diff --git a/extensions/vscode-api-tests/src/singlefolder-tests/chat.test.ts b/extensions/vscode-api-tests/src/singlefolder-tests/chat.test.ts
index ce1e544e505..6518dd519a5 100644
--- a/extensions/vscode-api-tests/src/singlefolder-tests/chat.test.ts
+++ b/extensions/vscode-api-tests/src/singlefolder-tests/chat.test.ts
@@ -120,7 +120,7 @@ suite('chat', () => {
 		assert.deepStrictEqual(result.metadata, { key: 'value' });
 	});
 
-	test('isolated participant history', async () => {
+	test('participant history not isolated within extension', async () => {
 		const onRequest = setupParticipant();
 		const onRequest2 = setupParticipant(true);
 
@@ -132,13 +132,13 @@ suite('chat', () => {
 			commands.executeCommand('workbench.action.chat.open', { query: '@participant2 hi' });
 		}, 0);
 		const request2 = await asPromise(onRequest2);
-		assert.strictEqual(request2.context.history.length, 0);
+		assert.strictEqual(request2.context.history.length, 10);
 
 		setTimeout(() => {
 			commands.executeCommand('workbench.action.chat.open', { query: '@participant2 hi' });
 		}, 0);
 		const request3 = await asPromise(onRequest2);
-		assert.strictEqual(request3.context.history.length, 2); // request + response = 2
+		assert.strictEqual(request3.context.history.length, 12); // request + response = 2
 	});
 
 	test('title provider is called for first request', async () => {
diff --git a/src/vs/workbench/contrib/chat/browser/media/chatEditorController.css b/src/vs/workbench/contrib/chat/browser/media/chatEditorController.css
index 513be97904c..03d8b6e6171 100644
--- a/src/vs/workbench/contrib/chat/browser/media/chatEditorController.css
+++ b/src/vs/workbench/contrib/chat/browser/media/chatEditorController.css
@@ -28,8 +28,7 @@
 
 .chat-diff-change-content-widget .monaco-action-bar .action-item .action-label.codicon {
 	width: unset;
-	padding: 0 2px;
-	z-index: 9;
+	padding: 2px;
 	font-size: 12px;
 	line-height: 14px;
 	color: var(--vscode-button-foreground);
diff --git a/src/vs/workbench/contrib/chat/common/chatServiceImpl.ts b/src/vs/workbench/contrib/chat/common/chatServiceImpl.ts
index f1d62f78d85..26f5332430b 100644
--- a/src/vs/workbench/contrib/chat/common/chatServiceImpl.ts
+++ b/src/vs/workbench/contrib/chat/common/chatServiceImpl.ts
@@ -16,14 +16,13 @@ import { StopWatch } from '../../../../base/common/stopwatch.js';
 import { URI, UriComponents } from '../../../../base/common/uri.js';
 import { localize } from '../../../../nls.js';
 import { IConfigurationService } from '../../../../platform/configuration/common/configuration.js';
-import { IContextKeyService } from '../../../../platform/contextkey/common/contextkey.js';
+import { ExtensionIdentifier } from '../../../../platform/extensions/common/extensions.js';
 import { IInstantiationService } from '../../../../platform/instantiation/common/instantiation.js';
 import { ILogService } from '../../../../platform/log/common/log.js';
 import { Progress } from '../../../../platform/progress/common/progress.js';
 import { IStorageService, StorageScope, StorageTarget } from '../../../../platform/storage/common/storage.js';
 import { ITelemetryService } from '../../../../platform/telemetry/common/telemetry.js';
 import { IWorkspaceContextService } from '../../../../platform/workspace/common/workspace.js';
-import { IWorkbenchAssignmentService } from '../../../services/assignment/common/assignmentService.js';
 import { IExtensionService } from '../../../services/extensions/common/extensions.js';
 import { ChatAgentLocation, IChatAgent, IChatAgentCommand, IChatAgentData, IChatAgentHistoryEntry, IChatAgentRequest, IChatAgentResult, IChatAgentService } from './chatAgents.js';
 import { ChatModel, ChatRequestModel, ChatRequestRemovalReason, IChatModel, IChatRequestModel, IChatRequestVariableData, IChatResponseModel, IExportableChatData, ISerializableChatData, ISerializableChatDataIn, ISerializableChatsData, normalizeSerializableChatData, toChatHistoryContent, updateRanges } from './chatModel.js';
@@ -131,8 +130,6 @@ export class ChatService extends Disposable implements IChatService {
 		@IChatSlashCommandService private readonly chatSlashCommandService: IChatSlashCommandService,
 		@IChatVariablesService private readonly chatVariablesService: IChatVariablesService,
 		@IChatAgentService private readonly chatAgentService: IChatAgentService,
-		@IWorkbenchAssignmentService workbenchAssignmentService: IWorkbenchAssignmentService,
-		@IContextKeyService contextKeyService: IContextKeyService,
 		@IConfigurationService private readonly configurationService: IConfigurationService
 	) {
 		super();
@@ -788,13 +785,23 @@ export class ChatService extends Disposable implements IChatService {
 
