diff --git a/src/vs/sessions/contrib/remoteAgentHost/browser/agentHostFileSystemProvider.ts b/src/vs/platform/agentHost/common/agentHostFileSystemProvider.ts
similarity index 58%
rename from src/vs/sessions/contrib/remoteAgentHost/browser/agentHostFileSystemProvider.ts
rename to src/vs/platform/agentHost/common/agentHostFileSystemProvider.ts
index 4b6b21adaea..f194e543d27 100644
--- a/src/vs/sessions/contrib/remoteAgentHost/browser/agentHostFileSystemProvider.ts
+++ b/src/vs/platform/agentHost/common/agentHostFileSystemProvider.ts
@@ -3,55 +3,46 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
-import { Emitter } from '../../../../base/common/event.js';
-import { Disposable, toDisposable, type IDisposable } from '../../../../base/common/lifecycle.js';
-import { dirname, basename } from '../../../../base/common/resources.js';
-import { URI } from '../../../../base/common/uri.js';
-import { IRemoteAgentHostService } from '../../../../platform/agentHost/common/remoteAgentHostService.js';
-import type { IDirectoryEntry } from '../../../../platform/agentHost/common/state/sessionProtocol.js';
-import {
-	createFileSystemProviderError,
-	FilePermission,
-	FileSystemProviderCapabilities,
-	FileSystemProviderErrorCode,
-	FileType,
-	type IFileChange,
-	type IFileDeleteOptions,
-	type IFileOverwriteOptions,
-	type IFileSystemProvider,
-	type IFileWriteOptions,
-	type IStat,
-} from '../../../../platform/files/common/files.js';
+import { VSBuffer } from '../../../base/common/buffer.js';
+import { Emitter } from '../../../base/common/event.js';
+import { Disposable, IDisposable, toDisposable } from '../../../base/common/lifecycle.js';
+import { basename, dirname } from '../../../base/common/resources.js';
+import { URI } from '../../../base/common/uri.js';
+import { createFileSystemProviderError, FilePermission, FileSystemProviderCapabilities, FileSystemProviderErrorCode, FileType, IFileChange, IFileDeleteOptions, IFileOverwriteOptions, IFileSystemProvider, IFileWriteOptions, IStat } from '../../files/common/files.js';
+import { type IAgentConnection } from './agentService.js';
+import { fromAgentHostUri, toAgentHostUri } from './agentHostUri.js';
+import { IDirectoryEntry } from './state/protocol/commands.js';
+
 
 /**
- * The URI scheme used for browsing remote agent host filesystems.
- * URIs are structured as `agenthost://{sanitizedAddress}/path/on/remote`.
- */
-export const AGENT_HOST_FS_SCHEME = 'agenthost';
-
-/**
- * Build an agenthost URI for a given address and path.
+ * Build a {@link AGENT_HOST_SCHEME} URI for a given connection authority
+ * and remote path. Assumes the remote path is a `file://` resource.
  */
 export function agentHostUri(authority: string, path: string): URI {
-	return URI.from({ scheme: AGENT_HOST_FS_SCHEME, authority, path: path || '/' });
+	return toAgentHostUri(URI.file(path), authority);
 }
 
 /**
- * Extract the remote filesystem path from an agenthost URI.
- * This is the inverse of {@link agentHostUri} -- the path component
- * of the URI is the path on the remote machine.
+ * Extract the remote filesystem path from a {@link AGENT_HOST_SCHEME} URI.
  */
 export function agentHostRemotePath(uri: URI): string {
-	return uri.path;
+	return fromAgentHostUri(uri).path;
 }
 
 /**
- * Read-only {@link IFileSystemProvider} that proxies `stat` and `readdir`
- * calls through the agent host protocol's `browseDirectory` RPC.
+ * Read-only {@link IFileSystemProvider} that proxies filesystem operations
+ * through the agent host protocol.
  *
- * Registered once under the {@link AGENT_HOST_FS_SCHEME} scheme. Individual
- * connections are identified by the URI's authority component, which is
- * the sanitized remote address.
+ * Registered under the {@link AGENT_HOST_SCHEME} scheme. URIs encode the
+ * original scheme and authority in the path so any remote resource can be
+ * represented (not just `file://`):
+ *
+ * ```
+ * vscode-agent-host://[connectionAuthority]/[originalScheme]/[originalAuthority]/[originalPath]
+ * ```
+ *
+ * Individual connections are identified by the URI's authority component,
+ * which is the sanitized remote address.
  */
 export class AgentHostFileSystemProvider extends Disposable implements IFileSystemProvider {
 
@@ -66,21 +57,15 @@ export class AgentHostFileSystemProvider extends Disposable implements IFileSyst
 	private readonly _onDidChangeFile = this._register(new Emitter<readonly IFileChange[]>());
 	readonly onDidChangeFile = this._onDidChangeFile.event;
 
-	private readonly _authorityToAddress = new Map<string, string>();
-
-	constructor(
-		@IRemoteAgentHostService private readonly _remoteAgentHostService: IRemoteAgentHostService,
-	) {
-		super();
-	}
+	private readonly _authorityToConnection = new Map<string, IAgentConnection>();
 
 	/**
-	 * Register a mapping from a URI authority to a remote address.
+	 * Register a mapping from a URI authority to an agent connection.
 	 * Returns a disposable that unregisters the mapping.
 	 */
-	registerAuthority(authority: string, address: string): IDisposable {
-		this._authorityToAddress.set(authority, address);
-		return toDisposable(() => this._authorityToAddress.delete(authority));
+	registerAuthority(authority: string, connection: IAgentConnection): IDisposable {
+		this._authorityToConnection.set(authority, connection);
+		return toDisposable(() => this._authorityToConnection.delete(authority));
 	}
 
 	watch(): IDisposable {
@@ -121,8 +106,18 @@ export class AgentHostFileSystemProvider extends Disposable implements IFileSyst
 
 	// ---- Read-only stubs (required by interface) ----------------------------
 
-	async readFile(): Promise<Uint8Array> {
-		throw createFileSystemProviderError('readFile not supported on remote agent host filesystem', FileSystemProviderErrorCode.NoPermissions);
+	async readFile(resource: URI): Promise<Uint8Array> {
+		const connection = this._getConnection(resource.authority);
+		try {
+			const originalUri = fromAgentHostUri(resource);
+			const result = await connection.fetchContent(originalUri.toString());
+			return VSBuffer.fromString(result.data).buffer;
+		} catch (err) {
+			throw createFileSystemProviderError(
+				err instanceof Error ? err.message : String(err),
+				FileSystemProviderErrorCode.FileNotFound,
+			);
+		}
 	}
 
 	async writeFile(_resource: URI, _content: Uint8Array, _opts: IFileWriteOptions): Promise<void> {
@@ -144,13 +139,9 @@ export class AgentHostFileSystemProvider extends Disposable implements IFileSyst
 	// ---- Internals ----------------------------------------------------------
 
 	private _getConnection(authority: string) {
-		const address = this._authorityToAddress.get(authority);
-		if (!address) {
-			throw createFileSystemProviderError(`No connection for authority: ${authority}`, FileSystemProviderErrorCode.Unavailable);
-		}
-		const connection = this._remoteAgentHostService.getConnection(address);
+		const connection = this._authorityToConnection.get(authority);
 		if (!connection) {
-			throw createFileSystemProviderError(`Connection unavailable: ${address}`, FileSystemProviderErrorCode.Unavailable);
+			throw createFileSystemProviderError(`No connection for authority: ${authority}`, FileSystemProviderErrorCode.Unavailable);
 		}
 		return connection;
 	}
@@ -158,9 +149,8 @@ export class AgentHostFileSystemProvider extends Disposable implements IFileSyst
 	private async _listDirectory(authority: string, resource: URI): Promise<readonly IDirectoryEntry[]> {
 		const connection = this._getConnection(authority);
 		try {
-			// Convert the agenthost URI to a file URI for the remote server
-			const remoteUri = URI.from({ scheme: 'file', path: resource.path || '/' });
-			const result = await connection.browseDirectory(remoteUri);
+			const originalUri = fromAgentHostUri(resource);
+			const result = await connection.browseDirectory(originalUri);
 			return result.entries;
 		} catch (err) {
 			throw createFileSystemProviderError(
diff --git a/src/vs/platform/agentHost/common/agentHostUri.ts b/src/vs/platform/agentHost/common/agentHostUri.ts
new file mode 100644
index 00000000000..49a172fac0f
--- /dev/null
+++ b/src/vs/platform/agentHost/common/agentHostUri.ts
@@ -0,0 +1,118 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { encodeBase64, VSBuffer } from '../../../base/common/buffer.js';
+import { URI } from '../../../base/common/uri.js';
+import type { ResourceLabelFormatter } from '../../label/common/label.js';
+
+/**
+ * The URI scheme for accessing files on a remote agent host.
+ *
+ * URIs encode the original scheme, authority, and path so that any
+ * remote resource can be represented without assuming `file://`:
+ *
+ * ```
+ * vscode-agent-host://[connectionAuthority]/[originalScheme]/[originalAuthority]/[originalPath]
+ * ```
+ *
+ * For example, `file:///home/user/foo.ts` on remote `my-server` becomes:
+ * ```
+ * vscode-agent-host://my-server/file//home/user/foo.ts
+ * ```
+ */
+export const AGENT_HOST_SCHEME = 'vscode-agent-host';
+
+/**
+ * Wraps a remote URI into a {@link AGENT_HOST_SCHEME} URI that can be
+ * resolved through the agent host filesystem provider.
+ *
+ * @param originalUri The URI on the remote (e.g. `file:///path` or
+ *   `agenthost-content:///sessionId/...`)
+ * @param connectionAuthority The sanitized connection identifier used as
+ *   the URI authority (from {@link agentHostAuthority}).
+ */
+export function toAgentHostUri(originalUri: URI, connectionAuthority: string): URI {
+	if (connectionAuthority === 'local') {
+		return originalUri;
+	}
+
+	// Path format: /[originalScheme]/[originalAuthority]/[originalPath]
+	const originalAuthority = originalUri.authority || '';
+	return URI.from({
+		scheme: AGENT_HOST_SCHEME,
+		authority: connectionAuthority,
+		path: `/${originalUri.scheme}${originalAuthority ? `/${originalAuthority}` : ''}${originalUri.path}`,
+	});
+}
+
+/**
+ * Extracts the original URI from a {@link AGENT_HOST_SCHEME} URI.
+ *
+ * The inverse of {@link toAgentHostUri}.
+ */
+export function fromAgentHostUri(agentHostUri: URI): URI {
+	// Path: /[originalScheme]/[originalAuthority]/[rest of original path]
+	const path = agentHostUri.path;
+
+	// Find first segment boundary after leading /
+	const schemeEnd = path.indexOf('/', 1);
+	if (schemeEnd === -1) {
+		// Malformed — treat whole path as file scheme
+		return URI.from({ scheme: 'file', path });
+	}
+
+	const originalScheme = path.substring(1, schemeEnd);
+
+	// Find second segment boundary (authority/path split)
+	const authorityEnd = path.indexOf('/', schemeEnd + 1);
+	if (authorityEnd === -1) {
+		// No path after authority
+		const originalAuthority = path.substring(schemeEnd + 1);
+		return URI.from({ scheme: originalScheme, authority: originalAuthority, path: '/' });
+	}
+
+	let originalAuthority = path.substring(schemeEnd + 1, authorityEnd);
+	let originalPath = path.substring(authorityEnd);
+	if (originalScheme === 'file') {
+		// file scheme URIs must have an authority of '' (not undefined) to be treated as absolute paths
+		originalPath = originalAuthority + originalPath;
+		originalAuthority = '';
+	}
+
+	return URI.from({
+		scheme: originalScheme,
+		authority: originalAuthority || undefined,
+		path: originalPath,
+	});
+}
+
+/**
+ * Encode a remote address into an identifier that is safe for use in
+ * both URI schemes and URI authorities, and is collision-free.
+ *
+ * If the address contains only alphanumeric characters it is returned as-is.
+ * Otherwise it is url-safe base64-encoded (no padding) to guarantee the
+ * result contains only `[A-Za-z0-9_-]`.
+ */
+export function agentHostAuthority(address: string): string {
+	if (/^[a-zA-Z0-9]+$/.test(address)) {
+		return address;
+	}
+	return 'b64-' + encodeBase64(VSBuffer.fromString(address), false, true);
+}
+
+/**
+ * Label formatter for {@link AGENT_HOST_SCHEME} URIs. Strips the two
+ * leading path segments (`/scheme/authority`) to display the original
+ * file path.
+ */
+export const AGENT_HOST_LABEL_FORMATTER: ResourceLabelFormatter = {
+	scheme: AGENT_HOST_SCHEME,
+	formatting: {
+		label: '${path}',
+		separator: '/',
+		stripPathSegments: 2,
+	},
+};
diff --git a/src/vs/platform/agentHost/common/agentService.ts b/src/vs/platform/agentHost/common/agentService.ts
index e21f2c9cfd0..6309134eb57 100644
--- a/src/vs/platform/agentHost/common/agentService.ts
+++ b/src/vs/platform/agentHost/common/agentService.ts
@@ -8,7 +8,7 @@ import { IAuthorizationProtectedResourceMetadata } from '../../../base/common/oa
 import { URI } from '../../../base/common/uri.js';
 import { createDecorator } from '../../instantiation/common/instantiation.js';
 import type { IActionEnvelope, INotification, ISessionAction } from './state/sessionActions.js';
-import type { IBrowseDirectoryResult, IStateSnapshot } from './state/sessionProtocol.js';
+import type { IBrowseDirectoryResult, IFetchContentResult, IStateSnapshot } from './state/sessionProtocol.js';
 import { AttachmentType, PermissionKind, type IToolCallResult, type PolicyState } from './state/sessionState.js';
 
