diff --git a/.npmrc b/.npmrc
index e2305b402ea..b07eade64d5 100644
--- a/.npmrc
+++ b/.npmrc
@@ -1,6 +1,6 @@
 disturl="https://electronjs.org/headers"
 target="39.6.0"
-ms_build_id="13312042"
+ms_build_id="13330601"
 runtime="electron"
 ignore-scripts=false
 build_from_source="true"
diff --git a/.vscode/settings.json b/.vscode/settings.json
index 0a58b8a5bf8..7307607bef7 100644
--- a/.vscode/settings.json
+++ b/.vscode/settings.json
@@ -70,7 +70,7 @@
 		"test/smoke/out/**": true,
 		"test/automation/out/**": true,
 		"test/integration/browser/out/**": true,
-		"src/vs/sessions/**": true
+		// "src/vs/sessions/**": true
 	},
 	// --- Search ---
 	"search.exclude": {
diff --git a/.vscode/tasks.json b/.vscode/tasks.json
index 14e637aaf2d..3e7b3c6765f 100644
--- a/.vscode/tasks.json
+++ b/.vscode/tasks.json
@@ -73,10 +73,11 @@
 				"owner": "typescript",
 				"applyTo": "closedDocuments",
 				"fileLocation": [
-					"absolute"
+					"relative",
+					"${workspaceFolder}"
 				],
 				"pattern": {
-					"regexp": "Error: ([^(]+)\\((\\d+|\\d+,\\d+|\\d+,\\d+,\\d+,\\d+)\\): (.*)$",
+					"regexp": "\\] ([^(]+)\\((\\d+,\\d+)\\): (.*)$",
 					"file": 1,
 					"location": 2,
 					"message": 3
diff --git a/build/gulpfile.extensions.ts b/build/gulpfile.extensions.ts
index cae158ea590..74d58f38406 100644
--- a/build/gulpfile.extensions.ts
+++ b/build/gulpfile.extensions.ts
@@ -8,6 +8,7 @@ import { EventEmitter } from 'events';
 EventEmitter.defaultMaxListeners = 100;
 
 import es from 'event-stream';
+import fancyLog from 'fancy-log';
 import glob from 'glob';
 import gulp from 'gulp';
 import filter from 'gulp-filter';
@@ -27,6 +28,25 @@ import watcher from './lib/watch/index.ts';
 const root = path.dirname(import.meta.dirname);
 const commit = getVersion(root);
 
+// Tracks active extension compilations to emit aggregate
+// "Starting compilation" / "Finished compilation" messages
+// that the problem matcher in tasks.json relies on.
+let activeExtensionCompilations = 0;
+
+function onExtensionCompilationStart(): void {
+	if (activeExtensionCompilations === 0) {
+		fancyLog('Starting compilation');
+	}
+	activeExtensionCompilations++;
+}
+
+function onExtensionCompilationEnd(): void {
+	activeExtensionCompilations--;
+	if (activeExtensionCompilations === 0) {
+		fancyLog('Finished compilation');
+	}
+}
+
 // To save 250ms for each gulp startup, we are caching the result here
 // const compilations = glob.sync('**/tsconfig.json', {
 // 	cwd: extensionsPath,
@@ -175,7 +195,25 @@ const tasks = compilations.map(function (tsconfigFile) {
 		const nonts = gulp.src(src, srcOpts).pipe(filter(['**', '!**/*.ts'], { dot: true }));
 		const watchInput = watcher(src, { ...srcOpts, ...{ readDelay: 200 } });
 		const watchNonTs = watchInput.pipe(filter(['**', '!**/*.ts'], { dot: true })).pipe(gulp.dest(out));
-		const tsgoStream = watchInput.pipe(util.debounce(() => createTsgoStream(absolutePath, { taskName: 'extensions' }, () => rewriteTsgoSourceMappingUrlsIfNeeded(false, out, baseUrl)), 200));
+		const tsgoStream = watchInput.pipe(util.debounce(() => {
+			onExtensionCompilationStart();
+			const stream = createTsgoStream(absolutePath, { taskName: 'extensions' }, () => rewriteTsgoSourceMappingUrlsIfNeeded(false, out, baseUrl));
+			// Wrap in a result stream that always emits 'end' (even on
+			// error) so the debounce resets to idle and can process future
+			// file changes. Errors from tsgo (e.g. type errors causing a
+			// non-zero exit code) are already reported by spawnTsgo's
+			// runReporter, so swallowing the stream error is safe.
+			const result = es.through();
+			stream.on('end', () => {
+				onExtensionCompilationEnd();
+				result.emit('end');
+			});
+			stream.on('error', () => {
+				onExtensionCompilationEnd();
+				result.emit('end');
+			});
+			return result;
+		}, 200));
 		const watchStream = es.merge(nonts.pipe(gulp.dest(out)), watchNonTs, tsgoStream);
 
 		return watchStream;
diff --git a/build/lib/compilation.ts b/build/lib/compilation.ts
index 0d6209e66c8..047e83eb7ff 100644
--- a/build/lib/compilation.ts
+++ b/build/lib/compilation.ts
@@ -368,8 +368,18 @@ function generateExtensionPointNames() {
 		}, function () {
 			collectedNames.sort();
 			const content = JSON.stringify(collectedNames, undefined, '\t') + '\n';
+			const filePath = 'vs/workbench/services/extensions/common/extensionPoints.json';
+			try {
+				const existing = fs.readFileSync(path.join('src', filePath), 'utf-8');
+				if (existing.replace(/\r\n/g, '\n') === content) {
+					this.emit('end');
+					return;
+				}
+			} catch {
+				// File doesn't exist yet, emit it
+			}
 			this.emit('data', new File({
-				path: 'vs/workbench/services/extensions/common/extensionPoints.json',
+				path: filePath,
 				contents: Buffer.from(content)
 			}));
 			this.emit('end');
diff --git a/build/lib/extensions.ts b/build/lib/extensions.ts
index fac7946fc98..6c1e65b0f57 100644
--- a/build/lib/extensions.ts
+++ b/build/lib/extensions.ts
@@ -441,7 +441,7 @@ interface IExtensionManifest {
 /**
  * Loosely based on `getExtensionKind` from `src/vs/workbench/services/extensions/common/extensionManifestPropertiesService.ts`
  */
-function isWebExtension(manifest: IExtensionManifest): boolean {
+export function isWebExtension(manifest: IExtensionManifest): boolean {
 	if (Boolean(manifest.browser)) {
 		return true;
 	}
@@ -578,11 +578,11 @@ export function packageMarketplaceExtensionsStream(forWeb: boolean): Stream {
 }
 
 export interface IScannedBuiltinExtension {
-	extensionPath: string;
-	packageJSON: any;
-	packageNLS?: any;
-	readmePath?: string;
-	changelogPath?: string;
+	readonly extensionPath: string;
+	readonly packageJSON: unknown;
+	readonly packageNLS: unknown | undefined;
+	readonly readmePath: string | undefined;
+	readonly changelogPath: string | undefined;
 }
 
 export function scanBuiltinExtensions(extensionsRoot: string, exclude: string[] = []): IScannedBuiltinExtension[] {
diff --git a/build/lib/extractExtensionPoints.ts b/build/lib/extractExtensionPoints.ts
index 1c442564026..97dbda06452 100644
--- a/build/lib/extractExtensionPoints.ts
+++ b/build/lib/extractExtensionPoints.ts
@@ -211,10 +211,23 @@ function scanDirectory(dir: string): string[] {
 	return names;
 }
 
+function normalize(s: string): string {
+	return s.replace(/\r\n/g, '\n');
+}
+
 function main(): void {
 	const names = scanDirectory(path.join(srcDir, 'vs', 'workbench'));
 	names.sort();
 	const output = JSON.stringify(names, undefined, '\t') + '\n';
+	try {
+		const existing = fs.readFileSync(outputPath, 'utf-8');
+		if (normalize(existing) === normalize(output)) {
+			console.log(`No changes to ${path.relative(rootDir, outputPath)}`);
+			return;
+		}
+	} catch {
+		// File doesn't exist yet, write it
+	}
 	fs.writeFileSync(outputPath, output, 'utf-8');
 	console.log(`Wrote ${names.length} extension points to ${path.relative(rootDir, outputPath)}`);
 }
diff --git a/build/lib/tsgo.ts b/build/lib/tsgo.ts
index 7f00c1816b5..36d925d4313 100644
--- a/build/lib/tsgo.ts
+++ b/build/lib/tsgo.ts
@@ -12,13 +12,17 @@ import * as path from 'path';
 const root = path.dirname(path.dirname(import.meta.dirname));
 const npx = process.platform === 'win32' ? 'npx.cmd' : 'npx';
 const ansiRegex = /[\u001b\u009b][[()#;?]*(?:[0-9]{1,4}(?:;[0-9]{0,4})*)?[0-9A-ORZcf-nqry=><]/g;
+const timestampRegex = /^\[\d{2}:\d{2}:\d{2}\]\s*/;
 
 export function spawnTsgo(projectPath: string, config: { taskName: string; noEmit?: boolean }, onComplete?: () => Promise<void> | void): Promise<void> {
-	function runReporter(stdError: string) {
-		const matches = (stdError || '').match(/error \w+: (.+)?/g);
-		fancyLog(`Finished ${ansiColors.green(config.taskName)} ${projectPath} with ${matches ? matches.length : 0} errors.`);
-		for (const match of matches || []) {
-			fancyLog.error(match);
+	function runReporter(output: string) {
+		const lines = (output || '').split('\n');
+		const errorLines = lines.filter(line => /error \w+:/.test(line));
+		if (errorLines.length > 0) {
+			fancyLog(`Finished ${ansiColors.green(config.taskName)} ${projectPath} with ${errorLines.length} errors.`);
+			for (const line of errorLines) {
+				fancyLog(line);
+			}
 		}
 	}
 
@@ -34,21 +38,28 @@ export function spawnTsgo(projectPath: string, config: { taskName: string; noEmi
 		shell: true
 	});
 
-	const handleData = (data: Buffer) => {
-		const lines = data.toString()
-			.split(/\r?\n/)
-			.map(line => line.replace(ansiRegex, '').trim())
-			.filter(line => line.length > 0)
-			.filter(line => !/Starting compilation|File change detected|Compilation complete/i.test(line));
+	let stdoutData = '';
+	let stderrData = '';
 
-		runReporter(lines.join('\n'));
-	};
-
-	child.stdout?.on('data', handleData);
-	child.stderr?.on('data', handleData);
+	child.stdout?.on('data', (data: Buffer) => {
+		stdoutData += data.toString();
+	});
+	child.stderr?.on('data', (data: Buffer) => {
+		stderrData += data.toString();
+	});
 
 	return new Promise<void>((resolve, reject) => {
 		child.on('exit', code => {
+			const allOutput = stdoutData + '\n' + stderrData;
+			const lines = allOutput
+				.split(/\r?\n/)
+				.map(line => line.replace(ansiRegex, '').trim())
+				.map(line => line.replace(timestampRegex, ''))
+				.filter(line => line.length > 0)
+				.filter(line => !/Starting compilation|File change detected|Compilation complete/i.test(line));
+
+			runReporter(lines.join('\n'));
+
 			if (code === 0) {
 				Promise.resolve(onComplete?.()).then(() => resolve(), reject);
 			} else {
diff --git a/build/next/index.ts b/build/next/index.ts
index f1c0784ef28..e8f5b1f72d1 100644
--- a/build/next/index.ts
+++ b/build/next/index.ts
@@ -15,6 +15,7 @@ import { getVersion } from '../lib/getVersion.ts';
 import product from '../../product.json' with { type: 'json' };
 import packageJson from '../../package.json' with { type: 'json' };
 import { useEsbuildTranspile } from '../buildConfig.ts';
+import { isWebExtension, type IScannedBuiltinExtension } from '../lib/extensions.ts';
 
 const globAsync = promisify(glob);
 
@@ -378,33 +379,43 @@ async function cleanDir(dir: string): Promise<void> {
  * Scan for built-in extensions in the given directory.
  * Returns an array of extension entries for the builtinExtensionsScannerService.
  */
-function scanBuiltinExtensions(extensionsRoot: string): Array<{ extensionPath: string; packageJSON: unknown }> {
-	const result: Array<{ extensionPath: string; packageJSON: unknown }> = [];
+function scanBuiltinExtensions(extensionsRoot: string): Array<IScannedBuiltinExtension> {
+	const scannedExtensions: Array<IScannedBuiltinExtension> = [];
 	const extensionsPath = path.join(REPO_ROOT, extensionsRoot);
 
 	if (!fs.existsSync(extensionsPath)) {
-		return result;
+		return scannedExtensions;
 	}
 
-	for (const entry of fs.readdirSync(extensionsPath, { withFileTypes: true })) {
-		if (!entry.isDirectory()) {
+	for (const extensionFolder of fs.readdirSync(extensionsPath)) {
+		const packageJSONPath = path.join(extensionsPath, extensionFolder, 'package.json');
+		if (!fs.existsSync(packageJSONPath)) {
 			continue;
 		}
-		const packageJsonPath = path.join(extensionsPath, entry.name, 'package.json');
-		if (fs.existsSync(packageJsonPath)) {
-			try {
-				const packageJSON = JSON.parse(fs.readFileSync(packageJsonPath, 'utf8'));
-				result.push({
-					extensionPath: entry.name,
-					packageJSON
-				});
-			} catch (e) {
-				// Skip invalid extensions
+		try {
+			const packageJSON = JSON.parse(fs.readFileSync(packageJSONPath, 'utf8'));
+			if (!isWebExtension(packageJSON)) {
+				continue;
 			}
+			const children = fs.readdirSync(path.join(extensionsPath, extensionFolder));
+			const packageNLSPath = children.filter(child => child === 'package.nls.json')[0];
+			const packageNLS = packageNLSPath ? JSON.parse(fs.readFileSync(path.join(extensionsPath, extensionFolder, packageNLSPath), 'utf8')) : undefined;
+			const readme = children.filter(child => /^readme(\.txt|\.md|)$/i.test(child))[0];
+			const changelog = children.filter(child => /^changelog(\.txt|\.md|)$/i.test(child))[0];
+
+			scannedExtensions.push({
+				extensionPath: extensionFolder,
+				packageJSON,
+				packageNLS,
+				readmePath: readme ? path.join(extensionFolder, readme) : undefined,
+				changelogPath: changelog ? path.join(extensionFolder, changelog) : undefined,
+			});
+		} catch (e) {
+			// Skip invalid extensions
 		}
 	}
 
-	return result;
+	return scannedExtensions;
 }
 
 /**
diff --git a/build/npm/gyp/package-lock.json b/build/npm/gyp/package-lock.json
index a4ef0b2fada..6e28e550f46 100644
--- a/build/npm/gyp/package-lock.json
+++ b/build/npm/gyp/package-lock.json
@@ -1069,9 +1069,9 @@
       }
     },
     "node_modules/tar": {
-      "version": "7.5.7",
-      "resolved": "https://registry.npmjs.org/tar/-/tar-7.5.7.tgz",
-      "integrity": "sha512-fov56fJiRuThVFXD6o6/Q354S7pnWMJIVlDBYijsTNx6jKSE4pvrDTs6lUnmGvNyfJwFQQwWy3owKz1ucIhveQ==",
+      "version": "7.5.9",
+      "resolved": "https://registry.npmjs.org/tar/-/tar-7.5.9.tgz",
+      "integrity": "sha512-BTLcK0xsDh2+PUe9F6c2TlRp4zOOBMTkoQHQIWSIzI0R7KG46uEwq4OPk2W7bZcprBMsuaeFsqwYr7pjh6CuHg==",
       "dev": true,
       "license": "BlueOak-1.0.0",
       "dependencies": {
diff --git a/build/package-lock.json b/build/package-lock.json
index ffcaa1455e7..36b85902e22 100644
--- a/build/package-lock.json
+++ b/build/package-lock.json
@@ -307,17 +307,17 @@
       }
     },
     "node_modules/@azure/core-xml": {
-      "version": "1.4.4",
-      "resolved": "https://registry.npmjs.org/@azure/core-xml/-/core-xml-1.4.4.tgz",
-      "integrity": "sha512-J4FYAqakGXcbfeZjwjMzjNcpcH4E+JtEBv+xcV1yL0Ydn/6wbQfeFKTCHh9wttAi0lmajHw7yBbHPRG+YHckZQ==",
+      "version": "1.5.0",
+      "resolved": "https://registry.npmjs.org/@azure/core-xml/-/core-xml-1.5.0.tgz",
+      "integrity": "sha512-D/sdlJBMJfx7gqoj66PKVmhDDaU6TKA49ptcolxdas29X7AfvLTmfAGLjAcIMBK7UZ2o4lygHIqVckOlQU3xWw==",
       "dev": true,
       "license": "MIT",
       "dependencies": {
-        "fast-xml-parser": "^4.4.1",
-        "tslib": "^2.6.2"
+        "fast-xml-parser": "^5.0.7",
+        "tslib": "^2.8.1"
       },
       "engines": {
-        "node": ">=18.0.0"
+        "node": ">=20.0.0"
       }
     },
     "node_modules/@azure/cosmos": {
@@ -5358,23 +5358,19 @@
       "license": "BSD-3-Clause"
     },
     "node_modules/fast-xml-parser": {
-      "version": "4.5.0",
-      "resolved": "https://registry.npmjs.org/fast-xml-parser/-/fast-xml-parser-4.5.0.tgz",
-      "integrity": "sha512-/PlTQCI96+fZMAOLMZK4CWG1ItCbfZ/0jx7UIJFChPNrx7tcEgerUgWbeieCM9MfHInUDyK8DWYZ+YrywDJuTg==",
+      "version": "5.3.6",
+      "resolved": "https://registry.npmjs.org/fast-xml-parser/-/fast-xml-parser-5.3.6.tgz",
+      "integrity": "sha512-QNI3sAvSvaOiaMl8FYU4trnEzCwiRr8XMWgAHzlrWpTSj+QaCSvOf1h82OEP1s4hiAXhnbXSyFWCf4ldZzZRVA==",
       "dev": true,
       "funding": [
         {
           "type": "github",
           "url": "https://github.com/sponsors/NaturalIntelligence"
-        },
-        {
-          "type": "paypal",
-          "url": "https://paypal.me/naturalintelligence"
         }
       ],
       "license": "MIT",
       "dependencies": {
-        "strnum": "^1.0.5"
+        "strnum": "^2.1.2"
       },
       "bin": {
         "fxparser": "src/cli/cli.js"
@@ -8933,10 +8929,16 @@
       }
     },
     "node_modules/strnum": {
-      "version": "1.0.5",
-      "resolved": "https://registry.npmjs.org/strnum/-/strnum-1.0.5.tgz",
-      "integrity": "sha512-J8bbNyKKXl5qYcR36TIO8W3mVGVHrmmxsd5PAItGkmyzwJvybiw2IVq5nqd0i4LSNSkB/sx9VHllbfFdr9k1JA==",
+      "version": "2.1.2",
+      "resolved": "https://registry.npmjs.org/strnum/-/strnum-2.1.2.tgz",
+      "integrity": "sha512-l63NF9y/cLROq/yqKXSLtcMeeyOfnSQlfMSlzFt/K73oIaD8DGaQWd7Z34X9GPiKqP5rbSh84Hl4bOlLcjiSrQ==",
       "dev": true,
+      "funding": [
+        {
+          "type": "github",
+          "url": "https://github.com/sponsors/NaturalIntelligence"
+        }
+      ],
       "license": "MIT"
     },
     "node_modules/structured-source": {
@@ -9433,10 +9435,11 @@
       }
     },
     "node_modules/tslib": {
-      "version": "2.6.3",
-      "resolved": "https://registry.npmjs.org/tslib/-/tslib-2.6.3.tgz",
-      "integrity": "sha512-xNvxJEOUiWPGhUuUdQgAJPKOOJfGnIyKySOc09XkKsgdUV/3E2zvwZYdejjmRgPCgcym1juLH3226yA7sEFJKQ==",
-      "dev": true
+      "version": "2.8.1",
+      "resolved": "https://registry.npmjs.org/tslib/-/tslib-2.8.1.tgz",
+      "integrity": "sha512-oJFu94HQb+KVduSUQL7wnpmqnfmLsOA/nAh6b6EH0wCEoK0/mPeXU6c3wKDV83MkOuHPRHtSXKKU99IBazS/2w==",
+      "dev": true,
+      "license": "0BSD"
     },
     "node_modules/tunnel": {
       "version": "0.0.6",
diff --git a/extensions/theme-2026/themes/2026-dark.json b/extensions/theme-2026/themes/2026-dark.json
index 4f25b3268fc..17cb3439ddd 100644
--- a/extensions/theme-2026/themes/2026-dark.json
+++ b/extensions/theme-2026/themes/2026-dark.json
@@ -7,8 +7,8 @@
 		"foreground": "#bfbfbf",
 		"disabledForeground": "#666666",
 		"errorForeground": "#f48771",
-		"descriptionForeground": "#888888",
-		"icon.foreground": "#888888",
+		"descriptionForeground": "#8C8C8C",
+		"icon.foreground": "#8C8C8C",
 		"focusBorder": "#3994BCB3",
 		"textBlockQuote.background": "#242526",
 		"textBlockQuote.border": "#2A2B2CFF",
@@ -16,7 +16,7 @@
 		"textLink.foreground": "#48A0C7",
 		"textLink.activeForeground": "#53A5CA",
 		"textPreformat.background": "#262626",
-		"textPreformat.foreground": "#888888",
+		"textPreformat.foreground": "#8C8C8C",
 		"textSeparator.foreground": "#2a2a2aFF",
 		"button.background": "#3994BCF2",
 		"button.foreground": "#FFFFFF",
@@ -69,7 +69,7 @@
 		"list.warningForeground": "#e5ba7d",
 		"activityBar.background": "#191A1B",
 		"activityBar.foreground": "#bfbfbf",
-		"activityBar.inactiveForeground": "#888888",
+		"activityBar.inactiveForeground": "#8C8C8C",
 		"activityBar.border": "#2A2B2CFF",
 		"activityBar.activeBorder": "#bfbfbf",
 		"activityBar.activeFocusBorder": "#3994BCB3",
@@ -86,7 +86,7 @@
 		"titleBar.activeBackground": "#191A1B",
 		"titleBar.activeForeground": "#bfbfbf",
 		"titleBar.inactiveBackground": "#191A1B",
-		"titleBar.inactiveForeground": "#888888",
+		"titleBar.inactiveForeground": "#8C8C8C",
 		"titleBar.border": "#2A2B2CFF",
 		"menubar.selectionBackground": "#242526",
 		"menubar.selectionForeground": "#bfbfbf",
@@ -120,11 +120,11 @@
 		"editor.lineHighlightBackground": "#242526",
 		"editor.rangeHighlightBackground": "#242526",
 		"editorLink.activeForeground": "#3a94bc",
-		"editorWhitespace.foreground": "#8888884D",
+		"editorWhitespace.foreground": "#8C8C8C4D",
 		"editorIndentGuide.background": "#8384854D",
 		"editorIndentGuide.activeBackground": "#838485",
 		"editorRuler.foreground": "#848484",
-		"editorCodeLens.foreground": "#888888",
+		"editorCodeLens.foreground": "#8C8C8C",
 		"editorBracketMatch.background": "#3994BC55",
 		"editorBracketMatch.border": "#2A2B2CFF",
 		"editorWidget.background": "#202122",
@@ -143,12 +143,12 @@
 		"peekViewEditor.matchHighlightBackground": "#3994BC33",
 		"peekViewResult.background": "#191A1B",
 		"peekViewResult.fileForeground": "#bfbfbf",
-		"peekViewResult.lineForeground": "#888888",
+		"peekViewResult.lineForeground": "#8C8C8C",
 		"peekViewResult.matchHighlightBackground": "#3994BC33",
 		"peekViewResult.selectionBackground": "#3994BC26",
 		"peekViewResult.selectionForeground": "#bfbfbf",
 		"peekViewTitle.background": "#242526",
-		"peekViewTitleDescription.foreground": "#888888",
+		"peekViewTitleDescription.foreground": "#8C8C8C",
 		"peekViewTitleLabel.foreground": "#bfbfbf",
 		"editorGutter.background": "#121314",
 		"editorGutter.addedBackground": "#72C892",
@@ -166,15 +166,15 @@
 		"panel.border": "#2A2B2CFF",
 		"panelTitle.activeBorder": "#3994BC",
 		"panelTitle.activeForeground": "#bfbfbf",
-		"panelTitle.inactiveForeground": "#888888",
+		"panelTitle.inactiveForeground": "#8C8C8C",
 		"statusBar.background": "#191A1B",
-		"statusBar.foreground": "#888888",
+		"statusBar.foreground": "#8C8C8C",
 		"statusBar.border": "#2A2B2CFF",
 		"statusBar.focusBorder": "#3994BCB3",
 		"statusBar.debuggingBackground": "#3994BC",
 		"statusBar.debuggingForeground": "#FFFFFF",
 		"statusBar.noFolderBackground": "#191A1B",
-		"statusBar.noFolderForeground": "#888888",
+		"statusBar.noFolderForeground": "#8C8C8C",
 		"statusBarItem.activeBackground": "#4B4C4D",
 		"statusBarItem.hoverBackground": "#262728",
 		"statusBarItem.focusBorder": "#3994BCB3",
@@ -184,7 +184,7 @@
 		"tab.activeBackground": "#121314",
 		"tab.activeForeground": "#bfbfbf",
 		"tab.inactiveBackground": "#191A1B",
-		"tab.inactiveForeground": "#888888",
+		"tab.inactiveForeground": "#8C8C8C",
 		"tab.border": "#2A2B2CFF",
 		"tab.lastPinnedBorder": "#2A2B2CFF",
 		"tab.activeBorder": "#121314",
@@ -192,12 +192,12 @@
 		"tab.hoverBackground": "#262728",
 		"tab.hoverForeground": "#bfbfbf",
 		"tab.unfocusedActiveBackground": "#121314",
-		"tab.unfocusedActiveForeground": "#888888",
+		"tab.unfocusedActiveForeground": "#8C8C8C",
 		"tab.unfocusedInactiveBackground": "#191A1B",
 		"tab.unfocusedInactiveForeground": "#444444",
 		"editorGroupHeader.tabsBackground": "#191A1B",
 		"editorGroupHeader.tabsBorder": "#2A2B2CFF",
-		"breadcrumb.foreground": "#888888",
+		"breadcrumb.foreground": "#8C8C8C",
 		"breadcrumb.background": "#121314",
 		"breadcrumb.focusForeground": "#bfbfbf",
 		"breadcrumb.activeSelectionForeground": "#bfbfbf",
@@ -612,7 +612,7 @@
 				"markup.fenced_code"
 			],
 			"settings": {
-				"foreground": "#888888"
+				"foreground": "#8C8C8C"
 			}
 		},
 		{
diff --git a/extensions/theme-2026/themes/2026-light.json b/extensions/theme-2026/themes/2026-light.json
index 95d65795f8b..b86ef612b20 100644
--- a/extensions/theme-2026/themes/2026-light.json
+++ b/extensions/theme-2026/themes/2026-light.json
@@ -7,24 +7,25 @@
 		"foreground": "#202020",
 		"disabledForeground": "#BBBBBB",
 		"errorForeground": "#ad0707",
-		"descriptionForeground": "#555555",
-		"icon.foreground": "#666666",
+		"descriptionForeground": "#606060",
+		"icon.foreground": "#606060",
 		"focusBorder": "#0069CCFF",
-		"textBlockQuote.background": "#EDEDED",
+		"textBlockQuote.background": "#EAEAEA",
 		"textBlockQuote.border": "#F2F3F4FF",
-		"textCodeBlock.background": "#EDEDED",
+		"textCodeBlock.background": "#EAEAEA",
 		"textLink.foreground": "#0069CC",
 		"textLink.activeForeground": "#0069CC",
-		"textPreformat.foreground": "#666666",
+		"textPreformat.foreground": "#606060",
+		"textPreformat.background": "#ECECEC",
 		"textSeparator.foreground": "#EEEEEEFF",
 		"button.background": "#0069CC",
 		"button.foreground": "#FFFFFF",
 		"button.hoverBackground": "#0063C1",
 		"button.border": "#EEEEF1",
-		"button.secondaryBackground": "#EDEDED",
+		"button.secondaryBackground": "#EAEAEA",
 		"button.secondaryForeground": "#202020",
-		"button.secondaryHoverBackground": "#EEEEEE",
-		"checkbox.background": "#EDEDED",
+		"button.secondaryHoverBackground": "#F2F3F4",
+		"checkbox.background": "#EAEAEA",
 		"checkbox.border": "#D8D8D8",
 		"checkbox.foreground": "#202020",
 		"dropdown.background": "#FFFFFF",
@@ -61,11 +62,11 @@
 		"badge.background": "#0069CC",
 		"badge.foreground": "#FFFFFF",
 		"progressBar.background": "#0069CC",
-		"list.activeSelectionBackground": "#0069CC44",
+		"list.activeSelectionBackground": "#0069CC1A",
 		"list.activeSelectionForeground": "#202020",
-		"list.inactiveSelectionBackground": "#E0E0E0",
+		"list.inactiveSelectionBackground": "#DADADA99",
 		"list.inactiveSelectionForeground": "#202020",
-		"list.hoverBackground": "#EEEEEE",
+		"list.hoverBackground": "#DADADA4f",
 		"list.hoverForeground": "#202020",
 		"list.dropBackground": "#0069CC15",
 		"list.focusBackground": "#0069CC1A",
@@ -77,7 +78,7 @@
 		"list.warningForeground": "#667309",
 		"activityBar.background": "#FAFAFD",
 		"activityBar.foreground": "#202020",
-		"activityBar.inactiveForeground": "#666666",
+		"activityBar.inactiveForeground": "#606060",
 		"activityBar.border": "#F2F3F4FF",
 		"activityBar.activeBorder": "#000000",
 		"activityBar.activeFocusBorder": "#0069CCFF",
@@ -94,9 +95,9 @@
 		"titleBar.activeBackground": "#FAFAFD",
 		"titleBar.activeForeground": "#424242",
 		"titleBar.inactiveBackground": "#FAFAFD",
-		"titleBar.inactiveForeground": "#666666",
+		"titleBar.inactiveForeground": "#606060",
 		"titleBar.border": "#F2F3F4FF",
-		"menubar.selectionBackground": "#EDEDED",
+		"menubar.selectionBackground": "#EAEAEA",
 		"menubar.selectionForeground": "#202020",
 		"menu.background": "#FAFAFD",
 		"menu.foreground": "#202020",
@@ -111,7 +112,7 @@
 		"commandCenter.border": "#D8D8D8",
 		"editor.background": "#FFFFFF",
 		"editor.foreground": "#202020",
-		"editorLineNumber.foreground": "#666666",
+		"editorLineNumber.foreground": "#606060",
 		"editorLineNumber.activeForeground": "#202020",
 		"editorCursor.foreground": "#202020",
 		"editor.selectionBackground": "#0069CC1A",
@@ -121,16 +122,16 @@
 		"editor.wordHighlightStrongBackground": "#0069CC26",
 		"editor.findMatchBackground": "#0069CC40",
 		"editor.findMatchHighlightBackground": "#0069CC1A",
-		"editor.findRangeHighlightBackground": "#EDEDED",
-		"editor.hoverHighlightBackground": "#EDEDED",
-		"editor.lineHighlightBackground": "#EDEDED40",
-		"editor.rangeHighlightBackground": "#EDEDED",
+		"editor.findRangeHighlightBackground": "#EAEAEA",
+		"editor.hoverHighlightBackground": "#EAEAEA",
+		"editor.lineHighlightBackground": "#EAEAEA40",
+		"editor.rangeHighlightBackground": "#EAEAEA",
 		"editorLink.activeForeground": "#0069CC",
-		"editorWhitespace.foreground": "#66666640",
+		"editorWhitespace.foreground": "#60606040",
 		"editorIndentGuide.background": "#F7F7F740",
 		"editorIndentGuide.activeBackground": "#EEEEEE",
 		"editorRuler.foreground": "#F7F7F7",
-		"editorCodeLens.foreground": "#666666",
+		"editorCodeLens.foreground": "#606060",
 		"editorBracketMatch.background": "#0069CC40",
 		"editorBracketMatch.border": "#F2F3F4FF",
 		"editorWidget.background": "#F0F0F3",
@@ -148,12 +149,12 @@
 		"peekViewEditor.matchHighlightBackground": "#0069CC33",
 		"peekViewResult.background": "#F0F0F3",
 		"peekViewResult.fileForeground": "#202020",
-		"peekViewResult.lineForeground": "#666666",
+		"peekViewResult.lineForeground": "#606060",
 		"peekViewResult.matchHighlightBackground": "#0069CC33",
 		"peekViewResult.selectionBackground": "#0069CC26",
 		"peekViewResult.selectionForeground": "#202020",
 		"peekViewTitle.background": "#F0F0F3",
-		"peekViewTitleDescription.foreground": "#666666",
+		"peekViewTitleDescription.foreground": "#606060",
 		"peekViewTitleLabel.foreground": "#202020",
 		"editorGutter.addedBackground": "#587c0c",
 		"editorGutter.deletedBackground": "#ad0707",
@@ -171,17 +172,17 @@
 		"panel.border": "#F2F3F4FF",
 		"panelTitle.activeBorder": "#000000",
 		"panelTitle.activeForeground": "#202020",
-		"panelTitle.inactiveForeground": "#666666",
+		"panelTitle.inactiveForeground": "#606060",
 		"statusBar.background": "#FAFAFD",
-		"statusBar.foreground": "#666666",
+		"statusBar.foreground": "#606060",
 		"statusBar.border": "#F2F3F4FF",
 		"statusBar.focusBorder": "#0069CCFF",
 		"statusBar.debuggingBackground": "#0069CC",
 		"statusBar.debuggingForeground": "#FFFFFF",
 		"statusBar.noFolderBackground": "#F0F0F3",
-		"statusBar.noFolderForeground": "#666666",
+		"statusBar.noFolderForeground": "#606060",
 		"statusBarItem.activeBackground": "#EEEEEE",
-		"statusBarItem.hoverBackground": "#EEEEEE",
+		"statusBarItem.hoverBackground": "#DADADA4f",
 		"statusBarItem.focusBorder": "#0069CCFF",
 		"statusBarItem.prominentBackground": "#0069CCDD",
 		"statusBarItem.prominentForeground": "#FFFFFF",
@@ -190,30 +191,30 @@
 		"tab.activeBackground": "#FFFFFF",
 		"tab.activeForeground": "#202020",
 		"tab.inactiveBackground": "#FAFAFD",
-		"tab.inactiveForeground": "#666666",
+		"tab.inactiveForeground": "#606060",
 		"tab.border": "#F2F3F4FF",
 		"tab.lastPinnedBorder": "#F2F3F4FF",
 		"tab.activeBorder": "#FAFAFD",
 		"tab.activeBorderTop": "#000000",
-		"tab.hoverBackground": "#EEEEEE",
+		"tab.hoverBackground": "#DADADA4f",
 		"tab.hoverForeground": "#202020",
 		"tab.unfocusedActiveBackground": "#FAFAFD",
-		"tab.unfocusedActiveForeground": "#666666",
+		"tab.unfocusedActiveForeground": "#606060",
 		"tab.unfocusedInactiveBackground": "#FAFAFD",
 		"tab.unfocusedInactiveForeground": "#BBBBBB",
 		"editorGroupHeader.tabsBackground": "#FAFAFD",
 		"editorGroupHeader.tabsBorder": "#F2F3F4FF",
-		"breadcrumb.foreground": "#666666",
+		"breadcrumb.foreground": "#606060",
 		"breadcrumb.background": "#FFFFFF",
 		"breadcrumb.focusForeground": "#202020",
 		"breadcrumb.activeSelectionForeground": "#202020",
 		"breadcrumbPicker.background": "#F0F0F3",
 		"notificationCenter.border": "#F2F3F4FF",
 		"notificationCenterHeader.foreground": "#202020",
-		"notificationCenterHeader.background": "#F0F0F3",
+		"notificationCenterHeader.background": "#FAFAFD",
 		"notificationToast.border": "#F2F3F4FF",
 		"notifications.foreground": "#202020",
-		"notifications.background": "#F0F0F3",
+		"notifications.background": "#FAFAFD",
 		"notifications.border": "#F2F3F4FF",
 		"notificationLink.foreground": "#0069CC",
 		"notificationsWarningIcon.foreground": "#B69500",
@@ -258,6 +259,7 @@
 		"quickInputTitle.background": "#F0F0F3",
 		"chat.requestBubbleBackground": "#EEF4FB",
 		"chat.requestBubbleHoverBackground": "#E6EDFA",
+		"chat.thinkingShimmer": "#999999",
 		"editorCommentsWidget.rangeBackground": "#EEF4FB",
 		"editorCommentsWidget.rangeActiveBackground": "#E6EDFA",
 		"charts.foreground": "#202020",
@@ -617,7 +619,7 @@
 				"markup.fenced_code"
 			],
 			"settings": {
-				"foreground": "#666666"
+				"foreground": "#606060"
 			}
 		},
 		{
diff --git a/extensions/theme-2026/themes/styles.css b/extensions/theme-2026/themes/styles.css
index 6dfbb2888a4..ec6b840db47 100644
--- a/extensions/theme-2026/themes/styles.css
+++ b/extensions/theme-2026/themes/styles.css
@@ -61,11 +61,16 @@
 }
 
 /* Ensure iframe containers in pane-body render above sidebar z-index */
-.monaco-workbench > div[data-keybinding-context],
 .monaco-workbench > div[data-keybinding-context] {
 	z-index: 50 !important;
 }
 
+/* Ensure in-editor pane iframes render below sidebar z-index */
+.monaco-workbench > div[data-parent-flow-to-element-id] {
+	z-index: 0 !important;
+}
+
+
 /* Ensure webview containers render above sidebar z-index */
 .monaco-workbench .part.sidebar .webview,
 .monaco-workbench .part.sidebar .webview-container,
@@ -200,7 +205,7 @@
 	background-color: color-mix(in srgb, var(--vscode-list-hoverBackground) 95%, black) !important;
 }
 
-.quick-input-list .quick-input-list-entry .quick-input-list-separator {
+.monaco-workbench .quick-input-list .quick-input-list-entry .quick-input-list-separator {
 	height: 16px;
 	margin-top: 2px;
 	display: flex;
@@ -208,14 +213,18 @@
 	font-size: 11px;
 	padding: 0 4px 1px 4px;
 	border-radius: var(--vscode-cornerRadius-small) !important;
-	background: color-mix(in srgb, var(--vscode-badge-background) 50%, transparent) !important;
+	background: color-mix(in srgb, var(--vscode-badge-background) 70%, transparent) !important;
 	color: var(--vscode-badge-foreground) !important;
 	margin-right: 8px;
 }
 
-.monaco-list-row.focused .quick-input-list-entry .quick-input-list-separator,
-.monaco-list-row.selected .quick-input-list-entry .quick-input-list-separator,
-.monaco-list-row:hover .quick-input-list-entry .quick-input-list-separator {
+.monaco-workbench.vs-dark .quick-input-list .quick-input-list-entry .quick-input-list-separator {
+	background: color-mix(in srgb, var(--vscode-badge-background) 50%, transparent) !important;
+}
+
+.monaco-workbench .monaco-list-row.focused .quick-input-list-entry .quick-input-list-separator,
+.monaco-workbench .monaco-list-row.selected .quick-input-list-entry .quick-input-list-separator,
+.monaco-workbench .monaco-list-row:hover .quick-input-list-entry .quick-input-list-separator {
 	background: transparent !important;
 	color: inherit !important;
 	padding: 0;
@@ -437,6 +446,15 @@
 	box-shadow: var(--shadow-sm);
 }
 
+.monaco-workbench .settings-editor > .settings-header > .search-container > .search-container-widgets > .settings-count-widget {
+	border-radius: var(--radius-sm);
+	background: color-mix(in srgb, var(--vscode-badge-background) 70%, transparent) !important;
+}
+
+.monaco-workbench.vs-dark .settings-editor > .settings-header > .search-container > .search-container-widgets > .settings-count-widget {
+	background: color-mix(in srgb, var(--vscode-badge-background) 50%, transparent) !important;
+}
+
 /* Welcome Tiles */
 .monaco-workbench .part.editor .welcomePageContainer .tile {
 	box-shadow: var(--shadow-md);
diff --git a/extensions/theme-defaults/themes/dark_vs.json b/extensions/theme-defaults/themes/dark_vs.json
index b66165d69e1..d1812b61ac0 100644
--- a/extensions/theme-defaults/themes/dark_vs.json
+++ b/extensions/theme-defaults/themes/dark_vs.json
@@ -156,7 +156,8 @@
 		{
 			"scope": "markup.italic",
 			"settings": {
-				"fontStyle": "italic"
+				"fontStyle": "italic",
+				"foreground": "#C586C0"
 			}
 		},
 		{
diff --git a/extensions/theme-defaults/themes/hc_light.json b/extensions/theme-defaults/themes/hc_light.json
index e59494f9cfb..572cbe871dd 100644
--- a/extensions/theme-defaults/themes/hc_light.json
+++ b/extensions/theme-defaults/themes/hc_light.json
@@ -122,7 +122,8 @@
 		{
 			"scope": "markup.italic",
 			"settings": {
-				"fontStyle": "italic"
+				"fontStyle": "italic",
+				"foreground": "#800080"
 			}
 		},
 		{
diff --git a/extensions/theme-defaults/themes/light_vs.json b/extensions/theme-defaults/themes/light_vs.json
index e4cc701f82c..3fdbbead3d0 100644
--- a/extensions/theme-defaults/themes/light_vs.json
+++ b/extensions/theme-defaults/themes/light_vs.json
@@ -159,7 +159,8 @@
 		{
 			"scope": "markup.italic",
 			"settings": {
-				"fontStyle": "italic"
+				"fontStyle": "italic",
+				"foreground": "#800080"
 			}
 		},
 		{
diff --git a/extensions/vscode-colorize-tests/test/colorize-results/test_md.json b/extensions/vscode-colorize-tests/test/colorize-results/test_md.json
index 648feab845a..7fd99b59bc0 100644
--- a/extensions/vscode-colorize-tests/test/colorize-results/test_md.json
+++ b/extensions/vscode-colorize-tests/test/colorize-results/test_md.json
@@ -1809,42 +1809,42 @@
 		"c": "_",
 		"t": "text.html.markdown meta.paragraph.markdown markup.italic.markdown punctuation.definition.italic.markdown",
 		"r": {
-			"dark_plus": "default: #D4D4D4",
-			"light_plus": "default: #000000",
-			"dark_vs": "default: #D4D4D4",
-			"light_vs": "default: #000000",
+			"dark_plus": "markup.italic: #C586C0",
+			"light_plus": "markup.italic: #800080",
+			"dark_vs": "markup.italic: #C586C0",
+			"light_vs": "markup.italic: #800080",
 			"hc_black": "default: #FFFFFF",
-			"dark_modern": "default: #CCCCCC",
-			"hc_light": "default: #292929",
-			"light_modern": "default: #3B3B3B"
+			"dark_modern": "markup.italic: #C586C0",
+			"hc_light": "markup.italic: #800080",
+			"light_modern": "markup.italic: #800080"
 		}
 	},
 	{
 		"c": "italics",
 		"t": "text.html.markdown meta.paragraph.markdown markup.italic.markdown",
 		"r": {
-			"dark_plus": "default: #D4D4D4",
-			"light_plus": "default: #000000",
-			"dark_vs": "default: #D4D4D4",
-			"light_vs": "default: #000000",
+			"dark_plus": "markup.italic: #C586C0",
+			"light_plus": "markup.italic: #800080",
+			"dark_vs": "markup.italic: #C586C0",
+			"light_vs": "markup.italic: #800080",
 			"hc_black": "default: #FFFFFF",
-			"dark_modern": "default: #CCCCCC",
-			"hc_light": "default: #292929",
-			"light_modern": "default: #3B3B3B"
+			"dark_modern": "markup.italic: #C586C0",
+			"hc_light": "markup.italic: #800080",
+			"light_modern": "markup.italic: #800080"
 		}
 	},
 	{
 		"c": "_",
 		"t": "text.html.markdown meta.paragraph.markdown markup.italic.markdown punctuation.definition.italic.markdown",
 		"r": {
-			"dark_plus": "default: #D4D4D4",
-			"light_plus": "default: #000000",
-			"dark_vs": "default: #D4D4D4",
-			"light_vs": "default: #000000",
+			"dark_plus": "markup.italic: #C586C0",
+			"light_plus": "markup.italic: #800080",
+			"dark_vs": "markup.italic: #C586C0",
+			"light_vs": "markup.italic: #800080",
 			"hc_black": "default: #FFFFFF",
-			"dark_modern": "default: #CCCCCC",
-			"hc_light": "default: #292929",
-			"light_modern": "default: #3B3B3B"
+			"dark_modern": "markup.italic: #C586C0",
+			"hc_light": "markup.italic: #800080",
+			"light_modern": "markup.italic: #800080"
 		}
 	},
 	{
diff --git a/extensions/vscode-colorize-tests/test/colorize-results/test_rst.json b/extensions/vscode-colorize-tests/test/colorize-results/test_rst.json
index aa8468c4d8a..a2838df578b 100644
--- a/extensions/vscode-colorize-tests/test/colorize-results/test_rst.json
+++ b/extensions/vscode-colorize-tests/test/colorize-results/test_rst.json
@@ -3,14 +3,14 @@
 		"c": "*italics*",
 		"t": "source.rst markup.italic",
 		"r": {
-			"dark_plus": "default: #D4D4D4",
-			"light_plus": "default: #000000",
-			"dark_vs": "default: #D4D4D4",
-			"light_vs": "default: #000000",
+			"dark_plus": "markup.italic: #C586C0",
+			"light_plus": "markup.italic: #800080",
+			"dark_vs": "markup.italic: #C586C0",
+			"light_vs": "markup.italic: #800080",
 			"hc_black": "default: #FFFFFF",
-			"dark_modern": "default: #CCCCCC",
-			"hc_light": "default: #292929",
-			"light_modern": "default: #3B3B3B"
+			"dark_modern": "markup.italic: #C586C0",
+			"hc_light": "markup.italic: #800080",
+			"light_modern": "markup.italic: #800080"
 		}
 	},
 	{
diff --git a/package-lock.json b/package-lock.json
index 32f7e1bae0a..8524540f7d4 100644
--- a/package-lock.json
+++ b/package-lock.json
@@ -30,16 +30,16 @@
         "@vscode/windows-mutex": "^0.5.0",
         "@vscode/windows-process-tree": "^0.6.0",
         "@vscode/windows-registry": "^1.1.0",
-        "@xterm/addon-clipboard": "^0.3.0-beta.152",
-        "@xterm/addon-image": "^0.10.0-beta.152",
-        "@xterm/addon-ligatures": "^0.11.0-beta.152",
-        "@xterm/addon-progress": "^0.3.0-beta.152",
-        "@xterm/addon-search": "^0.17.0-beta.152",
-        "@xterm/addon-serialize": "^0.15.0-beta.152",
-        "@xterm/addon-unicode11": "^0.10.0-beta.152",
-        "@xterm/addon-webgl": "^0.20.0-beta.151",
-        "@xterm/headless": "^6.1.0-beta.152",
-        "@xterm/xterm": "^6.1.0-beta.152",
+        "@xterm/addon-clipboard": "^0.3.0-beta.165",
+        "@xterm/addon-image": "^0.10.0-beta.165",
+        "@xterm/addon-ligatures": "^0.11.0-beta.165",
+        "@xterm/addon-progress": "^0.3.0-beta.165",
+        "@xterm/addon-search": "^0.17.0-beta.165",
+        "@xterm/addon-serialize": "^0.15.0-beta.165",
+        "@xterm/addon-unicode11": "^0.10.0-beta.165",
+        "@xterm/addon-webgl": "^0.20.0-beta.164",
+        "@xterm/headless": "^6.1.0-beta.165",
+        "@xterm/xterm": "^6.1.0-beta.165",
         "http-proxy-agent": "^7.0.0",
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@@ -150,7 +150,7 @@
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-        "tar": "^7.5.7",
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@@ -3909,30 +3909,30 @@
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+      "resolved": "https://registry.npmjs.org/@xterm/addon-clipboard/-/addon-clipboard-0.3.0-beta.165.tgz",
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-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
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       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-ligatures": {
-      "version": "0.11.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-ligatures/-/addon-ligatures-0.11.0-beta.152.tgz",
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+      "version": "0.11.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-ligatures/-/addon-ligatures-0.11.0-beta.165.tgz",
+      "integrity": "sha512-3nuPBH4ZrGYF+yj/tBB/+YaLRnn8qqbR9J9OcvM6aeDfboEeaFAYIpmdqjh+2Rl2JFTIgZoiS3dKLWaUUpk0Tw==",
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@@ -3942,7 +3942,7 @@
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       },
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-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
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@@ -3964,63 +3964,63 @@
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+      "version": "0.3.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-progress/-/addon-progress-0.3.0-beta.165.tgz",
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-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
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-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
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     },
     "node_modules/@xterm/addon-serialize": {
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+        "@xterm/xterm": "^6.1.0-beta.165"
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+        "@xterm/xterm": "^6.1.0-beta.165"
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       "license": "MIT",
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-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
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     "node_modules/@xterm/headless": {
-      "version": "6.1.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/headless/-/headless-6.1.0-beta.152.tgz",
-      "integrity": "sha512-Hkt+KPuifM8kqDKtbHq1uIhqdZMQazKTl9zaqjcWY3Vogx7+JVr6F+eN89KHnrvhUUOmhAM0JQAIRv1O+upfUw==",
+      "version": "6.1.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/headless/-/headless-6.1.0-beta.165.tgz",
+      "integrity": "sha512-GjAqUhEiY7gb12+yIItptgMKUwHMa7o39HpezD7sfNjYLjmvWQcB02jqUdVMsvjjAKTe2YJMXp3RkApeXdMRVg==",
       "license": "MIT",
       "workspaces": [
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-      "resolved": "https://registry.npmjs.org/@xterm/xterm/-/xterm-6.1.0-beta.152.tgz",
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+      "version": "6.1.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/xterm/-/xterm-6.1.0-beta.165.tgz",
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@@ -16389,9 +16389,9 @@
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-      "resolved": "https://registry.npmjs.org/tar/-/tar-7.5.7.tgz",
-      "integrity": "sha512-fov56fJiRuThVFXD6o6/Q354S7pnWMJIVlDBYijsTNx6jKSE4pvrDTs6lUnmGvNyfJwFQQwWy3owKz1ucIhveQ==",
+      "version": "7.5.9",
+      "resolved": "https://registry.npmjs.org/tar/-/tar-7.5.9.tgz",
+      "integrity": "sha512-BTLcK0xsDh2+PUe9F6c2TlRp4zOOBMTkoQHQIWSIzI0R7KG46uEwq4OPk2W7bZcprBMsuaeFsqwYr7pjh6CuHg==",
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diff --git a/package.json b/package.json
index 20b139291a3..4a17850e8f0 100644
--- a/package.json
+++ b/package.json
@@ -1,7 +1,7 @@
 {
   "name": "code-oss-dev",
   "version": "1.110.0",
-  "distro": "16be71799bd7ef33ea9b0206fb548ce74a47daa4",
+  "distro": "85914d5a600261a53306190177be48aa8f0cdfb4",
   "author": {
     "name": "Microsoft Corporation"
   },
@@ -95,16 +95,16 @@
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     "@vscode/windows-process-tree": "^0.6.0",
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-    "@xterm/addon-image": "^0.10.0-beta.152",
-    "@xterm/addon-ligatures": "^0.11.0-beta.152",
-    "@xterm/addon-progress": "^0.3.0-beta.152",
-    "@xterm/addon-search": "^0.17.0-beta.152",
-    "@xterm/addon-serialize": "^0.15.0-beta.152",
-    "@xterm/addon-unicode11": "^0.10.0-beta.152",
-    "@xterm/addon-webgl": "^0.20.0-beta.151",
-    "@xterm/headless": "^6.1.0-beta.152",
-    "@xterm/xterm": "^6.1.0-beta.152",
+    "@xterm/addon-clipboard": "^0.3.0-beta.165",
+    "@xterm/addon-image": "^0.10.0-beta.165",
+    "@xterm/addon-ligatures": "^0.11.0-beta.165",
+    "@xterm/addon-progress": "^0.3.0-beta.165",
+    "@xterm/addon-search": "^0.17.0-beta.165",
+    "@xterm/addon-serialize": "^0.15.0-beta.165",
+    "@xterm/addon-unicode11": "^0.10.0-beta.165",
+    "@xterm/addon-webgl": "^0.20.0-beta.164",
+    "@xterm/headless": "^6.1.0-beta.165",
+    "@xterm/xterm": "^6.1.0-beta.165",
     "http-proxy-agent": "^7.0.0",
     "https-proxy-agent": "^7.0.2",
     "jschardet": "3.1.4",
@@ -215,7 +215,7 @@
     "source-map": "0.6.1",
     "source-map-support": "^0.3.2",
     "style-loader": "^3.3.2",
-    "tar": "^7.5.7",
+    "tar": "^7.5.9",
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     "tsec": "0.2.7",
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@@ -244,4 +244,4 @@
   "optionalDependencies": {
     "windows-foreground-love": "0.6.1"
   }
-}
+}
\ No newline at end of file
diff --git a/remote/package-lock.json b/remote/package-lock.json
index de6d200c162..4cec83e52e8 100644
--- a/remote/package-lock.json
+++ b/remote/package-lock.json
@@ -22,16 +22,16 @@
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-        "@xterm/headless": "^6.1.0-beta.152",
-        "@xterm/xterm": "^6.1.0-beta.152",
+        "@xterm/addon-clipboard": "^0.3.0-beta.165",
+        "@xterm/addon-image": "^0.10.0-beta.165",
+        "@xterm/addon-ligatures": "^0.11.0-beta.165",
+        "@xterm/addon-progress": "^0.3.0-beta.165",
+        "@xterm/addon-search": "^0.17.0-beta.165",
+        "@xterm/addon-serialize": "^0.15.0-beta.165",
+        "@xterm/addon-unicode11": "^0.10.0-beta.165",
+        "@xterm/addon-webgl": "^0.20.0-beta.164",
+        "@xterm/headless": "^6.1.0-beta.165",
+        "@xterm/xterm": "^6.1.0-beta.165",
         "cookie": "^0.7.0",
         "http-proxy-agent": "^7.0.0",
         "https-proxy-agent": "^7.0.2",
@@ -577,30 +577,30 @@
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+      "version": "0.3.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-clipboard/-/addon-clipboard-0.3.0-beta.165.tgz",
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-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
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       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
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@@ -610,67 +610,67 @@
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       }
     },
     "node_modules/@xterm/addon-unicode11": {
-      "version": "0.10.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-unicode11/-/addon-unicode11-0.10.0-beta.152.tgz",
-      "integrity": "sha512-2HSpMjbckGAmU/56CTGuEbCZJZHxUlfNJ2uzR4akZyVVLEmavC4thHVSGT7Ei1zzpHZsAg0y4WMbcp4wzpPv3g==",
+      "version": "0.10.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-unicode11/-/addon-unicode11-0.10.0-beta.165.tgz",
+      "integrity": "sha512-a6myeixOXDYeuOj0GK+/LWXbXXWanFVMvQRUMgC7wmUNGgSZiyJ8NPWzhAq6Vib4jSQ02pd+ux4ZtWs5kyvFLg==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-webgl": {
-      "version": "0.20.0-beta.151",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-webgl/-/addon-webgl-0.20.0-beta.151.tgz",
-      "integrity": "sha512-3ogsmZKPKc8n9Mjik4jTmNYT2Nbboe/zqcjDNG7RONO3w/tUyoKQshYCMBxxGMNLDwvh3BQ/D9/6JvdNWA1ShA==",
+      "version": "0.20.0-beta.164",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-webgl/-/addon-webgl-0.20.0-beta.164.tgz",
+      "integrity": "sha512-wXTi281yTWY1iAmRh21N6AhcEMopTjIm4xsdDdNmS5LbhxNuhVKNNIGKm5Zhd/G9fpn/vrfC4yZ6KA0lI/ZAxg==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/headless": {
-      "version": "6.1.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/headless/-/headless-6.1.0-beta.152.tgz",
-      "integrity": "sha512-Hkt+KPuifM8kqDKtbHq1uIhqdZMQazKTl9zaqjcWY3Vogx7+JVr6F+eN89KHnrvhUUOmhAM0JQAIRv1O+upfUw==",
+      "version": "6.1.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/headless/-/headless-6.1.0-beta.165.tgz",
+      "integrity": "sha512-GjAqUhEiY7gb12+yIItptgMKUwHMa7o39HpezD7sfNjYLjmvWQcB02jqUdVMsvjjAKTe2YJMXp3RkApeXdMRVg==",
       "license": "MIT",
       "workspaces": [
         "addons/*"
       ]
     },
     "node_modules/@xterm/xterm": {
-      "version": "6.1.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/xterm/-/xterm-6.1.0-beta.152.tgz",
-      "integrity": "sha512-XHJ5ab19V6tmcHmBE7k9IYjXSwTxUd0c7oKLa5J+ZO0+aiXE8UKh9OEDw1oyl5ZQhw9gn71cGEo4TpB58KhfoQ==",
+      "version": "6.1.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/xterm/-/xterm-6.1.0-beta.165.tgz",
+      "integrity": "sha512-OUszO4HSmGPEw3EhboyIcNLQKJQKCDsYHv9kYFcaiK3biuNjGP0VAPVUJOLbf3V9fa1GLUUq+t985blqvTApoA==",
       "license": "MIT",
       "workspaces": [
         "addons/*"
diff --git a/remote/package.json b/remote/package.json
index 603dc5559ba..afaaabaf5c8 100644
--- a/remote/package.json
+++ b/remote/package.json
@@ -17,16 +17,16 @@
     "@vscode/vscode-languagedetection": "1.0.21",
     "@vscode/windows-process-tree": "^0.6.0",
     "@vscode/windows-registry": "^1.1.0",
-    "@xterm/addon-clipboard": "^0.3.0-beta.152",
-    "@xterm/addon-image": "^0.10.0-beta.152",
-    "@xterm/addon-ligatures": "^0.11.0-beta.152",
-    "@xterm/addon-progress": "^0.3.0-beta.152",
-    "@xterm/addon-search": "^0.17.0-beta.152",
-    "@xterm/addon-serialize": "^0.15.0-beta.152",
-    "@xterm/addon-unicode11": "^0.10.0-beta.152",
-    "@xterm/addon-webgl": "^0.20.0-beta.151",
-    "@xterm/headless": "^6.1.0-beta.152",
-    "@xterm/xterm": "^6.1.0-beta.152",
+    "@xterm/addon-clipboard": "^0.3.0-beta.165",
+    "@xterm/addon-image": "^0.10.0-beta.165",
+    "@xterm/addon-ligatures": "^0.11.0-beta.165",
+    "@xterm/addon-progress": "^0.3.0-beta.165",
+    "@xterm/addon-search": "^0.17.0-beta.165",
+    "@xterm/addon-serialize": "^0.15.0-beta.165",
+    "@xterm/addon-unicode11": "^0.10.0-beta.165",
+    "@xterm/addon-webgl": "^0.20.0-beta.164",
+    "@xterm/headless": "^6.1.0-beta.165",
+    "@xterm/xterm": "^6.1.0-beta.165",
     "cookie": "^0.7.0",
     "http-proxy-agent": "^7.0.0",
     "https-proxy-agent": "^7.0.2",
diff --git a/remote/web/package-lock.json b/remote/web/package-lock.json
index f443df36ae5..eeed651e576 100644
--- a/remote/web/package-lock.json
+++ b/remote/web/package-lock.json
@@ -14,15 +14,15 @@
         "@vscode/iconv-lite-umd": "0.7.1",
         "@vscode/tree-sitter-wasm": "^0.3.0",
         "@vscode/vscode-languagedetection": "1.0.21",
-        "@xterm/addon-clipboard": "^0.3.0-beta.152",
-        "@xterm/addon-image": "^0.10.0-beta.152",
-        "@xterm/addon-ligatures": "^0.11.0-beta.152",
-        "@xterm/addon-progress": "^0.3.0-beta.152",
-        "@xterm/addon-search": "^0.17.0-beta.152",
-        "@xterm/addon-serialize": "^0.15.0-beta.152",
-        "@xterm/addon-unicode11": "^0.10.0-beta.152",
-        "@xterm/addon-webgl": "^0.20.0-beta.151",
-        "@xterm/xterm": "^6.1.0-beta.152",
+        "@xterm/addon-clipboard": "^0.3.0-beta.165",
+        "@xterm/addon-image": "^0.10.0-beta.165",
+        "@xterm/addon-ligatures": "^0.11.0-beta.165",
+        "@xterm/addon-progress": "^0.3.0-beta.165",
+        "@xterm/addon-search": "^0.17.0-beta.165",
+        "@xterm/addon-serialize": "^0.15.0-beta.165",
+        "@xterm/addon-unicode11": "^0.10.0-beta.165",
+        "@xterm/addon-webgl": "^0.20.0-beta.164",
+        "@xterm/xterm": "^6.1.0-beta.165",
         "jschardet": "3.1.4",
         "katex": "^0.16.22",
         "tas-client": "0.3.1",
@@ -99,30 +99,30 @@
       }
     },
     "node_modules/@xterm/addon-clipboard": {
-      "version": "0.3.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-clipboard/-/addon-clipboard-0.3.0-beta.152.tgz",
-      "integrity": "sha512-D+wFHTTNj1qzlSL1h15tgFh6JgK/SSaotkohtaKykkKFmkdGrtJq8PpINaFipRDrZXX0d9eOD+wrMfz6IG+5Yw==",
+      "version": "0.3.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-clipboard/-/addon-clipboard-0.3.0-beta.165.tgz",
+      "integrity": "sha512-48GUTZg7sKB7tQvtC7FcH22GxxO0cIUVM4hw068Oi3cJnxDLLPQDicPv70fFG7zysGxxEKE7A39GMtHhwFI75Q==",
       "license": "MIT",
       "dependencies": {
         "js-base64": "^3.7.5"
       },
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-image": {
-      "version": "0.10.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-image/-/addon-image-0.10.0-beta.152.tgz",
-      "integrity": "sha512-pyQ/hQr3O0gY1La+6ZXdh0tI/+6MmNo2eFPNyWzB21J02xMu6nc30+B/H9VlPSR3AXHno5U67AWra5Y4FrE+5A==",
+      "version": "0.10.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-image/-/addon-image-0.10.0-beta.165.tgz",
+      "integrity": "sha512-DwYvKRgytc1OYoJVwA/doOTT92K8asgvnt3FzsHt5D+XgniwdvM5nwjxv95p6UXv0kEOxQWFy3sNJl/4g/5pew==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-ligatures": {
-      "version": "0.11.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-ligatures/-/addon-ligatures-0.11.0-beta.152.tgz",
-      "integrity": "sha512-DglTaxmWHolTfryequU/7+Q4bjpDywt7UDsE3SdbC7O/9fa1qaOZMVlxKtRBtMBBzX5PXa+Ha4qAaMS2psr3UQ==",
+      "version": "0.11.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-ligatures/-/addon-ligatures-0.11.0-beta.165.tgz",
+      "integrity": "sha512-3nuPBH4ZrGYF+yj/tBB/+YaLRnn8qqbR9J9OcvM6aeDfboEeaFAYIpmdqjh+2Rl2JFTIgZoiS3dKLWaUUpk0Tw==",
       "license": "MIT",
       "dependencies": {
         "lru-cache": "^6.0.0",
@@ -132,58 +132,58 @@
         "node": ">8.0.0"
       },
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-progress": {
-      "version": "0.3.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-progress/-/addon-progress-0.3.0-beta.152.tgz",
-      "integrity": "sha512-H3qNwUaTNDRm51s8IzcYRinnQBSf7QDXWkcyAuDlprDJlR5BFhmGr9hpMV/KlCo2s6nhWrFjiwkd642DJ7McMg==",
+      "version": "0.3.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-progress/-/addon-progress-0.3.0-beta.165.tgz",
+      "integrity": "sha512-Jl+dhHkFBUafrXCECI/EepcGV1GYuU1X/0oXkPYu/VYfbmkjQSAidmfBAEyS+4+AUK5Lkf6yLdb1N13tZVexyg==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-search": {
-      "version": "0.17.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-search/-/addon-search-0.17.0-beta.152.tgz",
-      "integrity": "sha512-0T/xDg0yh3PlS9HWOioIrNGP0OfUp4MtBJ7M2sfR+h23KKa4gl1ec7S1TsGU4gsvEMBKG1TB6jReX4vlKGYc4A==",
+      "version": "0.17.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-search/-/addon-search-0.17.0-beta.165.tgz",
+      "integrity": "sha512-3KjonTDJl/8M6jI5nTJITVT+Z528d/5CgqRmn6IV+sDgRfr3W84RZNDsaxXsLoc0GDsxQIB74/FmnNykUQ5Yew==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-serialize": {
-      "version": "0.15.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-serialize/-/addon-serialize-0.15.0-beta.152.tgz",
-      "integrity": "sha512-GnhwKg0dkpAI1gZmm9L69Xjseal5pKwXFaMUxzm+Viajcp/PdqK1pEBJX5RndToNF0Ti3xu4e6BFO7dqY/J9TA==",
+      "version": "0.15.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-serialize/-/addon-serialize-0.15.0-beta.165.tgz",
+      "integrity": "sha512-NjXE+of4NJagrtHlzePBuWQ8a9pBFhhmQuvOhPj9W3CSi+VanuMoM/oRaT1TbR3efHk2JdCsKVDJScEzY8kdjw==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-unicode11": {
-      "version": "0.10.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-unicode11/-/addon-unicode11-0.10.0-beta.152.tgz",
-      "integrity": "sha512-2HSpMjbckGAmU/56CTGuEbCZJZHxUlfNJ2uzR4akZyVVLEmavC4thHVSGT7Ei1zzpHZsAg0y4WMbcp4wzpPv3g==",
+      "version": "0.10.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-unicode11/-/addon-unicode11-0.10.0-beta.165.tgz",
+      "integrity": "sha512-a6myeixOXDYeuOj0GK+/LWXbXXWanFVMvQRUMgC7wmUNGgSZiyJ8NPWzhAq6Vib4jSQ02pd+ux4ZtWs5kyvFLg==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/addon-webgl": {
-      "version": "0.20.0-beta.151",
-      "resolved": "https://registry.npmjs.org/@xterm/addon-webgl/-/addon-webgl-0.20.0-beta.151.tgz",
-      "integrity": "sha512-3ogsmZKPKc8n9Mjik4jTmNYT2Nbboe/zqcjDNG7RONO3w/tUyoKQshYCMBxxGMNLDwvh3BQ/D9/6JvdNWA1ShA==",
+      "version": "0.20.0-beta.164",
+      "resolved": "https://registry.npmjs.org/@xterm/addon-webgl/-/addon-webgl-0.20.0-beta.164.tgz",
+      "integrity": "sha512-wXTi281yTWY1iAmRh21N6AhcEMopTjIm4xsdDdNmS5LbhxNuhVKNNIGKm5Zhd/G9fpn/vrfC4yZ6KA0lI/ZAxg==",
       "license": "MIT",
       "peerDependencies": {
-        "@xterm/xterm": "^6.1.0-beta.152"
+        "@xterm/xterm": "^6.1.0-beta.165"
       }
     },
     "node_modules/@xterm/xterm": {
-      "version": "6.1.0-beta.152",
-      "resolved": "https://registry.npmjs.org/@xterm/xterm/-/xterm-6.1.0-beta.152.tgz",
-      "integrity": "sha512-XHJ5ab19V6tmcHmBE7k9IYjXSwTxUd0c7oKLa5J+ZO0+aiXE8UKh9OEDw1oyl5ZQhw9gn71cGEo4TpB58KhfoQ==",
+      "version": "6.1.0-beta.165",
+      "resolved": "https://registry.npmjs.org/@xterm/xterm/-/xterm-6.1.0-beta.165.tgz",
+      "integrity": "sha512-OUszO4HSmGPEw3EhboyIcNLQKJQKCDsYHv9kYFcaiK3biuNjGP0VAPVUJOLbf3V9fa1GLUUq+t985blqvTApoA==",
       "license": "MIT",
       "workspaces": [
         "addons/*"
diff --git a/remote/web/package.json b/remote/web/package.json
index fa7ad6cca70..35cf04c172a 100644
--- a/remote/web/package.json
+++ b/remote/web/package.json
@@ -9,15 +9,15 @@
     "@vscode/iconv-lite-umd": "0.7.1",
     "@vscode/tree-sitter-wasm": "^0.3.0",
     "@vscode/vscode-languagedetection": "1.0.21",
-    "@xterm/addon-clipboard": "^0.3.0-beta.152",
-    "@xterm/addon-image": "^0.10.0-beta.152",
-    "@xterm/addon-ligatures": "^0.11.0-beta.152",
-    "@xterm/addon-progress": "^0.3.0-beta.152",
-    "@xterm/addon-search": "^0.17.0-beta.152",
-    "@xterm/addon-serialize": "^0.15.0-beta.152",
-    "@xterm/addon-unicode11": "^0.10.0-beta.152",
-    "@xterm/addon-webgl": "^0.20.0-beta.151",
-    "@xterm/xterm": "^6.1.0-beta.152",
+    "@xterm/addon-clipboard": "^0.3.0-beta.165",
+    "@xterm/addon-image": "^0.10.0-beta.165",
+    "@xterm/addon-ligatures": "^0.11.0-beta.165",
+    "@xterm/addon-progress": "^0.3.0-beta.165",
+    "@xterm/addon-search": "^0.17.0-beta.165",
+    "@xterm/addon-serialize": "^0.15.0-beta.165",
+    "@xterm/addon-unicode11": "^0.10.0-beta.165",
+    "@xterm/addon-webgl": "^0.20.0-beta.164",
+    "@xterm/xterm": "^6.1.0-beta.165",
     "jschardet": "3.1.4",
     "katex": "^0.16.22",
     "tas-client": "0.3.1",
diff --git a/src/vs/base/common/yaml.ts b/src/vs/base/common/yaml.ts
index 6f2e801d696..1cb0388afea 100644
--- a/src/vs/base/common/yaml.ts
+++ b/src/vs/base/common/yaml.ts
@@ -3,38 +3,62 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
+import { localize } from '../../nls.js';
+
 /**
  * Parses a simplified YAML-like input from a single string.
  * Supports objects, arrays, primitive types (string, number, boolean, null).
  * Tracks positions for error reporting and node locations.
  *
  * Limitations:
- * - No multi-line strings or block literals
  * - No anchors or references
  * - No complex types (dates, binary)
- * - No special handling for escape sequences in strings
- * - Indentation must be consistent (spaces only, no tabs)
- *
- * Notes:
- * - New line separators can be either "\n" or "\r\n". The input string is split into lines internally.
+ * - No single pair implicit entries
  *
  * @param input A string containing the YAML-like input
  * @param errors Array to collect parsing errors
- * @param options Parsing options
- * @returns The parsed representation (ObjectNode, ArrayNode, or primitive node)
+ * @returns The parsed representation (YamlMapNode, YamlSequenceNode, or YamlScalarNode)
  */
 export function parse(input: string, errors: YamlParseError[] = [], options: ParseOptions = {}): YamlNode | undefined {
-	// Normalize both LF and CRLF by splitting on either; CR characters are not retained as part of line text.
-	// This keeps the existing line/character based lexer logic intact.
-	const lines = input.length === 0 ? [] : input.split(/\r\n|\n/);
-	const parser = new YamlParser(lines, errors, options);
+	const scanner = new YamlScanner(input);
+	const tokens = scanner.scan();
+	const parser = new YamlParser(tokens, input, errors, options);
 	return parser.parse();
 }
 
+// -- AST Node Types ----------------------------------------------------------
+
+export interface YamlScalarNode {
+	readonly type: 'scalar';
+	readonly value: string;
+	readonly rawValue: string;
+	readonly startOffset: number;
+	readonly endOffset: number;
+	readonly format: 'single' | 'double' | 'none' | 'literal' | 'folded';
+}
+
+export interface YamlMapNode {
+	readonly type: 'map';
+	readonly properties: { key: YamlScalarNode; value: YamlNode }[];
+	readonly style: 'block' | 'flow';
+	readonly startOffset: number;
+	readonly endOffset: number;
+}
+
+export interface YamlSequenceNode {
+	readonly type: 'sequence';
+	readonly items: YamlNode[];
+	readonly style: 'block' | 'flow';
+	readonly startOffset: number;
+	readonly endOffset: number;
+}
+
+export type YamlNode = YamlSequenceNode | YamlMapNode | YamlScalarNode;
+
 export interface YamlParseError {
 	readonly message: string;
-	readonly start: Position;
-	readonly end: Position;
+	readonly startOffset: number;
+	readonly endOffset: number;
 	readonly code: string;
 }
 
@@ -42,851 +66,1529 @@ export interface ParseOptions {
 	readonly allowDuplicateKeys?: boolean;
 }
 
-export interface Position {
-	readonly line: number;
-	readonly character: number;
+// -- Token Types -------------------------------------------------------------
+
+const enum TokenType {
+	// Scalar values (unquoted, single-quoted, double-quoted)
+	Scalar,
+	// Structural tokens
+	Colon,           // ':'
+	Dash,            // '- '
+	Comma,           // ','
+	FlowMapStart,    // '{'
+	FlowMapEnd,      // '}'
+	FlowSeqStart,    // '['
+	FlowSeqEnd,      // ']'
+	// Whitespace / structure
+	Newline,
+	Indent,          // leading whitespace at start of line (carries the indent level)
+	Comment,
+	DocumentStart,  // '---'
+	DocumentEnd,    // '...'
+	EOF,
 }
 
-export interface YamlStringNode {
-	readonly type: 'string';
+interface Token {
+	readonly type: TokenType;
+	readonly startOffset: number;
+	readonly endOffset: number;
+	/** For Scalar tokens: the raw text (including quotes). */
+	readonly rawValue: string;
+	/** For Scalar tokens: the interpreted string value. */
 	readonly value: string;
-	readonly start: Position;
-	readonly end: Position;
+	/** For Scalar tokens: quote style. */
+	readonly format: 'single' | 'double' | 'none' | 'literal' | 'folded';
+	/** For Indent tokens: the column (number of spaces). */
+	readonly indent: number;
 }
 
-export interface YamlNumberNode {
-	readonly type: 'number';
-	readonly value: number;
-	readonly start: Position;
-	readonly end: Position;
+function makeToken(
+	type: TokenType,
+	startOffset: number,
+	endOffset: number,
+	extra?: Partial<Pick<Token, 'rawValue' | 'value' | 'format' | 'indent'>>
+): Token {
+	return {
+		type,
+		startOffset,
+		endOffset,
+		rawValue: extra?.rawValue ?? '',
+		value: extra?.value ?? '',
+		format: extra?.format ?? 'none' as Token['format'],
+		indent: extra?.indent ?? 0,
+	};
 }
 
-export interface YamlBooleanNode {
-	readonly type: 'boolean';
-	readonly value: boolean;
-	readonly start: Position;
-	readonly end: Position;
-}
+// -- Scanner -----------------------------------------------------------------
 
-export interface YamlNullNode {
-	readonly type: 'null';
-	readonly value: null;
-	readonly start: Position;
-	readonly end: Position;
-}
+class YamlScanner {
+	private pos = 0;
+	private readonly tokens: Token[] = [];
+	// Track flow nesting depth so commas and flow indicators are only special inside flow collections
+	private flowDepth = 0;
 
-export interface YamlObjectNode {
-	readonly type: 'object';
-	readonly properties: { key: YamlStringNode; value: YamlNode }[];
-	readonly start: Position;
-	readonly end: Position;
-}
+	constructor(private readonly input: string) { }
 
-export interface YamlArrayNode {
-	readonly type: 'array';
-	readonly items: YamlNode[];
-	readonly start: Position;
-	readonly end: Position;
-}
-
-export type YamlNode = YamlStringNode | YamlNumberNode | YamlBooleanNode | YamlNullNode | YamlObjectNode | YamlArrayNode;
-
-// Helper functions for position and node creation
-function createPosition(line: number, character: number): Position {
-	return { line, character };
-}
-
-// Specialized node creation functions using a more concise approach
-function createStringNode(value: string, start: Position, end: Position): YamlStringNode {
-	return { type: 'string', value, start, end };
-}
-
-function createNumberNode(value: number, start: Position, end: Position): YamlNumberNode {
-	return { type: 'number', value, start, end };
-}
-
-function createBooleanNode(value: boolean, start: Position, end: Position): YamlBooleanNode {
-	return { type: 'boolean', value, start, end };
-}
-
-function createNullNode(start: Position, end: Position): YamlNullNode {
-	return { type: 'null', value: null, start, end };
-}
-
-function createObjectNode(properties: { key: YamlStringNode; value: YamlNode }[], start: Position, end: Position): YamlObjectNode {
-	return { type: 'object', start, end, properties };
-}
-
-function createArrayNode(items: YamlNode[], start: Position, end: Position): YamlArrayNode {
-	return { type: 'array', start, end, items };
-}
-
-// Utility functions for parsing
-function isWhitespace(char: string): boolean {
-	return char === ' ' || char === '\t';
-}
-
-// Simplified number validation using regex
-function isValidNumber(value: string): boolean {
-	return /^-?\d*\.?\d+$/.test(value);
-}
-
-// Lexer/Tokenizer for YAML content
-class YamlLexer {
-	private lines: string[];
-	private currentLine: number = 0;
-	private currentChar: number = 0;
-
-	constructor(lines: string[]) {
-		this.lines = lines;
-	}
-
-	getCurrentPosition(): Position {
-		return createPosition(this.currentLine, this.currentChar);
-	}
-
-	getCurrentLineNumber(): number {
-		return this.currentLine;
-	}
-
-	getCurrentCharNumber(): number {
-		return this.currentChar;
-	}
-
-	getCurrentLineText(): string {
-		return this.currentLine < this.lines.length ? this.lines[this.currentLine] : '';
-	}
-
-	savePosition(): { line: number; char: number } {
-		return { line: this.currentLine, char: this.currentChar };
-	}
-
-	restorePosition(pos: { line: number; char: number }): void {
-		this.currentLine = pos.line;
-		this.currentChar = pos.char;
-	}
-
-	isAtEnd(): boolean {
-		return this.currentLine >= this.lines.length;
-	}
-
-	getCurrentChar(): string {
-		if (this.isAtEnd() || this.currentChar >= this.lines[this.currentLine].length) {
-			return '';
+	scan(): Token[] {
+		while (this.pos < this.input.length) {
+			this.scanLine();
 		}
-		return this.lines[this.currentLine][this.currentChar];
+		this.tokens.push(makeToken(TokenType.EOF, this.pos, this.pos));
+		return this.tokens;
 	}
 
-	peek(offset: number = 1): string {
-		const newChar = this.currentChar + offset;
-		if (this.currentLine >= this.lines.length || newChar >= this.lines[this.currentLine].length) {
-			return '';
+	// Scan a single logical line (up to and including the newline character)
+	private scanLine(): void {
+		// Handle blank lines / lines that are only whitespace
+		if (this.peekChar() === '\n') {
+			this.tokens.push(makeToken(TokenType.Newline, this.pos, this.pos + 1));
+			this.pos++;
+			return;
 		}
-		return this.lines[this.currentLine][newChar];
-	}
-
-	advance(): string {
-		const char = this.getCurrentChar();
-		if (this.currentChar >= this.lines[this.currentLine].length && this.currentLine < this.lines.length - 1) {
-			this.currentLine++;
-			this.currentChar = 0;
-		} else {
-			this.currentChar++;
+		if (this.peekChar() === '\r') {
+			const end = this.pos + (this.input[this.pos + 1] === '\n' ? 2 : 1);
+			this.tokens.push(makeToken(TokenType.Newline, this.pos, end));
+			this.pos = end;
+			return;
 		}
-		return char;
-	}
 
-	advanceLine(): void {
-		this.currentLine++;
-		this.currentChar = 0;
-	}
-
-	skipWhitespace(): void {
-		while (!this.isAtEnd() && this.currentChar < this.lines[this.currentLine].length && isWhitespace(this.getCurrentChar())) {
-			this.advance();
-		}
-	}
-
-	skipToEndOfLine(): void {
-		this.currentChar = this.lines[this.currentLine].length;
-	}
-
-	getIndentation(): number {
-		if (this.isAtEnd()) {
-			return 0;
-		}
+		// Measure leading whitespace → Indent token
+		const indentStart = this.pos;
 		let indent = 0;
-		for (let i = 0; i < this.lines[this.currentLine].length; i++) {
-			if (this.lines[this.currentLine][i] === ' ') {
-				indent++;
-			} else if (this.lines[this.currentLine][i] === '\t') {
-				indent += 4; // Treat tab as 4 spaces
-			} else {
+		while (this.pos < this.input.length && (this.input[this.pos] === ' ' || this.input[this.pos] === '\t')) {
+			indent++;
+			this.pos++;
+		}
+		if (indent > 0) {
+			this.tokens.push(makeToken(TokenType.Indent, indentStart, this.pos, { indent }));
+		}
+
+		// If line is now empty (only whitespace before newline/EOF), emit newline
+		if (this.pos >= this.input.length || this.peekChar() === '\n' || this.peekChar() === '\r') {
+			if (this.pos < this.input.length) {
+				const nlStart = this.pos;
+				const end = this.peekChar() === '\r' && this.input[this.pos + 1] === '\n' ? this.pos + 2 : this.pos + 1;
+				this.tokens.push(makeToken(TokenType.Newline, nlStart, end));
+				this.pos = end;
+			}
+			return;
+		}
+
+		// Check for document markers (--- / ...) at column 0
+		if (indent === 0 && this.input.length - this.pos >= 3) {
+			const c0 = this.input[this.pos];
+			const c1 = this.input[this.pos + 1];
+			const c2 = this.input[this.pos + 2];
+			const c3 = this.input[this.pos + 3];
+			const isTerminator = c3 === undefined || c3 === ' ' || c3 === '\t' || c3 === '\n' || c3 === '\r';
+			if (c0 === '-' && c1 === '-' && c2 === '-' && isTerminator) {
+				this.tokens.push(makeToken(TokenType.DocumentStart, this.pos, this.pos + 3));
+				this.pos += 3;
+				this.scanLineContent();
+				this.scanNewline();
+				return;
+			}
+			if (c0 === '.' && c1 === '.' && c2 === '.' && isTerminator) {
+				this.tokens.push(makeToken(TokenType.DocumentEnd, this.pos, this.pos + 3));
+				this.pos += 3;
+				this.scanLineContent();
+				this.scanNewline();
+				return;
+			}
+		}
+
+		// Check for comment-only line
+		if (this.peekChar() === '#') {
+			this.scanComment();
+			this.scanNewline();
+			return;
+		}
+
+		// Skip directive lines (e.g., %YAML 1.2, %TAG) - consume rest of line
+		if (this.peekChar() === '%') {
+			while (this.pos < this.input.length && this.input[this.pos] !== '\n' && this.input[this.pos] !== '\r') {
+				this.pos++;
+			}
+			this.scanNewline();
+			return;
+		}
+
+		// Scan the rest of the line for tokens
+		this.scanLineContent();
+		this.scanNewline();
+	}
+
+	private scanLineContent(): void {
+		while (this.pos < this.input.length && this.peekChar() !== '\n' && this.peekChar() !== '\r') {
+			this.skipInlineWhitespace();
+			if (this.pos >= this.input.length || this.peekChar() === '\n' || this.peekChar() === '\r') {
 				break;
 			}
-		}
-		return indent;
-	}
 
-	moveToNextNonEmptyLine(): void {
-		while (this.currentLine < this.lines.length) {
-			// First check current line from current position
-			if (this.currentChar < this.lines[this.currentLine].length) {
-				const remainingLine = this.lines[this.currentLine].substring(this.currentChar).trim();
-				if (remainingLine.length > 0 && !remainingLine.startsWith('#')) {
-					this.skipWhitespace();
-					return;
-				}
-			}
+			const ch = this.peekChar();
 
-			// Move to next line and check from beginning
-			this.currentLine++;
-			this.currentChar = 0;
-
-			if (this.currentLine < this.lines.length) {
-				const line = this.lines[this.currentLine].trim();
-				if (line.length > 0 && !line.startsWith('#')) {
-					this.skipWhitespace();
-					return;
-				}
+			if (ch === '#') {
+				this.scanComment();
+				break; // comment consumes rest of line
+			} else if (ch === '{') {
+				this.flowDepth++;
+				this.tokens.push(makeToken(TokenType.FlowMapStart, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === '}' && this.flowDepth > 0) {
+				this.flowDepth--;
+				this.tokens.push(makeToken(TokenType.FlowMapEnd, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === '[') {
+				this.flowDepth++;
+				this.tokens.push(makeToken(TokenType.FlowSeqStart, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === ']' && this.flowDepth > 0) {
+				this.flowDepth--;
+				this.tokens.push(makeToken(TokenType.FlowSeqEnd, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === ',' && this.flowDepth > 0) {
+				this.tokens.push(makeToken(TokenType.Comma, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === '-' && this.isBlockDash()) {
+				// Block sequence indicator: '- ' or '-' at end of line
+				this.tokens.push(makeToken(TokenType.Dash, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === ':' && this.isBlockColon()) {
+				this.tokens.push(makeToken(TokenType.Colon, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === ':' && this.flowDepth > 0 && this.lastTokenIsJsonLike()) {
+				// In flow context, ':' immediately following a JSON-like node (quoted scalar,
+				// flow mapping, or flow sequence) is a value indicator even without trailing space
+				this.tokens.push(makeToken(TokenType.Colon, this.pos, this.pos + 1));
+				this.pos++;
+			} else if (ch === '\'' || ch === '"') {
+				this.scanQuotedScalar(ch);
+			} else if ((ch === '|' || ch === '>') && this.flowDepth === 0 && this.isBlockScalarStart()) {
+				this.scanBlockScalar(ch as '|' | '>');
+				break; // Block scalar consumed multiple lines; return to main scan loop
+			} else {
+				this.scanUnquotedScalar();
 			}
 		}
 	}
-}
 
-// Parser class for handling YAML parsing
-class YamlParser {
-	private lexer: YamlLexer;
-	private errors: YamlParseError[];
-	private options: ParseOptions;
-	// Track nesting level of flow (inline) collections '[' ']' '{' '}'
-	private flowLevel: number = 0;
-
-	constructor(lines: string[], errors: YamlParseError[], options: ParseOptions) {
-		this.lexer = new YamlLexer(lines);
-		this.errors = errors;
-		this.options = options;
+	/** Check if '-' is a block sequence dash (followed by space, newline, or EOF) */
+	private isBlockDash(): boolean {
+		const next = this.input[this.pos + 1];
+		return next === undefined || next === ' ' || next === '\t' || next === '\n' || next === '\r';
 	}
 
-	addError(message: string, code: string, start: Position, end: Position): void {
-		this.errors.push({ message, code, start, end });
+	/** Check if ':' acts as a mapping value indicator (followed by space, newline, EOF, or flow indicator) */
+	private isBlockColon(): boolean {
+		const next = this.input[this.pos + 1];
+		if (next === undefined || next === ' ' || next === '\t' || next === '\n' || next === '\r') { return true; }
+		// Flow indicators after colon only count inside flow context
+		if (this.flowDepth > 0 && (next === ',' || next === '}' || next === ']')) { return true; }
+		return false;
 	}
 
-	parseValue(expectedIndent?: number): YamlNode {
-		this.lexer.skipWhitespace();
-
-		if (this.lexer.isAtEnd()) {
-			const pos = this.lexer.getCurrentPosition();
-			return createStringNode('', pos, pos);
-		}
-
-		const char = this.lexer.getCurrentChar();
-
-		// Handle quoted strings
-		if (char === '"' || char === `'`) {
-			return this.parseQuotedString(char);
-		}
-
-		// Handle inline arrays
-		if (char === '[') {
-			return this.parseInlineArray();
-		}
-
-		// Handle inline objects
-		if (char === '{') {
-			return this.parseInlineObject();
-		}
-
-		// Handle unquoted values
-		return this.parseUnquotedValue();
-	}
-
-	parseQuotedString(quote: string): YamlNode {
-		const start = this.lexer.getCurrentPosition();
-		this.lexer.advance(); // Skip opening quote
-
-		let value = '';
-		while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '' && this.lexer.getCurrentChar() !== quote) {
-			value += this.lexer.advance();
-		}
-
-		if (this.lexer.getCurrentChar() === quote) {
-			this.lexer.advance(); // Skip closing quote
-		}
-
-		const end = this.lexer.getCurrentPosition();
-		return createStringNode(value, start, end);
-	}
-
-	parseUnquotedValue(): YamlNode {
-		const start = this.lexer.getCurrentPosition();
-		let value = '';
-		let endPos = start;
-
-		// Helper function to check for value terminators
-		const isTerminator = (char: string): boolean => {
-			if (char === '#') { return true; }
-			// Comma, ']' and '}' only terminate inside flow collections
-			if (this.flowLevel > 0 && (char === ',' || char === ']' || char === '}')) { return true; }
+	/** Check if the last non-whitespace token is a JSON-like node (quoted scalar or flow end) */
+	private lastTokenIsJsonLike(): boolean {
+		for (let i = this.tokens.length - 1; i >= 0; i--) {
+			const t = this.tokens[i];
+			if (t.type === TokenType.Newline || t.type === TokenType.Indent || t.type === TokenType.Comment) {
+				continue;
+			}
+			// Quoted scalar or flow collection end bracket
+			if (t.type === TokenType.Scalar && t.format !== 'none') { return true; }
+			if (t.type === TokenType.FlowMapEnd || t.type === TokenType.FlowSeqEnd) { return true; }
 			return false;
-		};
-
-		// Handle opening quote that might not be closed
-		const firstChar = this.lexer.getCurrentChar();
-		if (firstChar === '"' || firstChar === `'`) {
-			value += this.lexer.advance();
-			endPos = this.lexer.getCurrentPosition();
-			while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '') {
-				const char = this.lexer.getCurrentChar();
-				if (char === firstChar || isTerminator(char)) {
-					break;
-				}
-				value += this.lexer.advance();
-				endPos = this.lexer.getCurrentPosition();
-			}
-		} else {
-			while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '') {
-				const char = this.lexer.getCurrentChar();
-				if (isTerminator(char)) {
-					break;
-				}
-				value += this.lexer.advance();
-				endPos = this.lexer.getCurrentPosition();
-			}
 		}
-		const trimmed = value.trimEnd();
-		const diff = value.length - trimmed.length;
-		if (diff) {
-			endPos = createPosition(start.line, endPos.character - diff);
-		}
-		const finalValue = (firstChar === '"' || firstChar === `'`) ? trimmed.substring(1) : trimmed;
-		return this.createValueNode(finalValue, start, endPos);
+		return false;
 	}
 
-	private createValueNode(value: string, start: Position, end: Position): YamlNode {
-		if (value === '') {
-			return createStringNode('', start, start);
-		}
+	private scanQuotedScalar(quote: '\'' | '"'): void {
+		const start = this.pos;
+		this.pos++; // skip opening quote
+		let value = '';
+		// Track trailing literal whitespace count so flow folding only trims
+		// source-level whitespace, not whitespace produced by escape sequences
+		let trailingLiteralWs = 0;
 
-		// Boolean values
-		if (value === 'true') {
-			return createBooleanNode(true, start, end);
-		}
-		if (value === 'false') {
-			return createBooleanNode(false, start, end);
-		}
-
-		// Null values
-		if (value === 'null' || value === '~') {
-			return createNullNode(start, end);
-		}
-
-		// Number values
-		const numberValue = Number(value);
-		if (!isNaN(numberValue) && isFinite(numberValue) && isValidNumber(value)) {
-			return createNumberNode(numberValue, start, end);
-		}
-
-		// Default to string
-		return createStringNode(value, start, end);
-	}
-
-	parseInlineArray(): YamlArrayNode {
-		const start = this.lexer.getCurrentPosition();
-		this.lexer.advance(); // Skip '['
-		this.flowLevel++;
-
-		const items: YamlNode[] = [];
-
-		while (!this.lexer.isAtEnd()) {
-			this.lexer.skipWhitespace();
-
-			// Handle end of array
-			if (this.lexer.getCurrentChar() === ']') {
-				this.lexer.advance();
-				break;
+		while (this.pos < this.input.length) {
+			const ch = this.input[this.pos];
+			if (ch === quote) {
+				// In single-quoted strings, '' is an escaped single quote
+				if (quote === '\'' && this.input[this.pos + 1] === '\'') {
+					value += '\'';
+					this.pos += 2;
+					trailingLiteralWs = 0;
+					continue;
+				}
+				this.pos++; // skip closing quote
+				const rawValue = this.input.substring(start, this.pos);
+				this.tokens.push(makeToken(TokenType.Scalar, start, this.pos, {
+					rawValue,
+					value,
+					format: quote === '\'' ? 'single' : 'double',
+				}));
+				return;
 			}
 
-			// Handle end of line - continue to next line for multi-line arrays
-			if (this.lexer.getCurrentChar() === '') {
-				this.lexer.advanceLine();
+			// Handle escape sequences in double-quoted strings
+			if (quote === '"' && ch === '\\') {
+				const next = this.input[this.pos + 1];
+				// Escaped line break: \ + newline → join lines without inserting a space
+				if (next === '\n' || next === '\r') {
+					this.pos++; // skip '\'
+					this.consumeNewline();
+					// Strip leading whitespace on continuation line
+					this.skipInlineWhitespace();
+					trailingLiteralWs = 0;
+					continue;
+				}
+				switch (next) {
+					case 'n': value += '\n'; break;
+					case 't': value += '\t'; break;
+					case '\\': value += '\\'; break;
+					case '"': value += '"'; break;
+					case '/': value += '/'; break;
+					case 'r': value += '\r'; break;
+					case '0': value += '\0'; break;
+					case 'a': value += '\x07'; break;
+					case 'b': value += '\b'; break;
+					case 'e': value += '\x1b'; break;
+					case 'v': value += '\v'; break;
+					case 'f': value += '\f'; break;
+					case ' ': value += ' '; break;
+					case '_': value += '\xa0'; break;
+					case 'x': {
+						// \xNN - 2-digit hex escape
+						const hex = this.input.substring(this.pos + 2, this.pos + 4);
+						const code = parseInt(hex, 16);
+						if (hex.length === 2 && !isNaN(code)) {
+							value += String.fromCharCode(code);
+							this.pos += 4;
+						} else {
+							value += '\\x';
+							this.pos += 2;
+						}
+						trailingLiteralWs = 0;
+						continue;
+					}
+					case 'u': {
+						// \uNNNN - 4-digit unicode escape
+						const hex = this.input.substring(this.pos + 2, this.pos + 6);
+						const code = parseInt(hex, 16);
+						if (hex.length === 4 && !isNaN(code)) {
+							value += String.fromCodePoint(code);
+							this.pos += 6;
+						} else {
+							value += '\\u';
+							this.pos += 2;
+						}
+						trailingLiteralWs = 0;
+						continue;
+					}
+					case 'U': {
+						// \UNNNNNNNN - 8-digit unicode escape
+						const hex = this.input.substring(this.pos + 2, this.pos + 10);
+						const code = parseInt(hex, 16);
+						if (hex.length === 8 && !isNaN(code)) {
+							value += String.fromCodePoint(code);
+							this.pos += 10;
+						} else {
+							value += '\\U';
+							this.pos += 2;
+						}
+						trailingLiteralWs = 0;
+						continue;
+					}
+					default: value += '\\' + (next ?? ''); break;
+				}
+				this.pos += 2;
+				trailingLiteralWs = 0;
 				continue;
 			}
 
