diff --git a/codex-rs/app-server/src/config_manager_service.rs b/codex-rs/app-server/src/config_manager_service.rs
index 3927fc7b8a..a222d3d598 100644
--- a/codex-rs/app-server/src/config_manager_service.rs
+++ b/codex-rs/app-server/src/config_manager_service.rs
@@ -143,7 +143,10 @@ impl ConfigManager {
             .map_err(|err| ConfigManagerError::json("failed to deserialize configuration", err))?;
 
         let mut origins = layers.origins();
-        origins.retain(|path, _| {
+        origins.retain(|path, metadata| {
+            if matches!(&metadata.name, ConfigLayerSource::PackagedDefaults { .. }) {
+                return false;
+            }
             let segments = path.split('.').map(str::to_string).collect::<Vec<_>>();
             layers
                 .requirements_toml()
@@ -160,6 +163,9 @@ impl ConfigManager {
             layers: params.include_layers.then(|| {
                 layers
                     .all_layers_high_to_low()
+                    .filter(|layer| {
+                        !matches!(&layer.name, ConfigLayerSource::PackagedDefaults { .. })
+                    })
                     .map(|layer| config_layer_to_api(layer.as_layer()))
                     .collect()
             }),
@@ -818,10 +824,8 @@ fn compute_override_metadata(
     effective: &TomlValue,
     segments: &[String],
 ) -> Option<OverriddenMetadata> {
-    let user_value = match layers.get_active_user_layer() {
-        Some(user_layer) => value_at_semantic_path(&user_layer.config, segments),
-        None => return None,
-    };
+    let user_layer = layers.get_active_user_layer()?;
+    let user_value = value_at_semantic_path(&user_layer.config, segments);
     let effective_value = value_at_semantic_path(effective, segments);
 
     if user_value.is_some() && user_value == effective_value {
@@ -833,6 +837,9 @@ fn compute_override_metadata(
     }
 
     let overriding_layer = find_effective_layer(layers, segments)?;
+    if overriding_layer.name.precedence() <= user_layer.name.precedence() {
+        return None;
+    }
     let message = override_message(&overriding_layer.name);
 
     Some(OverriddenMetadata {
diff --git a/codex-rs/app-server/src/config_manager_service_tests.rs b/codex-rs/app-server/src/config_manager_service_tests.rs
index 6fefac2c2c..216db74b00 100644
--- a/codex-rs/app-server/src/config_manager_service_tests.rs
+++ b/codex-rs/app-server/src/config_manager_service_tests.rs
@@ -174,6 +174,29 @@ async fn clear_missing_nested_config_is_noop() -> Result<()> {
     Ok(())
 }
 
+#[tokio::test]
+async fn clearing_user_setting_falls_back_to_packaged_default_without_override() -> Result<()> {
+    let tmp = tempdir()?;
+    let path = tmp.path().join(CONFIG_TOML_FILE);
+    std::fs::write(&path, "hide_agent_reasoning = true\n")?;
+
+    let service = ConfigManager::without_managed_config_for_tests(tmp.path().to_path_buf());
+    let response = service
+        .write_value(ConfigValueWriteParams {
+            file_path: Some(path.display().to_string()),
+            key_path: "hide_agent_reasoning".to_string(),
+            value: serde_json::Value::Null,
+            merge_strategy: MergeStrategy::Replace,
+            expected_version: None,
+        })
+        .await?;
+
+    assert_eq!(response.status, WriteStatus::Ok);
+    assert_eq!(response.overridden_metadata, None);
+    assert_eq!(std::fs::read_to_string(&path)?, "");
+    Ok(())
+}
+
 #[tokio::test]
 async fn clear_user_value_if_matches_clears_matching_value() -> Result<()> {
     let tmp = tempdir().expect("tempdir");
diff --git a/codex-rs/app-server/tests/suite/v2/config_rpc.rs b/codex-rs/app-server/tests/suite/v2/config_rpc.rs
index 76d31d7a5c..1b6ef1f9f8 100644
--- a/codex-rs/app-server/tests/suite/v2/config_rpc.rs
+++ b/codex-rs/app-server/tests/suite/v2/config_rpc.rs
@@ -270,6 +270,11 @@ sandbox_mode = "workspace-write"
             profile: None,
         }
     );
+    assert!(
+        origins
+            .values()
+            .all(|origin| !matches!(&origin.name, ConfigLayerSource::PackagedDefaults { .. }))
+    );
     let layers = layers.expect("layers present");
     assert_layers_user_then_optional_system(&layers, user_file)?;
 
diff --git a/codex-rs/config/BUILD.bazel b/codex-rs/config/BUILD.bazel
index 2b832782b0..2b54002753 100644
--- a/codex-rs/config/BUILD.bazel
+++ b/codex-rs/config/BUILD.bazel
@@ -2,5 +2,6 @@ load("//:defs.bzl", "codex_rust_crate")
 