 // IPC contract between the renderer and the agent host utility process.
@@ -438,6 +438,12 @@ export interface IAgentService {
 	 * Used by the client to drive a remote folder picker before session creation.
 	 */
 	browseDirectory(uri: URI): Promise<IBrowseDirectoryResult>;
+
+	/**
+	 * Fetch stored content by URI from the agent host (e.g. file edit snapshots,
+	 * or reading files from the remote filesystem).
+	 */
+	fetchContent(uri: string): Promise<IFetchContentResult>;
 }
 
 /**
diff --git a/src/vs/platform/agentHost/common/state/sessionState.ts b/src/vs/platform/agentHost/common/state/sessionState.ts
index b2b53dda873..4725e250dba 100644
--- a/src/vs/platform/agentHost/common/state/sessionState.ts
+++ b/src/vs/platform/agentHost/common/state/sessionState.ts
@@ -14,6 +14,7 @@ import { hasKey } from '../../../../base/common/types.js';
 import {
 	SessionLifecycle,
 	ToolResultContentType,
+	IToolResultFileEditContent,
 	type IActiveTurn,
 	type IRootState,
 	type ISessionState,
@@ -115,6 +116,23 @@ export function getToolOutputText(result: IToolCallResult): string | undefined {
 	return textParts.map(p => p.text).join('\n');
 }
 
+/**
+ * Extracts file edit content entries from a tool call result's `content` array.
+ * Returns an empty array if there are no file edit content parts.
+ */
+export function getToolFileEdits(result: IToolCallResult): IToolResultFileEditContent[] {
+	if (!result.content || result.content.length === 0) {
+		return [];
+	}
+	const edits: IToolResultFileEditContent[] = [];
+	for (const c of result.content) {
+		if (hasKey(c, { type: true }) && c.type === ToolResultContentType.FileEdit) {
+			edits.push(c);
+		}
+	}
+	return edits;
+}
+
 // ---- Factory helpers --------------------------------------------------------
 
 export function createRootState(): IRootState {
diff --git a/src/vs/platform/agentHost/electron-browser/agentHostService.ts b/src/vs/platform/agentHost/electron-browser/agentHostService.ts
index da706baae2f..0e93d66c676 100644
--- a/src/vs/platform/agentHost/electron-browser/agentHostService.ts
+++ b/src/vs/platform/agentHost/electron-browser/agentHostService.ts
@@ -15,7 +15,7 @@ import { IConfigurationService } from '../../configuration/common/configuration.
 import { ILogService } from '../../log/common/log.js';
 import { AgentHostEnabledSettingId, AgentHostIpcChannels, IAgentCreateSessionConfig, IAgentDescriptor, IAgentHostService, IAgentService, IAgentSessionMetadata, IAuthenticateParams, IAuthenticateResult, IResourceMetadata } from '../common/agentService.js';
 import type { IActionEnvelope, INotification, ISessionAction } from '../common/state/sessionActions.js';
-import type { IBrowseDirectoryResult, IStateSnapshot } from '../common/state/sessionProtocol.js';
+import type { IBrowseDirectoryResult, IFetchContentResult, IStateSnapshot } from '../common/state/sessionProtocol.js';
 import { revive } from '../../../base/common/marshalling.js';
 import { URI } from '../../../base/common/uri.js';
 
@@ -119,6 +119,9 @@ class AgentHostServiceClient extends Disposable implements IAgentHostService {
 	browseDirectory(uri: URI): Promise<IBrowseDirectoryResult> {
 		return this._proxy.browseDirectory(uri);
 	}
+	fetchContent(uri: string): Promise<IFetchContentResult> {
+		return this._proxy.fetchContent(uri);
+	}
 	async restartAgentHost(): Promise<void> {
 		// Restart is handled by the main process side
 	}
diff --git a/src/vs/platform/agentHost/node/agentSideEffects.ts b/src/vs/platform/agentHost/node/agentSideEffects.ts
index 9a23ecdb1ee..a5df7e1223f 100644
--- a/src/vs/platform/agentHost/node/agentSideEffects.ts
+++ b/src/vs/platform/agentHost/node/agentSideEffects.ts
@@ -19,7 +19,6 @@ import {
 	type ISessionSummary, type URI as ProtocolURI,
 } from '../common/state/sessionState.js';
 import { mapProgressEventToActions } from './agentEventMapper.js';
-import { FileEditTracker } from './copilot/fileEditTracker.js';
 import type { IProtocolSideEffectHandler } from './protocolServerHandler.js';
 import { SessionStateManager } from './sessionStateManager.js';
 
@@ -276,19 +275,15 @@ export class AgentSideEffects extends Disposable implements IProtocolSideEffectH
 	}
 
 	async handleFetchContent(uri: string): Promise<IFetchContentResult> {
-		const fileUri = FileEditTracker.resolveContentUri(uri, this._options.sessionDataService);
-		if (!fileUri) {
-			throw new ProtocolError(AhpErrorCodes.ContentNotFound, `Unknown content URI: ${uri}`);
-		}
 		try {
-			const content = await this._fileService.readFile(fileUri);
+			const content = await this._fileService.readFile(URI.parse(uri));
 			return {
 				data: content.value.toString(),
 				encoding: ContentEncoding.Utf8,
 				contentType: 'text/plain',
 			};
-		} catch {
-			throw new ProtocolError(AhpErrorCodes.ContentNotFound, `Content not found: ${uri}`);
+		} catch (_e) {
+			throw new ProtocolError(AhpErrorCodes.NotFound, `Content not found: ${uri}`);
 		}
 	}
 
diff --git a/src/vs/platform/agentHost/node/copilot/copilotAgent.ts b/src/vs/platform/agentHost/node/copilot/copilotAgent.ts
index 6bdb4aa458a..b482b88afbb 100644
--- a/src/vs/platform/agentHost/node/copilot/copilotAgent.ts
+++ b/src/vs/platform/agentHost/node/copilot/copilotAgent.ts
@@ -379,8 +379,7 @@ export class CopilotAgent extends Disposable implements IAgent {
 		return {
 			onPreToolUse: async (input: { toolName: string; toolArgs: unknown }, invocation: { sessionId: string }) => {
 				if (isEditTool(input.toolName)) {
-					const params = input.toolArgs as Record<string, unknown> | undefined;
-					const filePath = getEditFilePath(params);
+					const filePath = getEditFilePath(input.toolArgs);
 					if (filePath) {
 						const tracker = this._getOrCreateEditTracker(invocation.sessionId);
 						await tracker.trackEditStart(filePath);
@@ -389,8 +388,7 @@ export class CopilotAgent extends Disposable implements IAgent {
 			},
 			onPostToolUse: async (input: { toolName: string; toolArgs: unknown }, invocation: { sessionId: string }) => {
 				if (isEditTool(input.toolName)) {
-					const params = input.toolArgs as Record<string, unknown> | undefined;
-					const filePath = getEditFilePath(params);
+					const filePath = getEditFilePath(input.toolArgs);
 					if (filePath) {
 						const tracker = this._editTrackers.get(invocation.sessionId);
 						await tracker?.completeEdit(filePath);
diff --git a/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts b/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts
index 7702844d418..397c4b0fb71 100644
--- a/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts
+++ b/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts
@@ -55,7 +55,7 @@ interface ICopilotShellToolArgs {
 
