diff --git a/CLAUDE.md b/CLAUDE.md
index 8224cc1..b396b7b 100644
--- a/CLAUDE.md
+++ b/CLAUDE.md
@@ -64,7 +64,7 @@ The `fixtures/` directory contains test Neovim configurations for verifying plug
 3. **Lock File System** (`lua/claudecode/lockfile.lua`) - Creates discovery files for Claude CLI at `~/.claude/ide/`
 4. **Selection Tracking** (`lua/claudecode/selection.lua`) - Monitors text selections and sends updates to Claude
 5. **Diff Integration** (`lua/claudecode/diff.lua`) - Native Neovim diff support for Claude's file comparisons
-6. **Terminal Integration** (`lua/claudecode/terminal.lua`) - Manages Claude CLI terminal sessions
+6. **Terminal Integration** (`lua/claudecode/terminal.lua`) - Manages Claude CLI terminal sessions with support for internal Neovim terminals and external terminal applications
 
 ### WebSocket Server Implementation
 
@@ -106,6 +106,28 @@ The WebSocket server implements secure authentication using:
 
 **Format Compliance**: All tools return MCP-compliant format: `{content: [{type: "text", text: "JSON-stringified-data"}]}`
 
+### Terminal Integration Options
+
+**Internal Terminals** (within Neovim):
+
+- **Snacks.nvim**: `terminal/snacks.lua` - Advanced terminal with floating windows
+- **Native**: `terminal/native.lua` - Built-in Neovim terminal as fallback
+
+**External Terminals** (separate applications):
+
+- **External Provider**: `terminal/external.lua` - Launches Claude in external terminal apps
+
+**Configuration Example**:
+
+```lua
+opts = {
+  terminal = {
+    provider = "external",  -- "auto", "snacks", "native", or "external"
+    external_terminal_cmd = "alacritty -e %s"  -- Required for external provider
+  }
+}
+```
+
 ### Key File Locations
 
 - `lua/claudecode/init.lua` - Main entry point and setup
diff --git a/README.md b/README.md
index 09aa20f..0774826 100644
--- a/README.md
+++ b/README.md
@@ -257,9 +257,14 @@ For deep technical details, see [ARCHITECTURE.md](./ARCHITECTURE.md).
     terminal = {
       split_side = "right", -- "left" or "right"
       split_width_percentage = 0.30,
-      provider = "auto", -- "auto", "snacks", "native", or custom provider table
+      provider = "auto", -- "auto", "snacks", "native", "external", or custom provider table
       auto_close = true,
       snacks_win_opts = {}, -- Opts to pass to `Snacks.terminal.open()` - see Floating Window section below
+
+      -- Provider-specific options
+      provider_opts = {
+        external_terminal_cmd = nil, -- Command template for external terminal provider (e.g., "alacritty -e %s")
+      },
     },
 
     -- Diff Integration
@@ -440,7 +445,27 @@ For complete configuration options, see:
 - [Snacks.nvim Terminal Documentation](https://github.com/folke/snacks.nvim/blob/main/docs/terminal.md)
 - [Snacks.nvim Window Documentation](https://github.com/folke/snacks.nvim/blob/main/docs/win.md)
 
-## Custom Terminal Providers
+## Terminal Providers
+
+### External Terminal Provider
+
+Run Claude Code in a separate terminal application outside of Neovim:
+
+```lua
+{
+  "coder/claudecode.nvim",
+  opts = {
+    terminal = {
+      provider = "external",
+      provider_opts = {
+        external_terminal_cmd = "alacritty -e %s", -- Replace with your preferred terminal program. %s is replaced with claude command
+      },
+    },
+  },
+}
+```
+
+### Custom Terminal Providers
 
 You can create custom terminal providers by passing a table with the required functions instead of a string provider name:
 
diff --git a/lua/claudecode/config.lua b/lua/claudecode/config.lua
index d7b027c..5676781 100644
--- a/lua/claudecode/config.lua
+++ b/lua/claudecode/config.lua
@@ -52,6 +52,28 @@ function M.validate(config)
 
   assert(config.terminal_cmd == nil or type(config.terminal_cmd) == "string", "terminal_cmd must be nil or a string")
 