-			// Handle comments - comments should terminate the array parsing
-			if (this.lexer.getCurrentChar() === '#') {
-				// Skip the rest of the line (comment)
-				this.lexer.skipToEndOfLine();
-				this.lexer.advanceLine();
-				continue;
-			}
-
-			// Save position before parsing to detect if we're making progress
-			const positionBefore = this.lexer.savePosition();
-
-			// Parse array item
-			const item = this.parseValue();
-			// Skip implicit empty items that arise from a leading comma at the beginning of a new line
-			// (e.g. a line starting with ",foo" after a comment). A legitimate empty string element
-			// would have quotes and thus a non-zero span. We only filter zero-length spans.
-			if (!(item.type === 'string' && item.value === '' && item.start.line === item.end.line && item.start.character === item.end.character)) {
-				items.push(item);
-			}
-
-			// Check if we made progress - if not, we're likely stuck
-			const positionAfter = this.lexer.savePosition();
-			if (positionBefore.line === positionAfter.line && positionBefore.char === positionAfter.char) {
-				// No progress made, advance at least one character to prevent infinite loop
-				if (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '') {
-					this.lexer.advance();
-				} else {
-					break;
+			// Flow folding: handle newlines inside quoted scalars (both single and double)
+			if (ch === '\n' || ch === '\r') {
+				// Trim trailing literal whitespace (not escape-produced whitespace)
+				if (trailingLiteralWs > 0) {
+					value = value.substring(0, value.length - trailingLiteralWs);
 				}
-			}
+				trailingLiteralWs = 0;
 
-			this.lexer.skipWhitespace();
+				// Skip the newline
+				this.consumeNewline();
 
-			// Handle comma separator
-			if (this.lexer.getCurrentChar() === ',') {
-				this.lexer.advance();
-			}
-		}
-
-		const end = this.lexer.getCurrentPosition();
-		this.flowLevel--;
-		return createArrayNode(items, start, end);
-	}
-
-	parseInlineObject(): YamlObjectNode {
-		const start = this.lexer.getCurrentPosition();
-		this.lexer.advance(); // Skip '{'
-		this.flowLevel++;
-
-		const properties: { key: YamlStringNode; value: YamlNode }[] = [];
-
-		while (!this.lexer.isAtEnd()) {
-			this.lexer.skipWhitespace();
-
-			// Handle end of object
-			if (this.lexer.getCurrentChar() === '}') {
-				this.lexer.advance();
-				break;
-			}
-
-			// Handle comments - comments should terminate the object parsing
-			if (this.lexer.getCurrentChar() === '#') {
-				// Skip the rest of the line (comment)
-				this.lexer.skipToEndOfLine();
-				this.lexer.advanceLine();
-				continue;
-			}
-
-			// Save position before parsing to detect if we're making progress
-			const positionBefore = this.lexer.savePosition();
-
-			// Parse key - read until colon
-			const keyStart = this.lexer.getCurrentPosition();
-			let keyValue = '';
-
-			// Handle quoted keys
-			if (this.lexer.getCurrentChar() === '"' || this.lexer.getCurrentChar() === `'`) {
-				const quote = this.lexer.getCurrentChar();
-				this.lexer.advance(); // Skip opening quote
-
-				while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '' && this.lexer.getCurrentChar() !== quote) {
-					keyValue += this.lexer.advance();
-				}
-
-				if (this.lexer.getCurrentChar() === quote) {
-					this.lexer.advance(); // Skip closing quote
-				}
-			} else {
-				// Handle unquoted keys - read until colon
-				while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '' && this.lexer.getCurrentChar() !== ':') {
-					keyValue += this.lexer.advance();
-				}
-			}
-
-			keyValue = keyValue.trim();
-			const keyEnd = this.lexer.getCurrentPosition();
-			const key = createStringNode(keyValue, keyStart, keyEnd);
-
-			this.lexer.skipWhitespace();
-
-			// Expect colon
-			if (this.lexer.getCurrentChar() === ':') {
-				this.lexer.advance();
-			}
-
-			this.lexer.skipWhitespace();
-
-			// Parse value
-			const value = this.parseValue();
-
-			properties.push({ key, value });
-
-			// Check if we made progress - if not, we're likely stuck
-			const positionAfter = this.lexer.savePosition();
-			if (positionBefore.line === positionAfter.line && positionBefore.char === positionAfter.char) {
-				// No progress made, advance at least one character to prevent infinite loop
-				if (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '') {
-					this.lexer.advance();
-				} else {
-					break;
-				}
-			}
-
-			this.lexer.skipWhitespace();
-
-			// Handle comma separator
-			if (this.lexer.getCurrentChar() === ',') {
-				this.lexer.advance();
-			}
-		}
-
-		const end = this.lexer.getCurrentPosition();
-		this.flowLevel--;
-		return createObjectNode(properties, start, end);
-	}
-
-	parseBlockArray(baseIndent: number): YamlArrayNode {
-		const start = this.lexer.getCurrentPosition();
-		const items: YamlNode[] = [];
-
-		while (!this.lexer.isAtEnd()) {
-			this.lexer.moveToNextNonEmptyLine();
-
-			if (this.lexer.isAtEnd()) {
-				break;
-			}
-
-			const currentIndent = this.lexer.getIndentation();
-
-			// If indentation is less than expected, we're done with this array
-			if (currentIndent < baseIndent) {
-				break;
-			}
-
-			this.lexer.skipWhitespace();
-
-			// Check for array item marker
-			if (this.lexer.getCurrentChar() === '-') {
-				this.lexer.advance(); // Skip '-'
-				this.lexer.skipWhitespace();
-
-				const itemStart = this.lexer.getCurrentPosition();
-
-				// Check if this is a nested structure
-				if (this.lexer.getCurrentChar() === '' || this.lexer.getCurrentChar() === '#') {
-					// Empty item - check if next lines form a nested structure
-					this.lexer.advanceLine();
-
-					if (!this.lexer.isAtEnd()) {
-						const nextIndent = this.lexer.getIndentation();
-
-						if (nextIndent > currentIndent) {
-							// Check if the next line starts with a dash (nested array) or has properties (nested object)
-							this.lexer.skipWhitespace();
-							if (this.lexer.getCurrentChar() === '-') {
-								// It's a nested array
-								const nestedArray = this.parseBlockArray(nextIndent);
-								items.push(nestedArray);
-							} else {
-								// Check if it looks like an object property (has a colon)
-								const currentLine = this.lexer.getCurrentLineText();
-								const currentPos = this.lexer.getCurrentCharNumber();
-								const remainingLine = currentLine.substring(currentPos);
-
-								if (remainingLine.includes(':') && !remainingLine.trim().startsWith('#')) {
-									// It's a nested object
-									const nestedObject = this.parseBlockObject(nextIndent, this.lexer.getCurrentCharNumber());
-									items.push(nestedObject);
-								} else {
-									// Not a nested structure, create empty string
-									items.push(createStringNode('', itemStart, itemStart));
-								}
-							}
-						} else {
-							// No nested content, empty item
-							items.push(createStringNode('', itemStart, itemStart));
-						}
-					} else {
-						// End of input, empty item
-						items.push(createStringNode('', itemStart, itemStart));
-					}
-				} else {
-					// Parse the item value
-					// Check if this is a multi-line object by looking for a colon and checking next lines
-					const currentLine = this.lexer.getCurrentLineText();
-					const currentPos = this.lexer.getCurrentCharNumber();
-					const remainingLine = currentLine.substring(currentPos);
-
-					// Check if there's a colon on this line (indicating object properties)
-					const hasColon = remainingLine.includes(':');
-
-					if (hasColon) {
-						// Any line with a colon should be treated as an object
-						// Parse as an object with the current item's indentation as the base
-						const item = this.parseBlockObject(itemStart.character, itemStart.character);
-						items.push(item);
-					} else {
-						// No colon, parse as regular value
-						const item = this.parseValue();
-						items.push(item);
-
-						// Skip to end of line
-						while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '' && this.lexer.getCurrentChar() !== '#') {
-							this.lexer.advance();
-						}
-						this.lexer.advanceLine();
-					}
-				}
-			} else {
-				// No dash found at expected indent level, break
-				break;
-			}
-		}
-
-		// Calculate end position based on the last item
-		let end = start;
-		if (items.length > 0) {
-			const lastItem = items[items.length - 1];
-			end = lastItem.end;
-		} else {
-			// If no items, end is right after the start
-			end = createPosition(start.line, start.character + 1);
-		}
-
-		return createArrayNode(items, start, end);
-	}
-
-	parseBlockObject(baseIndent: number, baseCharPosition?: number): YamlObjectNode {
-		const start = this.lexer.getCurrentPosition();
-		const properties: { key: YamlStringNode; value: YamlNode }[] = [];
-		const localKeysSeen = new Set<string>();
-
-		// For parsing from current position (inline object parsing)
-		const fromCurrentPosition = baseCharPosition !== undefined;
-		let firstIteration = true;
-
-		while (!this.lexer.isAtEnd()) {
-			if (!firstIteration || !fromCurrentPosition) {
-				this.lexer.moveToNextNonEmptyLine();
-			}
-			firstIteration = false;
-
-			if (this.lexer.isAtEnd()) {
-				break;
-			}
-
-			const currentIndent = this.lexer.getIndentation();
-
-			if (fromCurrentPosition) {
-				// For current position parsing, check character position alignment
-				this.lexer.skipWhitespace();
-				const currentCharPosition = this.lexer.getCurrentCharNumber();
-
-				if (currentCharPosition < baseCharPosition) {
-					break;
-				}
-			} else {
-				// For normal block parsing, check indentation level
-				if (currentIndent < baseIndent) {
-					break;
-				}
-
-				// Check for incorrect indentation
-				if (currentIndent > baseIndent) {
-					const lineStart = createPosition(this.lexer.getCurrentLineNumber(), 0);
-					const lineEnd = createPosition(this.lexer.getCurrentLineNumber(), this.lexer.getCurrentLineText().length);
-					this.addError('Unexpected indentation', 'indentation', lineStart, lineEnd);
-
-					// Try to recover by treating it as a property anyway
-					this.lexer.skipWhitespace();
-				} else {
-					this.lexer.skipWhitespace();
-				}
-			}
-
-			// Parse key
-			const keyStart = this.lexer.getCurrentPosition();
-			let keyValue = '';
-
-			while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '' && this.lexer.getCurrentChar() !== ':') {
-				keyValue += this.lexer.advance();
-			}
-
-			keyValue = keyValue.trim();
-			const keyEnd = this.lexer.getCurrentPosition();
-			const key = createStringNode(keyValue, keyStart, keyEnd);
-
-			// Check for duplicate keys
-			if (!this.options.allowDuplicateKeys && localKeysSeen.has(keyValue)) {
-				this.addError(`Duplicate key '${keyValue}'`, 'duplicateKey', keyStart, keyEnd);
-			}
-			localKeysSeen.add(keyValue);
-
-			// Expect colon
-			if (this.lexer.getCurrentChar() === ':') {
-				this.lexer.advance();
-			}
-
-			this.lexer.skipWhitespace();
-
-			// Determine if value is on same line or next line(s)
-			let value: YamlNode;
-			const valueStart = this.lexer.getCurrentPosition();
-
-			if (this.lexer.getCurrentChar() === '' || this.lexer.getCurrentChar() === '#') {
-				// Value is on next line(s) or empty
-				this.lexer.advanceLine();
-
-				// Check next line for nested content
-				if (!this.lexer.isAtEnd()) {
-					const nextIndent = this.lexer.getIndentation();
-
-					if (nextIndent > currentIndent) {
-						// Nested content - determine if it's an object, array, or just a scalar value
-						this.lexer.skipWhitespace();
-
-						if (this.lexer.getCurrentChar() === '-') {
-							value = this.parseBlockArray(nextIndent);
-						} else {
-							// Check if this looks like an object property (has a colon)
-							const currentLine = this.lexer.getCurrentLineText();
-							const currentPos = this.lexer.getCurrentCharNumber();
-							const remainingLine = currentLine.substring(currentPos);
-
-							if (remainingLine.includes(':') && !remainingLine.trim().startsWith('#')) {
-								// It's a nested object
-								value = this.parseBlockObject(nextIndent);
-							} else {
-								// It's just a scalar value on the next line
-								value = this.parseValue();
-							}
-						}
-					} else if (!fromCurrentPosition && nextIndent === currentIndent) {
-						// Same indentation level - check if it's an array item
-						this.lexer.skipWhitespace();
-
-						if (this.lexer.getCurrentChar() === '-') {
-							value = this.parseBlockArray(currentIndent);
-						} else {
-							value = createStringNode('', valueStart, valueStart);
-						}
-					} else {
-						value = createStringNode('', valueStart, valueStart);
-					}
-				} else {
-					value = createStringNode('', valueStart, valueStart);
-				}
-			} else {
-				// Value is on the same line
-				value = this.parseValue();
-
-				// Skip any remaining content on this line (comments, etc.)
-				while (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() !== '' && this.lexer.getCurrentChar() !== '#') {
-					if (isWhitespace(this.lexer.getCurrentChar())) {
-						this.lexer.advance();
+				// Count empty lines (lines with only whitespace)
+				let emptyLineCount = 0;
+				while (this.pos < this.input.length) {
+					// Skip whitespace at start of line
+					this.skipInlineWhitespace();
+					// Check if this line is empty (another newline follows)
+					const c = this.input[this.pos];
+					if (c === '\n' || c === '\r') {
+						emptyLineCount++;
+						this.consumeNewline();
 					} else {
 						break;
 					}
 				}
 
-				// Skip to end of line if we hit a comment
-				if (this.lexer.getCurrentChar() === '#') {
-					this.lexer.skipToEndOfLine();
-				}
-
-				// Move to next line for next iteration
-				if (!this.lexer.isAtEnd() && this.lexer.getCurrentChar() === '') {
-					this.lexer.advanceLine();
+				// Apply folding: empty lines → \n each, otherwise single newline → space
+				if (emptyLineCount > 0) {
+					value += '\n'.repeat(emptyLineCount);
+				} else {
+					value += ' ';
 				}
+				continue;
 			}
 
-			properties.push({ key, value });
+			// Track literal whitespace for folding purposes
+			if (ch === ' ' || ch === '\t') {
+				trailingLiteralWs++;
+			} else {
+				trailingLiteralWs = 0;
+			}
+			value += ch;
+			this.pos++;
 		}
 
-		// Calculate the end position based on the last property
-		let end = start;
-		if (properties.length > 0) {
-			const lastProperty = properties[properties.length - 1];
-			end = lastProperty.value.end;
-		}
-
-		return createObjectNode(properties, start, end);
+		// Unterminated string - emit what we have
+		const rawValue = this.input.substring(start, this.pos);
+		this.tokens.push(makeToken(TokenType.Scalar, start, this.pos, {
+			rawValue,
+			value,
+			format: quote === '\'' ? 'single' : 'double',
+		}));
 	}
 
-	parse(): YamlNode | undefined {
-		if (this.lexer.isAtEnd()) {
-			return undefined;
-		}
+	private scanUnquotedScalar(): void {
+		const start = this.pos;
+		let end = this.pos;
 
-		this.lexer.moveToNextNonEmptyLine();
+		while (this.pos < this.input.length) {
+			const ch = this.input[this.pos];
+			// Stop at newline
+			if (ch === '\n' || ch === '\r') { break; }
+			// Stop at flow indicators (only inside flow collections)
+			if (this.flowDepth > 0 && (ch === ',' || ch === '}' || ch === ']')) { break; }
+			if (this.flowDepth > 0 && (ch === '{' || ch === '[')) { break; }
+			// Stop at ': ' or ':' at end-of-line (mapping value indicator)
+			if (ch === ':' && this.isBlockColon()) { break; }
+			// Stop at ' #' (comment)
+			if (ch === '#' && this.pos > start && (this.input[this.pos - 1] === ' ' || this.input[this.pos - 1] === '\t')) { break; }
 
-		if (this.lexer.isAtEnd()) {
-			return undefined;
-		}
-
-		// Determine the root structure type
-		this.lexer.skipWhitespace();
-
-		if (this.lexer.getCurrentChar() === '-') {
-			// Check if this is an array item or a negative number
-			// Look at the character after the dash
-			const nextChar = this.lexer.peek();
-			if (nextChar === ' ' || nextChar === '\t' || nextChar === '' || nextChar === '#') {
-				// It's an array item (dash followed by whitespace/end/comment)
-				return this.parseBlockArray(0);
-			} else {
-				// It's likely a negative number or other value, treat as single value
-				return this.parseValue();
+			this.pos++;
+			// Track the last non-whitespace position to trim trailing whitespace
+			if (ch !== ' ' && ch !== '\t') {
+				end = this.pos;
 			}
-		} else if (this.lexer.getCurrentChar() === '[') {
-			// Root is an inline array
-			return this.parseInlineArray();
-		} else if (this.lexer.getCurrentChar() === '{') {
-			// Root is an inline object
-			return this.parseInlineObject();
-		} else {
-			// Check if this looks like a key-value pair by looking for a colon
-			// For single values, there shouldn't be a colon
-			const currentLine = this.lexer.getCurrentLineText();
-			const currentPos = this.lexer.getCurrentCharNumber();
-			const remainingLine = currentLine.substring(currentPos);
+		}
 
-			// Check if there's a colon that's not inside quotes
-			let hasColon = false;
-			let inQuotes = false;
-			let quoteChar = '';
+		const rawValue = this.input.substring(start, end);
+		this.tokens.push(makeToken(TokenType.Scalar, start, end, {
+			rawValue,
+			value: rawValue,
+			format: 'none',
+		}));
+	}
 
-			for (let i = 0; i < remainingLine.length; i++) {
-				const char = remainingLine[i];
+	/**
+	 * Check if '|' or '>' at the current position is a block scalar indicator.
+	 * Must be followed by optional indentation/chomping indicators, optional comment, then newline.
+	 */
+	private isBlockScalarStart(): boolean {
+		let p = this.pos + 1;
+		// Skip optional indentation indicator (digit 1-9) and chomping indicator (+/-)
+		while (p < this.input.length) {
+			const c = this.input[p];
+			if (c >= '1' && c <= '9') { p++; continue; }
+			if (c === '+' || c === '-') { p++; continue; }
+			break;
+		}
+		// Skip optional whitespace
+		while (p < this.input.length && (this.input[p] === ' ' || this.input[p] === '\t')) { p++; }
+		// Must be at newline, EOF, or comment
+		if (p >= this.input.length) { return true; }
+		const c = this.input[p];
+		return c === '\n' || c === '\r' || c === '#';
+	}
 
-				if (!inQuotes && (char === '"' || char === `'`)) {
-					inQuotes = true;
-					quoteChar = char;
-				} else if (inQuotes && char === quoteChar) {
-					inQuotes = false;
-					quoteChar = '';
-				} else if (!inQuotes && char === ':') {
-					hasColon = true;
-					break;
-				} else if (!inQuotes && char === '#') {
-					// Comment starts, stop looking
+	/**
+	 * Scan a block scalar (literal '|' or folded '>').
+	 * Parses the header line for indentation indicator and chomping mode,
+	 * then collects all content lines that are indented beyond the detected indentation.
+	 */
+	private scanBlockScalar(style: '|' | '>'): void {
+		const start = this.pos;
+		this.pos++; // skip '|' or '>'
+
+		// Parse header: optional indentation indicator (1-9) and chomping indicator (+/-)
+		let explicitIndent = 0;
+		let chomping: 'clip' | 'strip' | 'keep' = 'clip';
+
+		// The order of indent indicator and chomping indicator can vary (D83L test)
+		for (let i = 0; i < 2; i++) {
+			if (this.pos < this.input.length) {
+				const c = this.input[this.pos];
+				if (c >= '1' && c <= '9' && explicitIndent === 0) {
+					explicitIndent = parseInt(c, 10);
+					this.pos++;
+				} else if (c === '-' && chomping === 'clip') {
+					chomping = 'strip';
+					this.pos++;
+				} else if (c === '+' && chomping === 'clip') {
+					chomping = 'keep';
+					this.pos++;
+				}
+			}
+		}
+
+		// Skip any trailing whitespace on the header line
+		while (this.pos < this.input.length && (this.input[this.pos] === ' ' || this.input[this.pos] === '\t')) {
+			this.pos++;
+		}
+
+		// Skip optional comment on header line
+		if (this.pos < this.input.length && this.input[this.pos] === '#') {
+			while (this.pos < this.input.length && this.input[this.pos] !== '\n' && this.input[this.pos] !== '\r') {
+				this.pos++;
+			}
+		}
+
+		// Skip the header line's newline
+		this.consumeNewline();
+
+		// Determine the parent block's indentation level.
+		// Per YAML spec 8.1.1.1, content indentation = parent_block_indent + N
+		// where N is the explicit indent indicator (or auto-detected).
+		// Also used to establish a minimum content indent for auto-detection.
+		const parentBlockIndent = this.getParentBlockIndent(start);
+
+		// Compute the content indentation level
+		let contentIndent = explicitIndent > 0 ? parentBlockIndent + explicitIndent : 0;
+		const lines: string[] = [];
+		let trailingNewlines = 0;
+
+		while (this.pos < this.input.length) {
+			const lineStart = this.pos;
+
+			// Count leading spaces on this line (tabs are not valid YAML indentation)
+			let lineIndent = 0;
+			while (this.pos < this.input.length && this.input[this.pos] === ' ') {
+				lineIndent++;
+				this.pos++;
+			}
+
+			// Check if this is an empty or whitespace-only line
+			if (this.pos >= this.input.length || this.input[this.pos] === '\n' || this.input[this.pos] === '\r') {
+				if (contentIndent > 0 && lineIndent >= contentIndent) {
+					// Whitespace-only line with enough indent - preserve excess whitespace
+					const preserved = this.input.substring(lineStart + contentIndent, this.pos);
+					lines.push(preserved);
+					if (preserved === '') {
+						// Effectively an empty line - counts as trailing
+						trailingNewlines++;
+					} else {
+						trailingNewlines = 0;
+					}
+				} else {
+					// Truly empty line - part of scalar content
+					lines.push('');
+					trailingNewlines++;
+				}
+				// Skip newline
+				this.consumeNewline();
+				continue;
+			}
+
+			// Check for document markers at column 0 - they terminate the block scalar
+			if (lineIndent === 0 && this.input.length - this.pos >= 3) {
+				const c0 = this.input[this.pos];
+				const c1 = this.input[this.pos + 1];
+				const c2 = this.input[this.pos + 2];
+				const c3 = this.input[this.pos + 3];
+				const isTerm = c3 === undefined || c3 === ' ' || c3 === '\t' || c3 === '\n' || c3 === '\r';
+				if ((c0 === '-' && c1 === '-' && c2 === '-' && isTerm) ||
+					(c0 === '.' && c1 === '.' && c2 === '.' && isTerm)) {
+					this.pos = lineStart;
 					break;
 				}
 			}
 
-			if (hasColon) {
-				// Root is an object
-				return this.parseBlockObject(0);
-			} else {
-				// Root is a single value
-				return this.parseValue();
+			// Auto-detect content indent from first non-empty line.
+			// Content must be more indented than the parent block.
+			if (contentIndent === 0) {
+				if (lineIndent <= parentBlockIndent) {
+					// Not enough indentation - terminates the block scalar
+					this.pos = lineStart;
+					break;
+				}
+				contentIndent = lineIndent;
+			}
+
+			// If this line's indentation is less than the content indent, the block scalar is done
+			if (lineIndent < contentIndent) {
+				this.pos = lineStart;
+				break;
+			}
+
+			// Read the rest of the line (the content)
+			const contentStart = lineStart + contentIndent;
+			while (this.pos < this.input.length && this.input[this.pos] !== '\n' && this.input[this.pos] !== '\r') {
+				this.pos++;
+			}
+			// The line content includes any extra indentation beyond contentIndent
+			const lineContent = this.input.substring(contentStart, this.pos);
+			lines.push(lineContent);
+			trailingNewlines = 0;
+
+			// Skip newline
+			this.consumeNewline();
+		}
+
+		// Process the collected lines according to the block scalar style
+		let value: string;
+		if (style === '|') {
+			// Literal: join lines with newlines (preserving all line breaks as-is)
+			value = lines.join('\n');
+		} else {
+			// Folded: per YAML spec, line breaks between adjacent non-more-indented
+			// content lines are folded into spaces. More-indented lines preserve breaks.
+			// Empty lines produce \n each. The break from content into an empty run
+			// is "trimmed" (absorbed) for non-more-indented lines, but preserved
+			// for more-indented lines.
+			value = '';
+			let lastNonEmptyIsMoreIndented = false;
+			let inEmptyRun = false;
+			let seenNonEmpty = false;
+
+			for (let i = 0; i < lines.length; i++) {
+				const line = lines[i];
+				const isMoreIndented = line.length > 0 && (line[0] === ' ' || line[0] === '\t');
+
+				if (line === '') {
+					// Empty line → contributes one \n
+					value += '\n';
+					inEmptyRun = true;
+				} else if (i === 0) {
+					value = line;
+					lastNonEmptyIsMoreIndented = isMoreIndented;
+					seenNonEmpty = true;
+				} else if (inEmptyRun) {
+					// Transitioning from empty lines back to content.
+					// If the previous content or current line is more-indented
+					// AND we've seen content before, the break is preserved.
+					// Otherwise the empties already provided all needed line breaks.
+					if ((lastNonEmptyIsMoreIndented || isMoreIndented) && seenNonEmpty) {
+						value += '\n' + line;
+					} else {
+						value += line;
+					}
+					lastNonEmptyIsMoreIndented = isMoreIndented;
+					inEmptyRun = false;
+					seenNonEmpty = true;
+				} else if (isMoreIndented || lastNonEmptyIsMoreIndented) {
+					// More-indented line → preserve newline
+					value += '\n' + line;
+					lastNonEmptyIsMoreIndented = isMoreIndented;
+					seenNonEmpty = true;
+				} else {
+					// Normal adjacent non-more-indented lines → fold to space
+					value += ' ' + line;
+					lastNonEmptyIsMoreIndented = false;
+					seenNonEmpty = true;
+				}
 			}
 		}
+
+		// Apply chomping to trailing newlines
+		if (trailingNewlines > 0) {
+			// Strip all trailing newlines from the value
+			let end = value.length;
+			while (end > 0 && value[end - 1] === '\n') {
+				end--;
+			}
+			value = value.substring(0, end);
+		}
+
+		// Determine if there was any actual (non-empty) content
+		const hasContent = lines.some(l => l !== '');
+
+		switch (chomping) {
+			case 'clip':
+				if (hasContent) {
+					// Add exactly one trailing newline
+					value += '\n';
+				}
+				break;
+			case 'keep':
+				if (hasContent) {
+					// Content + trailing: final line break + trailing empty line breaks
+					value += '\n'.repeat(trailingNewlines + 1);
+				} else {
+					// No content, only trailing empties
+					value = '\n'.repeat(trailingNewlines);
+				}
+				break;
+			case 'strip':
+				// No trailing newline
+				break;
+		}
+
+		const rawValue = this.input.substring(start, this.pos);
+		this.tokens.push(makeToken(TokenType.Scalar, start, this.pos, {
+			rawValue,
+			value,
+			format: style === '|' ? 'literal' : 'folded',
+		}));
+	}
+
+	/**
+	 * Determine the parent block's indentation level for a block scalar.
+	 * Looks at preceding tokens to find the context:
+	 * - After Colon: the indentation of the line containing the mapping key
+	 * - After Dash: the column of the dash
+	 * - At document level: -1 (allows content at indent 0)
+	 */
+	private getParentBlockIndent(blockScalarPos: number): number {
+		for (let i = this.tokens.length - 1; i >= 0; i--) {
+			const t = this.tokens[i];
+			if (t.type === TokenType.Newline || t.type === TokenType.Comment || t.type === TokenType.Indent) { continue; }
+			if (t.type === TokenType.Colon) {
+				// Block scalar is a mapping value. The parent indentation
+				// is the column of the mapping key (the scalar before the colon).
+				for (let j = i - 1; j >= 0; j--) {
+					const kt = this.tokens[j];
+					if (kt.type === TokenType.Newline || kt.type === TokenType.Comment || kt.type === TokenType.Indent) { continue; }
+					// Found the key token - return its column
+					return this.getColumnAt(kt.startOffset);
+				}
+				return 0;
+			}
+			if (t.type === TokenType.Dash) {
+				// Block scalar is a sequence item. Parent indent = column of the dash.
+				return this.getColumnAt(t.startOffset);
+			}
+			// Document root - content at indent 0 is valid
+			if (t.type === TokenType.DocumentStart) { return -1; }
+			// For any other token, use 0
+			break;
+		}
+		return 0;
+	}
+
+	/**
+	 * Get the column (0-based offset from start of line) for a position in the input.
+	 */
+	private getColumnAt(offset: number): number {
+		let col = 0;
+		let p = offset - 1;
+		while (p >= 0 && this.input[p] !== '\n' && this.input[p] !== '\r') {
+			col++;
+			p--;
+		}
+		return col;
+	}
+
+	private scanComment(): void {
+		const start = this.pos;
+		while (this.pos < this.input.length && this.input[this.pos] !== '\n' && this.input[this.pos] !== '\r') {
+			this.pos++;
+		}
+		this.tokens.push(makeToken(TokenType.Comment, start, this.pos, {
+			rawValue: this.input.substring(start, this.pos),
+			value: this.input.substring(start, this.pos),
+		}));
+	}
+
+	private scanNewline(): void {
+		const start = this.pos;
+		if (this.consumeNewline()) {
+			this.tokens.push(makeToken(TokenType.Newline, start, this.pos));
+		}
+	}
+
+	private skipInlineWhitespace(): void {
+		while (this.pos < this.input.length) {
+			const ch = this.input[this.pos];
+			if (ch === ' ' || ch === '\t') {
+				this.pos++;
+			} else {
+				break;
+			}
+		}
+	}
+
+	/** Advance past a newline sequence (\r\n, \n, or \r). Returns true if a newline was consumed. */
+	private consumeNewline(): boolean {
+		if (this.pos >= this.input.length) { return false; }
+		if (this.input[this.pos] === '\r' && this.input[this.pos + 1] === '\n') {
+			this.pos += 2;
+			return true;
+		}
+		if (this.input[this.pos] === '\n' || this.input[this.pos] === '\r') {
+			this.pos++;
+			return true;
+		}
+		return false;
+	}
+
+	private peekChar(): string {
+		return this.input[this.pos];
 	}
 }
 
+// -- Parser ------------------------------------------------------------------
 
+class YamlParser {
+	private pos = 0;
+
+	constructor(
+		private readonly tokens: Token[],
+		private readonly input: string,
+		private readonly errors: YamlParseError[],
+		private readonly options: ParseOptions,
+	) { }
+
+	parse(): YamlNode | undefined {
+		this.skipNewlinesAndComments();
+		// Skip document start marker (---) if present
+		if (this.currentToken().type === TokenType.DocumentStart) {
+			this.advance();
+			this.skipNewlinesAndComments();
+		}
+		if (this.currentToken().type === TokenType.EOF || this.currentToken().type === TokenType.DocumentEnd) {
+			return undefined;
+		}
+		const result = this.parseValue(-1);
+		return result;
+	}
+
+	// -- helpers ----------------------------------------------------------
+
+	private currentToken(): Token {
+		return this.tokens[this.pos];
+	}
+
+	private peek(offset = 0): Token {
+		return this.tokens[Math.min(this.pos + offset, this.tokens.length - 1)];
+	}
+
+	private advance(): Token {
+		const t = this.tokens[this.pos];
+		if (t.type !== TokenType.EOF) {
+			this.pos++;
+		}
+		return t;
+	}
+
+	private expect(type: TokenType): Token {
+		const t = this.currentToken();
+		if (t.type === type) {
+			return this.advance();
+		}
+		return t;
+	}
+
+	private emitError(message: string, startOffset: number, endOffset: number, code: string): void {
+		this.errors.push({ message, startOffset, endOffset, code });
+	}
+
+	private skipNewlinesAndComments(): void {
+		while (
+			this.currentToken().type === TokenType.Newline ||
+			this.currentToken().type === TokenType.Comment ||
+			(this.currentToken().type === TokenType.Indent && this.isFollowedByNewlineOrComment())
+		) {
+			this.advance();
+		}
+	}
+
+	/** Returns true if the current Indent token is followed immediately by Newline/Comment/EOF */
+	private isFollowedByNewlineOrComment(): boolean {
+		const next = this.peek(1);
+		return next.type === TokenType.Newline || next.type === TokenType.Comment || next.type === TokenType.EOF;
+	}
+
+	/**
+	 * Determines the current indentation level.
+	 * If the current token is an Indent, returns its indent value.
+	 * Otherwise returns 0 (token is at column 0).
+	 */
+	private currentIndent(): number {
+		if (this.currentToken().type === TokenType.Indent) {
+			return this.currentToken().indent;
+		}
+		return 0;
+	}
+
+	// -- Main parse entry for a value at a given indentation --------------
+
+	private parseValue(parentIndent: number): YamlNode | undefined {
+		this.skipNewlinesAndComments();
+		const token = this.currentToken();
+
+		// Flow collections (also check past indent)
+		const flowToken = token.type === TokenType.Indent ? this.peek(1) : token;
+		if (flowToken.type === TokenType.FlowMapStart || flowToken.type === TokenType.FlowSeqStart) {
+			if (token.type === TokenType.Indent) { this.advance(); }
+			if (flowToken.type === TokenType.FlowMapStart) { return this.parseFlowMap(); }
+			return this.parseFlowSeq();
+		}
+
+		// Block-level: detect if this is a sequence or mapping
+		const indent = this.currentIndent();
+
+		// Determine what the first meaningful token is at this indent
+		const firstContentToken = this.peekPastIndent();
+
+		if (firstContentToken.type === TokenType.Dash) {
+			return this.parseBlockSequence(indent);
+		}
+
+		// Check if this looks like a mapping (scalar followed by colon)
+		if (this.looksLikeMapping()) {
+			return this.parseBlockMapping(indent);
+		}
+
+		// Otherwise it's a scalar
+		if (token.type === TokenType.Scalar || token.type === TokenType.Indent) {
+			return this.parseScalar(parentIndent);
+		}
+
+		return undefined;
+	}
+
+	/** Peek past an optional Indent token to see the first content token */
+	private peekPastIndent(): Token {
+		if (this.currentToken().type === TokenType.Indent) {
+			return this.peek(1);
+		}
+		return this.currentToken();
+	}
+
+	/** Check if tokens at current position look like a mapping entry (key: value) */
+	private looksLikeMapping(): boolean {
+		let offset = 0;
+		if (this.peek(offset).type === TokenType.Indent) { offset++; }
+		if (this.peek(offset).type === TokenType.Scalar) {
+			offset++;
+			if (this.peek(offset).type === TokenType.Colon) { return true; }
+		}
+		return false;
+	}
+
+	// -- Scalar ----------------------------------------------------------
+
+	private parseScalar(parentIndent: number = -1): YamlScalarNode {
+		// Skip indent if present
+		if (this.currentToken().type === TokenType.Indent) {
+			this.advance();
+		}
+		const token = this.expect(TokenType.Scalar);
+		// Quoted scalars are complete as-is (scanner handles their multiline)
+		if (token.format !== 'none') {
+			return this.scalarFromToken(token);
+		}
+		// For unquoted (plain) scalars, check for multiline continuation
+		return this.parsePlainMultiline(token, parentIndent);
+	}
+
+	/**
+	 * Parse a multiline plain scalar. The first line's token is already consumed.
+	 * Continuation lines must be indented deeper than `parentIndent`.
+	 * Line folding rules:
+	 * - Single line break → space
+	 * - Each empty line → preserved as \n
+	 */
+	private parsePlainMultiline(firstToken: Token, parentIndent: number): YamlScalarNode {
+		let value = firstToken.value;
+		let endOffset = firstToken.endOffset;
+
+		while (true) {
+			// Save position to backtrack if continuation is not valid
+			const savedPos = this.pos;
+
+			// Count empty lines (newlines with only whitespace between)
+			let emptyLineCount = 0;
+			let foundContent = false;
+
+			while (this.pos < this.tokens.length) {
+				const t = this.currentToken();
+				if (t.type === TokenType.Comment) {
+					// Comment terminates a plain scalar
+					break;
+				}
+				if (t.type === TokenType.Newline) {
+					this.advance();
+					// Check if the next thing after this newline is blank or content
+					const afterNewline = this.currentToken();
+					if (afterNewline.type === TokenType.Newline) {
+						// Another newline means an empty line
+						emptyLineCount++;
+						continue;
+					}
+					if (afterNewline.type === TokenType.Indent) {
+						// Check what follows the indent
+						const afterIndent = this.peek(1);
+						if (afterIndent.type === TokenType.Newline || afterIndent.type === TokenType.EOF) {
+							// Indent followed by newline = empty line
+							emptyLineCount++;
+							this.advance(); // skip the indent
+							continue;
+						}
+						if (afterIndent.type === TokenType.Comment) {
+							// Comment terminates scalar
+							break;
+						}
+						// Content on this line - check indentation
+						if (afterNewline.indent > parentIndent) {
+							// Valid continuation line
+							foundContent = true;
+							break;
+						} else {
+							// Not deep enough - not a continuation
+							break;
+						}
+					}
+					if (afterNewline.type === TokenType.EOF) {
+						break;
+					}
+					// Document markers terminate plain scalars
+					if (afterNewline.type === TokenType.DocumentStart || afterNewline.type === TokenType.DocumentEnd) {
+						break;
+					}
+					// Content at column 0
+					if (parentIndent < 0) {
+						// Top-level: column 0 is valid continuation for parentIndent = -1
+						foundContent = true;
+						break;
+					}
+					break;
+				}
+				if (t.type === TokenType.Indent) {
+					// We should only get here at the very start of lookahead when
+					// the first token after the scalar's end is Indent (no newline before it),
+					// which shouldn't happen. Break to be safe.
+					break;
+				}
+				// Any other token (EOF, structural) = end of scalar
+				break;
+			}
+
+			if (!foundContent) {
+				// No continuation found - restore position
+				this.pos = savedPos;
+				break;
+			}
+
+			// We found a continuation line. Skip optional indent.
+			if (this.currentToken().type === TokenType.Indent) {
+				this.advance();
+			}
+
+			// The next token must be a Scalar for continuation
+			if (this.currentToken().type !== TokenType.Scalar) {
+				// A dash at a deeper indent than the parent is text content, not a sequence indicator
+				// (e.g., "- single multiline\n - sequence entry" → one scalar "single multiline - sequence entry")
+				if (this.currentToken().type === TokenType.Dash) {
+					const dashToken = this.advance();
+					let lineText = '-';
+					if (this.currentToken().type === TokenType.Scalar) {
+						const restToken = this.advance();
+						lineText = '- ' + restToken.value;
+						endOffset = restToken.endOffset;
+					} else {
+						endOffset = dashToken.endOffset;
+					}
+					if (emptyLineCount > 0) {
+						value += '\n'.repeat(emptyLineCount);
+					} else {
+						value += ' ';
+					}
+					value += lineText;
+					continue;
+				}
+				// Not a scalar continuation (could be Colon, etc.)
+				this.pos = savedPos;
+				break;
+			}
+
+			// Check that this line doesn't look like a mapping key (scalar followed by colon)
+			// which would mean the scalar ended and a new mapping entry starts
+			if (this.peek(1).type === TokenType.Colon) {
+				this.pos = savedPos;
+				break;
+			}
+
+			const contToken = this.advance();
+
+			// Apply line folding: empty lines become \n, single line break becomes space
+			if (emptyLineCount > 0) {
+				value += '\n'.repeat(emptyLineCount);
+			} else {
+				value += ' ';
+			}
+			value += contToken.value;
+			endOffset = contToken.endOffset;
+		}
+
+		return {
+			type: 'scalar',
+			value,
+			rawValue: this.input.substring(firstToken.startOffset, endOffset),
+			startOffset: firstToken.startOffset,
+			endOffset,
+			format: 'none',
+		};
+	}
+
+	// -- Block mapping ---------------------------------------------------
+
+	private parseBlockMapping(baseIndent: number, inlineFirstEntry = false): YamlMapNode {
+		const startOffset = this.currentToken().startOffset;
+		const properties: { key: YamlScalarNode; value: YamlNode }[] = [];
+		const seenKeys = new Set<string>();
+
+		// When called after a sequence dash, the first key is already at the current position
+		if (inlineFirstEntry) {
+			const firstEntry = this.parseMappingEntry(baseIndent);
+			if (firstEntry) {
+				seenKeys.add(firstEntry.key.value);
+				properties.push(firstEntry);
+			}
+		}
+
+		while (this.currentToken().type !== TokenType.EOF) {
+			this.skipNewlinesAndComments();
+			if (this.currentToken().type === TokenType.EOF) { break; }
+
+			const indent = this.currentIndent();
+			if (indent < baseIndent) { break; }
+			if (indent !== baseIndent) {
+				if (indent > baseIndent) {
+					this.emitError(
+						localize('unexpectedIndentation', 'Unexpected indentation (expected {0}, got {1})', baseIndent, indent),
+						this.currentToken().startOffset,
+						this.currentToken().endOffset,
+						'unexpected-indentation',
+					);
+				} else {
+					break;
+				}
+			}
+			if (!this.looksLikeMapping()) { break; }
+
+			const entry = this.parseMappingEntry(baseIndent);
+			if (!entry) { break; }
+
+			if (!this.options.allowDuplicateKeys && seenKeys.has(entry.key.value)) {
+				this.emitError(
+					localize('duplicateKey', 'Duplicate key: "{0}"', entry.key.value),
+					entry.key.startOffset,
+					entry.key.endOffset,
+					'duplicate-key',
+				);
+			}
+			seenKeys.add(entry.key.value);
+			properties.push(entry);
+		}
+
+		const endOffset = properties.length > 0 ? properties[properties.length - 1].value.endOffset : startOffset;
+		return { type: 'map', properties, style: 'block', startOffset, endOffset };
+	}
+
+	private parseMappingEntry(baseIndent: number): { key: YamlScalarNode; value: YamlNode } | undefined {
+		// Skip indent
+		if (this.currentToken().type === TokenType.Indent) {
+			this.advance();
+		}
+
+		// Parse key
+		const keyToken = this.expect(TokenType.Scalar);
+		const key = this.scalarFromToken(keyToken);
+
+		// Expect colon
+		const colon = this.expect(TokenType.Colon);
+		if (colon.type !== TokenType.Colon) {
+			this.emitError(localize('expectedColon', 'Expected ":"'), colon.startOffset, colon.endOffset, 'expected-colon');
+			return undefined;
+		}
+
+		// Parse value: could be on same line or next line (indented)
+		const value = this.parseMappingValue(baseIndent, colon);
+
+		return { key, value };
+	}
+
+	private parseMappingValue(baseIndent: number, colonToken: Token): YamlNode {
+		// Check if there's a value on the same line after the colon
+		const next = this.currentToken();
+
+		// Same-line flow collections
+		if (next.type === TokenType.FlowMapStart) { return this.parseFlowMap(); }
+		if (next.type === TokenType.FlowSeqStart) { return this.parseFlowSeq(); }
+
+		// Same-line scalar (may be multiline with continuation)
+		if (next.type === TokenType.Scalar) {
+			// Skip indent if present (shouldn't be here, but be safe)
+			if (this.currentToken().type === TokenType.Indent) {
+				this.advance();
+			}
+			const token = this.advance();
+			if (token.format !== 'none') {
+				return this.scalarFromToken(token);
+			}
+			// Plain scalar - allow multiline continuation deeper than baseIndent
+			return this.parsePlainMultiline(token, baseIndent);
+		}
+
+		// Value is on the next line (skip newlines/comments and check indentation)
+		this.skipNewlinesAndComments();
+		const afterNewline = this.currentToken();
+
+		if (afterNewline.type === TokenType.EOF) {
+			// Missing value at end of input
+			this.emitError(localize('missingValue', 'Missing value'), colonToken.startOffset, colonToken.endOffset, 'missing-value');
+			return this.makeEmptyScalar(colonToken.endOffset);
+		}
+
+		const nextIndent = this.currentIndent();
+
+		// Special case: a sequence at the same indent as the mapping key is allowed
+		// as the mapping value (e.g., "foo:\n- 42")
+		if (nextIndent === baseIndent && this.peekPastIndent().type === TokenType.Dash) {
+			return this.parseValue(baseIndent) ?? this.makeEmptyScalar(colonToken.endOffset);
+		}
+
+		if (nextIndent <= baseIndent) {
+			// No deeper indentation → missing value
+			this.emitError(localize('missingValue', 'Missing value'), colonToken.startOffset, colonToken.endOffset, 'missing-value');
+			return this.makeEmptyScalar(colonToken.endOffset);
+		}
+
+		// Parse the nested value
+		return this.parseValue(baseIndent) ?? this.makeEmptyScalar(colonToken.endOffset);
+	}
+
+	// -- Block sequence --------------------------------------------------
+
+	private parseBlockSequence(baseIndent: number): YamlSequenceNode {
+		const items: YamlNode[] = [];
+		const startOffset = this.currentToken().startOffset;
+		let endOffset = startOffset;
+		let isFirstItem = true;
+
+		while (this.currentToken().type !== TokenType.EOF) {
+			this.skipNewlinesAndComments();
+			if (this.currentToken().type === TokenType.EOF) { break; }
+
+			// For the first item, the dash may be on the same line (no Indent token).
+			// Compute the actual column to check against baseIndent.
+			let indent: number;
+			if (isFirstItem && this.currentToken().type === TokenType.Dash) {
+				indent = this.currentToken().startOffset - this.getLineStart(this.currentToken().startOffset);
+			} else {
+				indent = this.currentIndent();
+			}
+			isFirstItem = false;
+
+			if (indent < baseIndent) { break; }
+
+			if (indent !== baseIndent) {
+				if (indent > baseIndent) {
+					this.emitError(
+						localize('unexpectedIndentation', 'Unexpected indentation (expected {0}, got {1})', baseIndent, indent),
+						this.currentToken().startOffset,
+						this.currentToken().endOffset,
+						'unexpected-indentation',
+					);
+				} else {
+					break;
+				}
+			}
+
+			const contentToken = this.peekPastIndent();
+			if (contentToken.type !== TokenType.Dash) { break; }
+
+			// Skip indent
+			if (this.currentToken().type === TokenType.Indent) {
+				this.advance();
+			}
+
+			// Consume the dash
+			const dashToken = this.advance();
+
+			// Parse the item value
+			const itemValue = this.parseSequenceItemValue(baseIndent, dashToken);
+			items.push(itemValue);
+			endOffset = itemValue.endOffset;
+		}
+
+		return { type: 'sequence', items, style: 'block', startOffset, endOffset };
+	}
+
+	private parseSequenceItemValue(baseIndent: number, dashToken: Token): YamlNode {
+		const next = this.currentToken();
+
+		// Skip comment after dash
+		if (next.type === TokenType.Comment) {
+			this.advance();
+		}
+
+		// Flow collections on same line
+		if (next.type === TokenType.FlowMapStart) { return this.parseFlowMap(); }
+		if (next.type === TokenType.FlowSeqStart) { return this.parseFlowSeq(); }
+
+		// Nested sequence on same line (e.g., '- - value')
+		if (next.type === TokenType.Dash) {
+			// The nested sequence's base indent is the column of the dash
+			const nestedIndent = next.startOffset - this.getLineStart(next.startOffset);
+			return this.parseBlockSequence(nestedIndent);
+		}
+
+		// Inline scalar on same line
+		if (next.type === TokenType.Scalar) {
+			// Check if this is actually a mapping (key: value on same line after dash)
+			if (this.peek(1).type === TokenType.Colon) {
+				// It's an inline mapping after '- ' like '- name: John'
+				// The implicit indent for continuation lines is the column of the key
+				const itemIndent = next.startOffset - this.getLineStart(next.startOffset);
+				return this.parseBlockMapping(itemIndent, true);
+			}
+			return this.parseScalar(baseIndent);
+		}
+
+		// Value on next line
+		this.skipNewlinesAndComments();
+		if (this.currentToken().type === TokenType.EOF) {
+			this.emitError(localize('missingSeqItemValue', 'Missing sequence item value'), dashToken.startOffset, dashToken.endOffset, 'missing-value');
+			return this.makeEmptyScalar(dashToken.endOffset);
+		}
+
+		const nextIndent = this.currentIndent();
+		if (nextIndent <= baseIndent) {
+			// Empty item (just a dash)
+			this.emitError(localize('missingSeqItemValue', 'Missing sequence item value'), dashToken.startOffset, dashToken.endOffset, 'missing-value');
+			return this.makeEmptyScalar(dashToken.endOffset);
+		}
+
+		return this.parseValue(baseIndent) ?? this.makeEmptyScalar(dashToken.endOffset);
+	}
+
+	/** Calculate the start of the line containing the given offset */
+	private getLineStart(offset: number): number {
+		let i = offset - 1;
+		while (i >= 0 && this.input[i] !== '\n' && this.input[i] !== '\r') {
+			i--;
+		}
+		return i + 1;
+	}
+
+	// -- Flow map --------------------------------------------------------
+
+	private parseFlowMap(): YamlMapNode {
+		const startToken = this.advance(); // consume '{'
+		const properties: { key: YamlScalarNode; value: YamlNode }[] = [];
+
+		this.skipFlowWhitespace();
+
+		while (this.currentToken().type !== TokenType.FlowMapEnd && this.currentToken().type !== TokenType.EOF) {
+			// Parse key (must be a scalar)
+			let key: YamlScalarNode;
+			if (this.currentToken().type === TokenType.Scalar) {
+				key = this.parseFlowScalar();
+			} else {
+				this.emitError(localize('expectedMappingKey', 'Expected mapping key'), this.currentToken().startOffset, this.currentToken().endOffset, 'expected-key');
+				break;
+			}
+
+			this.skipFlowWhitespace();
+
+			// Check for colon - if missing, the key has an empty value (terminated by comma or })
+			let value: YamlNode;
+			if (this.currentToken().type === TokenType.Colon) {
+				this.advance();
+				this.skipFlowWhitespace();
+
+				// Parse value
+				value = this.parseFlowValue();
+			} else {
+				// Key without value (e.g., { key, other: val })
+				value = this.makeEmptyScalar(key.endOffset);
+			}
+
+			properties.push({ key, value });
+
+			this.skipFlowWhitespace();
+
+			// Consume comma if present
+			if (this.currentToken().type === TokenType.Comma) {
+				this.advance();
+				this.skipFlowWhitespace();
+			}
+		}
+
+		const endToken = this.currentToken();
+		if (endToken.type === TokenType.FlowMapEnd) {
+			this.advance();
+		} else {
+			this.emitError(localize('expectedFlowMapEnd', 'Expected "}"'), endToken.startOffset, endToken.endOffset, 'expected-flow-map-end');
+		}
+
+		return {
+			type: 'map',
+			properties,
+			style: 'flow',
+			startOffset: startToken.startOffset,
+			endOffset: endToken.type === TokenType.FlowMapEnd ? endToken.endOffset : endToken.startOffset,
+		};
+	}
+
+	// -- Flow sequence ---------------------------------------------------
+
+	private parseFlowSeq(): YamlSequenceNode {
+		const startToken = this.advance(); // consume '['
+		const items: YamlNode[] = [];
+
+		this.skipFlowWhitespace();
+
+		while (this.currentToken().type !== TokenType.FlowSeqEnd && this.currentToken().type !== TokenType.EOF) {
+			let item: YamlNode;
+			if (this.currentToken().type === TokenType.FlowMapStart) {
+				item = this.parseFlowMap();
+			} else if (this.currentToken().type === TokenType.FlowSeqStart) {
+				item = this.parseFlowSeq();
+			} else if (this.currentToken().type === TokenType.Scalar) {
+				item = this.parseFlowScalar();
+			} else {
+				this.emitError(localize('unexpectedTokenInFlowSeq', 'Unexpected token in flow sequence'), this.currentToken().startOffset, this.currentToken().endOffset, 'unexpected-token');
+				this.advance();
+				continue;
+			}
+
+			items.push(item);
+			this.skipFlowWhitespace();
+
+			if (this.currentToken().type === TokenType.Comma) {
+				this.advance();
+				this.skipFlowWhitespace();
+			}
+		}
+
+		const endToken = this.currentToken();
+		if (endToken.type === TokenType.FlowSeqEnd) {
+			this.advance();
+		} else {
+			this.emitError(localize('expectedFlowSeqEnd', 'Expected "]"'), endToken.startOffset, endToken.endOffset, 'expected-flow-seq-end');
+		}
+
+		return {
+			type: 'sequence',
+			items,
+			style: 'flow',
+			startOffset: startToken.startOffset,
+			endOffset: endToken.type === TokenType.FlowSeqEnd ? endToken.endOffset : endToken.startOffset,
+		};
+	}
+
+	/**
+	 * Parse a scalar inside a flow collection, handling multiline plain scalars.
+	 * In flow context, plain (unquoted) scalars can span multiple lines;
+	 * line breaks are folded into spaces.
+	 */
+	private parseFlowScalar(): YamlScalarNode {
+		const token = this.advance();
+		// Quoted scalars are complete as-is (scanner handles their multiline folding)
+		if (token.format !== 'none') {
+			return this.scalarFromToken(token);
+		}
+		// For unquoted (plain) scalars, fold continuation lines across newlines
+		let value = token.value;
+		let endOffset = token.endOffset;
+
+		while (true) {
+			// Look ahead for a newline followed by a plain scalar continuation
+			let hasNewline = false;
+			let p = this.pos;
+			while (p < this.tokens.length) {
+				const t = this.tokens[p];
+				if (t.type === TokenType.Newline) {
+					hasNewline = true;
+					p++;
+				} else if (t.type === TokenType.Indent || t.type === TokenType.Comment) {
+					p++;
+				} else {
+					break;
+				}
+			}
+
+			if (!hasNewline || p >= this.tokens.length) { break; }
+
+			const nextToken = this.tokens[p];
+			if (nextToken.type === TokenType.Scalar && nextToken.format === 'none') {
+				// Fold continuation line into the scalar
+				this.pos = p + 1;
+				value += ' ' + nextToken.value;
+				endOffset = nextToken.endOffset;
+			} else {
+				break;
+			}
+		}
+
+		return {
+			type: 'scalar',
+			value,
+			rawValue: this.input.substring(token.startOffset, endOffset),
+			startOffset: token.startOffset,
+			endOffset,
+			format: 'none',
+		};
+	}
+
+	/** Parse a value in flow context (used after colon in flow mappings/implicit mappings) */
+	private parseFlowValue(): YamlNode {
+		if (this.currentToken().type === TokenType.FlowMapStart) {
+			return this.parseFlowMap();
+		} else if (this.currentToken().type === TokenType.FlowSeqStart) {
+			return this.parseFlowSeq();
+		} else if (this.currentToken().type === TokenType.Scalar) {
+			return this.parseFlowScalar();
+		} else {
+			return this.makeEmptyScalar(this.currentToken().startOffset);
+		}
+	}
+
+	/** Skip whitespace, newlines, and comments inside flow collections */
+	private skipFlowWhitespace(): void {
+		while (true) {
+			const t = this.currentToken().type;
+			if (t === TokenType.Newline || t === TokenType.Indent || t === TokenType.Comment) {
+				this.advance();
+			} else {
+				break;
+			}
+		}
+	}
+
+	private scalarFromToken(token: Token): YamlScalarNode {
+		return {
+			type: 'scalar',
+			value: token.value,
+			rawValue: token.rawValue,
+			startOffset: token.startOffset,
+			endOffset: token.endOffset,
+			format: token.format,
+		};
+	}
+
+	private makeEmptyScalar(offset: number): YamlScalarNode {
+		return {
+			type: 'scalar',
+			value: '',
+			rawValue: '',
+			startOffset: offset,
+			endOffset: offset,
+			format: 'none',
+		};
+	}
+}
diff --git a/src/vs/base/test/common/yaml.test.ts b/src/vs/base/test/common/yaml.test.ts
index c6e3a53e7cc..3c78fd291d5 100644
--- a/src/vs/base/test/common/yaml.test.ts
+++ b/src/vs/base/test/common/yaml.test.ts
@@ -2,1173 +2,1131 @@
  *  Copyright (c) Microsoft Corporation. All rights reserved.
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
-import { deepStrictEqual, strictEqual, ok } from 'assert';
-import { parse, ParseOptions, YamlParseError, Position, YamlNode } from '../../common/yaml.js';
+
+import * as assert from 'assert';
+import { parse, YamlNode, YamlScalarNode, YamlMapNode, YamlSequenceNode, YamlParseError } from '../../common/yaml.js';
 import { ensureNoDisposablesAreLeakedInTestSuite } from './utils.js';
 
-
-function assertValidParse(input: string[], expected: YamlNode, expectedErrors: YamlParseError[], options?: ParseOptions): void {
+// Helper to parse and assert no errors
+function parseOk(input: string): YamlNode | undefined {
 	const errors: YamlParseError[] = [];
-	const text = input.join('\n');
-	const actual1 = parse(text, errors, options);
-	deepStrictEqual(actual1, expected);
-	deepStrictEqual(errors, expectedErrors);
+	const result = parse(input, errors);
+	assert.deepStrictEqual(errors, [], `Unexpected errors: ${JSON.stringify(errors)}`);
+	return result;
 }
 
-function pos(line: number, character: number): Position {
-	return { line, character };
+// Helper to assert a scalar node and verify its offsets match the raw value in the input
+function assertScalar(input: string, node: YamlNode | undefined, expected: { value: string; format?: 'single' | 'double' | 'none' | 'literal' | 'folded' }): void {
+	assert.ok(node, 'Expected a node but got undefined');
+	assert.strictEqual(node.type, 'scalar');
+	const scalar = node as YamlScalarNode;
+	assert.strictEqual(scalar.value, expected.value);
+	if (expected.format !== undefined) {
+		assert.strictEqual(scalar.format, expected.format);
+	}
+	// Verify that the offsets correctly correspond to the rawValue in the input
+	assert.strictEqual(
+		input.substring(scalar.startOffset, scalar.endOffset),
+		scalar.rawValue,
+		`Offset mismatch: input[${scalar.startOffset}..${scalar.endOffset}] is "${input.substring(scalar.startOffset, scalar.endOffset)}" but rawValue is "${scalar.rawValue}"`
+	);
+}
+
+// Helper to assert a map node and return properties for further assertions
+function assertMap(node: YamlNode | undefined, expectedKeyCount: number): YamlMapNode {
+	assert.ok(node, 'Expected a node but got undefined');
+	assert.strictEqual(node.type, 'map', `Expected map but got ${node.type}`);
+	const map = node as YamlMapNode;
+	assert.strictEqual(map.properties.length, expectedKeyCount, `Expected ${expectedKeyCount} properties but got ${map.properties.length}`);
+	return map;
+}
+
+// Helper to assert a sequence node and return items
+function assertSequence(node: YamlNode | undefined, expectedItemCount: number): YamlSequenceNode {
+	assert.ok(node, 'Expected a node but got undefined');
+	assert.strictEqual(node.type, 'sequence', `Expected sequence but got ${node.type}`);
+	const seq = node as YamlSequenceNode;
+	assert.strictEqual(seq.items.length, expectedItemCount, `Expected ${expectedItemCount} items but got ${seq.items.length}`);
+	return seq;
 }
 
 suite('YAML Parser', () => {
 
 	ensureNoDisposablesAreLeakedInTestSuite();
 
-	suite('scalars', () => {
-
-		test('numbers', () => {
-			assertValidParse(['1'], { type: 'number', start: pos(0, 0), end: pos(0, 1), value: 1 }, []);
-			assertValidParse(['1.234'], { type: 'number', start: pos(0, 0), end: pos(0, 5), value: 1.234 }, []);
-			assertValidParse(['-42'], { type: 'number', start: pos(0, 0), end: pos(0, 3), value: -42 }, []);
+	suite('Empty input', () => {
+		test('returns undefined for empty string', () => {
+			assert.strictEqual(parseOk(''), undefined);
 		});
 
-		test('boolean', () => {
-			assertValidParse(['true'], { type: 'boolean', start: pos(0, 0), end: pos(0, 4), value: true }, []);
-			assertValidParse(['false'], { type: 'boolean', start: pos(0, 0), end: pos(0, 5), value: false }, []);
+		test('returns undefined for whitespace-only input', () => {
+			assert.strictEqual(parseOk('   '), undefined);
 		});
 
-		test('null', () => {
-			assertValidParse(['null'], { type: 'null', start: pos(0, 0), end: pos(0, 4), value: null }, []);
-			assertValidParse(['~'], { type: 'null', start: pos(0, 0), end: pos(0, 1), value: null }, []);
-		});
-
-		test('string', () => {
-			assertValidParse(['A Developer'], { type: 'string', start: pos(0, 0), end: pos(0, 11), value: 'A Developer' }, []);
-			assertValidParse(['\'A Developer\''], { type: 'string', start: pos(0, 0), end: pos(0, 13), value: 'A Developer' }, []);
-			assertValidParse(['"A Developer"'], { type: 'string', start: pos(0, 0), end: pos(0, 13), value: 'A Developer' }, []);
-			assertValidParse(['*.js,*.ts'], { type: 'string', start: pos(0, 0), end: pos(0, 9), value: '*.js,*.ts' }, []);
+		test('returns undefined for newline-only input', () => {
+			assert.strictEqual(parseOk('\n\n'), undefined);
 		});
 	});
 
-	suite('objects', () => {
-
-		test('simple properties', () => {
-			assertValidParse(['name: John Doe'], {
-				type: 'object', start: pos(0, 0), end: pos(0, 14), properties: [
-					{
-						key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'name' },
-						value: { type: 'string', start: pos(0, 6), end: pos(0, 14), value: 'John Doe' }
-					}
-				]
-			}, []);
-			assertValidParse(['age: 30'], {
-				type: 'object', start: pos(0, 0), end: pos(0, 7), properties: [
-					{
-						key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'age' },
-						value: { type: 'number', start: pos(0, 5), end: pos(0, 7), value: 30 }
-					}
-				]
-			}, []);
-			assertValidParse(['active: true'], {
-				type: 'object', start: pos(0, 0), end: pos(0, 12), properties: [
-					{
-						key: { type: 'string', start: pos(0, 0), end: pos(0, 6), value: 'active' },
-						value: { type: 'boolean', start: pos(0, 8), end: pos(0, 12), value: true }
-					}
-				]
-			}, []);
-			assertValidParse(['value: null'], {
-				type: 'object', start: pos(0, 0), end: pos(0, 11), properties: [
-					{
-						key: { type: 'string', start: pos(0, 0), end: pos(0, 5), value: 'value' },
-						value: { type: 'null', start: pos(0, 7), end: pos(0, 11), value: null }
-					}
-				]
-			}, []);
+	suite('Scalars', () => {
+		test('unquoted scalar', () => {
+			const input = 'hello world';
+			const node = parseOk(input);
+			assertScalar(input, node, { value: 'hello world', format: 'none' });
 		});
 
-		test('value on next line', () => {
-			assertValidParse(
-				[
-					'name:',
-					'  John Doe',
-					'colors:',
-					'  [ Red, Green, Blue ]',
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(3, 22), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'name' },
-							value: { type: 'string', start: pos(1, 2), end: pos(1, 10), value: 'John Doe' }
-						},
-						{
-							key: { type: 'string', start: pos(2, 0), end: pos(2, 6), value: 'colors' },
-							value: {
-								type: 'array', start: pos(3, 2), end: pos(3, 22), items: [
-									{ type: 'string', start: pos(3, 4), end: pos(3, 7), value: 'Red' },
-									{ type: 'string', start: pos(3, 9), end: pos(3, 14), value: 'Green' },
-									{ type: 'string', start: pos(3, 16), end: pos(3, 20), value: 'Blue' }
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		test('literal block scalar format', () => {
+			const input = [
+				'text: |',
+				'  line one',
+				'  line two',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'line one\nline two\n', format: 'literal' });
 		});
 
-		test('multiple properties', () => {
-			assertValidParse(
-				[
-					'name: John Doe',
-					'age: 30'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 7), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'name' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 14), value: 'John Doe' }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 3), value: 'age' },
-							value: { type: 'number', start: pos(1, 5), end: pos(1, 7), value: 30 }
-						}
-					]
-				},
-				[]
-			);
+		test('folded block scalar format', () => {
+			const input = [
+				'text: >',
+				'  line one',
+				'  line two',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'line one line two\n', format: 'folded' });
 		});
 
-		test('nested object', () => {
-			assertValidParse(
-				[
-					'person:',
-					'  name: John Doe',
-					'  age: 30'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(2, 9), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 6), value: 'person' },
-							value: {
-								type: 'object', start: pos(1, 2), end: pos(2, 9), properties: [
-									{
-										key: { type: 'string', start: pos(1, 2), end: pos(1, 6), value: 'name' },
-										value: { type: 'string', start: pos(1, 8), end: pos(1, 16), value: 'John Doe' }
-									},
-									{
-										key: { type: 'string', start: pos(2, 2), end: pos(2, 5), value: 'age' },
-										value: { type: 'number', start: pos(2, 7), end: pos(2, 9), value: 30 }
-									}
-								]
-							}
-						}
-					]
-
-				},
-				[]
-			);
+		test('literal block scalar strip chomping (|-)', () => {
+			const input = [
+				'text: |-',
+				'  line one',
+				'  line two',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'line one\nline two', format: 'literal' });
 		});
 
-
-		test('nested objects with address', () => {
-			assertValidParse(
-				[
-					'person:',
-					'  name: John Doe',
-					'  age: 30',
-					'  address:',
-					'    street: 123 Main St',
-					'    city: Example City'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(5, 22), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 6), value: 'person' },
-							value: {
-								type: 'object', start: pos(1, 2), end: pos(5, 22),
-								properties: [
-									{
-										key: { type: 'string', start: pos(1, 2), end: pos(1, 6), value: 'name' },
-										value: { type: 'string', start: pos(1, 8), end: pos(1, 16), value: 'John Doe' }
-									},
-									{
-										key: { type: 'string', start: pos(2, 2), end: pos(2, 5), value: 'age' },
-										value: { type: 'number', start: pos(2, 7), end: pos(2, 9), value: 30 }
-									},
-									{
-										key: { type: 'string', start: pos(3, 2), end: pos(3, 9), value: 'address' },
-										value: {
-											type: 'object', start: pos(4, 4), end: pos(5, 22), properties: [
-												{
-													key: { type: 'string', start: pos(4, 4), end: pos(4, 10), value: 'street' },
-													value: { type: 'string', start: pos(4, 12), end: pos(4, 23), value: '123 Main St' }
-												},
-												{
-													key: { type: 'string', start: pos(5, 4), end: pos(5, 8), value: 'city' },
-													value: { type: 'string', start: pos(5, 10), end: pos(5, 22), value: 'Example City' }
-												}
-											]
-										}
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		test('literal block scalar keep chomping (|+)', () => {
+			const input = [
+				'text: |+',
+				'  line one',
+				'  line two',
+				'',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'line one\nline two\n', format: 'literal' });
 		});
 
-		test('properties without space after colon', () => {
-			assertValidParse(
-				['name:John'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 9), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'name' },
-							value: { type: 'string', start: pos(0, 5), end: pos(0, 9), value: 'John' }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test mixed: some properties with space, some without
-			assertValidParse(
-				[
-					'config:',
-					'  database:',
-					'    host:localhost',
-					'    port: 5432',
-					'    credentials:',
-					'      username:admin',
-					'      password: secret123'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(6, 25), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 6), value: 'config' },
-							value: {
-								type: 'object', start: pos(1, 2), end: pos(6, 25), properties: [
-									{
-										key: { type: 'string', start: pos(1, 2), end: pos(1, 10), value: 'database' },
-										value: {
-											type: 'object', start: pos(2, 4), end: pos(6, 25), properties: [
-												{
-													key: { type: 'string', start: pos(2, 4), end: pos(2, 8), value: 'host' },
-													value: { type: 'string', start: pos(2, 9), end: pos(2, 18), value: 'localhost' }
-												},
-												{
-													key: { type: 'string', start: pos(3, 4), end: pos(3, 8), value: 'port' },
-													value: { type: 'number', start: pos(3, 10), end: pos(3, 14), value: 5432 }
-												},
-												{
-													key: { type: 'string', start: pos(4, 4), end: pos(4, 15), value: 'credentials' },
-													value: {
-														type: 'object', start: pos(5, 6), end: pos(6, 25), properties: [
-															{
-																key: { type: 'string', start: pos(5, 6), end: pos(5, 14), value: 'username' },
-																value: { type: 'string', start: pos(5, 15), end: pos(5, 20), value: 'admin' }
-															},
-															{
-																key: { type: 'string', start: pos(6, 6), end: pos(6, 14), value: 'password' },
-																value: { type: 'string', start: pos(6, 16), end: pos(6, 25), value: 'secret123' }
-															}
-														]
-													}
-												}
-											]
-										}
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		test('folded block scalar strip chomping (>-)', () => {
+			const input = [
+				'text: >-',
+				'  line one',
+				'  line two',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'line one line two', format: 'folded' });
 		});
 
-		test('inline objects', () => {
-			assertValidParse(
-				['{name: John, age: 30}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 21), properties: [
-						{
-							key: { type: 'string', start: pos(0, 1), end: pos(0, 5), value: 'name' },
-							value: { type: 'string', start: pos(0, 7), end: pos(0, 11), value: 'John' }
-						},
-						{
-							key: { type: 'string', start: pos(0, 13), end: pos(0, 16), value: 'age' },
-							value: { type: 'number', start: pos(0, 18), end: pos(0, 20), value: 30 }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test with different data types
-			assertValidParse(
-				['{active: true, score: 85.5, role: null}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 39), properties: [
-						{
-							key: { type: 'string', start: pos(0, 1), end: pos(0, 7), value: 'active' },
-							value: { type: 'boolean', start: pos(0, 9), end: pos(0, 13), value: true }
-						},
-						{
-							key: { type: 'string', start: pos(0, 15), end: pos(0, 20), value: 'score' },
-							value: { type: 'number', start: pos(0, 22), end: pos(0, 26), value: 85.5 }
-						},
-						{
-							key: { type: 'string', start: pos(0, 28), end: pos(0, 32), value: 'role' },
-							value: { type: 'null', start: pos(0, 34), end: pos(0, 38), value: null }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test empty inline object
-			assertValidParse(
-				['{}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 2), properties: []
-				},
-				[]
-			);
-
-			// Test inline object with quoted keys and values
-			assertValidParse(
-				['{"name": "John Doe", "age": 30}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 31), properties: [
-						{
-							key: { type: 'string', start: pos(0, 1), end: pos(0, 7), value: 'name' },
-							value: { type: 'string', start: pos(0, 9), end: pos(0, 19), value: 'John Doe' }
-						},
-						{
-							key: { type: 'string', start: pos(0, 21), end: pos(0, 26), value: 'age' },
-							value: { type: 'number', start: pos(0, 28), end: pos(0, 30), value: 30 }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test inline object without spaces
-			assertValidParse(
-				['{name:John,age:30}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 18), properties: [
-						{
-							key: { type: 'string', start: pos(0, 1), end: pos(0, 5), value: 'name' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 10), value: 'John' }
-						},
-						{
-							key: { type: 'string', start: pos(0, 11), end: pos(0, 14), value: 'age' },
-							value: { type: 'number', start: pos(0, 15), end: pos(0, 17), value: 30 }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test multi-line inline object with internal comment line between properties
-			assertValidParse(
-				['{a:1, # comment about b', ' b:2, c:3}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 10), properties: [
-						{
-							key: { type: 'string', start: pos(0, 1), end: pos(0, 2), value: 'a' },
-							value: { type: 'number', start: pos(0, 3), end: pos(0, 4), value: 1 }
-						},
-						{
-							key: { type: 'string', start: pos(1, 1), end: pos(1, 2), value: 'b' },
-							value: { type: 'number', start: pos(1, 3), end: pos(1, 4), value: 2 }
-						},
-						{
-							key: { type: 'string', start: pos(1, 6), end: pos(1, 7), value: 'c' },
-							value: { type: 'number', start: pos(1, 8), end: pos(1, 9), value: 3 }
-						}
-					]
-				},
-				[]
-			);
+		test('folded block scalar keep chomping (>+)', () => {
+			const input = [
+				'text: >+',
+				'  line one',
+				'  line two',
+				'',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'line one line two\n', format: 'folded' });
 		});
 
-		test('special characters in values', () => {
-			// Test values with special characters
-			assertValidParse(
-				[`key: value with \t special chars`],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 31), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'string', start: pos(0, 5), end: pos(0, 31), value: `value with \t special chars` }
-						}
-					]
-				},
-				[]
-			);
+		test('single-quoted scalar', () => {
+			const input = `'hello world'`;
+			const node = parseOk(input);
+			assertScalar(input, node, { value: 'hello world', format: 'single' });
 		});
 
-		test('various whitespace types', () => {
-			// Test different types of whitespace
-			assertValidParse(
-				[`key:\t \t \t value`],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 15), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'string', start: pos(0, 10), end: pos(0, 15), value: 'value' }
-						}
-					]
-				},
-				[]
-			);
+		test('double-quoted scalar', () => {
+			const input = '"hello world"';
+			const node = parseOk(input);
+			assertScalar(input, node, { value: 'hello world', format: 'double' });
+		});
+
+		test('double-quoted scalar with escape sequences', () => {
+			const input = '"hello\\nworld"';
+			const node = parseOk(input);
+			assertScalar(input, node, { value: 'hello\nworld', format: 'double' });
+		});
+
+		test('single-quoted scalar with escaped single quote', () => {
+			const input = `'it''s a test'`;
+			const node = parseOk(input);
+			assertScalar(input, node, { value: `it's a test`, format: 'single' });
+		});
+
+		test('scalar offsets are correct', () => {
+			const node = parseOk('hello') as YamlScalarNode;
+			assert.strictEqual(node.startOffset, 0);
+			assert.strictEqual(node.endOffset, 5);
 		});
 	});
 
-	suite('arrays', () => {
-
-
-		test('arrays', () => {
-			assertValidParse(
-				[
-					'- Boston Red Sox',
-					'- Detroit Tigers',
-					'- New York Yankees'
-				],
-				{
-					type: 'array', start: pos(0, 0), end: pos(2, 18), items: [
-						{ type: 'string', start: pos(0, 2), end: pos(0, 16), value: 'Boston Red Sox' },
-						{ type: 'string', start: pos(1, 2), end: pos(1, 16), value: 'Detroit Tigers' },
-						{ type: 'string', start: pos(2, 2), end: pos(2, 18), value: 'New York Yankees' }
-					]
-
-				},
-				[]
-			);
+	suite('Block mappings', () => {
+		test('simple key-value pair', () => {
+			const input = 'name: John Doe';
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assert.strictEqual(map.properties[0].key.value, 'name');
+			assertScalar(input, map.properties[0].value, { value: 'John Doe' });
 		});
 
-
-		test('inline arrays', () => {
-			assertValidParse(
-				['[Apple, Banana, Cherry]'],
-				{
-					type: 'array', start: pos(0, 0), end: pos(0, 23), items: [
-						{ type: 'string', start: pos(0, 1), end: pos(0, 6), value: 'Apple' },
-						{ type: 'string', start: pos(0, 8), end: pos(0, 14), value: 'Banana' },
-						{ type: 'string', start: pos(0, 16), end: pos(0, 22), value: 'Cherry' }
-					]
-
-				},
-				[]
-			);
+		test('multiple key-value pairs', () => {
+			const input = [
+				'name: John Doe',
+				'age: 30',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			assert.strictEqual(map.properties[0].key.value, 'name');
+			assertScalar(input, map.properties[0].value, { value: 'John Doe' });
+			assert.strictEqual(map.properties[1].key.value, 'age');
+			assertScalar(input, map.properties[1].value, { value: '30' });
 		});
 
-		test('inline array with internal comment line', () => {
-			assertValidParse(
-				['[one # comment about two', ',two, three]'],
-				{
-					type: 'array', start: pos(0, 0), end: pos(1, 12), items: [
-						{ type: 'string', start: pos(0, 1), end: pos(0, 4), value: 'one' },
-						{ type: 'string', start: pos(1, 1), end: pos(1, 4), value: 'two' },
-						{ type: 'string', start: pos(1, 6), end: pos(1, 11), value: 'three' }
-					]
-				},
-				[]
-			);
+		test('nested mappings', () => {
+			const input = [
+				'name: John Doe',
+				'age: 30',
+				'mother:',
+				'  name: Susi Doe',
+				'  age: 50',
+				'  address:',
+				'    street: 123 Main St',
+				'    city: Example City',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 3);
+			assert.strictEqual(map.properties[0].key.value, 'name');
+			assert.strictEqual(map.properties[2].key.value, 'mother');
+			const mother = assertMap(map.properties[2].value, 3);
+			assert.strictEqual(mother.properties[0].key.value, 'name');
+			assertScalar(input, mother.properties[0].value, { value: 'Susi Doe' });
+			const address = assertMap(mother.properties[2].value, 2);
+			assert.strictEqual(address.properties[0].key.value, 'street');
+			assertScalar(input, address.properties[0].value, { value: '123 Main St' });
 		});
 
-		test('multi-line inline arrays', () => {
-			assertValidParse(
-				[
-					'[',
-					'    geen, ',
-					'    yello, red]'
-				],
-				{
-					type: 'array', start: pos(0, 0), end: pos(2, 15), items: [
-						{ type: 'string', start: pos(1, 4), end: pos(1, 8), value: 'geen' },
-						{ type: 'string', start: pos(2, 4), end: pos(2, 9), value: 'yello' },
-						{ type: 'string', start: pos(2, 11), end: pos(2, 14), value: 'red' }
-					]
-				},
-				[]
-			);
+		test('mapping with quoted keys and values', () => {
+			const input = [
+				'"name": \'John Doe\'',
+				'\'age\': "30"',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			assert.strictEqual(map.properties[0].key.format, 'double');
+			assert.strictEqual((map.properties[0].value as YamlScalarNode).format, 'single');
 		});
 
-		test('arrays of arrays', () => {
-			assertValidParse(
-				[
-					'-',
-					'  - Apple',
-					'  - Banana',
-					'  - Cherry'
-				],
-				{
-					type: 'array', start: pos(0, 0), end: pos(3, 10), items: [
-						{
-							type: 'array', start: pos(1, 2), end: pos(3, 10), items: [
-								{ type: 'string', start: pos(1, 4), end: pos(1, 9), value: 'Apple' },
-								{ type: 'string', start: pos(2, 4), end: pos(2, 10), value: 'Banana' },
-								{ type: 'string', start: pos(3, 4), end: pos(3, 10), value: 'Cherry' }
-							]
-						}
-					]
-				},
-				[]
-			);
-		});
-
-		test('inline arrays of inline arrays', () => {
-			assertValidParse(
-				[
-					'[',
-					'  [ee], [ff, gg]',
-					']',
-				],
-				{
-					type: 'array', start: pos(0, 0), end: pos(2, 1), items: [
-						{
-							type: 'array', start: pos(1, 2), end: pos(1, 6), items: [
-								{ type: 'string', start: pos(1, 3), end: pos(1, 5), value: 'ee' },
-							],
-						},
-						{
-							type: 'array', start: pos(1, 8), end: pos(1, 16), items: [
-								{ type: 'string', start: pos(1, 9), end: pos(1, 11), value: 'ff' },
-								{ type: 'string', start: pos(1, 13), end: pos(1, 15), value: 'gg' },
-							],
-						}
-					]
-				},
-				[]
-			);
-		});
-
-		test('object with array containing single object', () => {
-			assertValidParse(
-				[
-					'items:',
-					'- name: John',
-					'  age: 30'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(2, 9), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 5), value: 'items' },
-							value: {
-								type: 'array', start: pos(1, 0), end: pos(2, 9), items: [
-									{
-										type: 'object', start: pos(1, 2), end: pos(2, 9), properties: [
-											{
-												key: { type: 'string', start: pos(1, 2), end: pos(1, 6), value: 'name' },
-												value: { type: 'string', start: pos(1, 8), end: pos(1, 12), value: 'John' }
-											},
-											{
-												key: { type: 'string', start: pos(2, 2), end: pos(2, 5), value: 'age' },
-												value: { type: 'number', start: pos(2, 7), end: pos(2, 9), value: 30 }
-											}
-										]
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
-		});
-
-		test('arrays of objects', () => {
-			assertValidParse(
-				[
-					'-',
-					'  name: one',
-					'- name: two',
-					'-',
-					'  name: three'
-				],
-				{
-					type: 'array', start: pos(0, 0), end: pos(4, 13), items: [
-						{
-							type: 'object', start: pos(1, 2), end: pos(1, 11), properties: [
-								{
-									key: { type: 'string', start: pos(1, 2), end: pos(1, 6), value: 'name' },
-									value: { type: 'string', start: pos(1, 8), end: pos(1, 11), value: 'one' }
-								}
-							]
-						},
-						{
-							type: 'object', start: pos(2, 2), end: pos(2, 11), properties: [
-								{
-									key: { type: 'string', start: pos(2, 2), end: pos(2, 6), value: 'name' },
-									value: { type: 'string', start: pos(2, 8), end: pos(2, 11), value: 'two' }
-								}
-							]
-						},
-						{
-							type: 'object', start: pos(4, 2), end: pos(4, 13), properties: [
-								{
-									key: { type: 'string', start: pos(4, 2), end: pos(4, 6), value: 'name' },
-									value: { type: 'string', start: pos(4, 8), end: pos(4, 13), value: 'three' }
-								}
-							]
-						}
-					]
-				},
-				[]
-			);
+		test('mapping offsets', () => {
+			const input = 'name: John';
+			const node = parseOk(input) as YamlMapNode;
+			assert.strictEqual(node.startOffset, 0);
+			assert.strictEqual(node.endOffset, 10);
 		});
 	});
 
-	suite('complex structures', () => {
-
-		test('array of objects', () => {
-			assertValidParse(
-				[
-					'products:',
-					'  - name: Laptop',
-					'    price: 999.99',
-					'    in_stock: true',
-					'  - name: Mouse',
-					'    price: 25.50',
-					'    in_stock: false'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(6, 19), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 8), value: 'products' },
-							value: {
-								type: 'array', start: pos(1, 2), end: pos(6, 19), items: [
-									{
-										type: 'object', start: pos(1, 4), end: pos(3, 18), properties: [
-											{
-												key: { type: 'string', start: pos(1, 4), end: pos(1, 8), value: 'name' },
-												value: { type: 'string', start: pos(1, 10), end: pos(1, 16), value: 'Laptop' }
-											},
-											{
-												key: { type: 'string', start: pos(2, 4), end: pos(2, 9), value: 'price' },
-												value: { type: 'number', start: pos(2, 11), end: pos(2, 17), value: 999.99 }
-											},
-											{
-												key: { type: 'string', start: pos(3, 4), end: pos(3, 12), value: 'in_stock' },
-												value: { type: 'boolean', start: pos(3, 14), end: pos(3, 18), value: true }
-											}
-										]
-									},
-									{
-										type: 'object', start: pos(4, 4), end: pos(6, 19), properties: [
-											{
-												key: { type: 'string', start: pos(4, 4), end: pos(4, 8), value: 'name' },
-												value: { type: 'string', start: pos(4, 10), end: pos(4, 15), value: 'Mouse' }
-											},
-											{
-												key: { type: 'string', start: pos(5, 4), end: pos(5, 9), value: 'price' },
-												value: { type: 'number', start: pos(5, 11), end: pos(5, 16), value: 25.50 }
-											},
-											{
-												key: { type: 'string', start: pos(6, 4), end: pos(6, 12), value: 'in_stock' },
-												value: { type: 'boolean', start: pos(6, 14), end: pos(6, 19), value: false }
-											}
-										]
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+	suite('Block sequences', () => {
+		test('simple sequence', () => {
+			const input = [
+				'- Apple',
+				'- Banana',
+				'- Cherry',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+			assertScalar(input, seq.items[0], { value: 'Apple' });
+			assertScalar(input, seq.items[1], { value: 'Banana' });
+			assertScalar(input, seq.items[2], { value: 'Cherry' });
 		});
 
-		test('inline array mixed primitives', () => {
-			assertValidParse(
-				['vals: [1, true, null, "str"]'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 28), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'vals' },
-							value: {
-								type: 'array', start: pos(0, 6), end: pos(0, 28), items: [
-									{ type: 'number', start: pos(0, 7), end: pos(0, 8), value: 1 },
-									{ type: 'boolean', start: pos(0, 10), end: pos(0, 14), value: true },
-									{ type: 'null', start: pos(0, 16), end: pos(0, 20), value: null },
-									{ type: 'string', start: pos(0, 22), end: pos(0, 27), value: 'str' }
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		// Spec Example 2.4. Sequence of Mappings (229Q)
+		test('spec 2.4 - sequence of mappings (229Q)', () => {
+			const input = [
+				'-',
+				'  name: Mark McGwire',
+				'  hr:   65',
+				'  avg:  0.278',
+				'-',
+				'  name: Sammy Sosa',
+				'  hr:   63',
+				'  avg:  0.288',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 2);
+
+			const first = assertMap(seq.items[0], 3);
+			assert.strictEqual(first.properties[0].key.value, 'name');
+			assertScalar(input, first.properties[0].value, { value: 'Mark McGwire' });
+			assert.strictEqual(first.properties[1].key.value, 'hr');
+			assertScalar(input, first.properties[1].value, { value: '65' });
+			assert.strictEqual(first.properties[2].key.value, 'avg');
+			assertScalar(input, first.properties[2].value, { value: '0.278' });
+
+			const second = assertMap(seq.items[1], 3);
+			assert.strictEqual(second.properties[0].key.value, 'name');
+			assertScalar(input, second.properties[0].value, { value: 'Sammy Sosa' });
+			assert.strictEqual(second.properties[1].key.value, 'hr');
+			assertScalar(input, second.properties[1].value, { value: '63' });
+			assert.strictEqual(second.properties[2].key.value, 'avg');
+			assertScalar(input, second.properties[2].value, { value: '0.288' });
 		});
 
-		test('mixed inline structures', () => {
-			assertValidParse(
-				['config: {env: "prod", settings: [true, 42], debug: false}'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 57), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 6), value: 'config' },
-							value: {
-								type: 'object', start: pos(0, 8), end: pos(0, 57), properties: [
-									{
-										key: { type: 'string', start: pos(0, 9), end: pos(0, 12), value: 'env' },
-										value: { type: 'string', start: pos(0, 14), end: pos(0, 20), value: 'prod' }
-									},
-									{
-										key: { type: 'string', start: pos(0, 22), end: pos(0, 30), value: 'settings' },
-										value: {
-											type: 'array', start: pos(0, 32), end: pos(0, 42), items: [
-												{ type: 'boolean', start: pos(0, 33), end: pos(0, 37), value: true },
-												{ type: 'number', start: pos(0, 39), end: pos(0, 41), value: 42 }
-											]
-										}
-									},
-									{
-										key: { type: 'string', start: pos(0, 44), end: pos(0, 49), value: 'debug' },
-										value: { type: 'boolean', start: pos(0, 51), end: pos(0, 56), value: false }
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		test('sequence of mappings', () => {
+			const input = [
+				'-',
+				'  name: Mark McGwire',
+				'  hr:   65',
+				'  avg:  0.278',
+				'-',
+				'  name: Sammy Sosa',
+				'  hr:   63',
+				'  avg:  0.288',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 2);
+			const first = assertMap(seq.items[0], 3);
+			assertScalar(input, first.properties[0].value, { value: 'Mark McGwire' });
+			const second = assertMap(seq.items[1], 3);
+			assertScalar(input, second.properties[0].value, { value: 'Sammy Sosa' });
 		});
 
-		test('with comments', () => {
-			assertValidParse(
-				[
-					`# This is a comment`,
-					'name: John Doe  # inline comment',
-					'age: 30'
-				],
-				{
-					type: 'object', start: pos(1, 0), end: pos(2, 7), properties: [
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 4), value: 'name' },
-							value: { type: 'string', start: pos(1, 6), end: pos(1, 14), value: 'John Doe' }
-						},
-						{
-							key: { type: 'string', start: pos(2, 0), end: pos(2, 3), value: 'age' },
-							value: { type: 'number', start: pos(2, 5), end: pos(2, 7), value: 30 }
-						}
-					]
-				},
-				[]
-			);
+		test('map of sequences', () => {
+			const input = [
+				'american:',
+				'  - Boston Red Sox',
+				'  - Detroit Tigers',
+				'  - New York Yankees',
+				'national:',
+				'  - New York Mets',
+				'  - Chicago Cubs',
+				'  - Atlanta Braves',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			const american = assertSequence(map.properties[0].value, 3);
+			assertScalar(input, american.items[0], { value: 'Boston Red Sox' });
+			const national = assertSequence(map.properties[1].value, 3);
+			assertScalar(input, national.items[2], { value: 'Atlanta Braves' });
+		});
+
+		test('inline mapping after dash', () => {
+			const input = [
+				'- name: Mark McGwire',
+				'  hr: 65',
+				'- name: Sammy Sosa',
+				'  hr: 63',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 2);
+			const first = assertMap(seq.items[0], 2);
+			assertScalar(input, first.properties[0].value, { value: 'Mark McGwire' });
 		});
 	});
 
-	suite('edge cases and error handling', () => {
+	suite('Flow mappings', () => {
+		test('simple flow mapping', () => {
+			const input = '{hr: 65, avg: 0.278}';
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			assert.strictEqual(map.properties[0].key.value, 'hr');
+			assertScalar(input, map.properties[0].value, { value: '65' });
+			assert.strictEqual(map.properties[1].key.value, 'avg');
+			assertScalar(input, map.properties[1].value, { value: '0.278' });
+		});
 
+		test('flow mapping offsets', () => {
+			const input = '{hr: 65}';
+			const node = parseOk(input) as YamlMapNode;
+			assert.strictEqual(node.startOffset, 0);
+			assert.strictEqual(node.endOffset, 8);
+		});
+	});
 
-		// Edge cases
-		test('duplicate keys error', () => {
-			assertValidParse(
-				[
-					'key: 1',
-					'key: 2'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 6), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'number', start: pos(0, 5), end: pos(0, 6), value: 1 }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 3), value: 'key' },
-							value: { type: 'number', start: pos(1, 5), end: pos(1, 6), value: 2 }
-						}
-					]
-				},
-				[
-					{
-						message: 'Duplicate key \'key\'',
-						code: 'duplicateKey',
-						start: pos(1, 0),
-						end: pos(1, 3)
-					}
-				]
-			);
+	suite('Flow sequences', () => {
+		test('simple flow sequence', () => {
+			const input = '[Sammy Sosa  , 63, 0.288]';
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+			assertScalar(input, seq.items[0], { value: 'Sammy Sosa' });
+			assertScalar(input, seq.items[1], { value: '63' });
+			assertScalar(input, seq.items[2], { value: '0.288' });
+		});
+
+		test('flow sequence with quoted strings', () => {
+			const input = `[ 'Sammy Sosa', 63, 0.288]`;
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+			assertScalar(input, seq.items[0], { value: 'Sammy Sosa', format: 'single' });
+		});
+
+		test('flow sequence offsets', () => {
+			const input = '[a, b]';
+			const node = parseOk(input) as YamlSequenceNode;
+			assert.strictEqual(node.startOffset, 0);
+			assert.strictEqual(node.endOffset, 6);
+		});
+	});
+
+	suite('Mixed structures', () => {
+		test('object with scalars, arrays, inline objects and arrays', () => {
+			const input = [
+				'object:',
+				'    street: 123 Main St',
+				'    city: "Example City"',
+				'array:',
+				'  - Boston Red Sox',
+				`  - 'Detroit Tigers'`,
+				'inline object: {hr: 65, avg: 0.278}',
+				`inline array: [ 'Sammy Sosa', 63, 0.288]`,
+				'bool: false',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 5);
+
+			// Nested object
+			const obj = assertMap(map.properties[0].value, 2);
+			assertScalar(input, obj.properties[0].value, { value: '123 Main St' });
+			assertScalar(input, obj.properties[1].value, { value: 'Example City', format: 'double' });
+
+			// Array
+			const arr = assertSequence(map.properties[1].value, 2);
+			assertScalar(input, arr.items[0], { value: 'Boston Red Sox' });
+			assertScalar(input, arr.items[1], { value: 'Detroit Tigers', format: 'single' });
+
+			// Inline object
+			const inlineObj = assertMap(map.properties[2].value, 2);
+			assertScalar(input, inlineObj.properties[0].value, { value: '65' });
+
+			// Inline array
+			const inlineArr = assertSequence(map.properties[3].value, 3);
+			assertScalar(input, inlineArr.items[0], { value: 'Sammy Sosa', format: 'single' });
+
+			// Boolean as scalar
+			assertScalar(input, map.properties[4].value, { value: 'false' });
+		});
+
+		test('arrays of inline arrays', () => {
+			const input = [
+				'- [name        , hr, avg  ]',
+				'- [Mark McGwire, 65, 0.278]',
+				'- [Sammy Sosa  , 63, 0.288]',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+
+			const header = assertSequence(seq.items[0], 3);
+			assertScalar(input, header.items[0], { value: 'name' });
+			assertScalar(input, header.items[1], { value: 'hr' });
+			assertScalar(input, header.items[2], { value: 'avg' });
+
+			const row1 = assertSequence(seq.items[1], 3);
+			assertScalar(input, row1.items[0], { value: 'Mark McGwire' });
+		});
+	});
+
+	suite('Comments', () => {
+		test('comment-only lines are ignored', () => {
+			const input = [
+				'# This is a comment',
+				'name: John',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assert.strictEqual(map.properties[0].key.value, 'name');
+		});
+
+		test('inline comment after value', () => {
+			const input = [
+				'hr: # 1998 hr ranking',
+				'  - Mark McGwire',
+				'  - Sammy Sosa',
+				'rbi:',
+				'  # 1998 rbi ranking',
+				'  - Sammy Sosa',
+				'  - Ken Griffey#part of the value, not a comment',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+
+			const hr = assertSequence(map.properties[0].value, 2);
+			assertScalar(input, hr.items[0], { value: 'Mark McGwire' });
+
+			const rbi = assertSequence(map.properties[1].value, 2);
+			// '#' without leading space is part of the value
+			assertScalar(input, rbi.items[1], { value: 'Ken Griffey#part of the value, not a comment' });
+		});
+	});
+
+	suite('Error handling', () => {
+		test('missing value emits error and creates empty scalar', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'name:',
+				'age: 30',
+			].join('\n');
+			const node = parse(input, errors);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].value, { value: '' });
+			assert.ok(errors.some(e => e.code === 'missing-value'));
+		});
+
+		test('duplicate keys emit errors', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'name: John',
+				'name: Jane',
+			].join('\n');
+			const node = parse(input, errors);
+			assertMap(node, 2);
+			assert.ok(errors.some(e => e.code === 'duplicate-key'));
 		});
 
 		test('duplicate keys allowed with option', () => {
-			assertValidParse(
-				[
-					'key: 1',
-					'key: 2'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 6), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'number', start: pos(0, 5), end: pos(0, 6), value: 1 }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 3), value: 'key' },
-							value: { type: 'number', start: pos(1, 5), end: pos(1, 6), value: 2 }
-						}
-					]
-				},
-				[],
-				{ allowDuplicateKeys: true }
-			);
+			const errors: YamlParseError[] = [];
+			const input = [
+				'name: John',
+				'name: Jane',
+			].join('\n');
+			const node = parse(input, errors, { allowDuplicateKeys: true });
+			assertMap(node, 2);
+			assert.strictEqual(errors.length, 0);
 		});
 
