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Bevy of AI Chat Improvements in New VS Code Release
Microsoft's latest Visual Studio Code update, 1.105 (September 2025 update, announced Oct. 9), ships a focused set of improvements that push AI workflows further into the editor while polishing everyday developer ergonomics.
Notable in the new release is expanded Chat and Agents support: agents gain fully-qualified tool names, improved editing controls for custom models, nested AGENTS.md support, chain-of-thought display, and faster session navigation with new shortcuts and an improved Chat Sessions view. Chat can now include files from past commits, and recent-session recall (experimental) plus delegation to remote coding agents streamline multi-environment work.
[Click on image for larger view.] Chat Sessions View (source: Microsoft).
Under the hood, the Model Context Protocol (MCP) moves into preview-strength features with an integrated MCP marketplace, autostart options, richer resource previews, and updated MCP defaults and icons -- making it easier for extensions and models to interoperate. Platform integration also advances: OS notification toasts can alert users about chat responses and long-running tasks, and macOS gains native broker auth for Microsoft accounts while GitHub auth adds PKCE support.
Developer productivity improvements include Quick Input shortcuts being rebindable commands, AI-assisted merge conflict resolution, chat-specific terminal profiles, experimental auto-reply to terminal prompts, and persistent task terminal titles. Testing tooling sees enhancements (runTests now reports coverage) and language-focused tweaks such as a Python Copy Test Id action in the run gutter.
Accessibility and extension authors get attention too: verbose chat progress for screen readers, more persistent accessible views, and new extension APIs for prompt/instructions files and listing SecretStorage keys. Overall, 1.105 refines AI-first workflows and strengthens platform and extension primitives, targeting both end-user convenience and extension developer capabilities.
But the focus of the dev team is clearly AI, with the highlights of the announcement as presented by Microsoft mostly consisting of AI-related improvements:
OS integration
- Get notified about task completion and chat responses
- Native authentication experience on macOS
Developer productivity
- Resolve merge conflicts with AI assistance
- Pick up where you left off with the recent chats
Agent tools
- Install MCP servers from the MCP marketplace
- Use fully-qualified tool names to avoid conflicts
That fits with the company's initiative to turn VS Code into an open-source AI editor.
About the Author
David Ramel is an editor and writer at Converge 360.