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18.09.2025

VS Code 1.104: Smarter AI Model Handling and Safer Agent Features

Microsoft has rolled out Visual Studio Code 1.104, a fresh release of its widely used development environment, bringing advancements in AI integration and workspace safety.

Smarter AI Model Selection

One of the standout elements in this update is the preview of automatic model selection for chat interactions. Instead of requiring developers to manually choose which AI to run, the new “Auto” option lets VS Code decide which model will deliver the best performance while also avoiding rate-limit issues. Over the coming weeks, this capability will reach all GitHub Copilot users inside VS Code.

The model selector can currently switch between options such as Claude Sonnet 4, GPT-5, GPT-5 Mini, GPT-4.1, and Gemini Pro 2.5, unless organizational settings restrict access.

To complement this, the LanguageModelChatProviders API has reached stability. This API enables extension creators to integrate their own AI models—whether cloud-hosted or running locally—so that developers can pick them through the same unified chat interface.

Enhanced Agent Security

Another major focus of version 1.104 is agent safety. Agents in VS Code can act independently, modifying or creating files, which sometimes introduces risks if sensitive configuration files are altered. To mitigate this, the new release ensures that agents must explicitly request user confirmation before changing certain critical files.

Security was also refined in the terminal auto-approve setting, giving users more granular control over when the editor should automatically approve actions in the terminal. This balances convenience with protection.

Additional Improvements in 1.104

Beyond the headline updates, developers will notice a variety of smaller but useful changes:

  • Context awareness: If a workspace contains an AGENTS.md file, it is now automatically included in chat context, which benefits teams using multiple AI agents.

  • Interactive prompts: When tasks or commands need user input, the agent detects it and asks for a response directly in chat.

  • Refined changed files view: The list of modified files has been redesigned with quality-of-life improvements to streamline workflows.

  • MCP integration: VS Code now interprets Model Context Protocol (MCP) instructions and incorporates them into base prompts.

  • Math rendering: Mathematical expressions in chat are now displayed properly by default.

  • Customizable inline suggestions: A new editor.inlineSuggest.minShowDelay setting lets developers adjust how quickly AI suggestions appear while typing.

  • Improved code search: The #codebase tool now uses a new embedding model for more accurate semantic search.

  • Terminal stability: Tools like terminalSelection and terminalLastCommand have been moved from extensions into VS Code’s core for better reliability.

Release Availability

The September 11, 2025 update is available for download across Windows, macOS, and Linux at code.visualstudio.com.

This version builds on the previous August 7 release (1.103), which introduced better control over autostart behavior for MCP servers. With 1.104, Microsoft continues to sharpen VS Code’s AI-powered developer experience while making agent-based automation safer to use.