-		test('unexpected indentation error with recovery', () => {
-			// Parser reports error but still captures the over-indented property.
-			assertValidParse(
-				[
-					'key: 1',
-					'    stray: value'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 16), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'number', start: pos(0, 5), end: pos(0, 6), value: 1 }
-						},
-						{
-							key: { type: 'string', start: pos(1, 4), end: pos(1, 9), value: 'stray' },
-							value: { type: 'string', start: pos(1, 11), end: pos(1, 16), value: 'value' }
-						}
-					]
-				},
-				[
-					{
-						message: 'Unexpected indentation',
-						code: 'indentation',
-						start: pos(1, 0),
-						end: pos(1, 16)
-					}
-				]
-			);
+		test('wrong indentation emits error but still parses', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'parent:',
+				'  child1: a',
+				'    child2: b',
+			].join('\n');
+			const node = parse(input, errors);
+			assert.ok(node);
+			// Should have produced an indentation error
+			assert.ok(errors.some(e => e.code === 'unexpected-indentation'));
+		});
+	});
+
+	suite('Offset tracking', () => {
+		test('scalar offsets in mapping', () => {
+			const input = 'key: value';
+			const map = parseOk(input) as YamlMapNode;
+			assert.strictEqual(map.properties[0].key.startOffset, 0);
+			assert.strictEqual(map.properties[0].key.endOffset, 3);
+			const val = map.properties[0].value as YamlScalarNode;
+			assert.strictEqual(val.startOffset, 5);
+			assert.strictEqual(val.endOffset, 10);
 		});
 
-		test('empty values and inline empty array', () => {
-			assertValidParse(
-				[
-					'empty:',
-					'array: []'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 9), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 5), value: 'empty' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 6), value: '' }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 5), value: 'array' },
-							value: { type: 'array', start: pos(1, 7), end: pos(1, 9), items: [] }
-						}
-					]
-				},
-				[]
-			);
+		test('offsets are zero-based and endOffset is exclusive', () => {
+			const input = '"hi"';
+			const node = parseOk(input) as YamlScalarNode;
+			assert.strictEqual(node.startOffset, 0);
+			assert.strictEqual(node.endOffset, 4);
+			assert.strictEqual(node.value, 'hi');
+			assert.strictEqual(node.rawValue, '"hi"');
 		});
 
+		test('sequence item offsets', () => {
+			const input = [
+				'- a',
+				'- b',
+			].join('\n');
+			const seq = parseOk(input) as YamlSequenceNode;
+			const first = seq.items[0] as YamlScalarNode;
+			assert.strictEqual(first.startOffset, 2);
+			assert.strictEqual(first.endOffset, 3);
+		});
+	});
 
-
-		test('nested empty objects', () => {
-			// Parser should create nodes for both parent and child, with child having empty string value.
-			assertValidParse(
-				[
-					'parent:',
-					'  child:'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 8), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 6), value: 'parent' },
-							value: {
-								type: 'object', start: pos(1, 2), end: pos(1, 8), properties: [
-									{
-										key: { type: 'string', start: pos(1, 2), end: pos(1, 7), value: 'child' },
-										value: { type: 'string', start: pos(1, 8), end: pos(1, 8), value: '' }
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+	suite('Nested sequences', () => {
+		test('block sequence in block sequence (dash-dash)', () => {
+			const input = [
+				'- - s1_i1',
+				'  - s1_i2',
+				'- s2',
+			].join('\n');
+			const outer = assertSequence(parseOk(input), 2);
+			const inner = assertSequence(outer.items[0], 2);
+			assertScalar(input, inner.items[0], { value: 's1_i1' });
+			assertScalar(input, inner.items[1], { value: 's1_i2' });
+			assertScalar(input, outer.items[1], { value: 's2' });
 		});
 
-		test('empty object with only colons', () => {
-			// Test object with empty values
-			assertValidParse(
-				['key1:', 'key2:', 'key3:'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(2, 5), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'key1' },
-							value: { type: 'string', start: pos(0, 5), end: pos(0, 5), value: '' }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 4), value: 'key2' },
-							value: { type: 'string', start: pos(1, 5), end: pos(1, 5), value: '' }
-						},
-						{
-							key: { type: 'string', start: pos(2, 0), end: pos(2, 4), value: 'key3' },
-							value: { type: 'string', start: pos(2, 5), end: pos(2, 5), value: '' }
-						}
-					]
-				},
-				[]
-			);
+		test('sequence at same indent as parent mapping key', () => {
+			const input = [
+				'one:',
+				'- 2',
+				'- 3',
+				'four: 5',
+			].join('\n');
+			const map = assertMap(parseOk(input), 2);
+			assertScalar(input, map.properties[0].key, { value: 'one' });
+			const seq = assertSequence(map.properties[0].value, 2);
+			assertScalar(input, seq.items[0], { value: '2' });
+			assertScalar(input, seq.items[1], { value: '3' });
+			assertScalar(input, map.properties[1].key, { value: 'four' });
+			assertScalar(input, map.properties[1].value, { value: '5' });
+		});
+
+		test('sequence indented under mapping key', () => {
+			const input = [
+				'foo:',
+				'  - 42',
+				'bar:',
+				'  - 44',
+			].join('\n');
+			const map = assertMap(parseOk(input), 2);
+			const seq1 = assertSequence(map.properties[0].value, 1);
+			assertScalar(input, seq1.items[0], { value: '42' });
+			const seq2 = assertSequence(map.properties[1].value, 1);
+			assertScalar(input, seq2.items[0], { value: '44' });
+		});
+	});
+
+	suite('Multiline plain scalars', () => {
+		test('multiline scalar in mapping value', () => {
+			const input = [
+				'a: b',
+				' c',
+			].join('\n');
+			const map = assertMap(parseOk(input), 1);
+			assertScalar(input, map.properties[0].value, { value: 'b c' });
+		});
+
+		test('multiline scalar with multiple continuation lines', () => {
+			const input = [
+				'plain:',
+				'  This unquoted scalar',
+				'  spans many lines.',
+			].join('\n');
+			const map = assertMap(parseOk(input), 1);
+			assertScalar(input, map.properties[0].value, { value: 'This unquoted scalar spans many lines.' });
+		});
+
+		test('multiline scalar at top level', () => {
+			const input = [
+				'a',
+				'b',
+				'  c',
+				'd',
+			].join('\n');
+			const result = parseOk(input);
+			assertScalar(input, result, { value: 'a b c d' });
+		});
+
+		test('multiline scalar with empty line preserves newline', () => {
+			const input = [
+				'a: val1',
+				' val2',
+				'',
+				' val3',
+			].join('\n');
+			const map = assertMap(parseOk(input), 1);
+			// Empty line between val2 and val3 becomes \n
+			assertScalar(input, map.properties[0].value, { value: 'val1 val2\nval3' });
+		});
+
+		test('multiline scalar stops at same indent as mapping', () => {
+			const input = [
+				'a: b',
+				' c',
+				'd: e',
+			].join('\n');
+			const map = assertMap(parseOk(input), 2);
+			assertScalar(input, map.properties[0].value, { value: 'b c' });
+			assertScalar(input, map.properties[1].value, { value: 'e' });
+		});
+
+		test('multiline scalar value on next line', () => {
+			const input = [
+				'a:',
+				'  b',
+				'  c',
+			].join('\n');
+			const map = assertMap(parseOk(input), 1);
+			assertScalar(input, map.properties[0].value, { value: 'b c' });
+		});
+
+		test('multiline scalar stops at comment', () => {
+			const input = [
+				'value1',
+				'# a comment',
+				'value2',
+			].join('\n');
+			// Comment terminates the scalar continuation, so value2 is not part of value1
+			const result = parseOk(input);
+			assertScalar(input, result, { value: 'value1' });
+		});
+
+		test('multiline scalar with multiple mappings', () => {
+			const input = [
+				'a: b',
+				' c',
+				'd:',
+				' e',
+				'  f',
+			].join('\n');
+			const map = assertMap(parseOk(input), 2);
+			assertScalar(input, map.properties[0].value, { value: 'b c' });
+			assertScalar(input, map.properties[1].value, { value: 'e f' });
+		});
+	});
+
+	suite('Edge cases', () => {
+		test('colon in unquoted value', () => {
+			const input = 'url: http://example.com';
+			const map = parseOk(input) as YamlMapNode;
+			assertScalar(input, map.properties[0].value, { value: 'http://example.com' });
+		});
+
+		test('trailing whitespace is trimmed from unquoted scalars', () => {
+			const input = 'name: John   ';
+			const map = parseOk(input) as YamlMapNode;
+			assertScalar(input, map.properties[0].value, { value: 'John' });
+		});
+
+		test('empty flow map', () => {
+			const node = parseOk('{}');
+			const map = assertMap(node, 0);
+			assert.strictEqual(map.startOffset, 0);
+			assert.strictEqual(map.endOffset, 2);
+		});
+
+		test('empty flow sequence', () => {
+			const node = parseOk('[]');
+			const seq = assertSequence(node, 0);
+			assert.strictEqual(seq.startOffset, 0);
+			assert.strictEqual(seq.endOffset, 2);
+		});
+
+		test('CRLF line endings', () => {
+			const input = 'name: John\r\nage: 30';
+			const map = parseOk(input) as YamlMapNode;
+			assertMap(map, 2);
+			assertScalar(input, map.properties[0].value, { value: 'John' });
+			assertScalar(input, map.properties[1].value, { value: '30' });
+		});
+	});
+
+	suite('Old test suite', () => {
+
+		test('mapping value on next line', () => {
+			const input = [
+				'name:',
+				'  John Doe',
+				'colors:',
+				'  [ Red, Green, Blue ]',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].value, { value: 'John Doe' });
+			const colors = assertSequence(map.properties[1].value, 3);
+			assertScalar(input, colors.items[0], { value: 'Red' });
+			assertScalar(input, colors.items[1], { value: 'Green' });
+			assertScalar(input, colors.items[2], { value: 'Blue' });
+		});
+
+		test('flow map with different data types', () => {
+			const input = '{active: true, score: 85.5, role: null}';
+			const node = parseOk(input);
+			const map = assertMap(node, 3);
+			assertScalar(input, map.properties[0].key, { value: 'active' });
+			assertScalar(input, map.properties[0].value, { value: 'true' });
+			assertScalar(input, map.properties[1].key, { value: 'score' });
+			assertScalar(input, map.properties[1].value, { value: '85.5' });
+			assertScalar(input, map.properties[2].key, { value: 'role' });
+			assertScalar(input, map.properties[2].value, { value: 'null' });
+		});
+
+		test('flow map with quoted keys and values', () => {
+			const input = '{"name": "John Doe", "age": 30}';
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].key, { value: 'name', format: 'double' });
+			assertScalar(input, map.properties[0].value, { value: 'John Doe', format: 'double' });
+			assertScalar(input, map.properties[1].key, { value: 'age', format: 'double' });
+			assertScalar(input, map.properties[1].value, { value: '30' });
+		});
+
+		test('special characters in values', () => {
+			const input = `key: value with \t special chars`;
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: `value with \t special chars` });
+		});
+
+		test('various whitespace after colon', () => {
+			const input = `key:\t \t \t value`;
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'value' });
+		});
+
+		test('inline array with comment continuation', () => {
+			const input = [
+				'[one # comment about two',
+				',two, three]',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+			assertScalar(input, seq.items[0], { value: 'one' });
+			assertScalar(input, seq.items[1], { value: 'two' });
+			assertScalar(input, seq.items[2], { value: 'three' });
+		});
+
+		test('multi-line flow sequence', () => {
+			const input = [
+				'[',
+				'    geen, ',
+				'    yello, red]',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+			assertScalar(input, seq.items[0], { value: 'geen' });
+			assertScalar(input, seq.items[1], { value: 'yello' });
+			assertScalar(input, seq.items[2], { value: 'red' });
+		});
+
+		test('nested block sequences (dash on next line)', () => {
+			const input = [
+				'-',
+				'  - Apple',
+				'  - Banana',
+				'  - Cherry',
+			].join('\n');
+			const node = parseOk(input);
+			const outer = assertSequence(node, 1);
+			const inner = assertSequence(outer.items[0], 3);
+			assertScalar(input, inner.items[0], { value: 'Apple' });
+			assertScalar(input, inner.items[1], { value: 'Banana' });
+			assertScalar(input, inner.items[2], { value: 'Cherry' });
+		});
+
+		test('nested flow sequences', () => {
+			const input = [
+				'[',
+				'  [ee], [ff, gg]',
+				']',
+			].join('\n');
+			const node = parseOk(input);
+			const outer = assertSequence(node, 2);
+			const first = assertSequence(outer.items[0], 1);
+			assertScalar(input, first.items[0], { value: 'ee' });
+			const second = assertSequence(outer.items[1], 2);
+			assertScalar(input, second.items[0], { value: 'ff' });
+			assertScalar(input, second.items[1], { value: 'gg' });
+		});
+
+		test('mapping with sequence containing a mapping', () => {
+			const input = [
+				'items:',
+				'- name: John',
+				'  age: 30',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].key, { value: 'items' });
+			const seq = assertSequence(map.properties[0].value, 1);
+			const item = assertMap(seq.items[0], 2);
+			assertScalar(input, item.properties[0].value, { value: 'John' });
+			assertScalar(input, item.properties[1].value, { value: '30' });
+		});
+
+		test('sequence of mappings with varying styles', () => {
+			const input = [
+				'-',
+				'  name: one',
+				'- name: two',
+				'-',
+				'  name: three',
+			].join('\n');
+			const node = parseOk(input);
+			const seq = assertSequence(node, 3);
+			const first = assertMap(seq.items[0], 1);
+			assertScalar(input, first.properties[0].value, { value: 'one' });
+			const second = assertMap(seq.items[1], 1);
+			assertScalar(input, second.properties[0].value, { value: 'two' });
+			const third = assertMap(seq.items[2], 1);
+			assertScalar(input, third.properties[0].value, { value: 'three' });
+		});
+
+		test('sequence of multi-property mappings', () => {
+			const input = [
+				'products:',
+				'  - name: Laptop',
+				'    price: 999.99',
+				'    in_stock: true',
+				'  - name: Mouse',
+				'    price: 25.50',
+				'    in_stock: false',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			const products = assertSequence(map.properties[0].value, 2);
+			const laptop = assertMap(products.items[0], 3);
+			assertScalar(input, laptop.properties[0].value, { value: 'Laptop' });
+			assertScalar(input, laptop.properties[1].value, { value: '999.99' });
+			assertScalar(input, laptop.properties[2].value, { value: 'true' });
+			const mouse = assertMap(products.items[1], 3);
+			assertScalar(input, mouse.properties[0].value, { value: 'Mouse' });
+			assertScalar(input, mouse.properties[1].value, { value: '25.50' });
+			assertScalar(input, mouse.properties[2].value, { value: 'false' });
+		});
+
+		test('flow sequence with mixed types', () => {
+			// Note: current parser treats all values as scalars (strings), not typed
+			const input = 'vals: [1, true, null, "str"]';
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			const vals = assertSequence(map.properties[0].value, 4);
+			assertScalar(input, vals.items[0], { value: '1' });
+			assertScalar(input, vals.items[1], { value: 'true' });
+			assertScalar(input, vals.items[2], { value: 'null' });
+			assertScalar(input, vals.items[3], { value: 'str', format: 'double' });
+		});
+
+		test('flow map with nested flow sequence', () => {
+			const input = 'config: {env: "prod", settings: [true, 42], debug: false}';
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			const config = assertMap(map.properties[0].value, 3);
+			assertScalar(input, config.properties[0].key, { value: 'env' });
+			assertScalar(input, config.properties[0].value, { value: 'prod', format: 'double' });
+			const settings = assertSequence(config.properties[1].value, 2);
+			assertScalar(input, settings.items[0], { value: 'true' });
+			assertScalar(input, settings.items[1], { value: '42' });
+			assertScalar(input, config.properties[2].key, { value: 'debug' });
+			assertScalar(input, config.properties[2].value, { value: 'false' });
+		});
+
+		test('full-line and inline comments', () => {
+			const input = [
+				'# This is a comment',
+				'name: John Doe  # inline comment',
+				'age: 30',
+			].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].key, { value: 'name' });
+			assertScalar(input, map.properties[0].value, { value: 'John Doe' });
+			assertScalar(input, map.properties[1].key, { value: 'age' });
+			assertScalar(input, map.properties[1].value, { value: '30' });
+		});
+
+		test('unexpected indentation with recovery', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'key: 1',
+				'    stray: value',
+			].join('\n');
+			const node = parse(input, errors);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].key, { value: 'key' });
+			assertScalar(input, map.properties[0].value, { value: '1' });
+			assertScalar(input, map.properties[1].key, { value: 'stray' });
+			assertScalar(input, map.properties[1].value, { value: 'value' });
+			// Should report an indentation error
+			assert.ok(errors.some(e => e.code === 'unexpected-indentation'));
+		});
+
+		test('empty value followed by non-empty', () => {
+			const input = [
+				'empty:',
+				'array: []',
+			].join('\n');
+			const errors: YamlParseError[] = [];
+			const node = parse(input, errors);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].key, { value: 'empty' });
+			assertScalar(input, map.properties[0].value, { value: '' });
+			assertScalar(input, map.properties[1].key, { value: 'array' });
+			const arr = assertSequence(map.properties[1].value, 0);
+			assert.ok(arr);
+		});
+
+		test('nested mapping with empty value', () => {
+			const input = [
+				'parent:',
+				'  child:',
+			].join('\n');
+			const errors: YamlParseError[] = [];
+			const node = parse(input, errors);
+			const map = assertMap(node, 1);
+			const parent = assertMap(map.properties[0].value, 1);
+			assertScalar(input, parent.properties[0].key, { value: 'child' });
+			assertScalar(input, parent.properties[0].value, { value: '' });
+		});
+
+		test('multiple keys with empty values', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'key1:',
+				'key2:',
+				'key3:',
+			].join('\n');
+			const node = parse(input, errors);
+			const map = assertMap(node, 3);
+			assertScalar(input, map.properties[0].key, { value: 'key1' });
+			assertScalar(input, map.properties[0].value, { value: '' });
+			assertScalar(input, map.properties[1].key, { value: 'key2' });
+			assertScalar(input, map.properties[1].value, { value: '' });
+			assertScalar(input, map.properties[2].key, { value: 'key3' });
+			assertScalar(input, map.properties[2].value, { value: '' });
 		});
 
 		test('large input performance', () => {
-			// Test that large inputs are handled efficiently
-			const input = Array.from({ length: 1000 }, (_, i) => `key${i}: value${i}`);
-			const expectedProperties = Array.from({ length: 1000 }, (_, i) => ({
-				key: { type: 'string' as const, start: pos(i, 0), end: pos(i, `key${i}`.length), value: `key${i}` },
-				value: { type: 'string' as const, start: pos(i, `key${i}: `.length), end: pos(i, `key${i}: value${i}`.length), value: `value${i}` }
-			}));
-
+			const lines = Array.from({ length: 1000 }, (_, i) => `key${i}: value${i}`);
+			const input = lines.join('\n');
 			const start = Date.now();
-			assertValidParse(
-				input,
-				{
-					type: 'object',
-					start: pos(0, 0),
-					end: pos(999, 'key999: value999'.length),
-					properties: expectedProperties
-				},
-				[]
-			);
+			const node = parseOk(input);
 			const duration = Date.now() - start;
-
-			ok(duration < 100, `Parsing took ${duration}ms, expected < 100ms`);
+			const map = assertMap(node, 1000);
+			assertScalar(input, map.properties[0].key, { value: 'key0' });
+			assertScalar(input, map.properties[999].key, { value: 'key999' });
+			assert.ok(duration < 500, `Parsing took ${duration}ms, expected < 500ms`);
 		});
 
 		test('deeply nested structure performance', () => {
-			// Test that deeply nested structures are handled efficiently
 			const lines = [];
 			for (let i = 0; i < 50; i++) {
-				const indent = '  '.repeat(i);
-				lines.push(`${indent}level${i}:`);
+				lines.push('  '.repeat(i) + `level${i}:`);
 			}
 			lines.push('  '.repeat(50) + 'deepValue: reached');
-
+			const input = lines.join('\n');
 			const start = Date.now();
 			const errors: YamlParseError[] = [];
-			const result = parse(lines.join('\n'), errors);
+			const result = parse(input, errors);
 			const duration = Date.now() - start;
-
-			ok(result);
-			strictEqual(result.type, 'object');
-			strictEqual(errors.length, 0);
-			ok(duration < 100, `Parsing took ${duration}ms, expected < 100ms`);
+			assert.ok(result);
+			assert.strictEqual(result.type, 'map');
+			assert.ok(duration < 500, `Parsing took ${duration}ms, expected < 500ms`);
 		});
 
-		test('malformed array with position issues', () => {
-			// Test malformed arrays that might cause position advancement issues
-			assertValidParse(
-				[
-					'key: [',
-					'',
-					'',
-					'',
-					''
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(5, 0), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'array', start: pos(0, 5), end: pos(5, 0), items: [] }
-						}
-					]
-				},
-				[]
-			);
+		test('unclosed flow sequence with empty lines', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'key: [',
+				'',
+				'',
+				'',
+				'',
+			].join('\n');
+			const node = parse(input, errors);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].key, { value: 'key' });
+			const seq = map.properties[0].value as YamlSequenceNode;
+			assert.strictEqual(seq.type, 'sequence');
+			assert.strictEqual(seq.items.length, 0);
 		});
 
-		test('self-referential like structure', () => {
-			// Test structures that might appear self-referential
-			assertValidParse(
-				[
-					'a:',
-					'  b:',
-					'    a:',
-					'      b:',
-					'        value: test'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(4, 19), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 1), value: 'a' },
-							value: {
-								type: 'object', start: pos(1, 2), end: pos(4, 19), properties: [
-									{
-										key: { type: 'string', start: pos(1, 2), end: pos(1, 3), value: 'b' },
-										value: {
-											type: 'object', start: pos(2, 4), end: pos(4, 19), properties: [
-												{
-													key: { type: 'string', start: pos(2, 4), end: pos(2, 5), value: 'a' },
-													value: {
-														type: 'object', start: pos(3, 6), end: pos(4, 19), properties: [
-															{
-																key: { type: 'string', start: pos(3, 6), end: pos(3, 7), value: 'b' },
-																value: {
-																	type: 'object', start: pos(4, 8), end: pos(4, 19), properties: [
-																		{
-																			key: { type: 'string', start: pos(4, 8), end: pos(4, 13), value: 'value' },
-																			value: { type: 'string', start: pos(4, 15), end: pos(4, 19), value: 'test' }
-																		}
-																	]
-																}
-															}
-														]
-													}
-												}
-											]
-										}
-									}
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		test('deeply nested same-named keys', () => {
+			const input = [
+				'a:',
+				'  b:',
+				'    a:',
+				'      b:',
+				'        value: test',
+			].join('\n');
+			const node = parseOk(input);
+			const outerA = assertMap(node, 1);
+			assertScalar(input, outerA.properties[0].key, { value: 'a' });
+			const outerB = assertMap(outerA.properties[0].value, 1);
+			assertScalar(input, outerB.properties[0].key, { value: 'b' });
+			const innerA = assertMap(outerB.properties[0].value, 1);
+			assertScalar(input, innerA.properties[0].key, { value: 'a' });
+			const innerB = assertMap(innerA.properties[0].value, 1);
+			assertScalar(input, innerB.properties[0].key, { value: 'b' });
+			const leaf = assertMap(innerB.properties[0].value, 1);
+			assertScalar(input, leaf.properties[0].key, { value: 'value' });
+			assertScalar(input, leaf.properties[0].value, { value: 'test' });
 		});
 
-		test('array with empty lines', () => {
-			// Test arrays spanning multiple lines with empty lines
-			assertValidParse(
-				['arr: [', '', 'item1,', '', 'item2', '', ']'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(6, 1), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'arr' },
-							value: {
-								type: 'array', start: pos(0, 5), end: pos(6, 1), items: [
-									{ type: 'string', start: pos(2, 0), end: pos(2, 5), value: 'item1' },
-									{ type: 'string', start: pos(4, 0), end: pos(4, 5), value: 'item2' }
-								]
-							}
-						}
-					]
-				},
-				[]
-			);
+		test('flow sequence with empty lines between items', () => {
+			const input = ['arr: [', '', 'item1,', '', 'item2', '', ']'].join('\n');
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			const seq = assertSequence(map.properties[0].value, 2);
+			assertScalar(input, seq.items[0], { value: 'item1' });
+			assertScalar(input, seq.items[1], { value: 'item2' });
 		});
 
-		test('whitespace advancement robustness', () => {
-			// Test that whitespace advancement works correctly
-			assertValidParse(
-				[`key:      value`],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 15), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 3), value: 'key' },
-							value: { type: 'string', start: pos(0, 10), end: pos(0, 15), value: 'value' }
-						}
-					]
-				},
-				[]
-			);
+		test('excessive whitespace after colon', () => {
+			const input = 'key:      value';
+			const node = parseOk(input);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].value, { value: 'value' });
 		});
 
-
-		test('missing end quote in string values', () => {
-			// Test unclosed double quote - parser treats it as bare string with quote included
-			assertValidParse(
-				['name: "John'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 11), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'name' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 11), value: 'John' }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test unclosed single quote - parser treats it as bare string with quote included
-			assertValidParse(
-				['description: \'Hello world'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 25), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 11), value: 'description' },
-							value: { type: 'string', start: pos(0, 13), end: pos(0, 25), value: 'Hello world' }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test unclosed quote in multi-line context
-			assertValidParse(
-				[
-					'data: "incomplete',
-					'next: value'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(1, 11), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'data' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 17), value: 'incomplete' }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 4), value: 'next' },
-							value: { type: 'string', start: pos(1, 6), end: pos(1, 11), value: 'value' }
-						}
-					]
-				},
-				[]
-			);
-
-			// Test properly quoted strings for comparison
-			assertValidParse(
-				['name: "John"'],
-				{
-					type: 'object', start: pos(0, 0), end: pos(0, 12), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'name' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 12), value: 'John' }
-						}
-					]
-				},
-				[]
-			);
+		test('unclosed double quote', () => {
+			const input = 'name: "John';
+			const errors: YamlParseError[] = [];
+			const node = parse(input, errors);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].key, { value: 'name' });
+			// Parser should recover: value should be 'John' (sans quote)
+			assertScalar(input, map.properties[0].value, { value: 'John' });
 		});
 
-		test('comment in inline array #269078', () => {
-			// Test malformed array with comment-like content - should not cause endless loop
-			assertValidParse(
-				[
-					'mode: agent',
-					'tools: [#r'
-				],
-				{
-					type: 'object', start: pos(0, 0), end: pos(2, 0), properties: [
-						{
-							key: { type: 'string', start: pos(0, 0), end: pos(0, 4), value: 'mode' },
-							value: { type: 'string', start: pos(0, 6), end: pos(0, 11), value: 'agent' }
-						},
-						{
-							key: { type: 'string', start: pos(1, 0), end: pos(1, 5), value: 'tools' },
-							value: { type: 'array', start: pos(1, 7), end: pos(2, 0), items: [] }
-						}
-					]
-				},
-				[]
-			);
+		test('unclosed single quote', () => {
+			const input = `description: 'Hello world`;
+			const errors: YamlParseError[] = [];
+			const node = parse(input, errors);
+			const map = assertMap(node, 1);
+			assertScalar(input, map.properties[0].key, { value: 'description' });
+			assertScalar(input, map.properties[0].value, { value: 'Hello world' });
 		});
 
+		test('comment in unclosed flow sequence', () => {
+			const input = [
+				'mode: agent',
+				'tools: [#r',
+			].join('\n');
+			const errors: YamlParseError[] = [];
+			const node = parse(input, errors);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].key, { value: 'mode' });
+			assertScalar(input, map.properties[0].value, { value: 'agent' });
+			assertScalar(input, map.properties[1].key, { value: 'tools' });
+			const seq = map.properties[1].value as YamlSequenceNode;
+			assert.strictEqual(seq.type, 'sequence');
+			assert.strictEqual(seq.items.length, 0);
+		});
 
+		test('duplicate keys emit error', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'key: 1',
+				'key: 2',
+			].join('\n');
+			const node = parse(input, errors);
+			const map = assertMap(node, 2);
+			assertScalar(input, map.properties[0].value, { value: '1' });
+			assertScalar(input, map.properties[1].value, { value: '2' });
+			assert.ok(errors.some(e => e.code === 'duplicate-key'));
+		});
+
+		test('duplicate keys allowed via option', () => {
+			const errors: YamlParseError[] = [];
+			const input = [
+				'key: 1',
+				'key: 2',
+			].join('\n');
+			const node = parse(input, errors, { allowDuplicateKeys: true });
+			assertMap(node, 2);
+			assert.strictEqual(errors.length, 0);
+		});
 	});
-
 });
diff --git a/src/vs/code/electron-main/app.ts b/src/vs/code/electron-main/app.ts
index 5b64a6cbb1d..a055db7e3dd 100644
--- a/src/vs/code/electron-main/app.ts
+++ b/src/vs/code/electron-main/app.ts
@@ -37,7 +37,9 @@ import { IEncryptionMainService } from '../../platform/encryption/common/encrypt
 import { EncryptionMainService } from '../../platform/encryption/electron-main/encryptionMainService.js';
 import { NativeBrowserElementsMainService, INativeBrowserElementsMainService } from '../../platform/browserElements/electron-main/nativeBrowserElementsMainService.js';
 import { ipcBrowserViewChannelName } from '../../platform/browserView/common/browserView.js';
+import { ipcBrowserViewGroupChannelName } from '../../platform/browserView/common/browserViewGroup.js';
 import { BrowserViewMainService, IBrowserViewMainService } from '../../platform/browserView/electron-main/browserViewMainService.js';
+import { BrowserViewGroupMainService, IBrowserViewGroupMainService } from '../../platform/browserView/electron-main/browserViewGroupMainService.js';
 import { BrowserViewCDPProxyServer, IBrowserViewCDPProxyServer } from '../../platform/browserView/electron-main/browserViewCDPProxyServer.js';
 import { NativeParsedArgs } from '../../platform/environment/common/argv.js';
 import { IEnvironmentMainService } from '../../platform/environment/electron-main/environmentMainService.js';
@@ -1043,6 +1045,7 @@ export class CodeApplication extends Disposable {
 		// Browser View
 		services.set(IBrowserViewCDPProxyServer, new SyncDescriptor(BrowserViewCDPProxyServer, undefined, true));
 		services.set(IBrowserViewMainService, new SyncDescriptor(BrowserViewMainService, undefined, false /* proxied to other processes */));
+		services.set(IBrowserViewGroupMainService, new SyncDescriptor(BrowserViewGroupMainService, undefined, false /* proxied to other processes */));
 
 		// Keyboard Layout
 		services.set(IKeyboardLayoutMainService, new SyncDescriptor(KeyboardLayoutMainService));
@@ -1206,6 +1209,11 @@ export class CodeApplication extends Disposable {
 		mainProcessElectronServer.registerChannel(ipcBrowserViewChannelName, browserViewChannel);
 		sharedProcessClient.then(client => client.registerChannel(ipcBrowserViewChannelName, browserViewChannel));
 
+		// Browser View Group
+		const browserViewGroupChannel = ProxyChannel.fromService(accessor.get(IBrowserViewGroupMainService), disposables);
+		mainProcessElectronServer.registerChannel(ipcBrowserViewGroupChannelName, browserViewGroupChannel);
+		sharedProcessClient.then(client => client.registerChannel(ipcBrowserViewGroupChannelName, browserViewGroupChannel));
+
 		// Signing
 		const signChannel = ProxyChannel.fromService(accessor.get(ISignService), disposables);
 		mainProcessElectronServer.registerChannel('sign', signChannel);
diff --git a/src/vs/code/electron-utility/sharedProcess/sharedProcessMain.ts b/src/vs/code/electron-utility/sharedProcess/sharedProcessMain.ts
index 6569ef1fbc8..e112b958d73 100644
--- a/src/vs/code/electron-utility/sharedProcess/sharedProcessMain.ts
+++ b/src/vs/code/electron-utility/sharedProcess/sharedProcessMain.ts
@@ -136,6 +136,7 @@ import { IMeteredConnectionService } from '../../../platform/meteredConnection/c
 import { MeteredConnectionChannelClient, METERED_CONNECTION_CHANNEL } from '../../../platform/meteredConnection/common/meteredConnectionIpc.js';
 import { IPlaywrightService } from '../../../platform/browserView/common/playwrightService.js';
 import { PlaywrightService } from '../../../platform/browserView/node/playwrightService.js';
+import { IBrowserViewGroupRemoteService, BrowserViewGroupRemoteService } from '../../../platform/browserView/node/browserViewGroupRemoteService.js';
 
 class SharedProcessMain extends Disposable implements IClientConnectionFilter {
 
@@ -404,6 +405,7 @@ class SharedProcessMain extends Disposable implements IClientConnectionFilter {
 		services.set(ISharedWebContentExtractorService, new SyncDescriptor(SharedWebContentExtractorService));
 
 		// Playwright
+		services.set(IBrowserViewGroupRemoteService, new SyncDescriptor(BrowserViewGroupRemoteService));
 		services.set(IPlaywrightService, new SyncDescriptor(PlaywrightService));
 
 		return new InstantiationService(services);
diff --git a/src/vs/editor/contrib/inlineCompletions/browser/model/inlineSuggestionItem.ts b/src/vs/editor/contrib/inlineCompletions/browser/model/inlineSuggestionItem.ts
index 475902a836e..68e5f4502e2 100644
--- a/src/vs/editor/contrib/inlineCompletions/browser/model/inlineSuggestionItem.ts
+++ b/src/vs/editor/contrib/inlineCompletions/browser/model/inlineSuggestionItem.ts
@@ -513,6 +513,8 @@ export class InlineEditItem extends InlineSuggestionItemBase {
 		let inlineEditModelVersion = this._inlineEditModelVersion;
 		let newAction: InlineSuggestionAction | undefined;
 
+		const updatedTarget = TextModelValueReference.snapshot(textModel);
+
 		if (this.action?.kind === 'edit') { // TODO What about rename?
 			edits = edits.map(innerEdit => innerEdit.applyTextModelChanges(textModelChanges));
 
@@ -546,7 +548,7 @@ export class InlineEditItem extends InlineSuggestionItemBase {
 				snippetInfo: this.snippetInfo,
 				stringEdit: newEdit,
 				alternativeAction: this.action.alternativeAction,
-				target: this.originalTextRef,
+				target: updatedTarget,
 			};
 		} else if (this.action?.kind === 'jumpTo') {
 			const jumpToOffset = this.action.offset;
@@ -560,7 +562,7 @@ export class InlineEditItem extends InlineSuggestionItemBase {
 				kind: 'jumpTo',
 				position: newJumpToPosition,
 				offset: newJumpToOffset,
-				target: this.originalTextRef,
+				target: updatedTarget,
 			};
 		} else {
 			newAction = undefined;
@@ -582,7 +584,7 @@ export class InlineEditItem extends InlineSuggestionItemBase {
 			newDisplayLocation,
 			lastChangePartOfInlineEdit,
 			inlineEditModelVersion,
-			this.originalTextRef,
+			updatedTarget,
 		);
 	}
 
diff --git a/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorMenu.ts b/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorMenu.ts
index 52015f27148..afecdbf91d5 100644
--- a/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorMenu.ts
+++ b/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorMenu.ts
@@ -36,7 +36,7 @@ export class GutterIndicatorMenuContent {
 	constructor(
 		private readonly _editorObs: ObservableCodeEditor,
 		private readonly _data: InlineSuggestionGutterMenuData,
-		private readonly _close: (focusEditor: boolean) => void,
+		private readonly _close: (focusEditor: boolean, commandId?: string) => void,
 		@IContextKeyService private readonly _contextKeyService: IContextKeyService,
 		@IKeybindingService private readonly _keybindingService: IKeybindingService,
 		@ICommandService private readonly _commandService: ICommandService,
@@ -59,12 +59,36 @@ export class GutterIndicatorMenuContent {
 				isActive: activeElement.map(v => v === options.id),
 				onHoverChange: v => activeElement.set(v ? options.id : undefined, undefined),
 				onAction: () => {
-					this._close(true);
-					return this._commandService.executeCommand(typeof options.commandId === 'string' ? options.commandId : options.commandId.get(), ...(options.commandArgs ?? []));
+					const commandId = typeof options.commandId === 'string' ? options.commandId : options.commandId.get();
+					this._close(true, commandId);
+					return this._commandService.executeCommand(commandId, ...(options.commandArgs ?? []));
 				},
 			};
 		};
 
+		const extensionCommandGroups = this._data.extensionCommands.map(group =>
+			group.map((c, idx) => option(createOptionArgs({
+				id: c.command.id + '_' + idx,
+				title: c.command.title,
+				icon: c.icon ?? Codicon.symbolEvent,
+				commandId: c.command.id,
+				commandArgs: c.command.arguments
+			})))
+		);
+
+		const extensionCommandNodes: ChildNode = [];
+		for (const group of extensionCommandGroups) {
+			if (group.length > 0) {
+				extensionCommandNodes.push(separator());
+				extensionCommandNodes.push(...group);
+			}
+		}
+
+		if (this._data.extensionCommandsOnly) {
+			// drop leading separator
+			return hoverContent(extensionCommandNodes.slice(1));
+		}
+
 		const title = header(this._data.displayName);
 
 		const gotoAndAccept = option(createOptionArgs({
@@ -88,14 +112,6 @@ export class GutterIndicatorMenuContent {
 			commandId: inlineSuggestCommitAlternativeActionId,
 		})) : undefined;
 
-		const extensionCommands = this._data.extensionCommands.map((c, idx) => option(createOptionArgs({
-			id: c.command.id + '_' + idx,
-			title: c.command.title,
-			icon: c.icon ?? Codicon.symbolEvent,
-			commandId: c.command.id,
-			commandArgs: c.command.arguments
-		})));
-
 		const showModelEnabled = false;
 		const modelOptions = showModelEnabled ? this._data.modelInfo?.models.map((m: { id: string; name: string }) => option({
 			title: m.name,
@@ -160,11 +176,10 @@ export class GutterIndicatorMenuContent {
 			toggleCollapsedMode,
 			modelOptions.length ? separator() : undefined,
 			...modelOptions,
-			extensionCommands.length ? separator() : undefined,
 			snooze,
 			settings,
 
-			...extensionCommands,
+			...extensionCommandNodes,
 
 			actionBarFooter ? separator() : undefined,
 			actionBarFooter
diff --git a/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorView.ts b/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorView.ts
index 39294382663..27a5b2edaea 100644
--- a/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorView.ts
+++ b/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorView.ts
@@ -36,6 +36,7 @@ import { InlineSuggestAlternativeAction } from '../../../model/InlineSuggestAlte
 import { asCssVariable } from '../../../../../../../platform/theme/common/colorUtils.js';
 import { ThemeIcon } from '../../../../../../../base/common/themables.js';
 import { IUserInteractionService } from '../../../../../../../platform/userInteraction/browser/userInteractionService.js';
+import { Event, Emitter } from '../../../../../../../base/common/event.js';
 
 /**
  * Customization options for the gutter indicator appearance and behavior.
@@ -58,10 +59,11 @@ export class InlineEditsGutterIndicatorData {
 export class InlineSuggestionGutterMenuData {
 	public static fromInlineSuggestion(suggestion: InlineSuggestionItem): InlineSuggestionGutterMenuData {
 		const alternativeAction = suggestion.action?.kind === 'edit' ? suggestion.action.alternativeAction : undefined;
+		const commands = suggestion.source.inlineSuggestions.commands ?? [];
 		return new InlineSuggestionGutterMenuData(
 			suggestion.gutterMenuLinkAction,
 			suggestion.source.provider.displayName ?? localize('inlineSuggestion', "Inline Suggestion"),
-			suggestion.source.inlineSuggestions.commands ?? [],
+			commands.length > 0 ? [commands] : [],
 			alternativeAction,
 			suggestion.source.provider.modelInfo,
 			suggestion.source.provider.setModelId?.bind(suggestion.source.provider),
@@ -71,10 +73,11 @@ export class InlineSuggestionGutterMenuData {
 	constructor(
 		readonly action: Command | undefined,
 		readonly displayName: string,
-		readonly extensionCommands: InlineCompletionCommand[],
+		readonly extensionCommands: InlineCompletionCommand[][],
 		readonly alternativeAction: InlineSuggestAlternativeAction | undefined,
 		readonly modelInfo: IInlineCompletionModelInfo | undefined,
 		readonly setModelId: ((modelId: string) => Promise<void>) | undefined,
+		readonly extensionCommandsOnly: boolean = false,
 	) { }
 }
 
@@ -97,6 +100,10 @@ const CODICON_SIZE_PX = 16;
 const CODICON_PADDING_PX = 2;
 
 export class InlineEditsGutterIndicator extends Disposable {
+
+	private readonly _onDidCloseWithCommand = this._register(new Emitter<string>());
+	readonly onDidCloseWithCommand: Event<string> = this._onDidCloseWithCommand.event;
+
 	constructor(
 		private readonly _editorObs: ObservableCodeEditor,
 		private readonly _data: IObservable<InlineEditsGutterIndicatorData | undefined>,
@@ -472,10 +479,13 @@ export class InlineEditsGutterIndicator extends Disposable {
 			GutterIndicatorMenuContent,
 			this._editorObs,
 			data.gutterMenuData,
-			(focusEditor) => {
+			(focusEditor, commandId) => {
 				if (focusEditor) {
 					this._editorObs.editor.focus();
 				}
+				if (commandId) {
+					this._onDidCloseWithCommand.fire(commandId);
+				}
 				h?.dispose();
 			},
 		).toDisposableLiveElement());
@@ -584,6 +594,7 @@ export class InlineEditsGutterIndicator extends Disposable {
 					width: layout.map(l => l.iconRect.width),
 					position: 'relative',
 					right: layout.map(l => l.iconDirection === 'top' ? '1px' : '0'),
+					color: this._data.map(d => d?.customization?.icon?.color ? asCssVariable(d.customization.icon.color.id) : undefined),
 				}
 			}, [
 				layout.map((l, reader) => withStyles(renderIcon(l.icon.read(reader)), { fontSize: toPx(Math.min(l.iconRect.width - CODICON_PADDING_PX, CODICON_SIZE_PX)) })),
diff --git a/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/view.css b/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/view.css
index cbc244fc3ed..5359dc95b9d 100644
--- a/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/view.css
+++ b/src/vs/editor/contrib/inlineCompletions/browser/view/inlineEdits/view.css
@@ -217,6 +217,10 @@
 	.monaco-keybinding-key {
 		font-size: 13px;
 		opacity: 0.7;
+		padding: 0;
+		border: none;
+		margin: 0;
+		min-width: unset;
 	}
 
 	&.active {
@@ -270,4 +274,3 @@
 	background-position: center;
 	background-repeat: no-repeat;
 }
-
diff --git a/src/vs/platform/actionWidget/browser/actionList.ts b/src/vs/platform/actionWidget/browser/actionList.ts
index 2a452609df6..554a7cde357 100644
--- a/src/vs/platform/actionWidget/browser/actionList.ts
+++ b/src/vs/platform/actionWidget/browser/actionList.ts
@@ -4,6 +4,7 @@
  *--------------------------------------------------------------------------------------------*/
 import * as dom from '../../../base/browser/dom.js';
 import { ActionBar } from '../../../base/browser/ui/actionbar/actionbar.js';
+import { Button } from '../../../base/browser/ui/button/button.js';
 import { KeybindingLabel } from '../../../base/browser/ui/keybindingLabel/keybindingLabel.js';
 import { IListEvent, IListMouseEvent, IListRenderer, IListVirtualDelegate } from '../../../base/browser/ui/list/list.js';
 import { IListAccessibilityProvider, List } from '../../../base/browser/ui/list/listWidget.js';
@@ -18,7 +19,7 @@ import './actionWidget.css';
 import { localize } from '../../../nls.js';
 import { IContextViewService } from '../../contextview/browser/contextView.js';
 import { IKeybindingService } from '../../keybinding/common/keybinding.js';
-import { defaultListStyles } from '../../theme/browser/defaultStyles.js';
+import { defaultButtonStyles, defaultListStyles } from '../../theme/browser/defaultStyles.js';
 import { asCssVariable } from '../../theme/common/colorRegistry.js';
 import { ILayoutService } from '../../layout/browser/layoutService.js';
 import { IHoverService } from '../../hover/browser/hover.js';
@@ -67,16 +68,42 @@ export interface IActionListItem<T> {
 	 * Optional toolbar actions shown when the item is focused or hovered.
 	 */
 	readonly toolbarActions?: IAction[];
+	/**
+	 * Optional section identifier. Items with the same section belong to the same
+	 * collapsible group. Only meaningful when the ActionList is created with
+	 * collapsible sections.
+	 */
+	readonly section?: string;
+	/**
+	 * When true, clicking this item toggles the section's collapsed state
+	 * instead of selecting it.
+	 */
+	readonly isSectionToggle?: boolean;
+	/**
+	 * Optional CSS class name to add to the row container.
+	 */
+	readonly className?: string;
+	/**
+	 * Optional badge text to display after the label (e.g., "New").
+	 */
+	readonly badge?: string;
+	/**
+	 * When set, the description is rendered as a primary button.
+	 * The callback is invoked when the button is clicked.
+	 */
+	readonly descriptionButton?: { readonly label: string; readonly onDidClick: () => void };
 }
 
 interface IActionMenuTemplateData {
 	readonly container: HTMLElement;
 	readonly icon: HTMLElement;
 	readonly text: HTMLElement;
+	readonly badge: HTMLElement;
 	readonly description?: HTMLElement;
 	readonly keybinding: KeybindingLabel;
 	readonly toolbar: HTMLElement;
 	readonly elementDisposables: DisposableStore;
+	previousClassName?: string;
 }
 
 export const enum ActionListItemKind {
@@ -159,6 +186,10 @@ class ActionItemRenderer<T> implements IListRenderer<IActionListItem<T>, IAction
 		text.className = 'title';
 		container.append(text);
 
+		const badge = document.createElement('span');
+		badge.className = 'action-item-badge';
+		container.append(badge);
+
 		const description = document.createElement('span');
 		description.className = 'description';
 		container.append(description);
@@ -171,7 +202,7 @@ class ActionItemRenderer<T> implements IListRenderer<IActionListItem<T>, IAction
 
 		const elementDisposables = new DisposableStore();
 
-		return { container, icon, text, description, keybinding, toolbar, elementDisposables };
+		return { container, icon, text, badge, description, keybinding, toolbar, elementDisposables };
 	}
 
 	renderElement(element: IActionListItem<T>, _index: number, data: IActionMenuTemplateData): void {
@@ -194,10 +225,40 @@ class ActionItemRenderer<T> implements IListRenderer<IActionListItem<T>, IAction
 
 		dom.setVisibility(!element.hideIcon, data.icon);
 
+		// Apply optional className - clean up previous to avoid stale classes
+		// from virtualized row reuse
+		if (data.previousClassName) {
+			data.container.classList.remove(data.previousClassName);
+		}
+		data.container.classList.toggle('action-list-custom', !!element.className);
+		if (element.className) {
+			data.container.classList.add(element.className);
+		}
+		data.previousClassName = element.className;
+
 		data.text.textContent = stripNewlines(element.label);
 
+		// Render optional badge
+		if (element.badge) {
+			data.badge.textContent = element.badge;
+			data.badge.style.display = '';
+		} else {
+			data.badge.textContent = '';
+			data.badge.style.display = 'none';
+		}
+
 		// if there is a keybinding, prioritize over description for now
-		if (element.keybinding) {
+		if (element.descriptionButton) {
+			data.description!.textContent = '';
+			data.description!.style.display = 'inline';
+			const button = new Button(data.description!, { ...defaultButtonStyles, small: true });
+			button.label = element.descriptionButton.label;
+			data.elementDisposables.add(button.onDidClick(e => {
+				e?.stopPropagation();
+				element.descriptionButton!.onDidClick();
+			}));
+			data.elementDisposables.add(button);
+		} else if (element.keybinding) {
 			data.description!.textContent = element.keybinding.getLabel();
 			data.description!.style.display = 'inline';
 			data.description!.style.letterSpacing = '0.5px';
@@ -261,6 +322,26 @@ function getKeyboardNavigationLabel<T>(item: IActionListItem<T>): string | undef
 	return undefined;
 }
 
+/**
+ * Options for configuring the action list.
+ */
+export interface IActionListOptions {
+	/**
+	 * When true, shows a filter input at the bottom of the list.
+	 */
+	readonly showFilter?: boolean;
+
+	/**
+	 * Section IDs that should be collapsed by default.
+	 */
+	readonly collapsedByDefault?: ReadonlySet<string>;
+
+	/**
+	 * Minimum width for the action list.
+	 */
+	readonly minWidth?: number;
+}
+
 export class ActionList<T> extends Disposable {
 
 	public readonly domNode: HTMLElement;
@@ -277,12 +358,20 @@ export class ActionList<T> extends Disposable {
 
 	private _hover = this._register(new MutableDisposable<IHoverWidget>());
 
+	private readonly _collapsedSections = new Set<string>();
+	private _filterText = '';
+	private readonly _filterInput: HTMLInputElement | undefined;
+	private readonly _filterContainer: HTMLElement | undefined;
+	private _lastMinWidth = 0;
+	private _hasLaidOut = false;
+
 	constructor(
 		user: string,
 		preview: boolean,
 		items: readonly IActionListItem<T>[],
 		private readonly _delegate: IActionListDelegate<T>,
 		accessibilityProvider: Partial<IListAccessibilityProvider<IActionListItem<T>>> | undefined,
+		private readonly _options: IActionListOptions | undefined,
 		@IContextViewService private readonly _contextViewService: IContextViewService,
 		@IKeybindingService private readonly _keybindingService: IKeybindingService,
 		@ILayoutService private readonly _layoutService: ILayoutService,
@@ -291,6 +380,14 @@ export class ActionList<T> extends Disposable {
 		super();
 		this.domNode = document.createElement('div');
 		this.domNode.classList.add('actionList');
+
+		// Initialize collapsed sections
+		if (this._options?.collapsedByDefault) {
+			for (const section of this._options.collapsedByDefault) {
+				this._collapsedSections.add(section);
+			}
+		}
+
 		const virtualDelegate: IListVirtualDelegate<IActionListItem<T>> = {
 			getHeight: element => {
 				switch (element.kind) {
@@ -312,7 +409,7 @@ export class ActionList<T> extends Disposable {
 			new SeparatorRenderer(),
 		], {
 			keyboardSupport: false,
-			typeNavigationEnabled: true,
+			typeNavigationEnabled: !this._options?.showFilter,
 			keyboardNavigationLabelProvider: { getKeyboardNavigationLabel },
 			accessibilityProvider: {
 				getAriaLabel: element => {
@@ -352,13 +449,151 @@ export class ActionList<T> extends Disposable {
 		this._register(this._list.onDidChangeSelection(e => this.onListSelection(e)));
 
 		this._allMenuItems = items;
-		this._list.splice(0, this._list.length, this._allMenuItems);
+
+		// Create filter input
+		if (this._options?.showFilter) {
+			this._filterContainer = document.createElement('div');
+			this._filterContainer.className = 'action-list-filter';
+
+			this._filterInput = document.createElement('input');
+			this._filterInput.type = 'text';
+			this._filterInput.className = 'action-list-filter-input';
+			this._filterInput.placeholder = localize('actionList.filter.placeholder', "Search...");
+			this._filterInput.setAttribute('aria-label', localize('actionList.filter.ariaLabel', "Filter items"));
+			this._filterContainer.appendChild(this._filterInput);
+
+			this._register(dom.addDisposableListener(this._filterInput, 'input', () => {
+				this._filterText = this._filterInput!.value;
+				this._applyFilter();
+			}));
+
+			// Keyboard navigation from filter input
+			this._register(dom.addDisposableListener(this._filterInput, 'keydown', (e: KeyboardEvent) => {
+				if (e.key === 'ArrowUp') {
+					e.preventDefault();
+					this._list.domFocus();
+					const lastIndex = this._list.length - 1;
+					if (lastIndex >= 0) {
+						this._list.focusLast(undefined, this.focusCondition);
+					}
+				} else if (e.key === 'ArrowDown') {
+					e.preventDefault();
+					this._list.domFocus();
+					this.focusNext();
+				} else if (e.key === 'Enter') {
+					e.preventDefault();
+					this.acceptSelected();
+				} else if (e.key === 'Escape') {
+					if (this._filterText) {
+						e.preventDefault();
+						e.stopPropagation();
+						this._filterInput!.value = '';
+						this._filterText = '';
+						this._applyFilter();
+					}
+				}
+			}));
+		}
+
+		this._applyFilter();
 
 		if (this._list.length) {
 			this.focusNext();
 		}
 	}
 
+	private _toggleSection(section: string): void {
+		if (this._collapsedSections.has(section)) {
+			this._collapsedSections.delete(section);
+		} else {
+			this._collapsedSections.add(section);
+		}
+		this._applyFilter();
+	}
+
+	private _applyFilter(): void {
+		const filterLower = this._filterText.toLowerCase();
+		const isFiltering = filterLower.length > 0;
+		const visible: IActionListItem<T>[] = [];
+
+		for (const item of this._allMenuItems) {
+			if (item.kind === ActionListItemKind.Header) {
+				if (isFiltering) {
+					// When filtering, skip all headers
+					continue;
+				}
+				visible.push(item);
+				continue;
+			}
+
+			if (item.kind === ActionListItemKind.Separator) {
+				if (isFiltering) {
+					continue;
+				}
+				visible.push(item);
+				continue;
+			}
+
+			// Action item
+			if (isFiltering) {
+				// When filtering, skip section toggle items and only match content
+				if (item.isSectionToggle) {
+					continue;
+				}
+				// Match against label and description
+				const label = (item.label ?? '').toLowerCase();
+				const desc = (item.description ?? '').toLowerCase();
+				if (label.includes(filterLower) || desc.includes(filterLower)) {
+					visible.push(item);
+				}
+			} else {
+				// Update icon for section toggle items based on collapsed state
+				if (item.isSectionToggle && item.section) {
+					const collapsed = this._collapsedSections.has(item.section);
+					visible.push({
+						...item,
+						group: { ...item.group!, icon: collapsed ? Codicon.chevronRight : Codicon.chevronDown },
+					});
+					continue;
+				}
+				// Not filtering - check collapsed sections
+				if (item.section && this._collapsedSections.has(item.section)) {
+					continue;
+				}
+				visible.push(item);
+			}
+		}
+
+		// Capture whether the filter input currently has focus before splice
+		// which may cause DOM changes that shift focus.
+		const filterInputHasFocus = this._filterInput && dom.isActiveElement(this._filterInput);
+
+		this._list.splice(0, this._list.length, visible);
+
+		// Re-layout to adjust height after items changed
+		if (this._hasLaidOut) {
+			this.layout(this._lastMinWidth);
+			// Restore focus after splice destroyed DOM elements,
+			// otherwise the blur handler in ActionWidgetService closes the widget.
+			// Keep focus on the filter input if the user is typing a filter.
+			if (filterInputHasFocus) {
+				this._filterInput!.focus();
+			} else {
+				this._list.domFocus();
+			}
+			// Reposition the context view so the widget grows in the correct direction
+			this._contextViewService.layout();
+		}
+	}
+
+	/**
+	 * Returns the filter container element, if filter is enabled.
+	 * The caller is responsible for appending it to the widget DOM.
+	 */
+	get filterContainer(): HTMLElement | undefined {
+		return this._filterContainer;
+	}
+
 	private focusCondition(element: IActionListItem<unknown>): boolean {
 		return !element.disabled && element.kind === ActionListItemKind.Action;
 	}
@@ -371,39 +606,57 @@ export class ActionList<T> extends Disposable {
 	}
 
 	layout(minWidth: number): number {
-		// Updating list height, depending on how many separators and headers there are.
-		const numHeaders = this._allMenuItems.filter(item => item.kind === 'header').length;
-		const numSeparators = this._allMenuItems.filter(item => item.kind === 'separator').length;
-		const itemsHeight = this._allMenuItems.length * this._actionLineHeight;
-		const heightWithHeaders = itemsHeight + numHeaders * this._headerLineHeight - numHeaders * this._actionLineHeight;
-		const heightWithSeparators = heightWithHeaders + numSeparators * this._separatorLineHeight - numSeparators * this._actionLineHeight;
-		this._list.layout(heightWithSeparators);
-		let maxWidth = minWidth;
+		this._hasLaidOut = true;
+		this._lastMinWidth = minWidth;
+		// Compute height based on currently visible items in the list
+		const visibleCount = this._list.length;
+		let listHeight = 0;
+		for (let i = 0; i < visibleCount; i++) {
+			const element = this._list.element(i);
+			switch (element.kind) {
+				case ActionListItemKind.Header:
+					listHeight += this._headerLineHeight;
+					break;
+				case ActionListItemKind.Separator:
+					listHeight += this._separatorLineHeight;
+					break;
+				default:
+					listHeight += this._actionLineHeight;
+					break;
+			}
+		}
 
-		if (this._allMenuItems.length >= 50) {
-			maxWidth = 380;
+		this._list.layout(listHeight);
+		const effectiveMinWidth = Math.max(minWidth, this._options?.minWidth ?? 0);
+		let maxWidth = effectiveMinWidth;
+
+		if (visibleCount >= 50) {
+			maxWidth = Math.max(380, effectiveMinWidth);
 		} else {
 			// For finding width dynamically (not using resize observer)
-			const itemWidths: number[] = this._allMenuItems.map((_, index): number => {
-				const element = this._getRowElement(index);
+			const itemWidths: number[] = [];
+			for (let i = 0; i < visibleCount; i++) {
+				const element = this._getRowElement(i);
 				if (element) {
 					element.style.width = 'auto';
 					const width = element.getBoundingClientRect().width;
 					element.style.width = '';
-					return width;
+					itemWidths.push(width);
 				}
-				return 0;
-			});
+			}
 
 			// resize observer - can be used in the future since list widget supports dynamic height but not width
-			maxWidth = Math.max(...itemWidths, minWidth);
+			maxWidth = Math.max(...itemWidths, effectiveMinWidth);
 		}
 
+		const filterHeight = this._filterContainer ? 36 : 0;
 		const maxVhPrecentage = 0.7;
-		const height = Math.min(heightWithSeparators, this._layoutService.getContainer(dom.getWindow(this.domNode)).clientHeight * maxVhPrecentage);
-		this._list.layout(height, maxWidth);
+		const maxHeight = this._layoutService.getContainer(dom.getWindow(this.domNode)).clientHeight * maxVhPrecentage;
+		const height = Math.min(listHeight + filterHeight, maxHeight);
+		const listFinalHeight = height - filterHeight;
+		this._list.layout(listFinalHeight, maxWidth);
 
-		this.domNode.style.height = `${height}px`;
+		this.domNode.style.height = `${listFinalHeight}px`;
 
 		this._list.domFocus();
 		return maxWidth;
@@ -447,6 +700,10 @@ export class ActionList<T> extends Disposable {
 		}
 
 		const element = e.elements[0];
+		if (element.isSectionToggle) {
+			this._list.setSelection([]);
+			return;
+		}
 		if (element.item && this.focusCondition(element)) {
 			this._delegate.onSelect(element.item, e.browserEvent instanceof PreviewSelectedEvent);
 		} else {
@@ -526,6 +783,11 @@ export class ActionList<T> extends Disposable {
 	}
 
 	private onListClick(e: IListMouseEvent<IActionListItem<T>>): void {
+		if (e.element && e.element.isSectionToggle && e.element.section) {
+			const section = e.element.section;
+			queueMicrotask(() => this._toggleSection(section));
+			return;
+		}
 		if (e.element && this.focusCondition(e.element)) {
 			this._list.setFocus([]);
 		}
diff --git a/src/vs/platform/actionWidget/browser/actionWidget.css b/src/vs/platform/actionWidget/browser/actionWidget.css
index 4ea3a49bff7..e3969db45e1 100644
--- a/src/vs/platform/actionWidget/browser/actionWidget.css
+++ b/src/vs/platform/actionWidget/browser/actionWidget.css
@@ -122,6 +122,7 @@
 	display: flex;
 	gap: 6px;
 	align-items: center;
+	color: var(--vscode-foreground) !important;
 }
 
 .action-widget .monaco-list-row.action .codicon {
@@ -150,6 +151,16 @@
 	text-overflow: ellipsis;
 }
 
+.action-widget .monaco-list-row.action .action-item-badge {
+	padding: 0px 6px;
+	border-radius: 10px;
+	background-color: var(--vscode-badge-background);
+	color: var(--vscode-badge-foreground);
+	font-size: 11px;
+	line-height: 18px;
+	flex-shrink: 0;
+}
+
 .action-widget .monaco-list-row.action .monaco-keybinding > .monaco-keybinding-key {
 		background-color: var(--vscode-keybindingLabel-background);
 		color: var(--vscode-keybindingLabel-foreground);
@@ -205,8 +216,10 @@
 .action-widget .monaco-list .monaco-list-row .description {
 	opacity: 0.7;
 	margin-left: 0.5em;
+	flex-shrink: 0;
 }
 
+
 /* Item toolbar - shows on hover/focus */
 .action-widget .monaco-list-row.action .action-list-item-toolbar {
 	display: none;
@@ -227,3 +240,29 @@
 	gap: 4px;
 	font-size: 12px;
 }
+
+/* Filter input */
+.action-widget .action-list-filter {
+	border-top: 1px solid var(--vscode-editorHoverWidget-border);
+	padding: 4px;
+}
+
+.action-widget .action-list-filter-input {
+	width: 100%;
+	box-sizing: border-box;
+	padding: 4px 8px;
+	border: 1px solid var(--vscode-input-border, transparent);
+	border-radius: 3px;
+	background-color: var(--vscode-input-background);
+	color: var(--vscode-input-foreground);
+	font-size: 12px;
+	outline: none;
+}
+
+.action-widget .action-list-filter-input:focus {
+	border-color: var(--vscode-focusBorder);
+}
+
+.action-widget .action-list-filter-input::placeholder {
+	color: var(--vscode-input-placeholderForeground);
+}
diff --git a/src/vs/platform/actionWidget/browser/actionWidget.ts b/src/vs/platform/actionWidget/browser/actionWidget.ts
index 21b49245beb..53483956586 100644
--- a/src/vs/platform/actionWidget/browser/actionWidget.ts
+++ b/src/vs/platform/actionWidget/browser/actionWidget.ts
@@ -10,7 +10,7 @@ import { KeyCode, KeyMod } from '../../../base/common/keyCodes.js';
 import { Disposable, DisposableStore, IDisposable, MutableDisposable } from '../../../base/common/lifecycle.js';
 import './actionWidget.css';
 import { localize, localize2 } from '../../../nls.js';
-import { acceptSelectedActionCommand, ActionList, IActionListDelegate, IActionListItem, previewSelectedActionCommand } from './actionList.js';
+import { acceptSelectedActionCommand, ActionList, IActionListDelegate, IActionListItem, IActionListOptions, previewSelectedActionCommand } from './actionList.js';
 import { Action2, registerAction2 } from '../../actions/common/actions.js';
 import { IContextKeyService, RawContextKey } from '../../contextkey/common/contextkey.js';
 import { IContextViewService } from '../../contextview/browser/contextView.js';
@@ -36,7 +36,7 @@ export const IActionWidgetService = createDecorator<IActionWidgetService>('actio
 export interface IActionWidgetService {
 	readonly _serviceBrand: undefined;
 
-	show<T>(user: string, supportsPreview: boolean, items: readonly IActionListItem<T>[], delegate: IActionListDelegate<T>, anchor: HTMLElement | StandardMouseEvent | IAnchor, container: HTMLElement | undefined, actionBarActions?: readonly IAction[], accessibilityProvider?: Partial<IListAccessibilityProvider<IActionListItem<T>>>): void;
+	show<T>(user: string, supportsPreview: boolean, items: readonly IActionListItem<T>[], delegate: IActionListDelegate<T>, anchor: HTMLElement | StandardMouseEvent | IAnchor, container: HTMLElement | undefined, actionBarActions?: readonly IAction[], accessibilityProvider?: Partial<IListAccessibilityProvider<IActionListItem<T>>>, listOptions?: IActionListOptions): void;
 
 	hide(didCancel?: boolean): void;
 
@@ -60,10 +60,10 @@ class ActionWidgetService extends Disposable implements IActionWidgetService {
 		super();
 	}
 
-	show<T>(user: string, supportsPreview: boolean, items: readonly IActionListItem<T>[], delegate: IActionListDelegate<T>, anchor: HTMLElement | StandardMouseEvent | IAnchor, container: HTMLElement | undefined, actionBarActions?: readonly IAction[], accessibilityProvider?: Partial<IListAccessibilityProvider<IActionListItem<T>>>): void {
+	show<T>(user: string, supportsPreview: boolean, items: readonly IActionListItem<T>[], delegate: IActionListDelegate<T>, anchor: HTMLElement | StandardMouseEvent | IAnchor, container: HTMLElement | undefined, actionBarActions?: readonly IAction[], accessibilityProvider?: Partial<IListAccessibilityProvider<IActionListItem<T>>>, listOptions?: IActionListOptions): void {
 		const visibleContext = ActionWidgetContextKeys.Visible.bindTo(this._contextKeyService);
 
-		const list = this._instantiationService.createInstance(ActionList, user, supportsPreview, items, delegate, accessibilityProvider);
+		const list = this._instantiationService.createInstance(ActionList, user, supportsPreview, items, delegate, accessibilityProvider, listOptions);
 		this._contextViewService.showContextView({
 			getAnchor: () => anchor,
 			render: (container: HTMLElement) => {
@@ -137,6 +137,11 @@ class ActionWidgetService extends Disposable implements IActionWidgetService {
 			}
 		}
 
+		// Filter input (appended after the list, before action bar visually)
+		if (this._list.value?.filterContainer) {
+			widget.appendChild(this._list.value.filterContainer);
+		}
+
 		const width = this._list.value?.layout(actionBarWidth);
 		widget.style.width = `${width}px`;
 
diff --git a/src/vs/platform/actionWidget/browser/actionWidgetDropdown.ts b/src/vs/platform/actionWidget/browser/actionWidgetDropdown.ts
index 0fb0d916c6a..b7b61da059f 100644
--- a/src/vs/platform/actionWidget/browser/actionWidgetDropdown.ts
+++ b/src/vs/platform/actionWidget/browser/actionWidgetDropdown.ts
@@ -6,7 +6,7 @@
 import { IActionWidgetService } from './actionWidget.js';
 import { IAction } from '../../../base/common/actions.js';
 import { BaseDropdown, IActionProvider, IBaseDropdownOptions } from '../../../base/browser/ui/dropdown/dropdown.js';
-import { ActionListItemKind, IActionListDelegate, IActionListItem, IActionListItemHover } from './actionList.js';
+import { ActionListItemKind, IActionListDelegate, IActionListItem, IActionListItemHover, IActionListOptions } from './actionList.js';
 import { ThemeIcon } from '../../../base/common/themables.js';
 import { Codicon } from '../../../base/common/codicons.js';
 import { getActiveElement, isHTMLElement } from '../../../base/browser/dom.js';
@@ -52,6 +52,11 @@ export interface IActionWidgetDropdownOptions extends IBaseDropdownOptions {
 	 * provided, no telemetry will be sent.
 	 */
 	readonly reporter?: { id: string; name?: string; includeOptions?: boolean };
+
+	/**
+	 * Options for the underlying ActionList (filter, collapsible sections).
+	 */
+	readonly listOptions?: IActionListOptions;
 }
 
 /**
@@ -201,7 +206,8 @@ export class ActionWidgetDropdown extends BaseDropdown {
 			this._options.getAnchor?.() ?? this.element,
 			undefined,
 			actionBarActions,
-			accessibilityProvider
+			accessibilityProvider,
+			this._options.listOptions
 		);
 	}
 
diff --git a/src/vs/platform/actions/common/actions.ts b/src/vs/platform/actions/common/actions.ts
index c3d2db6d982..86afa862d5d 100644
--- a/src/vs/platform/actions/common/actions.ts
+++ b/src/vs/platform/actions/common/actions.ts
@@ -281,10 +281,11 @@ export class MenuId {
 	static readonly ChatToolOutputResourceContext = new MenuId('ChatToolOutputResourceContext');
 	static readonly ChatMultiDiffContext = new MenuId('ChatMultiDiffContext');
 	static readonly ChatConfirmationMenu = new MenuId('ChatConfirmationMenu');
-	static readonly ChatEditorInlineGutter = new MenuId('ChatEditorInlineGutter');
+	static readonly ChatEditorInlineMenu = new MenuId('ChatEditorInlineGutter');
 	static readonly ChatEditorInlineExecute = new MenuId('ChatEditorInputExecute');
 	static readonly ChatEditorInlineInputSide = new MenuId('ChatEditorInputSide');
 	static readonly InlineChatEditorAffordance = new MenuId('InlineChatEditorAffordance');
+	static readonly InlineChatInput = new MenuId('InlineChatInput');
 	static readonly AccessibleView = new MenuId('AccessibleView');
 	static readonly MultiDiffEditorContent = new MenuId('MultiDiffEditorContent');
 	static readonly MultiDiffEditorFileToolbar = new MenuId('MultiDiffEditorFileToolbar');
diff --git a/src/vs/platform/browserElements/common/browserElements.ts b/src/vs/platform/browserElements/common/browserElements.ts
index 218acce24fd..5f6b0c82414 100644
--- a/src/vs/platform/browserElements/common/browserElements.ts
+++ b/src/vs/platform/browserElements/common/browserElements.ts
@@ -46,6 +46,10 @@ export interface INativeBrowserElementsService {
 	getElementData(rect: IRectangle, token: CancellationToken, locator: IBrowserTargetLocator, cancellationId?: number): Promise<IElementData | undefined>;
 
 	startDebugSession(token: CancellationToken, locator: IBrowserTargetLocator, cancelAndDetachId?: number): Promise<void>;
+
+	startConsoleSession(token: CancellationToken, locator: IBrowserTargetLocator, cancelAndDetachId?: number): Promise<void>;
+
+	getConsoleLogs(locator: IBrowserTargetLocator): Promise<string | undefined>;
 }
 
 /**
diff --git a/src/vs/platform/browserElements/electron-main/nativeBrowserElementsMainService.ts b/src/vs/platform/browserElements/electron-main/nativeBrowserElementsMainService.ts
index fbf52a2a064..4e53a021745 100644
--- a/src/vs/platform/browserElements/electron-main/nativeBrowserElementsMainService.ts
+++ b/src/vs/platform/browserElements/electron-main/nativeBrowserElementsMainService.ts
@@ -25,6 +25,17 @@ interface NodeDataResponse {
 	bounds: IRectangle;
 }
 
+const MAX_CONSOLE_LOG_ENTRIES = 1000;
+const consoleLogStore = new Map<string, string[]>();
+
+function locatorKey(locator: IBrowserTargetLocator): string {
+	const key = locator.browserViewId ?? locator.webviewId;
+	if (!key) {
+		return 'unknown';
+	}
+	return key;
+}
+
 export class NativeBrowserElementsMainService extends Disposable implements INativeBrowserElementsMainService {
 	_serviceBrand: undefined;
 
@@ -38,11 +49,82 @@ export class NativeBrowserElementsMainService extends Disposable implements INat
 
 	get windowId(): never { throw new Error('Not implemented in electron-main'); }
 
+	async getConsoleLogs(windowId: number | undefined, locator: IBrowserTargetLocator): Promise<string | undefined> {
+		const key = locatorKey(locator);
+		const entries = consoleLogStore.get(key);
+		if (!entries || entries.length === 0) {
+			return undefined;
+		}
+		return entries.join('\n');
+	}
+
+	async startConsoleSession(windowId: number | undefined, token: CancellationToken, locator: IBrowserTargetLocator, cancelAndDetachId?: number): Promise<void> {
+		const window = this.windowById(windowId);
+		if (!window?.win) {
+			return undefined;
+		}
+
+		let targetWebContents: Electron.WebContents | undefined;
+		if (locator.browserViewId) {
+			targetWebContents = this.browserViewMainService.tryGetBrowserView(locator.browserViewId)?.webContents;
+		}
+
+		if (!targetWebContents) {
+			return undefined;
+		}
+
+		const key = locatorKey(locator);
+		if (!consoleLogStore.has(key)) {
+			consoleLogStore.set(key, []);
+		}
+
+		const levelMap: Record<number, string> = { 0: 'log', 1: 'warning', 2: 'error' };
+		const onConsoleMessage = (_event: Electron.Event, level: number, message: string, _line: number, _sourceId: string) => {
+			const levelName = levelMap[level] ?? 'log';
+			const formatted = `[${levelName}] ${message}`;
+			const current = consoleLogStore.get(key) ?? [];
+			current.push(formatted);
+			if (current.length > MAX_CONSOLE_LOG_ENTRIES) {
+				current.splice(0, current.length - MAX_CONSOLE_LOG_ENTRIES);
+			}
+			consoleLogStore.set(key, current);
+		};
+
+		const cleanupListeners = () => {
+			targetWebContents?.off('console-message', onConsoleMessage);
+			window.win?.webContents.off('ipc-message', onIpcMessage);
+		};
+
+		const onIpcMessage = async (_event: Electron.Event, channel: string, closedCancelAndDetachId: number) => {
+			if (channel === `vscode:cancelConsoleSession${cancelAndDetachId}`) {
+				if (cancelAndDetachId !== closedCancelAndDetachId) {
+					return;
+				}
+				cleanupListeners();
+				consoleLogStore.delete(key);
+			}
+		};
+
+		targetWebContents.on('console-message', onConsoleMessage);
+
+		targetWebContents.once('destroyed', () => {
+			cleanupListeners();
+			consoleLogStore.delete(key);
+		});
+
+		token.onCancellationRequested(() => {
+			cleanupListeners();
+			consoleLogStore.delete(key);
+		});
+
+		window.win.webContents.on('ipc-message', onIpcMessage);
+	}
+
 	/**
 	 * Find the webview target that matches the given locator.
 	 * Checks either webviewId or browserViewId depending on what's provided.
 	 */
-	async findWebviewTarget(debuggers: Electron.Debugger, locator: IBrowserTargetLocator): Promise<string | undefined> {
+	private async findWebviewTarget(debuggers: Electron.Debugger, locator: IBrowserTargetLocator): Promise<string | undefined> {
 		const { targetInfos } = await debuggers.sendCommand('Target.getTargets');
 
 		if (locator.webviewId) {
diff --git a/src/vs/platform/browserView/common/browserView.ts b/src/vs/platform/browserView/common/browserView.ts
index 5c8c9517dfb..f22fd39e70b 100644
--- a/src/vs/platform/browserView/common/browserView.ts
+++ b/src/vs/platform/browserView/common/browserView.ts
@@ -275,9 +275,4 @@ export interface IBrowserViewService {
 	 * @param id The browser view identifier
 	 */
 	clearStorage(id: string): Promise<void>;
-
-	/**
-	 * Get a CDP WebSocket endpoint URL.
-	 */
-	getDebugWebSocketEndpoint(): Promise<string>;
 }
diff --git a/src/vs/platform/browserView/common/browserViewGroup.ts b/src/vs/platform/browserView/common/browserViewGroup.ts
new file mode 100644
index 00000000000..0f43b98c8b0
--- /dev/null
+++ b/src/vs/platform/browserView/common/browserViewGroup.ts
@@ -0,0 +1,86 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { Event } from '../../../base/common/event.js';
+import { IDisposable } from '../../../base/common/lifecycle.js';
+
+export const ipcBrowserViewGroupChannelName = 'browserViewGroup';
+
+/**
+ * Fired when a browser view is added to or removed from a group.
+ */
+export interface IBrowserViewGroupViewEvent {
+	/** The ID of the browser view that was added or removed. */
+	readonly viewId: string;
+}
+
+/**
+ * A browser view group - an isolated collection of browser views.
+ *
+ * This interface is shared between the main-process entity and remote proxies.
+ */
+export interface IBrowserViewGroup extends IDisposable {
+	readonly id: string;
+
+	readonly onDidAddView: Event<IBrowserViewGroupViewEvent>;
+	readonly onDidRemoveView: Event<IBrowserViewGroupViewEvent>;
+	readonly onDidDestroy: Event<void>;
+
+	addView(viewId: string): Promise<void>;
+	removeView(viewId: string): Promise<void>;
+	getDebugWebSocketEndpoint(): Promise<string>;
+}
+
+/**
+ * Common service for managing browser view groups across processes.
+ *
+ * A browser view group is an isolated collection of browser views that can be
+ * independently exposed to different services or CDP clients.
+ *
+ * This interface is consumed via {@link ProxyChannel}.
+ * The main-process implementation is {@link BrowserViewGroupMainService}.
+ */
+export interface IBrowserViewGroupService {
+
+	// Dynamic events - one per group instance, keyed by group ID.
+	onDynamicDidAddView(groupId: string): Event<IBrowserViewGroupViewEvent>;
+	onDynamicDidRemoveView(groupId: string): Event<IBrowserViewGroupViewEvent>;
+	onDynamicDidDestroy(groupId: string): Event<void>;
+
+	/**
+	 * Create a new browser view group.
+	 * @returns The id of the newly created group.
+	 */
+	createGroup(): Promise<string>;
+
+	/**
+	 * Destroy a browser view group.
+	 * Views in the group are **not** destroyed - they are simply detached.
+	 * @param groupId The group identifier.
+	 */
+	destroyGroup(groupId: string): Promise<void>;
+
+	/**
+	 * Add a browser view to a group.
+	 * A view can belong to multiple groups simultaneously.
+	 * @param groupId The group identifier.
+	 * @param viewId The browser view identifier.
+	 */
+	addViewToGroup(groupId: string, viewId: string): Promise<void>;
+
+	/**
+	 * Remove a browser view from a group.
+	 * @param groupId The group identifier.
+	 * @param viewId The browser view identifier.
+	 */
+	removeViewFromGroup(groupId: string, viewId: string): Promise<void>;
+
+	/**
+	 * Get a short-lived CDP WebSocket endpoint URL for a specific group.
+	 * The returned URL contains a single-use token.
+	 * @param groupId The group identifier.
+	 */
+	getDebugWebSocketEndpoint(groupId: string): Promise<string>;
+}
diff --git a/src/vs/platform/browserView/electron-main/browserViewCDPProxyServer.ts b/src/vs/platform/browserView/electron-main/browserViewCDPProxyServer.ts
index 9142b497166..30ad512c042 100644
--- a/src/vs/platform/browserView/electron-main/browserViewCDPProxyServer.ts
+++ b/src/vs/platform/browserView/electron-main/browserViewCDPProxyServer.ts
@@ -22,44 +22,60 @@ export interface IBrowserViewCDPProxyServer {
 	readonly _serviceBrand: undefined;
 
 	/**
-	 * Returns a debug endpoint with a short-lived, single-use token.
+	 * Returns a debug endpoint with a short-lived, single-use token for a specific browser target.
 	 */
-	getWebSocketEndpoint(): Promise<string>;
+	getWebSocketEndpointForTarget(target: ICDPBrowserTarget): Promise<string>;
+
+	/**
+	 * Unregister a previously registered browser target.
+	 */
+	removeTarget(target: ICDPBrowserTarget): Promise<void>;
 }
 
 /**
  * WebSocket server that provides CDP debugging for browser views.
+ *
+ * Manages a registry of {@link ICDPBrowserTarget} instances, each reachable
+ * at its own `/devtools/browser/{id}` WebSocket endpoint.
  */
 export class BrowserViewCDPProxyServer extends Disposable implements IBrowserViewCDPProxyServer {
 	declare readonly _serviceBrand: undefined;
 
 	private server: http.Server | undefined;
 	private port: number | undefined;
-	private readonly tokens: TokenManager;
+
+	private readonly tokens = this._register(new TokenManager<string>());
+	private readonly targets = new Map<string, ICDPBrowserTarget>();
 
 	constructor(
-		private readonly browserTarget: ICDPBrowserTarget,
 		@ILogService private readonly logService: ILogService
 	) {
 		super();
-
-		this.tokens = this._register(new TokenManager());
 	}
 
 	/**
-	 * Returns a debug endpoint with a short-lived, single-use token in the
-	 * WebSocket URL. The token is revoked once a WebSocket connection is made
-	 * or after 30 seconds, whichever comes first.
+	 * Register a browser target and return a WebSocket endpoint URL for it.
+	 * The target is reachable at `/devtools/browser/{targetId}`.
 	 */
-	async getWebSocketEndpoint(): Promise<string> {
+	async getWebSocketEndpointForTarget(target: ICDPBrowserTarget): Promise<string> {
 		await this.ensureServerStarted();
 
-		const token = await this.tokens.issueToken();
-		return this.getWebSocketUrl(token);
+		const targetInfo = await target.getTargetInfo();
+		const targetId = targetInfo.targetId;
+
+		// Register (or re-register) the target
+		this.targets.set(targetId, target);
+
+		const token = await this.tokens.issueToken(targetId);
+		return `ws://localhost:${this.port}/devtools/browser/${targetId}?token=${token}`;
 	}
 
-	private getWebSocketUrl(token: string): string {
-		return `ws://localhost:${this.port}/devtools/browser?token=${token}`;
+	/**
+	 * Unregister a previously registered browser target.
+	 */
+	async removeTarget(target: ICDPBrowserTarget): Promise<void> {
+		const targetInfo = await target.getTargetInfo();
+		this.targets.delete(targetInfo.targetId);
 	}
 
 	private async ensureServerStarted(): Promise<void> {
@@ -93,14 +109,7 @@ export class BrowserViewCDPProxyServer extends Disposable implements IBrowserVie
 	private handleWebSocketUpgrade(req: http.IncomingMessage, socket: Socket): void {
 		const [pathname, params] = (req.url || '').split('?');
 
-		const token = new URLSearchParams(params).get('token');
-		if (!token || !this.tokens.consumeToken(token)) {
-			socket.write('HTTP/1.1 401 Unauthorized\r\n\r\n');
-			socket.end();
-			return;
-		}
-
-		const browserMatch = pathname.match(/^\/devtools\/browser(\/.*)?$/);
+		const browserMatch = pathname.match(/^\/devtools\/browser\/([^/?]+)$/);
 
 		this.logService.debug(`[BrowserViewDebugProxy] WebSocket upgrade requested: ${pathname}`);
 
@@ -111,6 +120,24 @@ export class BrowserViewCDPProxyServer extends Disposable implements IBrowserVie
 			return;
 		}
 
+		const targetId = browserMatch[1];
+
+		const token = new URLSearchParams(params).get('token');
+		const tokenTargetId = token && this.tokens.consumeToken(token);
+		if (!tokenTargetId || tokenTargetId !== targetId) {
+			socket.write('HTTP/1.1 401 Unauthorized\r\n\r\n');
+			socket.end();
+			return;
+		}
+
+		const target = this.targets.get(targetId);
+		if (!target) {
+			this.logService.warn(`[BrowserViewDebugProxy] Browser target not found: ${targetId}`);
+			socket.write('HTTP/1.1 404 Not Found\r\n\r\n');
+			socket.end();
+			return;
+		}
+
 		this.logService.debug(`[BrowserViewDebugProxy] WebSocket connected: ${pathname}`);
 
 		const upgraded = upgradeToISocket(req, socket, {
@@ -122,7 +149,7 @@ export class BrowserViewCDPProxyServer extends Disposable implements IBrowserVie
 			return;
 		}
 
-		const proxy = new CDPBrowserProxy(this.browserTarget);
+		const proxy = new CDPBrowserProxy(target);
 		const disposables = this.wireWebSocket(upgraded, proxy);
 		this._register(disposables);
 		this._register(upgraded);
@@ -200,31 +227,35 @@ export class BrowserViewCDPProxyServer extends Disposable implements IBrowserVie
 	}
 }
 
-class TokenManager extends Disposable {
-	/** Map of currently valid single-use tokens. Each expires after 30 seconds. */
-	private readonly tokens = new Map<string, { expiresAt: number }>();
+class TokenManager<TDetails> extends Disposable {
+	/** Map of currently valid single-use tokens to their associated details. */
+	private readonly tokens = new Map<string, { details: TDetails; expiresAt: number }>();
 
 	/**
-	 * Creates a short-lived, single-use token.
+	 * Creates a short-lived, single-use token bound to a specific target.
 	 * The token is revoked once consumed or after 30 seconds.
 	 */
-	async issueToken(): Promise<string> {
+	async issueToken(details: TDetails): Promise<string> {
 		const token = this.makeToken();
-		this.tokens.set(token, { expiresAt: Date.now() + 30_000 });
+		this.tokens.set(token, { details: Object.freeze(details), expiresAt: Date.now() + 30_000 });
 		this._register(disposableTimeout(() => this.tokens.delete(token), 30_000));
 		return token;
 	}
 
-	consumeToken(token: string): boolean {
+	/**
+	 * Consume a token. Returns the details it was issued with, or
+	 * `undefined` if the token is invalid or expired.
+	 */
+	consumeToken(token: string): TDetails | undefined {
 		if (!token) {
-			return false;
+			return undefined;
 		}
 		const info = this.tokens.get(token);
 		if (!info) {
-			return false;
+			return undefined;
 		}
 		this.tokens.delete(token);
-		return Date.now() <= info.expiresAt;
+		return Date.now() <= info.expiresAt ? info.details : undefined;
 	}
 
 	private makeToken(): string {
diff --git a/src/vs/platform/browserView/electron-main/browserViewGroup.ts b/src/vs/platform/browserView/electron-main/browserViewGroup.ts
new file mode 100644
index 00000000000..efd4d01abf3
--- /dev/null
+++ b/src/vs/platform/browserView/electron-main/browserViewGroup.ts
@@ -0,0 +1,202 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { Disposable, DisposableStore } from '../../../base/common/lifecycle.js';
+import { Emitter, Event } from '../../../base/common/event.js';
+import { BrowserView } from './browserView.js';
+import { ICDPTarget, CDPBrowserVersion, CDPWindowBounds, CDPTargetInfo, ICDPConnection, ICDPBrowserTarget } from '../common/cdp/types.js';
+import { CDPBrowserProxy } from '../common/cdp/proxy.js';
+import { IBrowserViewGroup, IBrowserViewGroupViewEvent } from '../common/browserViewGroup.js';
+import { IBrowserViewCDPProxyServer } from './browserViewCDPProxyServer.js';
+import { IBrowserViewMainService } from './browserViewMainService.js';
+
+/**
+ * An isolated group of {@link BrowserView} instances exposed as CDP targets.
+ *
+ * Each group represents an independent CDP "browser" endpoint
+ * (`/devtools/browser/{id}`). Different groups can expose different
+ * subsets of browser views, enabling selective target visibility across
+ * CDP sessions.
+ *
+ * Created via {@link BrowserViewGroupMainService.createGroup}.
+ */
+export class BrowserViewGroup extends Disposable implements ICDPBrowserTarget, IBrowserViewGroup {
+
+	private readonly views = new Map<string, BrowserView>();
+	private readonly viewListeners = this._register(new DisposableStore());
+
+	/** All context IDs known to this group, including those from views added to it. */
+	private readonly knownContextIds = new Set<string>();
+	/** Browser context IDs created by this group via {@link createBrowserContext}. */
+	private readonly ownedContextIds = new Set<string>();
+
+	private readonly _onTargetCreated = this._register(new Emitter<BrowserView>());
+	readonly onTargetCreated: Event<BrowserView> = this._onTargetCreated.event;
+
+	private readonly _onTargetDestroyed = this._register(new Emitter<BrowserView>());
+	readonly onTargetDestroyed: Event<BrowserView> = this._onTargetDestroyed.event;
+
+	private readonly _onDidAddView = this._register(new Emitter<IBrowserViewGroupViewEvent>());
+	readonly onDidAddView: Event<IBrowserViewGroupViewEvent> = this._onDidAddView.event;
+
+	private readonly _onDidRemoveView = this._register(new Emitter<IBrowserViewGroupViewEvent>());
+	readonly onDidRemoveView: Event<IBrowserViewGroupViewEvent> = this._onDidRemoveView.event;
+
+	private readonly _onDidDestroy = this._register(new Emitter<void>());
+	readonly onDidDestroy: Event<void> = this._onDidDestroy.event;
+
+	constructor(
+		readonly id: string,
+		@IBrowserViewMainService private readonly browserViewMainService: IBrowserViewMainService,
+		@IBrowserViewCDPProxyServer private readonly cdpProxyServer: IBrowserViewCDPProxyServer,
+	) {
+		super();
+	}
+
+	// #region View management
+
+	/**
+	 * Add a {@link BrowserView} to this group.
+	 * Fires {@link onDidAddView} and {@link onTargetCreated}.
+	 * Automatically removes the view when it closes.
+	 */
+	async addView(viewId: string): Promise<void> {
+		if (this.views.has(viewId)) {
+			return;
+		}
+		const view = this.browserViewMainService.tryGetBrowserView(viewId);
+		if (!view) {
+			throw new Error(`Browser view ${viewId} not found`);
+		}
+		this.views.set(view.id, view);
+		this.knownContextIds.add(view.session.id);
+		this._onDidAddView.fire({ viewId: view.id });
+		this._onTargetCreated.fire(view);
+
+		this.viewListeners.add(Event.once(view.onDidClose)(() => {
+			this.removeView(viewId);
+		}));
+	}
+
+	/**
+	 * Remove a {@link BrowserView} from this group.
+	 * Fires {@link onDidRemoveView} and {@link onTargetDestroyed} if the view was tracked.
+	 */
+	async removeView(viewId: string): Promise<void> {
+		const view = this.views.get(viewId);
+		if (view && this.views.delete(viewId)) {
+			this._onDidRemoveView.fire({ viewId: view.id });
+			this._onTargetDestroyed.fire(view);
+		}
+	}
+
+	// #endregion
+
+	// #region ICDPBrowserTarget implementation
+
+	getVersion(): CDPBrowserVersion {
+		return this.browserViewMainService.getVersion();
+	}
+
+	getWindowForTarget(target: ICDPTarget): { windowId: number; bounds: CDPWindowBounds } {
+		return this.browserViewMainService.getWindowForTarget(target);
+	}
+
+	async attach(): Promise<ICDPConnection> {
+		return new CDPBrowserProxy(this);
+	}
+
+	async getTargetInfo(): Promise<CDPTargetInfo> {
+		return {
+			targetId: this.id,
+			type: 'browser',
+			title: this.getVersion().product,
+			url: '',
+			attached: true,
+			canAccessOpener: false
+		};
+	}
+
+	getTargets(): IterableIterator<BrowserView> {
+		return this.views.values();
+	}
+
+	async createTarget(url: string, browserContextId?: string): Promise<ICDPTarget> {
+		if (browserContextId && !this.knownContextIds.has(browserContextId)) {
+			throw new Error(`Unknown browser context ${browserContextId}`);
+		}
+
+		const target = await this.browserViewMainService.createTarget(url, browserContextId);
+		if (target instanceof BrowserView) {
+			await this.addView(target.id);
+		}
+		return target;
+	}
+
+	async activateTarget(target: ICDPTarget): Promise<void> {
+		return this.browserViewMainService.activateTarget(target);
+	}
+
+	async closeTarget(target: ICDPTarget): Promise<boolean> {
+		if (target instanceof BrowserView) {
+			await this.removeView(target.id);
+		}
+		return this.browserViewMainService.closeTarget(target);
+	}
+
+	// Browser context management
+
+	/**
+	 * Returns only the browser context IDs that are visible to this group,
+	 * i.e. contexts used by views currently in the group.
+	 */
+	getBrowserContexts(): string[] {
+		return [...this.knownContextIds];
+	}
+
+	async createBrowserContext(): Promise<string> {
+		const contextId = await this.browserViewMainService.createBrowserContext();
+		this.knownContextIds.add(contextId);
+		this.ownedContextIds.add(contextId);
+		return contextId;
+	}
+
+	async disposeBrowserContext(browserContextId: string): Promise<void> {
+		if (!this.ownedContextIds.has(browserContextId)) {
+			throw new Error('Can only dispose browser contexts created by this group');
+		}
+
+		// Close views in this group that belong to the context before disposing
+		for (const view of this.views.values()) {
+			if (view.session.id === browserContextId) {
+				await this.removeView(view.id);
+			}
+		}
+
+		this.knownContextIds.delete(browserContextId);
+		this.ownedContextIds.delete(browserContextId);
+		return this.browserViewMainService.disposeBrowserContext(browserContextId);
+	}
+
+	// #endregion
+
+	// #region CDP endpoint
+
+	/**
+	 * Get a WebSocket endpoint URL for connecting to this group's CDP
+	 * session. The URL contains a short-lived, single-use token.
+	 */
+	async getDebugWebSocketEndpoint(): Promise<string> {
+		return this.cdpProxyServer.getWebSocketEndpointForTarget(this);
+	}
+
+	// #endregion
+
+	override dispose(): void {
+		this._onDidDestroy.fire();
+		this.cdpProxyServer.removeTarget(this);
+		super.dispose();
+	}
+}
diff --git a/src/vs/platform/browserView/electron-main/browserViewGroupMainService.ts b/src/vs/platform/browserView/electron-main/browserViewGroupMainService.ts
new file mode 100644
index 00000000000..20dd6331c0e
--- /dev/null
+++ b/src/vs/platform/browserView/electron-main/browserViewGroupMainService.ts
@@ -0,0 +1,88 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { Disposable, DisposableMap } from '../../../base/common/lifecycle.js';
+import { Event } from '../../../base/common/event.js';
+import { createDecorator, IInstantiationService } from '../../instantiation/common/instantiation.js';
+import { generateUuid } from '../../../base/common/uuid.js';
+import { IBrowserViewGroupService, IBrowserViewGroupViewEvent } from '../common/browserViewGroup.js';
+import { BrowserViewGroup } from './browserViewGroup.js';
+
+export const IBrowserViewGroupMainService = createDecorator<IBrowserViewGroupMainService>('browserViewGroupMainService');
+
+export interface IBrowserViewGroupMainService extends IBrowserViewGroupService {
+	readonly _serviceBrand: undefined;
+}
+
+/**
+ * Main-process service that manages {@link BrowserViewGroup} instances.
+ *
+ * Implements {@link IBrowserViewGroupService} so it can be surfaced to
+ * the workbench/shared process via {@link ProxyChannel}.
+ */
+export class BrowserViewGroupMainService extends Disposable implements IBrowserViewGroupMainService {
+	declare readonly _serviceBrand: undefined;
+
+	private readonly groups = this._register(new DisposableMap<string, BrowserViewGroup>());
+
+	constructor(
+		@IInstantiationService private readonly instantiationService: IInstantiationService
+	) {
+		super();
+	}
+
+	async createGroup(): Promise<string> {
+		const id = generateUuid();
+		const group = this.instantiationService.createInstance(BrowserViewGroup, id);
+		this.groups.set(id, group);
+
+		// Auto-cleanup when the group disposes itself
+		Event.once(group.onDidDestroy)(() => {
+			this.groups.deleteAndLeak(id);
+		});
+
+		return id;
+	}
+
+	async destroyGroup(groupId: string): Promise<void> {
+		this.groups.deleteAndDispose(groupId);
+	}
+
+	async addViewToGroup(groupId: string, viewId: string): Promise<void> {
+		return this._getGroup(groupId).addView(viewId);
+	}
+
+	async removeViewFromGroup(groupId: string, viewId: string): Promise<void> {
+		return this._getGroup(groupId).removeView(viewId);
+	}
+
+	async getDebugWebSocketEndpoint(groupId: string): Promise<string> {
+		return this._getGroup(groupId).getDebugWebSocketEndpoint();
+	}
+
+	onDynamicDidAddView(groupId: string): Event<IBrowserViewGroupViewEvent> {
+		return this._getGroup(groupId).onDidAddView;
+	}
+
+	onDynamicDidRemoveView(groupId: string): Event<IBrowserViewGroupViewEvent> {
+		return this._getGroup(groupId).onDidRemoveView;
+	}
+
+	onDynamicDidDestroy(groupId: string): Event<void> {
+		return this._getGroup(groupId).onDidDestroy;
+	}
+
+	/**
+	 * Get a group or throw if not found.
+	 */
+	private _getGroup(groupId: string): BrowserViewGroup {
+		const group = this.groups.get(groupId);
+		if (!group) {
+			throw new Error(`Browser view group ${groupId} not found`);
+		}
+		return group;
+	}
+}
+
diff --git a/src/vs/platform/browserView/electron-main/browserViewMainService.ts b/src/vs/platform/browserView/electron-main/browserViewMainService.ts
index f29b4c18a43..68e97b58b4f 100644
--- a/src/vs/platform/browserView/electron-main/browserViewMainService.ts
+++ b/src/vs/platform/browserView/electron-main/browserViewMainService.ts
@@ -15,7 +15,6 @@ import { generateUuid } from '../../../base/common/uuid.js';
 import { BrowserViewUri } from '../common/browserViewUri.js';
 import { IWindowsMainService } from '../../windows/electron-main/windows.js';
 import { BrowserSession } from './browserSession.js';
-import { IBrowserViewCDPProxyServer } from './browserViewCDPProxyServer.js';
 import { IProductService } from '../../product/common/productService.js';
 import { CDPBrowserProxy } from '../common/cdp/proxy.js';
 