 codex_rust_crate(
     name = "config",
+    compile_data = ["defaults.toml"],
     crate_name = "codex_config",
 )
diff --git a/codex-rs/config/defaults.toml b/codex-rs/config/defaults.toml
new file mode 100644
index 0000000000..4983ce1ae3
--- /dev/null
+++ b/codex-rs/config/defaults.toml
@@ -0,0 +1,17 @@
+# Fixed defaults for packaged Codex clients.
+include_permissions_instructions = true
+include_apps_instructions = true
+include_collaboration_mode_instructions = true
+include_environment_context = true
+cli_auth_credentials_store = "file"
+mcp_oauth_credentials_store = "auto"
+project_doc_max_bytes = 32768
+project_doc_fallback_filenames = []
+background_terminal_max_timeout = 300000
+file_opener = "vscode"
+hide_agent_reasoning = false
+chatgpt_base_url = "https://chatgpt.com/backend-api/"
+project_root_markers = [".git"]
+
+[history]
+persistence = "save-all"
diff --git a/codex-rs/config/src/loader/mod.rs b/codex-rs/config/src/loader/mod.rs
index ceae7853ca..244f7df02f 100644
--- a/codex-rs/config/src/loader/mod.rs
+++ b/codex-rs/config/src/loader/mod.rs
@@ -159,12 +159,25 @@ pub async fn load_config_layers_state(
                 ),
             )
         })?;
-        Some(ConfigLayerEntry::new(
+        ConfigLayerEntry::new(
             ConfigLayerSource::PackagedDefaults { file: file.clone() },
             resolve_relative_paths_in_config_toml(config, base_dir)?,
-        ))
+        )
     } else {
-        None
+        let file = AbsolutePathBuf::from_absolute_path(std::env::current_exe()?)?;
+        let raw_toml = include_str!("../../defaults.toml");
+        let config = toml::from_str(raw_toml).map_err(|error| {
+            io::Error::new(
+                io::ErrorKind::InvalidData,
+                format!("invalid embedded packaged defaults; this is a Codex build error: {error}"),
+            )
+        })?;
+        ConfigLayerEntry::new_with_raw_toml(
+            ConfigLayerSource::PackagedDefaults { file },
+            config,
+            raw_toml.to_owned(),
+            AbsolutePathBuf::from_absolute_path(codex_home)?,
+        )
     };
     let active_user_profile = overrides.user_config_profile.clone();
     let ignore_managed_requirements = overrides.ignore_managed_requirements;
@@ -250,7 +263,7 @@ pub async fn load_config_layers_state(
         .map_err(io::Error::other)?;
 
     let mut layers = Vec::<ConfigLayerEntry>::new();
-    layers.extend(packaged_defaults_layer);
+    layers.push(packaged_defaults_layer);
 
     let cli_overrides_layer = if cli_overrides.is_empty() {
         None
diff --git a/codex-rs/core/src/config/config_loader_tests.rs b/codex-rs/core/src/config/config_loader_tests.rs
index 0793850ac1..cc4dfea619 100644
--- a/codex-rs/core/src/config/config_loader_tests.rs
+++ b/codex-rs/core/src/config/config_loader_tests.rs
@@ -831,7 +831,7 @@ async fn managed_goal_token_budget_overrides_user_config() -> anyhow::Result<()>
 }
 
 #[tokio::test]
-async fn returns_empty_when_all_layers_missing() {
+async fn returns_packaged_defaults_when_other_layers_are_missing() {
     let tmp = tempdir().expect("tempdir");
     let managed_path = tmp.path().join("managed_config.toml");
 
@@ -865,12 +865,11 @@ async fn returns_empty_when_all_layers_missing() {
         "expected empty config for user layer when config.toml does not exist"
     );
 
-    let binding = layers.effective_config();
-    let base_table = binding.as_table().expect("base table expected");
-    assert!(
-        base_table.is_empty(),
-        "expected empty base layer when configs missing"
-    );
+    let packaged_defaults = layers
+        .layers_low_to_high()
+        .find(|layer| matches!(layer.name, ConfigLayerSource::PackagedDefaults { .. }))
+        .expect("packaged defaults layer should always be present");
+    assert_eq!(layers.effective_config(), packaged_defaults.config);
     let num_system_layers = layers
         .layers_high_to_low()
         .filter(|layer| matches!(layer.name, ConfigLayerSource::System { .. }))
@@ -879,16 +878,6 @@ async fn returns_empty_when_all_layers_missing() {
         num_system_layers, 1,
         "system layer should always be present"
     );
-
-    #[cfg(not(target_os = "macos"))]
-    {
-        let effective = layers.effective_config();
-        let table = effective.as_table().expect("top-level table expected");
-        assert!(
-            table.is_empty(),
-            "expected empty table when configs missing"
-        );
-    }
 }
 
 #[tokio::test]
@@ -1004,6 +993,9 @@ async fn includes_thread_config_layers_in_stack() -> anyhow::Result<()> {
             ConfigLayerSource::System {
                 file: expected_system_config,
             },
+            ConfigLayerSource::PackagedDefaults {
+                file: AbsolutePathBuf::from_absolute_path(std::env::current_exe()?)?,
+            },
         ]
     );
     assert_eq!(
@@ -2322,6 +2314,9 @@ model_provider = "cloud-provider"
             .map(|layer| layer.name.clone())
             .collect::<Vec<_>>(),
         vec![
+            ConfigLayerSource::PackagedDefaults {
+                file: AbsolutePathBuf::from_absolute_path(std::env::current_exe()?)?,
+            },
             ConfigLayerSource::System {
                 file: AbsolutePathBuf::from_absolute_path(&system_config_path)?,
             },