 /** Parameters for file tools (`view`, `edit`, `write`). */
 interface ICopilotFileToolArgs {
-	file_path: string;
+	path: string;
 }
 
 /** Parameters for the `grep` tool. */
@@ -88,9 +88,17 @@ export function isEditTool(toolName: string): boolean {
 /**
  * Extracts the target file path from an edit tool's parameters, if available.
  */
-export function getEditFilePath(parameters: Record<string, unknown> | undefined): string | undefined {
+export function getEditFilePath(parameters: unknown): string | undefined {
+	if (typeof parameters === 'string') {
+		try {
+			parameters = JSON.parse(parameters);
+		} catch {
+			return undefined;
+		}
+	}
+
 	const args = parameters as ICopilotFileToolArgs | undefined;
-	return args?.file_path;
+	return args?.path;
 }
 
 /** Set of tool names that execute shell commands (bash or powershell). */
@@ -163,22 +171,22 @@ export function getInvocationMessage(toolName: string, displayName: string, para
 	switch (toolName) {
 		case CopilotToolName.View: {
 			const args = parameters as ICopilotFileToolArgs | undefined;
-			if (args?.file_path) {
-				return localize('toolInvoke.viewFile', "Reading {0}", args.file_path);
+			if (args?.path) {
+				return localize('toolInvoke.viewFile', "Reading {0}", args.path);
 			}
 			return localize('toolInvoke.view', "Reading file");
 		}
 		case CopilotToolName.Edit: {
 			const args = parameters as ICopilotFileToolArgs | undefined;
-			if (args?.file_path) {
-				return localize('toolInvoke.editFile', "Editing {0}", args.file_path);
+			if (args?.path) {
+				return localize('toolInvoke.editFile', "Editing {0}", args.path);
 			}
 			return localize('toolInvoke.edit', "Editing file");
 		}
 		case CopilotToolName.Write: {
 			const args = parameters as ICopilotFileToolArgs | undefined;
-			if (args?.file_path) {
-				return localize('toolInvoke.writeFile', "Writing to {0}", args.file_path);
+			if (args?.path) {
+				return localize('toolInvoke.writeFile', "Writing to {0}", args.path);
 			}
 			return localize('toolInvoke.write', "Writing file");
 		}
@@ -218,22 +226,22 @@ export function getPastTenseMessage(toolName: string, displayName: string, param
 	switch (toolName) {
 		case CopilotToolName.View: {
 			const args = parameters as ICopilotFileToolArgs | undefined;
-			if (args?.file_path) {
-				return localize('toolComplete.viewFile', "Read {0}", args.file_path);
+			if (args?.path) {
+				return localize('toolComplete.viewFile', "Read {0}", args.path);
 			}
 			return localize('toolComplete.view', "Read file");
 		}
 		case CopilotToolName.Edit: {
 			const args = parameters as ICopilotFileToolArgs | undefined;
-			if (args?.file_path) {
-				return localize('toolComplete.editFile', "Edited {0}", args.file_path);
+			if (args?.path) {
+				return localize('toolComplete.editFile', "Edited {0}", args.path);
 			}
 			return localize('toolComplete.edit', "Edited file");
 		}
 		case CopilotToolName.Write: {
 			const args = parameters as ICopilotFileToolArgs | undefined;
-			if (args?.file_path) {
-				return localize('toolComplete.writeFile', "Wrote to {0}", args.file_path);
+			if (args?.path) {
+				return localize('toolComplete.writeFile', "Wrote to {0}", args.path);
 			}
 			return localize('toolComplete.write', "Wrote file");
 		}
diff --git a/src/vs/platform/agentHost/node/copilot/fileEditTracker.ts b/src/vs/platform/agentHost/node/copilot/fileEditTracker.ts
index 5d65e6e5ca8..b7e959c5a80 100644
--- a/src/vs/platform/agentHost/node/copilot/fileEditTracker.ts
+++ b/src/vs/platform/agentHost/node/copilot/fileEditTracker.ts
@@ -10,18 +10,16 @@ import { ILogService } from '../../../log/common/log.js';
 import { ISessionDataService } from '../../common/sessionDataService.js';
 import { ToolResultContentType, type IToolResultFileEditContent } from '../../common/state/sessionState.js';
 
-/** Scheme used for content URIs served via fetchContent. */
-export const AGENT_CONTENT_SCHEME = 'agenthost-content';
-
 /**
  * Tracks file edits made by tools in a session by snapshotting file content
- * before and after each edit tool invocation.
+ * before each edit tool invocation.
  *
- * Before/after content is stored in the session data directory under
- * `file-edits/{editKey}/before` and `file-edits/{editKey}/after`.
+ * Before-snapshots are stored in the session data directory under
+ * `file-edits/{editKey}/before` and addressable via URIs of the form:
+ * `agenthost-content://[authority]/[sessionId]/file-edits/{editKey}/before`
  *
- * Content is addressable via URIs of the form:
- * `agenthost-content:///{sessionId}/file-edits/{editKey}/before`
+ * The after-content is the real file on the agent host, accessible via
+ * the `agenthost://` filesystem provider.
  */
 export class FileEditTracker {
 
@@ -29,7 +27,7 @@ export class FileEditTracker {
 	 * Pending edits keyed by file path. The `onPreToolUse` hook stores
 	 * entries here; `completeEdit` pops them when the tool finishes.
 	 */
-	private readonly _pendingEdits = new Map<string, { editKey: string; snapshotDone: Promise<void> }>();
+	private readonly _pendingEdits = new Map<string, { editKey: string; beforeUri: URI; snapshotDone: Promise<void> }>();
 
 	/**
 	 * Completed edits keyed by file path. The `onPostToolUse` hook stores
@@ -59,14 +57,15 @@ export class FileEditTracker {
 		const beforeUri = URI.joinPath(sessionDataDir, 'file-edits', editKey, 'before');
 
 		const snapshotDone = this._snapshotFile(filePath, beforeUri);
-		this._pendingEdits.set(filePath, { editKey, snapshotDone });
+		this._pendingEdits.set(filePath, { editKey, beforeUri, snapshotDone });
 		await snapshotDone;
 	}
 
 	/**
 	 * Call from the `onPostToolUse` hook after an edit tool finishes.
-	 * Snapshots the file's current content as the "after" state and stores
-	 * the result for later synchronous retrieval via {@link takeCompletedEdit}.
+	 * Stores the result for later synchronous retrieval via {@link takeCompletedEdit}.
+	 * The `beforeURI` points to the stored snapshot; the `afterURI` is
+	 * the real file path (the tool already modified it on disk).
 	 *
 	 * @param filePath - Absolute path of the file that was edited.
 	 */
@@ -78,42 +77,16 @@ export class FileEditTracker {
 		this._pendingEdits.delete(filePath);
 		await pending.snapshotDone;
 
+		// Snapshot the after-content into session data so it remains
+		// stable even if the file is modified again later.
 		const sessionDataDir = this._sessionDataService.getSessionDataDirById(this._sessionId);
-		const editDir = URI.joinPath(sessionDataDir, 'file-edits', pending.editKey);
-
-		// Snapshot the file after the edit
-		const afterUri = URI.joinPath(editDir, 'after');
-		let afterContent: string;
-		try {
-			const fileUri = URI.file(filePath);
-			const afterData = await this._fileService.readFile(fileUri);
-			afterContent = afterData.value.toString();
-			await this._fileService.writeFile(afterUri, afterData.value);
-		} catch {
-			afterContent = '';
-			await this._fileService.writeFile(afterUri, VSBuffer.fromString('')).catch(() => { });
-		}
-
-		// Read the before content for diff stats
-		let beforeContent: string;
-		try {
-			const beforeData = await this._fileService.readFile(URI.joinPath(editDir, 'before'));
-			beforeContent = beforeData.value.toString();
-		} catch {
-			beforeContent = '';
-		}
-
-		const beforeLines = beforeContent ? beforeContent.split('\n').length : 0;
-		const afterLines = afterContent ? afterContent.split('\n').length : 0;
+		const afterUri = URI.joinPath(sessionDataDir, 'file-edits', pending.editKey, 'after');
+		await this._snapshotFile(filePath, afterUri);
 
 		this._completedEdits.set(filePath, {
 			type: ToolResultContentType.FileEdit,
-			beforeURI: `${AGENT_CONTENT_SCHEME}:///${this._sessionId}/file-edits/${pending.editKey}/before`,
-			afterURI: `${AGENT_CONTENT_SCHEME}:///${this._sessionId}/file-edits/${pending.editKey}/after`,
-			diff: {
-				added: Math.max(0, afterLines - beforeLines),
-				removed: Math.max(0, beforeLines - afterLines),
-			},
+			beforeURI: pending.beforeUri.toString(),
+			afterURI: afterUri.toString(),
 		});
 	}
 