@@ -51,8 +50,7 @@ export class BrowserViewMainService extends Disposable implements IBrowserViewMa
 		@IEnvironmentMainService private readonly environmentMainService: IEnvironmentMainService,
 		@IInstantiationService private readonly instantiationService: IInstantiationService,
 		@IWindowsMainService private readonly windowsMainService: IWindowsMainService,
-		@IProductService private readonly productService: IProductService,
-		@IBrowserViewCDPProxyServer private readonly cdpProxyServer: IBrowserViewCDPProxyServer,
+		@IProductService private readonly productService: IProductService
 	) {
 		super();
 	}
@@ -363,8 +361,4 @@ export class BrowserViewMainService extends Disposable implements IBrowserViewMa
 		);
 		await browserSession.electronSession.clearData();
 	}
-
-	async getDebugWebSocketEndpoint(): Promise<string> {
-		return this.cdpProxyServer.getWebSocketEndpoint();
-	}
 }
diff --git a/src/vs/platform/browserView/node/browserViewGroupRemoteService.ts b/src/vs/platform/browserView/node/browserViewGroupRemoteService.ts
new file mode 100644
index 00000000000..b4aaffb612d
--- /dev/null
+++ b/src/vs/platform/browserView/node/browserViewGroupRemoteService.ts
@@ -0,0 +1,109 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { Event } from '../../../base/common/event.js';
+import { Disposable } from '../../../base/common/lifecycle.js';
+import { ProxyChannel } from '../../../base/parts/ipc/common/ipc.js';
+import { createDecorator } from '../../instantiation/common/instantiation.js';
+import { IMainProcessService } from '../../ipc/common/mainProcessService.js';
+import { IBrowserViewGroup, IBrowserViewGroupService, IBrowserViewGroupViewEvent, ipcBrowserViewGroupChannelName } from '../common/browserViewGroup.js';
+
+export const IBrowserViewGroupRemoteService = createDecorator<IBrowserViewGroupRemoteService>('browserViewGroupRemoteService');
+
+/**
+ * Remote-process service for managing browser view groups.
+ *
+ * Connects to the main-process {@link BrowserViewGroupMainService} via
+ * IPC and provides {@link IBrowserViewGroup} instances for
+ * interacting with groups.
+ *
+ * Usable from the shared process.
+ */
+export interface IBrowserViewGroupRemoteService {
+	readonly _serviceBrand: undefined;
+
+	/**
+	 * Create a new browser view group.
+	 */
+	createGroup(): Promise<IBrowserViewGroup>;
+}
+
+/**
+ * Remote proxy for a browser view group living in the main process.
+ */
+class RemoteBrowserViewGroup extends Disposable implements IBrowserViewGroup {
+	constructor(
+		readonly id: string,
+		private readonly groupService: IBrowserViewGroupService,
+	) {
+		super();
+
+		this._register(groupService.onDynamicDidDestroy(this.id)(() => {
+			// Avoid loops
+			this.dispose(true);
+		}));
+	}
+
+	get onDidAddView(): Event<IBrowserViewGroupViewEvent> {
+		return this.groupService.onDynamicDidAddView(this.id);
+	}
+
+	get onDidRemoveView(): Event<IBrowserViewGroupViewEvent> {
+		return this.groupService.onDynamicDidRemoveView(this.id);
+	}
+
+	get onDidDestroy(): Event<void> {
+		return this.groupService.onDynamicDidDestroy(this.id);
+	}
+
+	async addView(viewId: string): Promise<void> {
+		return this.groupService.addViewToGroup(this.id, viewId);
+	}
+
+	async removeView(viewId: string): Promise<void> {
+		return this.groupService.removeViewFromGroup(this.id, viewId);
+	}
+
+	async getDebugWebSocketEndpoint(): Promise<string> {
+		return this.groupService.getDebugWebSocketEndpoint(this.id);
+	}
+
+	override dispose(fromService = false): void {
+		if (!fromService) {
+			this.groupService.destroyGroup(this.id);
+		}
+		super.dispose();
+	}
+}
+
+export class BrowserViewGroupRemoteService implements IBrowserViewGroupRemoteService {
+	declare readonly _serviceBrand: undefined;
+
+	private readonly _groupService: IBrowserViewGroupService;
+	private readonly _groups = new Map<string, IBrowserViewGroup>();
+
+	constructor(
+		@IMainProcessService mainProcessService: IMainProcessService,
+	) {
+		const channel = mainProcessService.getChannel(ipcBrowserViewGroupChannelName);
+		this._groupService = ProxyChannel.toService<IBrowserViewGroupService>(channel);
+	}
+
+	async createGroup(): Promise<IBrowserViewGroup> {
+		const id = await this._groupService.createGroup();
+		return this._wrap(id);
+	}
+
+	private _wrap(id: string): IBrowserViewGroup {
+		const group = new RemoteBrowserViewGroup(id, this._groupService);
+		this._groups.set(id, group);
+
+		Event.once(group.onDidDestroy)(() => {
+			this._groups.delete(id);
+		});
+
+		return group;
+	}
+}
diff --git a/src/vs/platform/browserView/node/playwrightService.ts b/src/vs/platform/browserView/node/playwrightService.ts
index 2dcd8fbd04e..f19ee20bd94 100644
--- a/src/vs/platform/browserView/node/playwrightService.ts
+++ b/src/vs/platform/browserView/node/playwrightService.ts
@@ -4,14 +4,14 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { Disposable } from '../../../base/common/lifecycle.js';
-import { ProxyChannel } from '../../../base/parts/ipc/common/ipc.js';
+import { DeferredPromise } from '../../../base/common/async.js';
 import { ILogService } from '../../log/common/log.js';
-import { IBrowserViewService, ipcBrowserViewChannelName } from '../common/browserView.js';
 import { IPlaywrightService } from '../common/playwrightService.js';
-import { IMainProcessService } from '../../ipc/common/mainProcessService.js';
+import { IBrowserViewGroupRemoteService } from '../node/browserViewGroupRemoteService.js';
+import { IBrowserViewGroup } from '../common/browserViewGroup.js';
 
 // eslint-disable-next-line local/code-import-patterns
-import type { Browser } from 'playwright-core';
+import type { Browser, BrowserContext, Page } from 'playwright-core';
 
 /**
  * Shared-process implementation of {@link IPlaywrightService}.
@@ -19,22 +19,22 @@ import type { Browser } from 'playwright-core';
 export class PlaywrightService extends Disposable implements IPlaywrightService {
 	declare readonly _serviceBrand: undefined;
 
-	private readonly browserViewService: IBrowserViewService;
 	private _browser: Browser | undefined;
+	private _pages: PlaywrightPageManager | undefined;
 	private _initPromise: Promise<void> | undefined;
 
 	constructor(
-		@IMainProcessService mainProcessService: IMainProcessService,
+		@IBrowserViewGroupRemoteService private readonly browserViewGroupRemoteService: IBrowserViewGroupRemoteService,
 		@ILogService private readonly logService: ILogService,
 	) {
 		super();
-
-		const channel = mainProcessService.getChannel(ipcBrowserViewChannelName);
-		this.browserViewService = ProxyChannel.toService<IBrowserViewService>(channel);
 	}
 
+	/**
+	 * Ensure the Playwright browser connection and page map are initialized.
+	 */
 	async initialize(): Promise<void> {
-		if (this._browser?.isConnected()) {
+		if (this._pages) {
 			return;
 		}
 
@@ -44,30 +44,41 @@ export class PlaywrightService extends Disposable implements IPlaywrightService
 
 		this._initPromise = (async () => {
 			try {
-				this.logService.debug('[PlaywrightService] Connecting to browser via CDP');
+				this.logService.debug('[PlaywrightService] Creating browser view group');
+				const group = this._register(await this.browserViewGroupRemoteService.createGroup());
 
+				this.logService.debug('[PlaywrightService] Connecting to browser via CDP');
 				const playwright = await import('playwright-core');
-				const endpoint = await this.browserViewService.getDebugWebSocketEndpoint();
+				const endpoint = await group.getDebugWebSocketEndpoint();
 				const browser = await playwright.chromium.connectOverCDP(endpoint);
 
 				this.logService.debug('[PlaywrightService] Connected to browser');
 
-				browser.on('disconnected', () => {
-					this.logService.debug('[PlaywrightService] Browser disconnected');
-					if (this._browser === browser) {
-						this._browser = undefined;
-					}
-				});
-
 				// This can happen if the service was disposed while we were waiting for the connection. In that case, clean up immediately.
 				if (this._initPromise === undefined) {
 					browser.close().catch(() => { /* ignore */ });
 					throw new Error('PlaywrightService was disposed during initialization');
 				}
 
+				const pageManager = this._register(new PlaywrightPageManager(group, browser, this.logService));
+
+				browser.on('disconnected', () => {
+					this.logService.debug('[PlaywrightService] Browser disconnected');
+					if (this._browser === browser) {
+						group.dispose();
+						pageManager.dispose();
+
+						this._browser = undefined;
+						this._pages = undefined;
+						this._initPromise = undefined;
+					}
+				});
+
 				this._browser = browser;
-			} finally {
+				this._pages = pageManager;
+			} catch (e) {
 				this._initPromise = undefined;
+				throw e;
 			}
 		})();
 
@@ -83,3 +94,272 @@ export class PlaywrightService extends Disposable implements IPlaywrightService
 		super.dispose();
 	}
 }
+
+/**
+ * Correlates browser view IDs with Playwright {@link Page} instances.
+ *
+ * When a browser view is added to a group, two asynchronous events follow
+ * through independent channels:
+ *
+ * 1. The group fires {@link IBrowserViewGroup.onDidAddView} (via IPC).
+ * 2. Playwright receives a CDP `Target.targetCreated` event (via WebSocket)
+ *    and fires a `page` event on the matching {@link BrowserContext}.
+ *
+ * This class pairs the two event streams by FIFO ordering: the first view-ID
+ * received is matched with the first page event received.
+ *
+ * A periodic scan handles the case where Playwright creates a new
+ * {@link BrowserContext} for a target whose session was previously unknown.
+ */
+class PlaywrightPageManager extends Disposable {
+
+	private readonly _viewIdToPage = new Map<string, Page>();
+	private readonly _pageToViewId = new WeakMap<Page, string>();
+
+	/** View IDs received from the group but not yet matched with a page. */
+	private _viewIdQueue: Array<{
+		viewId: string;
+		page: DeferredPromise<Page>;
+	}> = [];
+
+	/** Pages received from Playwright but not yet matched with a view ID. */
+	private _pageQueue: Array<{
+		page: Page;
+		viewId: DeferredPromise<string>;
+	}> = [];
+
+	private readonly _watchedContexts = new WeakSet<BrowserContext>();
+	private _scanTimer: ReturnType<typeof setInterval> | undefined;
+
+	constructor(
+		private readonly _group: IBrowserViewGroup,
+		private readonly _browser: Browser,
+		private readonly logService: ILogService,
+	) {
+		super();
+
+		this._register(_group.onDidAddView(e => this.onViewAdded(e.viewId)));
+		this._register(_group.onDidRemoveView(e => this.onViewRemoved(e.viewId)));
+		this.scanForNewContexts();
+	}
+
+	/**
+	 * Create a new page in the browser and return its associated page and view ID.
+	 */
+	async newPage(): Promise<{ viewId: string; page: Page }> {
+		const page = await this._browser.newPage();
+		const viewId = await this.onPageAdded(page);
+
+		return { viewId, page };
+	}
+
+	/**
+	 * Explicitly add an existing browser view to the CDP group.
+	 */
+	async addPage(viewId: string): Promise<void> {
+		if (this._viewIdToPage.has(viewId)) {
+			return;
+		}
+		if (this._viewIdQueue.some(item => item.viewId === viewId)) {
+			return;
+		}
+
+		// ensure the viewId is queued so we can immediately fetch the promise via getPage().
+		this.onViewAdded(viewId);
+
+		try {
+			await this._group.addView(viewId);
+		} catch (err: unknown) {
+			const errorMessage = err instanceof Error ? err.message : String(err);
+			this.logService.error('[PlaywrightPageMap] Failed to add view:', errorMessage);
+			this.onViewRemoved(viewId);
+		}
+	}
+
+	/**
+	 * Remove a browser view from the CDP group.
+	 */
+	async removePage(viewId: string): Promise<void> {
+		this.onViewRemoved(viewId);
+		try {
+			await this._group.removeView(viewId);
+		} catch (err: unknown) {
+			const errorMessage = err instanceof Error ? err.message : String(err);
+			this.logService.error('[PlaywrightPageMap] Failed to remove view:', errorMessage);
+		}
+	}
+
+	/**
+	 * Get the Playwright {@link Page} for a browser view that has already been added.
+	 * Throws if the view has not been added.
+	 */
+	async getPage(viewId: string): Promise<Page> {
+		const resolved = this._viewIdToPage.get(viewId);
+		if (resolved) {
+			return resolved;
+		}
+		const queued = this._viewIdQueue.find(item => item.viewId === viewId);
+		if (queued) {
+			return queued.page.p;
+		}
+
+		throw new Error(`Page "${viewId}" has not been added to the Playwright service`);
+	}
+
+	/**
+	 * Called when the group fires onDidAddView. Creates a deferred entry in
+	 * the view ID queue and attempts to match it with a page.
+	 */
+	private onViewAdded(viewId: string, timeoutMs = 10000): Promise<Page> {
+		const resolved = this._viewIdToPage.get(viewId);
+		if (resolved) {
+			return Promise.resolve(resolved);
+		}
+		const queued = this._viewIdQueue.find(item => item.viewId === viewId);
+		if (queued) {
+			return queued.page.p;
+		}
+
+		const deferred = new DeferredPromise<Page>();
+		const timeout = setTimeout(() => deferred.error(new Error(`Timed out waiting for page`)), timeoutMs);
+
+		deferred.p.finally(() => {
+			clearTimeout(timeout);
+			this._viewIdQueue = this._viewIdQueue.filter(item => item.viewId !== viewId);
+			if (this._viewIdQueue.length === 0) {
+				this.stopScanning();
+			}
+		});
+
+		this._viewIdQueue.push({ viewId, page: deferred });
+		this.tryMatch();
+		this.ensureScanning();
+
+		return deferred.p;
+	}
+
+	private onViewRemoved(viewId: string): void {
+		this._viewIdQueue = this._viewIdQueue.filter(item => item.viewId !== viewId);
+		const page = this._viewIdToPage.get(viewId);
+		if (page) {
+			this._pageToViewId.delete(page);
+		}
+		this._viewIdToPage.delete(viewId);
+	}
+
+	private onPageAdded(page: Page, timeoutMs = 10000): Promise<string> {
+		const resolved = this._pageToViewId.get(page);
+		if (resolved) {
+			return Promise.resolve(resolved);
+		}
+		const queued = this._pageQueue.find(item => item.page === page);
+		if (queued) {
+			return queued.viewId.p;
+		}
+
+		this.onContextAdded(page.context());
+		page.once('close', () => this.onPageRemoved(page));
+
+		const deferred = new DeferredPromise<string>();
+		const timeout = setTimeout(() => deferred.error(new Error(`Timed out waiting for browser view`)), timeoutMs);
+		deferred.p.finally(() => {
+			clearTimeout(timeout);
+			this._pageQueue = this._pageQueue.filter(item => item.page !== page);
+		});
+
+		this._pageQueue.push({ page, viewId: deferred });
+		this.tryMatch();
+
+		return deferred.p;
+	}
+
+	private onPageRemoved(page: Page): void {
+		this._pageQueue = this._pageQueue.filter(item => item.page !== page);
+		const viewId = this._pageToViewId.get(page);
+		if (viewId) {
+			this._viewIdToPage.delete(viewId);
+		}
+		this._pageToViewId.delete(page);
+	}
+
+	private onContextAdded(context: BrowserContext): void {
+		if (this._watchedContexts.has(context)) {
+			return;
+		}
+		this._watchedContexts.add(context);
+
+		context.on('page', (page: Page) => this.onPageAdded(page));
+		context.on('close', () => this.onContextRemoved(context));
+
+		for (const page of context.pages()) {
+			this.onPageAdded(page);
+		}
+	}
+
+	private onContextRemoved(context: BrowserContext): void {
+		this._watchedContexts.delete(context);
+	}
+
+	// --- Matching ---
+
+	/**
+	 * Pair up queued view IDs with queued pages in FIFO order and resolve
+	 * any callers waiting for the matched view IDs.
+	 */
+	private tryMatch(): void {
+		while (this._viewIdQueue.length > 0 && this._pageQueue.length > 0) {
+			const viewIdItem = this._viewIdQueue.shift()!;
+			const pageItem = this._pageQueue.shift()!;
+
+			this._viewIdToPage.set(viewIdItem.viewId, pageItem.page);
+			this._pageToViewId.set(pageItem.page, viewIdItem.viewId);
+
+			viewIdItem.page.complete(pageItem.page);
+			pageItem.viewId.complete(viewIdItem.viewId);
+
+			this.logService.debug(`[PlaywrightPageMap] Matched view ${viewIdItem.viewId} → page`);
+		}
+
+		if (this._viewIdQueue.length === 0) {
+			this.stopScanning();
+		}
+	}
+
+	// --- Context scanning ---
+
+	/**
+	 * Watch all current {@link BrowserContext BrowserContexts} for new pages.
+	 * Also processes any existing pages in newly discovered contexts.
+	 */
+	private scanForNewContexts(): void {
+		for (const context of this._browser.contexts()) {
+			this.onContextAdded(context);
+		}
+	}
+
+	private ensureScanning(): void {
+		if (this._scanTimer === undefined) {
+			this._scanTimer = setInterval(() => this.scanForNewContexts(), 100);
+		}
+	}
+
+	private stopScanning(): void {
+		if (this._scanTimer !== undefined) {
+			clearInterval(this._scanTimer);
+			this._scanTimer = undefined;
+		}
+	}
+
+	override dispose(): void {
+		this.stopScanning();
+		for (const { page } of this._viewIdQueue) {
+			page.error(new Error('PlaywrightPageMap disposed'));
+		}
+		for (const { viewId } of this._pageQueue) {
+			viewId.error(new Error('PlaywrightPageMap disposed'));
+		}
+		this._viewIdQueue = [];
+		this._pageQueue = [];
+		super.dispose();
+	}
+}
diff --git a/src/vs/platform/terminal/common/terminal.ts b/src/vs/platform/terminal/common/terminal.ts
index 4431f19b659..18c7915e8f2 100644
--- a/src/vs/platform/terminal/common/terminal.ts
+++ b/src/vs/platform/terminal/common/terminal.ts
@@ -339,7 +339,7 @@ export interface IPtyService {
 	shutdown(id: number, immediate: boolean): Promise<void>;
 	input(id: number, data: string): Promise<void>;
 	sendSignal(id: number, signal: string): Promise<void>;
-	resize(id: number, cols: number, rows: number): Promise<void>;
+	resize(id: number, cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): Promise<void>;
 	clearBuffer(id: number): Promise<void>;
 	getInitialCwd(id: number): Promise<string>;
 	getCwd(id: number): Promise<string>;
@@ -391,7 +391,7 @@ export interface IPtyServiceContribution {
 	handleProcessReady(persistentProcessId: number, process: ITerminalChildProcess): void;
 	handleProcessDispose(persistentProcessId: number): void;
 	handleProcessInput(persistentProcessId: number, data: string): void;
-	handleProcessResize(persistentProcessId: number, cols: number, rows: number): void;
+	handleProcessResize(persistentProcessId: number, cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): void;
 }
 
 export interface IPtyHostController {
@@ -810,7 +810,7 @@ export interface ITerminalChildProcess {
 	input(data: string): void;
 	sendSignal(signal: string): void;
 	processBinary(data: string): Promise<void>;
-	resize(cols: number, rows: number): void;
+	resize(cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): void;
 	clearBuffer(): void | Promise<void>;
 
 	/**
diff --git a/src/vs/platform/terminal/node/ptyHostService.ts b/src/vs/platform/terminal/node/ptyHostService.ts
index d85ba59ef12..0e66435f1ef 100644
--- a/src/vs/platform/terminal/node/ptyHostService.ts
+++ b/src/vs/platform/terminal/node/ptyHostService.ts
@@ -254,8 +254,8 @@ export class PtyHostService extends Disposable implements IPtyHostService {
 	processBinary(id: number, data: string): Promise<void> {
 		return this._proxy.processBinary(id, data);
 	}
-	resize(id: number, cols: number, rows: number): Promise<void> {
-		return this._proxy.resize(id, cols, rows);
+	resize(id: number, cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): Promise<void> {
+		return this._proxy.resize(id, cols, rows, pixelWidth, pixelHeight);
 	}
 	clearBuffer(id: number): Promise<void> {
 		return this._proxy.clearBuffer(id);
diff --git a/src/vs/platform/terminal/node/ptyService.ts b/src/vs/platform/terminal/node/ptyService.ts
index 826b09f47c8..e73086df28c 100644
--- a/src/vs/platform/terminal/node/ptyService.ts
+++ b/src/vs/platform/terminal/node/ptyService.ts
@@ -455,13 +455,13 @@ export class PtyService extends Disposable implements IPtyService {
 		return this._throwIfNoPty(id).writeBinary(data);
 	}
 	@traceRpc
-	async resize(id: number, cols: number, rows: number): Promise<void> {
+	async resize(id: number, cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): Promise<void> {
 		const pty = this._throwIfNoPty(id);
 		if (pty) {
 			for (const contrib of this._contributions) {
-				contrib.handleProcessResize(id, cols, rows);
+				contrib.handleProcessResize(id, cols, rows, pixelWidth, pixelHeight);
 			}
-			pty.resize(cols, rows);
+			pty.resize(cols, rows, pixelWidth, pixelHeight);
 		}
 	}
 	@traceRpc
@@ -902,7 +902,7 @@ class PersistentTerminalProcess extends Disposable {
 	writeBinary(data: string): Promise<void> {
 		return this._terminalProcess.processBinary(data);
 	}
-	resize(cols: number, rows: number): void {
+	resize(cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): void {
 		if (this._inReplay) {
 			return;
 		}
@@ -911,7 +911,7 @@ class PersistentTerminalProcess extends Disposable {
 		// Buffered events should flush when a resize occurs
 		this._bufferer.flushBuffer(this._persistentProcessId);
 
-		return this._terminalProcess.resize(cols, rows);
+		return this._terminalProcess.resize(cols, rows, pixelWidth, pixelHeight);
 	}
 	async clearBuffer(): Promise<void> {
 		this._serializer.clearBuffer();
diff --git a/src/vs/platform/terminal/node/terminalProcess.ts b/src/vs/platform/terminal/node/terminalProcess.ts
index 707bfa7fc0f..1f49fa67daa 100644
--- a/src/vs/platform/terminal/node/terminalProcess.ts
+++ b/src/vs/platform/terminal/node/terminalProcess.ts
@@ -515,7 +515,7 @@ export class TerminalProcess extends Disposable implements ITerminalChildProcess
 		}
 	}
 
-	resize(cols: number, rows: number): void {
+	resize(cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): void {
 		if (this._store.isDisposed) {
 			return;
 		}
@@ -537,7 +537,10 @@ export class TerminalProcess extends Disposable implements ITerminalChildProcess
 
 			this._logService.trace('node-pty.IPty#resize', cols, rows);
 			try {
-				this._ptyProcess.resize(cols, rows);
+				const pixelSize = pixelWidth !== undefined && pixelHeight !== undefined
+					? { width: pixelWidth, height: pixelHeight }
+					: undefined;
+				this._ptyProcess.resize(cols, rows, pixelSize);
 			} catch (e) {
 				// Swallow error if the pty has already exited
 				this._logService.trace('node-pty.IPty#resize exception ' + e.message);
diff --git a/src/vs/sessions/LAYOUT.md b/src/vs/sessions/LAYOUT.md
index 17ff3fee470..1448a8a3dca 100644
--- a/src/vs/sessions/LAYOUT.md
+++ b/src/vs/sessions/LAYOUT.md
@@ -704,6 +704,7 @@ interface IPartVisibilityState {
 
 | Date | Change |
 |------|--------|
+| 2026-02-17 | Added `-webkit-app-region: drag` to sidebar title area so it can be used to drag the window; interactive children (actions, composite bar, labels) marked `no-drag`; CSS rules scoped to `.agent-sessions-workbench` in `parts/media/sidebarPart.css` |
 | 2026-02-13 | Documentation sync: Updated all file names, class names, and references to match current implementation. `AgenticWorkbench` → `Workbench`, `AgenticSidebarPart` → `SidebarPart`, `AgenticAuxiliaryBarPart` → `AuxiliaryBarPart`, `AgenticPanelPart` → `PanelPart`, `agenticWorkbench.ts` → `workbench.ts`, `agenticWorkbenchMenus.ts` → `menus.ts`, `agenticLayoutActions.ts` → `layoutActions.ts`, `AgenticTitleBarWidget` → `SessionsTitleBarWidget`, `AgenticTitleBarContribution` → `SessionsTitleBarContribution`. Removed references to deleted files (`sidebarRevealButton.ts`, `floatingToolbar.ts`, `agentic.contributions.ts`, `agenticTitleBarWidget.ts`). Updated pane composite architecture from `SyncDescriptor`-based to `AgenticPaneCompositePartService`. Moved account widget docs from titlebar to sidebar footer. Added documentation for sidebar footer, project bar, traffic light spacer, card appearance styling, widget directory, and new contrib structure (`accountMenu/`, `chat/`, `configuration/`, `sessions/`). Updated titlebar actions to reflect Run Script split button and Open submenu. Removed Toggle Maximize panel action (no longer registered). Updated contributions section with all current contributions and their locations. |
 | 2026-02-13 | Changed grid structure: sidebar now spans full window height at root level (HORIZONTAL root orientation); Titlebar moved inside right section; Grid is now `Sidebar \| [Titlebar / TopRight / Panel]` instead of `Titlebar / [Sidebar \| RightSection]`; Panel maximize now excludes both titlebar and sidebar; Floating toolbar positioning no longer depends on titlebar height |
 | 2026-02-11 | Simplified titlebar: replaced `BrowserTitlebarPart`-derived implementation with standalone `TitlebarPart` using three `MenuWorkbenchToolBar` sections (left/center/right); Removed `CommandCenterControl`, `WindowTitle`, layout toolbar, and manual toolbar management; Center section uses `Menus.CommandCenter` which renders session picker via `IActionViewItemService`; Right section uses `Menus.TitleBarRight` which includes account submenu; Removed `commandCenterControl.ts` file |
diff --git a/src/vs/sessions/browser/menus.ts b/src/vs/sessions/browser/menus.ts
index 8d0fdbe0d1d..a6f273f3aeb 100644
--- a/src/vs/sessions/browser/menus.ts
+++ b/src/vs/sessions/browser/menus.ts
@@ -23,4 +23,5 @@ export const Menus = {
 	AuxiliaryBarTitle: new MenuId('SessionsAuxiliaryBarTitle'),
 	AuxiliaryBarTitleLeft: new MenuId('SessionsAuxiliaryBarTitleLeft'),
 	SidebarFooter: new MenuId('SessionsSidebarFooter'),
+	SidebarCustomizations: new MenuId('SessionsSidebarCustomizations'),
 } as const;
diff --git a/src/vs/sessions/browser/parts/auxiliaryBarPart.ts b/src/vs/sessions/browser/parts/auxiliaryBarPart.ts
index abb205600d5..d4e677a6215 100644
--- a/src/vs/sessions/browser/parts/auxiliaryBarPart.ts
+++ b/src/vs/sessions/browser/parts/auxiliaryBarPart.ts
@@ -105,7 +105,7 @@ export class AuxiliaryBarPart extends AbstractPaneCompositePart {
 			{
 				hasTitle: true,
 				trailingSeparator: false,
-				borderWidth: () => 0,
+				borderWidth: () => (this.getColor(SIDE_BAR_BORDER) || this.getColor(contrastBorder)) ? 1 : 0,
 			},
 			AuxiliaryBarPart.activeViewSettingsKey,
 			ActiveAuxiliaryContext.bindTo(contextKeyService),
diff --git a/src/vs/sessions/browser/parts/media/sidebarPart.css b/src/vs/sessions/browser/parts/media/sidebarPart.css
index 1c845edee3b..d8f4c728949 100644
--- a/src/vs/sessions/browser/parts/media/sidebarPart.css
+++ b/src/vs/sessions/browser/parts/media/sidebarPart.css
@@ -8,6 +8,26 @@
 	display: none;
 }
 
+/* Make the sidebar title area draggable to move the window */
+.agent-sessions-workbench .part.sidebar > .composite.title {
+	position: relative;
+}
+
+.agent-sessions-workbench .part.sidebar > .composite.title > .titlebar-drag-region {
+	top: 0;
+	left: 0;
+	display: block;
+	position: absolute;
+	width: 100%;
+	height: 100%;
+	-webkit-app-region: drag;
+}
+
+/* Interactive elements in the title area must not be draggable */
+.agent-sessions-workbench .part.sidebar > .composite.title .action-item {
+	-webkit-app-region: no-drag;
+}
+
 /* Sidebar Footer Container */
 .monaco-workbench .part.sidebar > .sidebar-footer {
 	display: flex;
diff --git a/src/vs/sessions/browser/parts/sidebarPart.ts b/src/vs/sessions/browser/parts/sidebarPart.ts
index fcae124b6e1..d632124f3de 100644
--- a/src/vs/sessions/browser/parts/sidebarPart.ts
+++ b/src/vs/sessions/browser/parts/sidebarPart.ts
@@ -99,7 +99,7 @@ export class SidebarPart extends AbstractPaneCompositePart {
 	) {
 		super(
 			Parts.SIDEBAR_PART,
-			{ hasTitle: true, trailingSeparator: false, borderWidth: () => 0 },
+			{ hasTitle: true, trailingSeparator: false, borderWidth: () => (this.getColor(SIDE_BAR_BORDER) || this.getColor(contrastBorder)) ? 1 : 0 },
 			SidebarPart.activeViewletSettingsKey,
 			ActiveViewletContext.bindTo(contextKeyService),
 			SidebarFocusContext.bindTo(contextKeyService),
@@ -134,6 +134,12 @@ export class SidebarPart extends AbstractPaneCompositePart {
 	protected override createTitleArea(parent: HTMLElement): HTMLElement | undefined {
 		const titleArea = super.createTitleArea(parent);
 
+		if (titleArea) {
+			// Add a drag region so the sidebar title area can be used to move the window,
+			// matching the titlebar's drag behavior.
+			prepend(titleArea, $('div.titlebar-drag-region'));
+		}
+
 		// macOS native: the sidebar spans full height and the traffic lights
 		// overlay the top-left corner. Add a fixed-width spacer inside the
 		// title area to push content horizontally past the traffic lights.
diff --git a/src/vs/sessions/browser/parts/titlebarPart.ts b/src/vs/sessions/browser/parts/titlebarPart.ts
index b2231dd47b8..f8839f0db5b 100644
--- a/src/vs/sessions/browser/parts/titlebarPart.ts
+++ b/src/vs/sessions/browser/parts/titlebarPart.ts
@@ -203,7 +203,7 @@ export class TitlebarPart extends Part implements ITitlebarPart {
 		}));
 
 		// Right toolbar (driven by Menus.TitleBarRight - includes account submenu)
-		const rightToolbarContainer = append(this.rightContent, $('div.action-toolbar-container'));
+		const rightToolbarContainer = prepend(this.rightContent, $('div.action-toolbar-container'));
 		this._register(this.instantiationService.createInstance(MenuWorkbenchToolBar, rightToolbarContainer, Menus.TitleBarRight, {
 			contextMenu: Menus.TitleBarContext,
 			telemetrySource: 'titlePart.right',
@@ -258,8 +258,15 @@ export class TitlebarPart extends Part implements ITitlebarPart {
 
 	private lastLayoutDimension: Dimension | undefined;
 
+	get hasZoomableElements(): boolean {
+		return true; // sessions titlebar always has command center and toolbar actions
+	}
+
 	get preventZoom(): boolean {
-		return getZoomFactor(getWindow(this.element)) < 1;
+		// Prevent zooming behavior if any of the following conditions are met:
+		// 1. Shrinking below the window control size (zoom < 1)
+		// 2. No custom items are present in the title bar
+		return getZoomFactor(getWindow(this.element)) < 1 || !this.hasZoomableElements;
 	}
 
 	override layout(width: number, height: number): void {
@@ -342,6 +349,7 @@ export class AuxiliaryTitlebarPart extends TitlebarPart implements IAuxiliaryTit
 	constructor(
 		readonly container: HTMLElement,
 		editorGroupsContainer: IEditorGroupsContainer,
+		private readonly mainTitlebar: TitlebarPart,
 		@IContextMenuService contextMenuService: IContextMenuService,
 		@IConfigurationService configurationService: IConfigurationService,
 		@IInstantiationService instantiationService: IInstantiationService,
@@ -354,6 +362,15 @@ export class AuxiliaryTitlebarPart extends TitlebarPart implements IAuxiliaryTit
 		const id = AuxiliaryTitlebarPart.COUNTER++;
 		super(`workbench.parts.auxiliaryTitle.${id}`, getWindow(container), contextMenuService, configurationService, instantiationService, themeService, storageService, layoutService, contextKeyService, hostService);
 	}
+
+	override get preventZoom(): boolean {
+		// Prevent zooming behavior if any of the following conditions are met:
+		// 1. Shrinking below the window control size (zoom < 1)
+		// 2. No custom items are present in the main title bar
+		// The auxiliary title bar never contains any zoomable items itself,
+		// but we want to match the behavior of the main title bar.
+		return getZoomFactor(getWindow(this.element)) < 1 || !this.mainTitlebar.hasZoomableElements;
+	}
 }
 
 /**
@@ -366,17 +383,21 @@ export class TitleService extends MultiWindowParts<TitlebarPart> implements ITit
 	readonly mainPart: TitlebarPart;
 
 	constructor(
-		@IInstantiationService private readonly instantiationService: IInstantiationService,
+		@IInstantiationService protected readonly instantiationService: IInstantiationService,
 		@IStorageService storageService: IStorageService,
 		@IThemeService themeService: IThemeService
 	) {
 		super('workbench.agentSessionsTitleService', themeService, storageService);
 
-		this.mainPart = this._register(this.instantiationService.createInstance(MainTitlebarPart));
+		this.mainPart = this._register(this.createMainTitlebarPart());
 		this.onMenubarVisibilityChange = this.mainPart.onMenubarVisibilityChange;
 		this._register(this.registerPart(this.mainPart));
 	}
 
+	protected createMainTitlebarPart(): TitlebarPart {
+		return this.instantiationService.createInstance(MainTitlebarPart);
+	}
+
 	//#region Auxiliary Titlebar Parts
 
 	createAuxiliaryTitlebarPart(container: HTMLElement, editorGroupsContainer: IEditorGroupsContainer, instantiationService: IInstantiationService): IAuxiliaryTitlebarPart {
@@ -386,7 +407,7 @@ export class TitleService extends MultiWindowParts<TitlebarPart> implements ITit
 
 		const disposables = new DisposableStore();
 
-		const titlebarPart = instantiationService.createInstance(AuxiliaryTitlebarPart, titlebarPartContainer, editorGroupsContainer);
+		const titlebarPart = this.doCreateAuxiliaryTitlebarPart(titlebarPartContainer, editorGroupsContainer, instantiationService);
 		disposables.add(this.registerPart(titlebarPart));
 
 		disposables.add(Event.runAndSubscribe(titlebarPart.onDidChange, () => titlebarPartContainer.style.height = `${titlebarPart.height}px`));
@@ -397,6 +418,10 @@ export class TitleService extends MultiWindowParts<TitlebarPart> implements ITit
 		return titlebarPart;
 	}
 
+	protected doCreateAuxiliaryTitlebarPart(container: HTMLElement, editorGroupsContainer: IEditorGroupsContainer, instantiationService: IInstantiationService): TitlebarPart & IAuxiliaryTitlebarPart {
+		return instantiationService.createInstance(AuxiliaryTitlebarPart, container, editorGroupsContainer, this.mainPart);
+	}
+
 	//#endregion
 
 	//#region Service Implementation
diff --git a/src/vs/sessions/browser/workbench.ts b/src/vs/sessions/browser/workbench.ts
index a7c2ce6026f..d9b4e673d1a 100644
--- a/src/vs/sessions/browser/workbench.ts
+++ b/src/vs/sessions/browser/workbench.ts
@@ -236,7 +236,7 @@ export class Workbench extends Disposable implements IWorkbenchLayoutService {
 
 	private readonly partVisibility: IPartVisibilityState = {
 		sidebar: true,
-		auxiliaryBar: true,
+		auxiliaryBar: false,
 		editor: false,
 		panel: false,
 		chatBar: true
@@ -1059,12 +1059,7 @@ export class Workbench extends Disposable implements IWorkbenchLayoutService {
 		}
 
 		this.partVisibility.sidebar = !hidden;
-
-		// Adjust CSS - for hiding, defer adding the class until animation
-		// completes so the part stays visible during the exit animation.
-		if (!hidden) {
-			this.mainContainer.classList.remove(LayoutClasses.SIDEBAR_HIDDEN);
-		}
+		this.mainContainer.classList.toggle(LayoutClasses.SIDEBAR_HIDDEN, hidden);
 
 		// Propagate to grid
 		this.workbenchGrid.setViewVisible(
@@ -1087,12 +1082,7 @@ export class Workbench extends Disposable implements IWorkbenchLayoutService {
 		}
 
 		this.partVisibility.auxiliaryBar = !hidden;
-
-		// Adjust CSS - for hiding, defer adding the class until animation
-		// completes so the part stays visible during the exit animation.
-		if (!hidden) {
-			this.mainContainer.classList.remove(LayoutClasses.AUXILIARYBAR_HIDDEN);
-		}
+		this.mainContainer.classList.toggle(LayoutClasses.AUXILIARYBAR_HIDDEN, hidden);
 
 		// Propagate to grid
 		this.workbenchGrid.setViewVisible(
@@ -1115,15 +1105,8 @@ export class Workbench extends Disposable implements IWorkbenchLayoutService {
 		}
 
 		this.partVisibility.editor = !hidden;
-
-		// Adjust CSS for main container
-		if (hidden) {
-			this.mainContainer.classList.add(LayoutClasses.MAIN_EDITOR_AREA_HIDDEN);
-			this.mainContainer.classList.remove(LayoutClasses.EDITOR_MODAL_VISIBLE);
-		} else {
-			this.mainContainer.classList.remove(LayoutClasses.MAIN_EDITOR_AREA_HIDDEN);
-			this.mainContainer.classList.add(LayoutClasses.EDITOR_MODAL_VISIBLE);
-		}
+		this.mainContainer.classList.toggle(LayoutClasses.MAIN_EDITOR_AREA_HIDDEN, hidden);
+		this.mainContainer.classList.toggle(LayoutClasses.EDITOR_MODAL_VISIBLE, !hidden);
 
 		// Show/hide modal
 		if (hidden) {
@@ -1144,13 +1127,7 @@ export class Workbench extends Disposable implements IWorkbenchLayoutService {
 		}
 
 		this.partVisibility.panel = !hidden;
-
-		// Adjust CSS - for hiding, defer adding the class until animation
-		// completes because `.nopanel .part.panel { display: none !important }`
-		// would instantly hide the panel content mid-animation.
-		if (!hidden) {
-			this.mainContainer.classList.remove(LayoutClasses.PANEL_HIDDEN);
-		}
+		this.mainContainer.classList.toggle(LayoutClasses.PANEL_HIDDEN, hidden);
 
 		// Propagate to grid
 		this.workbenchGrid.setViewVisible(
@@ -1173,13 +1150,7 @@ export class Workbench extends Disposable implements IWorkbenchLayoutService {
 		}
 
 		this.partVisibility.chatBar = !hidden;
-
-		// Adjust CSS
-		if (hidden) {
-			this.mainContainer.classList.add(LayoutClasses.CHATBAR_HIDDEN);
-		} else {
-			this.mainContainer.classList.remove(LayoutClasses.CHATBAR_HIDDEN);
-		}
+		this.mainContainer.classList.toggle(LayoutClasses.CHATBAR_HIDDEN, hidden);
 
 		// Propagate to grid
 		this.workbenchGrid.setViewVisible(this.chatBarPartView, !hidden);
diff --git a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationListWidget.ts b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationListWidget.ts
index 2b87f4219fa..9c05cd61f76 100644
--- a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationListWidget.ts
+++ b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationListWidget.ts
@@ -39,7 +39,7 @@ import { ILabelService } from '../../../../platform/label/common/label.js';
 import { parseAllHookFiles } from '../../../../workbench/contrib/chat/browser/promptSyntax/hookUtils.js';
 import { OS } from '../../../../base/common/platform.js';
 import { IRemoteAgentService } from '../../../../workbench/services/remote/common/remoteAgentService.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 import { ILogService } from '../../../../platform/log/common/log.js';
 import { Action, Separator } from '../../../../base/common/actions.js';
 import { IClipboardService } from '../../../../platform/clipboard/common/clipboardService.js';
@@ -340,7 +340,7 @@ export class AICustomizationListWidget extends Disposable {
 		@IPathService private readonly pathService: IPathService,
 		@ILabelService private readonly labelService: ILabelService,
 		@IRemoteAgentService private readonly remoteAgentService: IRemoteAgentService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 		@ILogService private readonly logService: ILogService,
 		@IClipboardService private readonly clipboardService: IClipboardService,
 		@ISCMService private readonly scmService: ISCMService,
diff --git a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagement.ts b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagement.ts
index e087542891a..131fbeff9e9 100644
--- a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagement.ts
+++ b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagement.ts
@@ -5,7 +5,7 @@
 
 import { RawContextKey } from '../../../../platform/contextkey/common/contextkey.js';
 import { URI } from '../../../../base/common/uri.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 import { localize } from '../../../../nls.js';
 import { MenuId } from '../../../../platform/actions/common/actions.js';
 
@@ -96,7 +96,7 @@ export const SIDEBAR_MIN_WIDTH = 150;
 export const SIDEBAR_MAX_WIDTH = 350;
 export const CONTENT_MIN_WIDTH = 400;
 
-export function getActiveSessionRoot(activeSessionService: ISessionsWorkbenchService): URI | undefined {
+export function getActiveSessionRoot(activeSessionService: ISessionsManagementService): URI | undefined {
 	const session = activeSessionService.getActiveSession();
 	return session?.worktree ?? session?.repository;
 }
diff --git a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagementEditor.ts b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagementEditor.ts
index 10fad486f0c..4571e7b0e0e 100644
--- a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagementEditor.ts
+++ b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationManagementEditor.ts
@@ -59,7 +59,7 @@ import { showConfigureHooksQuickPick } from '../../../../workbench/contrib/chat/
 import { CustomizationCreatorService } from './customizationCreatorService.js';
 import { ICommandService } from '../../../../platform/commands/common/commands.js';
 import { IAgentSessionsService } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsService.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 import { AgentSessionProviders } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessions.js';
 import { IWorkingCopyService } from '../../../../workbench/services/workingCopy/common/workingCopyService.js';
 
@@ -176,7 +176,7 @@ export class AICustomizationManagementEditor extends EditorPane {
 		@IConfigurationService private readonly configurationService: IConfigurationService,
 		@ILayoutService private readonly layoutService: ILayoutService,
 		@ICommandService private readonly commandService: ICommandService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 		@IAgentSessionsService private readonly agentSessionsService: IAgentSessionsService,
 		@IWorkingCopyService private readonly workingCopyService: IWorkingCopyService,
 	) {
diff --git a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationOverviewView.ts b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationOverviewView.ts
index d6681398747..677fdf24320 100644
--- a/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationOverviewView.ts
+++ b/src/vs/sessions/contrib/aiCustomizationManagement/browser/aiCustomizationOverviewView.ts
@@ -27,7 +27,7 @@ import { AICustomizationManagementEditorInput } from './aiCustomizationManagemen
 import { AICustomizationManagementEditor } from './aiCustomizationManagementEditor.js';
 import { agentIcon, instructionsIcon, promptIcon, skillIcon } from '../../aiCustomizationTreeView/browser/aiCustomizationTreeViewIcons.js';
 import { IWorkspaceContextService } from '../../../../platform/workspace/common/workspace.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 
 const $ = DOM.$;
 
@@ -66,7 +66,7 @@ export class AICustomizationOverviewView extends ViewPane {
 		@IEditorGroupsService private readonly editorGroupsService: IEditorGroupsService,
 		@IPromptsService private readonly promptsService: IPromptsService,
 		@IWorkspaceContextService private readonly workspaceContextService: IWorkspaceContextService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 	) {
 		super(options, keybindingService, contextMenuService, configurationService, contextKeyService, viewDescriptorService, instantiationService, openerService, themeService, hoverService);
 
diff --git a/src/vs/sessions/contrib/aiCustomizationManagement/browser/customizationCreatorService.ts b/src/vs/sessions/contrib/aiCustomizationManagement/browser/customizationCreatorService.ts
index 271a1f94d06..e1e8717e6af 100644
--- a/src/vs/sessions/contrib/aiCustomizationManagement/browser/customizationCreatorService.ts
+++ b/src/vs/sessions/contrib/aiCustomizationManagement/browser/customizationCreatorService.ts
@@ -3,7 +3,7 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 import { IChatWidgetService } from '../../../../workbench/contrib/chat/browser/chat.js';
 import { IChatService } from '../../../../workbench/contrib/chat/common/chatService/chatService.js';
 import { ChatModeKind } from '../../../../workbench/contrib/chat/common/constants.js';
@@ -30,7 +30,7 @@ export class CustomizationCreatorService {
 		@ICommandService private readonly commandService: ICommandService,
 		@IChatService private readonly chatService: IChatService,
 		@IChatWidgetService private readonly chatWidgetService: IChatWidgetService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 		@IPromptsService private readonly promptsService: IPromptsService,
 		@IQuickInputService private readonly quickInputService: IQuickInputService,
 	) { }
diff --git a/src/vs/sessions/contrib/aiCustomizationTreeView/browser/aiCustomizationTreeViewViews.ts b/src/vs/sessions/contrib/aiCustomizationTreeView/browser/aiCustomizationTreeViewViews.ts
index b8948468fea..b24b57c831f 100644
--- a/src/vs/sessions/contrib/aiCustomizationTreeView/browser/aiCustomizationTreeViewViews.ts
+++ b/src/vs/sessions/contrib/aiCustomizationTreeView/browser/aiCustomizationTreeViewViews.ts
@@ -35,7 +35,7 @@ import { IListVirtualDelegate } from '../../../../base/browser/ui/list/list.js';
 import { IEditorService } from '../../../../workbench/services/editor/common/editorService.js';
 import { ILogService } from '../../../../platform/log/common/log.js';
 import { IWorkspaceContextService } from '../../../../platform/workspace/common/workspace.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 
 //#region Context Keys
 
@@ -487,7 +487,7 @@ export class AICustomizationViewPane extends ViewPane {
 		@IMenuService private readonly menuService: IMenuService,
 		@ILogService private readonly logService: ILogService,
 		@IWorkspaceContextService private readonly workspaceContextService: IWorkspaceContextService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 	) {
 		super(options, keybindingService, contextMenuService, configurationService, contextKeyService, viewDescriptorService, instantiationService, openerService, themeService, hoverService);
 
diff --git a/src/vs/sessions/contrib/changesView/browser/changesView.ts b/src/vs/sessions/contrib/changesView/browser/changesView.ts
index d1d035676a9..a5e7e3e70a8 100644
--- a/src/vs/sessions/contrib/changesView/browser/changesView.ts
+++ b/src/vs/sessions/contrib/changesView/browser/changesView.ts
@@ -13,7 +13,7 @@ import { Codicon } from '../../../../base/common/codicons.js';
 import { MarkdownString } from '../../../../base/common/htmlContent.js';
 import { Iterable } from '../../../../base/common/iterator.js';
 import { DisposableStore, MutableDisposable } from '../../../../base/common/lifecycle.js';
-import { autorun, derived, observableFromEvent, observableValue } from '../../../../base/common/observable.js';
+import { autorun, derived, derivedOpts, IObservable, IObservableWithChange, observableFromEvent, observableValue } from '../../../../base/common/observable.js';
 import { basename, dirname } from '../../../../base/common/path.js';
 import { isEqual } from '../../../../base/common/resources.js';
 import { ThemeIcon } from '../../../../base/common/themables.js';
@@ -44,7 +44,6 @@ import { IResourceLabel, ResourceLabels } from '../../../../workbench/browser/la
 import { ViewPane, IViewPaneOptions, ViewAction } from '../../../../workbench/browser/parts/views/viewPane.js';
 import { ViewPaneContainer } from '../../../../workbench/browser/parts/views/viewPaneContainer.js';
 import { IViewDescriptorService } from '../../../../workbench/common/views.js';
-import { IChatWidgetService } from '../../../../workbench/contrib/chat/browser/chat.js';
 import { IAgentSessionsService } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsService.js';
 import { AgentSessionProviders } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessions.js';
 import { ChatContextKeys } from '../../../../workbench/contrib/chat/common/actions/chatContextKeys.js';
@@ -56,6 +55,7 @@ import { IActivityService, NumberBadge } from '../../../../workbench/services/ac
 import { ACTIVE_GROUP, IEditorService, SIDE_GROUP } from '../../../../workbench/services/editor/common/editorService.js';
 import { IExtensionService } from '../../../../workbench/services/extensions/common/extensions.js';
 import { IWorkbenchLayoutService } from '../../../../workbench/services/layout/browser/layoutService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 
 const $ = dom.$;
 
@@ -94,6 +94,11 @@ interface IChangesFolderItem {
 	readonly name: string;
 }
 
+interface IActiveSession {
+	readonly resource: URI;
+	readonly sessionType: string;
+}
+
 type ChangesTreeElement = IChangesFileItem | IChangesFolderItem;
 
 function isChangesFileItem(element: ChangesTreeElement): element is IChangesFileItem {
@@ -201,8 +206,14 @@ export class ChangesViewPane extends ViewPane {
 		this.storageService.store('changesView.viewMode', mode, StorageScope.WORKSPACE, StorageTarget.USER);
 	}
 
-	// Track the active session's editing session resource
-	private readonly activeSessionResource = observableValue<URI | undefined>(this, undefined);
+	// Track the active session used by this view
+	private readonly activeSession: IObservableWithChange<IActiveSession | undefined>;
+	private readonly activeSessionFileCountObs: IObservableWithChange<number>;
+	private readonly activeSessionHasChangesObs: IObservableWithChange<boolean>;
+
+	get activeSessionHasChanges(): IObservable<boolean> {
+		return this.activeSessionHasChangesObs;
+	}
 
 	// Badge for file count
 	private readonly badgeDisposable = this._register(new MutableDisposable());
@@ -220,9 +231,9 @@ export class ChangesViewPane extends ViewPane {
 		@IHoverService hoverService: IHoverService,
 		@IChatEditingService private readonly chatEditingService: IChatEditingService,
 		@IEditorService private readonly editorService: IEditorService,
-		@IChatWidgetService private readonly chatWidgetService: IChatWidgetService,
 		@IActivityService private readonly activityService: IActivityService,
 		@IAgentSessionsService private readonly agentSessionsService: IAgentSessionsService,
+		@ISessionsManagementService private readonly sessionManagementService: ISessionsManagementService,
 		@ILabelService private readonly labelService: ILabelService,
 		@IStorageService private readonly storageService: IStorageService,
 	) {
@@ -235,113 +246,85 @@ export class ChangesViewPane extends ViewPane {
 		this.viewModeContextKey = changesViewModeContextKey.bindTo(contextKeyService);
 		this.viewModeContextKey.set(initialMode);
 
+		// Track active session from sessions management service
+		this.activeSession = derivedOpts<IActiveSession | undefined>({
+			equalsFn: (a, b) => isEqual(a?.resource, b?.resource),
+		}, reader => {
+			const activeSession = this.sessionManagementService.activeSession.read(reader);
+			if (!activeSession?.resource) {
+				return undefined;
+			}
+
+			return {
+				resource: activeSession.resource,
+				sessionType: getChatSessionType(activeSession.resource),
+			};
+		}).recomputeInitiallyAndOnChange(this._store);
+
+		this.activeSessionFileCountObs = this.createActiveSessionFileCountObservable();
+		this.activeSessionHasChangesObs = this.activeSessionFileCountObs.map(fileCount => fileCount > 0).recomputeInitiallyAndOnChange(this._store);
+
 		// Setup badge tracking
 		this.registerBadgeTracking();
 
-		// Track active session from focused chat widgets
-		this.registerActiveSessionTracking();
-
 		// Set chatSessionType on the view's context key service so ViewTitle
 		// menu items can use it in their `when` clauses. Update reactively
 		// when the active session changes.
 		const viewSessionTypeKey = this.scopedContextKeyService.createKey<string>(ChatContextKeys.agentSessionType.key, '');
 		this._register(autorun(reader => {
-			const sessionResource = this.activeSessionResource.read(reader);
-			viewSessionTypeKey.set(sessionResource ? getChatSessionType(sessionResource) : '');
+			const activeSession = this.activeSession.read(reader);
+			viewSessionTypeKey.set(activeSession?.sessionType ?? '');
 		}));
 	}
 
-	private registerActiveSessionTracking(): void {
-		// Initialize with the last focused widget's session if available
-		const lastFocused = this.chatWidgetService.lastFocusedWidget;
-		if (lastFocused?.viewModel?.sessionResource) {
-			this.activeSessionResource.set(lastFocused.viewModel.sessionResource, undefined);
-		}
-
-		// Listen for new widgets and track their focus
-		this._register(this.chatWidgetService.onDidAddWidget(widget => {
-			this._register(widget.onDidFocus(() => {
-				if (widget.viewModel?.sessionResource) {
-					this.activeSessionResource.set(widget.viewModel.sessionResource, undefined);
-				}
-			}));
-
-			// Also track view model changes (when a widget loads a different session)
-			this._register(widget.onDidChangeViewModel(({ currentSessionResource }) => {
-				// Only update if this widget is focused
-				if (this.chatWidgetService.lastFocusedWidget === widget && currentSessionResource) {
-					this.activeSessionResource.set(currentSessionResource, undefined);
-				}
-			}));
-		}));
-
-		// Track focus changes on existing widgets
-		for (const widget of this.chatWidgetService.getAllWidgets()) {
-			this._register(widget.onDidFocus(() => {
-				if (widget.viewModel?.sessionResource) {
-					this.activeSessionResource.set(widget.viewModel.sessionResource, undefined);
-				}
-			}));
-
-			this._register(widget.onDidChangeViewModel(({ currentSessionResource }) => {
-				if (this.chatWidgetService.lastFocusedWidget === widget && currentSessionResource) {
-					this.activeSessionResource.set(currentSessionResource, undefined);
-				}
-			}));
-		}
-	}
-
 	private registerBadgeTracking(): void {
-		// Signal observable that triggers when sessions data changes
+		// Update badge when file count changes
+		this._register(autorun(reader => {
+			const fileCount = this.activeSessionFileCountObs.read(reader);
+			this.updateBadge(fileCount);
+		}));
+	}
+
+	private createActiveSessionFileCountObservable(): IObservableWithChange<number> {
+		const activeSessionResource = this.activeSession.map(a => a?.resource);
+
 		const sessionsChangedSignal = observableFromEvent(
 			this,
 			this.agentSessionsService.model.onDidChangeSessions,
 			() => ({}),
 		);
 
-		// Observable for session file changes from agentSessionsService (cloud/background sessions)
-		// Reactive to both activeSessionResource changes AND session data changes
 		const sessionFileChangesObs = derived(reader => {
-			const sessionResource = this.activeSessionResource.read(reader);
+			const sessionResource = activeSessionResource.read(reader);
 			sessionsChangedSignal.read(reader);
 			if (!sessionResource) {
 				return Iterable.empty();
 			}
+
 			const model = this.agentSessionsService.getSession(sessionResource);
 			return model?.changes instanceof Array ? model.changes : Iterable.empty();
 		});
 
-		// Create observable for the number of files changed in the active session
-		// Combines both editing session entries and session file changes (for cloud/background sessions)
-		const fileCountObs = derived(reader => {
-			const sessionResource = this.activeSessionResource.read(reader);
-			if (!sessionResource) {
+		return derived(reader => {
+			const activeSession = this.activeSession.read(reader);
+			if (!activeSession) {
 				return 0;
 			}
 
-			// Background chat sessions render the working set based on the session files, not the editing session
-			const isBackgroundSession = getChatSessionType(sessionResource) === AgentSessionProviders.Background;
+			const isBackgroundSession = activeSession.sessionType === AgentSessionProviders.Background;
 
-			// Count from editing session entries (skip for background sessions)
 			let editingSessionCount = 0;
 			if (!isBackgroundSession) {
 				const sessions = this.chatEditingService.editingSessionsObs.read(reader);
-				const session = sessions.find(candidate => isEqual(candidate.chatSessionResource, sessionResource));
+				const session = sessions.find(candidate => isEqual(candidate.chatSessionResource, activeSession.resource));
 				editingSessionCount = session ? session.entries.read(reader).length : 0;
 			}
 
-			// Count from session file changes (cloud/background sessions)
 			const sessionFiles = [...sessionFileChangesObs.read(reader)];
 			const sessionFilesCount = sessionFiles.length;
 
 			return editingSessionCount + sessionFilesCount;
-		});
-
-		// Update badge when file count changes
-		this._register(autorun(reader => {
-			const fileCount = fileCountObs.read(reader);
-			this.updateBadge(fileCount);
-		}));
+		}).recomputeInitiallyAndOnChange(this._store);
 	}
 
 	private updateBadge(fileCount: number): void {
@@ -404,25 +387,26 @@ export class ChangesViewPane extends ViewPane {
 
 	private onVisible(): void {
 		this.renderDisposables.clear();
+		const activeSessionResource = this.activeSession.map(a => a?.resource);
 
 		// Create observable for the active editing session
 		// Note: We must read editingSessionsObs to establish a reactive dependency,
 		// so that the view updates when a new editing session is added (e.g., cloud sessions)
 		const activeEditingSessionObs = derived(reader => {
-			const sessionResource = this.activeSessionResource.read(reader);
-			if (!sessionResource) {
+			const activeSession = this.activeSession.read(reader);
+			if (!activeSession) {
 				return undefined;
 			}
 			const sessions = this.chatEditingService.editingSessionsObs.read(reader);
-			return sessions.find(candidate => isEqual(candidate.chatSessionResource, sessionResource));
+			return sessions.find(candidate => isEqual(candidate.chatSessionResource, activeSession.resource));
 		});
 
 		// Create observable for edit session entries from the ACTIVE session only (local editing sessions)
 		const editSessionEntriesObs = derived(reader => {
-			const sessionResource = this.activeSessionResource.read(reader);
+			const activeSession = this.activeSession.read(reader);
 
 			// Background chat sessions render the working set based on the session files, not the editing session
-			if (sessionResource && getChatSessionType(sessionResource) === AgentSessionProviders.Background) {
+			if (activeSession?.sessionType === AgentSessionProviders.Background) {
 				return [];
 			}
 
@@ -462,9 +446,9 @@ export class ChangesViewPane extends ViewPane {
 		);
 
 		// Observable for session file changes from agentSessionsService (cloud/background sessions)
-		// Reactive to both activeSessionResource changes AND session data changes
+		// Reactive to both activeSession changes AND session data changes
 		const sessionFileChangesObs = derived(reader => {
-			const sessionResource = this.activeSessionResource.read(reader);
+			const sessionResource = activeSessionResource.read(reader);
 			sessionsChangedSignal.read(reader);
 			if (!sessionResource) {
 				return Iterable.empty();
@@ -530,8 +514,8 @@ export class ChangesViewPane extends ViewPane {
 			// `chatSessionType == copilotcli` (e.g. Create Pull Request) are shown
 			const chatSessionTypeKey = scopedContextKeyService.createKey<string>(ChatContextKeys.agentSessionType.key, '');
 			this.renderDisposables.add(autorun(reader => {
-				const sessionResource = this.activeSessionResource.read(reader);
-				chatSessionTypeKey.set(sessionResource ? getChatSessionType(sessionResource) : '');
+				const activeSession = this.activeSession.read(reader);
+				chatSessionTypeKey.set(activeSession?.sessionType ?? '');
 			}));
 
 			// Bind required context keys for the menu buttons
@@ -560,7 +544,7 @@ export class ChangesViewPane extends ViewPane {
 
 			this.renderDisposables.add(autorun(reader => {
 				const { isSessionMenu, added, removed } = topLevelStats.read(reader);
-				const sessionResource = this.activeSessionResource.read(reader);
+				const sessionResource = activeSessionResource.read(reader);
 				reader.store.add(scopedInstantiationService.createInstance(
 					MenuWorkbenchButtonBar,
 					this.actionsContainer!,
diff --git a/src/vs/sessions/contrib/chat/browser/chat.contribution.ts b/src/vs/sessions/contrib/chat/browser/chat.contribution.ts
index 8d3344be48d..b17a4083009 100644
--- a/src/vs/sessions/contrib/chat/browser/chat.contribution.ts
+++ b/src/vs/sessions/contrib/chat/browser/chat.contribution.ts
@@ -4,6 +4,7 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { Codicon } from '../../../../base/common/codicons.js';
+import { KeyCode, KeyMod } from '../../../../base/common/keyCodes.js';
 import { ServicesAccessor } from '../../../../editor/browser/editorExtensions.js';
 import { localize, localize2 } from '../../../../nls.js';
 import { Action2, MenuRegistry, registerAction2 } from '../../../../platform/actions/common/actions.js';
@@ -14,15 +15,19 @@ import { Registry } from '../../../../platform/registry/common/platform.js';
 import { SyncDescriptor } from '../../../../platform/instantiation/common/descriptors.js';
 import { AgentSessionProviders } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessions.js';
 import { isAgentSession } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsModel.js';
-import { ISessionsWorkbenchService, IsNewChatSessionContext } from '../../sessions/browser/sessionsWorkbenchService.js';
-import { ITerminalService, ITerminalGroupService } from '../../../../workbench/contrib/terminal/browser/terminal.js';
+import { ISessionsManagementService, IsNewChatSessionContext } from '../../sessions/browser/sessionsManagementService.js';
+import { ITerminalService } from '../../../../workbench/contrib/terminal/browser/terminal.js';
+import { TERMINAL_VIEW_ID } from '../../../../workbench/contrib/terminal/common/terminal.js';
+import { IViewsService } from '../../../../workbench/services/views/common/viewsService.js';
 import { Menus } from '../../../browser/menus.js';
 import { BranchChatSessionAction } from './branchChatSessionAction.js';
 import { RunScriptContribution } from './runScriptAction.js';
 import { InstantiationType, registerSingleton } from '../../../../platform/instantiation/common/extensions.js';
+import { KeybindingWeight } from '../../../../platform/keybinding/common/keybindingsRegistry.js';
 import { AgenticPromptsService } from './promptsService.js';
 import { IPromptsService } from '../../../../workbench/contrib/chat/common/promptSyntax/service/promptsService.js';
 import { ChatViewContainerId, ChatViewId } from '../../../../workbench/contrib/chat/browser/chat.js';
+import { CHAT_CATEGORY } from '../../../../workbench/contrib/chat/browser/actions/chatActions.js';
 import { NewChatViewPane, SessionsViewId } from './newChatViewPane.js';
 import { ViewPaneContainer } from '../../../../workbench/browser/parts/views/viewPaneContainer.js';
 import { registerIcon } from '../../../../platform/theme/common/iconRegistry.js';
@@ -46,9 +51,9 @@ export class OpenSessionWorktreeInVSCodeAction extends Action2 {
 
 	override async run(accessor: ServicesAccessor,): Promise<void> {
 		const hostService = accessor.get(IHostService);
-		const agentSessionsService = accessor.get(ISessionsWorkbenchService);
+		const sessionsManagementService = accessor.get(ISessionsManagementService);
 
-		const activeSession = agentSessionsService.activeSession.get();
+		const activeSession = sessionsManagementService.activeSession.get();
 		if (!activeSession) {
 			return;
 		}
@@ -64,6 +69,33 @@ export class OpenSessionWorktreeInVSCodeAction extends Action2 {
 }
 registerAction2(OpenSessionWorktreeInVSCodeAction);
 
+class NewChatInSessionsWindowAction extends Action2 {
+
+	constructor() {
+		super({
+			id: 'workbench.action.sessions.newChat',
+			title: localize2('chat.newEdits.label', "New Chat"),
+			category: CHAT_CATEGORY,
+			keybinding: {
+				weight: KeybindingWeight.WorkbenchContrib + 2,
+				primary: KeyMod.CtrlCmd | KeyCode.KeyN,
+				secondary: [KeyMod.CtrlCmd | KeyCode.KeyL],
+				mac: {
+					primary: KeyMod.CtrlCmd | KeyCode.KeyN,
+					secondary: [KeyMod.WinCtrl | KeyCode.KeyL]
+				},
+			}
+		});
+	}
+
+	override run(accessor: ServicesAccessor): void {
+		const sessionsManagementService = accessor.get(ISessionsManagementService);
+		sessionsManagementService.openNewSession();
+	}
+}
+
+registerAction2(NewChatInSessionsWindowAction);
+
 export class OpenSessionInTerminalAction extends Action2 {
 
 	constructor() {
@@ -81,10 +113,10 @@ export class OpenSessionInTerminalAction extends Action2 {
 
 	override async run(accessor: ServicesAccessor,): Promise<void> {
 		const terminalService = accessor.get(ITerminalService);
-		const terminalGroupService = accessor.get(ITerminalGroupService);
-		const agentSessionsService = accessor.get(ISessionsWorkbenchService);
+		const viewsService = accessor.get(IViewsService);
+		const sessionsManagementService = accessor.get(ISessionsManagementService);
 
-		const activeSession = agentSessionsService.activeSession.get();
+		const activeSession = sessionsManagementService.activeSession.get();
 		const repository = isAgentSession(activeSession) && activeSession.providerType !== AgentSessionProviders.Cloud
 			? activeSession.worktree
 			: undefined;
@@ -94,7 +126,7 @@ export class OpenSessionInTerminalAction extends Action2 {
 				terminalService.setActiveInstance(instance);
 			}
 		}
-		terminalGroupService.showPanel(true);
+		await viewsService.openView(TERMINAL_VIEW_ID, true);
 	}
 }
 
diff --git a/src/vs/sessions/contrib/chat/browser/media/chatWelcomePart.css b/src/vs/sessions/contrib/chat/browser/media/chatWelcomePart.css
index 6316384afb3..75d90b5f97d 100644
--- a/src/vs/sessions/contrib/chat/browser/media/chatWelcomePart.css
+++ b/src/vs/sessions/contrib/chat/browser/media/chatWelcomePart.css
@@ -12,7 +12,7 @@
 	height: 100%;
 	box-sizing: border-box;
 	overflow-x: hidden;
-	transition: justify-content 0.4s ease;
+	padding-bottom: 10%;
 }
 
 .chat-full-welcome.revealed {
@@ -29,32 +29,29 @@
 	overflow: visible;
 }
 
-/* Mascot */
-.chat-full-welcome-mascot {
-	width: 80px;
-	height: 80px;
+/* Watermark letterpress */
+.chat-full-welcome-letterpress {
+	width: 100%;
+	max-width: 200px;
+	aspect-ratio: 1/1;
+	background-image: url('../../../../../workbench/browser/parts/editor/media/letterpress-dark.svg');
 	background-size: contain;
-	background-repeat: no-repeat;
 	background-position: center;
+	background-repeat: no-repeat;
 	margin-top: 8px;
-	margin-bottom: 12px;
-	animation: chat-full-welcome-mascot-bounce 1s ease-in-out infinite;
-	transition: animation-duration 0.3s ease;
-	background-image: url('../../../../../workbench/browser/media/code-icon.svg');
+	margin-bottom: 20px;
 }
 
-.chat-full-welcome.revealed .chat-full-welcome-mascot {
-	animation-duration: 2s;
+.vs .chat-full-welcome-letterpress {
+	background-image: url('../../../../../workbench/browser/parts/editor/media/letterpress-light.svg');
 }
 
-@keyframes chat-full-welcome-mascot-bounce {
-	0%, 100% {
-		transform: translateY(0);
-	}
+.hc-light .chat-full-welcome-letterpress {
+	background-image: url('../../../../../workbench/browser/parts/editor/media/letterpress-hcLight.svg');
+}
 
-	50% {
-		transform: translateY(-6px);
-	}
+.hc-black .chat-full-welcome-letterpress {
+	background-image: url('../../../../../workbench/browser/parts/editor/media/letterpress-hcDark.svg');
 }
 
 /* Input slot */
@@ -71,18 +68,18 @@
 	animation: chat-full-welcome-fade-in 0.35s ease 0.15s both;
 }
 
-/* Option group pickers container (below the input) */
+/* Option group pickers container (above the input) */
 .chat-full-welcome-pickers-container {
 	display: none;
-	justify-content: center;
 	width: 100%;
 	max-width: 800px;
-	margin: 12px;
+	margin: 0 0 24px 0;
+	padding: 0;
 	box-sizing: border-box;
 }
 
 .chat-full-welcome.revealed .chat-full-welcome-pickers-container {
-	display: flex;
+	display: block;
 	animation: chat-full-welcome-fade-in 0.35s ease 0.1s both;
 }
 
@@ -103,6 +100,39 @@
 	margin-bottom: 0;
 }
 
+/* Local mode picker (Workspace / Worktree) below input */
+.chat-full-welcome-local-mode {
+	width: 100%;
+	max-width: 800px;
+	margin-top: 8px;
+	box-sizing: border-box;
+	display: none;
+	flex-direction: row;
+	align-items: center;
+	min-height: 28px;
+}
+
+.chat-full-welcome.revealed .chat-full-welcome-local-mode {
+	display: flex;
+}
+
+.sessions-chat-local-mode-left {
+	display: flex;
+	align-items: center;
+	min-width: 0;
+}
+
+.sessions-chat-local-mode-spacer {
+	flex: 1;
+}
+
+.sessions-chat-local-mode-right {
+	display: flex;
+	align-items: center;
+	gap: 2px;
+	min-width: 0;
+}
+
 /* Ensure the input editor fits properly */
 .chat-full-welcome-inputSlot .interactive-input-part {
 	margin: 0;
@@ -128,7 +158,7 @@
 	background-color: var(--vscode-input-background) !important;
 }
 
-/* Pickers row - flat horizontal bar below the input */
+/* Pickers row - two equal halves */
 .chat-full-welcome-pickers {
 	display: flex;
 	flex-direction: row;
@@ -136,56 +166,76 @@
 	align-items: center;
 	width: 100%;
 	box-sizing: border-box;
-	padding: 0 2px;
+	padding: 0;
 }
 
 .chat-full-welcome-pickers:empty {
 	display: none;
 }
 
-/* Left group (target dropdown + left-side extension pickers) */
-.sessions-chat-pickers-left {
-	display: flex;
-	align-items: center;
-	gap: 2px;
-	min-width: 0;
-}
-
-/* Spacer between left and right groups */
-.sessions-chat-pickers-spacer {
+/* Left half: target switcher, right-justified */
+.sessions-chat-pickers-left-half {
 	flex: 1;
-}
-
-/* Right group (repo/folder pickers) */
-.sessions-chat-extension-pickers-right {
 	display: flex;
+	justify-content: flex-end;
 	align-items: center;
-	gap: 2px;
 	min-width: 0;
 }
 
-.sessions-chat-extension-pickers-right:empty {
-	display: none;
-}
-
-/* Left extension pickers container */
-.sessions-chat-extension-pickers-left {
+/* Right half: pickers, left-justified */
+.sessions-chat-pickers-right-half {
+	flex: 1;
 	display: flex;
+	justify-content: flex-start;
 	align-items: center;
-	gap: 2px;
 	min-width: 0;
 }
 
-.sessions-chat-extension-pickers-left:empty {
+/* Separator between switcher and folder picker */
+.sessions-chat-pickers-left-separator {
+	width: 1px;
+	height: 22px;
+	background-color: var(--vscode-editorWidget-border, var(--vscode-contrastBorder));
+	margin: 0 12px;
+	flex-shrink: 0;
 	display: none;
 }
 
+/* Target switcher radio buttons - bigger and fancier */
+.sessions-chat-dropdown-wrapper .monaco-custom-radio > .monaco-button {
+	font-size: 13px;
+	line-height: 1.4em;
+	padding: 4px 14px;
+}
+
+.sessions-chat-dropdown-wrapper .monaco-custom-radio > .monaco-button:first-child {
+	border-top-left-radius: 6px;
+	border-bottom-left-radius: 6px;
+}
+
+.sessions-chat-dropdown-wrapper .monaco-custom-radio > .monaco-button:last-child {
+	border-top-right-radius: 6px;
+	border-bottom-right-radius: 6px;
+}
+
+.sessions-chat-dropdown-wrapper .monaco-custom-radio > .monaco-button:focus {
+	outline: none;
+}
+
+/* Folder label next to the picker */
+.sessions-chat-folder-label {
+	font-size: 13px;
+	color: var(--vscode-descriptionForeground);
+	white-space: nowrap;
+	margin-right: 6px;
+}
+
 /* Target dropdown button */
 .sessions-chat-dropdown-button {
 	display: flex;
 	align-items: center;
 	height: 16px;
-	padding: 3px 0 3px 6px;
+	padding: 3px 3px 3px 6px;
 	cursor: pointer;
 	font-size: 13px;
 	color: var(--vscode-descriptionForeground);
@@ -231,7 +281,7 @@
 	display: flex;
 	align-items: center;
 	height: 16px;
-	padding: 3px 0 3px 6px;
+	padding: 3px 3px 3px 6px;
 	background-color: transparent;
 	border: none;
 	color: var(--vscode-descriptionForeground);
diff --git a/src/vs/sessions/contrib/chat/browser/newChatViewPane.ts b/src/vs/sessions/contrib/chat/browser/newChatViewPane.ts
index 54a452f8c3d..1ada74835c2 100644
--- a/src/vs/sessions/contrib/chat/browser/newChatViewPane.ts
+++ b/src/vs/sessions/contrib/chat/browser/newChatViewPane.ts
@@ -7,7 +7,8 @@ import './media/chatWidget.css';
 import './media/chatWelcomePart.css';
 import * as dom from '../../../../base/browser/dom.js';
 import { Codicon } from '../../../../base/common/codicons.js';
-import { toAction } from '../../../../base/common/actions.js';
+import { Separator, toAction } from '../../../../base/common/actions.js';
+import { Radio } from '../../../../base/browser/ui/radio/radio.js';
 import { Emitter, Event } from '../../../../base/common/event.js';
 import { KeyCode } from '../../../../base/common/keyCodes.js';
 import { Disposable, DisposableStore, MutableDisposable } from '../../../../base/common/lifecycle.js';
@@ -25,17 +26,14 @@ import { IInstantiationService } from '../../../../platform/instantiation/common
 import { IKeybindingService } from '../../../../platform/keybinding/common/keybinding.js';
 import { ILogService } from '../../../../platform/log/common/log.js';
 import { IOpenerService } from '../../../../platform/opener/common/opener.js';
-import { IProductService } from '../../../../platform/product/common/productService.js';
 import { IThemeService } from '../../../../platform/theme/common/themeService.js';
 import { IHoverService } from '../../../../platform/hover/browser/hover.js';
 import { HoverPosition } from '../../../../base/browser/ui/hover/hoverWidget.js';
 import { renderIcon } from '../../../../base/browser/ui/iconLabel/iconLabels.js';
-import { isEqual } from '../../../../base/common/resources.js';
-import { asCSSUrl } from '../../../../base/browser/cssValue.js';
-import { FileAccess } from '../../../../base/common/network.js';
+import { basename, isEqual } from '../../../../base/common/resources.js';
 import { localize } from '../../../../nls.js';
-import { AgentSessionProviders, getAgentSessionProviderIcon } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessions.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { AgentSessionProviders } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessions.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 import { ChatSessionPosition, getResourceForNewChatSession } from '../../../../workbench/contrib/chat/browser/chatSessions/chatSessions.contribution.js';
 import { ChatSessionPickerActionItem, IChatSessionPickerDelegate } from '../../../../workbench/contrib/chat/browser/chatSessions/chatSessionPickerActionItem.js';
 import { SearchableOptionPickerActionItem } from '../../../../workbench/contrib/chat/browser/chatSessions/searchableOptionPickerActionItem.js';
@@ -43,10 +41,15 @@ import { ChatAgentLocation, ChatModeKind } from '../../../../workbench/contrib/c
 import { IChatSendRequestOptions } from '../../../../workbench/contrib/chat/common/chatService/chatService.js';
 import { IChatSessionProviderOptionGroup, IChatSessionProviderOptionItem, IChatSessionsService } from '../../../../workbench/contrib/chat/common/chatSessionsService.js';
 import { ILanguageModelChatMetadataAndIdentifier, ILanguageModelsService } from '../../../../workbench/contrib/chat/common/languageModels.js';
-import { IModelPickerDelegate, ModelPickerActionItem } from '../../../../workbench/contrib/chat/browser/widget/input/modelPickerActionItem.js';
+import { IModelPickerDelegate } from '../../../../workbench/contrib/chat/browser/widget/input/modelPickerActionItem.js';
+import { EnhancedModelPickerActionItem } from '../../../../workbench/contrib/chat/browser/widget/input/modelPickerActionItem2.js';
 import { IChatInputPickerOptions } from '../../../../workbench/contrib/chat/browser/widget/input/chatInputPickerActionItem.js';
 import { WorkspaceFolderCountContext } from '../../../../workbench/common/contextkeys.js';
 import { IViewDescriptorService } from '../../../../workbench/common/views.js';
+import { IWorkspaceContextService } from '../../../../platform/workspace/common/workspace.js';
+import { IFileDialogService } from '../../../../platform/dialogs/common/dialogs.js';
+import { IWorkspacesService, isRecentFolder } from '../../../../platform/workspaces/common/workspaces.js';
+import { IStorageService, StorageScope, StorageTarget } from '../../../../platform/storage/common/storage.js';
 import { IViewPaneOptions, ViewPane } from '../../../../workbench/browser/parts/views/viewPane.js';
 import { ContextMenuController } from '../../../../editor/contrib/contextmenu/browser/contextmenu.js';
 import { getSimpleEditorOptions } from '../../../../workbench/contrib/codeEditor/browser/simpleEditorOptions.js';
@@ -104,6 +107,20 @@ class TargetConfig extends Disposable implements ITargetConfig {
 			this._onDidChangeSelectedTarget.fire(target);
 		}
 	}
+
+	setAllowedTargets(targets: AgentSessionProviders[]): void {
+		const newSet = new Set(targets);
+		this._allowedTargets.set(newSet, undefined);
+		this._onDidChangeAllowedTargets.fire(newSet);
+
+		// If the currently selected target is no longer allowed, switch to the first allowed target
+		const current = this._selectedTarget.get();
+		if (current && !newSet.has(current)) {
+			const fallback = newSet.values().next().value;
+			this._selectedTarget.set(fallback, undefined);
+			this._onDidChangeSelectedTarget.fire(fallback);
+		}
+	}
 }
 
 // #endregion
@@ -119,6 +136,7 @@ export interface INewChatSendRequestData {
 	readonly query: string;
 	readonly sendOptions: IChatSendRequestOptions;
 	readonly selectedOptions: ReadonlyMap<string, IChatSessionProviderOptionItem>;
+	readonly folderUri?: URI;
 }
 
 /**
@@ -139,7 +157,7 @@ export interface INewChatWidgetOptions {
  */
 class NewChatWidget extends Disposable {
 
-	private readonly _targetConfig: ITargetConfig;
+	private readonly _targetConfig: TargetConfig;
 	private readonly _options: INewChatWidgetOptions;
 
 	// Input
@@ -155,6 +173,11 @@ class NewChatWidget extends Disposable {
 	private _extensionPickersLeftContainer: HTMLElement | undefined;
 	private _extensionPickersRightContainer: HTMLElement | undefined;
 	private _inputSlot: HTMLElement | undefined;
+	private _localModeContainer: HTMLElement | undefined;
+	private _localModeDropdownContainer: HTMLElement | undefined;
+	private _localModePickersContainer: HTMLElement | undefined;
+	private _localMode: 'workspace' | 'worktree' = 'worktree';
+	private _selectedFolderUri: URI | undefined;
 	private readonly _pickerWidgets = new Map<string, ChatSessionPickerActionItem | SearchableOptionPickerActionItem>();
 	private readonly _pickerWidgetDisposables = this._register(new DisposableStore());
 	private readonly _optionEmitters = new Map<string, Emitter<IChatSessionProviderOptionItem>>();
@@ -171,19 +194,29 @@ class NewChatWidget extends Disposable {
 		@ILanguageModelsService private readonly languageModelsService: ILanguageModelsService,
 		@IContextKeyService private readonly contextKeyService: IContextKeyService,
 		@IContextMenuService private readonly contextMenuService: IContextMenuService,
-		@IProductService private readonly productService: IProductService,
 		@ILogService private readonly logService: ILogService,
 		@IHoverService _hoverService: IHoverService,
+		@IWorkspaceContextService private readonly workspaceContextService: IWorkspaceContextService,
+		@IFileDialogService private readonly fileDialogService: IFileDialogService,
+		@IWorkspacesService private readonly workspacesService: IWorkspacesService,
+		@IStorageService private readonly storageService: IStorageService,
 	) {
 		super();
 		this._targetConfig = this._register(new TargetConfig(options.targetConfig));
 		this._options = options;
 
+		// Restore last picked folder
+		const lastFolder = this.storageService.get('agentSessions.lastPickedFolder', StorageScope.PROFILE);
+		if (lastFolder) {
+			try { this._selectedFolderUri = URI.parse(lastFolder); } catch { /* ignore */ }
+		}
+
 		// When target changes, regenerate pending resource
 		this._register(this._targetConfig.onDidChangeSelectedTarget(() => {
 			this._generatePendingSessionResource();
-			this._updateTargetDropdown();
+			this._notifyFolderSelection();
 			this._renderExtensionPickers(true);
+			this._renderLocalModePicker();
 		}));
 
 		this._register(this._targetConfig.onDidChangeAllowedTargets(() => {
@@ -196,6 +229,7 @@ class NewChatWidget extends Disposable {
 
 		// Listen for option group changes to re-render pickers
 		this._register(this.chatSessionsService.onDidChangeOptionGroups(() => {
+			this._notifyFolderSelection();
 			this._renderExtensionPickers();
 		}));
 
@@ -224,11 +258,12 @@ class NewChatWidget extends Disposable {
 		const wrapper = dom.append(container, dom.$('.sessions-chat-widget'));
 		const welcomeElement = dom.append(wrapper, dom.$('.chat-full-welcome'));
 
-		// Mascot
+		// Watermark letterpress
 		const header = dom.append(welcomeElement, dom.$('.chat-full-welcome-header'));
-		const quality = this.productService.quality ?? 'stable';
-		const mascot = dom.append(header, dom.$('.chat-full-welcome-mascot'));
-		mascot.style.backgroundImage = asCSSUrl(FileAccess.asBrowserUri(`vs/sessions/contrib/chat/browser/media/code-icon-agent-sessions-${quality}.svg`));
+		dom.append(header, dom.$('.chat-full-welcome-letterpress'));
+
+		// Option group pickers (above the input)
+		this._pickersContainer = dom.append(welcomeElement, dom.$('.chat-full-welcome-pickers-container'));
 
 		// Input slot
 		this._inputSlot = dom.append(welcomeElement, dom.$('.chat-full-welcome-inputSlot'));
@@ -239,8 +274,11 @@ class NewChatWidget extends Disposable {
 		this._createToolbar(inputArea);
 		this._inputSlot.appendChild(inputArea);
 
-		// Option group pickers (below the input)
-		this._pickersContainer = dom.append(welcomeElement, dom.$('.chat-full-welcome-pickers-container'));
+		// Local mode picker (below the input, shown when Local is selected)
+		this._localModeContainer = dom.append(welcomeElement, dom.$('.chat-full-welcome-local-mode'));
+		this._localModeDropdownContainer = dom.append(this._localModeContainer, dom.$('.sessions-chat-local-mode-left'));
+		dom.append(this._localModeContainer, dom.$('.sessions-chat-local-mode-spacer'));
+		this._localModePickersContainer = dom.append(this._localModeContainer, dom.$('.sessions-chat-local-mode-right'));
 
 		// Render target buttons & extension pickers
 		this._renderOptionGroupPickers();
@@ -251,12 +289,23 @@ class NewChatWidget extends Disposable {
 		// Generate pending resource for option changes
 		this._generatePendingSessionResource();
 
+		// Render local mode picker
+		this._renderLocalModePicker();
+
 		// Reveal
 		welcomeElement.classList.add('revealed');
 	}
 
-	private _generatePendingSessionResource(): void {
+	private _getEffectiveTarget(): AgentSessionProviders | undefined {
 		const target = this._targetConfig.selectedTarget.get();
+		if (target === AgentSessionProviders.Local && this._localMode === 'worktree') {
+			return AgentSessionProviders.Background;
+		}
+		return target;
+	}
+
+	private _generatePendingSessionResource(): void {
+		const target = this._getEffectiveTarget();
 		if (!target || target === AgentSessionProviders.Local) {
 			this._pendingSessionResource = undefined;
 			return;
@@ -354,7 +403,7 @@ class NewChatWidget extends Disposable {
 		const action = { id: 'sessions.modelPicker', label: '', enabled: true, class: undefined, tooltip: '', run: () => { } };
 
 		const modelPicker = this.instantiationService.createInstance(
-			ModelPickerActionItem, action, undefined, delegate, pickerOptions,
+			EnhancedModelPickerActionItem, action, delegate, pickerOptions,
 		);
 		this._modelPickerDisposable.value = modelPicker;
 		modelPicker.render(container);
@@ -397,17 +446,15 @@ class NewChatWidget extends Disposable {
 
 		const pickersRow = dom.append(this._pickersContainer, dom.$('.chat-full-welcome-pickers'));
 
-		// Left group: target dropdown + non-repo extension pickers
-		const leftGroup = dom.append(pickersRow, dom.$('.sessions-chat-pickers-left'));
-		this._targetDropdownContainer = dom.append(leftGroup, dom.$('.sessions-chat-dropdown-wrapper'));
+		// Left half: target switcher (right-justified within its half)
+		const leftHalf = dom.append(pickersRow, dom.$('.sessions-chat-pickers-left-half'));
+		this._targetDropdownContainer = dom.append(leftHalf, dom.$('.sessions-chat-dropdown-wrapper'));
 		this._renderTargetDropdown(this._targetDropdownContainer);
-		this._extensionPickersLeftContainer = dom.append(leftGroup, dom.$('.sessions-chat-extension-pickers-left'));
 
-		// Spacer
-		dom.append(pickersRow, dom.$('.sessions-chat-pickers-spacer'));
-
-		// Right group: repo/folder pickers
-		this._extensionPickersRightContainer = dom.append(pickersRow, dom.$('.sessions-chat-extension-pickers-right'));
+		// Right half: separator + pickers (left-justified within its half)
+		const rightHalf = dom.append(pickersRow, dom.$('.sessions-chat-pickers-right-half'));
+		this._extensionPickersLeftContainer = dom.append(rightHalf, dom.$('.sessions-chat-pickers-left-separator'));
+		this._extensionPickersRightContainer = dom.append(rightHalf, dom.$('.sessions-chat-extension-pickers-right'));
 
 		this._renderExtensionPickers();
 	}
@@ -418,62 +465,146 @@ class NewChatWidget extends Disposable {
 			return;
 		}
 
-		const activeType = this._targetConfig.selectedTarget.get() ?? AgentSessionProviders.Background;
-		const icon = getAgentSessionProviderIcon(activeType);
-		const name = getAgentSessionProviderName(activeType);
+		const activeType = this._targetConfig.selectedTarget.get() ?? AgentSessionProviders.Local;
+		const targets = [AgentSessionProviders.Local, AgentSessionProviders.Cloud].filter(t => allowed.has(t));
+		const activeIndex = targets.indexOf(activeType);
 
-		const button = dom.append(container, dom.$('.sessions-chat-dropdown-button'));
+		const radio = new Radio({
+			items: targets.map(target => ({
+				text: getAgentSessionProviderName(target),
+				isActive: target === activeType,
+			})),
+		});
+		this._welcomeContentDisposables.add(radio);
+		container.appendChild(radio.domNode);
+
+		if (activeIndex >= 0) {
+			radio.setActiveItem(activeIndex);
+		}
+
+		this._welcomeContentDisposables.add(radio.onDidSelect(index => {
+			this._targetConfig.setSelectedTarget(targets[index]);
+		}));
+	}
+
+	// --- Local mode picker (Workspace / Worktree) ---
+
+	private readonly _localModeDisposables = this._register(new DisposableStore());
+
+	private _renderLocalModePicker(): void {
+		if (!this._localModeContainer || !this._localModeDropdownContainer || !this._localModePickersContainer) {
+			return;
+		}
+
+		this._localModeDisposables.clear();
+		dom.clearNode(this._localModeDropdownContainer);
+		dom.clearNode(this._localModePickersContainer);
+
+		const selectedTarget = this._targetConfig.selectedTarget.get();
+		if (selectedTarget !== AgentSessionProviders.Local) {
+			this._localModeContainer.style.visibility = 'hidden';
+			return;
+		}
+
+		this._localModeContainer.style.visibility = '';
+
+		// Dropdown button for Workspace / Worktree
+		const modeLabel = this._localMode === 'workspace'
+			? localize('localMode.workspace', "Workspace")
+			: localize('localMode.worktree', "Worktree");
+		const modeIcon = this._localMode === 'workspace' ? Codicon.folder : Codicon.worktree;
+
+		const button = dom.append(this._localModeDropdownContainer, dom.$('.sessions-chat-dropdown-button'));
 		button.tabIndex = 0;
 		button.role = 'button';
 		button.ariaHasPopup = 'true';
-		dom.append(button, renderIcon(icon));
-		dom.append(button, dom.$('span.sessions-chat-dropdown-label', undefined, name));
+		dom.append(button, renderIcon(modeIcon));
+		dom.append(button, dom.$('span.sessions-chat-dropdown-label', undefined, modeLabel));
 		dom.append(button, renderIcon(Codicon.chevronDown));
 
-		this._welcomeContentDisposables.add(dom.addDisposableListener(button, dom.EventType.CLICK, () => {
-			const currentAllowed = this._targetConfig.allowedTargets.get();
-			const currentActive = this._targetConfig.selectedTarget.get();
-			const actions = [...currentAllowed]
-				.filter(t => t !== AgentSessionProviders.Local)
-				.map(sessionType => {
-					const label = getAgentSessionProviderName(sessionType);
-					return toAction({
-						id: `target.${sessionType}`,
-						label,
-						checked: sessionType === currentActive,
-						run: () => this._targetConfig.setSelectedTarget(sessionType),
-					});
-				});
+		this._localModeDisposables.add(dom.addDisposableListener(button, dom.EventType.CLICK, () => {
+			const actions = [
+				toAction({
+					id: 'localMode.workspace',
+					label: localize('localMode.workspace', "Workspace"),
+					checked: this._localMode === 'workspace',
+					run: () => this._setLocalMode('workspace'),
+				}),
+				toAction({
+					id: 'localMode.worktree',
+					label: localize('localMode.worktree', "Worktree"),
+					checked: this._localMode === 'worktree',
+					run: () => this._setLocalMode('worktree'),
+				}),
+			];
 			this.contextMenuService.showContextMenu({
 				getAnchor: () => button,
 				getActions: () => actions,
 			});
 		}));
+
+		// Render pickers in the right side
+		this._renderLocalModePickers();
 	}
 
-	private _updateTargetDropdown(): void {
-		if (!this._targetDropdownContainer) {
+	private _setLocalMode(mode: 'workspace' | 'worktree'): void {
+		if (this._localMode !== mode) {
+			this._localMode = mode;
+			this._generatePendingSessionResource();
+			this._notifyFolderSelection();
+			this._renderLocalModePicker();
+		}
+	}
+
+	private _notifyFolderSelection(): void {
+		if (!this._pendingSessionResource) {
 			return;
 		}
-		dom.clearNode(this._targetDropdownContainer);
-		this._renderTargetDropdown(this._targetDropdownContainer);
+		const folderUri = this._selectedFolderUri ?? this.workspaceContextService.getWorkspace().folders[0]?.uri;
+		if (folderUri) {
+			this.chatSessionsService.notifySessionOptionsChange(
+				this._pendingSessionResource,
+				[{ optionId: 'repository', value: folderUri.fsPath }]
+			).catch((err) => this.logService.error('Failed to notify extension of folder selection:', err));
+		}
+	}
+
+	private _renderLocalModePickers(): void {
+		if (!this._localModePickersContainer) {
+			return;
+		}
+		dom.clearNode(this._localModePickersContainer);
+
+		if (this._localMode === 'worktree') {
+			// Worktree mode: render extension pickers for Background provider
+			this._renderExtensionPickersInContainer(this._localModePickersContainer, AgentSessionProviders.Background);
+		}
 	}
 
 	// --- Welcome: Extension option pickers ---
 
 	private _renderExtensionPickers(force?: boolean): void {
-		if (!this._extensionPickersLeftContainer || !this._extensionPickersRightContainer) {
+		if (!this._extensionPickersRightContainer) {
 			return;
 		}
 
-		const activeSessionType = this._targetConfig.selectedTarget.get();
+		const activeSessionType = this._getEffectiveTarget();
 		if (!activeSessionType) {
 			this._clearExtensionPickers();
 			return;
 		}
 
+		// For Local target, show folder picker in top row and handle bottom row
+		if (this._targetConfig.selectedTarget.get() === AgentSessionProviders.Local) {
+			this._clearExtensionPickers();
+			this._renderLocalFolderPickerInTopRow();
+			this._renderLocalModePicker();
+			return;
+		}
+
 		const optionGroups = this.chatSessionsService.getOptionGroupsForSessionType(activeSessionType);
 		if (!optionGroups || optionGroups.length === 0) {
+			this._clearExtensionPickers();
 			return;
 		}
 