+  -- Validate terminal config
+  assert(type(config.terminal) == "table", "terminal must be a table")
+
+  -- Validate provider_opts if present
+  if config.terminal.provider_opts then
+    assert(type(config.terminal.provider_opts) == "table", "terminal.provider_opts must be a table")
+
+    -- Validate external_terminal_cmd in provider_opts
+    if config.terminal.provider_opts.external_terminal_cmd then
+      assert(
+        type(config.terminal.provider_opts.external_terminal_cmd) == "string",
+        "terminal.provider_opts.external_terminal_cmd must be a string"
+      )
+      if config.terminal.provider_opts.external_terminal_cmd ~= "" then
+        assert(
+          config.terminal.provider_opts.external_terminal_cmd:find("%%s"),
+          "terminal.provider_opts.external_terminal_cmd must contain '%s' placeholder for the Claude command"
+        )
+      end
+    end
+  end
+
   local valid_log_levels = { "trace", "debug", "info", "warn", "error" }
   local is_valid_log_level = false
   for _, level in ipairs(valid_log_levels) do
diff --git a/lua/claudecode/terminal.lua b/lua/claudecode/terminal.lua
index dce77c8..65273db 100644
--- a/lua/claudecode/terminal.lua
+++ b/lua/claudecode/terminal.lua
@@ -13,6 +13,9 @@ local defaults = {
   provider = "auto",
   show_native_term_exit_tip = true,
   terminal_cmd = nil,
+  provider_opts = {
+    external_terminal_cmd = nil,
+  },
   auto_close = true,
   env = {},
   snacks_win_opts = {},
@@ -134,6 +137,22 @@ local function get_provider()
     else
       logger.warn("terminal", "'snacks' provider configured, but Snacks.nvim not available. Falling back to 'native'.")
     end
+  elseif defaults.provider == "external" then
+    local external_provider = load_provider("external")
+    if external_provider then
+      -- Check availability based on our config instead of provider's internal state
+      local external_cmd = defaults.provider_opts and defaults.provider_opts.external_terminal_cmd
+
+      local has_external_cmd = external_cmd and external_cmd ~= "" and external_cmd:find("%%s")
+      if has_external_cmd then
+        return external_provider
+      else
+        logger.warn(
+          "terminal",
+          "'external' provider configured, but provider_opts.external_terminal_cmd not properly set. Falling back to 'native'."
+        )
+      end
+    end
   elseif defaults.provider == "native" then
     -- noop, will use native provider as default below
     logger.debug("terminal", "Using native terminal provider")
@@ -300,12 +319,39 @@ function M.setup(user_term_config, p_terminal_cmd, p_env)
   end
 