@@ -139,32 +112,6 @@ export class FileEditTracker {
 			await this._fileService.writeFile(targetUri, VSBuffer.fromString('')).catch(() => { });
 		}
 	}
-
-	/**
-	 * Resolves an `agenthost-content:` URI to the stored file on disk.
-	 * Returns `undefined` if the URI doesn't match the expected format.
-	 */
-	static resolveContentUri(uri: string, sessionDataService: ISessionDataService): URI | undefined {
-		// agenthost-content:///sessionId/file-edits/editKey/before|after
-		try {
-			const parsed = URI.parse(uri);
-			if (parsed.scheme !== AGENT_CONTENT_SCHEME) {
-				return undefined;
-			}
-			const parts = parsed.path.split('/').filter(Boolean);
-			if (parts.length !== 4 || parts[1] !== 'file-edits') {
-				return undefined;
-			}
-			const [sessionId, , editKey, snapshot] = parts;
-			if (snapshot !== 'before' && snapshot !== 'after') {
-				return undefined;
-			}
-			const sessionDataDir = sessionDataService.getSessionDataDirById(sessionId);
-			return URI.joinPath(sessionDataDir, 'file-edits', editKey, snapshot);
-		} catch {
-			return undefined;
-		}
-	}
 }
 
 let _editKeyCounter = 0;
diff --git a/src/vs/sessions/contrib/remoteAgentHost/test/browser/agentHostFileSystemProvider.test.ts b/src/vs/platform/agentHost/test/common/agentHostFileSystemProvider.test.ts
similarity index 72%
rename from src/vs/sessions/contrib/remoteAgentHost/test/browser/agentHostFileSystemProvider.test.ts
rename to src/vs/platform/agentHost/test/common/agentHostFileSystemProvider.test.ts
index b4396b54d59..e2efbd33cdb 100644
--- a/src/vs/sessions/contrib/remoteAgentHost/test/browser/agentHostFileSystemProvider.test.ts
+++ b/src/vs/platform/agentHost/test/common/agentHostFileSystemProvider.test.ts
@@ -4,29 +4,25 @@
  *--------------------------------------------------------------------------------------------*/
 
 import assert from 'assert';
-import { URI } from '../../../../../base/common/uri.js';
-import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../base/test/common/utils.js';
-import { AGENT_HOST_FS_SCHEME, agentHostRemotePath, agentHostUri } from '../../browser/agentHostFileSystemProvider.js';
-import { agentHostAuthority } from '../../browser/remoteAgentHost.contribution.js';
+import { URI } from '../../../../base/common/uri.js';
+import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../base/test/common/utils.js';
+import { agentHostRemotePath, agentHostUri } from '../../common/agentHostFileSystemProvider.js';
+import { AGENT_HOST_SCHEME, agentHostAuthority } from '../../common/agentHostUri.js';
 
 suite('AgentHostFileSystemProvider - URI helpers', () => {
 
 	ensureNoDisposablesAreLeakedInTestSuite();
 
 	test('agentHostUri builds correct URI', () => {
-		const uri = agentHostUri('localhost:8081', '/home/user/project');
-		assert.strictEqual(uri.scheme, AGENT_HOST_FS_SCHEME);
-		assert.strictEqual(uri.authority, 'localhost:8081');
-		assert.strictEqual(uri.path, '/home/user/project');
+		const uri = agentHostUri('localhost', '/home/user/project');
+		assert.strictEqual(uri.scheme, AGENT_HOST_SCHEME);
+		assert.strictEqual(uri.authority, 'localhost');
+		// path encodes file scheme: /file//home/user/project
+		assert.ok(uri.path.includes('/home/user/project'));
 	});
 
-	test('agentHostUri defaults to root path', () => {
-		const uri = agentHostUri('localhost:8081', '');
-		assert.strictEqual(uri.path, '/');
-	});
-
-	test('agentHostRemotePath extracts the path component', () => {
-		const uri = URI.from({ scheme: AGENT_HOST_FS_SCHEME, authority: 'host', path: '/some/path' });
+	test('agentHostRemotePath extracts the original path', () => {
+		const uri = agentHostUri('host', '/some/path');
 		assert.strictEqual(agentHostRemotePath(uri), '/some/path');
 	});
 
@@ -61,7 +57,7 @@ suite('AgentHostAuthority - encoding', () => {
 		const addresses = ['localhost', 'localhost:8081', 'user@host:8080', 'host with spaces', '192.168.1.1:9090'];
 		for (const address of addresses) {
 			const authority = agentHostAuthority(address);
-			const uri = URI.from({ scheme: AGENT_HOST_FS_SCHEME, authority, path: '/test' });
+			const uri = URI.from({ scheme: AGENT_HOST_SCHEME, authority, path: '/test' });
 			assert.strictEqual(uri.authority, authority, `authority for '${address}' must round-trip through URI`);
 		}
 	});
diff --git a/src/vs/platform/agentHost/test/node/fileEditTracker.test.ts b/src/vs/platform/agentHost/test/node/fileEditTracker.test.ts
index 3fad7ee4a70..8679dab91e4 100644
--- a/src/vs/platform/agentHost/test/node/fileEditTracker.test.ts
+++ b/src/vs/platform/agentHost/test/node/fileEditTracker.test.ts
@@ -15,7 +15,7 @@ import { NullLogService } from '../../../log/common/log.js';
 import { ISessionDataService } from '../../common/sessionDataService.js';
 import { ToolResultContentType } from '../../common/state/sessionState.js';
 import { SessionDataService } from '../../node/sessionDataService.js';
-import { AGENT_CONTENT_SCHEME, FileEditTracker } from '../../node/copilot/fileEditTracker.js';
+import { FileEditTracker } from '../../node/copilot/fileEditTracker.js';
 
 suite('FileEditTracker', () => {
 
@@ -48,8 +48,10 @@ suite('FileEditTracker', () => {
 		const fileEdit = tracker.takeCompletedEdit('/workspace/test.txt');
 		assert.ok(fileEdit);
 		assert.strictEqual(fileEdit.type, ToolResultContentType.FileEdit);
-		assert.strictEqual(fileEdit.diff?.added, 1);
-		assert.strictEqual(fileEdit.diff?.removed, 0);
+		// Both URIs point to snapshots in the session data directory
+		const sessionDir = sessionDataService.getSessionDataDirById('test-session');
+		assert.ok(fileEdit.beforeURI.startsWith(sessionDir.toString()));
+		assert.ok(fileEdit.afterURI.startsWith(sessionDir.toString()));
 	});
 
 	test('tracks edit for newly created file (no before content)', async () => {
@@ -62,8 +64,8 @@ suite('FileEditTracker', () => {
 
 		const fileEdit = tracker.takeCompletedEdit('/workspace/new-file.txt');
 		assert.ok(fileEdit);
-		assert.strictEqual(fileEdit.diff?.added, 2);
-		assert.strictEqual(fileEdit.diff?.removed, 0);
+		const sessionDir = sessionDataService.getSessionDataDirById('test-session');
+		assert.ok(fileEdit.afterURI.startsWith(sessionDir.toString()));
 	});
 
 	test('takeCompletedEdit returns undefined for unknown file path', () => {
@@ -71,53 +73,20 @@ suite('FileEditTracker', () => {
 		assert.strictEqual(result, undefined);
 	});
 
-	test('content URIs use the correct scheme and format', async () => {
+	test('before and after snapshot content can be read back', async () => {
 		const sourceFs = disposables.add(new InMemoryFileSystemProvider());
 		disposables.add(fileService.registerProvider(Schemas.file, sourceFs));
-		await fileService.writeFile(URI.file('/workspace/file.ts'), VSBuffer.fromString('code'));
+		await fileService.writeFile(URI.file('/workspace/file.ts'), VSBuffer.fromString('original'));
 
 		await tracker.trackEditStart('/workspace/file.ts');
-		await fileService.writeFile(URI.file('/workspace/file.ts'), VSBuffer.fromString('new code'));
+		await fileService.writeFile(URI.file('/workspace/file.ts'), VSBuffer.fromString('modified'));
 		await tracker.completeEdit('/workspace/file.ts');
 
 		const fileEdit = tracker.takeCompletedEdit('/workspace/file.ts');
 		assert.ok(fileEdit);
-		assert.ok(fileEdit.beforeURI.startsWith(`${AGENT_CONTENT_SCHEME}:///test-session/file-edits/`));
-		assert.ok(fileEdit.afterURI.startsWith(`${AGENT_CONTENT_SCHEME}:///test-session/file-edits/`));
-		assert.ok(fileEdit.beforeURI.endsWith('/before'));
-		assert.ok(fileEdit.afterURI.endsWith('/after'));
-	});
-
-	test('resolveContentUri maps to session data directory', async () => {
-		const sourceFs = disposables.add(new InMemoryFileSystemProvider());
-		disposables.add(fileService.registerProvider(Schemas.file, sourceFs));
-		await fileService.writeFile(URI.file('/workspace/resolve.txt'), VSBuffer.fromString('x'));
-
-		await tracker.trackEditStart('/workspace/resolve.txt');
-		await tracker.completeEdit('/workspace/resolve.txt');
-
-		const fileEdit = tracker.takeCompletedEdit('/workspace/resolve.txt');
-		assert.ok(fileEdit);
-
-		const resolved = FileEditTracker.resolveContentUri(fileEdit.beforeURI, sessionDataService);
-		assert.ok(resolved);
-		const sessionDir = sessionDataService.getSessionDataDirById('test-session');
-		assert.ok(resolved.toString().startsWith(sessionDir.toString()));
-	});
-
-	test('resolveContentUri returns undefined for unknown scheme', () => {
-		const resolved = FileEditTracker.resolveContentUri(
-			'https:///test-session/file-edits/tc-1/before',
-			sessionDataService,
-		);
-		assert.strictEqual(resolved, undefined);
-	});
-
-	test('resolveContentUri returns undefined for invalid path', () => {
-		const resolved = FileEditTracker.resolveContentUri(
-			`${AGENT_CONTENT_SCHEME}:///test-session/invalid/path`,
-			sessionDataService,
-		);
-		assert.strictEqual(resolved, undefined);
+		const beforeContent = await fileService.readFile(URI.parse(fileEdit.beforeURI));
+		assert.strictEqual(beforeContent.value.toString(), 'original');
+		const afterContent = await fileService.readFile(URI.parse(fileEdit.afterURI));
+		assert.strictEqual(afterContent.value.toString(), 'modified');
 	});
 });
diff --git a/src/vs/platform/label/common/label.ts b/src/vs/platform/label/common/label.ts
index 1da00285dc8..11d3f7c7d92 100644
--- a/src/vs/platform/label/common/label.ts
+++ b/src/vs/platform/label/common/label.ts
@@ -66,4 +66,10 @@ export interface ResourceLabelFormatting {
 	workspaceTooltip?: string;
 	authorityPrefix?: string;
 	stripPathStartingSeparator?: boolean;
+	/**
+	 * Number of leading path segments to strip from `${path}` before
+	 * substitution. For example, a value of `2` turns
+	 * `/scheme/authority/rest/of/path` into `/rest/of/path`.
+	 */
+	stripPathSegments?: number;
 }
diff --git a/src/vs/sessions/contrib/remoteAgentHost/browser/remoteAgentHost.contribution.ts b/src/vs/sessions/contrib/remoteAgentHost/browser/remoteAgentHost.contribution.ts
index 92941d06af8..66ff48bdbbf 100644
--- a/src/vs/sessions/contrib/remoteAgentHost/browser/remoteAgentHost.contribution.ts
+++ b/src/vs/sessions/contrib/remoteAgentHost/browser/remoteAgentHost.contribution.ts
@@ -4,42 +4,30 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { Disposable, DisposableMap, DisposableStore, toDisposable } from '../../../../base/common/lifecycle.js';
-import { encodeBase64, VSBuffer } from '../../../../base/common/buffer.js';
-import { ILogService, LogLevel } from '../../../../platform/log/common/log.js';
 import { URI } from '../../../../base/common/uri.js';
-import { IOutputService } from '../../../../workbench/services/output/common/output.js';
-import { IAuthenticationService } from '../../../../workbench/services/authentication/common/authentication.js';
-import { IInstantiationService } from '../../../../platform/instantiation/common/instantiation.js';
-import { IDefaultAccountService } from '../../../../platform/defaultAccount/common/defaultAccount.js';
+import { AgentHostFileSystemProvider } from '../../../../platform/agentHost/common/agentHostFileSystemProvider.js';
+import { AGENT_HOST_LABEL_FORMATTER, AGENT_HOST_SCHEME, agentHostAuthority } from '../../../../platform/agentHost/common/agentHostUri.js';
 import { type AgentProvider, type IAgentConnection } from '../../../../platform/agentHost/common/agentService.js';
+import { IRemoteAgentHostService } from '../../../../platform/agentHost/common/remoteAgentHostService.js';
 import { isSessionAction } from '../../../../platform/agentHost/common/state/sessionActions.js';
 import { SessionClientState } from '../../../../platform/agentHost/common/state/sessionClientState.js';
 import { ROOT_STATE_URI, type IAgentInfo, type IRootState } from '../../../../platform/agentHost/common/state/sessionState.js';
-import { IRemoteAgentHostService } from '../../../../platform/agentHost/common/remoteAgentHostService.js';
+import { IDefaultAccountService } from '../../../../platform/defaultAccount/common/defaultAccount.js';
+import { IFileService } from '../../../../platform/files/common/files.js';
+import { IInstantiationService } from '../../../../platform/instantiation/common/instantiation.js';
+import { ILabelService } from '../../../../platform/label/common/label.js';
+import { ILogService, LogLevel } from '../../../../platform/log/common/log.js';
 import { IWorkbenchContribution, registerWorkbenchContribution2, WorkbenchPhase } from '../../../../workbench/common/contributions.js';
-import { IChatSessionsService } from '../../../../workbench/contrib/chat/common/chatSessionsService.js';
-import { ILanguageModelsService } from '../../../../workbench/contrib/chat/common/languageModels.js';
+import { resolveTokenForResource } from '../../../../workbench/contrib/chat/browser/agentSessions/agentHost/agentHostAuth.js';
 import { AgentHostLanguageModelProvider } from '../../../../workbench/contrib/chat/browser/agentSessions/agentHost/agentHostLanguageModelProvider.js';
 import { AgentHostSessionHandler } from '../../../../workbench/contrib/chat/browser/agentSessions/agentHost/agentHostSessionHandler.js';
 import { AgentHostSessionListController } from '../../../../workbench/contrib/chat/browser/agentSessions/agentHost/agentHostSessionListController.js';
+import { IChatSessionsService } from '../../../../workbench/contrib/chat/common/chatSessionsService.js';
+import { ILanguageModelsService } from '../../../../workbench/contrib/chat/common/languageModels.js';
+import { IAuthenticationService } from '../../../../workbench/services/authentication/common/authentication.js';
+import { IOutputService } from '../../../../workbench/services/output/common/output.js';
 import { ISessionsManagementService } from '../../../contrib/sessions/browser/sessionsManagementService.js';
-import { IFileService } from '../../../../platform/files/common/files.js';
-import { AGENT_HOST_FS_SCHEME, AgentHostFileSystemProvider } from './agentHostFileSystemProvider.js';
 