@@ -503,7 +634,15 @@ class NewChatWidget extends Disposable {
 			return;
 		}
 
-		visibleGroups.sort((a, b) => (a.when ? 1 : 0) - (b.when ? 1 : 0));
+		visibleGroups.sort((a, b) => {
+			// Repo/folder pickers first, then others
+			const aRepo = isRepoOrFolderGroup(a) ? 0 : 1;
+			const bRepo = isRepoOrFolderGroup(b) ? 0 : 1;
+			if (aRepo !== bRepo) {
+				return aRepo - bRepo;
+			}
+			return (a.when ? 1 : 0) - (b.when ? 1 : 0);
+		});
 
 		if (!force && this._pickerWidgets.size === visibleGroups.length) {
 			const allMatch = visibleGroups.every(g => this._pickerWidgets.has(g.id));
@@ -514,6 +653,11 @@ class NewChatWidget extends Disposable {
 
 		this._clearExtensionPickers();
 
+		// Show the separator between target switcher and extension pickers
+		if (this._extensionPickersLeftContainer) {
+			this._extensionPickersLeftContainer.style.display = 'block';
+		}
+
 		for (const optionGroup of visibleGroups) {
 			const initialItem = this._getDefaultOptionForGroup(optionGroup);
 			const initialState = { group: optionGroup, item: initialItem };
@@ -556,15 +700,150 @@ class NewChatWidget extends Disposable {
 			this._pickerWidgetDisposables.add(widget);
 			this._pickerWidgets.set(optionGroup.id, widget);
 
-			// Repo/folder pickers go to the right; others go to the left
-			const isRightAligned = isRepoOrFolderGroup(optionGroup);
-			const targetContainer = isRightAligned ? this._extensionPickersRightContainer! : this._extensionPickersLeftContainer!;
+			// All pickers go to the right
+			const targetContainer = this._extensionPickersRightContainer!;
 
 			const slot = dom.append(targetContainer, dom.$('.sessions-chat-picker-slot'));
 			widget.render(slot);
 		}
 	}
 
+	private _renderLocalFolderPickerInTopRow(): void {
+		if (!this._extensionPickersRightContainer) {
+			return;
+		}
+
+		// Show the separator
+		if (this._extensionPickersLeftContainer) {
+			this._extensionPickersLeftContainer.style.display = 'block';
+		}
+
+		this._renderLocalFolderPickerInContainer(this._extensionPickersRightContainer, this._pickerWidgetDisposables);
+	}
+
+	private _renderLocalFolderPickerInContainer(container: HTMLElement, disposables: DisposableStore): void {
+		const currentFolderUri = this._selectedFolderUri ?? this.workspaceContextService.getWorkspace().folders[0]?.uri;
+		const folderName = currentFolderUri ? basename(currentFolderUri) : localize('pickFolder', "Pick Folder");
+
+		const slot = dom.append(container, dom.$('.sessions-chat-picker-slot'));
+		const button = dom.append(slot, dom.$('.sessions-chat-dropdown-button'));
+		button.tabIndex = 0;
+		button.role = 'button';
+		button.ariaHasPopup = 'true';
+		dom.append(button, dom.$('span.sessions-chat-dropdown-label', undefined, folderName));
+		dom.append(button, renderIcon(Codicon.chevronDown));
+
+		const switchFolder = async (folderUri: URI) => {
+			this._selectedFolderUri = folderUri;
+			this.storageService.store('agentSessions.lastPickedFolder', folderUri.toString(), StorageScope.PROFILE, StorageTarget.MACHINE);
+			this._notifyFolderSelection();
+			this._renderExtensionPickers(true);
+		};
+
+		disposables.add(dom.addDisposableListener(button, dom.EventType.CLICK, async () => {
+			const recentlyOpened = await this.workspacesService.getRecentlyOpened();
+			const recentFolders = recentlyOpened.workspaces
+				.filter(isRecentFolder)
+				.filter(r => !currentFolderUri || !isEqual(r.folderUri, currentFolderUri))
+				.slice(0, 10);
+
+			const actions = recentFolders.map(recent => toAction({
+				id: recent.folderUri.toString(),
+				label: recent.label || basename(recent.folderUri),
+				run: () => switchFolder(recent.folderUri),
+			}));
+
+			actions.push(new Separator());
+			actions.push(toAction({
+				id: 'browse',
+				label: localize('browseFolder', "Browse..."),
+				run: async () => {
+					const selected = await this.fileDialogService.showOpenDialog({
+						canSelectFiles: false,
+						canSelectFolders: true,
+						canSelectMany: false,
+						title: localize('selectFolder', "Select Folder"),
+					});
+					if (selected?.[0]) {
+						await switchFolder(selected[0]);
+					}
+				},
+			}));
+
+			this.contextMenuService.showContextMenu({
+				getAnchor: () => button,
+				getActions: () => actions,
+			});
+		}));
+	}
+
+	private _renderExtensionPickersInContainer(container: HTMLElement, sessionType: AgentSessionProviders): void {
+		const optionGroups = this.chatSessionsService.getOptionGroupsForSessionType(sessionType);
+		if (!optionGroups || optionGroups.length === 0) {
+			return;
+		}
+
+		const visibleGroups: IChatSessionProviderOptionGroup[] = [];
+		for (const group of optionGroups) {
+			if (isModelOptionGroup(group)) {
+				continue;
+			}
+			if (group.id === 'repository') {
+				continue;
+			}
+			const hasItems = group.items.length > 0 || (group.commands || []).length > 0 || !!group.searchable;
+			const passesWhenClause = this._evaluateOptionGroupVisibility(group);
+			if (hasItems && passesWhenClause) {
+				visibleGroups.push(group);
+			}
+		}
+
+		for (const optionGroup of visibleGroups) {
+			const initialItem = this._getDefaultOptionForGroup(optionGroup);
+			const initialState = { group: optionGroup, item: initialItem };
+
+			if (initialItem) {
+				this._updateOptionContextKey(optionGroup.id, initialItem.id);
+			}
+
+			const emitter = this._getOrCreateOptionEmitter(optionGroup.id);
+			const itemDelegate: IChatSessionPickerDelegate = {
+				getCurrentOption: () => this._selectedOptions.get(optionGroup.id) ?? this._getDefaultOptionForGroup(optionGroup),
+				onDidChangeOption: emitter.event,
+				setOption: (option: IChatSessionProviderOptionItem) => {
+					this._selectedOptions.set(optionGroup.id, option);
+					this._updateOptionContextKey(optionGroup.id, option.id);
+					emitter.fire(option);
+
+					if (this._pendingSessionResource) {
+						this.chatSessionsService.notifySessionOptionsChange(
+							this._pendingSessionResource,
+							[{ optionId: optionGroup.id, value: option }]
+						).catch((err) => this.logService.error(`Failed to notify extension of ${optionGroup.id} change:`, err));
+					}
+
+					this._renderLocalModePickers();
+				},
+				getOptionGroup: () => {
+					const groups = this.chatSessionsService.getOptionGroupsForSessionType(sessionType);
+					return groups?.find((g: { id: string }) => g.id === optionGroup.id);
+				},
+				getSessionResource: () => this._pendingSessionResource,
+			};
+
+			const action = toAction({ id: optionGroup.id, label: optionGroup.name, run: () => { } });
+			const widget = this.instantiationService.createInstance(
+				optionGroup.searchable ? SearchableOptionPickerActionItem : ChatSessionPickerActionItem,
+				action, initialState, itemDelegate
+			);
+
+			this._localModeDisposables.add(widget);
+
+			const slot = dom.append(container, dom.$('.sessions-chat-picker-slot'));
+			widget.render(slot);
+		}
+	}
+
 	private _evaluateOptionGroupVisibility(optionGroup: { id: string; when?: string }): boolean {
 		if (!optionGroup.when) {
 			return true;
@@ -578,7 +857,7 @@ class NewChatWidget extends Disposable {
 	}
 
 	private _syncOptionsFromSession(sessionResource: URI): void {
-		const activeSessionType = this._targetConfig.selectedTarget.get();
+		const activeSessionType = this._getEffectiveTarget();
 		if (!activeSessionType) {
 			return;
 		}
@@ -640,7 +919,7 @@ class NewChatWidget extends Disposable {
 		this._pickerWidgets.clear();
 		this._optionEmitters.clear();
 		if (this._extensionPickersLeftContainer) {
-			dom.clearNode(this._extensionPickersLeftContainer);
+			this._extensionPickersLeftContainer.style.display = 'none';
 		}
 		if (this._extensionPickersRightContainer) {
 			dom.clearNode(this._extensionPickersRightContainer);
@@ -655,7 +934,7 @@ class NewChatWidget extends Disposable {
 			return;
 		}
 
-		const target = this._targetConfig.selectedTarget.get();
+		const target = this._getEffectiveTarget();
 		if (!target) {
 			this.logService.warn('ChatWelcomeWidget: No target selected, cannot create session');
 			return;
@@ -682,12 +961,15 @@ class NewChatWidget extends Disposable {
 			agentIdSilent: contribution?.type,
 		};
 
+		const folderUri = this._selectedFolderUri ?? this.workspaceContextService.getWorkspace().folders[0]?.uri;
+
 		this._options.onSendRequest?.({
 			resource,
 			target,
 			query,
 			sendOptions,
 			selectedOptions: new Map(this._selectedOptions),
+			folderUri,
 		});
 	}
 
@@ -704,6 +986,10 @@ class NewChatWidget extends Disposable {
 	focusInput(): void {
 		this._editor?.focus();
 	}
+
+	updateAllowedTargets(targets: AgentSessionProviders[]): void {
+		this._targetConfig.setAllowedTargets(targets);
+	}
 }
 
 // #endregion
@@ -730,7 +1016,8 @@ export class NewChatViewPane extends ViewPane {
 		@IOpenerService openerService: IOpenerService,
 		@IThemeService themeService: IThemeService,
 		@IHoverService hoverService: IHoverService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
+		@IWorkspaceContextService private readonly workspaceContextService: IWorkspaceContextService,
 		@ILogService private readonly logService: ILogService,
 	) {
 		super(options, keybindingService, contextMenuService, configurationService, contextKeyService, viewDescriptorService, instantiationService, openerService, themeService, hoverService);
@@ -743,12 +1030,12 @@ export class NewChatViewPane extends ViewPane {
 			NewChatWidget,
 			{
 				targetConfig: {
-					allowedTargets: [AgentSessionProviders.Background, AgentSessionProviders.Cloud],
-					defaultTarget: AgentSessionProviders.Background,
+					allowedTargets: this.computeAllowedTargets(),
+					defaultTarget: AgentSessionProviders.Local,
 				},
 				onSendRequest: (data) => {
-					this.activeSessionService.openSessionAndSend(
-						data.resource, data.query, data.sendOptions, data.selectedOptions
+					this.activeSessionService.sendRequestForNewSession(
+						data.resource, data.query, data.sendOptions, data.selectedOptions, data.folderUri
 					).catch(e => this.logService.error('NewChatViewPane: Failed to open session and send request', e));
 				},
 			} satisfies INewChatWidgetOptions,
@@ -756,6 +1043,15 @@ export class NewChatViewPane extends ViewPane {
 
 		this._widget.render(container);
 		this._widget.focusInput();
+
+		this._register(this.workspaceContextService.onDidChangeWorkspaceFolders(() => {
+			this._widget?.updateAllowedTargets(this.computeAllowedTargets());
+		}));
+	}
+
+	private computeAllowedTargets(): AgentSessionProviders[] {
+		const targets: AgentSessionProviders[] = [AgentSessionProviders.Local, AgentSessionProviders.Cloud];
+		return targets;
 	}
 
 	protected override layoutBody(height: number, width: number): void {
diff --git a/src/vs/sessions/contrib/chat/browser/promptsService.ts b/src/vs/sessions/contrib/chat/browser/promptsService.ts
index 754a3f995ee..69c0e8e2497 100644
--- a/src/vs/sessions/contrib/chat/browser/promptsService.ts
+++ b/src/vs/sessions/contrib/chat/browser/promptsService.ts
@@ -17,7 +17,7 @@ import { IWorkbenchEnvironmentService } from '../../../../workbench/services/env
 import { IPathService } from '../../../../workbench/services/path/common/pathService.js';
 import { ISearchService } from '../../../../workbench/services/search/common/search.js';
 import { IUserDataProfileService } from '../../../../workbench/services/userDataProfile/common/userDataProfile.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 
 export class AgenticPromptsService extends PromptsService {
 	protected override createPromptFilesLocator(): PromptFilesLocator {
@@ -36,7 +36,7 @@ class AgenticPromptFilesLocator extends PromptFilesLocator {
 		@IUserDataProfileService userDataService: IUserDataProfileService,
 		@ILogService logService: ILogService,
 		@IPathService pathService: IPathService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 	) {
 		super(
 			fileService,
diff --git a/src/vs/sessions/contrib/chat/browser/runScriptAction.ts b/src/vs/sessions/contrib/chat/browser/runScriptAction.ts
index e9368f846a5..6138f48d98e 100644
--- a/src/vs/sessions/contrib/chat/browser/runScriptAction.ts
+++ b/src/vs/sessions/contrib/chat/browser/runScriptAction.ts
@@ -13,7 +13,7 @@ import { IQuickInputService } from '../../../../platform/quickinput/common/quick
 import { IStorageService, StorageScope, StorageTarget } from '../../../../platform/storage/common/storage.js';
 import { TerminalLocation } from '../../../../platform/terminal/common/terminal.js';
 import { IWorkbenchContribution } from '../../../../workbench/common/contributions.js';
-import { ISessionsWorkbenchService } from '../../sessions/browser/sessionsWorkbenchService.js';
+import { ISessionsManagementService } from '../../sessions/browser/sessionsManagementService.js';
 import { ITerminalService } from '../../../../workbench/contrib/terminal/browser/terminal.js';
 import { Menus } from '../../../browser/menus.js';
 
@@ -54,7 +54,7 @@ export class RunScriptContribution extends Disposable implements IWorkbenchContr
 	constructor(
 		@IStorageService private readonly _storageService: IStorageService,
 		@ITerminalService private readonly _terminalService: ITerminalService,
-		@ISessionsWorkbenchService activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService activeSessionService: ISessionsManagementService,
 		@IQuickInputService private readonly _quickInputService: IQuickInputService,
 	) {
 		super();
diff --git a/src/vs/sessions/contrib/configuration/browser/configuration.contribution.ts b/src/vs/sessions/contrib/configuration/browser/configuration.contribution.ts
index db053fcef22..9a5d00df685 100644
--- a/src/vs/sessions/contrib/configuration/browser/configuration.contribution.ts
+++ b/src/vs/sessions/contrib/configuration/browser/configuration.contribution.ts
@@ -8,7 +8,6 @@ import { Registry } from '../../../../platform/registry/common/platform.js';
 
 Registry.as<IConfigurationRegistry>(Extensions.Configuration).registerDefaultConfigurations([{
 	overrides: {
-		'chat.agentsControl.clickBehavior': 'focus',
 		'chat.agentsControl.enabled': true,
 		'chat.agent.maxRequests': 1000,
 		'chat.restoreLastPanelSession': true,
diff --git a/src/vs/sessions/contrib/sessions/browser/sessions.contribution.ts b/src/vs/sessions/contrib/sessions/browser/sessions.contribution.ts
index c5211ee8e27..b81e8fa6284 100644
--- a/src/vs/sessions/contrib/sessions/browser/sessions.contribution.ts
+++ b/src/vs/sessions/contrib/sessions/browser/sessions.contribution.ts
@@ -13,8 +13,9 @@ import { ViewPaneContainer } from '../../../../workbench/browser/parts/views/vie
 import { registerWorkbenchContribution2, WorkbenchPhase } from '../../../../workbench/common/contributions.js';
 import { InstantiationType, registerSingleton } from '../../../../platform/instantiation/common/extensions.js';
 import { SessionsTitleBarContribution } from './sessionsTitleBarWidget.js';
+import { SessionsAuxiliaryBarContribution } from './sessionsAuxiliaryBarContribution.js';
 import { AgenticSessionsViewPane, SessionsViewId } from './sessionsViewPane.js';
-import { SessionsWorkbenchService, ISessionsWorkbenchService } from './sessionsWorkbenchService.js';
+import { SessionsManagementService, ISessionsManagementService } from './sessionsManagementService.js';
 
 const agentSessionsViewIcon = registerIcon('chat-sessions-icon', Codicon.commentDiscussionSparkle, localize('agentSessionsViewIcon', 'Icon for Agent Sessions View'));
 const AGENT_SESSIONS_VIEW_TITLE = localize2('agentSessions.view.label', "Sessions");
@@ -46,5 +47,6 @@ const agentSessionsViewDescriptor: IViewDescriptor = {
 Registry.as<IViewsRegistry>(ViewContainerExtensions.ViewsRegistry).registerViews([agentSessionsViewDescriptor], agentSessionsViewContainer);
 
 registerWorkbenchContribution2(SessionsTitleBarContribution.ID, SessionsTitleBarContribution, WorkbenchPhase.AfterRestored);
+registerWorkbenchContribution2(SessionsAuxiliaryBarContribution.ID, SessionsAuxiliaryBarContribution, WorkbenchPhase.AfterRestored);
 
-registerSingleton(ISessionsWorkbenchService, SessionsWorkbenchService, InstantiationType.Delayed);
+registerSingleton(ISessionsManagementService, SessionsManagementService, InstantiationType.Delayed);
diff --git a/src/vs/sessions/contrib/sessions/browser/sessionsAuxiliaryBarContribution.ts b/src/vs/sessions/contrib/sessions/browser/sessionsAuxiliaryBarContribution.ts
new file mode 100644
index 00000000000..bcadacb70d5
--- /dev/null
+++ b/src/vs/sessions/contrib/sessions/browser/sessionsAuxiliaryBarContribution.ts
@@ -0,0 +1,64 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { autorun } from '../../../../base/common/observable.js';
+import { Disposable, IDisposable, MutableDisposable } from '../../../../base/common/lifecycle.js';
+import { IWorkbenchLayoutService, Parts } from '../../../../workbench/services/layout/browser/layoutService.js';
+import { IViewsService } from '../../../../workbench/services/views/common/viewsService.js';
+import { CHANGES_VIEW_ID, ChangesViewPane } from '../../changesView/browser/changesView.js';
+
+export class SessionsAuxiliaryBarContribution extends Disposable {
+
+	static readonly ID = 'workbench.contrib.sessionsAuxiliaryBarContribution';
+
+	private readonly activeChangesListener = this._register(new MutableDisposable<IDisposable>());
+	private activeChangesView: ChangesViewPane | null = null;
+
+	constructor(
+		@IViewsService private readonly viewsService: IViewsService,
+		@IWorkbenchLayoutService private readonly layoutService: IWorkbenchLayoutService,
+	) {
+		super();
+
+		this.tryBindToChangesView();
+
+		this._register(this.viewsService.onDidChangeViewVisibility(e => {
+			if (e.id !== CHANGES_VIEW_ID) {
+				return;
+			}
+
+			this.tryBindToChangesView();
+		}));
+	}
+
+	private tryBindToChangesView(): void {
+		const changesView = this.viewsService.getViewWithId<ChangesViewPane>(CHANGES_VIEW_ID);
+		if (!changesView) {
+			this.activeChangesView = null;
+			this.activeChangesListener.clear();
+			return;
+		}
+
+		if (this.activeChangesView === changesView) {
+			return;
+		}
+
+		this.activeChangesView = changesView;
+		this.activeChangesListener.value = autorun(reader => {
+			const hasChanges = changesView.activeSessionHasChanges.read(reader);
+			this.syncAuxiliaryBarVisibility(hasChanges);
+		});
+	}
+
+	private syncAuxiliaryBarVisibility(hasChanges: boolean): void {
+		const shouldHideAuxiliaryBar = !hasChanges;
+		const isAuxiliaryBarVisible = this.layoutService.isVisible(Parts.AUXILIARYBAR_PART);
+		if (shouldHideAuxiliaryBar === !isAuxiliaryBarVisible) {
+			return;
+		}
+
+		this.layoutService.setPartHidden(shouldHideAuxiliaryBar, Parts.AUXILIARYBAR_PART);
+	}
+} 
diff --git a/src/vs/sessions/contrib/sessions/browser/sessionsWorkbenchService.ts b/src/vs/sessions/contrib/sessions/browser/sessionsManagementService.ts
similarity index 61%
rename from src/vs/sessions/contrib/sessions/browser/sessionsWorkbenchService.ts
rename to src/vs/sessions/contrib/sessions/browser/sessionsManagementService.ts
index 1df7b2a3c04..5ebd3496cb3 100644
--- a/src/vs/sessions/contrib/sessions/browser/sessionsWorkbenchService.ts
+++ b/src/vs/sessions/contrib/sessions/browser/sessionsManagementService.ts
@@ -12,12 +12,17 @@ import { IContextKey, IContextKeyService, RawContextKey } from '../../../../plat
 import { ILogService } from '../../../../platform/log/common/log.js';
 import { IStorageService, StorageScope, StorageTarget } from '../../../../platform/storage/common/storage.js';
 import { ISessionOpenOptions, openSession as openSessionDefault } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsOpener.js';
-import { ChatViewPaneTarget, IChatWidgetService } from '../../../../workbench/contrib/chat/browser/chat.js';
+import { ChatViewId, ChatViewPaneTarget, IChatWidgetService } from '../../../../workbench/contrib/chat/browser/chat.js';
+import { ChatViewPane } from '../../../../workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewPane.js';
 import { IChatSessionItem, IChatSessionProviderOptionItem, IChatSessionsService } from '../../../../workbench/contrib/chat/common/chatSessionsService.js';
 import { IChatService, IChatSendRequestOptions } from '../../../../workbench/contrib/chat/common/chatService/chatService.js';
 import { ChatAgentLocation } from '../../../../workbench/contrib/chat/common/constants.js';
-import { IAgentSession } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsModel.js';
+import { IAgentSession, isAgentSession } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsModel.js';
 import { IAgentSessionsService } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsService.js';
+import { LocalChatSessionUri } from '../../../../workbench/contrib/chat/common/model/chatUri.js';
+import { IWorkspaceContextService } from '../../../../platform/workspace/common/workspace.js';
+import { IWorkspaceEditingService } from '../../../../workbench/services/workspaces/common/workspaceEditing.js';
+import { IViewsService } from '../../../../workbench/services/views/common/viewsService.js';
 
 export const IsNewChatSessionContext = new RawContextKey<boolean>('isNewChatSession', true);
 
@@ -43,7 +48,7 @@ export type IActiveSessionItem = (IChatSessionItem | IAgentSession) & {
 	readonly worktree: URI | undefined;
 };
 
-export interface ISessionsWorkbenchService {
+export interface ISessionsManagementService {
 	readonly _serviceBrand: undefined;
 
 	/**
@@ -62,22 +67,22 @@ export interface ISessionsWorkbenchService {
 	 */
 	openSession(sessionResource: URI, openOptions?: ISessionOpenOptions): Promise<void>;
 
-	/**
-	 * Open a new session, apply options, and send the initial request.
-	 * This is the main entry point for the new-chat welcome widget.
-	 */
-	openSessionAndSend(sessionResource: URI, query: string, sendOptions: IChatSendRequestOptions, selectedOptions?: ReadonlyMap<string, IChatSessionProviderOptionItem>): Promise<void>;
-
 	/**
 	 * Switch to the new-session view.
 	 * No-op if the current session is already a new session.
 	 */
 	openNewSession(): void;
+
+	/**
+	 * Open a new session, apply options, and send the initial request.
+	 * This is the main entry point for the new-chat welcome widget.
+	 */
+	sendRequestForNewSession(sessionResource: URI, query: string, sendOptions: IChatSendRequestOptions, selectedOptions?: ReadonlyMap<string, IChatSessionProviderOptionItem>, folderUri?: URI): Promise<void>;
 }
 
-export const ISessionsWorkbenchService = createDecorator<ISessionsWorkbenchService>('sessionsWorkbenchService');
+export const ISessionsManagementService = createDecorator<ISessionsManagementService>('sessionsManagementService');
 
-export class SessionsWorkbenchService extends Disposable implements ISessionsWorkbenchService {
+export class SessionsManagementService extends Disposable implements ISessionsManagementService {
 
 	declare readonly _serviceBrand: undefined;
 
@@ -96,6 +101,9 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 		@IInstantiationService private readonly instantiationService: IInstantiationService,
 		@ILogService private readonly logService: ILogService,
 		@IContextKeyService contextKeyService: IContextKeyService,
+		@IWorkspaceContextService private readonly workspaceContextService: IWorkspaceContextService,
+		@IWorkspaceEditingService private readonly workspaceEditingService: IWorkspaceEditingService,
+		@IViewsService private readonly viewsService: IViewsService,
 	) {
 		super();
 
@@ -107,9 +115,7 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 		this.lastSelectedSession = this.loadLastSelectedSession();
 
 		// Save on shutdown
-		this._register(this.storageService.onWillSaveState(() => {
-			this.saveLastSelectedSession();
-		}));
+		this._register(this.storageService.onWillSaveState(() => this.saveLastSelectedSession()));
 
 		// Update active session when session options change
 		this._register(this.chatSessionsService.onDidChangeSessionOptions(sessionResource => {
@@ -124,9 +130,7 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 		}));
 
 		// Update active session when the agent sessions model changes (e.g., metadata updates with worktree/repository info)
-		this._register(this.agentSessionsService.model.onDidChangeSessions(() => {
-			this.refreshActiveSessionFromModel();
-		}));
+		this._register(this.agentSessionsService.model.onDidChangeSessions(() => this.refreshActiveSessionFromModel()));
 	}
 
 	private refreshActiveSessionFromModel(): void {
@@ -137,6 +141,12 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 
 		const agentSession = this.agentSessionsService.model.getSession(currentActive.resource);
 		if (!agentSession) {
+			// Only switch sessions if the active session was a known agent session
+			// that got deleted. New session resources that aren't yet in the model
+			// should not trigger a switch.
+			if (isAgentSession(currentActive)) {
+				this.showNextSession();
+			}
 			return;
 		}
 
@@ -149,6 +159,19 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 		this._activeSession.set(activeSessionItem, undefined);
 	}
 
+	private showNextSession(): void {
+		const sessions = this.agentSessionsService.model.sessions
+			.filter(s => !s.isArchived())
+			.sort((a, b) => (b.timing.lastRequestEnded ?? b.timing.created) - (a.timing.lastRequestEnded ?? a.timing.created));
+
+		if (sessions.length > 0) {
+			this.setActiveSession(sessions[0]);
+			this.instantiationService.invokeFunction(openSessionDefault, sessions[0]);
+		} else {
+			this.openNewSession();
+		}
+	}
+
 	private getRepositoryFromMetadata(metadata: { readonly [key: string]: unknown } | undefined): [URI | undefined, URI | undefined] {
 		if (!metadata) {
 			return [undefined, undefined];
@@ -189,44 +212,106 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 	}
 
 	async openSession(sessionResource: URI, openOptions?: ISessionOpenOptions): Promise<void> {
-		const session = this.agentSessionsService.model.getSession(sessionResource);
-		if (session) {
-			this.isNewChatSessionContext.set(false);
-			this.setActiveSession(session);
-			await this.instantiationService.invokeFunction(openSessionDefault, session, openOptions);
+		this.isNewChatSessionContext.set(false);
+
+		const existingSession = this.agentSessionsService.model.getSession(sessionResource);
+		if (existingSession) {
+			await this.openExistingSession(existingSession, openOptions);
+		} else if (LocalChatSessionUri.isLocalSession(sessionResource)) {
+			await this.openLocalSession();
 		} else {
-			// For new sessions, load via the chat service first so the model
-			// is ready before the ChatViewPane renders it.
-			const modelRef = await this.chatService.loadSessionForResource(sessionResource, ChatAgentLocation.Chat, CancellationToken.None);
-			// Switch view only after the model is loaded so the ChatViewPane
-			// has content immediately when it becomes visible.
-			this.isNewChatSessionContext.set(false);
-			const chatWidget = await this.chatWidgetService.openSession(sessionResource, ChatViewPaneTarget);
-			if (!chatWidget?.viewModel) {
-				this.logService.warn(`[ActiveSessionService] Failed to open session: ${sessionResource.toString()}`);
-				modelRef?.dispose();
-				return;
-			}
-			const repository = this.getRepositoryFromSessionOption(sessionResource);
-			const activeSessionItem: IActiveSessionItem = {
-				resource: sessionResource,
-				label: chatWidget.viewModel.model.title || '',
-				timing: chatWidget.viewModel.model.timing,
-				repository,
-				worktree: undefined
-			};
-			this.logService.info(`[ActiveSessionService] Active session changed (new): ${sessionResource.toString()}, repository: ${repository?.toString() ?? 'none'}`);
-			this._activeSession.set(activeSessionItem, undefined);
+			await this.openNewRemoteSession(sessionResource);
 		}
 	}
 
-	async openSessionAndSend(sessionResource: URI, query: string, sendOptions: IChatSendRequestOptions, selectedOptions?: ReadonlyMap<string, IChatSessionProviderOptionItem>): Promise<void> {
-		// 1. Open the session in ChatViewPane - this transitions views,
-		//    loads the model, and connects it to the ChatWidget so
-		//    tool invocations work.
+	/**
+	 * Open an existing agent session - set it as active and reveal it.
+	 */
+	private async openExistingSession(session: IAgentSession, openOptions?: ISessionOpenOptions): Promise<void> {
+		this.setActiveSession(session);
+		await this.instantiationService.invokeFunction(openSessionDefault, session, openOptions);
+	}
+
+	/**
+	 * Open a fresh local chat session - show the ChatViewPane and clear the widget.
+	 */
+	private async openLocalSession(): Promise<void> {
+		const view = await this.viewsService.openView(ChatViewId) as ChatViewPane | undefined;
+		if (view) {
+			await view.widget.clear();
+			if (view.widget.viewModel) {
+				const folder = this.workspaceContextService.getWorkspace().folders[0];
+				const activeSessionItem: IActiveSessionItem = {
+					resource: view.widget.viewModel.sessionResource,
+					label: view.widget.viewModel.model.title || '',
+					timing: view.widget.viewModel.model.timing,
+					repository: folder?.uri,
+					worktree: undefined
+				};
+				this._activeSession.set(activeSessionItem, undefined);
+			}
+		}
+	}
+
+	/**
+	 * Open a new remote session - load the model first, then show it in the ChatViewPane.
+	 */
+	private async openNewRemoteSession(sessionResource: URI): Promise<void> {
+		const modelRef = await this.chatService.loadSessionForResource(sessionResource, ChatAgentLocation.Chat, CancellationToken.None);
+		const chatWidget = await this.chatWidgetService.openSession(sessionResource, ChatViewPaneTarget);
+		if (!chatWidget?.viewModel) {
+			this.logService.warn(`[ActiveSessionService] Failed to open session: ${sessionResource.toString()}`);
+			modelRef?.dispose();
+			return;
+		}
+		const repository = this.getRepositoryFromSessionOption(sessionResource);
+		const activeSessionItem: IActiveSessionItem = {
+			resource: sessionResource,
+			label: chatWidget.viewModel.model.title || '',
+			timing: chatWidget.viewModel.model.timing,
+			repository,
+			worktree: undefined
+		};
+		this.logService.info(`[ActiveSessionService] Active session changed (new): ${sessionResource.toString()}, repository: ${repository?.toString() ?? 'none'}`);
+		this._activeSession.set(activeSessionItem, undefined);
+	}
+
+	async sendRequestForNewSession(sessionResource: URI, query: string, sendOptions: IChatSendRequestOptions, selectedOptions?: ReadonlyMap<string, IChatSessionProviderOptionItem>, folderUri?: URI): Promise<void> {
+		if (LocalChatSessionUri.isLocalSession(sessionResource)) {
+			await this.sendLocalSession(sessionResource, query, folderUri);
+		} else {
+			await this.sendCustomSession(sessionResource, query, sendOptions, selectedOptions);
+		}
+	}
+
+	/**
+	 * Local sessions run directly through the ChatWidget.
+	 * Set the workspace folder, open a fresh chat view, and submit via acceptInput.
+	 */
+	private async sendLocalSession(sessionResource: URI, query: string, folderUri?: URI): Promise<void> {
+		if (folderUri) {
+			await this.workspaceEditingService.updateFolders(0, this.workspaceContextService.getWorkspace().folders.length, [{ uri: folderUri }]);
+		}
+
 		await this.openSession(sessionResource);
 
-		// 2. Apply selected options to the contributed session
+		const widget = this.chatWidgetService.lastFocusedWidget;
+		if (widget) {
+			widget.setInput(query);
+			widget.acceptInput(query);
+		}
+	}
+
+	/**
+	 * Custom sessions (worktree, cloud, etc.) go through the chat service.
+	 * Apply selected options, send the request, then wait for the extension
+	 * to create an agent session so it appears in the sidebar.
+	 */
+	private async sendCustomSession(sessionResource: URI, query: string, sendOptions: IChatSendRequestOptions, selectedOptions?: ReadonlyMap<string, IChatSessionProviderOptionItem>): Promise<void> {
+		// 1. Open the session - loads the model and shows the ChatViewPane
+		await this.openSession(sessionResource);
+
+		// 2. Apply selected options (repository, branch, etc.) to the contributed session
 		if (selectedOptions && selectedOptions.size > 0) {
 			const modelRef = this.chatService.getActiveSessionReference(sessionResource);
 			if (modelRef) {
@@ -245,22 +330,17 @@ export class SessionsWorkbenchService extends Disposable implements ISessionsWor
 			}
 		}
 
-		// 3. Snapshot existing session resources so we can detect the new one
+		// 3. Send the request
 		const existingResources = new Set(
 			this.agentSessionsService.model.sessions.map(s => s.resource.toString())
 		);
-
-		// 4. Send the request through the chat service - the model is now
-		//    connected to the ChatWidget, so tools and rendering work.
 		const result = await this.chatService.sendRequest(sessionResource, query, sendOptions);
 		if (result.kind === 'rejected') {
 			this.logService.error(`[ActiveSessionService] sendRequest rejected: ${result.reason}`);
 			return;
 		}
 
-		// 5. After send, the extension creates an agent session. Wait for it
-		//    and set it as the active session so the titlebar and sidebar
-		//    reflect the new session.
+		// 4. Wait for the extension to create an agent session, then set it as active
 		let newSession = this.agentSessionsService.model.sessions.find(
 			s => !existingResources.has(s.resource.toString())
 		);
diff --git a/src/vs/sessions/contrib/sessions/browser/sessionsTitleBarWidget.ts b/src/vs/sessions/contrib/sessions/browser/sessionsTitleBarWidget.ts
index 5d271a457ed..526fdb358d9 100644
--- a/src/vs/sessions/contrib/sessions/browser/sessionsTitleBarWidget.ts
+++ b/src/vs/sessions/contrib/sessions/browser/sessionsTitleBarWidget.ts
@@ -18,7 +18,7 @@ import { IWorkbenchContribution } from '../../../../workbench/common/contributio
 import { IActionViewItemService } from '../../../../platform/actions/browser/actionViewItemService.js';
 import { URI } from '../../../../base/common/uri.js';
 import { IAgentSessionsService } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsService.js';
-import { ISessionsWorkbenchService } from './sessionsWorkbenchService.js';
+import { ISessionsManagementService } from './sessionsManagementService.js';
 import { FocusAgentSessionsAction } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsActions.js';
 import { AgentSessionsPicker } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsPicker.js';
 import { autorun } from '../../../../base/common/observable.js';
@@ -60,7 +60,7 @@ export class SessionsTitleBarWidget extends BaseActionViewItem {
 		options: IBaseActionViewItemOptions | undefined,
 		@IInstantiationService private readonly instantiationService: IInstantiationService,
 		@IHoverService private readonly hoverService: IHoverService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 		@IChatService private readonly chatService: IChatService,
 		@IAgentSessionsService private readonly agentSessionsService: IAgentSessionsService,
 		@ICommandService private readonly commandService: ICommandService,
@@ -344,7 +344,9 @@ export class SessionsTitleBarWidget extends BaseActionViewItem {
 	}
 
 	private _showSessionsPicker(): void {
-		const picker = this.instantiationService.createInstance(AgentSessionsPicker, undefined);
+		const picker = this.instantiationService.createInstance(AgentSessionsPicker, undefined, {
+			overrideSessionOpen: (session, openOptions) => this.activeSessionService.openSession(session.resource, openOptions)
+		});
 		picker.pickAgentSession();
 	}
 
diff --git a/src/vs/sessions/contrib/sessions/browser/sessionsViewPane.ts b/src/vs/sessions/contrib/sessions/browser/sessionsViewPane.ts
index 63d62b4fa9d..ab3ba0b5a08 100644
--- a/src/vs/sessions/contrib/sessions/browser/sessionsViewPane.ts
+++ b/src/vs/sessions/contrib/sessions/browser/sessionsViewPane.ts
@@ -23,7 +23,7 @@ import { IHoverService } from '../../../../platform/hover/browser/hover.js';
 import { localize, localize2 } from '../../../../nls.js';
 import { AgentSessionsControl } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsControl.js';
 import { AgentSessionsFilter, AgentSessionsGrouping } from '../../../../workbench/contrib/chat/browser/agentSessions/agentSessionsFilter.js';
-import { ISessionsWorkbenchService } from './sessionsWorkbenchService.js';
+import { ISessionsManagementService } from './sessionsManagementService.js';
 import { Action2, ISubmenuItem, MenuId, MenuRegistry, registerAction2 } from '../../../../platform/actions/common/actions.js';
 import { HoverPosition } from '../../../../base/browser/ui/hover/hoverWidget.js';
 import { IWorkbenchLayoutService } from '../../../../workbench/services/layout/browser/layoutService.js';
@@ -73,7 +73,6 @@ const CUSTOMIZATIONS_COLLAPSED_KEY = 'agentSessions.customizationsCollapsed';
 export class AgenticSessionsViewPane extends ViewPane {
 
 	private viewPaneContainer: HTMLElement | undefined;
-	private newSessionButtonContainer: HTMLElement | undefined;
 	private sessionsControlContainer: HTMLElement | undefined;
 	sessionsControl: AgentSessionsControl | undefined;
 	private aiCustomizationContainer: HTMLElement | undefined;
@@ -98,7 +97,7 @@ export class AgenticSessionsViewPane extends ViewPane {
 		@IMcpService private readonly mcpService: IMcpService,
 		@IStorageService private readonly storageService: IStorageService,
 		@IWorkspaceContextService private readonly workspaceContextService: IWorkspaceContextService,
-		@ISessionsWorkbenchService private readonly activeSessionService: ISessionsWorkbenchService,
+		@ISessionsManagementService private readonly activeSessionService: ISessionsManagementService,
 	) {
 		super(options, keybindingService, contextMenuService, configurationService, contextKeyService, viewDescriptorService, instantiationService, openerService, themeService, hoverService);
 
@@ -156,7 +155,7 @@ export class AgenticSessionsViewPane extends ViewPane {
 		const sessionsContent = DOM.append(sessionsSection, $('.agent-sessions-content'));
 
 		// New Session Button
-		const newSessionButtonContainer = this.newSessionButtonContainer = DOM.append(sessionsContent, $('.agent-sessions-new-button-container'));
+		const newSessionButtonContainer = DOM.append(sessionsContent, $('.agent-sessions-new-button-container'));
 		const newSessionButton = this._register(new Button(newSessionButtonContainer, { ...defaultButtonStyles, secondary: true }));
 		newSessionButton.label = localize('newSession', "New Session");
 		this._register(newSessionButton.onDidClick(() => this.activeSessionService.openNewSession()));
@@ -195,6 +194,8 @@ export class AgenticSessionsViewPane extends ViewPane {
 				if (!sessionsControl.reveal(activeSession.resource)) {
 					sessionsControl.clearFocus();
 				}
+			} else {
+				sessionsControl.clearFocus(); // clear selection when a new session is created
 			}
 		}));
 
@@ -402,14 +403,11 @@ export class AgenticSessionsViewPane extends ViewPane {
 	protected override layoutBody(height: number, width: number): void {
 		super.layoutBody(height, width);
 
-		if (!this.sessionsControl || !this.newSessionButtonContainer) {
+		if (!this.sessionsControl || !this.sessionsControlContainer) {
 			return;
 		}
 
-		const buttonHeight = this.newSessionButtonContainer.offsetHeight;
-		const customizationHeight = this.aiCustomizationContainer?.offsetHeight || 0;
-		const availableSessionsHeight = height - buttonHeight - customizationHeight;
-		this.sessionsControl.layout(availableSessionsHeight, width);
+		this.sessionsControl.layout(this.sessionsControlContainer.offsetHeight, width);
 	}
 
 	override focus(): void {
diff --git a/src/vs/sessions/electron-browser/parts/titlebarPart.ts b/src/vs/sessions/electron-browser/parts/titlebarPart.ts
new file mode 100644
index 00000000000..8c2c0597b63
--- /dev/null
+++ b/src/vs/sessions/electron-browser/parts/titlebarPart.ts
@@ -0,0 +1,135 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { getZoomFactor } from '../../../base/browser/browser.js';
+import { getWindow, getWindowId } from '../../../base/browser/dom.js';
+import { IConfigurationService } from '../../../platform/configuration/common/configuration.js';
+import { IContextKeyService } from '../../../platform/contextkey/common/contextkey.js';
+import { IContextMenuService } from '../../../platform/contextview/browser/contextView.js';
+import { IInstantiationService } from '../../../platform/instantiation/common/instantiation.js';
+import { INativeHostService } from '../../../platform/native/common/native.js';
+import { IStorageService } from '../../../platform/storage/common/storage.js';
+import { IThemeService } from '../../../platform/theme/common/themeService.js';
+import { useWindowControlsOverlay } from '../../../platform/window/common/window.js';
+import { IHostService } from '../../../workbench/services/host/browser/host.js';
+import { IWorkbenchLayoutService, Parts } from '../../../workbench/services/layout/browser/layoutService.js';
+import { IAuxiliaryTitlebarPart } from '../../../workbench/browser/parts/titlebar/titlebarPart.js';
+import { IEditorGroupsContainer } from '../../../workbench/services/editor/common/editorGroupsService.js';
+import { CodeWindow, mainWindow } from '../../../base/browser/window.js';
+import { TitlebarPart, TitleService } from '../../browser/parts/titlebarPart.js';
+
+export class NativeTitlebarPart extends TitlebarPart {
+
+	private cachedWindowControlStyles: { bgColor: string; fgColor: string } | undefined;
+	private cachedWindowControlHeight: number | undefined;
+
+	constructor(
+		id: string,
+		targetWindow: CodeWindow,
+		@IContextMenuService contextMenuService: IContextMenuService,
+		@IConfigurationService configurationService: IConfigurationService,
+		@IInstantiationService instantiationService: IInstantiationService,
+		@IThemeService themeService: IThemeService,
+		@IStorageService storageService: IStorageService,
+		@IWorkbenchLayoutService layoutService: IWorkbenchLayoutService,
+		@IContextKeyService contextKeyService: IContextKeyService,
+		@IHostService hostService: IHostService,
+		@INativeHostService private readonly nativeHostService: INativeHostService,
+	) {
+		super(id, targetWindow, contextMenuService, configurationService, instantiationService, themeService, storageService, layoutService, contextKeyService, hostService);
+	}
+
+	override updateStyles(): void {
+		super.updateStyles();
+
+		if (this.element) {
+			if (useWindowControlsOverlay(this.configurationService)) {
+				if (
+					!this.cachedWindowControlStyles ||
+					this.cachedWindowControlStyles.bgColor !== this.element.style.backgroundColor ||
+					this.cachedWindowControlStyles.fgColor !== this.element.style.color
+				) {
+					this.nativeHostService.updateWindowControls({
+						targetWindowId: getWindowId(getWindow(this.element)),
+						backgroundColor: this.element.style.backgroundColor,
+						foregroundColor: this.element.style.color
+					});
+				}
+			}
+		}
+	}
+
+	override layout(width: number, height: number): void {
+		super.layout(width, height);
+
+		if (useWindowControlsOverlay(this.configurationService)) {
+			const newHeight = Math.round(height * getZoomFactor(getWindow(this.element)));
+			if (newHeight !== this.cachedWindowControlHeight) {
+				this.cachedWindowControlHeight = newHeight;
+				this.nativeHostService.updateWindowControls({
+					targetWindowId: getWindowId(getWindow(this.element)),
+					height: newHeight
+				});
+			}
+		}
+	}
+}
+
+class MainNativeTitlebarPart extends NativeTitlebarPart {
+
+	constructor(
+		@IContextMenuService contextMenuService: IContextMenuService,
+		@IConfigurationService configurationService: IConfigurationService,
+		@IInstantiationService instantiationService: IInstantiationService,
+		@IThemeService themeService: IThemeService,
+		@IStorageService storageService: IStorageService,
+		@IWorkbenchLayoutService layoutService: IWorkbenchLayoutService,
+		@IContextKeyService contextKeyService: IContextKeyService,
+		@IHostService hostService: IHostService,
+		@INativeHostService nativeHostService: INativeHostService,
+	) {
+		super(Parts.TITLEBAR_PART, mainWindow, contextMenuService, configurationService, instantiationService, themeService, storageService, layoutService, contextKeyService, hostService, nativeHostService);
+	}
+}
+
+class AuxiliaryNativeTitlebarPart extends NativeTitlebarPart implements IAuxiliaryTitlebarPart {
+
+	private static COUNTER = 1;
+
+	get height() { return this.minimumHeight; }
+
+	constructor(
+		readonly container: HTMLElement,
+		editorGroupsContainer: IEditorGroupsContainer,
+		private readonly mainTitlebar: TitlebarPart,
+		@IContextMenuService contextMenuService: IContextMenuService,
+		@IConfigurationService configurationService: IConfigurationService,
+		@IInstantiationService instantiationService: IInstantiationService,
+		@IThemeService themeService: IThemeService,
+		@IStorageService storageService: IStorageService,
+		@IWorkbenchLayoutService layoutService: IWorkbenchLayoutService,
+		@IContextKeyService contextKeyService: IContextKeyService,
+		@IHostService hostService: IHostService,
+		@INativeHostService nativeHostService: INativeHostService,
+	) {
+		const id = AuxiliaryNativeTitlebarPart.COUNTER++;
+		super(`workbench.parts.auxiliaryTitle.${id}`, getWindow(container), contextMenuService, configurationService, instantiationService, themeService, storageService, layoutService, contextKeyService, hostService, nativeHostService);
+	}
+
+	override get preventZoom(): boolean {
+		return getZoomFactor(getWindow(this.element)) < 1 || !this.mainTitlebar.hasZoomableElements;
+	}
+}
+
+export class NativeTitleService extends TitleService {
+
+	protected override createMainTitlebarPart(): MainNativeTitlebarPart {
+		return this.instantiationService.createInstance(MainNativeTitlebarPart);
+	}
+
+	protected override doCreateAuxiliaryTitlebarPart(container: HTMLElement, editorGroupsContainer: IEditorGroupsContainer, instantiationService: IInstantiationService): AuxiliaryNativeTitlebarPart {
+		return instantiationService.createInstance(AuxiliaryNativeTitlebarPart, container, editorGroupsContainer, this.mainPart);
+	}
+}
diff --git a/src/vs/sessions/electron-browser/titleService.ts b/src/vs/sessions/electron-browser/titleService.ts
new file mode 100644
index 00000000000..9ffc7a93650
--- /dev/null
+++ b/src/vs/sessions/electron-browser/titleService.ts
@@ -0,0 +1,10 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { InstantiationType, registerSingleton } from '../../platform/instantiation/common/extensions.js';
+import { ITitleService } from '../../workbench/services/title/browser/titleService.js';
+import { NativeTitleService } from './parts/titlebarPart.js';
+
+registerSingleton(ITitleService, NativeTitleService, InstantiationType.Eager);
diff --git a/src/vs/sessions/sessions.common.main.ts b/src/vs/sessions/sessions.common.main.ts
index 7e8c8e57a47..4119d7eaf13 100644
--- a/src/vs/sessions/sessions.common.main.ts
+++ b/src/vs/sessions/sessions.common.main.ts
@@ -351,9 +351,9 @@ import '../workbench/contrib/surveys/browser/nps.contribution.js';
 import '../workbench/contrib/surveys/browser/languageSurveys.contribution.js';
 
 // Welcome
-import '../workbench/contrib/welcomeGettingStarted/browser/gettingStarted.contribution.js';
-import '../workbench/contrib/welcomeAgentSessions/browser/agentSessionsWelcome.contribution.js';
-import '../workbench/contrib/welcomeWalkthrough/browser/walkThrough.contribution.js';
+// import '../workbench/contrib/welcomeGettingStarted/browser/gettingStarted.contribution.js';
+// import '../workbench/contrib/welcomeAgentSessions/browser/agentSessionsWelcome.contribution.js';
+// import '../workbench/contrib/welcomeWalkthrough/browser/walkThrough.contribution.js';
 import '../workbench/contrib/welcomeViews/common/viewsWelcome.contribution.js';
 import '../workbench/contrib/welcomeViews/common/newFile.contribution.js';
 
diff --git a/src/vs/sessions/sessions.desktop.main.ts b/src/vs/sessions/sessions.desktop.main.ts
index f690a68b72e..b9a4d26199c 100644
--- a/src/vs/sessions/sessions.desktop.main.ts
+++ b/src/vs/sessions/sessions.desktop.main.ts
@@ -9,6 +9,7 @@ import './sessions.common.main.js';
 //#region --- workbench (agentic desktop main)
 
 import './electron-browser/sessions.main.js';
+import './electron-browser/titleService.js';
 import '../workbench/electron-browser/desktop.contribution.js';
 
 //#endregion
diff --git a/src/vs/workbench/api/common/extHostLanguageModelTools.ts b/src/vs/workbench/api/common/extHostLanguageModelTools.ts
index f3d03c9d08a..cf52a6f3e30 100644
--- a/src/vs/workbench/api/common/extHostLanguageModelTools.ts
+++ b/src/vs/workbench/api/common/extHostLanguageModelTools.ts
@@ -264,7 +264,6 @@ export class ExtHostLanguageModelTools implements ExtHostLanguageModelToolsShape
 		const options: vscode.LanguageModelToolInvocationStreamOptions<any> = {
 			rawInput: context.rawInput,
 			chatRequestId: context.chatRequestId,
-			chatSessionId: context.chatSessionId,
 			chatSessionResource: context.chatSessionResource,
 			chatInteractionId: context.chatInteractionId
 		};
diff --git a/src/vs/workbench/api/common/extHostTreeViews.ts b/src/vs/workbench/api/common/extHostTreeViews.ts
index 6734cb807f7..fce5e9d47db 100644
--- a/src/vs/workbench/api/common/extHostTreeViews.ts
+++ b/src/vs/workbench/api/common/extHostTreeViews.ts
@@ -151,7 +151,13 @@ export class ExtHostTreeViews extends Disposable implements ExtHostTreeViewsShap
 			dispose: async () => {
 				// Wait for the registration promise to finish before doing the dispose.
 				await registerPromise;
-				this._treeViews.delete(viewId);
+				// Only notify the main thread if this view was not replaced by a new registration.
+				// When an extension disposes a view and immediately re-registers it, the new
+				// registration may have already updated _treeViews before this async dispose runs.
+				if (this._treeViews.get(viewId) === treeView) {
+					this._treeViews.delete(viewId);
+					this._proxy.$disposeTree(viewId);
+				}
 				treeView.dispose();
 			}
 		};
@@ -1108,6 +1114,5 @@ class ExtHostTreeView<T> extends Disposable {
 		this._refreshCancellationSource.dispose();
 
 		this._clearAll();
-		this._proxy.$disposeTree(this._viewId);
 	}
 }
diff --git a/src/vs/workbench/api/test/browser/extHostTreeViews.test.ts b/src/vs/workbench/api/test/browser/extHostTreeViews.test.ts
index 88d9928ac79..751a4ff73f9 100644
--- a/src/vs/workbench/api/test/browser/extHostTreeViews.test.ts
+++ b/src/vs/workbench/api/test/browser/extHostTreeViews.test.ts
@@ -499,6 +499,30 @@ suite('ExtHostTreeView', function () {
 			});
 	});
 
+	test('dispose and re-register tree view', async () => {
+		const disposeTreeSpy = sinon.spy(target, '$disposeTree');
+		const registerSpy = sinon.spy(target, '$registerTreeViewDataProvider');
+
+		// Create, dispose, and re-register a tree view with the same id
+		const treeView1 = testObject.createTreeView('reRegisterTreeProvider', { treeDataProvider: aNodeTreeDataProvider() }, extensionsDescription);
+		treeView1.dispose();
+		const treeView2 = testObject.createTreeView('reRegisterTreeProvider', { treeDataProvider: aNodeTreeDataProvider() }, extensionsDescription);
+
+		// Let all pending microtasks (the async dispose) settle
+		await new Promise<void>(r => setTimeout(r, 0));
+
+		// The new view should work — $getChildren should return results, not reject
+		const elements = await testObject.$getChildren('reRegisterTreeProvider');
+		assert.deepStrictEqual(unBatchChildren(elements)?.map(e => e.handle), ['0/0:a', '0/0:b']);
+
+		// $registerTreeViewDataProvider should have been called twice (once per createTreeView)
+		assert.strictEqual(registerSpy.callCount, 2);
+		// $disposeTree should NOT have been called — the old async dispose should detect it was replaced
+		assert.strictEqual(disposeTreeSpy.callCount, 0);
+
+		treeView2.dispose();
+	});
+
 	test('reveal will throw an error if getParent is not implemented', () => {
 		const treeView = testObject.createTreeView('treeDataProvider', { treeDataProvider: aNodeTreeDataProvider() }, extensionsDescription);
 		return treeView.reveal({ key: 'a' })
diff --git a/src/vs/workbench/browser/contextkeys.ts b/src/vs/workbench/browser/contextkeys.ts
index 16c7e5e2267..678a225f1df 100644
--- a/src/vs/workbench/browser/contextkeys.ts
+++ b/src/vs/workbench/browser/contextkeys.ts
@@ -16,7 +16,6 @@ import { getRemoteName } from '../../platform/remote/common/remoteHosts.js';
 import { getVirtualWorkspaceScheme } from '../../platform/workspace/common/virtualWorkspace.js';
 import { IWorkingCopyService } from '../services/workingCopy/common/workingCopyService.js';
 import { isNative } from '../../base/common/platform.js';
-import { IPaneCompositePartService } from '../services/panecomposite/browser/panecomposite.js';
 import { WebFileSystemAccess } from '../../platform/files/browser/webFileSystemAccess.js';
 import { IProductService } from '../../platform/product/common/productService.js';
 import { getTitleBarStyle } from '../../platform/window/common/window.js';
@@ -75,7 +74,6 @@ export class WorkbenchContextKeysHandler extends Disposable {
 		@IEditorGroupsService private readonly editorGroupService: IEditorGroupsService,
 		@IEditorService private readonly editorService: IEditorService,
 		@IWorkbenchLayoutService private readonly layoutService: IWorkbenchLayoutService,
-		@IPaneCompositePartService private readonly paneCompositeService: IPaneCompositePartService,
 		@IWorkingCopyService private readonly workingCopyService: IWorkingCopyService,
 	) {
 		super();
@@ -180,6 +178,7 @@ export class WorkbenchContextKeysHandler extends Disposable {
 
 		// Sidebar
 		this.sideBarVisibleContext = SideBarVisibleContext.bindTo(this.contextKeyService);
+		this.sideBarVisibleContext.set(this.layoutService.isVisible(Parts.SIDEBAR_PART));
 
 		// Title Bar
 		this.titleAreaVisibleContext = TitleBarVisibleContext.bindTo(this.contextKeyService);
@@ -245,14 +244,12 @@ export class WorkbenchContextKeysHandler extends Disposable {
 
 		this._register(this.layoutService.onDidChangePanelAlignment(alignment => this.panelAlignmentContext.set(alignment)));
 
-		this._register(this.paneCompositeService.onDidPaneCompositeClose(() => this.updateSideBarContextKeys()));
-		this._register(this.paneCompositeService.onDidPaneCompositeOpen(() => this.updateSideBarContextKeys()));
-
 		this._register(this.layoutService.onDidChangePartVisibility(() => {
 			this.mainEditorAreaVisibleContext.set(this.layoutService.isVisible(Parts.EDITOR_PART, mainWindow));
 			this.panelVisibleContext.set(this.layoutService.isVisible(Parts.PANEL_PART));
 			this.panelMaximizedContext.set(this.layoutService.isPanelMaximized());
 			this.auxiliaryBarVisibleContext.set(this.layoutService.isVisible(Parts.AUXILIARYBAR_PART));
+			this.sideBarVisibleContext.set(this.layoutService.isVisible(Parts.SIDEBAR_PART));
 
 			this.updateTitleBarContextKeys();
 		}));
@@ -326,10 +323,6 @@ export class WorkbenchContextKeysHandler extends Disposable {
 		}
 	}
 
-	private updateSideBarContextKeys(): void {
-		this.sideBarVisibleContext.set(this.layoutService.isVisible(Parts.SIDEBAR_PART));
-	}
-
 	private updateTitleBarContextKeys(): void {
 		this.titleAreaVisibleContext.set(this.layoutService.isVisible(Parts.TITLEBAR_PART, mainWindow));
 		this.titleBarStyleContext.set(getTitleBarStyle(this.configurationService));
diff --git a/src/vs/workbench/browser/parts/editor/modalEditorPart.ts b/src/vs/workbench/browser/parts/editor/modalEditorPart.ts
index b58cb981051..bdbd911fe28 100644
--- a/src/vs/workbench/browser/parts/editor/modalEditorPart.ts
+++ b/src/vs/workbench/browser/parts/editor/modalEditorPart.ts
@@ -78,8 +78,8 @@ export class ModalEditorPart {
 			if (e.target === modalElement) {
 				EventHelper.stop(e, true);
 
-				// Guide focus back into the modal when clicking outside modal
-				editorPartContainer.focus();
+				// Close modal when clicking outside the dialog
+				editorPart.close();
 			}
 		}));
 
diff --git a/src/vs/workbench/contrib/browserView/common/browserView.ts b/src/vs/workbench/contrib/browserView/common/browserView.ts
index d717ada29b9..732fa1974e4 100644
--- a/src/vs/workbench/contrib/browserView/common/browserView.ts
+++ b/src/vs/workbench/contrib/browserView/common/browserView.ts
@@ -68,11 +68,6 @@ export interface IBrowserViewWorkbenchService {
 	 * Clear all storage data for the current workspace browser session
 	 */
 	clearWorkspaceStorage(): Promise<void>;
-
-	/**
-	 * Get the endpoint for connecting to a browser view's CDP proxy server
-	 */
-	getDebugWebSocketEndpoint(): Promise<string>;
 }
 
 
diff --git a/src/vs/workbench/contrib/browserView/electron-browser/browserEditor.ts b/src/vs/workbench/contrib/browserView/electron-browser/browserEditor.ts
index ad793c2770e..e9f065deb3e 100644
--- a/src/vs/workbench/contrib/browserView/electron-browser/browserEditor.ts
+++ b/src/vs/workbench/contrib/browserView/electron-browser/browserEditor.ts
@@ -52,6 +52,7 @@ export const CONTEXT_BROWSER_CAN_GO_FORWARD = new RawContextKey<boolean>('browse
 export const CONTEXT_BROWSER_FOCUSED = new RawContextKey<boolean>('browserFocused', true, localize('browser.editorFocused', "Whether the browser editor is focused"));
 export const CONTEXT_BROWSER_STORAGE_SCOPE = new RawContextKey<string>('browserStorageScope', '', localize('browser.storageScope', "The storage scope of the current browser view"));
 export const CONTEXT_BROWSER_HAS_URL = new RawContextKey<boolean>('browserHasUrl', false, localize('browser.hasUrl', "Whether the browser has a URL loaded"));
+export const CONTEXT_BROWSER_HAS_ERROR = new RawContextKey<boolean>('browserHasError', false, localize('browser.hasError', "Whether the browser has a load error"));
 export const CONTEXT_BROWSER_DEVTOOLS_OPEN = new RawContextKey<boolean>('browserDevToolsOpen', false, localize('browser.devToolsOpen', "Whether developer tools are open for the current browser view"));
 export const CONTEXT_BROWSER_ELEMENT_SELECTION_ACTIVE = new RawContextKey<boolean>('browserElementSelectionActive', false, localize('browser.elementSelectionActive', "Whether element selection is currently active"));
 
@@ -188,6 +189,7 @@ export class BrowserEditor extends EditorPane {
 	private _canGoForwardContext!: IContextKey<boolean>;
 	private _storageScopeContext!: IContextKey<string>;
 	private _hasUrlContext!: IContextKey<boolean>;
+	private _hasErrorContext!: IContextKey<boolean>;
 	private _devToolsOpenContext!: IContextKey<boolean>;
 	private _elementSelectionActiveContext!: IContextKey<boolean>;
 
@@ -195,6 +197,7 @@ export class BrowserEditor extends EditorPane {
 	private readonly _inputDisposables = this._register(new DisposableStore());
 	private overlayManager: BrowserOverlayManager | undefined;
 	private _elementSelectionCts: CancellationTokenSource | undefined;
+	private _consoleSessionCts: CancellationTokenSource | undefined;
 	private _screenshotTimeout: ReturnType<typeof setTimeout> | undefined;
 
 	constructor(
@@ -226,6 +229,7 @@ export class BrowserEditor extends EditorPane {
 		this._canGoForwardContext = CONTEXT_BROWSER_CAN_GO_FORWARD.bindTo(contextKeyService);
 		this._storageScopeContext = CONTEXT_BROWSER_STORAGE_SCOPE.bindTo(contextKeyService);
 		this._hasUrlContext = CONTEXT_BROWSER_HAS_URL.bindTo(contextKeyService);
+		this._hasErrorContext = CONTEXT_BROWSER_HAS_ERROR.bindTo(contextKeyService);
 		this._devToolsOpenContext = CONTEXT_BROWSER_DEVTOOLS_OPEN.bindTo(contextKeyService);
 		this._elementSelectionActiveContext = CONTEXT_BROWSER_ELEMENT_SELECTION_ACTIVE.bindTo(contextKeyService);
 
@@ -367,6 +371,12 @@ export class BrowserEditor extends EditorPane {
 
 			// Update navigation bar and context keys from model
 			this.updateNavigationState(navEvent);
+
+			if (navEvent.url) {
+				this.startConsoleSession();
+			} else {
+				this.stopConsoleSession();
+			}
 		}));
 
 		this._inputDisposables.add(this._model.onDidChangeLoadingState(() => {
@@ -519,6 +529,7 @@ export class BrowserEditor extends EditorPane {
 		}
 
 		const error: IBrowserViewLoadError | undefined = this._model.error;
+		this._hasErrorContext.set(!!error);
 		if (error) {
 			// Update error content
 
@@ -759,6 +770,66 @@ export class BrowserEditor extends EditorPane {
 		}
 	}
 
+	async addConsoleLogsToChat(): Promise<void> {
+		const resourceUri = this.input?.resource;
+		if (!resourceUri) {
+			return;
+		}
+
+		const locator: IBrowserTargetLocator = { browserViewId: BrowserViewUri.getId(resourceUri) };
+
+		try {
+			const logs = await this.browserElementsService.getConsoleLogs(locator);
+			if (!logs) {
+				return;
+			}
+
+			const toAttach: IChatRequestVariableEntry[] = [];
+			toAttach.push({
+				id: 'console-logs-' + Date.now(),
+				name: localize('consoleLogs', 'Console Logs'),
+				fullName: localize('consoleLogs', 'Console Logs'),
+				value: logs,
+				kind: 'element',
+				icon: ThemeIcon.fromId(Codicon.output.id),
+			});
+
+			const widget = await this.chatWidgetService.revealWidget() ?? this.chatWidgetService.lastFocusedWidget;
+			widget?.attachmentModel?.addContext(...toAttach);
+		} catch (error) {
+			this.logService.error('BrowserEditor.addConsoleLogsToChat: Failed to get console logs', error);
+		}
+	}
+
+	private startConsoleSession(): void {
+		// don't restart if already running
+		if (this._consoleSessionCts) {
+			return;
+		}
+
+		const resourceUri = this.input?.resource;
+		if (!resourceUri || !this._model?.url) {
+			return;
+		}
+
+		const cts = new CancellationTokenSource();
+		this._consoleSessionCts = cts;
+		const locator: IBrowserTargetLocator = { browserViewId: BrowserViewUri.getId(resourceUri) };
+
+		this.browserElementsService.startConsoleSession(cts.token, locator).catch(error => {
+			if (!cts.token.isCancellationRequested) {
+				this.logService.error('BrowserEditor: Failed to start console session', error);
+			}
+		});
+	}
+
+	private stopConsoleSession(): void {
+		if (this._consoleSessionCts) {
+			this._consoleSessionCts.dispose(true);
+			this._consoleSessionCts = undefined;
+		}
+	}
+
 	/**
 	 * Update navigation state and context keys
 	 */
@@ -907,6 +978,9 @@ export class BrowserEditor extends EditorPane {
 			this._elementSelectionCts = undefined;
 		}
 
+		// Cancel any active console session
+		this.stopConsoleSession();
+
 		// Cancel any scheduled screenshots
 		this.cancelScheduledScreenshot();
 
@@ -920,6 +994,7 @@ export class BrowserEditor extends EditorPane {
 		this._canGoBackContext.reset();
 		this._canGoForwardContext.reset();
 		this._hasUrlContext.reset();
+		this._hasErrorContext.reset();
 		this._storageScopeContext.reset();
 		this._devToolsOpenContext.reset();
 		this._elementSelectionActiveContext.reset();
diff --git a/src/vs/workbench/contrib/browserView/electron-browser/browserViewActions.ts b/src/vs/workbench/contrib/browserView/electron-browser/browserViewActions.ts
index 43ce32c896b..39305f4c57b 100644
--- a/src/vs/workbench/contrib/browserView/electron-browser/browserViewActions.ts
+++ b/src/vs/workbench/contrib/browserView/electron-browser/browserViewActions.ts
@@ -11,7 +11,7 @@ import { KeybindingWeight } from '../../../../platform/keybinding/common/keybind
 import { KeyMod, KeyCode } from '../../../../base/common/keyCodes.js';
 import { ACTIVE_GROUP, IEditorService, SIDE_GROUP } from '../../../services/editor/common/editorService.js';
 import { Codicon } from '../../../../base/common/codicons.js';
-import { BrowserEditor, CONTEXT_BROWSER_CAN_GO_BACK, CONTEXT_BROWSER_CAN_GO_FORWARD, CONTEXT_BROWSER_DEVTOOLS_OPEN, CONTEXT_BROWSER_FOCUSED, CONTEXT_BROWSER_HAS_URL, CONTEXT_BROWSER_STORAGE_SCOPE, CONTEXT_BROWSER_ELEMENT_SELECTION_ACTIVE, CONTEXT_BROWSER_FIND_WIDGET_FOCUSED, CONTEXT_BROWSER_FIND_WIDGET_VISIBLE } from './browserEditor.js';
+import { BrowserEditor, CONTEXT_BROWSER_CAN_GO_BACK, CONTEXT_BROWSER_CAN_GO_FORWARD, CONTEXT_BROWSER_DEVTOOLS_OPEN, CONTEXT_BROWSER_FOCUSED, CONTEXT_BROWSER_HAS_ERROR, CONTEXT_BROWSER_HAS_URL, CONTEXT_BROWSER_STORAGE_SCOPE, CONTEXT_BROWSER_ELEMENT_SELECTION_ACTIVE, CONTEXT_BROWSER_FIND_WIDGET_FOCUSED, CONTEXT_BROWSER_FIND_WIDGET_VISIBLE } from './browserEditor.js';
 import { BrowserViewUri } from '../../../../platform/browserView/common/browserViewUri.js';
 import { IBrowserViewWorkbenchService } from '../common/browserView.js';
 import { BrowserViewStorageScope } from '../../../../platform/browserView/common/browserView.js';
@@ -55,7 +55,12 @@ class OpenIntegratedBrowserAction extends Action2 {
 
 		logBrowserOpen(telemetryService, options.url ? 'commandWithUrl' : 'commandWithoutUrl');
 
-		await editorService.openEditor({ resource }, group);
+		const editorPane = await editorService.openEditor({ resource }, group);
+
+		// Lock the group when opening to the side
+		if (options.openToSide && editorPane?.group) {
+			editorPane.group.lock(true);
+		}
 	}
 }
 
@@ -223,7 +228,7 @@ class AddElementToChatAction extends Action2 {
 			category: BrowserCategory,
 			icon: Codicon.inspect,
 			f1: true,
-			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, enabled),
+			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, CONTEXT_BROWSER_HAS_URL, CONTEXT_BROWSER_HAS_ERROR.negate(), enabled),
 			toggled: CONTEXT_BROWSER_ELEMENT_SELECTION_ACTIVE,
 			menu: {
 				id: MenuId.BrowserActionsToolbar,
@@ -249,6 +254,34 @@ class AddElementToChatAction extends Action2 {
 	}
 }
 
+class AddConsoleLogsToChatAction extends Action2 {
+	static readonly ID = 'workbench.action.browser.addConsoleLogsToChat';
+
+	constructor() {
+		const enabled = ContextKeyExpr.and(ChatContextKeys.enabled, ContextKeyExpr.equals('config.chat.sendElementsToChat.enabled', true));
+		super({
+			id: AddConsoleLogsToChatAction.ID,
+			title: localize2('browser.addConsoleLogsToChatAction', 'Add Console Logs to Chat'),
+			category: BrowserCategory,
+			icon: Codicon.output,
+			f1: true,
+			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, CONTEXT_BROWSER_HAS_URL, CONTEXT_BROWSER_HAS_ERROR.negate(), enabled),
+			menu: {
+				id: MenuId.BrowserActionsToolbar,
+				group: 'actions',
+				order: 2,
+				when: enabled
+			}
+		});
+	}
+
+	async run(accessor: ServicesAccessor, browserEditor = accessor.get(IEditorService).activeEditorPane): Promise<void> {
+		if (browserEditor instanceof BrowserEditor) {
+			await browserEditor.addConsoleLogsToChat();
+		}
+	}
+}
+
 class ToggleDevToolsAction extends Action2 {
 	static readonly ID = 'workbench.action.browser.toggleDevTools';
 
@@ -259,12 +292,12 @@ class ToggleDevToolsAction extends Action2 {
 			category: BrowserCategory,
 			icon: Codicon.terminal,
 			f1: true,
-			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, CONTEXT_BROWSER_HAS_URL),
+			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, CONTEXT_BROWSER_HAS_URL, CONTEXT_BROWSER_HAS_ERROR.negate()),
 			toggled: ContextKeyExpr.equals(CONTEXT_BROWSER_DEVTOOLS_OPEN.key, true),
 			menu: {
 				id: MenuId.BrowserActionsToolbar,
 				group: 'actions',
-				order: 2,
+				order: 3,
 			},
 			keybinding: {
 				weight: KeybindingWeight.WorkbenchContrib,
@@ -290,7 +323,8 @@ class OpenInExternalBrowserAction extends Action2 {
 			category: BrowserCategory,
 			icon: Codicon.linkExternal,
 			f1: true,
-			precondition: BROWSER_EDITOR_ACTIVE,
+			// Note: We do allow opening in an external browser even if there is an error page shown
+			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, CONTEXT_BROWSER_HAS_URL),
 			menu: {
 				id: MenuId.BrowserActionsToolbar,
 				group: ActionGroupPage,
@@ -422,7 +456,7 @@ class ShowBrowserFindAction extends Action2 {
 			title: localize2('browser.showFindAction', 'Find in Page'),
 			category: BrowserCategory,
 			f1: true,
-			precondition: BROWSER_EDITOR_ACTIVE,
+			precondition: ContextKeyExpr.and(BROWSER_EDITOR_ACTIVE, CONTEXT_BROWSER_HAS_URL, CONTEXT_BROWSER_HAS_ERROR.negate()),
 			menu: {
 				id: MenuId.BrowserActionsToolbar,
 				group: ActionGroupPage,
@@ -537,6 +571,7 @@ registerAction2(GoForwardAction);
 registerAction2(ReloadAction);
 registerAction2(FocusUrlInputAction);
 registerAction2(AddElementToChatAction);
+registerAction2(AddConsoleLogsToChatAction);
 registerAction2(ToggleDevToolsAction);
 registerAction2(OpenInExternalBrowserAction);
 registerAction2(ClearGlobalBrowserStorageAction);
diff --git a/src/vs/workbench/contrib/browserView/electron-browser/browserViewWorkbenchService.ts b/src/vs/workbench/contrib/browserView/electron-browser/browserViewWorkbenchService.ts
index 30199e27cbf..68d2376c587 100644
--- a/src/vs/workbench/contrib/browserView/electron-browser/browserViewWorkbenchService.ts
+++ b/src/vs/workbench/contrib/browserView/electron-browser/browserViewWorkbenchService.ts
@@ -54,8 +54,4 @@ export class BrowserViewWorkbenchService implements IBrowserViewWorkbenchService
 		const workspaceId = this.workspaceContextService.getWorkspace().id;
 		return this._browserViewService.clearWorkspaceStorage(workspaceId);
 	}
-
-	async getDebugWebSocketEndpoint() {
-		return this._browserViewService.getDebugWebSocketEndpoint();
-	}
 }
diff --git a/src/vs/workbench/contrib/chat/browser/actions/chatActions.ts b/src/vs/workbench/contrib/chat/browser/actions/chatActions.ts
index 7ac92123928..88e50c6a498 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/chatActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/chatActions.ts
@@ -605,14 +605,6 @@ export function registerChatActions() {
 			const chatVisible = viewsService.isViewVisible(ChatViewId);
 			const clickBehavior = configurationService.getValue<AgentsControlClickBehavior>(ChatConfiguration.AgentsControlClickBehavior);
 			switch (clickBehavior) {
-				case AgentsControlClickBehavior.Focus:
-					if (chatLocation === ViewContainerLocation.AuxiliaryBar) {
-						layoutService.setAuxiliaryBarMaximized(true);
-					} else {
-						this.updatePartVisibility(layoutService, chatLocation, true);
-					}
-					(await widgetService.revealWidget())?.focusInput();
-					break;
 				case AgentsControlClickBehavior.Cycle:
 					if (chatVisible) {
 						if (
diff --git a/src/vs/workbench/contrib/chat/browser/actions/chatContextActions.ts b/src/vs/workbench/contrib/chat/browser/actions/chatContextActions.ts
index e5781a9fc88..5542c4cad88 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/chatContextActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/chatContextActions.ts
@@ -129,6 +129,7 @@ class AttachFileToChatAction extends AttachResourceAction {
 			id: AttachFileToChatAction.ID,
 			title: localize2('workbench.action.chat.attachFile.label', "Add File to Chat"),
 			category: CHAT_CATEGORY,
+			icon: Codicon.attach,
 			precondition: ChatContextKeys.enabled,
 			f1: true,
 			menu: [{
@@ -173,9 +174,14 @@ class AttachFileToChatAction extends AttachResourceAction {
 					)
 				)
 			}, {
-				id: MenuId.ChatEditorInlineGutter,
-				group: '2_chat',
-				order: 2,
+				id: MenuId.InlineChatEditorAffordance,
+				group: '0_chat',
+				order: 3,
+				when: ContextKeyExpr.and(ChatContextKeys.enabled, EditorContextKeys.hasNonEmptySelection.negate())
+			}, {
+				id: MenuId.ChatEditorInlineMenu,
+				group: '0_chat',
+				order: 3,
 				when: ContextKeyExpr.and(ChatContextKeys.enabled, EditorContextKeys.hasNonEmptySelection.negate())
 			}]
 		});
@@ -290,6 +296,7 @@ class AttachSelectionToChatAction extends Action2 {
 			id: AttachSelectionToChatAction.ID,
 			title: localize2('workbench.action.chat.attachSelection.label', "Add Selection to Chat"),
 			category: CHAT_CATEGORY,
+			icon: Codicon.attach,
 			f1: true,
 			precondition: ChatContextKeys.enabled,
 			menu: [{
@@ -307,9 +314,14 @@ class AttachSelectionToChatAction extends Action2 {
 					)
 				)
 			}, {
-				id: MenuId.ChatEditorInlineGutter,
-				group: '2_chat',
-				order: 1,
+				id: MenuId.InlineChatEditorAffordance,
+				group: '0_chat',
+				order: 2,
+				when: ContextKeyExpr.and(ChatContextKeys.enabled, EditorContextKeys.hasNonEmptySelection)
+			}, {
+				id: MenuId.ChatEditorInlineMenu,
+				group: '0_chat',
+				order: 2,
 				when: ContextKeyExpr.and(ChatContextKeys.enabled, EditorContextKeys.hasNonEmptySelection)
 			}]
 		});
diff --git a/src/vs/workbench/contrib/chat/browser/actions/chatExecuteActions.ts b/src/vs/workbench/contrib/chat/browser/actions/chatExecuteActions.ts
index bf6d4807280..9ec8cb095eb 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/chatExecuteActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/chatExecuteActions.ts
@@ -181,7 +181,7 @@ abstract class SubmitAction extends Action2 {
 }
 
 const requestInProgressOrPendingToolCall = ContextKeyExpr.or(ChatContextKeys.requestInProgress, ChatContextKeys.Editing.hasToolConfirmation);
-const whenNotInProgress = ContextKeyExpr.and(ChatContextKeys.requestInProgress.negate(), ChatContextKeys.Editing.hasToolConfirmation.negate());
+const whenNotInProgress = ChatContextKeys.requestInProgress.negate();
 
 export class ChatSubmitAction extends SubmitAction {
 	static readonly ID = 'workbench.action.chat.submit';
diff --git a/src/vs/workbench/contrib/chat/browser/actions/chatQueueActions.ts b/src/vs/workbench/contrib/chat/browser/actions/chatQueueActions.ts
index c3200e37a00..a8d166e68f7 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/chatQueueActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/chatQueueActions.ts
@@ -13,17 +13,12 @@ import { ContextKeyExpr } from '../../../../../platform/contextkey/common/contex
 import { KeybindingWeight } from '../../../../../platform/keybinding/common/keybindingsRegistry.js';
 import { ChatContextKeys } from '../../common/actions/chatContextKeys.js';
 import { ChatRequestQueueKind, IChatService } from '../../common/chatService/chatService.js';
-import { ChatConfiguration } from '../../common/constants.js';
 import { isRequestVM } from '../../common/model/chatViewModel.js';
 import { IChatWidgetService } from '../chat.js';
 import { CHAT_CATEGORY } from './chatActions.js';
 
-const queueingEnabledCondition = ContextKeyExpr.equals(`config.${ChatConfiguration.RequestQueueingEnabled}`, true);
-const requestInProgressOrPendingToolCall = ContextKeyExpr.or(ChatContextKeys.requestInProgress, ChatContextKeys.Editing.hasToolConfirmation);
-
 const queuingActionsPresent = ContextKeyExpr.and(
-	queueingEnabledCondition,
-	ContextKeyExpr.or(requestInProgressOrPendingToolCall, ChatContextKeys.editingRequestType.isEqualTo(ChatContextKeys.EditingRequestType.QueueOrSteer)),
+	ContextKeyExpr.or(ChatContextKeys.requestInProgress, ChatContextKeys.editingRequestType.isEqualTo(ChatContextKeys.EditingRequestType.QueueOrSteer)),
 	ChatContextKeys.editingRequestType.notEqualsTo(ChatContextKeys.EditingRequestType.Sent),
 );
 
@@ -141,7 +136,6 @@ export class ChatRemovePendingRequestAction extends Action2 {
 				group: 'navigation',
 				order: 4,
 				when: ContextKeyExpr.and(
-					queueingEnabledCondition,
 					ChatContextKeys.isRequest,
 					ChatContextKeys.isPendingRequest
 				)
@@ -181,7 +175,6 @@ export class ChatSendPendingImmediatelyAction extends Action2 {
 				group: 'navigation',
 				order: 3,
 				when: ContextKeyExpr.and(
-					queueingEnabledCondition,
 					ChatContextKeys.isRequest,
 					ChatContextKeys.isPendingRequest
 				)
@@ -239,11 +232,8 @@ export class ChatRemoveAllPendingRequestsAction extends Action2 {
 				id: MenuId.ChatContext,
 				group: 'navigation',
 				order: 3,
-				when: ContextKeyExpr.and(
-					queueingEnabledCondition,
-					ChatContextKeys.hasPendingRequests
-				)
-			}]
+				when: ChatContextKeys.hasPendingRequests,
+			}],
 		});
 	}
 
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsActions.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsActions.ts
index 56f51542f99..160fde28808 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsActions.ts
@@ -149,7 +149,7 @@ export class PickAgentSessionAction extends Action2 {
 	async run(accessor: ServicesAccessor): Promise<void> {
 		const instantiationService = accessor.get(IInstantiationService);
 
-		const agentSessionsPicker = instantiationService.createInstance(AgentSessionsPicker, undefined);
+		const agentSessionsPicker = instantiationService.createInstance(AgentSessionsPicker, undefined, undefined);
 		await agentSessionsPicker.pickAgentSession();
 	}
 }
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsPicker.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsPicker.ts
index 27fe44366cb..056f9ecd07f 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsPicker.ts
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsPicker.ts
@@ -11,7 +11,7 @@ import { localize } from '../../../../../nls.js';
 import { ICommandService } from '../../../../../platform/commands/common/commands.js';
 import { IInstantiationService } from '../../../../../platform/instantiation/common/instantiation.js';
 import { IQuickInputButton, IQuickInputService, IQuickPickItem, IQuickPickSeparator } from '../../../../../platform/quickinput/common/quickInput.js';
-import { openSession } from './agentSessionsOpener.js';
+import { ISessionOpenOptions, openSession } from './agentSessionsOpener.js';
 import { IAgentSession, isLocalAgentSessionItem } from './agentSessionsModel.js';
 import { IAgentSessionsService } from './agentSessionsService.js';
 import { AgentSessionsSorter, groupAgentSessionsByDate, sessionDateFromNow } from './agentSessionsViewer.js';
@@ -62,12 +62,17 @@ export function getSessionButtons(session: IAgentSession): IQuickInputButton[] {
 	return buttons;
 }
 
+export interface IAgentSessionsPickerOptions {
+	overrideSessionOpen?(session: IAgentSession, openOptions?: ISessionOpenOptions): Promise<void>;
+}
+
 export class AgentSessionsPicker {
 
 	private readonly sorter = new AgentSessionsSorter();
 
 	constructor(
 		private readonly anchor: HTMLElement | undefined,
+		private readonly options: IAgentSessionsPickerOptions | undefined,
 		@IAgentSessionsService private readonly agentSessionsService: IAgentSessionsService,
 		@IQuickInputService private readonly quickInputService: IQuickInputService,
 		@IInstantiationService private readonly instantiationService: IInstantiationService,
@@ -87,13 +92,19 @@ export class AgentSessionsPicker {
 		disposables.add(picker.onDidAccept(e => {
 			const pick = picker.selectedItems[0];
 			if (pick) {
-				this.instantiationService.invokeFunction(openSession, pick.session, {
+				const openOptions: ISessionOpenOptions = {
 					sideBySide: e.inBackground,
 					editorOptions: {
 						preserveFocus: e.inBackground,
 						pinned: e.inBackground
 					}
-				});
+				};
+
+				if (this.options?.overrideSessionOpen) {
+					this.options.overrideSessionOpen(pick.session, openOptions);
+				} else {
+					this.instantiationService.invokeFunction(openSession, pick.session, openOptions);
+				}
 			}
 
 			if (!e.inBackground) {
diff --git a/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsViewer.ts b/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsViewer.ts
index bcc94cad564..daabea59fff 100644
--- a/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsViewer.ts
+++ b/src/vs/workbench/contrib/chat/browser/agentSessions/agentSessionsViewer.ts
@@ -758,13 +758,19 @@ export function groupAgentSessionsByDate(sessions: IAgentSession[]): Map<AgentSe
 		}
 	}
 
+	const sectionWithCount = (section: AgentSessionSection, sessions: IAgentSession[]) => ({
+		section,
+		label: localize('agentSessions.sectionWithCount', "{0} ({1})", AgentSessionSectionLabels[section], sessions.length),
+		sessions
+	});
+
 	return new Map<AgentSessionSection, IAgentSessionSection>([
-		[AgentSessionSection.InProgress, { section: AgentSessionSection.InProgress, label: AgentSessionSectionLabels[AgentSessionSection.InProgress], sessions: inProgressSessions }],
-		[AgentSessionSection.Today, { section: AgentSessionSection.Today, label: AgentSessionSectionLabels[AgentSessionSection.Today], sessions: todaySessions }],
-		[AgentSessionSection.Yesterday, { section: AgentSessionSection.Yesterday, label: AgentSessionSectionLabels[AgentSessionSection.Yesterday], sessions: yesterdaySessions }],
-		[AgentSessionSection.Week, { section: AgentSessionSection.Week, label: AgentSessionSectionLabels[AgentSessionSection.Week], sessions: weekSessions }],
-		[AgentSessionSection.Older, { section: AgentSessionSection.Older, label: AgentSessionSectionLabels[AgentSessionSection.Older], sessions: olderSessions }],
-		[AgentSessionSection.Archived, { section: AgentSessionSection.Archived, label: localize('agentSessions.archivedSectionWithCount', "Archived ({0})", archivedSessions.length), sessions: archivedSessions }],
+		[AgentSessionSection.InProgress, sectionWithCount(AgentSessionSection.InProgress, inProgressSessions)],
+		[AgentSessionSection.Today, sectionWithCount(AgentSessionSection.Today, todaySessions)],
+		[AgentSessionSection.Yesterday, sectionWithCount(AgentSessionSection.Yesterday, yesterdaySessions)],
+		[AgentSessionSection.Week, sectionWithCount(AgentSessionSection.Week, weekSessions)],
+		[AgentSessionSection.Older, sectionWithCount(AgentSessionSection.Older, olderSessions)],
+		[AgentSessionSection.Archived, sectionWithCount(AgentSessionSection.Archived, archivedSessions)],
 	]);
 }
 
diff --git a/src/vs/workbench/contrib/chat/browser/chat.contribution.ts b/src/vs/workbench/contrib/chat/browser/chat.contribution.ts
index 8b115b1fc94..cd8b77b0a0c 100644
--- a/src/vs/workbench/contrib/chat/browser/chat.contribution.ts
+++ b/src/vs/workbench/contrib/chat/browser/chat.contribution.ts
@@ -204,11 +204,10 @@ configurationRegistry.registerConfiguration({
 		},
 		[ChatConfiguration.AgentsControlClickBehavior]: {
 			type: 'string',
-			enum: [AgentsControlClickBehavior.Default, AgentsControlClickBehavior.Cycle, AgentsControlClickBehavior.Focus],
+			enum: [AgentsControlClickBehavior.Default, AgentsControlClickBehavior.Cycle],
 			enumDescriptions: [
 				nls.localize('chat.agentsControl.clickBehavior.default', "Clicking chat icon toggles chat visibility."),
 				nls.localize('chat.agentsControl.clickBehavior.cycle', "Clicking chat icon cycles through: show chat, maximize chat, hide chat. This requires chat to be contained in the secondary sidebar."),
-				nls.localize('chat.agentsControl.clickBehavior.focus', "Clicking chat icon focuses the chat view and maximizes it if located in the secondary sidebar.")
 			],
 			markdownDescription: nls.localize('chat.agentsControl.clickBehavior', "Controls the behavior when clicking on the chat icon in the command center."),
 			default: product.quality !== 'stable' ? AgentsControlClickBehavior.Cycle : AgentsControlClickBehavior.Default,
@@ -644,12 +643,6 @@ configurationRegistry.registerConfiguration({
 			enumItemLabels: ExploreAgentDefaultModel.modelLabels,
 			markdownEnumDescriptions: ExploreAgentDefaultModel.modelDescriptions
 		},
-		[ChatConfiguration.RequestQueueingEnabled]: {
-			type: 'boolean',
-			description: nls.localize('chat.requestQueuing.enabled.description', "When enabled, allows queuing additional messages while a request is in progress and steering the current request with a new message."),
-			default: true,
-			tags: ['experimental'],
-		},
 		[ChatConfiguration.RequestQueueingDefaultAction]: {
 			type: 'string',
 			enum: ['queue', 'steer'],
@@ -689,15 +682,10 @@ configurationRegistry.registerConfiguration({
 			default: true,
 			tags: ['experimental'],
 		},
-		['chat.statusWidget.sku']: {
-			type: 'string',
-			enum: ['free', 'anonymous'],
-			enumDescriptions: [
-				nls.localize('chat.statusWidget.sku.free', "Show status widget for free tier users."),
-				nls.localize('chat.statusWidget.sku.anonymous', "Show status widget for anonymous users.")
-			],
-			description: nls.localize('chat.statusWidget.enabled.description', "Controls which user type should see the status widget in new chat sessions when quota is exceeded."),
-			default: undefined,
+		['chat.statusWidget.anonymous']: {
+			type: 'boolean',
+			description: nls.localize('chat.statusWidget.anonymous.description', "Controls whether anonymous users see the status widget in new chat sessions when rate limited."),
+			default: false,
 			tags: ['experimental', 'advanced'],
 			experiment: {
 				mode: 'auto'
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingEditorOverlay.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingEditorOverlay.ts
index cbaa0bc4753..439ee6ac394 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingEditorOverlay.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingEditorOverlay.ts
@@ -10,7 +10,7 @@ import { HiddenItemStrategy, MenuWorkbenchToolBar } from '../../../../../platfor
 import { IInstantiationService } from '../../../../../platform/instantiation/common/instantiation.js';
 import { IChatEditingService, IChatEditingSession, IModifiedFileEntry, ModifiedFileEntryState } from '../../common/editing/chatEditingService.js';
 import { MenuId } from '../../../../../platform/actions/common/actions.js';
-import { ActionViewItem, IBaseActionViewItemOptions } from '../../../../../base/browser/ui/actionbar/actionViewItems.js';
+import { ActionViewItem, IActionViewItemOptions } from '../../../../../base/browser/ui/actionbar/actionViewItems.js';
 import { IAction, IActionRunner } from '../../../../../base/common/actions.js';
 import { $, addDisposableGenericMouseMoveListener, append } from '../../../../../base/browser/dom.js';
 import { assertType } from '../../../../../base/common/types.js';
@@ -35,7 +35,7 @@ export class ChatEditingAcceptRejectActionViewItem extends ActionViewItem {
 
 	constructor(
 		action: IAction,
-		options: IBaseActionViewItemOptions,
+		options: IActionViewItemOptions,
 		private readonly _entry: IObservable<IModifiedFileEntry | undefined>,
 		private readonly _editor: { focus(): void } | undefined,
 		private readonly _keybindingService: IKeybindingService,
@@ -92,7 +92,7 @@ export class ChatEditingAcceptRejectActionViewItem extends ActionViewItem {
 
 	protected override getTooltip(): string | undefined {
 		const value = super.getTooltip();
-		if (!value || this.options.keybinding) {
+		if (!value) {
 			return value;
 		}
 		return this._keybindingService.appendKeybinding(value, this._action.id);
diff --git a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingTextModelChangeService.ts b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingTextModelChangeService.ts
index acbbd2c650f..07b5ef8421f 100644
--- a/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingTextModelChangeService.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatEditing/chatEditingTextModelChangeService.ts
@@ -34,6 +34,7 @@ import { IChatResponseModel } from '../../common/model/chatModel.js';
 import { ChatAgentLocation } from '../../common/constants.js';
 import { IDocumentDiff2 } from './chatEditingCodeEditorIntegration.js';
 import { pendingRewriteMinimap } from './chatEditingModifiedFileEntry.js';
+import { chatSessionResourceToId } from '../../common/model/chatUri.js';
 
 type affectedLines = { linesAdded: number; linesRemoved: number; lineCount: number; hasRemainingEdits: boolean };
 type acceptedOrRejectedLines = affectedLines & { state: 'accepted' | 'rejected' };
@@ -260,7 +261,7 @@ export class ChatEditingTextModelChangeService extends Disposable {
 			return EditSources.unknown({ name: 'editSessionUndoRedo' });
 		}
 
-		const sessionId = responseModel.session.sessionId;
+		const sessionId = chatSessionResourceToId(responseModel.session.sessionResource);
 		const request = responseModel.session.getRequests().at(-1);
 		const languageId = this.modifiedModel.getLanguageId();
 		const agent = responseModel.agent;
diff --git a/src/vs/workbench/contrib/chat/browser/chatRepoInfo.ts b/src/vs/workbench/contrib/chat/browser/chatRepoInfo.ts
index e5848bf941a..494c639a67a 100644
--- a/src/vs/workbench/contrib/chat/browser/chatRepoInfo.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatRepoInfo.ts
@@ -23,7 +23,6 @@ import * as nls from '../../../../nls.js';
 
 const MAX_CHANGES = 100;
 const MAX_DIFFS_SIZE_BYTES = 900 * 1024;
-const MAX_SESSIONS_WITH_FULL_DIFFS = 5;
 const MAX_FILE_SIZE_BYTES = 1 * 1024 * 1024; // 1 MB per file
 /**
  * Regex to match `url = <remote-url>` lines in git config.
@@ -374,7 +373,83 @@ function computeDiffHunks(
 }
 
 /**
- * Captures repository state from the first available SCM repository.
+ * Captures lightweight repository metadata (branch, commit, remote) from SCM providers.
+ * No file I/O or diff computation - reads only from already-loaded SCM observables.
+ * Used on chat message submission to record the point-in-time commit state.
+ */
+export function captureRepoMetadata(scmService: ISCMService): IExportableRepoData | undefined {
+	const repositories = [...scmService.repositories];
+	if (repositories.length === 0) {
+		return undefined;
+	}
+
+	const repository = repositories[0];
+	const rootUri = repository.provider.rootUri;
+	if (!rootUri) {
+		return undefined;
+	}
+
+	let localBranch: string | undefined;
+	let localHeadCommit: string | undefined;
+	let remoteTrackingBranch: string | undefined;
+	let remoteHeadCommit: string | undefined;
+	let remoteBaseBranch: string | undefined;
+
+	const historyProvider = repository.provider.historyProvider?.get();
+	if (historyProvider) {
+		const historyItemRef = historyProvider.historyItemRef.get();
+		localBranch = historyItemRef?.name;
+		localHeadCommit = historyItemRef?.revision;
+
+		const historyItemRemoteRef = historyProvider.historyItemRemoteRef.get();
+		if (historyItemRemoteRef) {
+			remoteTrackingBranch = historyItemRemoteRef.name;
+			remoteHeadCommit = historyItemRemoteRef.revision;
+		}
+
+		const historyItemBaseRef = historyProvider.historyItemBaseRef.get();
+		if (historyItemBaseRef) {
+			remoteBaseBranch = historyItemBaseRef.name;
+		}
+	}
+
+	// Determine workspace type and sync status without file I/O.
+	// Cannot determine remoteUrl/remoteVendor or detect plain-folder here (requires reading .git/config).
+	// The full captureRepoInfo at export time will produce accurate classification.
+	let workspaceType: IExportableRepoData['workspaceType'];
+	let syncStatus: IExportableRepoData['syncStatus'];
+
+	if (remoteTrackingBranch || remoteHeadCommit || remoteBaseBranch) {
+		workspaceType = 'remote-git';
+
+		if (!remoteTrackingBranch) {
+			syncStatus = 'unpublished';
+		} else if (localHeadCommit && remoteHeadCommit && localHeadCommit === remoteHeadCommit) {
+			syncStatus = 'synced';
+		} else {
+			syncStatus = 'unpushed';
+		}
+	} else {
+		// No remote refs available; conservatively classify as local-git
+		workspaceType = 'local-git';
+		syncStatus = 'local-only';
+	}
+
+	return {
+		workspaceType,
+		syncStatus,
+		localBranch,
+		remoteTrackingBranch,
+		remoteBaseBranch,
+		localHeadCommit,
+		remoteHeadCommit,
+		diffsStatus: 'notCaptured',
+	};
+}
+
+/**
+ * Captures full repository state including working tree diffs.
+ * Performs file I/O and diff computation - should only be called on explicit user action (e.g., export).
  */
 export async function captureRepoInfo(scmService: ISCMService, fileService: IFileService): Promise<IExportableRepoData | undefined> {
 	const repositories = [...scmService.repositories];
@@ -564,7 +639,9 @@ export async function captureRepoInfo(scmService: ISCMService, fileService: IFil
 }
 
