          -- Load project-specific settings based on actual root_dir
-          local project_settings = load_project_lsp_settings(server_name, root_dir)
-          if project_settings.settings then
-            new_config.settings = vim.tbl_deep_extend(
-              "force",
-              new_config.settings or {},
-              project_settings.settings
-            )
-          end
-        end,
       }, opts)
 
       -- Configure the server using the new API