diff --git a/.github/instructions/chat.instructions.md b/.github/instructions/chat.instructions.md
index c1d1061bb56..657866be205 100644
--- a/.github/instructions/chat.instructions.md
+++ b/.github/instructions/chat.instructions.md
@@ -1,5 +1,4 @@
 ---
-applyTo: '**/chat/**'
 description: Chat feature area coding guidelines
 ---
 
diff --git a/.github/instructions/interactive.instructions.md b/.github/instructions/interactive.instructions.md
index 21ed92f6460..d6867257e66 100644
--- a/.github/instructions/interactive.instructions.md
+++ b/.github/instructions/interactive.instructions.md
@@ -1,6 +1,5 @@
 ---
-applyTo: '**/interactive/**'
-description: Architecture documentation for VS Code interactive window component
+description: Architecture documentation for VS Code interactive window component. Use when working in folder 
 ---
 
 # Interactive Window
diff --git a/.github/instructions/learnings.instructions.md b/.github/instructions/learnings.instructions.md
index 9358a943e3d..22fa31ae474 100644
--- a/.github/instructions/learnings.instructions.md
+++ b/.github/instructions/learnings.instructions.md
@@ -1,5 +1,4 @@
 ---
-applyTo: **
 description: This document describes how to deal with learnings that you make. (meta instruction)
 ---
 
diff --git a/.github/instructions/notebook.instructions.md b/.github/instructions/notebook.instructions.md
index 3d78e744d31..890b0c20db2 100644
--- a/.github/instructions/notebook.instructions.md
+++ b/.github/instructions/notebook.instructions.md
@@ -1,5 +1,4 @@
 ---
-applyTo: '**/notebook/**'
 description: Architecture documentation for VS Code notebook and interactive window components
 ---
 
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts
index 59d21a4755a..33094047675 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts
@@ -346,6 +346,9 @@ export class PromptBody {
 				// Match markdown links: [text](link)
 				const linkMatch = line.matchAll(/\[(.*?)\]\((.+?)\)/g);
 				for (const match of linkMatch) {
+					if (match.index > 0 && line[match.index - 1] === '!') {
+						continue; // skip image links
+					}
 					const linkEndOffset = match.index + match[0].length - 1; // before the parenthesis
 					const linkStartOffset = match.index + match[0].length - match[2].length - 1;
 					const range = new Range(i + 1, linkStartOffset + 1, i + 1, linkEndOffset + 1);
diff --git a/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/newPromptsParser.test.ts b/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/newPromptsParser.test.ts
index b08976de84b..cb5fed7747b 100644
--- a/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/newPromptsParser.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/newPromptsParser.test.ts
@@ -22,7 +22,7 @@ suite('NewPromptsParser', () => {
 			/* 04 */`tools: ['tool1', 'tool2']`,
 			/* 05 */'---',
 			/* 06 */'This is an agent test.',
-			/* 07 */'Here is a #tool:tool1 variable (and one with closing parenthesis after: #tool:tool-2) and a #file:./reference1.md as well as a [reference](./reference2.md).',
+			/* 07 */'Here is a #tool:tool1 variable (and one with closing parenthesis after: #tool:tool-2) and a #file:./reference1.md as well as a [reference](./reference2.md) and an image ![image](./image.png).',
 		].join('\n');
 		const result = new PromptFileParser().parse(uri, content);
 		assert.deepEqual(result.uri, uri);
@@ -42,7 +42,7 @@ suite('NewPromptsParser', () => {
 		]);
 		assert.deepEqual(result.body.range, { startLineNumber: 6, startColumn: 1, endLineNumber: 8, endColumn: 1 });
 		assert.equal(result.body.offset, 75);
-		assert.equal(result.body.getContent(), 'This is an agent test.\nHere is a #tool:tool1 variable (and one with closing parenthesis after: #tool:tool-2) and a #file:./reference1.md as well as a [reference](./reference2.md).');
+		assert.equal(result.body.getContent(), 'This is an agent test.\nHere is a #tool:tool1 variable (and one with closing parenthesis after: #tool:tool-2) and a #file:./reference1.md as well as a [reference](./reference2.md) and an image ![image](./image.png).');
 
 		assert.deepEqual(result.body.fileReferences, [
 			{ range: new Range(7, 99, 7, 114), content: './reference1.md', isMarkdownLink: false },