 /**
- * Captures repository information for chat sessions on creation and first message.
+ * Captures lightweight repository metadata for chat sessions on first message.
+ * Only reads from already-loaded SCM provider observables, no file I/O.
+ * Full diff capture is deferred to export time (see chatExportZip.ts).
  */
 export class ChatRepoInfoContribution extends Disposable implements IWorkbenchContribution {
 
@@ -576,7 +653,6 @@ export class ChatRepoInfoContribution extends Disposable implements IWorkbenchCo
 		@IChatService private readonly chatService: IChatService,
 		@IChatEntitlementService private readonly chatEntitlementService: IChatEntitlementService,
 		@ISCMService private readonly scmService: ISCMService,
-		@IFileService private readonly fileService: IFileService,
 		@ILogService private readonly logService: ILogService,
 		@IConfigurationService private readonly configurationService: IConfigurationService,
 	) {
@@ -586,12 +662,12 @@ export class ChatRepoInfoContribution extends Disposable implements IWorkbenchCo
 			this.registerConfigurationIfInternal();
 		}));
 
-		this._register(this.chatService.onDidSubmitRequest(async ({ chatSessionResource }) => {
+		this._register(this.chatService.onDidSubmitRequest(({ chatSessionResource }) => {
 			const model = this.chatService.getSession(chatSessionResource);
 			if (!model) {
 				return;
 			}
-			await this.captureAndSetRepoData(model);
+			this.captureAndSetRepoMetadata(model);
 		}));
 	}
 
@@ -612,7 +688,7 @@ export class ChatRepoInfoContribution extends Disposable implements IWorkbenchCo
 			properties: {
 				[ChatConfiguration.RepoInfoEnabled]: {
 					type: 'boolean',
-					description: nls.localize('chat.repoInfo.enabled', "Controls whether repository information (branch, commit, working tree diffs) is captured at the start of chat sessions for internal diagnostics."),
+					description: nls.localize('chat.repoInfo.enabled', "Controls whether lightweight repository metadata (branch, commit, remotes) is captured when a chat request is submitted for internal diagnostics."),
 					default: false,
 				}
 			}
@@ -622,12 +698,15 @@ export class ChatRepoInfoContribution extends Disposable implements IWorkbenchCo
 		this.logService.debug('[ChatRepoInfo] Configuration registered for internal user');
 	}
 
-	private async captureAndSetRepoData(model: IChatModel): Promise<void> {
+	/**
+	 * Captures lightweight metadata (branch, commit, remote refs) on first message.
+	 * Synchronous, no file I/O. Reads only from SCM provider observables.
+	 */
+	private captureAndSetRepoMetadata(model: IChatModel): void {
 		if (!this.chatEntitlementService.isInternal) {
 			return;
 		}
 
-		// Check if repo info capture is enabled via configuration
 		if (!this.configurationService.getValue<boolean>(ChatConfiguration.RepoInfoEnabled)) {
 			return;
 		}
@@ -637,55 +716,17 @@ export class ChatRepoInfoContribution extends Disposable implements IWorkbenchCo
 		}
 
 		try {
-			const repoData = await captureRepoInfo(this.scmService, this.fileService);
-			if (repoData) {
-				model.setRepoData(repoData);
-				if (!repoData.localHeadCommit && repoData.workspaceType !== 'plain-folder') {
-					this.logService.warn('[ChatRepoInfo] Captured repo data without commit hash - git history may not be ready');
+			const metadata = captureRepoMetadata(this.scmService);
+			if (metadata) {
+				model.setRepoData(metadata);
+				if (!metadata.localHeadCommit) {
+					this.logService.warn('[ChatRepoInfo] Captured repo metadata without commit hash - git history may not be ready');
 				}
-
-				// Trim diffs from older sessions to manage storage
-				this.trimOldSessionDiffs();
 			} else {
 				this.logService.debug('[ChatRepoInfo] No SCM repository available for chat session');
 			}
 		} catch (error) {
-			this.logService.warn('[ChatRepoInfo] Failed to capture repo info:', error);
-		}
-	}
-
-	/**
-	 * Trims diffs from older sessions, keeping full diffs only for the most recent sessions.
-	 */
-	private trimOldSessionDiffs(): void {
-		try {
-			// Get all sessions with repoData that has diffs
-			const sessionsWithDiffs: { model: IChatModel; timestamp: number }[] = [];
-
-			for (const model of this.chatService.chatModels.get()) {
-				if (model.repoData?.diffs && model.repoData.diffs.length > 0 && model.repoData.diffsStatus === 'included') {
-					sessionsWithDiffs.push({ model, timestamp: model.timestamp });
-				}
-			}
-
-			// Sort by timestamp descending (most recent first)
-			sessionsWithDiffs.sort((a, b) => b.timestamp - a.timestamp);
-
-			// Trim diffs from sessions beyond the limit
-			for (let i = MAX_SESSIONS_WITH_FULL_DIFFS; i < sessionsWithDiffs.length; i++) {
-				const { model } = sessionsWithDiffs[i];
-				if (model.repoData) {
-					const trimmedRepoData: IExportableRepoData = {
-						...model.repoData,
-						diffs: undefined,
-						diffsStatus: 'trimmedForStorage'
-					};
-					model.setRepoData(trimmedRepoData);
-					this.logService.trace(`[ChatRepoInfo] Trimmed diffs from older session: ${model.sessionResource.toString()}`);
-				}
-			}
-		} catch (error) {
-			this.logService.warn('[ChatRepoInfo] Failed to trim old session diffs:', error);
+			this.logService.warn('[ChatRepoInfo] Failed to capture repo metadata:', error);
 		}
 	}
 }
diff --git a/src/vs/workbench/contrib/chat/browser/chatSessions/chatSessions.contribution.ts b/src/vs/workbench/contrib/chat/browser/chatSessions/chatSessions.contribution.ts
index cb8b452684a..bb70941b5ac 100644
--- a/src/vs/workbench/contrib/chat/browser/chatSessions/chatSessions.contribution.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatSessions/chatSessions.contribution.ts
@@ -993,15 +993,25 @@ export class ChatSessionsService extends Disposable implements IChatSessionsServ
 	}
 
 	public async getOrCreateChatSession(sessionResource: URI, token: CancellationToken): Promise<IChatSession> {
-		const existingSessionData = this._sessions.get(sessionResource);
-		if (existingSessionData) {
-			return existingSessionData.session;
+		{
+			const existingSessionData = this._sessions.get(sessionResource);
+			if (existingSessionData) {
+				return existingSessionData.session;
+			}
 		}
 
 		if (!(await raceCancellationError(this.canResolveChatSession(sessionResource), token))) {
 			throw Error(`Can not find provider for ${sessionResource}`);
 		}
 
+		// Check again after async provider resolution
+		{
+			const existingSessionData = this._sessions.get(sessionResource);
+			if (existingSessionData) {
+				return existingSessionData.session;
+			}
+		}
+
 		const resolvedType = this._resolveToPrimaryType(sessionResource.scheme) || sessionResource.scheme;
 		const provider = this._contentProviders.get(resolvedType);
 		if (!provider) {
@@ -1009,6 +1019,16 @@ export class ChatSessionsService extends Disposable implements IChatSessionsServ
 		}
 
 		const session = await raceCancellationError(provider.provideChatSessionContent(sessionResource, token), token);
+
+		// Make sure another session wasn't created while we were awaiting the provider
+		{
+			const existingSessionData = this._sessions.get(sessionResource);
+			if (existingSessionData) {
+				session.dispose();
+				return existingSessionData.session;
+			}
+		}
+
 		const sessionData = new ContributedChatSessionData(session, sessionResource.scheme, sessionResource, session.options, resource => {
 			sessionData.dispose();
 			this._sessions.delete(resource);
@@ -1016,6 +1036,9 @@ export class ChatSessionsService extends Disposable implements IChatSessionsServ
 
 		this._sessions.set(sessionResource, sessionData);
 
+		// Make sure any listeners are aware of the new session and its options
+		this._onDidChangeSessionOptions.fire(sessionResource);
+
 		return session;
 	}
 
diff --git a/src/vs/workbench/contrib/chat/browser/chatSetup/chatSetupRunner.ts b/src/vs/workbench/contrib/chat/browser/chatSetup/chatSetupRunner.ts
index 9929aa7064e..8922f2cbf35 100644
--- a/src/vs/workbench/contrib/chat/browser/chatSetup/chatSetupRunner.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatSetup/chatSetupRunner.ts
@@ -31,6 +31,7 @@ import { ChatSetupController } from './chatSetupController.js';
 import { IChatSetupResult, ChatSetupAnonymous, InstallChatEvent, InstallChatClassification, ChatSetupStrategy, ChatSetupResultValue } from './chatSetup.js';
 import { IDefaultAccountService } from '../../../../../platform/defaultAccount/common/defaultAccount.js';
 import { IHostService } from '../../../../services/host/browser/host.js';
+import { IWorkbenchAssignmentService } from '../../../../services/assignment/common/assignmentService.js';
 
 const defaultChat = {
 	publicCodeMatchesUrl: product.defaultChatAgent?.publicCodeMatchesUrl ?? '',
@@ -49,7 +50,7 @@ export class ChatSetup {
 		let instance = ChatSetup.instance;
 		if (!instance) {
 			instance = ChatSetup.instance = instantiationService.invokeFunction(accessor => {
-				return new ChatSetup(context, controller, accessor.get(ITelemetryService), accessor.get(IWorkbenchLayoutService), accessor.get(IKeybindingService), accessor.get(IChatEntitlementService) as ChatEntitlementService, accessor.get(ILogService), accessor.get(IChatWidgetService), accessor.get(IWorkspaceTrustRequestService), accessor.get(IMarkdownRendererService), accessor.get(IDefaultAccountService), accessor.get(IHostService));
+				return new ChatSetup(context, controller, accessor.get(ITelemetryService), accessor.get(IWorkbenchLayoutService), accessor.get(IKeybindingService), accessor.get(IChatEntitlementService) as ChatEntitlementService, accessor.get(ILogService), accessor.get(IChatWidgetService), accessor.get(IWorkspaceTrustRequestService), accessor.get(IMarkdownRendererService), accessor.get(IDefaultAccountService), accessor.get(IHostService), accessor.get(IWorkbenchAssignmentService));
 			});
 		}
 
@@ -72,7 +73,8 @@ export class ChatSetup {
 		@IWorkspaceTrustRequestService private readonly workspaceTrustRequestService: IWorkspaceTrustRequestService,
 		@IMarkdownRendererService private readonly markdownRendererService: IMarkdownRendererService,
 		@IDefaultAccountService private readonly defaultAccountService: IDefaultAccountService,
-		@IHostService private readonly hostService: IHostService
+		@IHostService private readonly hostService: IHostService,
+		@IWorkbenchAssignmentService private readonly experimentService: IWorkbenchAssignmentService,
 	) { }
 
 	skipDialog(): void {
@@ -162,7 +164,8 @@ export class ChatSetup {
 	private async showDialog(options?: { forceSignInDialog?: boolean; forceAnonymous?: ChatSetupAnonymous }): Promise<ChatSetupStrategy> {
 		const disposables = new DisposableStore();
 
-		const buttons = this.getButtons(options);
+		const useCloseButton = await this.experimentService.getTreatment<boolean>('chatSetupDialogCloseButton');
+		const buttons = this.getButtons(options, useCloseButton);
 
 		const dialog = disposables.add(new Dialog(
 			this.layoutService.activeContainer,
@@ -174,8 +177,8 @@ export class ChatSetup {
 				detail: ' ', // workaround allowing us to render the message in large
 				icon: Codicon.copilotLarge,
 				alignment: DialogContentsAlignment.Vertical,
-				cancelId: buttons.length - 1,
-				disableCloseButton: true,
+				cancelId: useCloseButton ? buttons.length : buttons.length - 1,
+				disableCloseButton: !useCloseButton,
 				renderFooter: footer => footer.appendChild(this.createDialogFooter(disposables, options)),
 				buttonOptions: buttons.map(button => button[2])
 			}, this.keybindingService, this.layoutService, this.hostService)
@@ -187,7 +190,7 @@ export class ChatSetup {
 		return buttons[button]?.[1] ?? ChatSetupStrategy.Canceled;
 	}
 
-	private getButtons(options?: { forceSignInDialog?: boolean; forceAnonymous?: ChatSetupAnonymous }): Array<[string, ChatSetupStrategy, { styleButton?: (button: IButton) => void } | undefined]> {
+	private getButtons(options?: { forceSignInDialog?: boolean; forceAnonymous?: ChatSetupAnonymous }, useCloseButton?: boolean): Array<[string, ChatSetupStrategy, { styleButton?: (button: IButton) => void } | undefined]> {
 		type ContinueWithButton = [string, ChatSetupStrategy, { styleButton?: (button: IButton) => void } | undefined];
 		const styleButton = (...classes: string[]) => ({ styleButton: (button: IButton) => button.element.classList.add(...classes) });
 
@@ -221,7 +224,9 @@ export class ChatSetup {
 			buttons = [[localize('setupAIButton', "Use AI Features"), ChatSetupStrategy.DefaultSetup, undefined]];
 		}
 
-		buttons.push([localize('skipForNow', "Skip for now"), ChatSetupStrategy.Canceled, styleButton('link-button', 'skip-button')]);
+		if (!useCloseButton) {
+			buttons.push([localize('skipForNow', "Skip for now"), ChatSetupStrategy.Canceled, styleButton('link-button', 'skip-button')]);
+		}
 
 		return buttons;
 	}
diff --git a/src/vs/workbench/contrib/chat/browser/chatSlashCommands.ts b/src/vs/workbench/contrib/chat/browser/chatSlashCommands.ts
index 9c54a9062e5..b7011234695 100644
--- a/src/vs/workbench/contrib/chat/browser/chatSlashCommands.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatSlashCommands.ts
@@ -14,11 +14,14 @@ import { IChatSlashCommandService } from '../common/participants/chatSlashComman
 import { IChatService } from '../common/chatService/chatService.js';
 import { ChatAgentLocation, ChatModeKind } from '../common/constants.js';
 import { ACTION_ID_NEW_CHAT } from './actions/chatActions.js';
-import { ChatSubmitAction, OpenModelPickerAction } from './actions/chatExecuteActions.js';
+import { ChatSubmitAction, OpenModePickerAction, OpenModelPickerAction } from './actions/chatExecuteActions.js';
 import { ConfigureToolsAction } from './actions/chatToolActions.js';
 import { IAgentSessionsService } from './agentSessions/agentSessionsService.js';
 import { IChatWidgetService } from './chat.js';
+import { CONFIGURE_INSTRUCTIONS_ACTION_ID } from './promptSyntax/attachInstructionsAction.js';
 import { showConfigureHooksQuickPick } from './promptSyntax/hookActions.js';
+import { CONFIGURE_PROMPTS_ACTION_ID } from './promptSyntax/runPromptAction.js';
+import { CONFIGURE_SKILLS_ACTION_ID } from './promptSyntax/skillActions.js';
 import { agentSlashCommandToMarkdown, agentToMarkdown } from './widget/chatContentParts/chatMarkdownDecorationsRenderer.js';
 
 export class ChatSlashCommandsContribution extends Disposable {
@@ -93,7 +96,7 @@ export class ChatSlashCommandsContribution extends Disposable {
 			silent: true,
 			locations: [ChatAgentLocation.Chat]
 		}, async () => {
-			await commandService.executeCommand('workbench.action.chat.configure.customagents');
+			await commandService.executeCommand(OpenModePickerAction.ID);
 		}));
 		this._store.add(slashCommandService.registerSlashCommand({
 			command: 'skills',
@@ -103,7 +106,7 @@ export class ChatSlashCommandsContribution extends Disposable {
 			silent: true,
 			locations: [ChatAgentLocation.Chat]
 		}, async () => {
-			await commandService.executeCommand('workbench.action.chat.configure.skills');
+			await commandService.executeCommand(CONFIGURE_SKILLS_ACTION_ID);
 		}));
 		this._store.add(slashCommandService.registerSlashCommand({
 			command: 'instructions',
@@ -113,7 +116,7 @@ export class ChatSlashCommandsContribution extends Disposable {
 			silent: true,
 			locations: [ChatAgentLocation.Chat]
 		}, async () => {
-			await commandService.executeCommand('workbench.action.chat.configure.instructions');
+			await commandService.executeCommand(CONFIGURE_INSTRUCTIONS_ACTION_ID);
 		}));
 		this._store.add(slashCommandService.registerSlashCommand({
 			command: 'prompts',
@@ -123,7 +126,7 @@ export class ChatSlashCommandsContribution extends Disposable {
 			silent: true,
 			locations: [ChatAgentLocation.Chat]
 		}, async () => {
-			await commandService.executeCommand('workbench.action.chat.configure.prompts');
+			await commandService.executeCommand(CONFIGURE_PROMPTS_ACTION_ID);
 		}));
 		this._store.add(slashCommandService.registerSlashCommand({
 			command: 'rename',
diff --git a/src/vs/workbench/contrib/chat/browser/chatTipService.ts b/src/vs/workbench/contrib/chat/browser/chatTipService.ts
index a4ab011764a..3a5d17812a8 100644
--- a/src/vs/workbench/contrib/chat/browser/chatTipService.ts
+++ b/src/vs/workbench/contrib/chat/browser/chatTipService.ts
@@ -112,6 +112,11 @@ export interface ITipDefinition {
 	 * Command IDs that are allowed to be executed from this tip's markdown.
 	 */
 	readonly enabledCommands?: string[];
+	/**
+	 * Chat model IDs for which this tip is eligible.
+	 * Compared against the lowercased `chatModelId` context key.
+	 */
+	readonly onlyWhenModelIds?: readonly string[];
 	/**
 	 * Command IDs that, if ever executed in this workspace, make this tip ineligible.
 	 * The tip won't be shown if the user has already performed the action it suggests.
@@ -144,6 +149,12 @@ export interface ITipDefinition {
  * Static catalog of tips. Each tip has an optional when clause for eligibility.
  */
 const TIP_CATALOG: ITipDefinition[] = [
+	{
+		id: 'tip.switchToAuto',
+		message: localize('tip.switchToAuto', "Tip: Using gpt-4.1? Try switching to [Auto](command:workbench.action.chat.openModelPicker) in the model picker for better coding performance."),
+		enabledCommands: ['workbench.action.chat.openModelPicker'],
+		onlyWhenModelIds: ['gpt-4.1'],
+	},
 	{
 		id: 'tip.agentMode',
 		message: localize('tip.agentMode', "Tip: Try [Agents](command:workbench.action.chat.openEditSession) to make edits across your project and run commands."),
@@ -615,6 +626,16 @@ export class ChatTipService extends Disposable implements IChatTipService {
 
 		// Return the already-shown tip for stable rerenders
 		if (this._tipRequestId === 'welcome' && this._shownTip) {
+			if (!this._isEligible(this._shownTip, contextKeyService)) {
+				const nextTip = this._findNextEligibleTip(this._shownTip.id, contextKeyService);
+				if (nextTip) {
+					this._shownTip = nextTip;
+					this._storageService.store(ChatTipService._LAST_TIP_ID_KEY, nextTip.id, StorageScope.PROFILE, StorageTarget.USER);
+					const tip = this._createTip(nextTip);
+					this._onDidNavigateTip.fire(tip);
+					return tip;
+				}
+			}
 			return this._createTip(this._shownTip);
 		}
 
@@ -623,6 +644,24 @@ export class ChatTipService extends Disposable implements IChatTipService {
 		return tip;
 	}
 
+	private _findNextEligibleTip(currentTipId: string, contextKeyService: IContextKeyService): ITipDefinition | undefined {
+		const currentIndex = TIP_CATALOG.findIndex(tip => tip.id === currentTipId);
+		if (currentIndex === -1) {
+			return undefined;
+		}
+
+		const dismissedIds = new Set(this._getDismissedTipIds());
+		for (let i = 1; i < TIP_CATALOG.length; i++) {
+			const idx = (currentIndex + i) % TIP_CATALOG.length;
+			const candidate = TIP_CATALOG[idx];
+			if (!dismissedIds.has(candidate.id) && this._isEligible(candidate, contextKeyService)) {
+				return candidate;
+			}
+		}
+
+		return undefined;
+	}
+
 	private _pickTip(sourceId: string, contextKeyService: IContextKeyService): IChatTip | undefined {
 		// Record the current mode for future eligibility decisions.
 		this._tracker.recordCurrentMode(contextKeyService);
@@ -711,6 +750,13 @@ export class ChatTipService extends Disposable implements IChatTipService {
 	}
 
 	private _isEligible(tip: ITipDefinition, contextKeyService: IContextKeyService): boolean {
+		if (tip.onlyWhenModelIds?.length) {
+			const currentModelId = this._getCurrentChatModelId(contextKeyService);
+			const isModelMatch = tip.onlyWhenModelIds.some(modelId => currentModelId === modelId || currentModelId.startsWith(`${modelId}-`));
+			if (!isModelMatch) {
+				return false;
+			}
+		}
 		if (tip.when && !contextKeyService.contextMatchesRules(tip.when)) {
 			this._logService.debug('#ChatTips: tip is not eligible due to when clause', tip.id, tip.when.serialize());
 			return false;
@@ -722,6 +768,42 @@ export class ChatTipService extends Disposable implements IChatTipService {
 		return true;
 	}
 
+	private _getCurrentChatModelId(contextKeyService: IContextKeyService): string {
+		const normalize = (modelId: string | undefined): string => {
+			const normalizedModelId = modelId?.toLowerCase() ?? '';
+			if (!normalizedModelId) {
+				return '';
+			}
+
+			if (normalizedModelId.includes('/')) {
+				return normalizedModelId.split('/').at(-1) ?? '';
+			}
+
+			return normalizedModelId;
+		};
+
+		const contextKeyModelId = normalize(contextKeyService.getContextKeyValue<string>(ChatContextKeys.chatModelId.key));
+		if (contextKeyModelId) {
+			return contextKeyModelId;
+		}
+
+		const location = contextKeyService.getContextKeyValue<ChatAgentLocation>(ChatContextKeys.location.key) ?? ChatAgentLocation.Chat;
+		const sessionType = contextKeyService.getContextKeyValue<string>(ChatContextKeys.chatSessionType.key) ?? '';
+		const candidateStorageKeys = sessionType
+			? [`chat.currentLanguageModel.${location}.${sessionType}`, `chat.currentLanguageModel.${location}`]
+			: [`chat.currentLanguageModel.${location}`];
+
+		for (const storageKey of candidateStorageKeys) {
+			const persistedModelIdentifier = this._storageService.get(storageKey, StorageScope.APPLICATION);
+			const persistedModelId = normalize(persistedModelIdentifier);
+			if (persistedModelId) {
+				return persistedModelId;
+			}
+		}
+
+		return '';
+	}
+
 	private _isChatLocation(contextKeyService: IContextKeyService): boolean {
 		const location = contextKeyService.getContextKeyValue<ChatAgentLocation>(ChatContextKeys.location.key);
 		return !location || location === ChatAgentLocation.Chat;
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/attachInstructionsAction.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/attachInstructionsAction.ts
index f009cb3eba9..e2113a96523 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/attachInstructionsAction.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/attachInstructionsAction.ts
@@ -26,12 +26,12 @@ import { IOpenerService } from '../../../../../platform/opener/common/opener.js'
 /**
  * Action ID for the `Attach Instruction` action.
  */
-const ATTACH_INSTRUCTIONS_ACTION_ID = 'workbench.action.chat.attach.instructions';
+export const ATTACH_INSTRUCTIONS_ACTION_ID = 'workbench.action.chat.attach.instructions';
 
 /**
  * Action ID for the `Configure Instruction` action.
  */
-const CONFIGURE_INSTRUCTIONS_ACTION_ID = 'workbench.action.chat.configure.instructions';
+export const CONFIGURE_INSTRUCTIONS_ACTION_ID = 'workbench.action.chat.configure.instructions';
 
 
 class ManageInstructionsFilesAction extends Action2 {
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/pickers/promptFilePickers.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/pickers/promptFilePickers.ts
index da74b4da74d..5113db79b5c 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/pickers/promptFilePickers.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/pickers/promptFilePickers.ts
@@ -318,8 +318,8 @@ const MAKE_VISIBLE_BUTTON: IQuickInputButton = {
  * Button that sets a prompt file to be invisible.
  */
 const MAKE_INVISIBLE_BUTTON: IQuickInputButton = {
-	tooltip: localize('makeInvisible', "Hide from agent picker"),
-	iconClass: ThemeIcon.asClassName(Codicon.eyeClosed),
+	tooltip: localize('makeInvisible', "Shown in chat view agent picker. Click to hide."),
+	iconClass: ThemeIcon.asClassName(Codicon.eye),
 };
 
 export class PromptFilePickers {
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/promptFileRewriter.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/promptFileRewriter.ts
index 96e913156aa..302ab0356b3 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/promptFileRewriter.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/promptFileRewriter.ts
@@ -44,7 +44,7 @@ export class PromptFileRewriter {
 			this.rewriteAttribute(model, '', toolsAttr.range);
 			return;
 		} else {
-			this.rewriteTools(model, newTools, toolsAttr.value.range, toolsAttr.value.type === 'string');
+			this.rewriteTools(model, newTools, toolsAttr.value.range, toolsAttr.value.type === 'scalar');
 		}
 	}
 
@@ -77,7 +77,7 @@ export class PromptFileRewriter {
 		if (!nameAttr) {
 			return;
 		}
-		if (nameAttr.value.type === 'string' && nameAttr.value.value === newName) {
+		if (nameAttr.value.type === 'scalar' && nameAttr.value.value === newName) {
 			return;
 		}
 
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/promptToolsCodeLensProvider.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/promptToolsCodeLensProvider.ts
index 021f38acfd4..538f5d4ac2d 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/promptToolsCodeLensProvider.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/promptToolsCodeLensProvider.ts
@@ -72,21 +72,21 @@ class PromptToolsCodeLensProvider extends Disposable implements CodeLensProvider
 			return undefined;
 		}
 		let value = toolsAttr.value;
-		if (value.type === 'string') {
+		if (value.type === 'scalar') {
 			value = parseCommaSeparatedList(value);
 		}
-		if (value.type !== 'array') {
+		if (value.type !== 'sequence') {
 			return undefined;
 		}
 		const items = value.items;
-		const selectedTools = items.filter(item => item.type === 'string').map(item => item.value);
+		const selectedTools = items.filter(item => item.type === 'scalar').map(item => item.value);
 
 		const codeLens: CodeLens = {
 			range: toolsAttr.range.collapseToStart(),
 			command: {
 				title: localize('configure-tools.capitalized.ellipsis', "Configure Tools..."),
 				id: this.cmdId,
-				arguments: [model, toolsAttr.range, toolsAttr.value.type === 'string', selectedTools, target]
+				arguments: [model, toolsAttr.range, toolsAttr.value.type === 'scalar', selectedTools, target]
 			}
 		};
 		return { lenses: [codeLens] };
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/runPromptAction.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/runPromptAction.ts
index fac4e86a1c0..c301e918ed9 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/runPromptAction.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/runPromptAction.ts
@@ -57,7 +57,7 @@ const RUN_SELECTED_PROMPT_ACTION_ID = 'workbench.action.chat.run.prompt';
 /**
  * Action ID for the `Configure Prompt Files...` action.
  */
-const CONFIGURE_PROMPTS_ACTION_ID = 'workbench.action.chat.configure.prompts';
+export const CONFIGURE_PROMPTS_ACTION_ID = 'workbench.action.chat.configure.prompts';
 
 /**
  * Constructor options for the `Run Prompt` base action.
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/skillActions.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/skillActions.ts
index 01d802c1541..a90166a3a59 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/skillActions.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/skillActions.ts
@@ -19,7 +19,7 @@ import { IOpenerService } from '../../../../../platform/opener/common/opener.js'
 /**
  * Action ID for the `Configure Skills` action.
  */
-const CONFIGURE_SKILLS_ACTION_ID = 'workbench.action.chat.configure.skills';
+export const CONFIGURE_SKILLS_ACTION_ID = 'workbench.action.chat.configure.skills';
 
 
 class ManageSkillsAction extends Action2 {
diff --git a/src/vs/workbench/contrib/chat/browser/tools/languageModelToolsService.ts b/src/vs/workbench/contrib/chat/browser/tools/languageModelToolsService.ts
index f7d22ff52f2..7b590f36922 100644
--- a/src/vs/workbench/contrib/chat/browser/tools/languageModelToolsService.ts
+++ b/src/vs/workbench/contrib/chat/browser/tools/languageModelToolsService.ts
@@ -445,6 +445,10 @@ export class LanguageModelToolsService extends Disposable implements ILanguageMo
 		if (dto.context?.sessionResource) {
 			model = this._chatService.getSession(dto.context.sessionResource);
 			request = model?.getRequests().at(-1);
+			if (request?.response?.isCanceled || request?.response?.isComplete) {
+				this._logService.debug(`[LanguageModelToolsService#invokeTool] Ignoring tool ${dto.toolId} for cancelled/complete request ${request.id}`);
+				throw new CancellationError();
+			}
 		}
 
 		// Check if there's an existing pending tool call from streaming phase BEFORE hook check
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownContentPart.ts b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownContentPart.ts
index d4b4cec56b2..812f076e628 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownContentPart.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownContentPart.ts
@@ -120,11 +120,6 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 		const element = context.element;
 		const inUndoStop = (findLast(context.content, e => e.kind === 'undoStop', context.contentIndex) as IChatUndoStop | undefined)?.id;
 
-		// We release editors in order so that it's more likely that the same editor will
-		// be assigned if this element is re-rendered right away, like it often is during
-		// progressive rendering
-		const orderedDisposablesList: IDisposable[] = [];
-
 		// Need to track the index of the codeblock within the response so it can have a unique ID,
 		// and within this part to find it within the codeblocks array
 		let globalCodeBlockIndexStart = codeBlockStartIndex;
@@ -141,11 +136,28 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 
 		const enableMath = configurationService.getValue<boolean>(ChatConfiguration.EnableMath);
 
+		const renderStore = this._register(new MutableDisposable<DisposableStore>());
+
 		const doRenderMarkdown = () => {
 			if (this._store.isDisposed) {
 				return;
 			}
 
+			// Dispose previous render and reset state for re-render
+			const store = new DisposableStore();
+			renderStore.value = store;
+			dom.clearNode(this.domNode);
+			this.allRefs.length = 0;
+			this._codeblocks.length = 0;
+			this.mathLayoutParticipants.clear();
+			globalCodeBlockIndexStart = codeBlockStartIndex;
+			thisPartCodeBlockIndexStart = 0;
+
+			// We release editors in order so that it's more likely that the same editor will
+			// be assigned if this element is re-rendered right away, like it often is during
+			// progressive rendering
+			const orderedDisposablesList: IDisposable[] = [];
+
 			// TODO: Move katex support into chatMarkdownRenderer
 			const markedExtensions = enableMath
 				? coalesce([MarkedKatexSupport.getExtension(dom.getWindow(context.container), {
@@ -160,7 +172,7 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 				breaks: true,
 			};
 
-			const result = this._register(renderer.render(markdown.content, {
+			const result = store.add(renderer.render(markdown.content, {
 				sanitizerConfig: MarkedKatexSupport.getSanitizerOptions({
 					allowedTags: allowedChatMarkdownHtmlTags,
 					allowedAttributes: allowedMarkdownHtmlAttributes,
@@ -201,7 +213,7 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 						}
 					}
 					if (languageId === 'vscode-extensions') {
-						const chatExtensions = this._register(instantiationService.createInstance(ChatExtensionsContentPart, { kind: 'extensions', extensions: text.split(',') }));
+						const chatExtensions = store.add(instantiationService.createInstance(ChatExtensionsContentPart, { kind: 'extensions', extensions: text.split(',') }));
 						return chatExtensions.domNode;
 					}
 					const globalIndex = globalCodeBlockIndexStart++;
@@ -216,8 +228,8 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 							range = parsedBody.range && Range.lift(parsedBody.range);
 							const modelRefPromise = this.textModelService.createModelReference(parsedBody.uri);
 							textModel = modelRefPromise.then(ref => {
-								if (!this._store.isDisposed) {
-									this._register(ref);
+								if (!store.isDisposed) {
+									store.add(ref);
 								}
 								return ref.object.textEditorModel;
 							});
@@ -330,12 +342,12 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 			}
 
 			const markdownDecorationsRenderer = instantiationService.createInstance(ChatMarkdownDecorationsRenderer);
-			this._register(markdownDecorationsRenderer.walkTreeAndAnnotateReferenceLinks(markdown, result.element));
+			store.add(markdownDecorationsRenderer.walkTreeAndAnnotateReferenceLinks(markdown, result.element));
 
 			const layoutParticipants = new Lazy(() => {
 				const observer = new ResizeObserver(() => this.mathLayoutParticipants.forEach(layout => layout()));
 				observer.observe(this.domNode);
-				this._register(toDisposable(() => observer.disconnect()));
+				store.add(toDisposable(() => observer.disconnect()));
 				return this.mathLayoutParticipants;
 			});
 
@@ -357,19 +369,21 @@ export class ChatMarkdownContentPart extends Disposable implements IChatContentP
 				scrollable.scanDomNode();
 			}
 
-			orderedDisposablesList.reverse().forEach(d => this._register(d));
+			orderedDisposablesList.reverse().forEach(d => store.add(d));
 		};
 
+		// Always render immediately
+		doRenderMarkdown();
+
 		if (enableMath && !MarkedKatexSupport.getExtension(dom.getWindow(context.container))) {
-			// Need to load async
+			// KaTeX not yet loaded - load it and re-render when ready
 			MarkedKatexSupport.loadExtension(dom.getWindow(context.container))
+				.then(() => {
+					doRenderMarkdown();
+				})
 				.catch(e => {
 					console.error('Failed to load MarkedKatexSupport extension:', e);
-				}).finally(() => {
-					doRenderMarkdown();
 				});
-		} else {
-			doRenderMarkdown();
 		}
 	}
 
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownDecorationsRenderer.ts b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownDecorationsRenderer.ts
index 12dbdf346e3..560e9ecf849 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownDecorationsRenderer.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatMarkdownDecorationsRenderer.ts
@@ -260,45 +260,6 @@ export class ChatMarkdownDecorationsRenderer {
 		return container;
 	}
 
-	/**
-	 * Renders a parsed chat request as plain text DOM elements with inline decoration spans
-	 * for agents, slash commands, and other special parts. No markdown rendering is used.
-	 */
-	renderParsedRequestToPlainText(parsedRequest: IParsedChatRequest, store: DisposableStore): HTMLElement {
-		const container = dom.$('span');
-		container.style.whiteSpace = 'pre-wrap';
-		for (const part of parsedRequest.parts) {
-			if (part instanceof ChatRequestTextPart) {
-				container.appendChild(document.createTextNode(part.text));
-			} else if (part instanceof ChatRequestAgentPart) {
-				const widget = this.renderResourceWidget(`${chatAgentLeader}${part.agent.name}`, undefined, store);
-				const hover: Lazy<ChatAgentHover> = new Lazy(() => store.add(this.instantiationService.createInstance(ChatAgentHover)));
-				store.add(this.hoverService.setupManagedHover(getDefaultHoverDelegate('element'), widget, () => {
-					hover.value.setAgent(part.agent.id);
-					return hover.value.domNode;
-				}, getChatAgentHoverOptions(() => part.agent, this.commandService)));
-				container.appendChild(widget);
-			} else {
-				const title = this.getDecorationTitle(part);
-				const widget = this.renderResourceWidget(part.text, title ? { title } : undefined, store);
-				container.appendChild(widget);
-			}
-		}
-		return container;
-	}
-
-	private getDecorationTitle(part: IParsedChatRequestPart): string | undefined {
-		const uri = part instanceof ChatRequestDynamicVariablePart && part.data instanceof URI ?
-			part.data :
-			undefined;
-		return uri ? this.labelService.getUriLabel(uri, { relative: true }) :
-			part instanceof ChatRequestSlashCommandPart ? part.slashCommand.detail :
-				part instanceof ChatRequestAgentSubcommandPart ? part.command.description :
-					part instanceof ChatRequestSlashPromptPart ? part.name :
-						part instanceof ChatRequestToolPart ? (this.toolsService.getTool(part.toolId)?.userDescription) :
-							undefined;
-	}
-
 	private injectKeybindingHint(a: HTMLAnchorElement, href: string, keybindingService: IKeybindingService): void {
 		const command = href.match(/command:([^\)]+)/)?.[1];
 		if (command) {
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatQuestionCarouselPart.ts b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatQuestionCarouselPart.ts
index 3bd10b0b917..d1284a8d1e6 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatQuestionCarouselPart.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatQuestionCarouselPart.ts
@@ -4,13 +4,16 @@
  *--------------------------------------------------------------------------------------------*/
 
 import * as dom from '../../../../../../base/browser/dom.js';
+import { renderAsPlaintext } from '../../../../../../base/browser/markdownRenderer.js';
 import { StandardKeyboardEvent } from '../../../../../../base/browser/keyboardEvent.js';
 import { Emitter, Event } from '../../../../../../base/common/event.js';
+import { IMarkdownString, MarkdownString, isMarkdownString } from '../../../../../../base/common/htmlContent.js';
 import { KeyCode } from '../../../../../../base/common/keyCodes.js';
 import { Disposable, DisposableStore, MutableDisposable } from '../../../../../../base/common/lifecycle.js';
 import { hasKey } from '../../../../../../base/common/types.js';
 import { localize } from '../../../../../../nls.js';
 import { IAccessibilityService } from '../../../../../../platform/accessibility/common/accessibility.js';
+import { IMarkdownRendererService } from '../../../../../../platform/markdown/browser/markdownRenderer.js';
 import { defaultButtonStyles, defaultCheckboxStyles, defaultInputBoxStyles } from '../../../../../../platform/theme/browser/defaultStyles.js';
 import { Button } from '../../../../../../base/browser/ui/button/button.js';
 import { InputBox } from '../../../../../../base/browser/ui/inputbox/inputBox.js';
@@ -55,6 +58,7 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 	private readonly _multiSelectCheckboxes: Map<string, Checkbox[]> = new Map();
 	private readonly _freeformTextareas: Map<string, HTMLTextAreaElement> = new Map();
 	private readonly _inputBoxes: DisposableStore = this._register(new DisposableStore());
+	private readonly _questionRenderStore = this._register(new MutableDisposable<DisposableStore>());
 
 	/**
 	 * Disposable store for interactive UI components (header, nav buttons, etc.)
@@ -66,6 +70,7 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 		public readonly carousel: IChatQuestionCarousel,
 		context: IChatContentPartRenderContext,
 		private readonly _options: IChatQuestionCarouselOptions,
+		@IMarkdownRendererService private readonly _markdownRendererService: IMarkdownRendererService,
 		@IHoverService private readonly _hoverService: IHoverService,
 		@IAccessibilityService private readonly _accessibilityService: IAccessibilityService,
 	) {
@@ -233,7 +238,7 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 		const question = this.carousel.questions[this._currentIndex];
 		if (question) {
 			const questionText = question.message ?? question.title;
-			const messageContent = typeof questionText === 'string' ? questionText : questionText.value;
+			const messageContent = this.getQuestionText(questionText);
 			const questionCount = this.carousel.questions.length;
 			const alertMessage = questionCount === 1
 				? messageContent
@@ -265,6 +270,7 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 	private clearInteractiveResources(): void {
 		// Dispose interactive UI disposables (header, nav buttons, etc.)
 		this._interactiveUIStore.clear();
+		this._questionRenderStore.clear();
 		this._inputBoxes.clear();
 		this._textInputBoxes.clear();
 		this._singleSelectItems.clear();
@@ -400,7 +406,7 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 		}
 
 		const questionText = question.message ?? question.title;
-		const messageContent = typeof questionText === 'string' ? questionText : questionText.value;
+		const messageContent = this.getQuestionText(questionText);
 		const questionCount = this.carousel.questions.length;
 
 		if (questionCount === 1) {
@@ -429,6 +435,9 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 			return;
 		}
 
+		const questionRenderStore = new DisposableStore();
+		this._questionRenderStore.value = questionRenderStore;
+
 		// Clear previous input boxes and stale references
 		this._inputBoxes.clear();
 		this._textInputBoxes.clear();
@@ -452,26 +461,29 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 		const questionText = question.message ?? question.title;
 		if (questionText) {
 			const title = dom.$('.chat-question-title');
-			const messageContent = typeof questionText === 'string'
-				? questionText
-				: questionText.value;
+			const messageContent = this.getQuestionText(questionText);
 
 			title.setAttribute('aria-label', messageContent);
 
-			// Check for subtitle in parentheses at the end
-			const parenMatch = messageContent.match(/^(.+?)\s*(\([^)]+\))\s*$/);
-			if (parenMatch) {
-				// Main title (bold)
-				const mainTitle = dom.$('span.chat-question-title-main');
-				mainTitle.textContent = parenMatch[1];
-				title.appendChild(mainTitle);
-
-				// Subtitle in parentheses (normal weight)
-				const subtitle = dom.$('span.chat-question-title-subtitle');
-				subtitle.textContent = ' ' + parenMatch[2];
-				title.appendChild(subtitle);
+			if (isMarkdownString(questionText)) {
+				const renderedTitle = questionRenderStore.add(this._markdownRendererService.render(MarkdownString.lift(questionText)));
+				title.appendChild(renderedTitle.element);
 			} else {
-				title.textContent = messageContent;
+				// Check for subtitle in parentheses at the end
+				const parenMatch = messageContent.match(/^(.+?)\s*(\([^)]+\))\s*$/);
+				if (parenMatch) {
+					// Main title (bold)
+					const mainTitle = dom.$('span.chat-question-title-main');
+					mainTitle.textContent = parenMatch[1];
+					title.appendChild(mainTitle);
+
+					// Subtitle in parentheses (normal weight)
+					const subtitle = dom.$('span.chat-question-title-subtitle');
+					subtitle.textContent = ' ' + parenMatch[2];
+					title.appendChild(subtitle);
+				} else {
+					title.textContent = messageContent;
+				}
 			}
 			headerRow.appendChild(title);
 		}
@@ -1180,6 +1192,14 @@ export class ChatQuestionCarouselPart extends Disposable implements IChatContent
 		}
 	}
 
+	private getQuestionText(questionText: string | IMarkdownString): string {
+		if (typeof questionText === 'string') {
+			return questionText;
+		}
+
+		return renderAsPlaintext(questionText);
+	}
+
 	hasSameContent(other: IChatRendererContent, _followingContent: IChatRendererContent[], element: ChatTreeItem): boolean {
 		// does not have same content when it is not skipped and is active and we stop the response
 		if (!this._isSkipped && !this.carousel.isUsed && isResponseVM(element) && element.isComplete) {
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatTipContentPart.ts b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatTipContentPart.ts
index 7a9859e7a58..256999f36bd 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatTipContentPart.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/chatTipContentPart.ts
@@ -66,7 +66,7 @@ export class ChatTipContentPart extends Disposable {
 			const nextTip = this._getNextTip();
 			if (nextTip) {
 				this._renderTip(nextTip);
-				this.focus();
+				dom.runAtThisOrScheduleAtNextAnimationFrame(dom.getWindow(this.domNode), () => this.focus());
 			} else {
 				this._onDidHide.fire();
 			}
@@ -74,7 +74,7 @@ export class ChatTipContentPart extends Disposable {
 
 		this._register(this._chatTipService.onDidNavigateTip(tip => {
 			this._renderTip(tip);
-			this.focus();
+			dom.runAtThisOrScheduleAtNextAnimationFrame(dom.getWindow(this.domNode), () => this.focus());
 		}));
 
 		this._register(this._chatTipService.onDidHideTip(() => {
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatConfirmationWidget.css b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatConfirmationWidget.css
index f200f56f932..1a3d83505b7 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatConfirmationWidget.css
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatConfirmationWidget.css
@@ -202,12 +202,12 @@
 .chat-confirmation-widget2 {
 	margin-bottom: 8px;
 	border: 1px solid var(--vscode-chat-requestBorder);
-	border-radius: 4px;
+	border-radius: var(--vscode-cornerRadius-medium);
 }
 
 .chat-confirmation-widget2 .chat-confirmation-widget-title {
 	border-bottom: 1px solid var(--vscode-chat-requestBorder);
-	padding: 5px 9px;
+	padding: 4px 8px;
 	display: flex;
 	justify-content: space-between;
 	column-gap: 10px;
@@ -218,6 +218,10 @@
 		p {
 			margin: 0 !important;
 		}
+
+		.codicon {
+			margin-right: 4px;
+		}
 	}
 
 	p,
@@ -261,7 +265,7 @@
 
 .chat-confirmation-message-terminal .chat-confirmation-message-terminal-disclaimer p:last-child {
 	margin-bottom: 0 !important;
-	padding: 5px 9px 0 9px;
+	padding: 4px 8px 0 8px;
 }
 
 .chat-confirmation-widget-container.hideButtons .chat-confirmation-widget-buttons,
@@ -271,7 +275,7 @@
 
 .chat-confirmation-widget2 .chat-confirmation-widget-buttons {
 	display: flex;
-	padding: 5px 9px;
+	padding: 4px 8px;
 
 	.chat-buttons {
 		display: flex;
@@ -283,6 +287,14 @@
 			width: inherit;
 		}
 	}
+
+	.monaco-button-dropdown > .monaco-button.monaco-dropdown-button {
+		padding: 0px 4px 0 3px;
+	}
+
+	.monaco-button-dropdown > .monaco-button.monaco-dropdown-button.codicon[class*='codicon-'] {
+		font-size: 12px;
+	}
 }
 
 .chat-confirmation-widget2 .interactive-result-code-block.compare {
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatQuestionCarousel.css b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatQuestionCarousel.css
index 4a6cbd669af..57a3a06ca78 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatQuestionCarousel.css
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatContentParts/media/chatQuestionCarousel.css
@@ -60,6 +60,21 @@
 				font-size: var(--vscode-chat-font-size-body-s);
 				margin: 0;
 
+				.rendered-markdown {
+					a {
+						color: var(--vscode-textLink-foreground);
+					}
+
+					a:hover,
+					a:active {
+						color: var(--vscode-textLink-activeForeground);
+					}
+
+					p {
+						margin: 0;
+					}
+				}
+
 				.chat-question-title-main {
 					font-weight: 500;
 				}
diff --git a/src/vs/workbench/contrib/chat/browser/widget/chatWidget.ts b/src/vs/workbench/contrib/chat/browser/widget/chatWidget.ts
index 5a297297f9a..5caa093f45d 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/chatWidget.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/chatWidget.ts
@@ -1932,6 +1932,25 @@ export class ChatWidget extends Disposable implements IChatWidget {
 			this.renderFollowups();
 			this.renderChatSuggestNextWidget();
 		}));
+		let previousModelIdentifier: string | undefined;
+		this._register(autorun(reader => {
+			const modelIdentifier = this.inputPart.selectedLanguageModel.read(reader)?.identifier;
+			if (previousModelIdentifier === undefined) {
+				previousModelIdentifier = modelIdentifier;
+				return;
+			}
+
+			if (previousModelIdentifier === modelIdentifier) {
+				return;
+			}
+
+			previousModelIdentifier = modelIdentifier;
+			if (!this._gettingStartedTipPartRef) {
+				return;
+			}
+
+			this.chatTipService.getWelcomeTip(this.contextKeyService);
+		}));
 
 		this._register(autorun(r => {
 			const toolSetIds = new Set<string>();
@@ -1989,7 +2008,6 @@ export class ChatWidget extends Disposable implements IChatWidget {
 
 		this._codeBlockModelCollection.clear();
 
-		this.container.setAttribute('data-session-id', model.sessionId);
 		this.viewModel = this.instantiationService.createInstance(ChatViewModel, model, this._codeBlockModelCollection, undefined);
 
 		// Pass input model reference to input part for state syncing
@@ -2250,35 +2268,6 @@ export class ChatWidget extends Disposable implements IChatWidget {
 		}
 	}
 
-	private hasPendingQuestionCarousel(response: IChatResponseModel | undefined): boolean {
-		return Boolean(response?.response.value.some(part => part.kind === 'questionCarousel' && !part.isUsed));
-	}
-
-
-	private dismissPendingQuestionCarousel(): void {
-		if (!this.viewModel) {
-			return;
-		}
-
-		const inputPart = this.inputPartDisposable.value;
-		if (!inputPart) {
-			return;
-		}
-
-		const responseId = inputPart.questionCarouselResponseId;
-		if (!responseId || this.viewModel.model.lastRequest?.id !== responseId) {
-			return;
-		}
-
-		const carouselPart = inputPart.questionCarousel;
-		if (!carouselPart) {
-			return;
-		}
-
-		carouselPart.ignore();
-		inputPart.clearQuestionCarousel(responseId);
-	}
-
 	private async _acceptInput(query: { query: string } | undefined, options: IChatAcceptInputOptions = {}): Promise<IChatResponseModel | undefined> {
 		if (!query && this.input.generating) {
 			// if the user submits the input and generation finishes quickly, just submit it for them
@@ -2334,16 +2323,17 @@ export class ChatWidget extends Disposable implements IChatWidget {
 		}
 
 		const model = this.viewModel.model;
-
-		// Enable steering while a question carousel is pending, useful for when the questions are off track and the user needs to course correct.
-		const hasPendingQuestionCarousel = this.hasPendingQuestionCarousel(model.lastRequest?.response);
-		const shouldAutoSteer = hasPendingQuestionCarousel && options.queue === undefined;
-		if (shouldAutoSteer) {
-			options.queue = ChatRequestQueueKind.Steering;
-			this.dismissPendingQuestionCarousel();
-		}
-
 		const requestInProgress = model.requestInProgress.get();
+		// Cancel the request if the user chooses to take a different path.
+		// This is a bit of a heuristic for the common case of tool confirmation+reroute.
+		// But we don't do this if there are queued messages, because we would either
+		// discard them or need a prompt (as in `confirmPendingRequestsBeforeSend`)
+		// which could be a surprising behavior if the user finishes typing a steering
+		// request just as confirmation is triggered.
+		if (model.requestNeedsInput.get() && !model.getPendingRequests().length) {
+			this.chatService.cancelCurrentRequestForSession(this.viewModel.sessionResource);
+			options.queue ??= ChatRequestQueueKind.Queued;
+		}
 		if (requestInProgress) {
 			options.queue ??= ChatRequestQueueKind.Queued;
 		}
diff --git a/src/vs/workbench/contrib/chat/browser/widget/input/chatInputPart.ts b/src/vs/workbench/contrib/chat/browser/widget/input/chatInputPart.ts
index a9d05cafbbc..cfe1d784a8b 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/input/chatInputPart.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/input/chatInputPart.ts
@@ -126,6 +126,7 @@ import { SessionTypePickerActionItem } from './sessionTargetPickerActionItem.js'
 import { WorkspacePickerActionItem } from './workspacePickerActionItem.js';
 import { ChatContextUsageWidget } from '../../widgetHosts/viewPane/chatContextUsageWidget.js';
 import { Target } from '../../../common/promptSyntax/service/promptsService.js';
+import { InlineCompletionsController } from '../../../../../../editor/contrib/inlineCompletions/browser/controller/inlineCompletionsController.js';
 
 const $ = dom.$;
 
@@ -349,6 +350,7 @@ export class ChatInputPart extends Disposable implements IHistoryNavigationWidge
 	private editingSentRequestKey!: IContextKey<ChatContextKeys.EditingRequestType | undefined>;
 	private chatModeKindKey: IContextKey<ChatModeKind>;
 	private chatModeNameKey: IContextKey<string>;
+	private chatModelIdKey: IContextKey<string>;
 	private withinEditSessionKey: IContextKey<boolean>;
 	private filePartOfEditSessionKey: IContextKey<boolean>;
 	private chatSessionHasOptions: IContextKey<boolean>;
@@ -567,6 +569,7 @@ export class ChatInputPart extends Disposable implements IHistoryNavigationWidge
 		this._hasQuestionCarouselContextKey = ChatContextKeys.Editing.hasQuestionCarousel.bindTo(contextKeyService);
 		this.chatModeKindKey = ChatContextKeys.chatModeKind.bindTo(contextKeyService);
 		this.chatModeNameKey = ChatContextKeys.chatModeName.bindTo(contextKeyService);
+		this.chatModelIdKey = ChatContextKeys.chatModelId.bindTo(contextKeyService);
 		this.withinEditSessionKey = ChatContextKeys.withinEditSessionDiff.bindTo(contextKeyService);
 		this.filePartOfEditSessionKey = ChatContextKeys.filePartOfEditSession.bindTo(contextKeyService);
 		this.chatSessionHasOptions = ChatContextKeys.chatSessionHasModels.bindTo(contextKeyService);
@@ -638,6 +641,7 @@ export class ChatInputPart extends Disposable implements IHistoryNavigationWidge
 		}));
 		this._register(autorun(reader => {
 			const lm = this._currentLanguageModel.read(reader);
+			this.chatModelIdKey.set(lm?.metadata.id.toLowerCase() ?? '');
 			if (lm?.metadata.name) {
 				this.accessibilityService.alert(lm.metadata.name);
 			}
@@ -995,6 +999,9 @@ export class ChatInputPart extends Disposable implements IHistoryNavigationWidge
 	public setCurrentLanguageModel(model: ILanguageModelChatMetadataAndIdentifier) {
 		this._currentLanguageModel.set(model, undefined);
 
+		// Record usage for the recently used models list
+		this.languageModelsService.recordModelUsage(model.identifier);
+
 		if (this.cachedWidth) {
 			// For quick chat and editor chat, relayout because the input may need to shrink to accomodate the model name
 			this.layout(this.cachedWidth);
@@ -2067,7 +2074,7 @@ export class ChatInputPart extends Disposable implements IHistoryNavigationWidge
 
 		this._inputEditorElement = dom.append(editorContainer, $(chatInputEditorContainerSelector));
 		const editorOptions = getSimpleCodeEditorWidgetOptions();
-		editorOptions.contributions?.push(...EditorExtensionsRegistry.getSomeEditorContributions([ContentHoverController.ID, GlyphHoverController.ID, DropIntoEditorController.ID, CopyPasteController.ID, LinkDetector.ID]));
+		editorOptions.contributions?.push(...EditorExtensionsRegistry.getSomeEditorContributions([ContentHoverController.ID, GlyphHoverController.ID, DropIntoEditorController.ID, CopyPasteController.ID, LinkDetector.ID, InlineCompletionsController.ID]));
 		this._inputEditor = this._register(scopedInstantiationService.createInstance(CodeEditorWidget, this._inputEditorElement, options, editorOptions));
 
 		SuggestController.get(this._inputEditor)?.forceRenderingAbove();
@@ -2281,7 +2288,7 @@ export class ChatInputPart extends Disposable implements IHistoryNavigationWidge
 
 		let inputModel = this.modelService.getModel(this.inputUri);
 		if (!inputModel) {
-			inputModel = this.modelService.createModel('', null, this.inputUri, true);
+			inputModel = this.modelService.createModel('', null, this.inputUri, false);
 		}
 
 		this.textModelResolverService.createModelReference(this.inputUri).then(ref => {
diff --git a/src/vs/workbench/contrib/chat/browser/widget/input/chatModelPicker.ts b/src/vs/workbench/contrib/chat/browser/widget/input/chatModelPicker.ts
new file mode 100644
index 00000000000..8e7831378c1
--- /dev/null
+++ b/src/vs/workbench/contrib/chat/browser/widget/input/chatModelPicker.ts
@@ -0,0 +1,513 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import * as dom from '../../../../../../base/browser/dom.js';
+import { StandardKeyboardEvent } from '../../../../../../base/browser/keyboardEvent.js';
+import { renderIcon, renderLabelWithIcons } from '../../../../../../base/browser/ui/iconLabel/iconLabels.js';
+import { Codicon } from '../../../../../../base/common/codicons.js';
+import { Emitter, Event } from '../../../../../../base/common/event.js';
+import { KeyCode } from '../../../../../../base/common/keyCodes.js';
+import { Disposable } from '../../../../../../base/common/lifecycle.js';
+import { ThemeIcon } from '../../../../../../base/common/themables.js';
+import { localize } from '../../../../../../nls.js';
+import { ActionListItemKind, IActionListItem, IActionListOptions } from '../../../../../../platform/actionWidget/browser/actionList.js';
+import { IActionWidgetService } from '../../../../../../platform/actionWidget/browser/actionWidget.js';
+import { IActionWidgetDropdownAction } from '../../../../../../platform/actionWidget/browser/actionWidgetDropdown.js';
+import { ICommandService } from '../../../../../../platform/commands/common/commands.js';
+import { IOpenerService } from '../../../../../../platform/opener/common/opener.js';
+import { IProductService } from '../../../../../../platform/product/common/productService.js';
+import { ITelemetryService } from '../../../../../../platform/telemetry/common/telemetry.js';
+import { TelemetryTrustedValue } from '../../../../../../platform/telemetry/common/telemetryUtils.js';
+import { MANAGE_CHAT_COMMAND_ID } from '../../../common/constants.js';
+import { ICuratedModel, ILanguageModelChatMetadataAndIdentifier, ILanguageModelsService } from '../../../common/languageModels.js';
+import { IChatEntitlementService, isProUser } from '../../../../../services/chat/common/chatEntitlementService.js';
+import { URI } from '../../../../../../base/common/uri.js';
+import * as semver from '../../../../../../base/common/semver/semver.js';
+
+function isVersionAtLeast(current: string, required: string): boolean {
+	const currentSemver = semver.coerce(current);
+	if (!currentSemver) {
+		return false;
+	}
+	return semver.gte(currentSemver, required);
+}
+
+/**
+ * Section identifiers for collapsible groups in the model picker.
+ */
+const ModelPickerSection = {
+	Other: 'other',
+} as const;
+
+type ChatModelChangeClassification = {
+	owner: 'lramos15';
+	comment: 'Reporting when the model picker is switched';
+	fromModel?: { classification: 'SystemMetaData'; purpose: 'FeatureInsight'; comment: 'The previous chat model' };
+	toModel: { classification: 'SystemMetaData'; purpose: 'FeatureInsight'; comment: 'The new chat model' };
+};
+
+type ChatModelChangeEvent = {
+	fromModel: string | TelemetryTrustedValue<string> | undefined;
+	toModel: string | TelemetryTrustedValue<string>;
+};
+
+function createModelItem(
+	action: IActionWidgetDropdownAction & { section?: string },
+): IActionListItem<IActionWidgetDropdownAction> {
+	return {
+		item: action,
+		kind: ActionListItemKind.Action,
+		label: action.label,
+		description: action.description,
+		group: { title: '', icon: action.icon ?? ThemeIcon.fromId(action.checked ? Codicon.check.id : Codicon.blank.id) },
+		hideIcon: false,
+		section: action.section,
+	};
+}
+
+function createModelAction(
+	model: ILanguageModelChatMetadataAndIdentifier,
+	selectedModelId: string | undefined,
+	onSelect: (model: ILanguageModelChatMetadataAndIdentifier) => void,
+	section?: string,
+): IActionWidgetDropdownAction & { section?: string } {
+	return {
+		id: model.identifier,
+		enabled: true,
+		icon: model.metadata.statusIcon,
+		checked: model.identifier === selectedModelId,
+		class: undefined,
+		description: model.metadata.multiplier ?? model.metadata.detail,
+		tooltip: model.metadata.name,
+		label: model.metadata.name,
+		section,
+		run: () => onSelect(model),
+	};
+}
+
+/**
+ * Builds the grouped items for the model picker dropdown.
+ *
+ * Layout:
+ * 1. Auto (always first)
+ * 2. Recently used + curated models (merged, sorted alphabetically, no header)
+ * 3. Other Models (collapsible toggle, sorted alphabetically)
+ *    - Last item is "Manage Models..."
+ */
+function buildModelPickerItems(
+	models: ILanguageModelChatMetadataAndIdentifier[],
+	selectedModelId: string | undefined,
+	recentModelIds: string[],
+	curatedModels: ICuratedModel[],
+	isProUser: boolean,
+	currentVSCodeVersion: string,
+	onSelect: (model: ILanguageModelChatMetadataAndIdentifier) => void,
+	commandService: ICommandService,
+	openerService: IOpenerService,
+	upgradePlanUrl: string | undefined,
+): IActionListItem<IActionWidgetDropdownAction>[] {
+	const items: IActionListItem<IActionWidgetDropdownAction>[] = [];
+
+	// Collect all available models
+	const allModelsMap = new Map<string, ILanguageModelChatMetadataAndIdentifier>();
+	for (const model of models) {
+		allModelsMap.set(model.identifier, model);
+	}
+
+	// Build a secondary lookup by metadata.id for flexible matching
+	const modelsByMetadataId = new Map<string, ILanguageModelChatMetadataAndIdentifier>();
+	for (const model of models) {
+		modelsByMetadataId.set(model.metadata.id, model);
+	}
+
+	// Track which model IDs have been placed in the promoted group
+	const placed = new Set<string>();
+
+	// --- 1. Auto ---
+	const isAutoSelected = !selectedModelId || !allModelsMap.has(selectedModelId);
+	const defaultModel = models.find(m => Object.values(m.metadata.isDefaultForLocation).some(v => v));
+	const autoDescription = defaultModel?.metadata.multiplier ?? defaultModel?.metadata.detail;
+	items.push(createModelItem({
+		id: 'auto',
+		enabled: true,
+		checked: isAutoSelected,
+		class: undefined,
+		tooltip: localize('chat.modelPicker.auto', "Auto"),
+		label: localize('chat.modelPicker.auto', "Auto"),
+		description: autoDescription,
+		run: () => {
+			if (defaultModel) {
+				onSelect(defaultModel);
+			}
+		}
+	}));
+
+	// --- 2. Promoted models (recently used + curated, merged & sorted alphabetically) ---
+	const promotedModels: ILanguageModelChatMetadataAndIdentifier[] = [];
+	const unavailableCurated: { curated: ICuratedModel; reason: 'upgrade' | 'update' | 'admin' }[] = [];
+
+	// Add recently used (skip the default model - it's already represented by "Auto")
+	for (const id of recentModelIds) {
+		const model = allModelsMap.get(id);
+		if (model && !placed.has(model.identifier) && model !== defaultModel) {
+			promotedModels.push(model);
+			placed.add(model.identifier);
+		}
+	}
+
+	// Add curated - available ones become promoted, unavailable ones become disabled entries
+	for (const curated of curatedModels) {
+		const model = allModelsMap.get(curated.id) ?? modelsByMetadataId.get(curated.id);
+		if (model && !placed.has(model.identifier)) {
+			promotedModels.push(model);
+			placed.add(model.identifier);
+		} else if (!model) {
+			// Model is not available - determine reason
+			if (!isProUser) {
+				unavailableCurated.push({ curated, reason: 'upgrade' });
+			} else if (curated.minVSCodeVersion && !isVersionAtLeast(currentVSCodeVersion, curated.minVSCodeVersion)) {
+				unavailableCurated.push({ curated, reason: 'update' });
+			} else {
+				unavailableCurated.push({ curated, reason: 'admin' });
+			}
+		}
+	}
+
+	// Sort alphabetically for a stable list
+	promotedModels.sort((a, b) => a.metadata.name.localeCompare(b.metadata.name));
+
+	if (promotedModels.length > 0 || unavailableCurated.length > 0) {
+		items.push({
+			kind: ActionListItemKind.Separator,
+		});
+		for (const model of promotedModels) {
+			const action = createModelAction(model, selectedModelId, onSelect);
+			items.push(createModelItem(action));
+		}
+
+		// Unavailable curated models shown as disabled with action button
+		for (const { curated, reason } of unavailableCurated) {
+			const label = reason === 'upgrade'
+				? localize('chat.modelPicker.upgrade', "Upgrade")
+				: reason === 'update'
+					? localize('chat.modelPicker.update', "Update VS Code")
+					: localize('chat.modelPicker.adminEnable', "Contact Admin");
+			const onButtonClick = reason === 'upgrade' && upgradePlanUrl
+				? () => openerService.open(URI.parse(upgradePlanUrl))
+				: reason === 'update'
+					? () => commandService.executeCommand('update.checkForUpdate')
+					: () => { };
+			items.push({
+				item: {
+					id: curated.id,
+					enabled: false,
+					checked: false,
+					class: undefined,
+					tooltip: label,
+					label: curated.id,
+					description: label,
+					run: () => { }
+				},
+				kind: ActionListItemKind.Action,
+				label: curated.id,
+				descriptionButton: { label, onDidClick: onButtonClick },
+				disabled: true,
+				group: { title: '', icon: Codicon.blank },
+				hideIcon: false,
+				className: 'unavailable-model',
+			});
+		}
+	}
+
+	// --- 3. Other Models (collapsible) ---
+	const otherModels: ILanguageModelChatMetadataAndIdentifier[] = [];
+	for (const model of models) {
+		if (!placed.has(model.identifier)) {
+			// Skip the default model - it's already represented by the top-level "Auto" entry
+			const isDefault = Object.values(model.metadata.isDefaultForLocation).some(v => v);
+			if (isDefault) {
+				continue;
+			}
+			otherModels.push(model);
+		}
+	}
+
+	if (otherModels.length > 0) {
+		items.push({
+			kind: ActionListItemKind.Separator,
+		});
+		items.push({
+			item: {
+				id: 'otherModels',
+				enabled: true,
+				checked: false,
+				class: undefined,
+				tooltip: localize('chat.modelPicker.otherModels', "Other Models"),
+				label: localize('chat.modelPicker.otherModels', "Other Models"),
+				run: () => { /* toggle handled by isSectionToggle */ }
+			},
+			kind: ActionListItemKind.Action,
+			label: localize('chat.modelPicker.otherModels', "Other Models"),
+			group: { title: '', icon: Codicon.chevronDown },
+			hideIcon: false,
+			section: ModelPickerSection.Other,
+			isSectionToggle: true,
+		});
+		for (const model of otherModels) {
+			const action = createModelAction(model, selectedModelId, onSelect, ModelPickerSection.Other);
+			items.push(createModelItem(action));
+		}
+
+		// "Manage Models..." entry inside Other Models section, styled as a link
+		items.push({
+			item: {
+				id: 'manageModels',
+				enabled: true,
+				checked: false,
+				class: 'manage-models-action',
+				tooltip: localize('chat.manageModels.tooltip', "Manage Language Models"),
+				label: localize('chat.manageModels', "Manage Models..."),
+				icon: Codicon.settingsGear,
+				run: () => {
+					commandService.executeCommand(MANAGE_CHAT_COMMAND_ID);
+				}
+			},
+			kind: ActionListItemKind.Action,
+			label: localize('chat.manageModels', "Manage Models..."),
+			group: { title: '', icon: Codicon.settingsGear },
+			hideIcon: false,
+			section: ModelPickerSection.Other,
+			className: 'manage-models-link',
+		});
+	}
+
+	return items;
+}
+
+/**
+ * Returns the ActionList options for the model picker (filter + collapsed sections).
+ */
+function getModelPickerListOptions(): IActionListOptions {
+	return {
+		showFilter: true,
+		collapsedByDefault: new Set([ModelPickerSection.Other]),
+		minWidth: 300,
+	};
+}
+
+export type ModelPickerBadge = 'info' | 'warning';
+
+/**
+ * A model selection dropdown widget.
+ *
+ * Renders a button showing the currently selected model name.
+ * On click, opens a grouped picker popup with:
+ * Auto → Promoted (recently used + curated) → Other Models (collapsed with search).
+ *
+ * The widget owns its state - set models, selection, and curated IDs via setters.
+ * Listen for selection changes via `onDidChangeSelection`.
+ */
+export class ModelPickerWidget extends Disposable {
+
+	private readonly _onDidChangeSelection = this._register(new Emitter<ILanguageModelChatMetadataAndIdentifier>());
+	readonly onDidChangeSelection: Event<ILanguageModelChatMetadataAndIdentifier> = this._onDidChangeSelection.event;
+
+	private _models: ILanguageModelChatMetadataAndIdentifier[] = [];
+	private _selectedModel: ILanguageModelChatMetadataAndIdentifier | undefined;
+	private _badge: ModelPickerBadge | undefined;
+
+	private _domNode: HTMLElement | undefined;
+	private _badgeIcon: HTMLElement | undefined;
+
+	get selectedModel(): ILanguageModelChatMetadataAndIdentifier | undefined {
+		return this._selectedModel;
+	}
+
+	get domNode(): HTMLElement | undefined {
+		return this._domNode;
+	}
+
+	constructor(
+		@IActionWidgetService private readonly _actionWidgetService: IActionWidgetService,
+		@ICommandService private readonly _commandService: ICommandService,
+		@IOpenerService private readonly _openerService: IOpenerService,
+		@ITelemetryService private readonly _telemetryService: ITelemetryService,
+		@ILanguageModelsService private readonly _languageModelsService: ILanguageModelsService,
+		@IProductService private readonly _productService: IProductService,
+		@IChatEntitlementService private readonly _entitlementService: IChatEntitlementService,
+	) {
+		super();
+	}
+
+	setModels(models: ILanguageModelChatMetadataAndIdentifier[]): void {
+		this._models = models;
+		this._renderLabel();
+	}
+
+	setSelectedModel(model: ILanguageModelChatMetadataAndIdentifier | undefined): void {
+		this._selectedModel = model;
+		this._renderLabel();
+	}
+
+	setBadge(badge: ModelPickerBadge | undefined): void {
+		this._badge = badge;
+		this._updateBadge();
+	}
+
+	render(container: HTMLElement): void {
+		this._domNode = dom.append(container, dom.$('a.action-label'));
+		this._domNode.tabIndex = 0;
+		this._domNode.setAttribute('role', 'button');
+		this._domNode.setAttribute('aria-haspopup', 'true');
+		this._domNode.setAttribute('aria-expanded', 'false');
+
+		this._badgeIcon = dom.append(this._domNode, dom.$('span.model-picker-badge'));
+		this._updateBadge();
+
+		this._renderLabel();
+
+		// Open picker on click
+		this._register(dom.addDisposableListener(this._domNode, dom.EventType.MOUSE_DOWN, (e) => {
+			if (e.button !== 0) {
+				return; // only left click
+			}
+			dom.EventHelper.stop(e, true);
+			this.show();
+		}));
+
+		// Open picker on Enter/Space
+		this._register(dom.addDisposableListener(this._domNode, dom.EventType.KEY_DOWN, (e) => {
+			const event = new StandardKeyboardEvent(e);
+			if (event.equals(KeyCode.Enter) || event.equals(KeyCode.Space)) {
+				dom.EventHelper.stop(e, true);
+				this.show();
+			}
+		}));
+	}
+
+	show(anchor?: HTMLElement): void {
+		const anchorElement = anchor ?? this._domNode;
+		if (!anchorElement) {
+			return;
+		}
+
+		// Mark new models as seen immediately when the picker is opened
+		this._languageModelsService.markNewModelsAsSeen();
+
+		const previousModel = this._selectedModel;
+
+		const onSelect = (model: ILanguageModelChatMetadataAndIdentifier) => {
+			this._telemetryService.publicLog2<ChatModelChangeEvent, ChatModelChangeClassification>('chat.modelChange', {
+				fromModel: previousModel?.metadata.vendor === 'copilot' ? new TelemetryTrustedValue(previousModel.identifier) : 'unknown',
+				toModel: model.metadata.vendor === 'copilot' ? new TelemetryTrustedValue(model.identifier) : 'unknown'
+			});
+			this._selectedModel = model;
+			this._renderLabel();
+			this._onDidChangeSelection.fire(model);
+		};
+
+		const isPro = isProUser(this._entitlementService.entitlement);
+		const curatedModels = this._languageModelsService.getCuratedModels();
+		const curatedForTier = isPro ? curatedModels.paid : curatedModels.free;
+
+		const items = buildModelPickerItems(
+			this._models,
+			this._selectedModel?.identifier,
+			this._languageModelsService.getRecentlyUsedModelIds(7),
+			curatedForTier,
+			isPro,
+			this._productService.version,
+			onSelect,
+			this._commandService,
+			this._openerService,
+			this._productService.defaultChatAgent?.upgradePlanUrl,
+		);
+
+		const listOptions = getModelPickerListOptions();
+		const previouslyFocusedElement = dom.getActiveElement();
+
+		const delegate = {
+			onSelect: (action: IActionWidgetDropdownAction) => {
+				this._actionWidgetService.hide();
+				action.run();
+			},
+			onHide: () => {
+				this._domNode?.setAttribute('aria-expanded', 'false');
+				if (dom.isHTMLElement(previouslyFocusedElement)) {
+					previouslyFocusedElement.focus();
+				}
+			}
+		};
+
+		this._domNode?.setAttribute('aria-expanded', 'true');
+
+		this._actionWidgetService.show(
+			'ChatModelPicker',
+			false,
+			items,
+			delegate,
+			anchorElement,
+			undefined,
+			[],
+			{
+				isChecked(element) {
+					return element.kind === 'action' && !!element?.item?.checked;
+				},
+				getRole: (e) => {
+					switch (e.kind) {
+						case 'action': return 'menuitemcheckbox';
+						case 'separator': return 'separator';
+						default: return 'separator';
+					}
+				},
+				getWidgetRole: () => 'menu',
+			},
+			listOptions
+		);
+	}
+
+	private _updateBadge(): void {
+		if (this._badgeIcon) {
+			if (this._badge) {
+				const icon = this._badge === 'info' ? Codicon.info : Codicon.warning;
+				dom.reset(this._badgeIcon, renderIcon(icon));
+				this._badgeIcon.style.display = '';
+				this._badgeIcon.classList.toggle('info', this._badge === 'info');
+				this._badgeIcon.classList.toggle('warning', this._badge === 'warning');
+			} else {
+				this._badgeIcon.style.display = 'none';
+			}
+		}
+	}
+
+	private _renderLabel(): void {
+		if (!this._domNode) {
+			return;
+		}
+
+		const { name, statusIcon } = this._selectedModel?.metadata || {};
+		const domChildren: (HTMLElement | string)[] = [];
+
+		if (statusIcon) {
+			const iconElement = renderIcon(statusIcon);
+			domChildren.push(iconElement);
+		}
+
+		domChildren.push(dom.$('span.chat-input-picker-label', undefined, name ?? localize('chat.modelPicker.auto', "Auto")));
+
+		// Badge icon between label and chevron
+		if (this._badgeIcon) {
+			domChildren.push(this._badgeIcon);
+		}
+
+		domChildren.push(...renderLabelWithIcons(`$(chevron-down)`));
+
+		dom.reset(this._domNode, ...domChildren);
+
+		// Aria
+		const modelName = this._selectedModel?.metadata.name ?? localize('chat.modelPicker.auto', "Auto");
+		this._domNode.ariaLabel = localize('chat.modelPicker.ariaLabel', "Pick Model, {0}", modelName);
+	}
+}
diff --git a/src/vs/workbench/contrib/chat/browser/widget/input/chatStatusWidget.ts b/src/vs/workbench/contrib/chat/browser/widget/input/chatStatusWidget.ts
index 03954d815de..87fa84c517c 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/input/chatStatusWidget.ts
+++ b/src/vs/workbench/contrib/chat/browser/widget/input/chatStatusWidget.ts
@@ -51,10 +51,7 @@ export class ChatStatusWidget extends Disposable implements IChatInputPartWidget
 		const entitlement = this.chatEntitlementService.entitlement;
 		const isAnonymous = this.chatEntitlementService.anonymous;
 
-		// Free tier is always enabled, anonymous is controlled by experiment via chat.statusWidget.sku
-		const enabledSku = this.configurationService.getValue<string | null>('chat.statusWidget.sku');
-
-		if (isAnonymous && enabledSku === 'anonymous') {
+		if (isAnonymous && this.configurationService.getValue<boolean>('chat.statusWidget.anonymous')) {
 			this.createWidgetContent('anonymous');
 		} else if (entitlement === ChatEntitlement.Free) {
 			this.createWidgetContent('free');
@@ -82,7 +79,7 @@ export class ChatStatusWidget extends Disposable implements IChatInputPartWidget
 		this.actionButton.element.classList.add('chat-status-button');
 
 		if (enabledSku === 'anonymous') {
-			const message = localize('chat.anonymousRateLimited.message', "You've reached the limit for chat messages. Try Copilot Pro for free.");
+			const message = localize('chat.anonymousRateLimited.message', "You've reached the limit for chat messages. Sign in to use Copilot Free.");
 			const buttonLabel = localize('chat.anonymousRateLimited.signIn', "Sign In");
 			this.messageElement.textContent = message;
 			this.actionButton.label = buttonLabel;
diff --git a/src/vs/workbench/contrib/chat/browser/widget/input/modelPickerActionItem2.ts b/src/vs/workbench/contrib/chat/browser/widget/input/modelPickerActionItem2.ts
new file mode 100644
index 00000000000..c19279bee0a
--- /dev/null
+++ b/src/vs/workbench/contrib/chat/browser/widget/input/modelPickerActionItem2.ts
@@ -0,0 +1,126 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import { getActiveWindow } from '../../../../../../base/browser/dom.js';
+import { IManagedHoverContent } from '../../../../../../base/browser/ui/hover/hover.js';
+import { getBaseLayerHoverDelegate } from '../../../../../../base/browser/ui/hover/hoverDelegate2.js';
+import { getDefaultHoverDelegate } from '../../../../../../base/browser/ui/hover/hoverDelegateFactory.js';
+import { BaseActionViewItem } from '../../../../../../base/browser/ui/actionbar/actionViewItems.js';
+import { IAction } from '../../../../../../base/common/actions.js';
+import { MutableDisposable } from '../../../../../../base/common/lifecycle.js';
+import { autorun } from '../../../../../../base/common/observable.js';
+import { localize } from '../../../../../../nls.js';
+import { IContextKeyService } from '../../../../../../platform/contextkey/common/contextkey.js';
+import { IInstantiationService } from '../../../../../../platform/instantiation/common/instantiation.js';
+import { IKeybindingService } from '../../../../../../platform/keybinding/common/keybinding.js';
+import { ILanguageModelsService } from '../../../common/languageModels.js';
+import { IChatInputPickerOptions } from './chatInputPickerActionItem.js';
+import { ModelPickerWidget } from './chatModelPicker.js';
+import { IModelPickerDelegate } from './modelPickerActionItem.js';
+
+/**
+ * Enhanced action view item for selecting a language model in the chat interface.
+ *
+ * Wraps a {@link ModelPickerWidget} and adapts it for use in an action bar,
+ * providing curated model suggestions, upgrade prompts, and grouped layout.
+ */
+export class EnhancedModelPickerActionItem extends BaseActionViewItem {
+	private readonly _pickerWidget: ModelPickerWidget;
+	private readonly _managedHover = this._register(new MutableDisposable());
+
+	constructor(
+		action: IAction,
+		delegate: IModelPickerDelegate,
+		private readonly pickerOptions: IChatInputPickerOptions,
+		@IInstantiationService instantiationService: IInstantiationService,
+		@IContextKeyService private readonly _contextKeyService: IContextKeyService,
+		@IKeybindingService private readonly keybindingService: IKeybindingService,
+		@ILanguageModelsService private readonly languageModelsService: ILanguageModelsService,
+	) {
+		super(undefined, action);
+
+		this._pickerWidget = this._register(instantiationService.createInstance(ModelPickerWidget));
+		this._pickerWidget.setModels(delegate.getModels());
+		this._pickerWidget.setSelectedModel(delegate.currentModel.get());
+		this._updateBadge();
+
+		// Sync delegate → widget when model list or selection changes externally
+		this._register(autorun(t => {
+			const model = delegate.currentModel.read(t);
+			this._pickerWidget.setSelectedModel(model);
+			this._updateTooltip();
+		}));
+
+		// Sync widget → delegate when user picks a model
+		this._register(this._pickerWidget.onDidChangeSelection(model => {
+			delegate.setModel(model);
+		}));
+
+		// Update models when language models change
+		this._register(this.languageModelsService.onDidChangeLanguageModels(() => {
+			this._pickerWidget.setModels(delegate.getModels());
+		}));
+
+		// Update badge when new models appear
+		this._register(this.languageModelsService.onDidChangeNewModelIds(() => this._updateBadge()));
+	}
+
+	override render(container: HTMLElement): void {
+		this._pickerWidget.render(container);
+		this.element = this._pickerWidget.domNode;
+		this._updateTooltip();
+		container.classList.add('chat-input-picker-item');
+	}
+
+	private _getAnchorElement(): HTMLElement {
+		if (this.element && getActiveWindow().document.contains(this.element)) {
+			return this.element;
+		}
+		return this.pickerOptions.getOverflowAnchor?.() ?? this.element!;
+	}
+
+	public openModelPicker(): void {
+		this._showPicker();
+	}
+
+	public show(): void {
+		this._showPicker();
+	}
+
+	private _showPicker(): void {
+		this._pickerWidget.show(this._getAnchorElement());
+	}
+
+	private _updateBadge(): void {
+		const hasNew = this.languageModelsService.getNewModelIds().length > 0;
+		this._pickerWidget.setBadge(hasNew ? 'info' : undefined);
+	}
+
+	private _updateTooltip(): void {
+		if (!this.element) {
+			return;
+		}
+		const hoverContent = this._getHoverContents();
+		if (typeof hoverContent === 'string' && hoverContent) {
+			this._managedHover.value = getBaseLayerHoverDelegate().setupManagedHover(
+				getDefaultHoverDelegate('mouse'),
+				this.element,
+				hoverContent
+			);
+		} else {
+			this._managedHover.clear();
+		}
+	}
+
+	private _getHoverContents(): IManagedHoverContent | undefined {
+		let label = localize('chat.modelPicker.label', "Pick Model");
+		const keybindingLabel = this.keybindingService.lookupKeybinding(this._action.id, this._contextKeyService)?.getLabel();
+		if (keybindingLabel) {
+			label += ` (${keybindingLabel})`;
+		}
+		const { statusIcon, tooltip } = this._pickerWidget.selectedModel?.metadata || {};
+		return statusIcon && tooltip ? `${label} • ${tooltip}` : label;
+	}
+}
diff --git a/src/vs/workbench/contrib/chat/browser/widget/media/chat.css b/src/vs/workbench/contrib/chat/browser/widget/media/chat.css
index 4580ea562d7..29d2a72833f 100644
--- a/src/vs/workbench/contrib/chat/browser/widget/media/chat.css
+++ b/src/vs/workbench/contrib/chat/browser/widget/media/chat.css
@@ -124,6 +124,7 @@
 	0% {
 		background-position: 120% 0;
 	}
+
 	100% {
 		background-position: -120% 0;
 	}
@@ -457,14 +458,12 @@
 	}
 
 	/* not ideal but I cannot query the last div with this class... */
-	.rendered-markdown:last-of-type > P > SPAN:empty,
-	.rendered-markdown:last-of-type > SPAN:empty {
+	.rendered-markdown:last-of-type > P > SPAN:empty {
 		display: inline-block;
 		width: 11px;
 	}
 
-	.rendered-markdown:last-of-type > P > SPAN:empty::after,
-	.rendered-markdown:last-of-type > SPAN:empty::after {
+	.rendered-markdown:last-of-type > P > SPAN:empty::after {
 		content: '';
 		white-space: nowrap;
 		overflow: hidden;
@@ -1093,8 +1092,7 @@ have to be updated for changes to the rules above, or to support more deeply nes
 	border: 1px solid var(--vscode-input-border, transparent);
 	background-color: var(--vscode-editor-background);
 	border-bottom: none;
-	border-top-left-radius: 4px;
-	border-top-right-radius: 4px;
+	border-radius: var(--vscode-cornerRadius-large) var(--vscode-cornerRadius-large) 0 0;
 	flex-direction: column;
 	gap: 2px;
 	overflow: hidden;
@@ -1336,14 +1334,27 @@ have to be updated for changes to the rules above, or to support more deeply nes
 		.action-label {
 			min-width: 0px;
 			overflow: hidden;
+			position: relative;
 
 			.chat-input-picker-label {
 				overflow: hidden;
 				text-overflow: ellipsis;
 			}
 
-			.codicon-warning {
-				color: var(--vscode-problemsWarningIcon-foreground);
+			.model-picker-badge {
+				display: inline-flex;
+				align-items: center;
+				margin-left: 4px;
+				flex-shrink: 0;
+				font-size: 12px;
+
+				.codicon.codicon-info {
+					color: var(--vscode-problemsInfoIcon-foreground) !important;
+				}
+
+				.codicon.codicon-warning {
+					color: var(--vscode-problemsWarningIcon-foreground) !important;
+				}
 			}
 
 			span + .chat-input-picker-label {
@@ -1367,6 +1378,20 @@ have to be updated for changes to the rules above, or to support more deeply nes
 	}
 }
 
+/* Manage Models link style in model picker */
+.action-widget .monaco-list-row.action.manage-models-link {
+	color: var(--vscode-textLink-foreground) !important;
+}
+
+.action-widget .monaco-list-row.action.manage-models-link .codicon {
+	color: var(--vscode-textLink-foreground) !important;
+}
+
+.action-widget .monaco-list-row.action.manage-models-link:hover,
+.action-widget .monaco-list-row.action.manage-models-link.focused {
+	color: var(--vscode-textLink-activeForeground) !important;
+}
+
 
 
 .interactive-session .chat-input-toolbar .chat-input-picker-item .action-label,
@@ -1375,12 +1400,7 @@ have to be updated for changes to the rules above, or to support more deeply nes
 	padding: 3px 0px 3px 6px;
 	display: flex;
 	align-items: center;
-	color: var(--vscode-descriptionForeground);
-}
-
-.monaco-workbench .interactive-session .chat-input-toolbars .monaco-action-bar .action-item .codicon.codicon,
-.monaco-workbench .interactive-session .chat-input-toolbars .action-label .codicon.codicon {
-	color: var(--vscode-descriptionForeground) !important;
+	color: var(--vscode-foreground);
 }
 
 .monaco-workbench .interactive-session .chat-input-toolbar .chat-input-picker-item .action-label .codicon-chevron-down,
diff --git a/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewPane.ts b/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewPane.ts
index df7195252c1..a824546fe77 100644
--- a/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewPane.ts
+++ b/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewPane.ts
@@ -66,7 +66,9 @@ import { IChatEntitlementService } from '../../../../../services/chat/common/cha
 import { IWorkbenchEnvironmentService } from '../../../../../services/environment/common/environmentService.js';
 
 interface IChatViewPaneState extends Partial<IChatModelInputState> {
-	/** @deprecated */
+	/**
+	 * @deprecated This is kept around to support old view states. However it should not be set on new states and `sessionResource` should be used instead.
+	 */
 	sessionId?: string;
 	sessionResource?: URI;
 
@@ -695,7 +697,6 @@ export class ChatViewPane extends ViewPane implements IViewWelcomeDelegate {
 			await this.updateWidgetLockState(model.sessionResource); // Update widget lock state based on session type
 
 			// remember as model to restore in view state
-			this.viewState.sessionId = model.sessionId;
 			this.viewState.sessionResource = model.sessionResource;
 		}
 
diff --git a/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewTitleControl.ts b/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewTitleControl.ts
index 0cbc75d1883..b60a4f3b64f 100644
--- a/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewTitleControl.ts
+++ b/src/vs/workbench/contrib/chat/browser/widgetHosts/viewPane/chatViewTitleControl.ts
@@ -78,7 +78,7 @@ export class ChatViewTitleControl extends Disposable {
 			async run(accessor: ServicesAccessor): Promise<void> {
 				const instantiationService = accessor.get(IInstantiationService);
 
-				const agentSessionsPicker = instantiationService.createInstance(AgentSessionsPicker, that.titleLabel.value?.element);
+				const agentSessionsPicker = instantiationService.createInstance(AgentSessionsPicker, that.titleLabel.value?.element, undefined);
 				await agentSessionsPicker.pickAgentSession();
 			}
 		}));
diff --git a/src/vs/workbench/contrib/chat/common/actions/chatContextKeys.ts b/src/vs/workbench/contrib/chat/common/actions/chatContextKeys.ts
index 529f40e06fc..b97209bce15 100644
--- a/src/vs/workbench/contrib/chat/common/actions/chatContextKeys.ts
+++ b/src/vs/workbench/contrib/chat/common/actions/chatContextKeys.ts
@@ -45,6 +45,7 @@ export namespace ChatContextKeys {
 	export const inChatTerminalToolOutput = new RawContextKey<boolean>('inChatTerminalToolOutput', false, { type: 'boolean', description: localize('inChatTerminalToolOutput', "True when focus is in the chat terminal output region.") });
 	export const chatModeKind = new RawContextKey<ChatModeKind>('chatAgentKind', ChatModeKind.Ask, { type: 'string', description: localize('agentKind', "The 'kind' of the current agent.") });
 	export const chatModeName = new RawContextKey<string>('chatModeName', '', { type: 'string', description: localize('chatModeName', "The name of the current chat mode (e.g. 'Plan' for custom modes).") });
+	export const chatModelId = new RawContextKey<string>('chatModelId', '', { type: 'string', description: localize('chatModelId', "The short id of the currently selected chat model (for example 'gpt-4.1').") });
 
 	export const supported = ContextKeyExpr.or(IsWebContext.negate(), RemoteNameContext.notEqualsTo(''), ContextKeyExpr.has('config.chat.experimental.serverlessWebEnabled'));
 	export const enabled = new RawContextKey<boolean>('chatIsEnabled', false, { type: 'boolean', description: localize('chatIsEnabled', "True when chat is enabled because a default chat participant is activated with an implementation.") });
diff --git a/src/vs/workbench/contrib/chat/common/chatService/chatServiceImpl.ts b/src/vs/workbench/contrib/chat/common/chatService/chatServiceImpl.ts
index e315b22d9a1..f295461bad9 100644
--- a/src/vs/workbench/contrib/chat/common/chatService/chatServiceImpl.ts
+++ b/src/vs/workbench/contrib/chat/common/chatService/chatServiceImpl.ts
@@ -28,6 +28,7 @@ import { Progress } from '../../../../../platform/progress/common/progress.js';
 import { IStorageService, StorageScope, StorageTarget } from '../../../../../platform/storage/common/storage.js';
 import { IWorkspaceContextService } from '../../../../../platform/workspace/common/workspace.js';
 import { IExtensionService } from '../../../../services/extensions/common/extensions.js';
+import { IChatEntitlementService } from '../../../../services/chat/common/chatEntitlementService.js';
 import { InlineChatConfigKeys } from '../../../inlineChat/common/inlineChat.js';
 import { IMcpService } from '../../../mcp/common/mcpTypes.js';
 import { awaitStatsForSession } from '../chat.js';
@@ -155,6 +156,7 @@ export class ChatService extends Disposable implements IChatService {
 		@IChatSessionsService private readonly chatSessionService: IChatSessionsService,
 		@IMcpService private readonly mcpService: IMcpService,
 		@IPromptsService private readonly promptsService: IPromptsService,
+		@IChatEntitlementService private readonly chatEntitlementService: IChatEntitlementService,
 	) {
 		super();
 
@@ -787,21 +789,16 @@ export class ChatService extends Disposable implements IChatService {
 		}
 
 		const hasPendingRequest = this._pendingRequests.has(sessionResource);
-		const hasPendingQueue = model.getPendingRequests().length > 0;
 
 		if (options?.queue) {
-			return this.queuePendingRequest(model, sessionResource, request, options);
+			const queued = this.queuePendingRequest(model, sessionResource, request, options);
+			this.processPendingRequests(sessionResource);
+			return queued;
 		} else if (hasPendingRequest) {
 			this.trace('sendRequest', `Session ${sessionResource} already has a pending request`);
 			return { kind: 'rejected', reason: 'Request already in progress' };
 		}
 
-		if (options?.queue && hasPendingQueue) {
-			const queued = this.queuePendingRequest(model, sessionResource, request, options);
-			this.processNextPendingRequest(model);
-			return queued;
-		}
-
 		const requests = model.getRequests();
 		for (let i = requests.length - 1; i >= 0; i -= 1) {
 			const request = requests[i];
@@ -844,6 +841,13 @@ export class ChatService extends Disposable implements IChatService {
 			parserContext = { selectedAgent: agent, mode: options.modeInfo?.kind };
 			const commandPart = options.slashCommand ? ` ${chatSubcommandLeader}${options.slashCommand}` : '';
 			request = `${chatAgentLeader}${agent.name}${commandPart} ${request}`;
+		} else if (options?.agentIdSilent && !parserContext?.forcedAgent) {
+			// Resolve slash commandsin the context of locked participant so its subcommands take precedence over global
+			// slash commands with the same name.
+			const silentAgent = this.chatAgentService.getAgent(options.agentIdSilent);
+			if (silentAgent) {
+				parserContext = { ...parserContext, forcedAgent: silentAgent };
+			}
 		}
 
 		const parsedRequest = this.instantiationService.createInstance(ChatRequestParser).parseChatRequest(sessionResource, request, location, parserContext);
@@ -869,7 +873,7 @@ export class ChatService extends Disposable implements IChatService {
 			agent: agentPart?.agent ?? defaultAgent,
 			agentSlashCommandPart,
 			commandPart,
-			sessionId: model.sessionId,
+			sessionResource: model.sessionResource,
 			location: model.initialLocation,
 			options,
 			enableCommandDetection
@@ -1138,6 +1142,10 @@ export class ChatService extends Disposable implements IChatService {
 					completeResponseCreated();
 					this.trace('sendRequest', `Provider returned response for session ${model.sessionResource}`);
 
+					if (rawResult.errorDetails?.isRateLimited) {
+						this.chatEntitlementService.markAnonymousRateLimited();
+					}
+
 					shouldProcessPending = !rawResult.errorDetails && !token.isCancellationRequested;
 					request.response?.complete();
 					if (agentOrCommandFollowups) {
@@ -1171,9 +1179,12 @@ export class ChatService extends Disposable implements IChatService {
 		let shouldProcessPending = false;
 		const rawResponsePromise = sendRequestInternal();
 		// Note- requestId is not known at this point, assigned later
-		this._pendingRequests.set(model.sessionResource, this.instantiationService.createInstance(CancellableRequest, source, undefined));
+		const cancellableRequest = this.instantiationService.createInstance(CancellableRequest, source, undefined);
+		this._pendingRequests.set(model.sessionResource, cancellableRequest);
 		rawResponsePromise.finally(() => {
-			this._pendingRequests.deleteAndDispose(model.sessionResource);
+			if (this._pendingRequests.get(model.sessionResource) === cancellableRequest) {
+				this._pendingRequests.deleteAndDispose(model.sessionResource);
+			}
 			// Process the next pending request from the queue if any
 			if (shouldProcessPending) {
 				this.processNextPendingRequest(model);
diff --git a/src/vs/workbench/contrib/chat/common/chatService/chatServiceTelemetry.ts b/src/vs/workbench/contrib/chat/common/chatService/chatServiceTelemetry.ts
index 6cd2769fbec..2a0f2cf7cc8 100644
--- a/src/vs/workbench/contrib/chat/common/chatService/chatServiceTelemetry.ts
+++ b/src/vs/workbench/contrib/chat/common/chatService/chatServiceTelemetry.ts
@@ -13,6 +13,7 @@ import { ChatAgentVoteDirection, ChatCopyKind, IChatSendRequestOptions, IChatUse
 import { isImageVariableEntry } from '../attachments/chatVariableEntries.js';
 import { ChatAgentLocation } from '../constants.js';
 import { ILanguageModelsService } from '../languageModels.js';
+import { chatSessionResourceToId } from '../model/chatUri.js';
 
 type ChatVoteEvent = {
 	direction: 'up' | 'down';
@@ -263,7 +264,7 @@ export class ChatRequestTelemetry {
 		agent: IChatAgentData;
 		agentSlashCommandPart: ChatRequestAgentSubcommandPart | undefined;
 		commandPart: ChatRequestSlashCommandPart | undefined;
-		sessionId: string;
+		sessionResource: URI;
 		location: ChatAgentLocation;
 		options: IChatSendRequestOptions | undefined;
 		enableCommandDetection: boolean;
@@ -294,7 +295,7 @@ export class ChatRequestTelemetry {
 			agent: detectedAgent?.id ?? this.opts.agent.id,
 			agentExtensionId: detectedAgent?.extensionId.value ?? this.opts.agent.extensionId.value,
 			slashCommand: this.opts.agentSlashCommandPart ? this.opts.agentSlashCommandPart.command.name : this.opts.commandPart?.slashCommand.command,
-			chatSessionId: this.opts.sessionId,
+			chatSessionId: chatSessionResourceToId(this.opts.sessionResource),
 			enableCommandDetection: this.opts.enableCommandDetection,
 			isParticipantDetected: !!detectedAgent,
 			location: this.opts.location,
diff --git a/src/vs/workbench/contrib/chat/common/chatSessionsService.ts b/src/vs/workbench/contrib/chat/common/chatSessionsService.ts
index 989e005c0b5..8ccd21ac647 100644
--- a/src/vs/workbench/contrib/chat/common/chatSessionsService.ts
+++ b/src/vs/workbench/contrib/chat/common/chatSessionsService.ts
@@ -262,7 +262,7 @@ export interface IChatSessionsService {
 	/**
 	 * Fired when options for a chat session change.
 	 */
-	onDidChangeSessionOptions: Event<URI>;
+	readonly onDidChangeSessionOptions: Event<URI>;
 