   for k, v in pairs(user_term_config) do
-    if defaults[k] ~= nil and k ~= "terminal_cmd" then -- terminal_cmd is handled above
+    if k == "terminal_cmd" then
+      -- terminal_cmd is handled above, skip
+      break
+    elseif k == "provider_opts" then
+      -- Handle nested provider options
+      if type(v) == "table" then
+        defaults[k] = defaults[k] or {}
+        for opt_k, opt_v in pairs(v) do
+          if opt_k == "external_terminal_cmd" then
+            if opt_v == nil or type(opt_v) == "string" then
+              defaults[k][opt_k] = opt_v
+            else
+              vim.notify(
+                "claudecode.terminal.setup: Invalid value for provider_opts.external_terminal_cmd: " .. tostring(opt_v),
+                vim.log.levels.WARN
+              )
+            end
+          else
+            -- For other provider options, just copy them
+            defaults[k][opt_k] = opt_v
+          end
+        end
+      else
+        vim.notify("claudecode.terminal.setup: Invalid value for provider_opts: " .. tostring(v), vim.log.levels.WARN)
+      end
+    elseif defaults[k] ~= nil then -- Other known config keys
       if k == "split_side" and (v == "left" or v == "right") then
         defaults[k] = v
       elseif k == "split_width_percentage" and type(v) == "number" and v > 0 and v < 1 then
         defaults[k] = v
-      elseif k == "provider" and (v == "snacks" or v == "native" or v == "auto" or type(v) == "table") then
+      elseif
+        k == "provider" and (v == "snacks" or v == "native" or v == "external" or v == "auto" or type(v) == "table")
+      then
         defaults[k] = v
       elseif k == "show_native_term_exit_tip" and type(v) == "boolean" then
         defaults[k] = v
@@ -316,7 +362,7 @@ function M.setup(user_term_config, p_terminal_cmd, p_env)
       else
         vim.notify("claudecode.terminal.setup: Invalid value for " .. k .. ": " .. tostring(v), vim.log.levels.WARN)
       end
-    elseif k ~= "terminal_cmd" then -- Avoid warning for terminal_cmd if passed in user_term_config
+    else
       vim.notify("claudecode.terminal.setup: Unknown configuration key: " .. k, vim.log.levels.WARN)
     end
   end
diff --git a/lua/claudecode/terminal/external.lua b/lua/claudecode/terminal/external.lua
new file mode 100644
index 0000000..8c960e5
--- /dev/null
+++ b/lua/claudecode/terminal/external.lua
@@ -0,0 +1,144 @@
+--- External terminal provider for Claude Code.
+---Launches Claude Code in an external terminal application using a user-specified command.
+---@module 'claudecode.terminal.external'
+
+---@type ClaudeCodeTerminalProvider
+local M = {}
+
+local logger = require("claudecode.logger")
+
+local jobid = nil
+---@type ClaudeCodeTerminalConfig
+local config
+
+local function cleanup_state()
+  jobid = nil
+end
+
+local function is_valid()
+  -- For external terminals, we only track if we have a running job
+  -- We don't manage terminal windows since they're external
+  return jobid and jobid > 0
+end
+
+---@param term_config ClaudeCodeTerminalConfig
+function M.setup(term_config)
+  config = term_config or {}
+end
+
+---@param cmd_string string
+---@param env_table table
+function M.open(cmd_string, env_table)
+  if is_valid() then
+    -- External terminal is already running, we can't focus it programmatically
+    -- Just log that it's already running
+    logger.debug("terminal", "External Claude terminal is already running")
+    return
+  end
+
+  -- Get external terminal command from provider_opts
+  local external_cmd = config.provider_opts and config.provider_opts.external_terminal_cmd
+
+  if not external_cmd or external_cmd == "" then
+    vim.notify(
+      "external_terminal_cmd not configured. Please set terminal.provider_opts.external_terminal_cmd in your config.",
+      vim.log.levels.ERROR
+    )
+    return
+  end
+
+  -- Replace %s in the template with the Claude command
+  if not external_cmd:find("%%s") then
+    vim.notify("external_terminal_cmd must contain '%s' placeholder for the Claude command.", vim.log.levels.ERROR)
+    return
+  end
+
+  -- Build command by replacing %s with Claude command and splitting
+  local full_command = string.format(external_cmd, cmd_string)
+  local cmd_parts = vim.split(full_command, " ")
+
+  -- Start the external terminal as a detached process
+  jobid = vim.fn.jobstart(cmd_parts, {
+    detach = true,
+    env = env_table,
+    on_exit = function(job_id, exit_code, _)
+      vim.schedule(function()
+        if job_id == jobid then
+          cleanup_state()
+        end
+      end)
+    end,
+  })
+
+  if not jobid or jobid <= 0 then
+    vim.notify("Failed to start external terminal with command: " .. full_command, vim.log.levels.ERROR)
+    cleanup_state()
+    return
+  end
+end
+
+function M.close()
+  if is_valid() then
+    -- Try to stop the job gracefully
+    vim.fn.jobstop(jobid)
+    cleanup_state()
+  end
+end
+
+--- Simple toggle: always start external terminal (can't hide external terminals)
+---@param cmd_string string
+---@param env_table table
+---@param effective_config table
+function M.simple_toggle(cmd_string, env_table, effective_config)
+  if is_valid() then
+    -- External terminal is running, stop it
+    M.close()
+  else
+    -- Start external terminal
+    M.open(cmd_string, env_table, effective_config, true)
+  end
+end
+
+--- Smart focus toggle: same as simple toggle for external terminals
+---@param cmd_string string
+---@param env_table table
+---@param effective_config table
+function M.focus_toggle(cmd_string, env_table, effective_config)
+  -- For external terminals, focus toggle behaves the same as simple toggle
+  -- since we can't detect or control focus of external windows
+  M.simple_toggle(cmd_string, env_table, effective_config)
+end
+
+--- Legacy toggle function for backward compatibility
+---@param cmd_string string
+---@param env_table table
+---@param effective_config table
+function M.toggle(cmd_string, env_table, effective_config)
+  M.simple_toggle(cmd_string, env_table, effective_config)
+end
+
+---@return number?
+function M.get_active_bufnr()
+  -- External terminals don't have associated Neovim buffers
+  return nil
+end
+
+--- No-op function for external terminals since we can't ensure visibility of external windows
+function M.ensure_visible() end
+
+---@return boolean
+function M.is_available()
+  -- Availability is checked by terminal.lua before this provider is selected
+  return true
+end
+
+---@return table?
+function M._get_terminal_for_test()
+  -- For testing purposes, return job info if available
+  if is_valid() then
+    return { jobid = jobid }
+  end
+  return nil
+end
+
+return M
diff --git a/lua/claudecode/types.lua b/lua/claudecode/types.lua
index c825d25..2dad779 100644
--- a/lua/claudecode/types.lua
+++ b/lua/claudecode/types.lua
@@ -32,7 +32,11 @@
 ---@alias ClaudeCodeSplitSide "left"|"right"
 
 -- In-tree terminal provider names
----@alias ClaudeCodeTerminalProviderName "auto"|"snacks"|"native"
+---@alias ClaudeCodeTerminalProviderName "auto"|"snacks"|"native"|"external"
+
+-- Terminal provider-specific options
+---@class ClaudeCodeTerminalProviderOptions
+---@field external_terminal_cmd string? Command template for external terminal (e.g., "alacritty -e %s")
 
 -- @ mention queued for Claude Code
 ---@class ClaudeCodeMention
@@ -61,6 +65,7 @@
 ---@field provider ClaudeCodeTerminalProviderName|ClaudeCodeTerminalProvider
 ---@field show_native_term_exit_tip boolean
 ---@field terminal_cmd string?
+---@field provider_opts ClaudeCodeTerminalProviderOptions?
 ---@field auto_close boolean
 ---@field env table<string, string>
 ---@field snacks_win_opts table