Microsoft has released Visual Studio Code 1.136, an update to the popular programming editor that previews an Agent Merge feature and introduces two experimental features for agentic coding.

VS Code 1.136 was released September 2 and can be downloaded from code.visualstudio.com.

Agent Merge, a preview feature, helps take a pull request across the finish line, Microsoft said. Agent Merge asks an agent to address review feedback, fix failed checks and merge conflicts, and rerun workflows until the pull request is ready to merge. To use Agent Merge, turn on the setting chat.agentMerge.enabled. Then you can enable Agent Merge for a session by running “Enable Agent Merge for Active Session” from the Agents window or selecting the “Agent Merge” button in the title bar.

VS Code 1.136 also introduces multi-root workspaces, an experimental feature that allows developers to work with GitHub Copilot and Claude agents across multiple project folders in the editor window chat view. Agent hooks remain scoped to a single workspace folder, Microsoft said. If hooks are detected in multiple folders, VS Code prompts the user to select the primary folder from which to load them.

Another experimental feature in VS Code 1.136 is chat backgrounds in the Agents window. This allows users to personalize the Agents window with a theme-aware pattern of built-in VS Code icons or an image of their own. Also new for chat are enterprise controls for dictation data. The new controls allow administrators to manage the dictation model and language-model transcript cleanup through enterprise policies. Microsoft said it was possible to require on-device transcription and disable language-model cleanup, so dictation remains available while preventing dictation data from being sent to cloud transcription or a Copilot model.

Visual Studio Code 1.132, the latest version of Microsoft’s popular, open-source code editor, has been released. The brings improvements to built-in dictation, side chats, and support for commenting on web elements in the integrated browser.

VS Code 1.132 was released August 5. The update can be downloaded for Windows, Linux, and macOS at code.visualstudio.com.

With VS Code 1.132, the built-in multilingual dictation function lets developers dictate in multiple languages using an on-device model that follows language preference or detects the language automatically. The built-in dictation converts speech to text in chat inputs, editors, and terminals. Dictation now uses multilingual Nemotron 3.5 as the default on-device model. Plus, terminal dictation now applies shell-aware cleanup, so spoken commands preserve shell syntax.

Also in VS Code 1.132, developers can open a side chat by typing /bt in the chat input. A side chat shares the context and prompt cache of the primary chat, but allows developers to ask the agent questions about the current turn without interrupting the turn. Similarly, developers can select text in a chat response to ask contextual questions about that response.

Other new capabilities and improvements in VS Code 1.132:

• The integrated browser adds support for selecting web page elements and annotating them with agent feedback. Users can trigger this mode by using the workbench.action.browser.addElementCommentToChat keyboard shortcut.
• Active development continues on the agent host, a new VS Code feature that lets users connect to the same agent session from multiple VS Code windows. The agent host runs agent harnesses such as Copilot, Claude, and Codex in a dedicated process based on the Agent Host Protocol (AHP).
• In the previous release, Microsoft introduced the hybrid Markdown editor, which combines rendered Markdown with in-place editing and agent-actionable comments. In this release, Markdown diffs can be opened in the hybrid Markdown editor. 
• Expanded terminal output in chat now reflows to the available width as the view is resized. Previously, output used a fixed width, which caused lines to wrap too early and left unused space in wider views.

Microsoft has shipped Visual Code 1.131, an update to its code editor with improvements for monitoring subagents, dictation, and Markdown editing.

Released July 29, Visual Studio Code 1.131 can be downloaded for Windows, Linux, or Mac at code.visualstudio.com.

An enhancement to the Agents window in VS Code 1.131 allows developers to see what a running subagent is doing without opening its conversation. For each subagent, the main conversation now shows the model used by the subagent, how long the subagent has been running, and the tool the subagent is actively calling.

A preview of built-in dictation across VS Code gives developers dictation capabilities without having to install the VS Code Speech extension. The transcription service works in chat inputs, text editors, and the terminal, Microsoft said. A single speech session and microphone selection are shared across all three surfaces, which prevents overlapping recordings and keeps dictated text in the intended location, according to the company. This is an experimental feature.

VS Code 1.131 also introduces a hybrid Markdown editor in the Agents window, allow users to view Markdown files, edit them in place, and add comments that an agent can act on. By using “Reopen editor with”, developers can switch easily between the text editor and the new Markdown editor, both in the Agents window and editor windows. The hybrid Markdown editor is an experimental feature.

For accessibility, screen reader users now can read terminal output at their own pace while commands continue to produce output. Set terminal.integrated.accessibleViewPreserveCursorPosition to always preserve the cursor position in the terminal Accessible View, including when new content arrives. Existing true and false values continue to work. Terminal live updates also use a non-interrupting ARIA status announcement instead of an assertive alert. Output remains available to screen readers without repeatedly interrupting other speech.

VS Code 1.131 followed VS Code 1.130 by one week. VS Code 1.132 should arrive soon.