 	/**
 	 * Get the capabilities for a specific session type
@@ -279,7 +279,7 @@ export interface IChatSessionsService {
 	 * Returns whether the session type requires custom models. When true, the model picker should show filtered custom models.
 	 */
 	requiresCustomModelsForSessionType(chatSessionType: string): boolean;
-	onDidChangeOptionGroups: Event<string>;
+	readonly onDidChangeOptionGroups: Event<string>;
 
 	getOptionGroupsForSessionType(chatSessionType: string): IChatSessionProviderOptionGroup[] | undefined;
 	setOptionGroupsForSessionType(chatSessionType: string, handle: number, optionGroups?: IChatSessionProviderOptionGroup[]): void;
diff --git a/src/vs/workbench/contrib/chat/common/constants.ts b/src/vs/workbench/contrib/chat/common/constants.ts
index ff6e4cfffb8..8066635dc74 100644
--- a/src/vs/workbench/contrib/chat/common/constants.ts
+++ b/src/vs/workbench/contrib/chat/common/constants.ts
@@ -13,7 +13,6 @@ export enum ChatConfiguration {
 	AgentEnabled = 'chat.agent.enabled',
 	PlanAgentDefaultModel = 'chat.planAgent.defaultModel',
 	ExploreAgentDefaultModel = 'chat.exploreAgent.defaultModel',
-	RequestQueueingEnabled = 'chat.requestQueuing.enabled',
 	RequestQueueingDefaultAction = 'chat.requestQueuing.defaultAction',
 	AgentStatusEnabled = 'chat.agentsControl.enabled',
 	EditorAssociations = 'chat.editorAssociations',
@@ -93,7 +92,6 @@ export enum CollapsedToolsDisplayMode {
 export enum AgentsControlClickBehavior {
 	Default = 'default',
 	Cycle = 'cycle',
-	Focus = 'focus',
 }
 
 export type RawChatParticipantLocation = 'panel' | 'terminal' | 'notebook' | 'editing-session';
diff --git a/src/vs/workbench/contrib/chat/common/languageModels.ts b/src/vs/workbench/contrib/chat/common/languageModels.ts
index f77edfbc6b4..e452196a385 100644
--- a/src/vs/workbench/contrib/chat/common/languageModels.ts
+++ b/src/vs/workbench/contrib/chat/common/languageModels.ts
@@ -3,7 +3,7 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
-import { SequencerByKey } from '../../../../base/common/async.js';
+import { SequencerByKey, timeout } from '../../../../base/common/async.js';
 import { VSBuffer } from '../../../../base/common/buffer.js';
 import { CancellationToken } from '../../../../base/common/cancellation.js';
 import { IStringDictionary } from '../../../../base/common/collections.js';
@@ -13,11 +13,12 @@ import { hash } from '../../../../base/common/hash.js';
 import { Iterable } from '../../../../base/common/iterator.js';
 import { IJSONSchema, TypeFromJsonSchema } from '../../../../base/common/jsonSchema.js';
 import { DisposableStore, IDisposable, toDisposable } from '../../../../base/common/lifecycle.js';
+import { IObservable, observableValue } from '../../../../base/common/observable.js';
 import { equals } from '../../../../base/common/objects.js';
 import Severity from '../../../../base/common/severity.js';
 import { format, isFalsyOrWhitespace } from '../../../../base/common/strings.js';
 import { ThemeIcon } from '../../../../base/common/themables.js';
-import { isString } from '../../../../base/common/types.js';
+import { isObject, isString } from '../../../../base/common/types.js';
 import { URI } from '../../../../base/common/uri.js';
 import { generateUuid } from '../../../../base/common/uuid.js';
 import { localize } from '../../../../nls.js';
@@ -25,6 +26,8 @@ import { ContextKeyExpr, IContextKey, IContextKeyService } from '../../../../pla
 import { ExtensionIdentifier } from '../../../../platform/extensions/common/extensions.js';
 import { createDecorator } from '../../../../platform/instantiation/common/instantiation.js';
 import { ILogService } from '../../../../platform/log/common/log.js';
+import { IProductService } from '../../../../platform/product/common/productService.js';
+import { asJson, IRequestService } from '../../../../platform/request/common/request.js';
 import { IQuickInputService, QuickInputHideReason } from '../../../../platform/quickinput/common/quickInput.js';
 import { ISecretStorageService } from '../../../../platform/secrets/common/secrets.js';
 import { IStorageService, StorageScope, StorageTarget } from '../../../../platform/storage/common/storage.js';
@@ -363,6 +366,55 @@ export interface ILanguageModelsService {
 	configureLanguageModelsProviderGroup(vendorId: string, name?: string): Promise<void>;
 
 	migrateLanguageModelsProviderGroup(languageModelsProviderGroup: ILanguageModelsProviderGroup): Promise<void>;
+
+	/**
+	 * Returns the most recently used model identifiers, ordered by most-recent-first.
+	 * @param maxCount Maximum number of entries to return (default 7).
+	 */
+	getRecentlyUsedModelIds(maxCount?: number): string[];
+
+	/**
+	 * Records that a model was used, updating the recently used list.
+	 */
+	recordModelUsage(modelIdentifier: string): void;
+
+	/**
+	 * Returns the curated models from the models control manifest,
+	 * separated into free and paid tiers.
+	 */
+	getCuratedModels(): ICuratedModels;
+
+	/**
+	 * Returns the IDs of curated models that are marked as new and have not been seen yet.
+	 */
+	getNewModelIds(): string[];
+
+	/**
+	 * Fires when the set of new (unseen) model IDs changes.
+	 */
+	readonly onDidChangeNewModelIds: Event<void>;
+
+	/**
+	 * Marks all new models as seen, clearing the new badge.
+	 */
+	markNewModelsAsSeen(): void;
+
+	/**
+	 * Observable map of restricted chat participant names to allowed extension publisher/IDs.
+	 * Fetched from the chat control manifest.
+	 */
+	readonly restrictedChatParticipants: IObservable<{ [name: string]: string[] }>;
+}
+
+export interface ICuratedModel {
+	readonly id: string;
+	readonly isNew?: boolean;
+	readonly minVSCodeVersion?: string;
+}
+
+export interface ICuratedModels {
+	readonly free: ICuratedModel[];
+	readonly paid: ICuratedModel[];
 }
 
 const languageModelChatProviderType = {
@@ -451,6 +503,25 @@ export const languageModelChatProviderExtensionPoint = ExtensionsRegistry.regist
 });
 
 const CHAT_MODEL_PICKER_PREFERENCES_STORAGE_KEY = 'chatModelPickerPreferences';
+const CHAT_MODEL_RECENTLY_USED_STORAGE_KEY = 'chatModelRecentlyUsed';
+const CHAT_MODEL_SEEN_NEW_MODELS_STORAGE_KEY = 'chatModelSeenNewModels';
+const CHAT_PARTICIPANT_NAME_REGISTRY_STORAGE_KEY = 'chat.participantNameRegistry';
+const CHAT_CURATED_MODELS_STORAGE_KEY = 'chat.curatedModels';
+
+interface IRawCuratedModel {
+	readonly id: string;
+	readonly isNew?: boolean;
+	readonly minVSCodeVersion?: string;
+}
+
+interface IChatControlResponse {
+	readonly version: number;
+	readonly restrictedChatParticipants: { [name: string]: string[] };
+	readonly curatedModels?: {
+		readonly free?: IRawCuratedModel[];
+		readonly paid?: IRawCuratedModel[];
+	};
+}
 
 export class LanguageModelsService implements ILanguageModelsService {
 
@@ -476,6 +547,20 @@ export class LanguageModelsService implements ILanguageModelsService {
 	private readonly _onLanguageModelChange = this._store.add(new Emitter<string>());
 	readonly onDidChangeLanguageModels: Event<string> = this._onLanguageModelChange.event;
 
+	private _recentlyUsedModelIds: string[] = [];
+	private _curatedModels: ICuratedModels = { free: [], paid: [] };
+	private _newModelIds: Set<string> = new Set();
+	private _seenNewModelIds: Set<string> = new Set();
+
+	private _chatControlUrl: string | undefined;
+	private _chatControlDisposed = false;
+
+	private readonly _restrictedChatParticipants = observableValue<{ [name: string]: string[] }>(this, Object.create(null));
+	readonly restrictedChatParticipants: IObservable<{ [name: string]: string[] }> = this._restrictedChatParticipants;
+
+	private readonly _onDidChangeNewModelIds = this._store.add(new Emitter<void>());
+	readonly onDidChangeNewModelIds: Event<void> = this._onDidChangeNewModelIds.event;
+
 	constructor(
 		@IExtensionService private readonly _extensionService: IExtensionService,
 		@ILogService private readonly _logService: ILogService,
@@ -484,9 +569,14 @@ export class LanguageModelsService implements ILanguageModelsService {
 		@ILanguageModelsConfigurationService private readonly _languageModelsConfigurationService: ILanguageModelsConfigurationService,
 		@IQuickInputService private readonly _quickInputService: IQuickInputService,
 		@ISecretStorageService private readonly _secretStorageService: ISecretStorageService,
+		@IProductService private readonly _productService: IProductService,
+		@IRequestService private readonly _requestService: IRequestService,
 	) {
 		this._hasUserSelectableModels = ChatContextKeys.languageModelsAreUserSelectable.bindTo(_contextKeyService);
 		this._modelPickerUserPreferences = this._readModelPickerPreferences();
+		this._recentlyUsedModelIds = this._readRecentlyUsedModels();
+		this._seenNewModelIds = this._readSeenNewModels();
+		this._initChatControlData();
 		this._store.add(this._storageService.onDidChangeValue(StorageScope.PROFILE, CHAT_MODEL_PICKER_PREFERENCES_STORAGE_KEY, this._store)(() => this._onDidChangeModelPickerPreferences()));
 
 		this._store.add(this.onDidChangeLanguageModels(() => this._hasUserSelectableModels.set(this._modelCache.size > 0 && Array.from(this._modelCache.values()).some(model => model.isUserSelectable))));
@@ -1293,7 +1383,174 @@ export class LanguageModelsService implements ILanguageModelsService {
 		await this.addLanguageModelsProviderGroup(name, vendor, configuration);
 	}
 
+	//#region Recently used models
+
+	private _readRecentlyUsedModels(): string[] {
+		return this._storageService.getObject<string[]>(CHAT_MODEL_RECENTLY_USED_STORAGE_KEY, StorageScope.PROFILE, []);
+	}
+
+	private _saveRecentlyUsedModels(): void {
+		this._storageService.store(CHAT_MODEL_RECENTLY_USED_STORAGE_KEY, this._recentlyUsedModelIds, StorageScope.PROFILE, StorageTarget.USER);
+	}
+
+	getRecentlyUsedModelIds(maxCount: number = 7): string[] {
+		// Filter to only include models that still exist in the cache
+		return this._recentlyUsedModelIds
+			.filter(id => this._modelCache.has(id))
+			.slice(0, maxCount);
+	}
+
+	recordModelUsage(modelIdentifier: string): void {
+		// Remove if already present (to move to front)
+		const index = this._recentlyUsedModelIds.indexOf(modelIdentifier);
+		if (index !== -1) {
+			this._recentlyUsedModelIds.splice(index, 1);
+		}
+		// Add to front
+		this._recentlyUsedModelIds.unshift(modelIdentifier);
+		// Cap at a reasonable max to avoid unbounded growth
+		if (this._recentlyUsedModelIds.length > 20) {
+			this._recentlyUsedModelIds.length = 20;
+		}
+		this._saveRecentlyUsedModels();
+	}
+
+	//#endregion
+
+	//#region Curated models
+
+	getCuratedModels(): ICuratedModels {
+		return this._curatedModels;
+	}
+
+	private _setCuratedModels(free: IRawCuratedModel[], paid: IRawCuratedModel[]): void {
+		const toPublic = (m: IRawCuratedModel): ICuratedModel => ({ id: m.id, isNew: m.isNew, minVSCodeVersion: m.minVSCodeVersion });
+
+		this._curatedModels = { free: [], paid: [] };
+		const newIds = new Set<string>();
+
+		for (const model of free) {
+			this._curatedModels.free.push(toPublic(model));
+			if (model.isNew) {
+				newIds.add(model.id);
+			}
+		}
+
+		for (const model of paid) {
+			this._curatedModels.paid.push(toPublic(model));
+			if (model.isNew) {
+				newIds.add(model.id);
+			}
+		}
+
+		this._newModelIds = newIds;
+		this._onDidChangeNewModelIds.fire();
+	}
+
+	getNewModelIds(): string[] {
+		const result: string[] = [];
+		for (const id of this._newModelIds) {
+			if (!this._seenNewModelIds.has(id)) {
+				result.push(id);
+			}
+		}
+		return result;
+	}
+
+	markNewModelsAsSeen(): void {
+		let changed = false;
+		for (const id of this._newModelIds) {
+			if (!this._seenNewModelIds.has(id)) {
+				this._seenNewModelIds.add(id);
+				changed = true;
+			}
+		}
+		if (changed) {
+			this._saveSeenNewModels();
+			this._onDidChangeNewModelIds.fire();
+		}
+	}
+
+	private _readSeenNewModels(): Set<string> {
+		return new Set(this._storageService.getObject<string[]>(CHAT_MODEL_SEEN_NEW_MODELS_STORAGE_KEY, StorageScope.PROFILE, []));
+	}
+
+	private _saveSeenNewModels(): void {
+		this._storageService.store(CHAT_MODEL_SEEN_NEW_MODELS_STORAGE_KEY, [...this._seenNewModelIds], StorageScope.PROFILE, StorageTarget.USER);
+	}
+
+	//#endregion
+
+	//#region Chat control data
+
+	private _initChatControlData(): void {
+		this._chatControlUrl = this._productService.chatParticipantRegistry;
+		if (!this._chatControlUrl) {
+			return;
+		}
+
+		// Restore participant registry from storage
+		const raw = this._storageService.get(CHAT_PARTICIPANT_NAME_REGISTRY_STORAGE_KEY, StorageScope.APPLICATION);
+		try {
+			this._restrictedChatParticipants.set(JSON.parse(raw ?? '{}'), undefined);
+		} catch (err) {
+			this._storageService.remove(CHAT_PARTICIPANT_NAME_REGISTRY_STORAGE_KEY, StorageScope.APPLICATION);
+		}
+
+		// Restore curated models from storage
+		const rawCurated = this._storageService.get(CHAT_CURATED_MODELS_STORAGE_KEY, StorageScope.APPLICATION);
+		try {
+			const curated = JSON.parse(rawCurated ?? '{}');
+			if (isObject(curated) && Array.isArray(curated.free) && Array.isArray(curated.paid)) {
+				this._setCuratedModels(curated.free, curated.paid);
+			}
+		} catch (err) {
+			this._storageService.remove(CHAT_CURATED_MODELS_STORAGE_KEY, StorageScope.APPLICATION);
+		}
+
+		this._refreshChatControlData();
+	}
+
+	private _refreshChatControlData(): void {
+		if (this._chatControlDisposed) {
+			return;
+		}
+
+		this._fetchChatControlData()
+			.catch(err => this._logService.warn('Failed to fetch chat control data', err))
+			.then(() => timeout(5 * 60 * 1000)) // every 5 minutes
+			.then(() => this._refreshChatControlData());
+	}
+
+	private async _fetchChatControlData(): Promise<void> {
+		const context = await this._requestService.request({ type: 'GET', url: this._chatControlUrl! }, CancellationToken.None);
+
+		if (context.res.statusCode !== 200) {
+			throw new Error('Could not get chat control data.');
+		}
+
+		const result = await asJson<IChatControlResponse>(context);
+
+		if (!result || result.version !== 1) {
+			throw new Error('Unexpected chat control response.');
+		}
+
+		// Update restricted chat participants
+		const registry = result.restrictedChatParticipants;
+		this._restrictedChatParticipants.set(registry, undefined);
+		this._storageService.store(CHAT_PARTICIPANT_NAME_REGISTRY_STORAGE_KEY, JSON.stringify(registry), StorageScope.APPLICATION, StorageTarget.MACHINE);
+
+		// Update curated models
+		if (result.curatedModels) {
+			this._setCuratedModels(result.curatedModels?.free ?? [], result.curatedModels?.paid ?? []);
+			this._storageService.store(CHAT_CURATED_MODELS_STORAGE_KEY, JSON.stringify(result.curatedModels), StorageScope.APPLICATION, StorageTarget.MACHINE);
+		}
+	}
+
+	//#endregion
+
 	dispose() {
+		this._chatControlDisposed = true;
 		this._store.dispose();
 		this._providers.clear();
 	}
diff --git a/src/vs/workbench/contrib/chat/common/model/chatModel.ts b/src/vs/workbench/contrib/chat/common/model/chatModel.ts
index e804c918744..c5d858de46c 100644
--- a/src/vs/workbench/contrib/chat/common/model/chatModel.ts
+++ b/src/vs/workbench/contrib/chat/common/model/chatModel.ts
@@ -2652,7 +2652,6 @@ export class ChatModel extends Disposable implements IChatModel {
 			creationDate: this._timestamp,
 			customTitle: this._customTitle,
 			inputState: this.inputModel.toJSON(),
-			repoData: this._repoData,
 		};
 	}
 
diff --git a/src/vs/workbench/contrib/chat/common/participants/chatAgents.ts b/src/vs/workbench/contrib/chat/common/participants/chatAgents.ts
index 55f5e4c319c..c3c760b5d6a 100644
--- a/src/vs/workbench/contrib/chat/common/participants/chatAgents.ts
+++ b/src/vs/workbench/contrib/chat/common/participants/chatAgents.ts
@@ -4,14 +4,13 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { findLast } from '../../../../../base/common/arraysFind.js';
-import { timeout } from '../../../../../base/common/async.js';
 import { CancellationToken } from '../../../../../base/common/cancellation.js';
 import { Emitter, Event } from '../../../../../base/common/event.js';
 import { IMarkdownString } from '../../../../../base/common/htmlContent.js';
 import { Iterable } from '../../../../../base/common/iterator.js';
 import { Disposable, IDisposable, toDisposable } from '../../../../../base/common/lifecycle.js';
 import { revive, Revived } from '../../../../../base/common/marshalling.js';
-import { IObservable, observableValue } from '../../../../../base/common/observable.js';
+import { IObservable } from '../../../../../base/common/observable.js';
 import { equalsIgnoreCase } from '../../../../../base/common/strings.js';
 import { ThemeIcon } from '../../../../../base/common/themables.js';
 import { URI } from '../../../../../base/common/uri.js';
@@ -20,16 +19,13 @@ import { IConfigurationService } from '../../../../../platform/configuration/com
 import { ContextKeyExpr, IContextKey, IContextKeyService } from '../../../../../platform/contextkey/common/contextkey.js';
 import { ExtensionIdentifier } from '../../../../../platform/extensions/common/extensions.js';
 import { createDecorator } from '../../../../../platform/instantiation/common/instantiation.js';
-import { ILogService } from '../../../../../platform/log/common/log.js';
-import { IProductService } from '../../../../../platform/product/common/productService.js';
-import { asJson, IRequestService } from '../../../../../platform/request/common/request.js';
-import { IStorageService, StorageScope, StorageTarget } from '../../../../../platform/storage/common/storage.js';
 import { ChatContextKeys } from '../actions/chatContextKeys.js';
 import { IChatAgentEditedFileEvent, IChatProgressHistoryResponseContent, IChatRequestModeInstructions, IChatRequestVariableData, ISerializableChatAgentData } from '../model/chatModel.js';
 import { IChatRequestHooks } from '../promptSyntax/hookSchema.js';
 import { IRawChatCommandContribution } from './chatParticipantContribTypes.js';
 import { IChatFollowup, IChatLocationData, IChatProgress, IChatResponseErrorDetails, IChatTaskDto } from '../chatService/chatService.js';
 import { ChatAgentLocation, ChatConfiguration, ChatModeKind } from '../constants.js';
+import { ILanguageModelsService } from '../languageModels.js';
 
 //#region agent service, commands etc
 
@@ -661,13 +657,6 @@ export class MergedChatAgent implements IChatAgent {
 
 export const IChatAgentNameService = createDecorator<IChatAgentNameService>('chatAgentNameService');
 
-type IChatParticipantRegistry = { [name: string]: string[] };
-
-interface IChatParticipantRegistryResponse {
-	readonly version: number;
-	readonly restrictedChatParticipants: IChatParticipantRegistry;
-}
-
 export interface IChatAgentNameService {
 	_serviceBrand: undefined;
 	getAgentNameRestriction(chatAgentData: IChatAgentData): boolean;
@@ -675,64 +664,11 @@ export interface IChatAgentNameService {
 
 export class ChatAgentNameService implements IChatAgentNameService {
 
-	private static readonly StorageKey = 'chat.participantNameRegistry';
-
 	declare _serviceBrand: undefined;
 
-	private readonly url!: string;
-	private registry = observableValue<IChatParticipantRegistry>(this, Object.create(null));
-	private disposed = false;
-
 	constructor(
-		@IProductService productService: IProductService,
-		@IRequestService private readonly requestService: IRequestService,
-		@ILogService private readonly logService: ILogService,
-		@IStorageService private readonly storageService: IStorageService
+		@ILanguageModelsService private readonly languageModelsService: ILanguageModelsService,
 	) {
-		if (!productService.chatParticipantRegistry) {
-			return;
-		}
-
-		this.url = productService.chatParticipantRegistry;
-
-		const raw = storageService.get(ChatAgentNameService.StorageKey, StorageScope.APPLICATION);
-
-		try {
-			this.registry.set(JSON.parse(raw ?? '{}'), undefined);
-		} catch (err) {
-			storageService.remove(ChatAgentNameService.StorageKey, StorageScope.APPLICATION);
-		}
-
-		this.refresh();
-	}
-
-	private refresh(): void {
-		if (this.disposed) {
-			return;
-		}
-
-		this.update()
-			.catch(err => this.logService.warn('Failed to fetch chat participant registry', err))
-			.then(() => timeout(5 * 60 * 1000)) // every 5 minutes
-			.then(() => this.refresh());
-	}
-
-	private async update(): Promise<void> {
-		const context = await this.requestService.request({ type: 'GET', url: this.url }, CancellationToken.None);
-
-		if (context.res.statusCode !== 200) {
-			throw new Error('Could not get extensions report.');
-		}
-
-		const result = await asJson<IChatParticipantRegistryResponse>(context);
-
-		if (!result || result.version !== 1) {
-			throw new Error('Unexpected chat participant registry response.');
-		}
-
-		const registry = result.restrictedChatParticipants;
-		this.registry.set(registry, undefined);
-		this.storageService.store(ChatAgentNameService.StorageKey, JSON.stringify(registry), StorageScope.APPLICATION, StorageTarget.MACHINE);
 	}
 
 	/**
@@ -752,7 +688,7 @@ export class ChatAgentNameService implements IChatAgentNameService {
 	private checkAgentNameRestriction(name: string, chatAgentData: IChatAgentData): IObservable<boolean> {
 		// Registry is a map of name to an array of extension publisher IDs or extension IDs that are allowed to use it.
 		// Look up the list of extensions that are allowed to use this name
-		const allowList = this.registry.map<string[] | undefined>(registry => registry[name.toLowerCase()]);
+		const allowList = this.languageModelsService.restrictedChatParticipants.map<string[] | undefined>(registry => registry[name.toLowerCase()]);
 		return allowList.map(allowList => {
 			if (!allowList) {
 				return true;
@@ -761,10 +697,6 @@ export class ChatAgentNameService implements IChatAgentNameService {
 			return allowList.some(id => equalsIgnoreCase(id, id.includes('.') ? chatAgentData.extensionId.value : chatAgentData.extensionPublisherId));
 		});
 	}
-
-	dispose() {
-		this.disposed = true;
-	}
 }
 
 export function getFullyQualifiedId(chatAgentData: IChatAgentData): string {
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/computeAutomaticInstructions.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/computeAutomaticInstructions.ts
index 50c007fc116..3c3e2597382 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/computeAutomaticInstructions.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/computeAutomaticInstructions.ts
@@ -7,6 +7,7 @@ import { CancellationToken } from '../../../../../base/common/cancellation.js';
 import { match, splitGlobAware } from '../../../../../base/common/glob.js';
 import { ResourceMap, ResourceSet } from '../../../../../base/common/map.js';
 import { Schemas } from '../../../../../base/common/network.js';
+import { OperatingSystem } from '../../../../../base/common/platform.js';
 import { basename, dirname } from '../../../../../base/common/resources.js';
 import { URI } from '../../../../../base/common/uri.js';
 import { localize } from '../../../../../nls.js';
@@ -14,6 +15,7 @@ import { IConfigurationService } from '../../../../../platform/configuration/com
 import { IFileService } from '../../../../../platform/files/common/files.js';
 import { ILabelService } from '../../../../../platform/label/common/label.js';
 import { ILogService } from '../../../../../platform/log/common/log.js';
+import { IRemoteAgentService } from '../../../../services/remote/common/remoteAgentService.js';
 import { ITelemetryService } from '../../../../../platform/telemetry/common/telemetry.js';
 import { IWorkspaceContextService } from '../../../../../platform/workspace/common/workspace.js';
 import { ChatRequestVariableSet, IChatRequestVariableEntry, isPromptFileVariableEntry, toPromptFileVariableEntry, toPromptTextVariableEntry, PromptFileVariableKind, IPromptTextVariableEntry, ChatRequestToolReferenceEntry, toToolVariableEntry } from '../attachments/chatVariableEntries.js';
@@ -68,6 +70,7 @@ export class ComputeAutomaticInstructions {
 		@IConfigurationService private readonly _configurationService: IConfigurationService,
 		@IWorkspaceContextService private readonly _workspaceService: IWorkspaceContextService,
 		@IFileService private readonly _fileService: IFileService,
+		@IRemoteAgentService private readonly _remoteAgentService: IRemoteAgentService,
 		@ITelemetryService private readonly _telemetryService: ITelemetryService,
 		@ILanguageModelToolsService private readonly _languageModelToolsService: ILanguageModelToolsService,
 	) {
@@ -294,6 +297,10 @@ export class ComputeAutomaticInstructions {
 		const readTool = this._getTool('readFile');
 		const runSubagentTool = this._getTool(VSCodeToolReference.runSubagent);
 
+		const remoteEnv = await this._remoteAgentService.getEnvironment();
+		const remoteOS = remoteEnv?.os;
+		const filePath = (uri: URI) => getFilePath(uri, remoteOS);
+
 		const entries: string[] = [];
 		if (readTool) {
 
@@ -316,13 +323,13 @@ export class ComputeAutomaticInstructions {
 						if (description) {
 							entries.push(`<description>${description}</description>`);
 						}
-						entries.push(`<file>${getFilePath(uri)}</file>`);
+						entries.push(`<file>${filePath(uri)}</file>`);
 						const applyToPattern = this._getApplyToPattern(applyTo, paths);
 						if (applyToPattern) {
 							entries.push(`<applyTo>${applyToPattern}</applyTo>`);
 						}
 					} else {
-						entries.push(`<file>${getFilePath(uri)}</file>`);
+						entries.push(`<file>${filePath(uri)}</file>`);
 					}
 					entries.push('</instruction>');
 					hasContent = true;
@@ -335,7 +342,7 @@ export class ComputeAutomaticInstructions {
 				const description = folderName.trim().length === 0 ? localize('instruction.file.description.agentsmd.root', 'Instructions for the workspace') : localize('instruction.file.description.agentsmd.folder', 'Instructions for folder \'{0}\'', folderName);
 				entries.push('<instruction>');
 				entries.push(`<description>${description}</description>`);
-				entries.push(`<file>${getFilePath(uri)}</file>`);
+				entries.push(`<file>${filePath(uri)}</file>`);
 				entries.push('</instruction>');
 				hasContent = true;
 
@@ -378,7 +385,7 @@ export class ComputeAutomaticInstructions {
 					if (skill.description) {
 						entries.push(`<description>${skill.description}</description>`);
 					}
-					entries.push(`<file>${getFilePath(skill.uri)}</file>`);
+					entries.push(`<file>${filePath(skill.uri)}</file>`);
 					entries.push('</skill>');
 				}
 				entries.push('</skills>', '', ''); // add trailing newline
@@ -492,9 +499,19 @@ export class ComputeAutomaticInstructions {
 }
 
 
-function getFilePath(uri: URI): string {
+export function getFilePath(uri: URI, remoteOS: OperatingSystem | undefined): string {
 	if (uri.scheme === Schemas.file || uri.scheme === Schemas.vscodeRemote) {
-		return uri.fsPath;
+		const fsPath = uri.fsPath;
+		// uri.fsPath uses the local OS's path separators, but the path
+		// may belong to a remote with a different OS. Normalize separators
+		// to match the remote OS (idempotent when local and remote match).
+		if (remoteOS !== undefined) {
+			if (remoteOS === OperatingSystem.Windows) {
+				return fsPath.replace(/\//g, '\\');
+			}
+			return fsPath.replace(/\\/g, '/');
+		}
+		return fsPath;
 	}
 	return uri.toString();
 }
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/PromptHeaderDefinitionProvider.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/PromptHeaderDefinitionProvider.ts
index 076f9f2d1eb..8de8c06dfba 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/PromptHeaderDefinitionProvider.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/PromptHeaderDefinitionProvider.ts
@@ -39,7 +39,7 @@ export class PromptHeaderDefinitionProvider implements DefinitionProvider {
 		}
 
 		const agentAttr = header.getAttribute(PromptHeaderAttributes.agent) ?? header.getAttribute(PromptHeaderAttributes.mode);
-		if (agentAttr && agentAttr.value.type === 'string' && agentAttr.range.containsPosition(position)) {
+		if (agentAttr && agentAttr.value.type === 'scalar' && agentAttr.range.containsPosition(position)) {
 			const agent = this.chatModeService.findModeByName(agentAttr.value.value);
 			if (agent && agent.uri) {
 				return {
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptCodeActions.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptCodeActions.ts
index bd4ecc7de0f..704d5cd6208 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptCodeActions.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptCodeActions.ts
@@ -119,17 +119,17 @@ export class PromptCodeActionProvider implements CodeActionProvider {
 			return;
 		}
 		let value = toolsAttr.value;
-		if (value.type === 'string') {
+		if (value.type === 'scalar') {
 			value = parseCommaSeparatedList(value);
 		}
-		if (value.type !== 'array') {
+		if (value.type !== 'sequence') {
 			return;
 		}
 		const values = value.items;
 		const deprecatedNames = new Lazy(() => this.languageModelToolsService.getDeprecatedFullReferenceNames());
 		const edits: TextEdit[] = [];
 		for (const item of values) {
-			if (item.type !== 'string') {
+			if (item.type !== 'scalar') {
 				continue;
 			}
 			const newNames = deprecatedNames.value.get(item.value);
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHeaderAutocompletion.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHeaderAutocompletion.ts
index c02f3dfcd53..5e60a57cf89 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHeaderAutocompletion.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHeaderAutocompletion.ts
@@ -15,7 +15,7 @@ import { IChatModeService } from '../../chatModes.js';
 import { getPromptsTypeForLanguageId, PromptsType } from '../promptTypes.js';
 import { IPromptsService, Target } from '../service/promptsService.js';
 import { Iterable } from '../../../../../../base/common/iterator.js';
-import { ClaudeHeaderAttributes, IArrayValue, IValue, parseCommaSeparatedList, PromptHeader, PromptHeaderAttributes } from '../promptFileParser.js';
+import { ClaudeHeaderAttributes, ISequenceValue, IValue, parseCommaSeparatedList, PromptHeader, PromptHeaderAttributes } from '../promptFileParser.js';
 import { getAttributeDescription, getTarget, getValidAttributeNames, claudeAgentAttributes, claudeRulesAttributes, knownClaudeTools, knownGithubCopilotTools, IValueEntry } from './promptValidator.js';
 import { localize } from '../../../../../../nls.js';
 import { formatArrayValue, getQuotePreference } from '../utils/promptEditHelper.js';
@@ -161,7 +161,7 @@ export class PromptHeaderAutocompletion implements CompletionItemProvider {
 
 		if (promptType === PromptsType.prompt || promptType === PromptsType.agent) {
 			if (attribute.key === PromptHeaderAttributes.model) {
-				if (attribute.value.type === 'array') {
+				if (attribute.value.type === 'sequence') {
 					// if the position is inside the tools metadata, we provide tool name completions
 					const getValues = async () => {
 						if (target === Target.Claude) {
@@ -175,10 +175,10 @@ export class PromptHeaderAutocompletion implements CompletionItemProvider {
 			}
 			if (attribute.key === PromptHeaderAttributes.tools || attribute.key === ClaudeHeaderAttributes.disallowedTools) {
 				let value = attribute.value;
-				if (value.type === 'string') {
+				if (value.type === 'scalar') {
 					value = parseCommaSeparatedList(value);
 				}
-				if (value.type === 'array') {
+				if (value.type === 'sequence') {
 					// if the position is inside the tools metadata, we provide tool name completions
 					const getValues = async () => {
 						if (target === Target.GitHubCopilot) {
@@ -195,7 +195,7 @@ export class PromptHeaderAutocompletion implements CompletionItemProvider {
 			}
 		}
 		if (attribute.key === PromptHeaderAttributes.agents) {
-			if (attribute.value.type === 'array') {
+			if (attribute.value.type === 'sequence') {
 				return this.provideArrayCompletions(model, position, attribute.value, async () => {
 					return await this.promptsService.getCustomAgents(CancellationToken.None);
 				});
@@ -329,12 +329,12 @@ export class PromptHeaderAutocompletion implements CompletionItemProvider {
 		return result;
 	}
 
-	private async provideArrayCompletions(model: ITextModel, position: Position, arrayValue: IArrayValue, getValues: () => Promise<ReadonlyArray<IValueEntry>>): Promise<CompletionList | undefined> {
+	private async provideArrayCompletions(model: ITextModel, position: Position, arrayValue: ISequenceValue, getValues: () => Promise<ReadonlyArray<IValueEntry>>): Promise<CompletionList | undefined> {
 		const getSuggestions = async (toolRange: Range, currentItem?: IValue) => {
 			const suggestions: CompletionItem[] = [];
 			const entries = await getValues();
 			const quotePreference = getQuotePreference(arrayValue, model);
-			const existingValues = new Set<string>(arrayValue.items.filter(item => item !== currentItem).filter(item => item.type === 'string').map(item => item.value));
+			const existingValues = new Set<string>(arrayValue.items.filter(item => item !== currentItem).filter(item => item.type === 'scalar').map(item => item.value));
 			for (const entry of entries) {
 				const entryName = entry.name;
 				if (existingValues.has(entryName)) {
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHovers.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHovers.ts
index 662ce196265..8fe87c45a10 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHovers.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptHovers.ts
@@ -99,12 +99,12 @@ export class PromptHoverProvider implements HoverProvider {
 
 	private getToolHover(node: IHeaderAttribute, position: Position, baseMessage: string, target: Target): Hover | undefined {
 		let value = node.value;
-		if (value.type === 'string') {
+		if (value.type === 'scalar') {
 			value = parseCommaSeparatedList(value);
 		}
-		if (value.type === 'array') {
+		if (value.type === 'sequence') {
 			for (const toolName of value.items) {
-				if (toolName.type === 'string' && toolName.range.containsPosition(position)) {
+				if (toolName.type === 'scalar' && toolName.range.containsPosition(position)) {
 					const description = this.getToolHoverByName(toolName.value, toolName.range, target);
 					if (description) {
 						return description;
@@ -181,14 +181,14 @@ export class PromptHoverProvider implements HoverProvider {
 			}
 			return undefined;
 		};
-		if (node.value.type === 'string') {
+		if (node.value.type === 'scalar') {
 			const hover = modelHoverContent(node.value.value);
 			if (hover) {
 				return hover;
 			}
-		} else if (node.value.type === 'array') {
+		} else if (node.value.type === 'sequence') {
 			for (const item of node.value.items) {
-				if (item.type === 'string' && item.range.containsPosition(position)) {
+				if (item.type === 'scalar' && item.range.containsPosition(position)) {
 					const hover = modelHoverContent(item.value);
 					if (hover) {
 						return hover;
@@ -202,7 +202,7 @@ export class PromptHoverProvider implements HoverProvider {
 	private getAgentHover(agentAttribute: IHeaderAttribute, position: Position, baseMessage: string): Hover | undefined {
 		const lines: string[] = [];
 		const value = agentAttribute.value;
-		if (value.type === 'string' && value.range.containsPosition(position)) {
+		if (value.type === 'scalar' && value.range.containsPosition(position)) {
 			const agent = this.chatModeService.findModeByName(value.value);
 			if (agent) {
 				const description = agent.description.get() || (isBuiltinChatMode(agent) ? localize('promptHeader.prompt.agent.builtInDesc', 'Built-in agent') : localize('promptHeader.prompt.agent.customDesc', 'Custom agent'));
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptValidator.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptValidator.ts
index 55559b5b04f..8b9a1b018cf 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptValidator.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/languageProviders/promptValidator.ts
@@ -16,7 +16,7 @@ import { ChatModeKind } from '../../constants.js';
 import { ILanguageModelChatMetadata, ILanguageModelsService } from '../../languageModels.js';
 import { ILanguageModelToolsService, SpecedToolAliases } from '../../tools/languageModelToolsService.js';
 import { getPromptsTypeForLanguageId, PromptsType } from '../promptTypes.js';
-import { GithubPromptHeaderAttributes, IArrayValue, IHeaderAttribute, IStringValue, parseCommaSeparatedList, ParsedPromptFile, PromptHeader, PromptHeaderAttributes } from '../promptFileParser.js';
+import { GithubPromptHeaderAttributes, ISequenceValue, IHeaderAttribute, IScalarValue, parseCommaSeparatedList, ParsedPromptFile, PromptHeader, PromptHeaderAttributes, IValue } from '../promptFileParser.js';
 import { Disposable, DisposableStore, toDisposable } from '../../../../../../base/common/lifecycle.js';
 import { Delayer } from '../../../../../../base/common/async.js';
 import { ResourceMap } from '../../../../../../base/common/map.js';
@@ -67,7 +67,7 @@ export class PromptValidator {
 		}
 
 		const nameAttribute = promptAST.header?.attributes.find(attr => attr.key === PromptHeaderAttributes.name);
-		if (!nameAttribute || nameAttribute.value.type !== 'string') {
+		if (!nameAttribute || nameAttribute.value.type !== 'scalar') {
 			return;
 		}
 
@@ -253,7 +253,7 @@ export class PromptValidator {
 		if (!nameAttribute) {
 			return;
 		}
-		if (nameAttribute.value.type !== 'string') {
+		if (nameAttribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.nameMustBeString', "The 'name' attribute must be a string."), nameAttribute.range, MarkerSeverity.Error));
 			return;
 		}
@@ -268,7 +268,7 @@ export class PromptValidator {
 		if (!descriptionAttribute) {
 			return;
 		}
-		if (descriptionAttribute.value.type !== 'string') {
+		if (descriptionAttribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.descriptionMustBeString', "The 'description' attribute must be a string."), descriptionAttribute.range, MarkerSeverity.Error));
 			return;
 		}
@@ -283,7 +283,7 @@ export class PromptValidator {
 		if (!argumentHintAttribute) {
 			return;
 		}
-		if (argumentHintAttribute.value.type !== 'string') {
+		if (argumentHintAttribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.argumentHintMustBeString', "The 'argument-hint' attribute must be a string."), argumentHintAttribute.range, MarkerSeverity.Error));
 			return;
 		}
@@ -298,26 +298,26 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'string' && attribute.value.type !== 'array') {
+		if (attribute.value.type !== 'scalar' && attribute.value.type !== 'sequence') {
 			report(toMarker(localize('promptValidator.modelMustBeStringOrArray', "The 'model' attribute must be a string or an array of strings."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
 
 		const modelNames: [string, Range][] = [];
-		if (attribute.value.type === 'string') {
+		if (attribute.value.type === 'scalar') {
 			const modelName = attribute.value.value.trim();
 			if (modelName.length === 0) {
 				report(toMarker(localize('promptValidator.modelMustBeNonEmpty', "The 'model' attribute must be a non-empty string."), attribute.value.range, MarkerSeverity.Error));
 				return;
 			}
 			modelNames.push([modelName, attribute.value.range]);
-		} else if (attribute.value.type === 'array') {
+		} else if (attribute.value.type === 'sequence') {
 			if (attribute.value.items.length === 0) {
 				report(toMarker(localize('promptValidator.modelArrayMustNotBeEmpty', "The 'model' array must not be empty."), attribute.value.range, MarkerSeverity.Error));
 				return;
 			}
 			for (const item of attribute.value.items) {
-				if (item.type !== 'string') {
+				if (item.type !== 'scalar') {
 					report(toMarker(localize('promptValidator.modelArrayMustContainStrings', "The 'model' array must contain only strings."), item.range, MarkerSeverity.Error));
 					return;
 				}
@@ -356,7 +356,7 @@ export class PromptValidator {
 				if (!attribute) {
 					continue;
 				}
-				if (attribute.value.type !== 'string') {
+				if (attribute.value.type !== 'scalar') {
 					report(toMarker(localize('promptValidator.claude.attributeMustBeString', "The '{0}' attribute must be a string.", claudeAttributeName), attribute.value.range, MarkerSeverity.Error));
 					continue;
 				} else {
@@ -393,7 +393,7 @@ export class PromptValidator {
 		if (!attribute) {
 			return undefined; // default agent for prompts is Agent
 		}
-		if (attribute.value.type !== 'string') {
+		if (attribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.attributeMustBeString', "The '{0}' attribute must be a string.", attribute.key), attribute.value.range, MarkerSeverity.Error));
 			return undefined;
 		}
@@ -405,7 +405,7 @@ export class PromptValidator {
 		return this.validateAgentValue(attribute.value, report);
 	}
 
-	private validateAgentValue(value: IStringValue, report: (markers: IMarkerData) => void): IChatMode | undefined {
+	private validateAgentValue(value: IScalarValue, report: (markers: IMarkerData) => void): IChatMode | undefined {
 		const agents = this.chatModeService.getModes();
 		const availableAgents = [];
 
@@ -431,10 +431,10 @@ export class PromptValidator {
 			report(toMarker(localize('promptValidator.toolsOnlyInAgent', "The 'tools' attribute is only supported when using agents. Attribute will be ignored."), attribute.range, MarkerSeverity.Warning));
 		}
 		let value = attribute.value;
-		if (value.type === 'string') {
+		if (value.type === 'scalar') {
 			value = parseCommaSeparatedList(value);
 		}
-		if (value.type !== 'array') {
+		if (value.type !== 'sequence') {
 			report(toMarker(localize('promptValidator.toolsMustBeArrayOrMap', "The 'tools' attribute must be an array or a comma separated string."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
@@ -445,12 +445,12 @@ export class PromptValidator {
 		}
 	}
 
-	private validateVSCodeTools(valueItem: IArrayValue, report: (markers: IMarkerData) => void) {
+	private validateVSCodeTools(valueItem: ISequenceValue, report: (markers: IMarkerData) => void) {
 		if (valueItem.items.length > 0) {
 			const available = new Set<string>(this.languageModelToolsService.getFullReferenceNames());
 			const deprecatedNames = this.languageModelToolsService.getDeprecatedFullReferenceNames();
 			for (const item of valueItem.items) {
-				if (item.type !== 'string') {
+				if (item.type !== 'scalar') {
 					report(toMarker(localize('promptValidator.eachToolMustBeString', "Each tool name in the 'tools' attribute must be a string."), item.range, MarkerSeverity.Error));
 				} else if (item.value) {
 					if (!available.has(item.value)) {
@@ -477,7 +477,7 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'string') {
+		if (attribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.applyToMustBeString', "The 'applyTo' attribute must be a string."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
@@ -505,12 +505,12 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'array') {
+		if (attribute.value.type !== 'sequence') {
 			report(toMarker(localize('promptValidator.pathsMustBeArray', "The 'paths' attribute must be an array of glob patterns."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
 		for (const item of attribute.value.items) {
-			if (item.type !== 'string') {
+			if (item.type !== 'scalar') {
 				report(toMarker(localize('promptValidator.eachPathMustBeString', "Each entry in the 'paths' attribute must be a string."), item.range, MarkerSeverity.Error));
 				continue;
 			}
@@ -535,7 +535,7 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'array' && attribute.value.type !== 'string') {
+		if (attribute.value.type !== 'sequence' && attribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.excludeAgentMustBeArray', "The 'excludeAgent' attribute must be an string or array."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
@@ -546,12 +546,12 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'array') {
+		if (attribute.value.type !== 'sequence') {
 			report(toMarker(localize('promptValidator.handoffsMustBeArray', "The 'handoffs' attribute must be an array."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
 		for (const item of attribute.value.items) {
-			if (item.type !== 'object') {
+			if (item.type !== 'map') {
 				report(toMarker(localize('promptValidator.eachHandoffMustBeObject', "Each handoff in the 'handoffs' attribute must be an object with 'label', 'agent', 'prompt' and optional 'send'."), item.range, MarkerSeverity.Error));
 				continue;
 			}
@@ -559,34 +559,34 @@ export class PromptValidator {
 			for (const prop of item.properties) {
 				switch (prop.key.value) {
 					case 'label':
-						if (prop.value.type !== 'string' || prop.value.value.trim().length === 0) {
+						if (prop.value.type !== 'scalar' || prop.value.value.trim().length === 0) {
 							report(toMarker(localize('promptValidator.handoffLabelMustBeNonEmptyString', "The 'label' property in a handoff must be a non-empty string."), prop.value.range, MarkerSeverity.Error));
 						}
 						break;
 					case 'agent':
-						if (prop.value.type !== 'string' || prop.value.value.trim().length === 0) {
+						if (prop.value.type !== 'scalar' || prop.value.value.trim().length === 0) {
 							report(toMarker(localize('promptValidator.handoffAgentMustBeNonEmptyString', "The 'agent' property in a handoff must be a non-empty string."), prop.value.range, MarkerSeverity.Error));
 						} else {
 							this.validateAgentValue(prop.value, report);
 						}
 						break;
 					case 'prompt':
-						if (prop.value.type !== 'string') {
+						if (prop.value.type !== 'scalar') {
 							report(toMarker(localize('promptValidator.handoffPromptMustBeString', "The 'prompt' property in a handoff must be a string."), prop.value.range, MarkerSeverity.Error));
 						}
 						break;
 					case 'send':
-						if (prop.value.type !== 'boolean') {
+						if (!isTrueOrFalse(prop.value)) {
 							report(toMarker(localize('promptValidator.handoffSendMustBeBoolean', "The 'send' property in a handoff must be a boolean."), prop.value.range, MarkerSeverity.Error));
 						}
 						break;
 					case 'showContinueOn':
-						if (prop.value.type !== 'boolean') {
+						if (!isTrueOrFalse(prop.value)) {
 							report(toMarker(localize('promptValidator.handoffShowContinueOnMustBeBoolean', "The 'showContinueOn' property in a handoff must be a boolean."), prop.value.range, MarkerSeverity.Error));
 						}
 						break;
 					case 'model':
-						if (prop.value.type !== 'string') {
+						if (prop.value.type !== 'scalar') {
 							report(toMarker(localize('promptValidator.handoffModelMustBeString', "The 'model' property in a handoff must be a string."), prop.value.range, MarkerSeverity.Error));
 						}
 						break;
@@ -614,7 +614,7 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'string') {
+		if (attribute.value.type !== 'scalar') {
 			report(toMarker(localize('promptValidator.targetMustBeString', "The 'target' attribute must be a string."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
@@ -634,8 +634,8 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'boolean') {
-			report(toMarker(localize('promptValidator.userInvocableMustBeBoolean', "The 'user-invocable' attribute must be a boolean."), attribute.value.range, MarkerSeverity.Error));
+		if (!isTrueOrFalse(attribute.value)) {
+			report(toMarker(localize('promptValidator.userInvocableMustBeBoolean', "The 'user-invocable' attribute must be 'true' or 'false'."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
 	}
@@ -653,8 +653,8 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'boolean') {
-			report(toMarker(localize('promptValidator.disableModelInvocationMustBeBoolean', "The 'disable-model-invocation' attribute must be a boolean."), attribute.value.range, MarkerSeverity.Error));
+		if (!isTrueOrFalse(attribute.value)) {
+			report(toMarker(localize('promptValidator.disableModelInvocationMustBeBoolean', "The 'disable-model-invocation' attribute must be 'true' or 'false'."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
 	}
@@ -664,7 +664,7 @@ export class PromptValidator {
 		if (!attribute) {
 			return;
 		}
-		if (attribute.value.type !== 'array') {
+		if (attribute.value.type !== 'sequence') {
 			report(toMarker(localize('promptValidator.agentsMustBeArray', "The 'agents' attribute must be an array."), attribute.value.range, MarkerSeverity.Error));
 			return;
 		}
@@ -677,7 +677,7 @@ export class PromptValidator {
 		// Check each item is a string and agent exists
 		const agentNames: string[] = [];
 		for (const item of attribute.value.items) {
-			if (item.type !== 'string') {
+			if (item.type !== 'scalar') {
 				report(toMarker(localize('promptValidator.eachAgentMustBeString', "Each agent name in the 'agents' attribute must be a string."), item.range, MarkerSeverity.Error));
 			} else if (item.value) {
 				agentNames.push(item.value);
@@ -697,6 +697,13 @@ export class PromptValidator {
 	}
 }
 
+function isTrueOrFalse(value: IValue): boolean {
+	if (value.type === 'scalar') {
+		return (value.value === 'true' || value.value === 'false') && value.format === 'none';
+	}
+	return false;
+}
+
 const allAttributeNames: Record<PromptsType, string[]> = {
 	[PromptsType.prompt]: [PromptHeaderAttributes.name, PromptHeaderAttributes.description, PromptHeaderAttributes.model, PromptHeaderAttributes.tools, PromptHeaderAttributes.mode, PromptHeaderAttributes.agent, PromptHeaderAttributes.argumentHint],
 	[PromptsType.instructions]: [PromptHeaderAttributes.name, PromptHeaderAttributes.description, PromptHeaderAttributes.applyTo, PromptHeaderAttributes.excludeAgent],
@@ -877,33 +884,33 @@ export function mapClaudeTools(claudeToolNames: readonly string[]): string[] {
 
 export const claudeAgentAttributes: Record<string, { type: string; description: string; defaults?: string[]; items?: IValueEntry[]; enums?: IValueEntry[] }> = {
 	'name': {
-		type: 'string',
+		type: 'scalar',
 		description: localize('attribute.name', "Unique identifier using lowercase letters and hyphens (required)"),
 	},
 	'description': {
-		type: 'string',
+		type: 'scalar',
 		description: localize('attribute.description', "When to delegate to this subagent (required)"),
 	},
 	'tools': {
-		type: 'array',
+		type: 'sequence',
 		description: localize('attribute.tools', "Array of tools the subagent can use. Inherits all tools if omitted"),
 		defaults: ['Read, Edit, Bash'],
 		items: knownClaudeTools
 	},
 	'disallowedTools': {
-		type: 'array',
+		type: 'sequence',
 		description: localize('attribute.disallowedTools', "Tools to deny, removed from inherited or specified list"),
 		defaults: ['Write, Edit, Bash'],
 		items: knownClaudeTools
 	},
 	'model': {
-		type: 'string',
+		type: 'scalar',
 		description: localize('attribute.model', "Model to use: sonnet, opus, haiku, or inherit. Defaults to inherit."),
 		defaults: ['sonnet', 'opus', 'haiku', 'inherit'],
 		enums: knownClaudeModels
 	},
 	'permissionMode': {
-		type: 'string',
+		type: 'scalar',
 		description: localize('attribute.permissionMode', "Permission mode: default, acceptEdits, dontAsk, bypassPermissions, or plan."),
 		defaults: ['default', 'acceptEdits', 'dontAsk', 'bypassPermissions', 'plan'],
 		enums: [
@@ -916,11 +923,11 @@ export const claudeAgentAttributes: Record<string, { type: string; description:
 		]
 	},
 	'skills': {
-		type: 'array',
+		type: 'sequence',
 		description: localize('attribute.skills', "Skills to load into the subagent's context at startup."),
 	},
 	'mcpServers': {
-		type: 'array',
+		type: 'sequence',
 		description: localize('attribute.mcpServers', "MCP servers available to this subagent."),
 	},
 	'hooks': {
@@ -928,7 +935,7 @@ export const claudeAgentAttributes: Record<string, { type: string; description:
 		description: localize('attribute.hooks', "Lifecycle hooks scoped to this subagent."),
 	},
 	'memory': {
-		type: 'string',
+		type: 'scalar',
 		description: localize('attribute.memory', "Persistent memory scope: user, project, or local. Enables cross-session learning."),
 		defaults: ['user', 'project', 'local'],
 		enums: [
@@ -945,11 +952,11 @@ export const claudeAgentAttributes: Record<string, { type: string; description:
  */
 export const claudeRulesAttributes: Record<string, { type: string; description: string; defaults?: string[]; items?: IValueEntry[]; enums?: IValueEntry[] }> = {
 	'description': {
-		type: 'string',
+		type: 'scalar',
 		description: localize('attribute.rules.description', "A description of what this rule covers, used to provide context about when it applies."),
 	},
 	'paths': {
-		type: 'array',
+		type: 'sequence',
 		description: localize('attribute.rules.paths', "Array of glob patterns that describe for which files the rule applies. Based on these patterns, the file is automatically included in the prompt when the context contains a file that matches.\nExample: `['src/**/*.ts', 'test/**']`"),
 	},
 };
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts
index bb0bc234244..e11732310ec 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/promptFileParser.ts
@@ -7,8 +7,9 @@ import { Iterable } from '../../../../../base/common/iterator.js';
 import { dirname, joinPath } from '../../../../../base/common/resources.js';
 import { splitLinesIncludeSeparators } from '../../../../../base/common/strings.js';
 import { URI } from '../../../../../base/common/uri.js';
-import { parse, YamlNode, YamlParseError, Position as YamlPosition } from '../../../../../base/common/yaml.js';
+import { parse, YamlNode, YamlParseError } from '../../../../../base/common/yaml.js';
 import { Range } from '../../../../../editor/common/core/range.js';
+import { PositionOffsetTransformer } from '../../../../../editor/common/core/text/positionToOffsetImpl.js';
 import { Target } from './service/promptsService.js';
 
 export class PromptFileParser {
@@ -107,19 +108,38 @@ export class PromptHeader {
 	private get _parsedHeader(): ParsedHeader {
 		if (this._parsed === undefined) {
 			const yamlErrors: YamlParseError[] = [];
-			const lines = this.linesWithEOL.slice(this.range.startLineNumber - 1, this.range.endLineNumber - 1).join('');
-			const node = parse(lines, yamlErrors);
+			const headerContent = this.linesWithEOL.slice(this.range.startLineNumber - 1, this.range.endLineNumber - 1).join('');
+			const node = parse(headerContent, yamlErrors);
+			const transformer = new PositionOffsetTransformer(headerContent);
+			const asRange = ({ startOffset, endOffset }: { startOffset: number; endOffset: number }): Range => {
+				const startPos = transformer.getPosition(startOffset), endPos = transformer.getPosition(endOffset);
+				const headerDelta = this.range.startLineNumber - 1;
+				return new Range(startPos.lineNumber + headerDelta, startPos.column, endPos.lineNumber + headerDelta, endPos.column);
+			};
+			const asValue = (node: YamlNode): IValue => {
+				switch (node.type) {
+					case 'scalar':
+						return { type: 'scalar', value: node.value, range: asRange(node), format: node.format };
+					case 'sequence':
+						return { type: 'sequence', items: node.items.map(item => asValue(item)), range: asRange(node) };
+					case 'map': {
+						const properties = node.properties.map(property => ({ key: asValue(property.key) as IScalarValue, value: asValue(property.value) }));
+						return { type: 'map', properties, range: asRange(node) };
+					}
+				}
+			};
+
 			const attributes = [];
-			const errors: ParseError[] = yamlErrors.map(err => ({ message: err.message, range: this.asRange(err), code: err.code }));
+			const errors: ParseError[] = yamlErrors.map(err => ({ message: err.message, range: asRange(err), code: err.code }));
 			if (node) {
-				if (node.type !== 'object') {
+				if (node.type !== 'map') {
 					errors.push({ message: 'Invalid header, expecting <key: value> pairs', range: this.range, code: 'INVALID_YAML' });
 				} else {
 					for (const property of node.properties) {
 						attributes.push({
 							key: property.key.value,
-							range: this.asRange({ start: property.key.start, end: property.value.end }),
-							value: this.asValue(property.value)
+							range: asRange({ startOffset: property.key.startOffset, endOffset: property.value.endOffset }),
+							value: asValue(property.value)
 						});
 					}
 				}
@@ -129,29 +149,6 @@ export class PromptHeader {
 		return this._parsed;
 	}
 
-	private asRange({ start, end }: { start: YamlPosition; end: YamlPosition }): Range {
-		return new Range(this.range.startLineNumber + start.line, start.character + 1, this.range.startLineNumber + end.line, end.character + 1);
-	}
-
-	private asValue(node: YamlNode): IValue {
-		switch (node.type) {
-			case 'string':
-				return { type: 'string', value: node.value, range: this.asRange(node) };
-			case 'number':
-				return { type: 'number', value: node.value, range: this.asRange(node) };
-			case 'boolean':
-				return { type: 'boolean', value: node.value, range: this.asRange(node) };
-			case 'null':
-				return { type: 'null', value: node.value, range: this.asRange(node) };
-			case 'array':
-				return { type: 'array', items: node.items.map(item => this.asValue(item)), range: this.asRange(node) };
-			case 'object': {
-				const properties = node.properties.map(property => ({ key: this.asValue(property.key) as IStringValue, value: this.asValue(property.value) }));
-				return { type: 'object', properties, range: this.asRange(node) };
-			}
-		}
-	}
-
 	public get attributes(): IHeaderAttribute[] {
 		return this._parsedHeader.attributes;
 	}
@@ -166,7 +163,7 @@ export class PromptHeader {
 
 	private getStringAttribute(key: string): string | undefined {
 		const attribute = this._parsedHeader.attributes.find(attr => attr.key === key);
-		if (attribute?.value.type === 'string') {
+		if (attribute?.value.type === 'scalar') {
 			return attribute.value.value;
 		}
 		return undefined;
@@ -210,11 +207,7 @@ export class PromptHeader {
 	}
 
 	public get infer(): boolean | undefined {
-		const attribute = this._parsedHeader.attributes.find(attr => attr.key === PromptHeaderAttributes.infer);
-		if (attribute?.value.type === 'boolean') {
-			return attribute.value.value;
-		}
-		return undefined;
+		return this.getBooleanAttribute(PromptHeaderAttributes.infer);
 	}
 
 	public get tools(): string[] | undefined {
@@ -223,13 +216,13 @@ export class PromptHeader {
 			return undefined;
 		}
 		let value = toolsAttribute.value;
-		if (value.type === 'string') {
+		if (value.type === 'scalar') {
 			value = parseCommaSeparatedList(value);
 		}
-		if (value.type === 'array') {
+		if (value.type === 'sequence') {
 			const tools: string[] = [];
 			for (const item of value.items) {
-				if (item.type === 'string' && item.value) {
+				if (item.type === 'scalar' && item.value) {
 					tools.push(item.value);
 				}
 			}
@@ -243,11 +236,11 @@ export class PromptHeader {
 		if (!handoffsAttribute) {
 			return undefined;
 		}
-		if (handoffsAttribute.value.type === 'array') {
+		if (handoffsAttribute.value.type === 'sequence') {
 			// Array format: list of objects: { agent, label, prompt, send?, showContinueOn?, model? }
 			const handoffs: IHandOff[] = [];
 			for (const item of handoffsAttribute.value.items) {
-				if (item.type === 'object') {
+				if (item.type === 'map') {
 					let agent: string | undefined;
 					let label: string | undefined;
 					let prompt: string | undefined;
@@ -255,17 +248,17 @@ export class PromptHeader {
 					let showContinueOn: boolean | undefined;
 					let model: string | undefined;
 					for (const prop of item.properties) {
-						if (prop.key.value === 'agent' && prop.value.type === 'string') {
+						if (prop.key.value === 'agent' && prop.value.type === 'scalar') {
 							agent = prop.value.value;
-						} else if (prop.key.value === 'label' && prop.value.type === 'string') {
+						} else if (prop.key.value === 'label' && prop.value.type === 'scalar') {
 							label = prop.value.value;
-						} else if (prop.key.value === 'prompt' && prop.value.type === 'string') {
+						} else if (prop.key.value === 'prompt' && prop.value.type === 'scalar') {
 							prompt = prop.value.value;
-						} else if (prop.key.value === 'send' && prop.value.type === 'boolean') {
-							send = prop.value.value;
-						} else if (prop.key.value === 'showContinueOn' && prop.value.type === 'boolean') {
-							showContinueOn = prop.value.value;
-						} else if (prop.key.value === 'model' && prop.value.type === 'string') {
+						} else if (prop.key.value === 'send' && prop.value.type === 'scalar') {
+							send = parseBoolean(prop.value);
+						} else if (prop.key.value === 'showContinueOn' && prop.value.type === 'scalar') {
+							showContinueOn = parseBoolean(prop.value);
+						} else if (prop.key.value === 'model' && prop.value.type === 'scalar') {
 							model = prop.value.value;
 						}
 					}
@@ -292,10 +285,10 @@ export class PromptHeader {
 		if (!attribute) {
 			return undefined;
 		}
-		if (attribute.value.type === 'array') {
+		if (attribute.value.type === 'sequence') {
 			const result: string[] = [];
 			for (const item of attribute.value.items) {
-				if (item.type === 'string' && item.value) {
+				if (item.type === 'scalar' && item.value) {
 					result.push(item.value);
 				}
 			}
@@ -309,13 +302,13 @@ export class PromptHeader {
 		if (!attribute) {
 			return undefined;
 		}
-		if (attribute.value.type === 'string') {
+		if (attribute.value.type === 'scalar') {
 			return [attribute.value.value];
 		}
-		if (attribute.value.type === 'array') {
+		if (attribute.value.type === 'sequence') {
 			const result: string[] = [];
 			for (const item of attribute.value.items) {
-				if (item.type === 'string') {
+				if (item.type === 'scalar') {
 					result.push(item.value);
 				}
 			}
@@ -339,13 +332,22 @@ export class PromptHeader {
 
 	private getBooleanAttribute(key: string): boolean | undefined {
 		const attribute = this._parsedHeader.attributes.find(attr => attr.key === key);
-		if (attribute?.value.type === 'boolean') {
-			return attribute.value.value;
+		if (attribute?.value.type === 'scalar') {
+			return parseBoolean(attribute.value);
 		}
 		return undefined;
 	}
 }
 
+function parseBoolean(stringValue: IScalarValue): boolean | undefined {
+	if (stringValue.value === 'true') {
+		return true;
+	} else if (stringValue.value === 'false') {
+		return false;
+	}
+	return undefined;
+}
+
 export interface IHandOff {
 	readonly agent: string;
 	readonly label: string;
@@ -361,24 +363,26 @@ export interface IHeaderAttribute {
 	readonly value: IValue;
 }
 
-export interface IStringValue { readonly type: 'string'; readonly value: string; readonly range: Range }
-export interface INumberValue { readonly type: 'number'; readonly value: number; readonly range: Range }
-export interface INullValue { readonly type: 'null'; readonly value: null; readonly range: Range }
-export interface IBooleanValue { readonly type: 'boolean'; readonly value: boolean; readonly range: Range }
+export interface IScalarValue {
+	readonly type: 'scalar';
+	readonly value: string;
+	readonly range: Range;
+	readonly format: 'single' | 'double' | 'none' | 'literal' | 'folded';
+}
 
-export interface IArrayValue {
-	readonly type: 'array';
+export interface ISequenceValue {
+	readonly type: 'sequence';
 	readonly items: readonly IValue[];
 	readonly range: Range;
 }
 
-export interface IObjectValue {
-	readonly type: 'object';
-	readonly properties: { key: IStringValue; value: IValue }[];
+export interface IMapValue {
+	readonly type: 'map';
+	readonly properties: { key: IScalarValue; value: IValue }[];
 	readonly range: Range;
 }
 
-export type IValue = IStringValue | INumberValue | IBooleanValue | IArrayValue | IObjectValue | INullValue;
+export type IValue = IScalarValue | ISequenceValue | IMapValue;
 
 
 interface ParsedBody {
@@ -492,10 +496,10 @@ export interface IBodyVariableReference {
  * Values can be unquoted or quoted (single or double quotes).
  *
  * @param input A string containing comma-separated values
- * @returns An IArrayValue containing the parsed values and their ranges
+ * @returns An ISequenceValue containing the parsed values and their ranges
  */
-export function parseCommaSeparatedList(stringValue: IStringValue): IArrayValue {
-	const result: IStringValue[] = [];
+export function parseCommaSeparatedList(stringValue: IScalarValue): ISequenceValue {
+	const result: IScalarValue[] = [];
 	const input = stringValue.value;
 	const positionOffset = stringValue.range.getStartPosition();
 	let pos = 0;
@@ -514,6 +518,7 @@ export function parseCommaSeparatedList(stringValue: IStringValue): IArrayValue
 		const startPos = pos;
 		let value = '';
 		let endPos: number;
+		let quoteStyle: 'single' | 'double' | 'none';
 
 		const char = input[pos];
 		if (char === '"' || char === `'`) {
@@ -530,7 +535,7 @@ export function parseCommaSeparatedList(stringValue: IStringValue): IArrayValue
 			if (pos < input.length) {
 				pos++;
 			}
-
+			quoteStyle = quote === '"' ? 'double' : 'single';
 		} else {
 			// Unquoted string - read until comma or end
 			const startPos = pos;
@@ -540,9 +545,10 @@ export function parseCommaSeparatedList(stringValue: IStringValue): IArrayValue
 			}
 			value = value.trimEnd();
 			endPos = startPos + value.length;
+			quoteStyle = 'none';
 		}
 
-		result.push({ type: 'string', value: value, range: new Range(positionOffset.lineNumber, positionOffset.column + startPos, positionOffset.lineNumber, positionOffset.column + endPos) });
+		result.push({ type: 'scalar', value: value, range: new Range(positionOffset.lineNumber, positionOffset.column + startPos, positionOffset.lineNumber, positionOffset.column + endPos), format: quoteStyle });
 
 		// Skip whitespace after value
 		while (pos < input.length && isWhitespace(input[pos])) {
@@ -555,7 +561,7 @@ export function parseCommaSeparatedList(stringValue: IStringValue): IArrayValue
 		}
 	}
 
-	return { type: 'array', items: result, range: stringValue.range };
+	return { type: 'sequence', items: result, range: stringValue.range };
 }
 
 
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsServiceImpl.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsServiceImpl.ts
index 1e1d84d7d65..912a103fe58 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsServiceImpl.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsServiceImpl.ts
@@ -548,10 +548,10 @@ export class PromptsService extends Disposable implements IPromptsService {
 				let metadata: any | undefined;
 				if (ast.header) {
 					const advanced = ast.header.getAttribute(PromptHeaderAttributes.advancedOptions);
-					if (advanced && advanced.value.type === 'object') {
+					if (advanced && advanced.value.type === 'map') {
 						metadata = {};
 						for (const [key, value] of Object.entries(advanced.value)) {
-							if (['string', 'number', 'boolean'].includes(value.type)) {
+							if (value.type === 'scalar') {
 								metadata[key] = value;
 							}
 						}
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/utils/promptEditHelper.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/utils/promptEditHelper.ts
index ba398b6754a..152288f1198 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/utils/promptEditHelper.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/utils/promptEditHelper.ts
@@ -4,7 +4,7 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { ITextModel } from '../../../../../../editor/common/model.js';
-import { IArrayValue } from '../promptFileParser.js';
+import { ISequenceValue } from '../promptFileParser.js';
 
 const isSimpleNameRegex = /^[\w\/\.-]+$/;
 
@@ -20,8 +20,8 @@ export function formatArrayValue(name: string, quotePreference?: QuotePreference
 
 export type QuotePreference = '\'' | '\"' | '';
 
-export function getQuotePreference(arrayValue: IArrayValue, model: ITextModel): QuotePreference {
-	const firstStringItem = arrayValue.items.find(item => item.type === 'string' && isSimpleNameRegex.test(item.value));
+export function getQuotePreference(arrayValue: ISequenceValue, model: ITextModel): QuotePreference {
+	const firstStringItem = arrayValue.items.find(item => item.type === 'scalar' && isSimpleNameRegex.test(item.value));
 	const firstChar = firstStringItem ? model.getValueInRange(firstStringItem.range).charAt(0) : undefined;
 	if (firstChar === `'` || firstChar === `"`) {
 		return firstChar;
diff --git a/src/vs/workbench/contrib/chat/common/tools/languageModelToolsService.ts b/src/vs/workbench/contrib/chat/common/tools/languageModelToolsService.ts
index 3316f148d31..d14a93696e0 100644
--- a/src/vs/workbench/contrib/chat/common/tools/languageModelToolsService.ts
+++ b/src/vs/workbench/contrib/chat/common/tools/languageModelToolsService.ts
@@ -349,8 +349,6 @@ export interface IToolInvocationStreamContext {
 	toolCallId: string;
 	rawInput: unknown;
 	chatRequestId?: string;
-	/** @deprecated Use {@link chatSessionResource} instead */
-	chatSessionId?: string;
 	chatSessionResource?: URI;
 	chatInteractionId?: string;
 }
diff --git a/src/vs/workbench/contrib/chat/electron-browser/actions/chatExportZip.ts b/src/vs/workbench/contrib/chat/electron-browser/actions/chatExportZip.ts
index 7de3b5ea61e..a32ee2b588a 100644
--- a/src/vs/workbench/contrib/chat/electron-browser/actions/chatExportZip.ts
+++ b/src/vs/workbench/contrib/chat/electron-browser/actions/chatExportZip.ts
@@ -7,7 +7,6 @@ import { joinPath } from '../../../../../base/common/resources.js';
 import { ServicesAccessor } from '../../../../../editor/browser/editorExtensions.js';
 import { localize, localize2 } from '../../../../../nls.js';
 import { Action2, registerAction2 } from '../../../../../platform/actions/common/actions.js';
-import { IConfigurationService } from '../../../../../platform/configuration/common/configuration.js';
 import { ContextKeyExpr } from '../../../../../platform/contextkey/common/contextkey.js';
 import { IFileDialogService } from '../../../../../platform/dialogs/common/dialogs.js';
 import { IFileService } from '../../../../../platform/files/common/files.js';
@@ -19,7 +18,6 @@ import { IChatWidgetService } from '../../browser/chat.js';
 import { captureRepoInfo } from '../../browser/chatRepoInfo.js';
 import { ChatContextKeys } from '../../common/actions/chatContextKeys.js';
 import { IChatService } from '../../common/chatService/chatService.js';
-import { ChatConfiguration } from '../../common/constants.js';
 import { ISCMService } from '../../../scm/common/scm.js';
 
 export function registerChatExportZipAction() {
@@ -42,9 +40,6 @@ export function registerChatExportZipAction() {
 			const notificationService = accessor.get(INotificationService);
 			const scmService = accessor.get(ISCMService);
 			const fileService = accessor.get(IFileService);
-			const configurationService = accessor.get(IConfigurationService);
-
-			const repoInfoEnabled = configurationService.getValue<boolean>(ChatConfiguration.RepoInfoEnabled) ?? false;
 
 			const widget = widgetService.lastFocusedWidget;
 			if (!widget || !widget.viewModel) {
@@ -83,36 +78,32 @@ export function registerChatExportZipAction() {
 					});
 				}
 
-				if (repoInfoEnabled) {
-					const currentRepoData = await captureRepoInfo(scmService, fileService);
-					if (currentRepoData) {
-						files.push({
-							path: 'chat.repo.end.json',
-							contents: JSON.stringify(currentRepoData, undefined, 2)
-						});
-					}
+				const currentRepoData = await captureRepoInfo(scmService, fileService);
+				if (currentRepoData) {
+					files.push({
+						path: 'chat.repo.end.json',
+						contents: JSON.stringify(currentRepoData, undefined, 2)
+					});
+				}
 
-					if (!model.repoData && !currentRepoData) {
-						notificationService.notify({
-							severity: Severity.Warning,
-							message: localize('chatExportZip.noRepoData', "Exported chat without repository context. No Git repository was detected.")
-						});
-					}
+				if (!model.repoData && !currentRepoData) {
+					notificationService.notify({
+						severity: Severity.Warning,
+						message: localize('chatExportZip.noRepoData', "Exported chat without repository context. No Git repository was detected.")
+					});
 				}
 			} else {
-				if (repoInfoEnabled) {
-					const currentRepoData = await captureRepoInfo(scmService, fileService);
-					if (currentRepoData) {
-						files.push({
-							path: 'chat.repo.begin.json',
-							contents: JSON.stringify(currentRepoData, undefined, 2)
-						});
-					} else {
-						notificationService.notify({
-							severity: Severity.Warning,
-							message: localize('chatExportZip.noRepoData', "Exported chat without repository context. No Git repository was detected.")
-						});
-					}
+				const currentRepoData = await captureRepoInfo(scmService, fileService);
+				if (currentRepoData) {
+					files.push({
+						path: 'chat.repo.begin.json',
+						contents: JSON.stringify(currentRepoData, undefined, 2)
+					});
+				} else {
+					notificationService.notify({
+						severity: Severity.Warning,
+						message: localize('chatExportZip.noRepoData', "Exported chat without repository context. No Git repository was detected.")
+					});
 				}
 			}
 
diff --git a/src/vs/workbench/contrib/chat/test/browser/chatManagement/chatModelsViewModel.test.ts b/src/vs/workbench/contrib/chat/test/browser/chatManagement/chatModelsViewModel.test.ts
index 4ad52ff646c..0439386a341 100644
--- a/src/vs/workbench/contrib/chat/test/browser/chatManagement/chatModelsViewModel.test.ts
+++ b/src/vs/workbench/contrib/chat/test/browser/chatManagement/chatModelsViewModel.test.ts
@@ -4,10 +4,11 @@
  *--------------------------------------------------------------------------------------------*/
 
 import assert from 'assert';
-import { Emitter } from '../../../../../../base/common/event.js';
+import { Emitter, Event } from '../../../../../../base/common/event.js';
 import { IDisposable } from '../../../../../../base/common/lifecycle.js';
+import { observableValue } from '../../../../../../base/common/observable.js';
 import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../../base/test/common/utils.js';
-import { ILanguageModelChatMetadata, ILanguageModelChatMetadataAndIdentifier, ILanguageModelChatProvider, ILanguageModelChatSelector, ILanguageModelsGroup, ILanguageModelsService, IUserFriendlyLanguageModel, ILanguageModelProviderDescriptor } from '../../../common/languageModels.js';
+import { ICuratedModels, ILanguageModelChatMetadata, ILanguageModelChatMetadataAndIdentifier, ILanguageModelChatProvider, ILanguageModelChatSelector, ILanguageModelsGroup, ILanguageModelsService, IUserFriendlyLanguageModel, ILanguageModelProviderDescriptor } from '../../../common/languageModels.js';
 import { ChatModelGroup, ChatModelsViewModel, ILanguageModelEntry, ILanguageModelProviderEntry, isLanguageModelProviderEntry, isLanguageModelGroupEntry, ILanguageModelGroupEntry } from '../../../browser/chatManagement/chatModelsViewModel.js';
 import { ExtensionIdentifier } from '../../../../../../platform/extensions/common/extensions.js';
 import { IStringDictionary } from '../../../../../../base/common/collections.js';
@@ -134,6 +135,14 @@ class MockLanguageModelsService implements ILanguageModelsService {
 	}
 
 	async migrateLanguageModelsProviderGroup(languageModelsProviderGroup: ILanguageModelsProviderGroup): Promise<void> { }
+
+	getRecentlyUsedModelIds(_maxCount?: number): string[] { return []; }
+	recordModelUsage(_modelIdentifier: string): void { }
+	getCuratedModels(): ICuratedModels { return { free: [], paid: [] }; }
+	getNewModelIds(): string[] { return []; }
+	onDidChangeNewModelIds = Event.None;
+	markNewModelsAsSeen(): void { }
+	restrictedChatParticipants = observableValue('restrictedChatParticipants', Object.create(null));
 }
 
 suite('ChatModelsViewModel', () => {
diff --git a/src/vs/workbench/contrib/chat/test/browser/chatTipService.test.ts b/src/vs/workbench/contrib/chat/test/browser/chatTipService.test.ts
index f25d39059a6..5ee2250a373 100644
--- a/src/vs/workbench/contrib/chat/test/browser/chatTipService.test.ts
+++ b/src/vs/workbench/contrib/chat/test/browser/chatTipService.test.ts
@@ -14,7 +14,7 @@ import { TestInstantiationService } from '../../../../../platform/instantiation/
 import { MockContextKeyService } from '../../../../../platform/keybinding/test/common/mockKeybindingService.js';
 import { ILogService, NullLogService } from '../../../../../platform/log/common/log.js';
 import { IProductService } from '../../../../../platform/product/common/productService.js';
-import { IStorageService, InMemoryStorageService } from '../../../../../platform/storage/common/storage.js';
+import { IStorageService, InMemoryStorageService, StorageScope, StorageTarget } from '../../../../../platform/storage/common/storage.js';
 import { ChatTipService, ITipDefinition, TipEligibilityTracker } from '../../browser/chatTipService.js';
 import { AgentFileType, IPromptPath, IPromptsService, IResolvedAgentFile, PromptsStorage } from '../../common/promptSyntax/service/promptsService.js';
 import { URI } from '../../../../../base/common/uri.js';
@@ -100,6 +100,73 @@ suite('ChatTipService', () => {
 		assert.ok(tip.content.value.length > 0, 'Tip should have content');
 	});
 
+	test('returns Auto switch tip when current model is gpt-4.1', () => {
+		const service = createService();
+		contextKeyService.createKey(ChatContextKeys.chatModelId.key, 'gpt-4.1');
+
+		const tip = service.getWelcomeTip(contextKeyService);
+
+		assert.ok(tip);
+		assert.strictEqual(tip.id, 'tip.switchToAuto');
+	});
+
+	test('does not return Auto switch tip when current model is not gpt-4.1', () => {
+		const service = createService();
+		contextKeyService.createKey(ChatContextKeys.chatModelId.key, 'auto');
+
+		const tip = service.getWelcomeTip(contextKeyService);
+
+		assert.ok(tip);
+		assert.notStrictEqual(tip.id, 'tip.switchToAuto');
+	});
+
+	test('does not return Auto switch tip when current model context key is empty and no fallback is available', () => {
+		const service = createService();
+		contextKeyService.createKey(ChatContextKeys.chatModelId.key, '');
+
+		const tip = service.getWelcomeTip(contextKeyService);
+
+		assert.ok(tip);
+		assert.notStrictEqual(tip.id, 'tip.switchToAuto');
+	});
+
+	test('returns Auto switch tip when current model is persisted and context key is empty', () => {
+		storageService.store('chat.currentLanguageModel.panel', 'copilot/gpt-4.1-2025-04-14', StorageScope.APPLICATION, StorageTarget.USER);
+		const service = createService();
+		contextKeyService.createKey(ChatContextKeys.chatModelId.key, '');
+
+		const tip = service.getWelcomeTip(contextKeyService);
+
+		assert.ok(tip);
+		assert.strictEqual(tip.id, 'tip.switchToAuto');
+	});
+
+	test('returns Auto switch tip when current model is versioned gpt-4.1', () => {
+		const service = createService();
+		contextKeyService.createKey(ChatContextKeys.chatModelId.key, 'gpt-4.1-2025-04-14');
+
+		const tip = service.getWelcomeTip(contextKeyService);
+
+		assert.ok(tip);
+		assert.strictEqual(tip.id, 'tip.switchToAuto');
+	});
+
+	test('switching models advances away from gpt-4.1 tip', () => {
+		const service = createService();
+		contextKeyService.createKey(ChatContextKeys.chatModelId.key, 'gpt-4.1');
+
+		const firstTip = service.getWelcomeTip(contextKeyService);
+		assert.ok(firstTip);
+		assert.strictEqual(firstTip.id, 'tip.switchToAuto');
+
+		const switchedContextKeyService = new MockContextKeyServiceWithRulesMatching();
+		switchedContextKeyService.createKey(ChatContextKeys.chatModelId.key, 'auto');
+		const nextTip = service.getWelcomeTip(switchedContextKeyService);
+
+		assert.ok(nextTip);
+		assert.notStrictEqual(nextTip.id, 'tip.switchToAuto');
+	});
+
 	test('returns same welcome tip on rerender', () => {
 		const service = createService();
 
diff --git a/src/vs/workbench/contrib/chat/test/browser/promptSyntax/languageProviders/promptValidator.test.ts b/src/vs/workbench/contrib/chat/test/browser/promptSyntax/languageProviders/promptValidator.test.ts
index 5fe0c45d88f..775ad671cec 100644
--- a/src/vs/workbench/contrib/chat/test/browser/promptSyntax/languageProviders/promptValidator.test.ts
+++ b/src/vs/workbench/contrib/chat/test/browser/promptSyntax/languageProviders/promptValidator.test.ts
@@ -273,7 +273,7 @@ suite('PromptValidator', () => {
 			const content = [
 				'---',
 				'description: "Test with invalid model array"',
-				`model: ['MAE 4 (olama)', 123]`,
+				`model: ['MAE 4 (olama)', []]`,
 				'---',
 			].join('\n');
 			const markers = await validate(content, PromptsType.agent);
@@ -299,7 +299,7 @@ suite('PromptValidator', () => {
 			const content = [
 				'---',
 				'description: "Test with invalid model type"',
-				`model: 123`,
+				`model: {}`,
 				'---',
 			].join('\n');
 			const markers = await validate(content, PromptsType.agent);
@@ -312,7 +312,7 @@ suite('PromptValidator', () => {
 			const content = [
 				'---',
 				'description: "Test"',
-				`tools: ['tool1', 2]`,
+				`tools: ['tool1', {}]`,
 				'---',
 			].join('\n');
 			const markers = await validate(content, PromptsType.agent);
@@ -773,7 +773,7 @@ suite('PromptValidator', () => {
 			{
 				const content = [
 					'---',
-					'name: 123',
+					'name: []',
 					'description: "Test agent"',
 					'target: vscode',
 					'---',
@@ -1005,7 +1005,7 @@ suite('PromptValidator', () => {
 			const content = [
 				'---',
 				'description: "Test"',
-				`agents: ['agent', 123]`,
+				`agents: ['agent', {}]`,
 				`tools: ['agent']`,
 				'---',
 			].join('\n');
@@ -1127,7 +1127,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.agent);
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be 'true' or 'false'.`);
 			}
 
 			// Invalid user-invocable: number value
@@ -1143,7 +1143,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.agent);
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be 'true' or 'false'.`);
 			}
 		});
 
@@ -1204,7 +1204,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.agent);
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be 'true' or 'false'.`);
 			}
 
 			// Invalid disable-model-invocation: number value
@@ -1220,7 +1220,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.agent);
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be 'true' or 'false'.`);
 			}
 		});
 	});
@@ -1242,7 +1242,7 @@ suite('PromptValidator', () => {
 			const content = [
 				'---',
 				'description: "Instr"',
-				'applyTo: 5',
+				'applyTo: []',
 				'---',
 			].join('\n');
 			const markers = await validate(content, PromptsType.instructions);
@@ -1646,7 +1646,7 @@ suite('PromptValidator', () => {
 		test('skill with non-string name type does not validate folder match', async () => {
 			const content = [
 				'---',
-				'name: 123',
+				'name: []',
 				'description: Test Skill',
 				'---',
 				'This is a skill.'
@@ -1729,7 +1729,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.skill, URI.parse('file:///.github/skills/my-skill/SKILL.md'));
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be 'true' or 'false'.`);
 			}
 
 			// Number value instead of boolean
@@ -1745,7 +1745,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.skill, URI.parse('file:///.github/skills/my-skill/SKILL.md'));
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'user-invocable' attribute must be 'true' or 'false'.`);
 			}
 		});
 
@@ -1789,7 +1789,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.skill, URI.parse('file:///.github/skills/my-skill/SKILL.md'));
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be 'true' or 'false'.`);
 			}
 
 			// Number value instead of boolean
@@ -1805,7 +1805,7 @@ suite('PromptValidator', () => {
 				const markers = await validate(content, PromptsType.skill, URI.parse('file:///.github/skills/my-skill/SKILL.md'));
 				assert.strictEqual(markers.length, 1);
 				assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be a boolean.`);
+				assert.strictEqual(markers[0].message, `The 'disable-model-invocation' attribute must be 'true' or 'false'.`);
 			}
 		});
 
@@ -1842,7 +1842,7 @@ suite('PromptValidator', () => {
 				'---',
 				'name: my-skill',
 				'description: Test Skill',
-				'argument-hint: 123',
+				'argument-hint: []',
 				'---',
 				'Body'
 			].join('\n');
@@ -1910,32 +1910,6 @@ suite('PromptValidator', () => {
 			assert.strictEqual(markers[0].message, `The 'paths' attribute must be an array of glob patterns.`);
 		});
 
-		test('claude rules paths entries must be strings', async () => {
-			const content = [
-				'---',
-				'description: "Rules"',
-				`paths: [123, '**/*.ts']`,
-				'---',
-			].join('\n');
-			const markers = await validate(content, PromptsType.instructions, claudeRulesUri);
-			assert.strictEqual(markers.length, 1);
-			assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-			assert.strictEqual(markers[0].message, `Each entry in the 'paths' attribute must be a string.`);
-		});
-
-		test('claude rules paths entries must be non-empty', async () => {
-			const content = [
-				'---',
-				'description: "Rules"',
-				`paths: ['']`,
-				'---',
-			].join('\n');
-			const markers = await validate(content, PromptsType.instructions, claudeRulesUri);
-			assert.strictEqual(markers.length, 1);
-			assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-			assert.strictEqual(markers[0].message, `Path entries must be non-empty glob patterns.`);
-		});
-
 		test('claude rules with unknown attribute shows warning', async () => {
 			const content = [
 				'---',
@@ -1962,7 +1936,6 @@ suite('PromptValidator', () => {
 				[
 					{ severity: MarkerSeverity.Error, message: `The 'description' attribute should not be empty.` },
 					{ severity: MarkerSeverity.Error, message: `Path entries must be non-empty glob patterns.` },
-					{ severity: MarkerSeverity.Error, message: `Each entry in the 'paths' attribute must be a string.` },
 				]
 			);
 		});
@@ -2047,7 +2020,7 @@ suite('PromptValidator', () => {
 				'---',
 				'name: test-agent',
 				'description: Test',
-				'model: 123',
+				'model: []',
 				'---',
 			].join('\n');
 			const markers = await validate(content, PromptsType.agent, claudeAgentUri);
@@ -2085,21 +2058,6 @@ suite('PromptValidator', () => {
 			assert.strictEqual(markers[0].message, `Unknown value 'allowAll', valid: default, acceptEdits, plan, delegate, dontAsk, bypassPermissions.`);
 		});
 
-		test('Claude agent with non-string permissionMode value', async () => {
-			const content = [
-				'---',
-				'name: test-agent',
-				'description: Test',
-				'model: sonnet',
-				'permissionMode: true',
-				'---',
-			].join('\n');
-			const markers = await validate(content, PromptsType.agent, claudeAgentUri);
-			assert.strictEqual(markers.length, 1);
-			assert.strictEqual(markers[0].severity, MarkerSeverity.Error);
-			assert.strictEqual(markers[0].message, `The 'permissionMode' attribute must be a string.`);
-		});
-
 		test('Claude agent with valid memory values', async () => {
 			for (const mem of ['user', 'project', 'local']) {
 				const content = [
diff --git a/src/vs/workbench/contrib/chat/test/browser/tools/languageModelToolsService.test.ts b/src/vs/workbench/contrib/chat/test/browser/tools/languageModelToolsService.test.ts
index 06845cf18a1..a2dcac90b3f 100644
--- a/src/vs/workbench/contrib/chat/test/browser/tools/languageModelToolsService.test.ts
+++ b/src/vs/workbench/contrib/chat/test/browser/tools/languageModelToolsService.test.ts
@@ -620,6 +620,40 @@ suite('LanguageModelToolsService', () => {
 		}, 'Expected tool call to be cancelled');
 	});
 
+	test('rejects tool invocation for cancelled request id', async () => {
+		let invoked = false;
+		const tool = registerToolForTest(service, store, 'testTool', {
+			invoke: async () => {
+				invoked = true;
+				return { content: [{ kind: 'text', value: 'done' }] };
+			}
+		});
+
+		const sessionId = 'sessionId-cancelled-request';
+		const requestId = 'requestId-cancelled-request';
+		const fakeModel = {
+			sessionId,
+			sessionResource: LocalChatSessionUri.forSession(sessionId),
+			getRequests: () => [{
+				id: requestId,
+				modelId: 'test-model',
+				response: { isCanceled: true },
+			}],
+		} as ChatModel;
+		chatService.addSession(fakeModel);
+
+		const dto: IToolInvocation = {
+			...tool.makeDto({ a: 1 }, { sessionId }),
+			chatRequestId: requestId,
+		};
+
+		await assert.rejects(service.invokeTool(dto, async () => 0, CancellationToken.None), err => {
+			return isCancellationError(err);
+		}, 'Expected tool invocation to be rejected for cancelled request id');
+
+		assert.strictEqual(invoked, false, 'Tool implementation should not run after request cancellation');
+	});
+
 	test('toFullReferenceNames', () => {
 		setupToolsForTest(service, store);
 
diff --git a/src/vs/workbench/contrib/chat/test/browser/widget/chatContentParts/chatQuestionCarouselPart.test.ts b/src/vs/workbench/contrib/chat/test/browser/widget/chatContentParts/chatQuestionCarouselPart.test.ts
index 4cffb9f84e7..2d91102c1e1 100644
--- a/src/vs/workbench/contrib/chat/test/browser/widget/chatContentParts/chatQuestionCarouselPart.test.ts
+++ b/src/vs/workbench/contrib/chat/test/browser/widget/chatContentParts/chatQuestionCarouselPart.test.ts
@@ -5,6 +5,7 @@
 
 import assert from 'assert';
 import { mainWindow } from '../../../../../../../base/browser/window.js';
+import { MarkdownString } from '../../../../../../../base/common/htmlContent.js';
 import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../../../base/test/common/utils.js';
 import { workbenchInstantiationService } from '../../../../../../test/browser/workbenchTestServices.js';
 import { ChatQuestionCarouselPart, IChatQuestionCarouselOptions } from '../../../../browser/widget/chatContentParts/chatQuestionCarouselPart.js';
@@ -85,6 +86,25 @@ suite('ChatQuestionCarouselPart', () => {
 			assert.ok(title?.textContent?.includes('Fallback title text'));
 		});
 
+		test('renders markdown in question message', () => {
+			const carousel = createMockCarousel([
+				{
+					id: 'q1',
+					type: 'text',
+					title: 'Question',
+					message: new MarkdownString('Please review **details** in [docs](https://example.com)')
+				}
+			]);
+			createWidget(carousel);
+
+			const title = widget.domNode.querySelector('.chat-question-title');
+			assert.ok(title, 'title element should exist');
+			assert.ok(title?.querySelector('.rendered-markdown'), 'markdown content should be rendered');
+			assert.strictEqual(title?.textContent?.includes('**details**'), false, 'markdown syntax should not be shown as raw text');
+			const link = title?.querySelector('a') as HTMLAnchorElement | null;
+			assert.ok(link, 'markdown link should render as anchor');
+		});
+
 		test('renders progress indicator correctly', () => {
 			const carousel = createMockCarousel([
 				{ id: 'q1', type: 'text', title: 'Question 1', message: 'Question 1' },
diff --git a/src/vs/workbench/contrib/chat/test/common/chatService/chatService.test.ts b/src/vs/workbench/contrib/chat/test/common/chatService/chatService.test.ts
index 601e1389741..15a5add3196 100644
--- a/src/vs/workbench/contrib/chat/test/common/chatService/chatService.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/chatService/chatService.test.ts
@@ -33,7 +33,8 @@ import { IExtensionService, nullExtensionDescription } from '../../../../../serv
 import { ILifecycleService } from '../../../../../services/lifecycle/common/lifecycle.js';
 import { IViewsService } from '../../../../../services/views/common/viewsService.js';
 import { IWorkspaceEditingService } from '../../../../../services/workspaces/common/workspaceEditing.js';
-import { InMemoryTestFileService, mock, TestContextService, TestExtensionService, TestStorageService } from '../../../../../test/common/workbenchTestServices.js';
+import { IChatEntitlementService } from '../../../../../services/chat/common/chatEntitlementService.js';
+import { InMemoryTestFileService, mock, TestChatEntitlementService, TestContextService, TestExtensionService, TestStorageService } from '../../../../../test/common/workbenchTestServices.js';
 import { IMcpService } from '../../../../mcp/common/mcpTypes.js';
 import { TestMcpService } from '../../../../mcp/test/common/testMcpService.js';
 import { ChatAgentService, IChatAgent, IChatAgentData, IChatAgentImplementation, IChatAgentService } from '../../../common/participants/chatAgents.js';
@@ -163,6 +164,7 @@ suite('ChatService', () => {
 			[IPromptsService, new MockPromptsService()],
 		)));
 		instantiationService.stub(IStorageService, testDisposables.add(new TestStorageService()));
+		instantiationService.stub(IChatEntitlementService, new TestChatEntitlementService());
 		instantiationService.stub(ILogService, new NullLogService());
 		instantiationService.stub(IUserDataProfilesService, { defaultProfile: toUserDataProfile('default', 'Default', URI.file('/test/userdata'), URI.file('/test/cache')) });
 		instantiationService.stub(ITelemetryService, NullTelemetryService);
diff --git a/src/vs/workbench/contrib/chat/test/common/languageModels.test.ts b/src/vs/workbench/contrib/chat/test/common/languageModels.test.ts
index 48e2b40d1f1..ddac0e86cc3 100644
--- a/src/vs/workbench/contrib/chat/test/common/languageModels.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/languageModels.test.ts
@@ -22,6 +22,8 @@ import { ContextKeyExpression } from '../../../../../platform/contextkey/common/
 import { ILanguageModelsConfigurationService } from '../../common/languageModelsConfiguration.js';
 import { IQuickInputService } from '../../../../../platform/quickinput/common/quickInput.js';
 import { TestSecretStorageService } from '../../../../../platform/secrets/test/common/testSecretStorageService.js';
+import { IProductService } from '../../../../../platform/product/common/productService.js';
+import { IRequestService } from '../../../../../platform/request/common/request.js';
 
 suite('LanguageModels', function () {
 
@@ -50,6 +52,8 @@ suite('LanguageModels', function () {
 			},
 			new class extends mock<IQuickInputService>() { },
 			new TestSecretStorageService(),
+			new class extends mock<IProductService>() { override readonly version = '1.100.0'; },
+			new class extends mock<IRequestService>() { },
 		);
 
 		languageModels.deltaLanguageModelChatProviderDescriptors([
@@ -251,6 +255,8 @@ suite('LanguageModels - When Clause', function () {
 			},
 			new class extends mock<IQuickInputService>() { },
 			new TestSecretStorageService(),
+			new class extends mock<IProductService>() { override readonly version = '1.100.0'; },
+			new class extends mock<IRequestService>() { },
 		);
 
 		languageModelsWithWhen.deltaLanguageModelChatProviderDescriptors([
@@ -312,6 +318,8 @@ suite('LanguageModels - Model Picker Preferences Storage', function () {
 			},
 			new class extends mock<IQuickInputService>() { },
 			new TestSecretStorageService(),
+			new class extends mock<IProductService>() { override readonly version = '1.100.0'; },
+			new class extends mock<IRequestService>() { },
 		);
 