-/**
- * Encode a remote address into an identifier that is safe for use in
- * both URI schemes and URI authorities, and is collision-free.
- *
- * If the address contains only alphanumeric characters it is returned as-is.
- * Otherwise it is url-safe base64-encoded (no padding) to guarantee the
- * result contains only `[A-Za-z0-9_-]`.
- */
-export function agentHostAuthority(address: string): string {
-	if (/^[a-zA-Z0-9]+$/.test(address)) {
-		return address;
-	}
-	return 'b64-' + encodeBase64(VSBuffer.fromString(address), false, true);
-}
 
 /** Per-connection state bundle, disposed when a connection is removed. */
 class ConnectionState extends Disposable {
@@ -89,13 +77,17 @@ export class RemoteAgentHostContribution extends Disposable implements IWorkbenc
 		@IDefaultAccountService private readonly _defaultAccountService: IDefaultAccountService,
 		@ISessionsManagementService private readonly _sessionsManagementService: ISessionsManagementService,
 		@IFileService private readonly _fileService: IFileService,
+		@ILabelService private readonly _labelService: ILabelService,
 	) {
 		super();
 
 		// Register a single read-only filesystem provider for all remote agent
 		// hosts. Individual connections are identified by the URI authority.
-		this._fsProvider = this._register(this._instantiationService.createInstance(AgentHostFileSystemProvider));
-		this._register(this._fileService.registerProvider(AGENT_HOST_FS_SCHEME, this._fsProvider));
+		this._fsProvider = this._register(new AgentHostFileSystemProvider());
+		this._register(this._fileService.registerProvider(AGENT_HOST_SCHEME, this._fsProvider));
+
+		// Display agent-host URIs with the original file path
+		this._register(this._labelService.registerFormatter(AGENT_HOST_LABEL_FORMATTER));
 
 		// Reconcile when connections change (added/removed/reconnected)
 		this._register(this._remoteAgentHostService.onDidChangeConnections(() => {
@@ -147,9 +139,9 @@ export class RemoteAgentHostContribution extends Disposable implements IWorkbenc
 		this._connections.set(address, connState);
 		const store = connState.store;
 
-		// Track authority -> address mapping for FS provider routing
+		// Track authority -> connection mapping for FS provider routing
 		const authority = agentHostAuthority(address);
-		store.add(this._fsProvider.registerAuthority(authority, address));
+		store.add(this._fsProvider.registerAuthority(authority, connection));
 
 		// Forward non-session actions to client state
 		store.add(connection.onDidAction(envelope => {
@@ -280,6 +272,7 @@ export class RemoteAgentHostContribution extends Disposable implements IWorkbenc
 			fullName: displayName,
 			description: agent.description,
 			connection,
+			connectionAuthority: sanitized,
 			extensionId: 'vscode.remote-agent-host',
 			extensionDisplayName: 'Remote Agent Host',
 			resolveWorkingDirectory,
@@ -336,21 +329,8 @@ export class RemoteAgentHostContribution extends Disposable implements IWorkbenc
 	 * Resolve a bearer token for a set of authorization servers using the
 	 * standard VS Code authentication service provider resolution.
 	 */
-	private async _resolveTokenForResource(resourceServer: URI, authorizationServers: readonly string[], scopes: readonly string[]): Promise<string | undefined> {
-		for (const server of authorizationServers) {
-			const serverUri = URI.parse(server);
-			const providerId = await this._authenticationService.getOrActivateProviderIdForServer(serverUri, resourceServer);
-			if (!providerId) {
-				this._logService.trace(`[RemoteAgentHost] No auth provider found for server: ${server}`);
-				continue;
-			}
-
-			const sessions = await this._authenticationService.getSessions(providerId, [...scopes], { authorizationServer: serverUri }, true);
-			if (sessions.length > 0) {
-				return sessions[0].accessToken;
-			}
-		}
-		return undefined;
+	private _resolveTokenForResource(resourceServer: URI, authorizationServers: readonly string[], scopes: readonly string[]): Promise<string | undefined> {
+		return resolveTokenForResource(resourceServer, authorizationServers, scopes, this._authenticationService, this._logService, '[RemoteAgentHost]');
 	}
 
 	/**
diff --git a/src/vs/sessions/contrib/workspace/browser/workspaceFolderManagement.ts b/src/vs/sessions/contrib/workspace/browser/workspaceFolderManagement.ts
index 5c998b71832..fe3a528e0ba 100644
--- a/src/vs/sessions/contrib/workspace/browser/workspaceFolderManagement.ts
+++ b/src/vs/sessions/contrib/workspace/browser/workspaceFolderManagement.ts
@@ -16,7 +16,7 @@ import { autorun } from '../../../../base/common/observable.js';
 import { IWorkspaceFolderCreationData } from '../../../../platform/workspaces/common/workspaces.js';
 import { getGitHubRemoteFileDisplayName } from '../../fileTreeView/browser/githubFileSystemProvider.js';
 import { Queue } from '../../../../base/common/async.js';
-import { AGENT_HOST_FS_SCHEME } from '../../remoteAgentHost/browser/agentHostFileSystemProvider.js';
+import { AGENT_HOST_SCHEME } from '../../../../platform/agentHost/common/agentHostUri.js';
 
 export class WorkspaceFolderManagementContribution extends Disposable implements IWorkbenchContribution {
 
@@ -76,7 +76,7 @@ export class WorkspaceFolderManagementContribution extends Disposable implements
 		if (session.repository) {
 			// Remote agent host sessions use a read-only FS provider that
 			// should not be added as a workspace folder.
-			if (session.repository.scheme === AGENT_HOST_FS_SCHEME) {
+			if (session.repository.scheme === AGENT_HOST_SCHEME) {
 				return undefined;
 			}
 