 	private getHistoryEntriesFromModel(requests: IChatRequestModel[], sessionId: string, location: ChatAgentLocation, forAgentId: string): IChatAgentHistoryEntry[] {
 		const history: IChatAgentHistoryEntry[] = [];
+
+
+		const defaultAgentId = this.chatAgentService.getDefaultAgent(location)?.id;
+
+		const forAgentExtension = this.chatAgentService.getAgent(forAgentId);
+
 		for (const request of requests) {
 			if (!request.response) {
 				continue;
 			}
 
-			const defaultAgentId = this.chatAgentService.getDefaultAgent(location)?.id;
-			if (forAgentId !== request.response.agent?.id && forAgentId !== defaultAgentId) {
+			const responseAgentExtension = request.response.agent ? this.chatAgentService.getAgent(request.response.agent.id) : undefined;
+
+			if (forAgentId !== defaultAgentId
+				&& forAgentId !== request.response.agent?.id
+				&& !ExtensionIdentifier.equals(forAgentExtension?.extensionId, responseAgentExtension?.extensionId)
+			) {
 				// An agent only gets to see requests that were sent to this agent.
 				// The default agent (the undefined case) gets to see all of them.
 				continue;
diff --git a/src/vs/workbench/contrib/chat/test/common/chatService.test.ts b/src/vs/workbench/contrib/chat/test/common/chatService.test.ts
index 393c3813b83..c96a79b08c6 100644
--- a/src/vs/workbench/contrib/chat/test/common/chatService.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/chatService.test.ts
@@ -34,6 +34,7 @@ import { IExtensionService, nullExtensionDescription } from '../../../../service
 import { IViewsService } from '../../../../services/views/common/viewsService.js';
 import { TestContextService, TestExtensionService, TestStorageService } from '../../../../test/common/workbenchTestServices.js';
 import { MarkdownString } from '../../../../../base/common/htmlContent.js';
+import { ExtensionIdentifier } from '../../../../../platform/extensions/common/extensions.js';
 
 const chatAgentWithUsedContextId = 'ChatProviderWithUsedContext';
 const chatAgentWithUsedContext: IChatAgent = {
@@ -196,9 +197,11 @@ suite('ChatService', () => {
 		};
 
 		testDisposables.add(chatAgentService.registerAgent('defaultAgent', { ...getAgentData('defaultAgent'), isDefault: true }));
-		testDisposables.add(chatAgentService.registerAgent('agent2', getAgentData('agent2')));
+		testDisposables.add(chatAgentService.registerAgent('agent2', { ...getAgentData('agent2'), extensionId: new ExtensionIdentifier('foo.bar') }));
+		testDisposables.add(chatAgentService.registerAgent('agent3', getAgentData('agent3')));
 		testDisposables.add(chatAgentService.registerAgentImplementation('defaultAgent', historyLengthAgent));
 		testDisposables.add(chatAgentService.registerAgentImplementation('agent2', historyLengthAgent));
+		testDisposables.add(chatAgentService.registerAgentImplementation('agent3', historyLengthAgent));
 
 		const testService = testDisposables.add(instantiationService.createInstance(ChatService));
 		const model = testDisposables.add(testService.startSession(ChatAgentLocation.Panel, CancellationToken.None));
@@ -217,12 +220,19 @@ suite('ChatService', () => {
 		assert.strictEqual(model.getRequests().length, 2);
 		assert.strictEqual(model.getRequests()[1].response?.result?.metadata?.historyLength, 0);
 
-		// Send a request to defaultAgent - the default agent can see agent2's message
-		const response3 = await testService.sendRequest(model.sessionId, `test request`, { agentId: 'defaultAgent' });
+		// Send a request to agent3- it can see the default agent's message because they are from the same extension
+		const response3 = await testService.sendRequest(model.sessionId, `test request`, { agentId: 'agent3' });
 		assert(response3);
 		await response3.responseCompletePromise;
 		assert.strictEqual(model.getRequests().length, 3);
-		assert.strictEqual(model.getRequests()[2].response?.result?.metadata?.historyLength, 2);
+		assert.strictEqual(model.getRequests()[2].response?.result?.metadata?.historyLength, 1);
+
+		// Send a request to defaultAgent - the default agent can see agent2's message
+		const response4 = await testService.sendRequest(model.sessionId, `test request`, { agentId: 'defaultAgent' });
+		assert(response4);
+		await response4.responseCompletePromise;
+		assert.strictEqual(model.getRequests().length, 4);
+		assert.strictEqual(model.getRequests()[3].response?.result?.metadata?.historyLength, 3);
 	});
 
 	test('can serialize', async () => {