Microsoft has released Visual Studio Code 1.130, an update to the code editor that brings several improvements to the Agents window, along with enhancements to the agent host and the terminal.

VS Code 1.130 was released on July 22, one week after VS Code 1.129. Developers can access the release for Windows, Linux, or Mac from code.visualstudio.com.

With the new release, the Agents window gets updates that make it easier to review changes and manage chats. File-level diff statistics help users assess the size of each file’s changes when scanning a multi-file diff. The window also gets a more compact multi-file diff that makes it easier to review changes, Microsoft said. The Agents window is a dedicated window in VS Code that lets users run and track multiple agent sessions in parallel across their projects, without opening each workspace in a separate window.

Also with VS Code 1.130, assisted permissions for agent tool calls are available in the agent host. With assisted permissions, the LLM evaluates the risk of each tool call and decides whether the tool can run or should require the user’s approval. The setting to enable assisted permissions is chat.assistedPermissions.enabled. In another agent host improvement, quick chats running on the agent host now use compact, single-line rows in the sessions list. Regular sessions retain a second line with change statistics, status, and timestamps.

VS Code users now can open file links from Git diff output in the terminal when Git’s diff.mnemonicPrefix option is enabled. VS Code recognizes prefixes such as i/ for the index and w/ for the working tree, and removes the prefix from the link target so the correct file opens. When mnemonic prefixes are enabled, VS Code also recognizes the numeric prefixes produced by git diff --no-index.

Timestamps for chat requests and responses now are displayed when users hover over the message toolbar. You can disable this through the chat.verbose setting.

Microsoft has released Visual Studio Code 1.129, an update to its free, popular code editor that features a dedicated agent host and an editor panel in the Agents window. The updated editor also allows users to run terminal commands from chat prompts with a !prefix and offers a preview of a modern UI for the workbench.

Released July 15, VS Code 1.129 can be downloaded from code.visualstudio.com for Windows, Linux, and Mac.

Microsoft is rearchitecting how agent sessions work in VS Code around the agent host — a dedicated process that runs agent harnesses such as Claude, Copilot, and Codex, based on the Agent Host Protocol (AHP). Since a session lives in its own process, the same session can be connected to and rendered from multiple VS Code windows at once. The agent host’s Copilot agent is powered by the Copilot SDK, which means that its behavior and functionality is aligned with the Copilot CLI, the standalone GitHub Copilot app, and other Copilot products. The agent host is being rolled out to users in the editor window and the Agents window. It’s enabled through the chat.agentHost.enabled setting.

The Agents window shows conversation with an agent next to a detail area for the files and changes it produces. This release introduces a redesigned editor panel that brings the editor and the detail area together into one docked pane with a shared tab bar, so reviewing an agent’s work feels like working in the main editor instead of switching between separate panels.

Other new features and improvements in VS Code 1.129:

• Users now can prefix chat messages with a ! to run their contents as terminal commands. This works in agent host sessions, both in the editor and in the Agents window.
• Developers can now use Bring Your Own Key (BYOK) models in the Agents window when selecting the Copilot harness running on the agent host.
• Developers can preview a modernized VS Code UI that updates the look and feel of the editor workbench. This is currently an experimental feature that can be enabled with the workbench.experimental.modernUI setting.

VS Code 1.129 follows Visual Studio Code 1.128, released July 13. An update, VS Code 1.129.1, fixes three bugs including remote agent hosts failing to start.

Visual Studio Code 1.128, the most recent edition of Microsoft’s code editor, adds support for multi-chat agent sessions using Anthropic Claude agents.

Introduced July 8, VS Code 1.28 can be downloaded for Windows, Linux, or Mac from code.visualstudio.com.

With VS Code 1.28, multi-chat agent sessions now support using Anthropic Claude agents. With multiple chats, a session can contain related chats, allowing users to compare approaches, branch from an earlier turn, and run work in parallel. Users can add chats, fork a chat from an existing turn, switch between peer chats, and send turns concurrently. Each chat keeps its own history, title, and model selection, and restores with the parent session after restart, Microsoft said.

VS Code 1.28 also makes Copilot Vision generally available. With Copilot Vision, VS Code users can attach images and PDFs by pasting them into chat, dragging and dropping them, or using the context menu. Images also may be read by the agent via a tool call, Microsoft said.

Also in VS Code 1.28:

• Quick chats allow users to ask a question in the Agents window without opening a workspace first.
• VS Code can contribute OS-level keyboard shortcuts that take effect even if VS Code is not in focus. Users can add systemWide to a keybinding definition in keybindings.json to make it OS-level.
• Developers can configure a location for browser tabs to open via a new setting, workbench.browser.newTabPlacement. The setting provides three options: to open browser tabs in the active editor group, in a dedicated group to the side, or in a dedicated auxiliary window.
• VS Code can contribute OS-level keyboard shortcuts. These shortcuts take effect even if VS Code is not in focus.
• Administrators can configure where GitHub Copilot sends OpenTelemetry (OTel) data, allowing organizations to enforce telemetry flows to an approved collector without each developer setting OTEL_* environment variables. The managed configuration applies to both the Copilot Chat extension and the agent host process.