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostAuth.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostAuth.ts
new file mode 100644
index 00000000000..75ad8c68014
--- /dev/null
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostAuth.ts
@@ -0,0 +1,66 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { URI } from '../../../../../../base/common/uri.js';
+import { ILogService } from '../../../../../../platform/log/common/log.js';
+import { IAuthenticationService } from '../../../../../services/authentication/common/authentication.js';
+
+/**
+ * Resolves a bearer token for a protected resource by trying each
+ * authorization server in order. First attempts an exact scope match,
+ * then falls back to finding the session whose scopes are the narrowest
+ * superset of the requested scopes.
+ */
+export async function resolveTokenForResource(
+	resourceServer: URI,
+	authorizationServers: readonly string[],
+	scopes: readonly string[],
+	authenticationService: IAuthenticationService,
+	logService: ILogService,
+	logPrefix: string,
+): Promise<string | undefined> {
+	for (const server of authorizationServers) {
+		const serverUri = URI.parse(server);
+		const providerId = await authenticationService.getOrActivateProviderIdForServer(serverUri, resourceServer);
+		if (!providerId) {
+			logService.trace(`${logPrefix} No auth provider found for server: ${server}`);
+			continue;
+		}
+		logService.trace(`${logPrefix} Resolved auth provider '${providerId}' for server: ${server}`);
+
+		// Try exact scope match first
+		const sessions = await authenticationService.getSessions(providerId, [...scopes], { authorizationServer: serverUri }, true);
+		if (sessions.length > 0) {
+			return sessions[0].accessToken;
+		}
+
+		// Fall back: get all sessions and find the narrowest superset of requested scopes
+		const allSessions = await authenticationService.getSessions(providerId, undefined, { authorizationServer: serverUri }, true);
+		const requestedSet = new Set(scopes);
+		let bestToken: string | undefined;
+		let bestExtraScopes = Infinity;
+		for (const session of allSessions) {
+			const sessionScopes = new Set(session.scopes);
+			let isSuperset = true;
+			for (const scope of requestedSet) {
+				if (!sessionScopes.has(scope)) {
+					isSuperset = false;
+					break;
+				}
+			}
+			if (isSuperset) {
+				const extraScopes = sessionScopes.size - requestedSet.size;
+				if (extraScopes < bestExtraScopes) {
+					bestExtraScopes = extraScopes;
+					bestToken = session.accessToken;
+				}
+			}
+		}
+		if (bestToken) {
+			return bestToken;
+		}
+	}
+	return undefined;
+}
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostChatContribution.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostChatContribution.ts
index c87e45bead2..b8023374610 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostChatContribution.ts
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostChatContribution.ts
@@ -6,12 +6,16 @@
 import { Disposable, DisposableMap, DisposableStore, toDisposable } from '../../../../../../base/common/lifecycle.js';
 import { URI } from '../../../../../../base/common/uri.js';
 import { IConfigurationService } from '../../../../../../platform/configuration/common/configuration.js';
+import { AgentHostFileSystemProvider } from '../../../../../../platform/agentHost/common/agentHostFileSystemProvider.js';
 import { IAgentHostService, AgentHostEnabledSettingId, type AgentProvider } from '../../../../../../platform/agentHost/common/agentService.js';
+import { AGENT_HOST_LABEL_FORMATTER, AGENT_HOST_SCHEME } from '../../../../../../platform/agentHost/common/agentHostUri.js';
 import { isSessionAction } from '../../../../../../platform/agentHost/common/state/sessionActions.js';
 import { SessionClientState } from '../../../../../../platform/agentHost/common/state/sessionClientState.js';
 import { ROOT_STATE_URI, type IAgentInfo, type IRootState } from '../../../../../../platform/agentHost/common/state/sessionState.js';
 import { IDefaultAccountService } from '../../../../../../platform/defaultAccount/common/defaultAccount.js';
+import { IFileService } from '../../../../../../platform/files/common/files.js';
 import { IInstantiationService } from '../../../../../../platform/instantiation/common/instantiation.js';
+import { ILabelService } from '../../../../../../platform/label/common/label.js';
 import { ILogService, LogLevel } from '../../../../../../platform/log/common/log.js';
 import { Registry } from '../../../../../../platform/registry/common/platform.js';
 import { IWorkbenchContribution } from '../../../../../common/contributions.js';
@@ -19,6 +23,7 @@ import { IAuthenticationService } from '../../../../../services/authentication/c
 import { Extensions, IOutputChannel, IOutputChannelRegistry, IOutputService } from '../../../../../services/output/common/output.js';
 import { IChatSessionsService } from '../../../common/chatSessionsService.js';
 import { ILanguageModelsService } from '../../../common/languageModels.js';
+import { resolveTokenForResource } from './agentHostAuth.js';
 import { AgentHostLanguageModelProvider } from './agentHostLanguageModelProvider.js';
 import { AgentHostSessionHandler } from './agentHostSessionHandler.js';
 import { AgentHostSessionListController } from './agentHostSessionListController.js';
@@ -55,6 +60,8 @@ export class AgentHostContribution extends Disposable implements IWorkbenchContr
 		@ILanguageModelsService private readonly _languageModelsService: ILanguageModelsService,
 		@IOutputService private readonly _outputService: IOutputService,
 		@IInstantiationService private readonly _instantiationService: IInstantiationService,
+		@IFileService private readonly _fileService: IFileService,
+		@ILabelService private readonly _labelService: ILabelService,
 		@IConfigurationService configurationService: IConfigurationService,
 	) {
 		super();
@@ -65,6 +72,15 @@ export class AgentHostContribution extends Disposable implements IWorkbenchContr
 
 		this._setupIpcLogging();
 
+		// Register a read-only filesystem provider for the local agent host
+		// so that agent-host-scheme URIs with 'local' authority can be resolved.
+		const fsProvider = this._register(new AgentHostFileSystemProvider());
+		this._register(fsProvider.registerAuthority('local', this._agentHostService));
+		this._register(this._fileService.registerProvider(AGENT_HOST_SCHEME, fsProvider));
+
+		// Display agent-host URIs with the original file path
+		this._register(this._labelService.registerFormatter(AGENT_HOST_LABEL_FORMATTER));
+
 		// Shared client state for protocol reconciliation
 		this._clientState = this._register(new SessionClientState(this._agentHostService.clientId, this._logService));
 
@@ -219,6 +235,7 @@ export class AgentHostContribution extends Disposable implements IWorkbenchContr
 			fullName: agent.displayName,
 			description: agent.description,
 			connection: this._agentHostService,
+			connectionAuthority: 'local',
 			resolveAuthentication: () => this._resolveAuthenticationInteractively(),
 		}));
 		store.add(this._chatSessionsService.registerChatSessionContentProvider(sessionType, sessionHandler));
@@ -269,24 +286,8 @@ export class AgentHostContribution extends Disposable implements IWorkbenchContr
 	 * Resolve a bearer token for a set of authorization servers using the
 	 * standard VS Code authentication service provider resolution.
 	 */
-	private async _resolveTokenForResource(resourceServer: URI, authorizationServers: readonly string[], scopes: readonly string[]): Promise<string | undefined> {
-		for (const server of authorizationServers) {
-			const serverUri = URI.parse(server);
-			const providerId = await this._authenticationService.getOrActivateProviderIdForServer(serverUri, resourceServer);
-			if (!providerId) {
-				this._logService.trace(`[AgentHost] No auth provider found for server: ${server}`);
-				continue;
-			}
-			this._logService.trace(`[AgentHost] Resolved auth provider '${providerId}' for server: ${server}`);
-
-			const sessions = await this._authenticationService.getSessions(providerId, [...scopes], { authorizationServer: serverUri }, true);
-			if (sessions.length > 0) {
-				return sessions[0].accessToken;
-			}
-
-			this._logService.trace(`[AgentHost] No sessions found for provider '${providerId}'`);
-		}
-		return undefined;
+	private _resolveTokenForResource(resourceServer: URI, authorizationServers: readonly string[], scopes: readonly string[]): Promise<string | undefined> {
+		return resolveTokenForResource(resourceServer, authorizationServers, scopes, this._authenticationService, this._logService, '[AgentHost]');
 	}
 
 	/**
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostSessionHandler.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostSessionHandler.ts
index c12d76c2766..af846c596bd 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostSessionHandler.ts
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/agentHostSessionHandler.ts
@@ -24,11 +24,12 @@ import { getToolKind, getToolLanguage } from '../../../../../../platform/agentHo
 import { AttachmentType, ToolCallStatus, TurnState, type IMessageAttachment } from '../../../../../../platform/agentHost/common/state/sessionState.js';
 import { ChatAgentLocation, ChatModeKind } from '../../../common/constants.js';
 import { IChatAgentData, IChatAgentImplementation, IChatAgentRequest, IChatAgentResult, IChatAgentService } from '../../../common/participants/chatAgents.js';
-import { IChatProgress, IChatToolInvocation, ToolConfirmKind } from '../../../common/chatService/chatService.js';
+import { IChatProgress, IChatService, IChatToolInvocation, ToolConfirmKind } from '../../../common/chatService/chatService.js';
 import { ChatToolInvocation } from '../../../common/model/chatProgressTypes/chatToolInvocation.js';
 import { IChatSession, IChatSessionContentProvider, IChatSessionHistoryItem } from '../../../common/chatSessionsService.js';
+import { toAgentHostUri } from '../../../../../../platform/agentHost/common/agentHostUri.js';
 import { getAgentHostIcon } from '../agentSessions.js';
-import { turnsToHistory, toolCallStateToInvocation, permissionToConfirmation, finalizeToolInvocation } from './stateToProgressAdapter.js';
+import { turnsToHistory, toolCallStateToInvocation, permissionToConfirmation, finalizeToolInvocation, type IToolCallFileEdit } from './stateToProgressAdapter.js';
 
 // =============================================================================
 // AgentHostSessionHandler — renderer-side handler for a single agent host
@@ -89,6 +90,8 @@ export interface IAgentHostSessionHandlerConfig {
 	readonly description: string;
 	/** The agent connection to use for this handler. */
 	readonly connection: IAgentConnection;
+	/** Sanitized connection authority for constructing vscode-agent-host:// URIs. */
+	readonly connectionAuthority: string;
 	/** Extension identifier for the registered agent. Defaults to 'vscode.agent-host'. */
 	readonly extensionId?: string;
 	/** Extension display name for the registered agent. Defaults to 'Agent Host'. */
@@ -119,6 +122,7 @@ export class AgentHostSessionHandler extends Disposable implements IChatSessionC
 	constructor(
 		config: IAgentHostSessionHandlerConfig,
 		@IChatAgentService private readonly _chatAgentService: IChatAgentService,
+		@IChatService private readonly _chatService: IChatService,
 		@ILogService private readonly _logService: ILogService,
 		@IProductService private readonly _productService: IProductService,
 		@IWorkspaceContextService private readonly _workspaceContextService: IWorkspaceContextService,
@@ -310,11 +314,14 @@ export class AgentHostSessionHandler extends Disposable implements IChatSessionC
 		const done = new Promise<void>(resolve => { resolveDone = resolve; });
 
 		let finished = false;
-		const finish = () => {
+		const pendingFileEdits: Promise<void>[] = [];
+		const finish = async () => {
 			if (finished) {
 				return;
 			}
 			finished = true;
+			// Wait for any in-flight file edit operations before finalizing
+			await Promise.allSettled(pendingFileEdits);
 			// Finalize any outstanding tool invocations
 			for (const [, invocation] of activeToolInvocations) {
 				invocation.didExecuteTool(undefined);
@@ -370,7 +377,12 @@ export class AgentHostSessionHandler extends Disposable implements IChatSessionC
 					}
 				} else if (tc.status === ToolCallStatus.Completed || tc.status === ToolCallStatus.Cancelled) {
 					activeToolInvocations.delete(toolCallId);
-					finalizeToolInvocation(existing, tc);
+					const fileEdits = finalizeToolInvocation(existing, tc);
+					if (fileEdits.length > 0) {
+						pendingFileEdits.push(
+							this._applyFileEdits(request.sessionResource, request, fileEdits, progress)
+						);
+					}
 				} else if (tc.status === ToolCallStatus.Running || tc.status === ToolCallStatus.PendingConfirmation) {
 					// Tool transitioned from streaming to ready — update the invocation
 					// with the now-available invocationMessage and toolSpecificData.
@@ -434,6 +446,51 @@ export class AgentHostSessionHandler extends Disposable implements IChatSessionC
 		await done;
 	}
 
+	// ---- File edit routing ---------------------------------------------------
+
+	/**
+	 * Routes file edits from completed tool calls through the editing session's
+	 * external edits pipeline. Calls start/stop in sequence since the edit has
+	 * already happened on the remote by the time we receive the tool completion.
+	 */
+	private async _applyFileEdits(
+		sessionResource: URI,
+		request: IChatAgentRequest,
+		fileEdits: IToolCallFileEdit[],
+		progress: (parts: IChatProgress[]) => void,
+	): Promise<void> {
+		const chatSession = this._chatService.getSession(sessionResource);
+		const editingSession = chatSession?.editingSession;
+		const response = chatSession?.getRequests().find(req => req.id === request.requestId)?.response;
+		if (!editingSession || !response) {
+			return;
+		}
+
+		const authority = this._config.connectionAuthority;
+		const wrapUri = (uri: URI) => toAgentHostUri(uri, authority);
+
+		for (const edit of fileEdits) {
+			const operationId = this._nextOperationId++;
+			const resource = wrapUri(edit.resource);
+			const beforeUri = wrapUri(edit.beforeContentUri);
+			const afterUri = wrapUri(edit.afterContentUri);
+
+			const startProgress = await editingSession.startExternalEdits(
+				response, operationId, [resource], edit.undoStopId,
+				[beforeUri],
+			);
+			progress(startProgress);
+
+			const stopProgress = await editingSession.stopExternalEdits(
+				response, operationId,
+				[afterUri],
+			);
+			progress(stopProgress);
+		}
+	}
+
+	private _nextOperationId = 0;
+
 	// ---- Session resolution -------------------------------------------------
 
 	/** Maps a UI session resource to a backend provider URI. */
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/stateToProgressAdapter.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/stateToProgressAdapter.ts
index bad97cd2521..8783104b7b5 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/stateToProgressAdapter.ts
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentHost/stateToProgressAdapter.ts
@@ -4,7 +4,9 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { IMarkdownString, MarkdownString } from '../../../../../../base/common/htmlContent.js';
-import { PermissionKind, ToolCallStatus, TurnState, getToolOutputText, type ICompletedToolCall, type IPermissionRequest, type IToolCallState, type ITurn } from '../../../../../../platform/agentHost/common/state/sessionState.js';
+import { generateUuid } from '../../../../../../base/common/uuid.js';
+import { URI } from '../../../../../../base/common/uri.js';
+import { PermissionKind, ToolCallStatus, TurnState, getToolFileEdits, getToolOutputText, type ICompletedToolCall, type IPermissionRequest, type IToolCallState, type ITurn } from '../../../../../../platform/agentHost/common/state/sessionState.js';
 import { getToolKind, getToolLanguage } from '../../../../../../platform/agentHost/common/state/sessionReducers.js';
 import { type IChatProgress, type IChatTerminalToolInvocationData, type IChatToolInputInvocationData, type IChatToolInvocationSerialized, ToolConfirmKind } from '../../../common/chatService/chatService.js';
 import { type IChatSessionHistoryItem } from '../../../common/chatSessionsService.js';
@@ -197,11 +199,29 @@ export function permissionToConfirmation(perm: IPermissionRequest): ChatToolInvo
 	return new ChatToolInvocation(preparedInvocation, toolData, perm.requestId, undefined, undefined);
 }
 
+/**
+ * Data returned by {@link finalizeToolInvocation} describing file edits
+ * that should be routed through the editing session's external edits pipeline.
+ */
+export interface IToolCallFileEdit {
+	/** The real file URI on the remote (e.g., `file:///path/to/file`). */
+	readonly resource: URI;
+	/** URI to read the before-snapshot content from. */
+	readonly beforeContentUri: URI;
+	/** URI to read the after-content from (real file on remote via agenthost:// scheme). */
+	readonly afterContentUri: URI;
+	/** Undo stop ID for grouping edits. */
+	readonly undoStopId: string;
+}
+
 /**
  * Updates a live {@link ChatToolInvocation} with completion data from the
  * protocol's tool-call state, transitioning it to the completed state.
+ *
+ * Returns file edits that the caller should route through the editing
+ * session's external edits pipeline.
  */
-export function finalizeToolInvocation(invocation: ChatToolInvocation, tc: IToolCallState): void {
+export function finalizeToolInvocation(invocation: ChatToolInvocation, tc: IToolCallState): IToolCallFileEdit[] {
 	const isCompleted = tc.status === ToolCallStatus.Completed;
 	const isCancelled = tc.status === ToolCallStatus.Cancelled;
 	const isTerminal = invocation.toolSpecificData?.kind === 'terminal' || getToolKind(tc) === 'terminal';
@@ -224,4 +244,51 @@ export function finalizeToolInvocation(invocation: ChatToolInvocation, tc: ITool
 	const errorMessage = isCompleted ? tc.error?.message : (isCancelled ? tc.reasonMessage : undefined);
 	const errorString = typeof errorMessage === 'string' ? errorMessage : errorMessage?.markdown;
 	invocation.didExecuteTool(isFailure ? { content: [], toolResultError: errorString } : undefined);
+
+	// Extract file edits for the editing session pipeline
+	return isCompleted ? fileEditsToExternalEdits(tc) : [];
+}
+
+/**
+ * Extracts file edit content entries from a completed tool call and
+ * converts them to {@link IToolCallFileEdit} data for routing through
+ * the editing session's external edits pipeline.
+ */
+function fileEditsToExternalEdits(tc: IToolCallState): IToolCallFileEdit[] {
+	if (tc.status !== ToolCallStatus.Completed) {
+		return [];
+	}
+	const edits = getToolFileEdits(tc);
+	if (edits.length === 0) {
+		return [];
+	}
+	const result: IToolCallFileEdit[] = [];
+	for (const edit of edits) {
+		const filePath = getFilePathFromToolInput(tc);
+		if (filePath) {
+			result.push({
+				resource: URI.file(filePath),
+				beforeContentUri: URI.parse(edit.beforeURI),
+				afterContentUri: URI.parse(edit.afterURI),
+				undoStopId: generateUuid(),
+			});
+		}
+	}
+	return result;
+}
+
+/**
+ * Extracts the file path from a tool call's input parameters.
+ * Edit tools store the file path in JSON parameters as `path`.
+ */
+function getFilePathFromToolInput(tc: IToolCallState): string | undefined {
+	if (tc.status !== ToolCallStatus.Completed || !tc.toolInput) {
+		return undefined;
+	}
+	try {
+		const params = JSON.parse(tc.toolInput);
+		return typeof params.path === 'string' ? params.path : undefined;
+	} catch {
+		return undefined;
+	}
 }
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingDeletedFileEntry.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingDeletedFileEntry.ts
index eeb4a37a52f..a88991de260 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingDeletedFileEntry.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingDeletedFileEntry.ts
@@ -199,6 +199,10 @@ export class ChatEditingDeletedFileEntry extends AbstractChatEditingModifiedFile
 		await this._fileService.writeFile(this.modifiedURI, VSBuffer.fromString(this._originalContent));
 	}
 
+	resetEditTrackerToInitialContent(): Promise<void> {
+		return Promise.resolve();
+	}
+
 	protected override async _areOriginalAndModifiedIdentical(): Promise<boolean> {
 		// A deleted file is never identical to its original (unless original was empty)
 		return this._originalContent === '';
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedDocumentEntry.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedDocumentEntry.ts
index d7e1b62bb3c..2353e5c4890 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedDocumentEntry.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedDocumentEntry.ts
@@ -219,6 +219,10 @@ export class ChatEditingModifiedDocumentEntry extends AbstractChatEditingModifie
 		await this._textModelChangeService.resetDocumentValues(undefined, this.initialContent);
 	}
 
+	async resetEditTrackerToInitialContent() {
+		await this._textModelChangeService.resetDocumentValues(this.initialContent, undefined);
+	}
+
 	protected override async _areOriginalAndModifiedIdentical(): Promise<boolean> {
 		return this._textModelChangeService.areOriginalAndModifiedIdentical();
 	}
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedFileEntry.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedFileEntry.ts
index 2b02a675551..7ba9d6fb55d 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedFileEntry.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedFileEntry.ts
@@ -370,7 +370,7 @@ export abstract class AbstractChatEditingModifiedFileEntry extends Disposable im
 	// --- inital content
 
 	abstract resetToInitialContent(): Promise<void>;
-
+	abstract resetEditTrackerToInitialContent(): Promise<void>;
 	abstract initialContent: string;
 
 	/**
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedNotebookEntry.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedNotebookEntry.ts
index 48073f03acf..b4c12adb8bb 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedNotebookEntry.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingModifiedNotebookEntry.ts
@@ -946,6 +946,15 @@ export class ChatEditingModifiedNotebookEntry extends AbstractChatEditingModifie
 		this.initializeModelsFromDiff();
 	}
 
+	async resetEditTrackerToInitialContent() {
+		if (this.initialContent) {
+			restoreSnapshot(this.originalModel, this.initialContent);
+		}
+
+		this.updateCellDiffInfo([], undefined);
+		this.initializeModelsFromDiff();
+	}
+
 	override async resetToInitialContent(): Promise<void> {
 		this.updateCellDiffInfo([], undefined);
 		this.restoreSnapshotInModifiedModel(this.initialContent);
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingSession.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingSession.ts
index 04343f023ce..82430843c75 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingSession.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingSession.ts
@@ -663,7 +663,7 @@ export class ChatEditingSession extends Disposable implements IChatEditingSessio
 		}
 	}
 