Microsoft has been pushing hard to make Visual Studio Code a major way to consume its AI services, mostly in the form of GitHub Copilot. GitHub Copilot’s deep integration with VS Code brings many conveniences — inline autocomplete, for instance — but it’s frustrating for those, like me, who would rather use another model provider, or even a locally hosted LLM, for those functions.

Visual Studio Code 1.122 introduced a new feature, “Use BYOK [Bring Your Own Key] without a GitHub sign-in,” that allows you to “use chat, tools, and MCP servers in air-gapped or restricted environments where GitHub sign-in isn’t possible.” More importantly, it “enables fully offline workflows with local models like Ollama.”

In other words, you can now use locally hosted LLMs for chat, tools, and Model Context Protocol servers inside Visual Studio Code. The one thing you still can’t do is use a local LLM for inline and next-edit suggestions — at least, not without additional tooling.

Choosing a model for BYOK mode

If you want to use a local LLM with VS Code’s bring-your-own-model system, the first thing you need is a way to host the model. VS Code lacks a model-hosting mechanism of its own, although it’s conceivable that a VS Code extension may offer something like that in the future. That said, hosting models is complicated enough that a dedicated app is really needed for the job.

One easy way to host models is via a product like LM Studio, a convenient GUI for standing up, serving, and managing LLMs on one’s own hardware. The model host does not have to be the same system you run VS Code on, either. It can be on a server box you control, or on a cloud instance.

The choice of model is also important. Many models are powerful but won’t run well on commodity hardware because they’re simply too big. A good rule of thumb is to choose a model that fits into existing VRAM, along with the memory needed for a sizable token context (the more, the better). Also, the model should be suited to coding and development work. Some models in this vein that fit comfortably into 8GB VRAM include:

• Gemma4 (effective 2 billion parameters version)
• Qwen3.5 9B
• Codestral 22B v.0.1 (proprietary license)

Setting up BYOK mode in VS Code

Once you have a model up and running, you can integrate it with Visual Studio Code. If you’ve disabled VS Code’s AI features, you will need to turn them on. Make sure the setting chat.disableAIFeatures is turned off. You can find it in Settings | Chat | Miscellaneous.

Third-party language models are managed through Visual Studio Code’s language model list. Press Ctrl-Shift-P and type Manage Language Models to open the list of existing language models.

First you will see a list of the built-in models, which are all externally hosted. To add a new model, select Add Models at the top right and select Custom Endpoint.

You’ll then get a series of prompts:

• Group Name: This is “Custom Endpoint” by default, but you can choose any name you want. The name is strictly for organizing the model list and doesn’t affect things like model recognition or connectivity.
• API Key: If you’ve configured LM Studio to use an API key for serving models, provide it here. If you’re hosting the model locally and you haven’t explicitly set up API keys, you can leave this blank.
• API Type: The options here are Chat Completions, Responses, and Messages. Most of the time you’ll want to use Responses, as it’s the most general-purpose option of the three.

Once you finish providing those answers, you’ll be dropped into a modal editor for a JSON file that holds the details about the endpoint you’re configuring.

You’ll need to provide a few more details by typing them into the labeled fields:

• id: A text field that uniquely identifies this particular entry. The choice of ID is pretty much arbitrary; if you’re using only a single model, the ID could be the model name.
• name: The name of the model that is used to identify it on the model server. In LM Studio, you can get this name by clicking on My Models in the main interface, then selecting the three-dot icon for the model in question and clicking Copy Default Identifier. For Qwen 2.5, for instance, name might be something like qwen2.5-coder-7b-instruct.
• url: The URL to the server’s endpoint. On LM Studio, this defaults to something like http://127.0.0.1:1234/v1. The /v1 at the end is important because that endpoint is used for autodiscovery of models and their capabilities.

The other fields generally don’t need editing. Most models have tool calling functionality. If you know for a fact that the model you’re using doesn’t have vision support, then set vision to false.

Once you have these fields filled in, you can close the modal editor to save the changes. If you reload the Manage Language Models page, you’ll now see your new endpoint:

You should now be able to launch the chat window and use the defined model for conversation and utilities:

One current, and major, limitation of Visual Studio Code’s BYOK functionality is that it only works for chat and utility tasks. It doesn’t allow you to use a local model for inline suggestions or code completions. The only way to take advantage of local models for expanded functionality with VS Code is to use a third-party tool like Continue.

It isn’t clear if Microsoft will eventually lift this restriction. GitHub Copilot integration in VS Code is a large part of how Copilot as a service reaches its target audience. For the time being, you can certainly use third-party and local models for a significant part of your AI-assisted development work in VS Code, and you can close the functionality gap with additional tooling.