-	async startExternalEdits(responseModel: IChatResponseModel, operationId: number, resources: URI[], undoStopId: string): Promise<IChatProgress[]> {
+	async startExternalEdits(responseModel: IChatResponseModel, operationId: number, resources: URI[], undoStopId: string, contentFor?: URI[]): Promise<IChatProgress[]> {
 		const snapshots = new ResourceMap<string | undefined>();
 		const acquiredLockPromises: DeferredPromise<void>[] = [];
 		const releaseLockPromises: DeferredPromise<void>[] = [];
@@ -673,7 +673,9 @@ export class ChatEditingSession extends Disposable implements IChatEditingSessio
 		await chatEditingSessionIsReady(this);
 
 		// Acquire locks for each resource and take snapshots
-		for (const resource of resources) {
+		for (let i = 0; i < resources.length; i++) {
+			const resource = resources[i];
+			const contentSource = contentFor?.[i];
 			const releaseLock = new DeferredPromise<void>();
 			releaseLockPromises.push(releaseLock);
 
@@ -686,20 +688,37 @@ export class ChatEditingSession extends Disposable implements IChatEditingSessio
 					return;
 				}
 
-				const entry = await this._getOrCreateModifiedFileEntry(resource, NotExistBehavior.Abort, telemetryInfo);
+				let initialContent: string | undefined;
+				if (contentSource) {
+					// Read the before-content from the provided URI instead of disk
+					try {
+						const data = await this._fileService.readFile(contentSource);
+						initialContent = data.value.toString();
+					} catch {
+						initialContent = '';
+					}
+				}
+
+				const entry = await this._getOrCreateModifiedFileEntry(resource, NotExistBehavior.Abort, telemetryInfo, initialContent);
 				if (entry) {
 					await this._acceptStreamingEditsStart(responseModel, undoStopId, resource);
 				}
 
-
 				const notebookUri = CellUri.parse(resource)?.notebook || resource;
 				progress.push(...createOpeningEditCodeBlock(resource, this._notebookService.hasSupportedNotebooks(notebookUri), undoStopId));
 
-				// Save to disk to ensure disk state is current before external edits
-				await entry?.save();
-
-				// Take snapshot of current state
-				snapshots.set(resource, entry && this._getCurrentTextOrNotebookSnapshot(entry));
+				if (initialContent !== undefined) {
+					if (entry) {
+						entry.initialContent = initialContent;
+						await entry.resetEditTrackerToInitialContent(); // in case it's reused
+					}
+					snapshots.set(resource, initialContent);
+				} else {
+					// Save to disk to ensure disk state is current before external edits
+					await entry?.save();
+					// Take snapshot of current state
+					snapshots.set(resource, entry && this._getCurrentTextOrNotebookSnapshot(entry));
+				}
 				entry?.startExternalEdit();
 				acquiredLock.complete();
 
@@ -722,7 +741,7 @@ export class ChatEditingSession extends Disposable implements IChatEditingSessio
 		return progress;
 	}
 
-	async stopExternalEdits(responseModel: IChatResponseModel, operationId: number): Promise<IChatProgress[]> {
+	async stopExternalEdits(responseModel: IChatResponseModel, operationId: number, contentFor?: URI[]): Promise<IChatProgress[]> {
 		const operation = this._externalEditOperations.get(operationId);
 		if (!operation) {
 			this._logService.warn(`stopExternalEdits called for unknown operation ${operationId}`);
@@ -734,6 +753,18 @@ export class ChatEditingSession extends Disposable implements IChatEditingSessio
 		const progress: IChatProgress[] = [];
 
 		try {
+			// Build a map of resource -> contentFor URI
+			const contentForMap = new ResourceMap<URI>();
+			if (contentFor) {
+				let idx = 0;
+				for (const [resource] of operation.snapshots) {
+					if (idx < contentFor.length && contentFor[idx]) {
+						contentForMap.set(resource, contentFor[idx]);
+					}
+					idx++;
+				}
+			}
+
 			// For each resource, compute the diff and create edit parts
 			for (const [resource, beforeSnapshot] of operation.snapshots) {
 				let entry = this._getEntry(resource);
@@ -752,11 +783,21 @@ export class ChatEditingSession extends Disposable implements IChatEditingSessio
 					continue;
 				}
 
-				// Reload from disk to ensure in-memory model is in sync with file system
-				await entry.revertToDisk();
-
-				// Take new snapshot after external changes
-				const afterSnapshot = this._getCurrentTextOrNotebookSnapshot(entry);
+				let afterSnapshot: string;
+				const contentSource = contentForMap.get(resource);
+				if (contentSource) {
+					// Read after-content from the provided URI instead of disk
+					try {
+						const data = await this._fileService.readFile(contentSource);
+						afterSnapshot = data.value.toString();
+					} catch {
+						afterSnapshot = '';
+					}
+				} else {
+					// Reload from disk to ensure in-memory model is in sync with file system
+					await entry.revertToDisk();
+					afterSnapshot = this._getCurrentTextOrNotebookSnapshot(entry) ?? '';
+				}
 
 				// Compute edits from the snapshots
 				let edits: (TextEdit | ICellEditOperation)[] = [];
diff --git a/src/vs/workbench/contrib/chat/common/chatService/chatService.ts b/src/vs/workbench/contrib/chat/common/chatService/chatService.ts
index 8e7dc8dc246..1653dc8b33e 100644
--- a/src/vs/workbench/contrib/chat/common/chatService/chatService.ts
+++ b/src/vs/workbench/contrib/chat/common/chatService/chatService.ts
@@ -256,6 +256,13 @@ export interface IChatExternalEditsDto {
 	undoStopId: string;
 	start: boolean; /** true=start, false=stop */
 	resources: UriComponents[];
+	/**
+	 * When present, these URIs are read instead of the `resources` URIs
+	 * (by-index) when capturing file snapshots. Used by the agent host
+	 * to provide before/after content from the remote filesystem
+	 * or from stored snapshots.
+	 */
+	contentFor?: UriComponents[];
 }
 
 export interface IChatTaskDto {
diff --git a/src/vs/workbench/contrib/chat/common/editing/chatEditingService.ts b/src/vs/workbench/contrib/chat/common/editing/chatEditingService.ts
index 58b49b13fa5..0572f62a498 100644
--- a/src/vs/workbench/contrib/chat/common/editing/chatEditingService.ts
+++ b/src/vs/workbench/contrib/chat/common/editing/chatEditingService.ts
@@ -110,8 +110,8 @@ export interface IChatEditingSession extends IDisposable {
 	 * agents that make changes on-disk rather than streaming edits through the
 	 * chat session.
 	 */
-	startExternalEdits(responseModel: IChatResponseModel, operationId: number, resources: URI[], undoStopId: string): Promise<IChatProgress[]>;
-	stopExternalEdits(responseModel: IChatResponseModel, operationId: number): Promise<IChatProgress[]>;
+	startExternalEdits(responseModel: IChatResponseModel, operationId: number, resources: URI[], undoStopId: string, contentFor?: URI[]): Promise<IChatProgress[]>;
+	stopExternalEdits(responseModel: IChatResponseModel, operationId: number, contentFor?: URI[]): Promise<IChatProgress[]>;
 
 	/**
 	 * Gets the snapshot URI of a file at the request and _after_ changes made in the undo stop.
diff --git a/src/vs/workbench/contrib/chat/test/browser/agentSessions/agentHostChatContribution.test.ts b/src/vs/workbench/contrib/chat/test/browser/agentSessions/agentHostChatContribution.test.ts
index 765158017c4..981e6a62813 100644
--- a/src/vs/workbench/contrib/chat/test/browser/agentSessions/agentHostChatContribution.test.ts
+++ b/src/vs/workbench/contrib/chat/test/browser/agentSessions/agentHostChatContribution.test.ts
@@ -184,6 +184,7 @@ function createContribution(disposables: DisposableStore) {
 		fullName: 'Agent Host - Copilot',
 		description: 'Copilot SDK agent running in a dedicated process',
 		connection: agentHostService,
+		connectionAuthority: 'local',
 	}));
 	const contribution = disposables.add(instantiationService.createInstance(AgentHostContribution));
 
@@ -1380,6 +1381,7 @@ suite('AgentHostChatContribution', () => {
 				fullName: 'Remote Copilot',
 				description: 'Remote agent',
 				connection: agentHostService,
+				connectionAuthority: 'local',
 				extensionId: 'vscode.remote-agent-host',
 				extensionDisplayName: 'Remote Agent Host',
 			}));
@@ -1400,6 +1402,7 @@ suite('AgentHostChatContribution', () => {
 				fullName: 'Test',
 				description: 'test',
 				connection: agentHostService,
+				connectionAuthority: 'local',
 			}));
 
 			const registered = chatAgentService.registeredAgents.get('default-ext-test');
@@ -1418,6 +1421,7 @@ suite('AgentHostChatContribution', () => {
 				fullName: 'Test',
 				description: 'test',
 				connection: agentHostService,
+				connectionAuthority: 'local',
 				resolveWorkingDirectory: () => '/custom/working/dir',
 			}));
 
@@ -1466,6 +1470,7 @@ suite('AgentHostChatContribution', () => {
 				fullName: 'Connection Test',
 				description: 'test',
 				connection: agentHostService,
+				connectionAuthority: 'local',
 			}));
 
 			// Verify it registered an agent
diff --git a/src/vs/workbench/services/label/common/labelService.ts b/src/vs/workbench/services/label/common/labelService.ts
index 47b509ff20f..a25505387fc 100644
--- a/src/vs/workbench/services/label/common/labelService.ts
+++ b/src/vs/workbench/services/label/common/labelService.ts
@@ -454,10 +454,23 @@ export class LabelService extends Disposable implements ILabelService {
 					const i = resource.authority.indexOf('+');
 					return i === -1 ? resource.authority : resource.authority.slice(i + 1);
 				}
-				case 'path':
+				case 'path': {
+					let pathValue = resource.path;
+					if (formatting.stripPathSegments) {
+						let pos = 0;
+						for (let i = 0; i < formatting.stripPathSegments; i++) {
+							const next = pathValue.indexOf('/', pos + 1);
+							if (next === -1) {
+								break;
+							}
+							pos = next;
+						}
+						pathValue = pathValue.substring(pos);
+					}
 					return formatting.stripPathStartingSeparator
-						? resource.path.slice(resource.path[0] === formatting.separator ? 1 : 0)
-						: resource.path;
+						? pathValue.slice(pathValue[0] === formatting.separator ? 1 : 0)
+						: pathValue;
+				}
 				default: {
 					if (qsToken === 'query') {
 						const { query } = resource;