 		// Register vendor1 used in most tests
@@ -548,6 +556,8 @@ suite('LanguageModels - Model Change Events', function () {
 			},
 			new class extends mock<IQuickInputService>() { },
 			new TestSecretStorageService(),
+			new class extends mock<IProductService>() { override readonly version = '1.100.0'; },
+			new class extends mock<IRequestService>() { },
 		);
 
 		// Register the vendor first
@@ -895,6 +905,8 @@ suite('LanguageModels - Vendor Change Events', function () {
 			},
 			new class extends mock<IQuickInputService>() { },
 			new TestSecretStorageService(),
+			new class extends mock<IProductService>() { override readonly version = '1.100.0'; },
+			new class extends mock<IRequestService>() { },
 		);
 	});
 
diff --git a/src/vs/workbench/contrib/chat/test/common/languageModels.ts b/src/vs/workbench/contrib/chat/test/common/languageModels.ts
index 35b2595109d..ee3375bdef5 100644
--- a/src/vs/workbench/contrib/chat/test/common/languageModels.ts
+++ b/src/vs/workbench/contrib/chat/test/common/languageModels.ts
@@ -7,8 +7,9 @@ import { CancellationToken } from '../../../../../base/common/cancellation.js';
 import { IStringDictionary } from '../../../../../base/common/collections.js';
 import { Event } from '../../../../../base/common/event.js';
 import { Disposable, IDisposable } from '../../../../../base/common/lifecycle.js';
+import { observableValue } from '../../../../../base/common/observable.js';
 import { ExtensionIdentifier } from '../../../../../platform/extensions/common/extensions.js';
-import { IChatMessage, ILanguageModelChatMetadata, ILanguageModelChatMetadataAndIdentifier, ILanguageModelChatProvider, ILanguageModelChatResponse, ILanguageModelChatSelector, ILanguageModelProviderDescriptor, ILanguageModelsGroup, ILanguageModelsService, IUserFriendlyLanguageModel } from '../../common/languageModels.js';
+import { IChatMessage, ICuratedModels, ILanguageModelChatMetadata, ILanguageModelChatMetadataAndIdentifier, ILanguageModelChatProvider, ILanguageModelChatResponse, ILanguageModelChatSelector, ILanguageModelProviderDescriptor, ILanguageModelsGroup, ILanguageModelsService, IUserFriendlyLanguageModel } from '../../common/languageModels.js';
 import { ILanguageModelsProviderGroup } from '../../common/languageModelsConfiguration.js';
 
 export class NullLanguageModelsService implements ILanguageModelsService {
@@ -85,4 +86,24 @@ export class NullLanguageModelsService implements ILanguageModelsService {
 	}
 
 	async migrateLanguageModelsProviderGroup(languageModelsProviderGroup: ILanguageModelsProviderGroup): Promise<void> { }
+
+	getRecentlyUsedModelIds(_maxCount?: number): string[] {
+		return [];
+	}
+
+	recordModelUsage(_modelIdentifier: string): void { }
+
+	getCuratedModels(): ICuratedModels {
+		return { free: [], paid: [] };
+	}
+
+	getNewModelIds(): string[] {
+		return [];
+	}
+
+	onDidChangeNewModelIds = Event.None;
+
+	markNewModelsAsSeen(): void { }
+
+	restrictedChatParticipants = observableValue('restrictedChatParticipants', Object.create(null));
 }
diff --git a/src/vs/workbench/contrib/chat/test/common/promptSyntax/computeAutomaticInstructions.test.ts b/src/vs/workbench/contrib/chat/test/common/promptSyntax/computeAutomaticInstructions.test.ts
index 3cb6fe2ad58..2d008a2567f 100644
--- a/src/vs/workbench/contrib/chat/test/common/promptSyntax/computeAutomaticInstructions.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/promptSyntax/computeAutomaticInstructions.test.ts
@@ -8,6 +8,7 @@ import * as sinon from 'sinon';
 import { CancellationToken } from '../../../../../../base/common/cancellation.js';
 import { Event } from '../../../../../../base/common/event.js';
 import { Schemas } from '../../../../../../base/common/network.js';
+import { OperatingSystem } from '../../../../../../base/common/platform.js';
 import { URI } from '../../../../../../base/common/uri.js';
 import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../../base/test/common/utils.js';
 import { ILanguageService } from '../../../../../../editor/common/languages/language.js';
@@ -27,7 +28,7 @@ import { testWorkspace } from '../../../../../../platform/workspace/test/common/
 import { IUserDataProfileService } from '../../../../../services/userDataProfile/common/userDataProfile.js';
 import { TestContextService, TestUserDataProfileService } from '../../../../../test/common/workbenchTestServices.js';
 import { ChatRequestVariableSet, isPromptFileVariableEntry, isPromptTextVariableEntry, toFileVariableEntry } from '../../../common/attachments/chatVariableEntries.js';
-import { ComputeAutomaticInstructions, InstructionsCollectionEvent } from '../../../common/promptSyntax/computeAutomaticInstructions.js';
+import { ComputeAutomaticInstructions, getFilePath, InstructionsCollectionEvent } from '../../../common/promptSyntax/computeAutomaticInstructions.js';
 import { PromptsConfig } from '../../../common/promptSyntax/config/config.js';
 import { AGENTS_SOURCE_FOLDER, CLAUDE_RULES_SOURCE_FOLDER, INSTRUCTION_FILE_EXTENSION, INSTRUCTIONS_DEFAULT_SOURCE_FOLDER, LEGACY_MODE_DEFAULT_SOURCE_FOLDER, PROMPT_DEFAULT_SOURCE_FOLDER, PROMPT_FILE_EXTENSION } from '../../../common/promptSyntax/config/promptFileLocations.js';
 import { INSTRUCTIONS_LANGUAGE_ID, PROMPT_LANGUAGE_ID } from '../../../common/promptSyntax/promptTypes.js';
@@ -39,6 +40,7 @@ import { IPathService } from '../../../../../services/path/common/pathService.js
 import { IFileQuery, ISearchService } from '../../../../../services/search/common/search.js';
 import { IExtensionService } from '../../../../../services/extensions/common/extensions.js';
 import { ILanguageModelToolsService } from '../../../common/tools/languageModelToolsService.js';
+import { IRemoteAgentService } from '../../../../../../workbench/services/remote/common/remoteAgentService.js';
 import { basename } from '../../../../../../base/common/resources.js';
 import { match } from '../../../../../../base/common/glob.js';
 import { ChatModeKind } from '../../../common/constants.js';
@@ -169,6 +171,10 @@ suite('ComputeAutomaticInstructions', () => {
 		} as unknown as ILanguageModelToolsService;
 		instaService.stub(ILanguageModelToolsService, toolsService);
 
+		instaService.stub(IRemoteAgentService, {
+			getEnvironment: () => Promise.resolve(null),
+		});
+
 		service = disposables.add(instaService.createInstance(PromptsService));
 		instaService.stub(IPromptsService, service);
 	});
@@ -2011,3 +2017,53 @@ suite('ComputeAutomaticInstructions', () => {
 		assert.ok(!paths.includes(claudeMdUri.path), 'Should not include CLAUDE.md (symlink to copilot)');
 	});
 });
+
+suite('getFilePath', () => {
+
+	ensureNoDisposablesAreLeakedInTestSuite();
+
+	test('should return fsPath for file:// URIs', () => {
+		const uri = URI.file('/workspace/src/file.ts');
+		const result = getFilePath(uri, undefined);
+		assert.strictEqual(result, uri.fsPath);
+	});
+
+	test('should return fsPath for vscode-remote URIs', () => {
+		const uri = URI.from({ scheme: Schemas.vscodeRemote, path: '/workspace/src/file.ts' });
+		const result = getFilePath(uri, undefined);
+		assert.strictEqual(result, uri.fsPath);
+	});
+
+	test('should return uri.toString() for other schemes', () => {
+		const uri = URI.from({ scheme: 'untitled', path: '/workspace/src/file.ts' });
+		const result = getFilePath(uri, undefined);
+		assert.strictEqual(result, uri.toString());
+	});
+
+	test('should use backslashes when remote is Windows', () => {
+		const uri = URI.from({ scheme: Schemas.vscodeRemote, path: '/C:/Users/dev/project/file.ts' });
+		const result = getFilePath(uri, OperatingSystem.Windows);
+		assert.ok(!result.includes('/'), 'Should not contain forward slashes');
+		assert.ok(result.includes('\\'), 'Should contain backslashes');
+	});
+
+	test('should use forward slashes when remote is Linux', () => {
+		const uri = URI.from({ scheme: Schemas.vscodeRemote, path: '/home/user/project/file.ts' });
+		const result = getFilePath(uri, OperatingSystem.Linux);
+		assert.ok(!result.includes('\\'), 'Should not contain backslashes');
+		assert.ok(result.includes('/home/user/project/file.ts'), 'Should contain the forward-slash path');
+	});
+
+	test('should use forward slashes when remote is macOS', () => {
+		const uri = URI.from({ scheme: Schemas.vscodeRemote, path: '/Users/dev/project/file.ts' });
+		const result = getFilePath(uri, OperatingSystem.Macintosh);
+		assert.ok(!result.includes('\\'), 'Should not contain backslashes');
+		assert.ok(result.includes('/Users/dev/project/file.ts'), 'Should contain the forward-slash path');
+	});
+
+	test('should not replace slashes when remoteOS is undefined', () => {
+		const uri = URI.file('/workspace/src/file.ts');
+		const result = getFilePath(uri, undefined);
+		assert.strictEqual(result, uri.fsPath);
+	});
+});
diff --git a/src/vs/workbench/contrib/chat/test/common/promptSyntax/promptFileReference.test.ts b/src/vs/workbench/contrib/chat/test/common/promptSyntax/promptFileReference.test.ts
index 0d09d3047d1..728349a04bf 100644
--- a/src/vs/workbench/contrib/chat/test/common/promptSyntax/promptFileReference.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/promptSyntax/promptFileReference.test.ts
@@ -323,7 +323,7 @@ suite('PromptFileReference', function () {
 									name: 'file3.prompt.md',
 									contents: [
 										'---',
-										'tools: [ false, \'my-tool1\' , ]',
+										'tools: [ \'my-tool1\' , ]',
 										'---',
 										'',
 										'[](./some-other-folder/non-existing-folder)',
@@ -360,7 +360,7 @@ suite('PromptFileReference', function () {
 													name: 'another-file.prompt.md',
 													contents: [
 														'---',
-														'tools: [\'my-tool3\', false, "my-tool2" ]',
+														'tools: [\'my-tool3\', "my-tool2" ]',
 														'---',
 														`[](${rootFolder}/folder1/some-other-folder)`,
 														'another-file.prompt.md contents\t [#file:file.txt](../file.txt)',
@@ -441,7 +441,7 @@ suite('PromptFileReference', function () {
 								contents: [
 									'---',
 									'applyTo: \'**/*\'',
-									'tools: [ false, \'my-tool12\' , ]',
+									'tools: [ \'my-tool12\' , ]',
 									'description: \'Description of my prompt.\'',
 									'---',
 									'## Files',
@@ -457,7 +457,7 @@ suite('PromptFileReference', function () {
 										name: 'file3.prompt.md',
 										contents: [
 											'---',
-											'tools: [ false, \'my-tool1\' , ]',
+											'tools: [ \'my-tool1\' , ]',
 											'---',
 											' some more\t content',
 										],
@@ -547,7 +547,7 @@ suite('PromptFileReference', function () {
 								contents: [
 									'---',
 									'applyTo: \'**/*\'',
-									'tools: [ false, \'my-tool12\' , ]',
+									'tools: [ \'my-tool12\' , ]',
 									'description: \'Description of my instructions file.\'',
 									'---',
 									'## Files',
@@ -563,7 +563,7 @@ suite('PromptFileReference', function () {
 										name: 'file3.prompt.md',
 										contents: [
 											'---',
-											'tools: [ false, \'my-tool1\' , ]',
+											'tools: [ \'my-tool1\' , ]',
 											'---',
 											' some more\t content',
 										],
@@ -668,7 +668,7 @@ suite('PromptFileReference', function () {
 										name: 'file3.prompt.md',
 										contents: [
 											'---',
-											'tools: [ false, \'my-tool1\' , ]',
+											'tools: [ \'my-tool1\' , ]',
 											'agent: \'agent\'\t',
 											'---',
 											' some more\t content',
@@ -771,7 +771,7 @@ suite('PromptFileReference', function () {
 										name: 'file3.prompt.md',
 										contents: [
 											'---',
-											'tools: [ false, \'my-tool1\' , ]',
+											'tools: [ \'my-tool1\' , ]',
 											'---',
 											' some more\t content',
 										],
@@ -874,7 +874,7 @@ suite('PromptFileReference', function () {
 										name: 'file3.prompt.md',
 										contents: [
 											'---',
-											'tools: [ false, \'my-tool1\' , ]',
+											'tools: [ \'my-tool1\' , ]',
 											'---',
 											' some more\t content',
 										],
@@ -961,7 +961,7 @@ suite('PromptFileReference', function () {
 								name: 'file2.prompt.md',
 								contents: [
 									'---',
-									'tools: [ false, \'my-tool12\' , ]',
+									'tools: [ \'my-tool12\' , ]',
 									'description: \'Description of the prompt file.\'',
 									'---',
 									'## Files',
@@ -977,7 +977,7 @@ suite('PromptFileReference', function () {
 										name: 'file3.prompt.md',
 										contents: [
 											'---',
-											'tools: [ false, \'my-tool1\' , ]',
+											'tools: [ \'my-tool1\' , ]',
 											'---',
 											' some more\t content',
 										],
diff --git a/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptFileParser.test.ts b/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptFileParser.test.ts
index d4a3d7d430a..ed6e2f47948 100644
--- a/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptFileParser.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptFileParser.test.ts
@@ -8,7 +8,7 @@ import assert from 'assert';
 import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../../../base/test/common/utils.js';
 import { Range } from '../../../../../../../editor/common/core/range.js';
 import { URI } from '../../../../../../../base/common/uri.js';
-import { IStringValue, parseCommaSeparatedList, PromptFileParser } from '../../../../common/promptSyntax/promptFileParser.js';
+import { IScalarValue, parseCommaSeparatedList, PromptFileParser } from '../../../../common/promptSyntax/promptFileParser.js';
 
 suite('PromptFileParser', () => {
 	ensureNoDisposablesAreLeakedInTestSuite();
@@ -30,12 +30,12 @@ suite('PromptFileParser', () => {
 		assert.ok(result.body);
 		assert.deepEqual(result.header.range, { startLineNumber: 2, startColumn: 1, endLineNumber: 5, endColumn: 1 });
 		assert.deepEqual(result.header.attributes, [
-			{ key: 'description', range: new Range(2, 1, 2, 26), value: { type: 'string', value: 'Agent test', range: new Range(2, 14, 2, 26) } },
-			{ key: 'model', range: new Range(3, 1, 3, 15), value: { type: 'string', value: 'GPT 4.1', range: new Range(3, 8, 3, 15) } },
+			{ key: 'description', range: new Range(2, 1, 2, 26), value: { type: 'scalar', value: 'Agent test', range: new Range(2, 14, 2, 26), format: 'double' } },
+			{ key: 'model', range: new Range(3, 1, 3, 15), value: { type: 'scalar', value: 'GPT 4.1', range: new Range(3, 8, 3, 15), format: 'none' } },
 			{
 				key: 'tools', range: new Range(4, 1, 4, 26), value: {
-					type: 'array',
-					items: [{ type: 'string', value: 'tool1', range: new Range(4, 9, 4, 16) }, { type: 'string', value: 'tool2', range: new Range(4, 18, 4, 25) }],
+					type: 'sequence',
+					items: [{ type: 'scalar', value: 'tool1', range: new Range(4, 9, 4, 16), format: 'single' }, { type: 'scalar', value: 'tool2', range: new Range(4, 18, 4, 25), format: 'single' }],
 					range: new Range(4, 8, 4, 26)
 				}
 			},
@@ -80,29 +80,29 @@ suite('PromptFileParser', () => {
 		assert.ok(result.header);
 		assert.deepEqual(result.header.range, { startLineNumber: 2, startColumn: 1, endLineNumber: 13, endColumn: 1 });
 		assert.deepEqual(result.header.attributes, [
-			{ key: 'description', range: new Range(2, 1, 2, 26), value: { type: 'string', value: 'Agent test', range: new Range(2, 14, 2, 26) } },
-			{ key: 'model', range: new Range(3, 1, 3, 15), value: { type: 'string', value: 'GPT 4.1', range: new Range(3, 8, 3, 15) } },
+			{ key: 'description', range: new Range(2, 1, 2, 26), value: { type: 'scalar', value: 'Agent test', range: new Range(2, 14, 2, 26), format: 'double' } },
+			{ key: 'model', range: new Range(3, 1, 3, 15), value: { type: 'scalar', value: 'GPT 4.1', range: new Range(3, 8, 3, 15), format: 'none' } },
 			{
 				key: 'handoffs', range: new Range(4, 1, 12, 15), value: {
-					type: 'array',
-					range: new Range(5, 3, 12, 15),
+					type: 'sequence',
+					range: new Range(5, 1, 12, 15),
 					items: [
 						{
-							type: 'object', range: new Range(5, 5, 8, 16),
+							type: 'map', range: new Range(5, 5, 8, 16),
 							properties: [
-								{ key: { type: 'string', value: 'label', range: new Range(5, 5, 5, 10) }, value: { type: 'string', value: 'Implement', range: new Range(5, 12, 5, 23) } },
-								{ key: { type: 'string', value: 'agent', range: new Range(6, 5, 6, 10) }, value: { type: 'string', value: 'Default', range: new Range(6, 12, 6, 19) } },
-								{ key: { type: 'string', value: 'prompt', range: new Range(7, 5, 7, 11) }, value: { type: 'string', value: 'Implement the plan', range: new Range(7, 13, 7, 33) } },
-								{ key: { type: 'string', value: 'send', range: new Range(8, 5, 8, 9) }, value: { type: 'boolean', value: false, range: new Range(8, 11, 8, 16) } },
+								{ key: { type: 'scalar', value: 'label', range: new Range(5, 5, 5, 10), format: 'none' }, value: { type: 'scalar', value: 'Implement', range: new Range(5, 12, 5, 23), format: 'double' } },
+								{ key: { type: 'scalar', value: 'agent', range: new Range(6, 5, 6, 10), format: 'none' }, value: { type: 'scalar', value: 'Default', range: new Range(6, 12, 6, 19), format: 'none' } },
+								{ key: { type: 'scalar', value: 'prompt', range: new Range(7, 5, 7, 11), format: 'none' }, value: { type: 'scalar', value: 'Implement the plan', range: new Range(7, 13, 7, 33), format: 'double' } },
+								{ key: { type: 'scalar', value: 'send', range: new Range(8, 5, 8, 9), format: 'none' }, value: { type: 'scalar', value: 'false', range: new Range(8, 11, 8, 16), format: 'none' } },
 							]
 						},
 						{
-							type: 'object', range: new Range(9, 5, 12, 15),
+							type: 'map', range: new Range(9, 5, 12, 15),
 							properties: [
-								{ key: { type: 'string', value: 'label', range: new Range(9, 5, 9, 10) }, value: { type: 'string', value: 'Save', range: new Range(9, 12, 9, 18) } },
-								{ key: { type: 'string', value: 'agent', range: new Range(10, 5, 10, 10) }, value: { type: 'string', value: 'Default', range: new Range(10, 12, 10, 19) } },
-								{ key: { type: 'string', value: 'prompt', range: new Range(11, 5, 11, 11) }, value: { type: 'string', value: 'Save the plan to a file', range: new Range(11, 13, 11, 38) } },
-								{ key: { type: 'string', value: 'send', range: new Range(12, 5, 12, 9) }, value: { type: 'boolean', value: true, range: new Range(12, 11, 12, 15) } },
+								{ key: { type: 'scalar', value: 'label', range: new Range(9, 5, 9, 10), format: 'none' }, value: { type: 'scalar', value: 'Save', range: new Range(9, 12, 9, 18), format: 'double' } },
+								{ key: { type: 'scalar', value: 'agent', range: new Range(10, 5, 10, 10), format: 'none' }, value: { type: 'scalar', value: 'Default', range: new Range(10, 12, 10, 19), format: 'none' } },
+								{ key: { type: 'scalar', value: 'prompt', range: new Range(11, 5, 11, 11), format: 'none' }, value: { type: 'scalar', value: 'Save the plan to a file', range: new Range(11, 13, 11, 38), format: 'double' } },
+								{ key: { type: 'scalar', value: 'send', range: new Range(12, 5, 12, 9), format: 'none' }, value: { type: 'scalar', value: 'true', range: new Range(12, 11, 12, 15), format: 'none' } },
 							]
 						},
 					]
@@ -180,8 +180,8 @@ suite('PromptFileParser', () => {
 		assert.ok(result.body);
 		assert.deepEqual(result.header.range, { startLineNumber: 2, startColumn: 1, endLineNumber: 4, endColumn: 1 });
 		assert.deepEqual(result.header.attributes, [
-			{ key: 'description', range: new Range(2, 1, 2, 54), value: { type: 'string', value: 'Code style instructions for TypeScript', range: new Range(2, 14, 2, 54) } },
-			{ key: 'applyTo', range: new Range(3, 1, 3, 14), value: { type: 'string', value: '*.ts', range: new Range(3, 10, 3, 14) } },
+			{ key: 'description', range: new Range(2, 1, 2, 54), value: { type: 'scalar', value: 'Code style instructions for TypeScript', range: new Range(2, 14, 2, 54), format: 'double' } },
+			{ key: 'applyTo', range: new Range(3, 1, 3, 14), value: { type: 'scalar', value: '*.ts', range: new Range(3, 10, 3, 14), format: 'none' } },
 		]);
 		assert.deepEqual(result.body.range, { startLineNumber: 5, startColumn: 1, endLineNumber: 6, endColumn: 1 });
 		assert.equal(result.body.offset, 76);
@@ -212,13 +212,13 @@ suite('PromptFileParser', () => {
 		assert.ok(result.body);
 		assert.deepEqual(result.header.range, { startLineNumber: 2, startColumn: 1, endLineNumber: 6, endColumn: 1 });
 		assert.deepEqual(result.header.attributes, [
-			{ key: 'description', range: new Range(2, 1, 2, 48), value: { type: 'string', value: 'General purpose coding assistant', range: new Range(2, 14, 2, 48) } },
-			{ key: 'agent', range: new Range(3, 1, 3, 13), value: { type: 'string', value: 'agent', range: new Range(3, 8, 3, 13) } },
-			{ key: 'model', range: new Range(4, 1, 4, 15), value: { type: 'string', value: 'GPT 4.1', range: new Range(4, 8, 4, 15) } },
+			{ key: 'description', range: new Range(2, 1, 2, 48), value: { type: 'scalar', value: 'General purpose coding assistant', range: new Range(2, 14, 2, 48), format: 'double' } },
+			{ key: 'agent', range: new Range(3, 1, 3, 13), value: { type: 'scalar', value: 'agent', range: new Range(3, 8, 3, 13), format: 'none' } },
+			{ key: 'model', range: new Range(4, 1, 4, 15), value: { type: 'scalar', value: 'GPT 4.1', range: new Range(4, 8, 4, 15), format: 'none' } },
 			{
 				key: 'tools', range: new Range(5, 1, 5, 30), value: {
-					type: 'array',
-					items: [{ type: 'string', value: 'search', range: new Range(5, 9, 5, 17) }, { type: 'string', value: 'terminal', range: new Range(5, 19, 5, 29) }],
+					type: 'sequence',
+					items: [{ type: 'scalar', value: 'search', range: new Range(5, 9, 5, 17), format: 'single' }, { type: 'scalar', value: 'terminal', range: new Range(5, 19, 5, 29), format: 'single' }],
 					range: new Range(5, 8, 5, 30)
 				}
 			},
@@ -306,53 +306,53 @@ suite('PromptFileParser', () => {
 
 	suite('parseCommaSeparatedList', () => {
 
-		function assertCommaSeparatedList(input: string, expected: IStringValue[]): void {
-			const actual = parseCommaSeparatedList({ type: 'string', value: input, range: new Range(1, 1, 1, input.length + 1) });
+		function assertCommaSeparatedList(input: string, expected: IScalarValue[]): void {
+			const actual = parseCommaSeparatedList({ type: 'scalar', value: input, range: new Range(1, 1, 1, input.length + 1), format: 'none' });
 			assert.deepStrictEqual(actual.items, expected);
 		}
 
 		test('simple unquoted values', () => {
 			assertCommaSeparatedList('a, b, c', [
-				{ type: 'string', value: 'a', range: new Range(1, 1, 1, 2) },
-				{ type: 'string', value: 'b', range: new Range(1, 4, 1, 5) },
-				{ type: 'string', value: 'c', range: new Range(1, 7, 1, 8) }
+				{ type: 'scalar', value: 'a', range: new Range(1, 1, 1, 2), format: 'none' },
+				{ type: 'scalar', value: 'b', range: new Range(1, 4, 1, 5), format: 'none' },
+				{ type: 'scalar', value: 'c', range: new Range(1, 7, 1, 8), format: 'none' }
 			]);
 		});
 
 		test('unquoted values without spaces', () => {
 			assertCommaSeparatedList('foo,bar,baz', [
-				{ type: 'string', value: 'foo', range: new Range(1, 1, 1, 4) },
-				{ type: 'string', value: 'bar', range: new Range(1, 5, 1, 8) },
-				{ type: 'string', value: 'baz', range: new Range(1, 9, 1, 12) }
+				{ type: 'scalar', value: 'foo', range: new Range(1, 1, 1, 4), format: 'none' },
+				{ type: 'scalar', value: 'bar', range: new Range(1, 5, 1, 8), format: 'none' },
+				{ type: 'scalar', value: 'baz', range: new Range(1, 9, 1, 12), format: 'none' }
 			]);
 		});
 
 		test('double quoted values', () => {
 			assertCommaSeparatedList('"hello", "world"', [
-				{ type: 'string', value: 'hello', range: new Range(1, 1, 1, 8) },
-				{ type: 'string', value: 'world', range: new Range(1, 10, 1, 17) }
+				{ type: 'scalar', value: 'hello', range: new Range(1, 1, 1, 8), format: 'double' },
+				{ type: 'scalar', value: 'world', range: new Range(1, 10, 1, 17), format: 'double' }
 			]);
 		});
 
 		test('single quoted values', () => {
 			assertCommaSeparatedList(`'one', 'two'`, [
-				{ type: 'string', value: 'one', range: new Range(1, 1, 1, 6) },
-				{ type: 'string', value: 'two', range: new Range(1, 8, 1, 13) }
+				{ type: 'scalar', value: 'one', range: new Range(1, 1, 1, 6), format: 'single' },
+				{ type: 'scalar', value: 'two', range: new Range(1, 8, 1, 13), format: 'single' }
 			]);
 		});
 
 		test('mixed quoted and unquoted values', () => {
 			assertCommaSeparatedList('unquoted, "double", \'single\'', [
-				{ type: 'string', value: 'unquoted', range: new Range(1, 1, 1, 9) },
-				{ type: 'string', value: 'double', range: new Range(1, 11, 1, 19) },
-				{ type: 'string', value: 'single', range: new Range(1, 21, 1, 29) }
+				{ type: 'scalar', value: 'unquoted', range: new Range(1, 1, 1, 9), format: 'none' },
+				{ type: 'scalar', value: 'double', range: new Range(1, 11, 1, 19), format: 'double' },
+				{ type: 'scalar', value: 'single', range: new Range(1, 21, 1, 29), format: 'single' }
 			]);
 		});
 
 		test('quoted values with commas inside', () => {
 			assertCommaSeparatedList('"a,b", "c,d"', [
-				{ type: 'string', value: 'a,b', range: new Range(1, 1, 1, 6) },
-				{ type: 'string', value: 'c,d', range: new Range(1, 8, 1, 13) }
+				{ type: 'scalar', value: 'a,b', range: new Range(1, 1, 1, 6), format: 'double' },
+				{ type: 'scalar', value: 'c,d', range: new Range(1, 8, 1, 13), format: 'double' }
 			]);
 		});
 
@@ -362,46 +362,46 @@ suite('PromptFileParser', () => {
 
 		test('single value', () => {
 			assertCommaSeparatedList('single', [
-				{ type: 'string', value: 'single', range: new Range(1, 1, 1, 7) }
+				{ type: 'scalar', value: 'single', range: new Range(1, 1, 1, 7), format: 'none' }
 			]);
 		});
 
 		test('values with extra whitespace', () => {
 			assertCommaSeparatedList('  a  ,  b  ,  c  ', [
-				{ type: 'string', value: 'a', range: new Range(1, 3, 1, 4) },
-				{ type: 'string', value: 'b', range: new Range(1, 9, 1, 10) },
-				{ type: 'string', value: 'c', range: new Range(1, 15, 1, 16) }
+				{ type: 'scalar', value: 'a', range: new Range(1, 3, 1, 4), format: 'none' },
+				{ type: 'scalar', value: 'b', range: new Range(1, 9, 1, 10), format: 'none' },
+				{ type: 'scalar', value: 'c', range: new Range(1, 15, 1, 16), format: 'none' }
 			]);
 		});
 
 		test('quoted value with spaces', () => {
 			assertCommaSeparatedList('"hello world", "foo bar"', [
-				{ type: 'string', value: 'hello world', range: new Range(1, 1, 1, 14) },
-				{ type: 'string', value: 'foo bar', range: new Range(1, 16, 1, 25) }
+				{ type: 'scalar', value: 'hello world', range: new Range(1, 1, 1, 14), format: 'double' },
+				{ type: 'scalar', value: 'foo bar', range: new Range(1, 16, 1, 25), format: 'double' }
 			]);
 		});
 
 		test('with position offset', () => {
 			// Simulate parsing a list that starts at line 5, character 10
-			const result = parseCommaSeparatedList({ type: 'string', value: 'a, b, c', range: new Range(6, 11, 6, 18) });
+			const result = parseCommaSeparatedList({ type: 'scalar', value: 'a, b, c', range: new Range(6, 11, 6, 18), format: 'none' });
 			assert.deepStrictEqual(result.items, [
-				{ type: 'string', value: 'a', range: new Range(6, 11, 6, 12) },
-				{ type: 'string', value: 'b', range: new Range(6, 14, 6, 15) },
-				{ type: 'string', value: 'c', range: new Range(6, 17, 6, 18) }
+				{ type: 'scalar', value: 'a', range: new Range(6, 11, 6, 12), format: 'none' },
+				{ type: 'scalar', value: 'b', range: new Range(6, 14, 6, 15), format: 'none' },
+				{ type: 'scalar', value: 'c', range: new Range(6, 17, 6, 18), format: 'none' }
 			]);
 		});
 
 		test('entire input wrapped in double quotes', () => {
 			// When the entire input is wrapped in quotes, it should be treated as a single quoted value
 			assertCommaSeparatedList('"a, b, c"', [
-				{ type: 'string', value: 'a, b, c', range: new Range(1, 1, 1, 10) }
+				{ type: 'scalar', value: 'a, b, c', range: new Range(1, 1, 1, 10), format: 'double' }
 			]);
 		});
 
 		test('entire input wrapped in single quotes', () => {
 			// When the entire input is wrapped in single quotes, it should be treated as a single quoted value
 			assertCommaSeparatedList(`'a, b, c'`, [
-				{ type: 'string', value: 'a, b, c', range: new Range(1, 1, 1, 10) }
+				{ type: 'scalar', value: 'a, b, c', range: new Range(1, 1, 1, 10), format: 'single' }
 			]);
 		});
 
diff --git a/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptsService.test.ts b/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptsService.test.ts
index 2b803e88df2..dd8f81d4dd3 100644
--- a/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptsService.test.ts
+++ b/src/vs/workbench/contrib/chat/test/common/promptSyntax/service/promptsService.test.ts
@@ -47,6 +47,7 @@ import { InMemoryStorageService, IStorageService } from '../../../../../../../pl
 import { IPathService } from '../../../../../../services/path/common/pathService.js';
 import { IFileMatch, IFileQuery, ISearchService } from '../../../../../../services/search/common/search.js';
 import { IExtensionService } from '../../../../../../services/extensions/common/extensions.js';
+import { IRemoteAgentService } from '../../../../../../services/remote/common/remoteAgentService.js';
 import { ChatModeKind } from '../../../../common/constants.js';
 import { HookType } from '../../../../common/promptSyntax/hookSchema.js';
 
@@ -153,6 +154,10 @@ suite('PromptsService', () => {
 			}
 		});
 
+		instaService.stub(IRemoteAgentService, {
+			getEnvironment: () => Promise.resolve(null),
+		});
+
 		service = disposables.add(instaService.createInstance(PromptsService));
 		instaService.stub(IPromptsService, service);
 	});
@@ -184,7 +189,7 @@ suite('PromptsService', () => {
 					contents: [
 						'---',
 						'description: \'Root prompt description.\'',
-						'tools: [\'my-tool1\', , true]',
+						'tools: [\'my-tool1\', , tool]',
 						'agent: "agent" ',
 						'---',
 						'## Files',
@@ -239,7 +244,7 @@ suite('PromptsService', () => {
 					contents: [
 						'---',
 						'description: "Another file description."',
-						'tools: [\'my-tool3\', false, "my-tool2" ]',
+						'tools: [\'my-tool3\', "my-tool2" ]',
 						'applyTo: "**/*.tsx"',
 						'---',
 						`[](${rootFolder}/folder1/some-other-folder)`,
@@ -263,7 +268,7 @@ suite('PromptsService', () => {
 			const result1 = await service.parseNew(rootFileUri, CancellationToken.None);
 			assert.deepEqual(result1.uri, rootFileUri);
 			assert.deepEqual(result1.header?.description, 'Root prompt description.');
-			assert.deepEqual(result1.header?.tools, ['my-tool1']);
+			assert.deepEqual(result1.header?.tools, ['my-tool1', 'tool']);
 			assert.deepEqual(result1.header?.agent, 'agent');
 			assert.ok(result1.body);
 			assert.deepEqual(
diff --git a/src/vs/workbench/contrib/debug/common/debugger.ts b/src/vs/workbench/contrib/debug/common/debugger.ts
index c734119ad85..2b3e423f822 100644
--- a/src/vs/workbench/contrib/debug/common/debugger.ts
+++ b/src/vs/workbench/contrib/debug/common/debugger.ts
@@ -118,7 +118,7 @@ export class Debugger implements IDebugger, IDebuggerMetadata {
 		throw new Error(nls.localize('cannot.find.da', "Cannot find debug adapter for type '{0}'.", this.type));
 	}
 
-	async substituteVariables(folder: IWorkspaceFolder | undefined, config: IConfig): Promise<IConfig> {
+	async substituteVariables(folder: IWorkspaceFolder | undefined, config: IConfig): Promise<IConfig | undefined> {
 		const substitutedConfig = await this.adapterManager.substituteVariables(this.type, folder, config);
 		return await this.configurationResolverService.resolveWithInteractionReplace(folder, substitutedConfig, 'launch', this.variables, substitutedConfig.__configurationTarget);
 	}
diff --git a/src/vs/workbench/contrib/extensions/browser/media/extensionEditor.css b/src/vs/workbench/contrib/extensions/browser/media/extensionEditor.css
index 2e1cece4685..8daf6dc9427 100644
--- a/src/vs/workbench/contrib/extensions/browser/media/extensionEditor.css
+++ b/src/vs/workbench/contrib/extensions/browser/media/extensionEditor.css
@@ -9,7 +9,7 @@
 	display: flex;
 	flex-direction: column;
 	margin: 0px auto;
-	max-width: 90%;
+	max-width: 95%;
 }
 
 .extension-editor .clickable {
diff --git a/src/vs/workbench/contrib/externalTerminal/electron-browser/externalTerminal.contribution.ts b/src/vs/workbench/contrib/externalTerminal/electron-browser/externalTerminal.contribution.ts
index 1edaaa8ada1..832c960a207 100644
--- a/src/vs/workbench/contrib/externalTerminal/electron-browser/externalTerminal.contribution.ts
+++ b/src/vs/workbench/contrib/externalTerminal/electron-browser/externalTerminal.contribution.ts
@@ -5,6 +5,7 @@
 
 import * as nls from '../../../../nls.js';
 import * as paths from '../../../../base/common/path.js';
+import { URI } from '../../../../base/common/uri.js';
 import { DEFAULT_TERMINAL_OSX, IExternalTerminalSettings } from '../../../../platform/externalTerminal/common/externalTerminal.js';
 import { MenuId, MenuRegistry } from '../../../../platform/actions/common/actions.js';
 import { KeyMod, KeyCode } from '../../../../base/common/keyCodes.js';
@@ -19,6 +20,9 @@ import { IConfigurationService } from '../../../../platform/configuration/common
 import { TerminalContextKeys } from '../../terminal/common/terminalContextKey.js';
 import { IRemoteAuthorityResolverService } from '../../../../platform/remote/common/remoteAuthorityResolver.js';
 import { LifecyclePhase } from '../../../services/lifecycle/common/lifecycle.js';
+import { IWorkspaceContextService } from '../../../../platform/workspace/common/workspace.js';
+import { IQuickInputService, IQuickPickItem } from '../../../../platform/quickinput/common/quickInput.js';
+import { ILabelService } from '../../../../platform/label/common/label.js';
 
 const OPEN_NATIVE_CONSOLE_COMMAND_ID = 'workbench.action.terminal.openNativeConsole';
 KeybindingsRegistry.registerCommandAndKeybindingRule({
@@ -32,9 +36,30 @@ KeybindingsRegistry.registerCommandAndKeybindingRule({
 		const terminalService = accessor.get(IExternalTerminalService);
 		const configurationService = accessor.get(IConfigurationService);
 		const remoteAuthorityResolverService = accessor.get(IRemoteAuthorityResolverService);
-		const root = historyService.getLastActiveWorkspaceRoot();
+		const workspaceContextService = accessor.get(IWorkspaceContextService);
+		const quickInputService = accessor.get(IQuickInputService);
+		const labelService = accessor.get(ILabelService);
 		const config = configurationService.getValue<IExternalTerminalSettings>('terminal.external');
 
+		// When there are multiple workspace folders, let the user pick one
+		const folders = workspaceContextService.getWorkspace().folders;
+		let root: URI | undefined;
+		if (folders.length > 1) {
+			const folderPicks: IQuickPickItem[] = folders.map(folder => ({
+				label: folder.name,
+				description: labelService.getUriLabel(folder.uri, { relative: true })
+			}));
+			const pick = await quickInputService.pick(folderPicks, {
+				placeHolder: nls.localize('selectWorkspace', "Select workspace folder")
+			});
+			if (!pick) {
+				return;
+			}
+			root = folders[folderPicks.indexOf(pick)].uri;
+		} else {
+			root = historyService.getLastActiveWorkspaceRoot();
+		}
+
 		// It's a local workspace, open the root
 		if (root?.scheme === Schemas.file) {
 			terminalService.openTerminal(config, root.fsPath);
diff --git a/src/vs/workbench/contrib/externalTerminal/test/electron-browser/externalTerminal.contribution.test.ts b/src/vs/workbench/contrib/externalTerminal/test/electron-browser/externalTerminal.contribution.test.ts
new file mode 100644
index 00000000000..243b1268dc1
--- /dev/null
+++ b/src/vs/workbench/contrib/externalTerminal/test/electron-browser/externalTerminal.contribution.test.ts
@@ -0,0 +1,179 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+import assert from 'assert';
+import { URI } from '../../../../../base/common/uri.js';
+import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../base/test/common/utils.js';
+import { TestInstantiationService } from '../../../../../platform/instantiation/test/common/instantiationServiceMock.js';
+import { mock } from '../../../../../base/test/common/mock.js';
+import { IHistoryService } from '../../../../services/history/common/history.js';
+import { IExternalTerminalService } from '../../../../../platform/externalTerminal/electron-browser/externalTerminalService.js';
+import { IExternalTerminalSettings } from '../../../../../platform/externalTerminal/common/externalTerminal.js';
+import { IConfigurationService } from '../../../../../platform/configuration/common/configuration.js';
+import { TestConfigurationService } from '../../../../../platform/configuration/test/common/testConfigurationService.js';
+import { IRemoteAuthorityResolverService } from '../../../../../platform/remote/common/remoteAuthorityResolver.js';
+import { IWorkspace, IWorkspaceContextService, IWorkspaceFolder } from '../../../../../platform/workspace/common/workspace.js';
+import { CommandsRegistry } from '../../../../../platform/commands/common/commands.js';
+import { IQuickInputService, IQuickPickItem } from '../../../../../platform/quickinput/common/quickInput.js';
+import { ILabelService } from '../../../../../platform/label/common/label.js';
+import '../../electron-browser/externalTerminal.contribution.js';
+
+suite('ExternalTerminal contribution', () => {
+	const store = ensureNoDisposablesAreLeakedInTestSuite();
+
+	let instantiationService: TestInstantiationService;
+	let openTerminalCalls: { cwd: string | undefined }[];
+	let pickCalls: IQuickPickItem[][];
+
+	function createWorkspaceFolder(uri: URI, name: string, index: number): IWorkspaceFolder {
+		return {
+			uri,
+			name,
+			index,
+			toResource: (relativePath: string) => URI.joinPath(uri, relativePath)
+		};
+	}
+
+	function setupServices(options: {
+		folders: IWorkspaceFolder[];
+		lastActiveRoot?: URI;
+		lastActiveFile?: URI;
+		pickedFolder?: IWorkspaceFolder | undefined;
+	}) {
+		instantiationService = store.add(new TestInstantiationService());
+
+		openTerminalCalls = [];
+		pickCalls = [];
+
+		instantiationService.stub(IHistoryService, new class extends mock<IHistoryService>() {
+			override getLastActiveWorkspaceRoot() {
+				return options.lastActiveRoot;
+			}
+			override getLastActiveFile(_schemeFilter: string) {
+				return options.lastActiveFile;
+			}
+		});
+
+		instantiationService.stub(IExternalTerminalService, new class extends mock<IExternalTerminalService>() {
+			override async openTerminal(_config: IExternalTerminalSettings, cwd: string | undefined) {
+				openTerminalCalls.push({ cwd });
+			}
+		});
+
+		instantiationService.stub(IConfigurationService, new TestConfigurationService({
+			terminal: { external: { linuxExec: 'xterm', osxExec: 'Terminal.app', windowsExec: 'cmd' } }
+		}));
+
+		instantiationService.stub(IRemoteAuthorityResolverService, new class extends mock<IRemoteAuthorityResolverService>() {
+		});
+
+		instantiationService.stub(IWorkspaceContextService, new class extends mock<IWorkspaceContextService>() {
+			override getWorkspace(): IWorkspace {
+				return {
+					id: 'test-workspace',
+					folders: options.folders,
+				};
+			}
+		});
+
+		instantiationService.stub(IQuickInputService, new class extends mock<IQuickInputService>() {
+			override async pick<T extends IQuickPickItem>(picks: T[]): Promise<T | undefined> {
+				pickCalls.push(picks);
+				if (options.pickedFolder) {
+					const index = options.folders.indexOf(options.pickedFolder);
+					return picks[index];
+				}
+				return undefined;
+			}
+		});
+
+		instantiationService.stub(ILabelService, new class extends mock<ILabelService>() {
+			override getUriLabel(uri: URI) {
+				return uri.fsPath;
+			}
+		});
+	}
+
+	test('single folder - uses last active workspace root', async () => {
+		const folderUri = URI.file('/workspace/project');
+		const folder = createWorkspaceFolder(folderUri, 'project', 0);
+
+		setupServices({
+			folders: [folder],
+			lastActiveRoot: folderUri,
+		});
+
+		const handler = CommandsRegistry.getCommand('workbench.action.terminal.openNativeConsole')!.handler;
+		await instantiationService.invokeFunction(handler);
+
+		assert.deepStrictEqual(openTerminalCalls, [{ cwd: folderUri.fsPath }]);
+		assert.deepStrictEqual(pickCalls, []);
+	});
+
+	test('multiple folders - shows picker and opens selected folder', async () => {
+		const folder1Uri = URI.file('/workspace/project1');
+		const folder2Uri = URI.file('/workspace/project2');
+		const folder1 = createWorkspaceFolder(folder1Uri, 'project1', 0);
+		const folder2 = createWorkspaceFolder(folder2Uri, 'project2', 1);
+
+		setupServices({
+			folders: [folder1, folder2],
+			pickedFolder: folder2,
+		});
+
+		const handler = CommandsRegistry.getCommand('workbench.action.terminal.openNativeConsole')!.handler;
+		await instantiationService.invokeFunction(handler);
+
+		assert.strictEqual(pickCalls.length, 1);
+		assert.deepStrictEqual(openTerminalCalls, [{ cwd: folder2Uri.fsPath }]);
+	});
+
+	test('multiple folders - picker cancelled does not open terminal', async () => {
+		const folder1Uri = URI.file('/workspace/project1');
+		const folder2Uri = URI.file('/workspace/project2');
+		const folder1 = createWorkspaceFolder(folder1Uri, 'project1', 0);
+		const folder2 = createWorkspaceFolder(folder2Uri, 'project2', 1);
+
+		setupServices({
+			folders: [folder1, folder2],
+			pickedFolder: undefined,
+		});
+
+		const handler = CommandsRegistry.getCommand('workbench.action.terminal.openNativeConsole')!.handler;
+		await instantiationService.invokeFunction(handler);
+
+		assert.strictEqual(pickCalls.length, 1);
+		assert.deepStrictEqual(openTerminalCalls, []);
+	});
+
+	test('no workspace root - falls back to active file directory', async () => {
+		const fileUri = URI.file('/workspace/project/src/file.ts');
+		const expectedDir = URI.file('/workspace/project/src').fsPath;
+
+		setupServices({
+			folders: [],
+			lastActiveRoot: undefined,
+			lastActiveFile: fileUri,
+		});
+
+		const handler = CommandsRegistry.getCommand('workbench.action.terminal.openNativeConsole')!.handler;
+		await instantiationService.invokeFunction(handler);
+
+		assert.deepStrictEqual(openTerminalCalls, [{ cwd: expectedDir }]);
+	});
+
+	test('no workspace, no file - opens terminal without cwd', async () => {
+		setupServices({
+			folders: [],
+			lastActiveRoot: undefined,
+			lastActiveFile: undefined,
+		});
+
+		const handler = CommandsRegistry.getCommand('workbench.action.terminal.openNativeConsole')!.handler;
+		await instantiationService.invokeFunction(handler);
+
+		assert.deepStrictEqual(openTerminalCalls, [{ cwd: undefined }]);
+	});
+});
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChat.contribution.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChat.contribution.ts
index c3bb43bc90b..ce4653f5cfb 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChat.contribution.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChat.contribution.ts
@@ -93,7 +93,8 @@ MenuRegistry.appendMenuItem(MenuId.InlineChatEditorAffordance, {
 	order: 1,
 	command: {
 		id: ACTION_START,
-		title: localize('editCode', "Edit Code"),
+		title: localize('editCode', "Ask for Edits"),
+		shortTitle: localize('editCodeShort', "Ask for Edits"),
 		icon: Codicon.sparkle,
 	},
 	when: EditorContextKeys.hasNonEmptySelection,
@@ -103,6 +104,7 @@ MenuRegistry.appendMenuItem(MenuId.InlineChatEditorAffordance, {
 
 registerAction2(InlineChatActions.StartSessionAction);
 registerAction2(InlineChatActions.FocusInlineChat);
+registerAction2(InlineChatActions.SubmitInlineChatInputAction);
 
 
 const workbenchContributionsRegistry = Registry.as<IWorkbenchContributionsRegistry>(WorkbenchExtensions.Workbench);
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts
index f7dc57db292..1b1a6396311 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatActions.ts
@@ -11,7 +11,7 @@ import { EmbeddedDiffEditorWidget } from '../../../../editor/browser/widget/diff
 import { EmbeddedCodeEditorWidget } from '../../../../editor/browser/widget/codeEditor/embeddedCodeEditorWidget.js';
 import { EditorContextKeys } from '../../../../editor/common/editorContextKeys.js';
 import { InlineChatController, InlineChatRunOptions } from './inlineChatController.js';
-import { ACTION_ACCEPT_CHANGES, CTX_INLINE_CHAT_FOCUSED, CTX_INLINE_CHAT_VISIBLE, CTX_INLINE_CHAT_OUTER_CURSOR_POSITION, CTX_INLINE_CHAT_POSSIBLE, ACTION_START, CTX_INLINE_CHAT_V2_ENABLED, CTX_INLINE_CHAT_V1_ENABLED, CTX_HOVER_MODE } from '../common/inlineChat.js';
+import { ACTION_ACCEPT_CHANGES, CTX_INLINE_CHAT_FOCUSED, CTX_INLINE_CHAT_VISIBLE, CTX_INLINE_CHAT_OUTER_CURSOR_POSITION, CTX_INLINE_CHAT_POSSIBLE, ACTION_START, CTX_INLINE_CHAT_V2_ENABLED, CTX_INLINE_CHAT_V1_ENABLED, CTX_HOVER_MODE, CTX_INLINE_CHAT_INPUT_HAS_TEXT } from '../common/inlineChat.js';
 import { ctxHasEditorModification, ctxHasRequestInProgress } from '../../chat/browser/chatEditing/chatEditingEditorContextKeys.js';
 import { localize, localize2 } from '../../../../nls.js';
 import { Action2, IAction2Options, MenuId } from '../../../../platform/actions/common/actions.js';
@@ -75,10 +75,6 @@ export class StartSessionAction extends Action2 {
 				id: MenuId.ChatTitleBarMenu,
 				group: 'a_open',
 				order: 3,
-			}, {
-				id: MenuId.ChatEditorInlineGutter,
-				group: '1_chat',
-				order: 1,
 			}]
 		});
 	}
@@ -330,3 +326,28 @@ export class UndoAndCloseSessionAction2 extends KeepOrUndoSessionAction {
 		});
 	}
 }
+
+export class SubmitInlineChatInputAction extends AbstractInlineChatAction {
+
+	constructor() {
+		super({
+			id: 'inlineChat.submitInput',
+			title: localize2('submitInput', "Send"),
+			icon: Codicon.send,
+			precondition: CTX_INLINE_CHAT_INPUT_HAS_TEXT,
+			menu: [{
+				id: MenuId.InlineChatInput,
+				group: '0_main',
+				order: 1,
+			}]
+		});
+	}
+
+	override runInlineChatCommand(_accessor: ServicesAccessor, ctrl: InlineChatController, _editor: ICodeEditor, ..._args: unknown[]): void {
+		const value = ctrl.inputWidget.value;
+		if (value) {
+			ctrl.inputWidget.hide();
+			ctrl.run({ message: value, autoSend: true });
+		}
+	}
+}
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatAffordance.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatAffordance.ts
index 58ecc761706..ea0933b7e44 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatAffordance.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatAffordance.ts
@@ -23,15 +23,18 @@ import { IInlineChatSessionService } from './inlineChatSessionService.js';
 import { CodeActionController } from '../../../../editor/contrib/codeAction/browser/codeActionController.js';
 import { ITelemetryService } from '../../../../platform/telemetry/common/telemetry.js';
 import { generateUuid } from '../../../../base/common/uuid.js';
+import { Event } from '../../../../base/common/event.js';
 
 type InlineChatAffordanceEvent = {
 	mode: string;
 	id: string;
+	commandId: string;
 };
 
 type InlineChatAffordanceClassification = {
 	mode: { classification: 'SystemMetaData'; purpose: 'FeatureInsight'; comment: 'The affordance mode: gutter or editor.' };
 	id: { classification: 'SystemMetaData'; purpose: 'FeatureInsight'; comment: 'UUID to correlate shown and selected events.' };
+	commandId: { classification: 'SystemMetaData'; purpose: 'FeatureInsight'; comment: 'The command that was executed.' };
 	owner: 'jrieken';
 	comment: 'Tracks when the inline chat affordance is shown or selected.';
 };
@@ -83,7 +86,7 @@ export class InlineChatAffordance extends Disposable {
 			affordanceId = generateUuid();
 			const mode = affordance.read(undefined);
 			if (mode === 'gutter' || mode === 'editor') {
-				telemetryService.publicLog2<InlineChatAffordanceEvent, InlineChatAffordanceClassification>('inlineChatAffordance/shown', { mode, id: affordanceId });
+				telemetryService.publicLog2<InlineChatAffordanceEvent, InlineChatAffordanceClassification>('inlineChatAffordance/shown', { mode, id: affordanceId, commandId: '' });
 			}
 			selectionData.set(value, undefined);
 		}));
@@ -106,7 +109,12 @@ export class InlineChatAffordance extends Disposable {
 			}
 		}));
 
-		this._store.add(this.#instantiationService.createInstance(
+		// Hide when the editor context menu shows
+		this._store.add(this.#editor.onContextMenu(() => {
+			selectionData.set(undefined, undefined);
+		}));
+
+		const gutterAffordance = this._store.add(this.#instantiationService.createInstance(
 			InlineChatGutterAffordance,
 			editorObs,
 			derived(r => affordance.read(r) === 'gutter' ? selectionData.read(r) : undefined),
@@ -119,17 +127,19 @@ export class InlineChatAffordance extends Disposable {
 			derived(r => affordance.read(r) === 'editor' ? selectionData.read(r) : undefined)
 		);
 		this._store.add(editorAffordance);
-		this._store.add(editorAffordance.onDidRunAction(() => {
+
+		this._store.add(Event.any(editorAffordance.onDidRunAction, gutterAffordance.onDidRunAction)(commandId => {
 			if (affordanceId) {
-				telemetryService.publicLog2<InlineChatAffordanceEvent, InlineChatAffordanceClassification>('inlineChatAffordance/selected', { mode: 'editor', id: affordanceId });
+				telemetryService.publicLog2<InlineChatAffordanceEvent, InlineChatAffordanceClassification>('inlineChatAffordance/selected', { mode: affordance.get(), id: affordanceId, commandId });
 			}
 		}));
 
 		this._store.add(autorun(r => {
-			const isEditor = affordance.read(r) === 'editor';
+			const mode = affordance.read(r);
+			const hideWithSelection = mode === 'editor' || mode === 'gutter';
 			const controller = CodeActionController.get(this.#editor);
 			if (controller) {
-				controller.onlyLightBulbWithEmptySelection = isEditor;
+				controller.onlyLightBulbWithEmptySelection = hideWithSelection;
 			}
 		}));
 
@@ -139,10 +149,6 @@ export class InlineChatAffordance extends Disposable {
 				return;
 			}
 
-			if (affordanceId) {
-				telemetryService.publicLog2<InlineChatAffordanceEvent, InlineChatAffordanceClassification>('inlineChatAffordance/selected', { mode: 'gutter', id: affordanceId });
-			}
-
 			// Reveal the line in case it's outside the viewport (e.g., when triggered from sticky scroll)
 			this.#editor.revealLineInCenterIfOutsideViewport(data.lineNumber, ScrollType.Immediate);
 
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts
index 1790933cbb8..79335bf93cd 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatController.ts
@@ -118,6 +118,7 @@ export class InlineChatController implements IEditorContribution {
 	private readonly _renderMode: IObservable<'zone' | 'hover'>;
 	private readonly _zone: Lazy<InlineChatZoneWidget>;
 	private readonly _gutterIndicator: InlineChatAffordance;
+	private readonly _inputWidget: InlineChatInputWidget;
 
 	private readonly _currentSession: IObservable<IInlineChatSession2 | undefined>;
 
@@ -129,6 +130,10 @@ export class InlineChatController implements IEditorContribution {
 		return Boolean(this._currentSession.get());
 	}
 
+	get inputWidget(): InlineChatInputWidget {
+		return this._inputWidget;
+	}
+
 	constructor(
 		private readonly _editor: ICodeEditor,
 		@IInstantiationService private readonly _instaService: IInstantiationService,
@@ -152,7 +157,7 @@ export class InlineChatController implements IEditorContribution {
 		const notebookAgentConfig = observableConfigValue(InlineChatConfigKeys.notebookAgent, false, this._configurationService);
 		this._renderMode = observableConfigValue(InlineChatConfigKeys.RenderMode, 'zone', this._configurationService);
 
-		const overlayWidget = this._store.add(this._instaService.createInstance(InlineChatInputWidget, editorObs));
+		const overlayWidget = this._inputWidget = this._store.add(this._instaService.createInstance(InlineChatInputWidget, editorObs));
 		const sessionOverlayWidget = this._store.add(this._instaService.createInstance(InlineChatSessionOverlayWidget, editorObs));
 		this._gutterIndicator = this._store.add(this._instaService.createInstance(InlineChatAffordance, this._editor, overlayWidget));
 
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatEditorAffordance.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatEditorAffordance.ts
index 0aacdb12572..519ae158e7f 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatEditorAffordance.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatEditorAffordance.ts
@@ -147,8 +147,8 @@ export class InlineChatEditorAffordance extends Disposable implements IContentWi
 	private _position: IContentWidgetPosition | null = null;
 	private _isVisible = false;
 
-	private readonly _onDidRunAction = this._store.add(new Emitter<void>());
-	readonly onDidRunAction: Event<void> = this._onDidRunAction.event;
+	private readonly _onDidRunAction = this._store.add(new Emitter<string>());
+	readonly onDidRunAction: Event<string> = this._onDidRunAction.event;
 
 	readonly allowEditorOverflow = false;
 	readonly suppressMouseDown = false;
@@ -179,7 +179,10 @@ export class InlineChatEditorAffordance extends Disposable implements IContentWi
 				return undefined;
 			}
 		}));
-		this._store.add(toolbar.actionRunner.onDidRun(() => this._onDidRunAction.fire()));
+		this._store.add(toolbar.actionRunner.onDidRun((e) => {
+			this._onDidRunAction.fire(e.action.id);
+			this._hide();
+		}));
 
 		this._store.add(autorun(r => {
 			const sel = selection.read(r);
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatGutterAffordance.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatGutterAffordance.ts
index 26c3a60a339..19d67a29e95 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatGutterAffordance.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatGutterAffordance.ts
@@ -4,41 +4,73 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { Codicon } from '../../../../base/common/codicons.js';
-import { autorun, constObservable, derived, IObservable, ISettableObservable, observableValue } from '../../../../base/common/observable.js';
+import { Emitter, Event } from '../../../../base/common/event.js';
+import { autorun, constObservable, derived, IObservable, ISettableObservable, observableFromEvent, observableValue } from '../../../../base/common/observable.js';
+import { ThemeIcon } from '../../../../base/common/themables.js';
 import { ObservableCodeEditor } from '../../../../editor/browser/observableCodeEditor.js';
 import { LineRange } from '../../../../editor/common/core/ranges/lineRange.js';
 import { Selection, SelectionDirection } from '../../../../editor/common/core/selection.js';
+import { InlineCompletionCommand } from '../../../../editor/common/languages.js';
+import { CodeActionController } from '../../../../editor/contrib/codeAction/browser/codeActionController.js';
 import { InlineEditsGutterIndicator, InlineEditsGutterIndicatorData, InlineSuggestionGutterMenuData, SimpleInlineSuggestModel } from '../../../../editor/contrib/inlineCompletions/browser/view/inlineEdits/components/gutterIndicatorView.js';
 import { InlineEditTabAction } from '../../../../editor/contrib/inlineCompletions/browser/view/inlineEdits/inlineEditsViewInterface.js';
-import { localize } from '../../../../nls.js';
 import { IAccessibilityService } from '../../../../platform/accessibility/common/accessibility.js';
+import { IMenuService, MenuId, MenuItemAction } from '../../../../platform/actions/common/actions.js';
+import { IContextKeyService } from '../../../../platform/contextkey/common/contextkey.js';
 import { IHoverService } from '../../../../platform/hover/browser/hover.js';
 import { HoverService } from '../../../../platform/hover/browser/hoverService.js';
 import { IInstantiationService } from '../../../../platform/instantiation/common/instantiation.js';
 import { IKeybindingService } from '../../../../platform/keybinding/common/keybinding.js';
 import { IThemeService } from '../../../../platform/theme/common/themeService.js';
 import { IUserInteractionService } from '../../../../platform/userInteraction/browser/userInteractionService.js';
-import { ACTION_START } from '../common/inlineChat.js';
 
 export class InlineChatGutterAffordance extends InlineEditsGutterIndicator {
 
+	private readonly _onDidRunAction = this._store.add(new Emitter<string>());
+	readonly onDidRunAction: Event<string> = this._onDidRunAction.event;
+
 	constructor(
 		private readonly _myEditorObs: ObservableCodeEditor,
 		selection: IObservable<Selection | undefined>,
 		private readonly _hover: ISettableObservable<{ rect: DOMRect; above: boolean; lineNumber: number } | undefined>,
-		@IKeybindingService private readonly _keybindingService: IKeybindingService,
+		@IKeybindingService _keybindingService: IKeybindingService,
 		@IHoverService hoverService: HoverService,
 		@IInstantiationService instantiationService: IInstantiationService,
 		@IAccessibilityService accessibilityService: IAccessibilityService,
 		@IThemeService themeService: IThemeService,
 		@IUserInteractionService userInteractionService: IUserInteractionService,
+		@IMenuService menuService: IMenuService,
+		@IContextKeyService contextKeyService: IContextKeyService,
 	) {
+
+		const menu = menuService.createMenu(MenuId.InlineChatEditorAffordance, contextKeyService);
+		const menuObs = observableFromEvent(menu.onDidChange, () => menu.getActions({ renderShortTitle: false }));
+
+		const codeActionController = CodeActionController.get(_myEditorObs.editor);
+		const lightBulbObs = codeActionController?.lightBulbState;
+
 		const data = derived<InlineEditsGutterIndicatorData | undefined>(r => {
 			const value = selection.read(r);
 			if (!value) {
 				return undefined;
 			}
 
+			const commandGroups: InlineCompletionCommand[][] = [];
+			for (const [, groupActions] of menuObs.read(r)) {
+				const group: InlineCompletionCommand[] = [];
+				for (const action of groupActions) {
+					if (action instanceof MenuItemAction) {
+						group.push({
+							command: { id: action.item.id, title: action.label },
+							icon: ThemeIcon.isThemeIcon(action.item.icon) ? action.item.icon : undefined
+						});
+					}
+				}
+				if (group.length > 0) {
+					commandGroups.push(group);
+				}
+			}
+
 			// Use the cursor position (active end of selection) to determine the line
 			const cursorPosition = value.getPosition();
 			const lineRange = new LineRange(cursorPosition.lineNumber, cursorPosition.lineNumber + 1);
@@ -47,20 +79,23 @@ export class InlineChatGutterAffordance extends InlineEditsGutterIndicator {
 			const gutterMenuData = new InlineSuggestionGutterMenuData(
 				undefined, // action
 				'', // displayName
-				[], // extensionCommands
+				commandGroups, // extensionCommands
 				undefined, // alternativeAction
 				undefined, // modelInfo
 				undefined, // setModelId
+				true, // extensionCommandsOnly
 			);
 
+			// Use lightbulb icon/color when code actions are available, otherwise sparkle
+			const lightBulbInfo = lightBulbObs?.read(r);
+			const icon = lightBulbInfo ? lightBulbInfo.icon : Codicon.sparkle;
+
 			return new InlineEditsGutterIndicatorData(
 				gutterMenuData,
 				lineRange,
 				new SimpleInlineSuggestModel(() => { }, () => this._doShowHover()),
 				undefined, // altAction
-				{
-					icon: Codicon.sparkle,
-				}
+				{ icon }
 			);
 		});
 
@@ -71,18 +106,14 @@ export class InlineChatGutterAffordance extends InlineEditsGutterIndicator {
 			hoverService, instantiationService, accessibilityService, themeService, userInteractionService
 		);
 
+		this._store.add(menu);
+
 		this._store.add(autorun(r => {
 			const element = _hover.read(r);
 			this._hoverVisible.set(!!element, undefined);
 		}));
-	}
 
-	protected override _showHover(): void {
-		this._hoverService.showInstantHover({
-			target: this._iconRef.element,
-			content: this._keybindingService.appendKeybinding(localize('inlineChatGutterHover', "Inline Chat"), ACTION_START),
-			// appearance: { showPointer: true }
-		});
+		this._store.add(this.onDidCloseWithCommand(commandId => this._onDidRunAction.fire(commandId)));
 	}
 
 	private _doShowHover(): void {
diff --git a/src/vs/workbench/contrib/inlineChat/browser/inlineChatOverlayWidget.ts b/src/vs/workbench/contrib/inlineChat/browser/inlineChatOverlayWidget.ts
index 0284206c2bf..844b7dae003 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/inlineChatOverlayWidget.ts
+++ b/src/vs/workbench/contrib/inlineChat/browser/inlineChatOverlayWidget.ts
@@ -5,10 +5,11 @@
 
 import './media/inlineChatOverlayWidget.css';
 import * as dom from '../../../../base/browser/dom.js';
-import { renderAsPlaintext } from '../../../../base/browser/markdownRenderer.js';
+import { DEFAULT_FONT_FAMILY } from '../../../../base/browser/fonts.js';
 import { StandardKeyboardEvent } from '../../../../base/browser/keyboardEvent.js';
-import { IAction, Separator } from '../../../../base/common/actions.js';
+import { renderAsPlaintext } from '../../../../base/browser/markdownRenderer.js';
 import { ActionBar, ActionsOrientation } from '../../../../base/browser/ui/actionbar/actionbar.js';
+import { BaseActionViewItem } from '../../../../base/browser/ui/actionbar/actionViewItems.js';
 import { Codicon } from '../../../../base/common/codicons.js';
 import { KeyCode } from '../../../../base/common/keyCodes.js';
 import { Disposable, DisposableStore, toDisposable } from '../../../../base/common/lifecycle.js';
@@ -23,20 +24,19 @@ import { CodeEditorWidget, ICodeEditorWidgetOptions } from '../../../../editor/b
 import { IModelService } from '../../../../editor/common/services/model.js';
 import { localize } from '../../../../nls.js';
 import { HiddenItemStrategy, MenuWorkbenchToolBar } from '../../../../platform/actions/browser/toolbar.js';
+import { getFlatActionBarActions } from '../../../../platform/actions/browser/menuEntryActionViewItem.js';
 import { IMenuService, MenuId } from '../../../../platform/actions/common/actions.js';
 import { IContextKeyService } from '../../../../platform/contextkey/common/contextkey.js';
 import { IInstantiationService } from '../../../../platform/instantiation/common/instantiation.js';
+import { ICommandService } from '../../../../platform/commands/common/commands.js';
 import { ChatEditingAcceptRejectActionViewItem } from '../../chat/browser/chatEditing/chatEditingEditorOverlay.js';
-import { ACTION_START } from '../common/inlineChat.js';
+import { CTX_INLINE_CHAT_INPUT_HAS_TEXT } from '../common/inlineChat.js';
 import { StickyScrollController } from '../../../../editor/contrib/stickyScroll/browser/stickyScrollController.js';
 import { IKeybindingService } from '../../../../platform/keybinding/common/keybinding.js';
-import { getFlatActionBarActions } from '../../../../platform/actions/browser/menuEntryActionViewItem.js';
 import { IConfigurationService } from '../../../../platform/configuration/common/configuration.js';
 import { getSimpleEditorOptions } from '../../codeEditor/browser/simpleEditorOptions.js';
 import { PlaceholderTextContribution } from '../../../../editor/contrib/placeholderText/browser/placeholderTextContribution.js';
-import { InlineChatRunOptions } from './inlineChatController.js';
 import { IInlineChatSession2 } from './inlineChatSessionService.js';
-import { Position } from '../../../../editor/common/core/position.js';
 import { CancelChatActionId } from '../../chat/browser/actions/chatExecuteActions.js';
 import { assertType } from '../../../../base/common/types.js';
 
@@ -46,8 +46,9 @@ import { assertType } from '../../../../base/common/types.js';
 export class InlineChatInputWidget extends Disposable {
 
 	private readonly _domNode: HTMLElement;
+	private readonly _container: HTMLElement;
 	private readonly _inputContainer: HTMLElement;
-	private readonly _actionBar: ActionBar;
+	private readonly _toolbarContainer: HTMLElement;
 	private readonly _input: IActiveCodeEditor;
 	private readonly _position = observableValue<IOverlayWidgetPosition | null>(this, null);
 	readonly position: IObservable<IOverlayWidgetPosition | null> = this._position;
@@ -55,7 +56,7 @@ export class InlineChatInputWidget extends Disposable {
 
 	private readonly _showStore = this._store.add(new DisposableStore());
 	private readonly _stickyScrollHeight: IObservable<number>;
-	private _inlineStartAction: IAction | undefined;
+	private readonly _layoutData: IObservable<{ totalWidth: number; toolbarWidth: number; height: number; editorPad: number }>;
 	private _anchorLineNumber: number = 0;
 	private _anchorLeft: number = 0;
 	private _anchorAbove: boolean = false;
@@ -63,9 +64,9 @@ export class InlineChatInputWidget extends Disposable {
 
 	constructor(
 		private readonly _editorObs: ObservableCodeEditor,
-		@IKeybindingService private readonly _keybindingService: IKeybindingService,
-		@IMenuService private readonly _menuService: IMenuService,
 		@IContextKeyService private readonly _contextKeyService: IContextKeyService,
+		@ICommandService private readonly _commandService: ICommandService,
+		@IMenuService private readonly _menuService: IMenuService,
 		@IInstantiationService instantiationService: IInstantiationService,
 		@IModelService modelService: IModelService,
 		@IConfigurationService configurationService: IConfigurationService,
@@ -75,25 +76,48 @@ export class InlineChatInputWidget extends Disposable {
 		// Create container
 		this._domNode = dom.$('.inline-chat-gutter-menu');
 
+		// Create inner container (background + focus border)
+		this._container = dom.append(this._domNode, dom.$('.inline-chat-gutter-container'));
+
 		// Create input editor container
-		this._inputContainer = dom.append(this._domNode, dom.$('.input'));
-		this._inputContainer.style.width = '200px';
-		this._inputContainer.style.height = '26px';
-		this._inputContainer.style.display = 'flex';
-		this._inputContainer.style.alignItems = 'center';
-		this._inputContainer.style.justifyContent = 'center';
+		this._inputContainer = dom.append(this._container, dom.$('.input'));
+
+		// Create toolbar container
+		this._toolbarContainer = dom.append(this._container, dom.$('.toolbar'));
+
+		// Create vertical actions bar below the input container
+		const actionsContainer = dom.append(this._domNode, dom.$('.inline-chat-gutter-actions'));
+		const actionBar = this._store.add(new ActionBar(actionsContainer, {
+			orientation: ActionsOrientation.VERTICAL,
+			preventLoopNavigation: true,
+		}));
+		const actionsMenu = this._store.add(this._menuService.createMenu(MenuId.ChatEditorInlineMenu, this._contextKeyService));
+		const updateActions = () => {
+			const actions = getFlatActionBarActions(actionsMenu.getActions({ shouldForwardArgs: true }));
+			actionBar.clear();
+			actionBar.push(actions);
+			dom.setVisibility(actions.length > 0, actionsContainer);
+		};
+		this._store.add(actionsMenu.onDidChange(updateActions));
+		updateActions();
 
 		// Create editor options
 		const options = getSimpleEditorOptions(configurationService);
-		options.wordWrap = 'on';
+		options.wordWrap = 'off';
+		options.wrappingStrategy = 'advanced';
 		options.lineNumbers = 'off';
 		options.glyphMargin = false;
 		options.lineDecorationsWidth = 0;
 		options.lineNumbersMinChars = 0;
 		options.folding = false;
 		options.minimap = { enabled: false };
-		options.scrollbar = { vertical: 'auto', horizontal: 'hidden', alwaysConsumeMouseWheel: true, verticalSliderSize: 6 };
+		options.scrollbar = { vertical: 'hidden', horizontal: 'hidden', alwaysConsumeMouseWheel: true };
 		options.renderLineHighlight = 'none';
+		options.fontFamily = DEFAULT_FONT_FAMILY;
+		options.fontSize = 13;
+		options.lineHeight = 20;
+		options.cursorWidth = 1;
+		options.padding = { top: 2, bottom: 2 };
 
 		const codeEditorWidgetOptions: ICodeEditorWidgetOptions = {
 			isSimpleWidget: true,
@@ -107,86 +131,149 @@ export class InlineChatInputWidget extends Disposable {
 		const model = this._store.add(modelService.createModel('', null, URI.parse(`gutter-input:${Date.now()}`), true));
 		this._input.setModel(model);
 
+		// Create toolbar
+		const toolbar = this._store.add(instantiationService.createInstance(MenuWorkbenchToolBar, this._toolbarContainer, MenuId.InlineChatInput, {
+			telemetrySource: 'inlineChatInput.toolbar',
+			hiddenItemStrategy: HiddenItemStrategy.NoHide,
+			toolbarOptions: {
+				primaryGroup: () => true,
+			},
+			menuOptions: { shouldForwardArgs: true },
+		}));
+
 		// Initialize sticky scroll height observable
 		const stickyScrollController = StickyScrollController.get(this._editorObs.editor);
 		this._stickyScrollHeight = stickyScrollController ? observableFromEvent(stickyScrollController.onDidChangeStickyScrollHeight, () => stickyScrollController.stickyScrollWidgetHeight) : constObservable(0);
 
+		// Track toolbar width changes
+		const toolbarWidth = observableValue<number>(this, 0);
+		const resizeObserver = new dom.DisposableResizeObserver(() => {
+			toolbarWidth.set(dom.getTotalWidth(toolbar.getElement()), undefined);
+		});
+		this._store.add(resizeObserver);
+		this._store.add(resizeObserver.observe(toolbar.getElement()));
+
+		// Compute min and max widget width based on editor content width
+		const maxWidgetWidth = derived(r => {
+			const layoutInfo = this._editorObs.layoutInfo.read(r);
+			return Math.max(0, Math.round(layoutInfo.contentWidth * 0.70));
+		});
+		const minWidgetWidth = derived(r => {
+			const layoutInfo = this._editorObs.layoutInfo.read(r);
+			return Math.max(0, Math.round(layoutInfo.contentWidth * 0.33));
+		});
+
+		const contentWidth = observableFromEvent(this, this._input.onDidChangeModelContent, () => this._input.getContentWidth());
+		const contentHeight = observableFromEvent(this, this._input.onDidContentSizeChange, () => this._input.getContentHeight());
+
+		this._layoutData = derived(r => {
+			const editorPad = 6;
+			const totalWidth = contentWidth.read(r) + editorPad + toolbarWidth.read(r);
+			const minWidth = minWidgetWidth.read(r);
+			const maxWidth = maxWidgetWidth.read(r);
+			const clampedWidth = this._input.getOption(EditorOption.wordWrap) === 'on'
+				? maxWidth
+				: Math.max(minWidth, Math.min(totalWidth, maxWidth));
+
+			const lineHeight = this._input.getOption(EditorOption.lineHeight);
+			const clampedHeight = Math.min(contentHeight.read(r), (3 * lineHeight));
+
+			if (totalWidth > clampedWidth) {
+				// enable word wrap
+				this._input.updateOptions({ wordWrap: 'on', });
+			}
+
+			return {
+				editorPad,
+				toolbarWidth: toolbarWidth.read(r),
+				totalWidth: clampedWidth,
+				height: clampedHeight
+			};
+		});
+
+		// Update container width and editor layout when width changes
+		this._store.add(autorun(r => {
+			const { editorPad, toolbarWidth, totalWidth, height } = this._layoutData.read(r);
+
+			const inputWidth = totalWidth - toolbarWidth - editorPad;
+			this._container.style.width = `${totalWidth}px`;
+			this._inputContainer.style.width = `${inputWidth}px`;
+			this._input.layout({ width: inputWidth, height });
+		}));
+
+		// Toggle focus class on the container
+		this._store.add(this._input.onDidFocusEditorText(() => this._container.classList.add('focused')));
+		this._store.add(this._input.onDidBlurEditorText(() => this._container.classList.remove('focused')));
+
+		// Toggle scroll decoration on the toolbar
+		this._store.add(this._input.onDidScrollChange(e => {
+			this._toolbarContainer.classList.toggle('fake-scroll-decoration', e.scrollTop > 0);
+		}));
+
 		// Update placeholder based on selection state
 		this._store.add(autorun(r => {
 			const selection = this._editorObs.cursorSelection.read(r);
 			const hasSelection = selection && !selection.isEmpty();
 			const placeholderText = hasSelection
-				? localize('placeholderWithSelection', "Modify selected code")
-				: localize('placeholderNoSelection', "Generate code");
+				? localize('placeholderWithSelection', "Describe how to change this")
+				: localize('placeholderNoSelection', "Describe what to generate");
 
-			this._input.updateOptions({ placeholder: this._keybindingService.appendKeybinding(placeholderText, ACTION_START) });
+			this._input.updateOptions({ placeholder: placeholderText });
 		}));
 
-		// Listen to content size changes and resize the input editor (max 3 lines)
-		this._store.add(this._input.onDidContentSizeChange(e => {
-			if (e.contentHeightChanged) {
-				this._updateInputHeight(e.contentHeight);
-			}
-		}));
 
-		// Handle Enter key to submit and ArrowDown to focus action bar
+		// Track input text for context key and adjust width based on content
+		const inputHasText = CTX_INLINE_CHAT_INPUT_HAS_TEXT.bindTo(this._contextKeyService);
+		this._store.add(this._input.onDidChangeModelContent(() => {
+			inputHasText.set(this._input.getModel().getValue().trim().length > 0);
+		}));
+		this._store.add(toDisposable(() => inputHasText.reset()));
+
+		// Handle Enter key to submit, ArrowDown to move to actions
 		this._store.add(this._input.onKeyDown(e => {
 			if (e.keyCode === KeyCode.Enter && !e.shiftKey) {
-				const value = this._input.getModel().getValue() ?? '';
-				// TODO@jrieken this isn't nice
-				if (this._inlineStartAction && value) {
-					e.preventDefault();
-					e.stopPropagation();
-					this._actionBar.actionRunner.run(
-						this._inlineStartAction,
-						{ message: value, autoSend: true } satisfies InlineChatRunOptions
-					);
-				}
+				e.preventDefault();
+				e.stopPropagation();
+				this._commandService.executeCommand('inlineChat.submitInput');
 			} else if (e.keyCode === KeyCode.Escape) {
 				// Hide overlay if input is empty
 				const value = this._input.getModel().getValue() ?? '';
 				if (!value) {
 					e.preventDefault();
 					e.stopPropagation();
-					this._hide();
+					this.hide();
 				}
-			} else if (e.keyCode === KeyCode.DownArrow) {
-				// Focus first action bar item when at the end of the input
-				const inputModel = this._input.getModel();
+			} else if (e.keyCode === KeyCode.DownArrow && !actionBar.isEmpty()) {
+				const model = this._input.getModel();
 				const position = this._input.getPosition();
-				const lastLineNumber = inputModel.getLineCount();
-				const lastLineMaxColumn = inputModel.getLineMaxColumn(lastLineNumber);
-				if (Position.equals(position, new Position(lastLineNumber, lastLineMaxColumn))) {
+				if (position && position.lineNumber === model.getLineCount()) {
 					e.preventDefault();
 					e.stopPropagation();
-					this._actionBar.focus();
+					actionBar.focus(0);
 				}
 			}
 		}));
 
-		// Create vertical action bar
-		this._actionBar = this._store.add(new ActionBar(this._domNode, {
-			orientation: ActionsOrientation.VERTICAL,
-			preventLoopNavigation: true,
-		}));
-
-		// Handle ArrowUp on first action bar item to focus input editor
-		this._store.add(dom.addDisposableListener(this._actionBar.domNode, 'keydown', e => {
+		// ArrowUp on first action bar item moves focus back to input editor
+		this._store.add(dom.addDisposableListener(actionBar.domNode, 'keydown', (e: KeyboardEvent) => {
 			const event = new StandardKeyboardEvent(e);
-			if (event.equals(KeyCode.UpArrow) && this._actionBar.isFocused(this._actionBar.viewItems.findIndex(item => item.action.id !== Separator.ID))) {
-				event.preventDefault();
-				event.stopPropagation();
-				this._input.focus();
+			if (event.keyCode === KeyCode.UpArrow) {
+				const firstItem = actionBar.viewItems[0] as BaseActionViewItem | undefined;
+				if (firstItem?.element && dom.isAncestorOfActiveElement(firstItem.element)) {
+					event.preventDefault();
+					event.stopPropagation();
+					this._input.focus();
+				}
 			}
 		}, true));
 
 		// Track focus - hide when focus leaves
 		const focusTracker = this._store.add(dom.trackFocus(this._domNode));
-		this._store.add(focusTracker.onDidBlur(() => this._hide()));
+		this._store.add(focusTracker.onDidBlur(() => this.hide()));
+	}
 
-		// Handle action bar cancel (Escape key)
-		this._store.add(this._actionBar.onDidCancel(() => this._hide()));
-		this._store.add(this._actionBar.onWillRun(() => this._hide()));
+	get value(): string {
+		return this._input.getModel().getValue().trim();
 	}
 
 	/**
@@ -199,11 +286,8 @@ export class InlineChatInputWidget extends Disposable {
 		this._showStore.clear();
 
 		// Clear input state
+		this._input.updateOptions({ wordWrap: 'off' });
 		this._input.getModel().setValue('');
-		this._updateInputHeight(this._input.getContentHeight());
-
-		// Refresh actions from menu
-		this._refreshActions();
 
 		// Store anchor info for scroll updates
 		this._anchorLineNumber = lineNumber;
@@ -234,7 +318,7 @@ export class InlineChatInputWidget extends Disposable {
 			);
 			const hasContent = !!this._input.getModel().getValue();
 			if (!isLineVisible && !hasContent) {
-				this._hide();
+				this.hide();
 			} else {
 				this._updatePosition();
 			}
@@ -277,44 +361,16 @@ export class InlineChatInputWidget extends Disposable {
 	/**
 	 * Hide the widget (removes from editor but does not dispose).
 	 */
-	private _hide(): void {
+	hide(): void {
 		// Focus editor if focus is still within the editor's DOM
 		const editorDomNode = this._editorObs.editor.getDomNode();
 		if (editorDomNode && dom.isAncestorOfActiveElement(editorDomNode)) {
 			this._editorObs.editor.focus();
 		}
 		this._position.set(null, undefined);
+		this._input.getModel().setValue('');
 		this._showStore.clear();
 	}
-
-	private _refreshActions(): void {
-		// Clear existing actions
-		this._actionBar.clear();
-		this._inlineStartAction = undefined;
-
-		// Get fresh actions from menu
-		const actions = getFlatActionBarActions(this._menuService.getMenuActions(MenuId.ChatEditorInlineGutter, this._contextKeyService, { shouldForwardArgs: true }));
-
-		// Set actions with keybindings (skip ACTION_START since we have the input editor)
-		for (const action of actions) {
-			if (action.id === ACTION_START) {
-				this._inlineStartAction = action;
-				continue;
-			}
-			const keybinding = this._keybindingService.lookupKeybinding(action.id)?.getLabel();
-			this._actionBar.push(action, { icon: false, label: true, keybinding });
-		}
-	}
-
-	private _updateInputHeight(contentHeight: number): void {
-		const lineHeight = this._input.getOption(EditorOption.lineHeight);
-		const maxHeight = 3 * lineHeight;
-		const clampedHeight = Math.min(contentHeight, maxHeight);
-		const containerPadding = 8;
-
-		this._inputContainer.style.height = `${clampedHeight + containerPadding}px`;
-		this._input.layout({ width: 200, height: clampedHeight });
-	}
 }
 
 /**
@@ -452,7 +508,7 @@ export class InlineChatSessionOverlayWidget extends Disposable {
 					return undefined; // use default action view item with label
 				}
 
-				return new ChatEditingAcceptRejectActionViewItem(action, options, entry, undefined, that._keybindingService, primaryActions);
+				return new ChatEditingAcceptRejectActionViewItem(action, { ...options, keybinding: undefined }, entry, undefined, that._keybindingService, primaryActions);
 			}
 		}));
 
diff --git a/src/vs/workbench/contrib/inlineChat/browser/media/inlineChat.css b/src/vs/workbench/contrib/inlineChat/browser/media/inlineChat.css
index 2215f0f84dd..da1e670cf8b 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/media/inlineChat.css
+++ b/src/vs/workbench/contrib/inlineChat/browser/media/inlineChat.css
@@ -321,45 +321,3 @@
 .monaco-workbench .inline-chat .chat-attached-context {
 	padding: 2px 0px;
 }
-
-/* Gutter menu overlay widget */
-.inline-chat-gutter-menu {
-	background: var(--vscode-menu-background);
-	border: 1px solid var(--vscode-menu-border, var(--vscode-widget-border));
-	border-radius: 4px;
-	box-shadow: 0 2px 8px var(--vscode-widget-shadow);
-	padding: 4px 0;
-	min-width: 160px;
-	z-index: 10000;
-}
-
-.inline-chat-gutter-menu .input {
-	padding: 0 8px;
-}
-
-.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item {
-	display: flex;
-	justify-content: space-between;
-	border-radius: 3px;
-	margin: 0 4px;
-}
-
-.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item .action-label {
-	font-size: 13px;
-	width: 100%;
-}
-
-.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):hover,
-.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):focus-within {
-	background-color: var(--vscode-list-activeSelectionBackground);
-	color: var(--vscode-list-activeSelectionForeground);
-	outline: 1px solid var(--vscode-menu-selectionBorder, transparent);
-	outline-offset: -1px;
-}
-
-.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):hover .action-label,
-.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):focus-within .action-label {
-	color: var(--vscode-list-activeSelectionForeground);
-	outline: 1px solid var(--vscode-menu-selectionBorder, transparent);
-	outline-offset: -1px;
-}
diff --git a/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatEditorAffordance.css b/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatEditorAffordance.css
index 14913c7eb45..b50a69f8752 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatEditorAffordance.css
+++ b/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatEditorAffordance.css
@@ -4,8 +4,8 @@
  *--------------------------------------------------------------------------------------------*/
 
 .inline-chat-content-widget {
-	background-color: var(--vscode-editor-background);
-	padding: 2px;
+	background-color: var(--vscode-panel-background);
+	padding: 0 1px;
 	border-radius: 8px;
 	display: flex;
 	align-items: center;
@@ -14,21 +14,27 @@
 	min-width: var(--vscode-inline-chat-affordance-height);
 	min-height: var(--vscode-inline-chat-affordance-height);
 	line-height: var(--vscode-inline-chat-affordance-height);
+	border: 1px solid var(--vscode-input-border, transparent);
 }
 
 .inline-chat-content-widget .action-label.codicon.codicon-light-bulb,
-.inline-chat-content-widget .action-label.codicon.codicon-lightbulb-sparkle {
+.inline-chat-content-widget .action-label.codicon.codicon-lightbulb-sparkle,
+.inline-edits-view-gutter-indicator .codicon.codicon-light-bulb,
+.inline-edits-view-gutter-indicator .codicon.codicon-lightbulb-sparkle {
 	margin: 0;
 	color: var(--vscode-editorLightBulb-foreground);
 }
 
 .inline-chat-content-widget .action-label.codicon.codicon-lightbulb-autofix,
-.inline-chat-content-widget .action-label.codicon.codicon-lightbulb-sparkle-autofix {
+.inline-chat-content-widget .action-label.codicon.codicon-lightbulb-sparkle-autofix,
+.inline-edits-view-gutter-indicator .codicon.codicon-lightbulb-autofix,
+.inline-edits-view-gutter-indicator .codicon.codicon-lightbulb-sparkle-autofix {
 	margin: 0;
 	color: var(--vscode-editorLightBulbAutoFix-foreground, var(--vscode-editorLightBulb-foreground));
 }
 
-.inline-chat-content-widget .action-label.codicon.codicon-sparkle-filled {
+.inline-chat-content-widget .action-label.codicon.codicon-sparkle-filled,
+.inline-edits-view-gutter-indicator .codicon.codicon-sparkle-filled {
 	margin: 0;
 	color: var(--vscode-editorLightBulbAi-foreground, var(--vscode-icon-foreground));
 }
diff --git a/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatOverlayWidget.css b/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatOverlayWidget.css
index 1af3ff339a1..294867b3056 100644
--- a/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatOverlayWidget.css
+++ b/src/vs/workbench/contrib/inlineChat/browser/media/inlineChatOverlayWidget.css
@@ -3,12 +3,93 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
+
+/* Gutter menu overlay widget */
+.inline-chat-gutter-menu {
+	background: var(--vscode-panel-background);
+	border: 1px solid var(--vscode-menu-border, var(--vscode-widget-border));
+	border-radius: 8px;
+	box-shadow: 0 2px 8px var(--vscode-widget-shadow);
+	z-index: 10000;
+}
+
+.inline-chat-gutter-menu .input {
+	padding: 0 3px;
+}
+
+.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item {
+	display: flex;
+	justify-content: space-between;
+	border-radius: 3px;
+	margin: 0 4px;
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-actions {
+	padding-bottom: 2px;
+}
+
+.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item .action-label {
+	font-size: 13px;
+	width: 100%;
+}
+
+.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):hover,
+.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):focus-within {
+	background-color: var(--vscode-list-activeSelectionBackground);
+	color: var(--vscode-list-activeSelectionForeground);
+	outline: 1px solid var(--vscode-menu-selectionBorder, transparent);
+	outline-offset: -1px;
+}
+
+.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):hover .action-label,
+.inline-chat-gutter-menu .monaco-action-bar.vertical .action-item:not(.disabled):focus-within .action-label {
+	color: var(--vscode-list-activeSelectionForeground);
+	outline: 1px solid var(--vscode-menu-selectionBorder, transparent);
+	outline-offset: -1px;
+}
+
+
 .inline-chat-gutter-menu.clamped {
 	transition: top 100ms;
 }
 
-.inline-chat-gutter-menu .input .monaco-editor-background {
-	background-color: var(--vscode-menu-background);
+.inline-chat-gutter-menu .inline-chat-gutter-container {
+	box-sizing: border-box;
+	display: flex;
+	align-items: center;
+	margin: 6px 4px 4px 4px;
+	background-color: var(--vscode-input-background);
+	border: 1px solid var(--vscode-input-border, transparent);
+	border-radius: 4px;
+	overflow: hidden;
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-container.focused {
+	border-color: var(--vscode-focusBorder);
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-container > .input {
+	flex: 1;
+	min-width: 0;
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-container > .input .monaco-editor-background {
+	background-color: var(--vscode-input-background);
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-container > .toolbar {
+	display: flex;
+	align-items: center;
+	align-self: stretch;
+	padding: 0 4px;
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-container > .toolbar.fake-scroll-decoration {
+	box-shadow: var(--vscode-scrollbar-shadow) 0 6px 6px -6px inset;
+}
+
+.inline-chat-gutter-menu .inline-chat-gutter-container > .toolbar .monaco-action-bar .actions-container {
+	gap: 2px;
 }
 
 .inline-chat-session-overlay-widget {
diff --git a/src/vs/workbench/contrib/inlineChat/common/inlineChat.ts b/src/vs/workbench/contrib/inlineChat/common/inlineChat.ts
index e8866c447f3..99591004f82 100644
--- a/src/vs/workbench/contrib/inlineChat/common/inlineChat.ts
+++ b/src/vs/workbench/contrib/inlineChat/common/inlineChat.ts
@@ -108,6 +108,7 @@ export const CTX_INLINE_CHAT_FOCUSED = new RawContextKey<boolean>('inlineChatFoc
 export const CTX_INLINE_CHAT_EDITING = new RawContextKey<boolean>('inlineChatEditing', true, localize('inlineChatEditing', "Whether the user is currently editing or generating code in the inline chat"));
 export const CTX_INLINE_CHAT_RESPONSE_FOCUSED = new RawContextKey<boolean>('inlineChatResponseFocused', false, localize('inlineChatResponseFocused', "Whether the interactive widget's response is focused"));
 export const CTX_INLINE_CHAT_EMPTY = new RawContextKey<boolean>('inlineChatEmpty', false, localize('inlineChatEmpty', "Whether the interactive editor input is empty"));
+export const CTX_INLINE_CHAT_INPUT_HAS_TEXT = new RawContextKey<boolean>('inlineChatInputHasText', false, localize('inlineChatInputHasText', "Whether the inline chat input widget has text"));
 export const CTX_INLINE_CHAT_INNER_CURSOR_FIRST = new RawContextKey<boolean>('inlineChatInnerCursorFirst', false, localize('inlineChatInnerCursorFirst', "Whether the cursor of the iteractive editor input is on the first line"));
 export const CTX_INLINE_CHAT_INNER_CURSOR_LAST = new RawContextKey<boolean>('inlineChatInnerCursorLast', false, localize('inlineChatInnerCursorLast', "Whether the cursor of the iteractive editor input is on the last line"));
 export const CTX_INLINE_CHAT_OUTER_CURSOR_POSITION = new RawContextKey<'above' | 'below' | ''>('inlineChatOuterCursorPosition', '', localize('inlineChatOuterCursorPosition', "Whether the cursor of the outer editor is above or below the interactive editor input"));
diff --git a/src/vs/workbench/contrib/tasks/browser/terminalTaskSystem.ts b/src/vs/workbench/contrib/tasks/browser/terminalTaskSystem.ts
index 82bc7998af4..2cf3ac03c1e 100644
--- a/src/vs/workbench/contrib/tasks/browser/terminalTaskSystem.ts
+++ b/src/vs/workbench/contrib/tasks/browser/terminalTaskSystem.ts
@@ -880,7 +880,7 @@ export class TerminalTaskSystem extends Disposable implements ITaskSystem {
 		let promise: Promise<ITaskSummary> | undefined = undefined;
 		if (task.configurationProperties.isBackground) {
 			const problemMatchers = await this._resolveMatchers(resolver, task.configurationProperties.problemMatchers);
-			const watchingProblemMatcher = new WatchingProblemCollector(problemMatchers, this._markerService, this._modelService, this._fileService);
+			const watchingProblemMatcher = new WatchingProblemCollector(problemMatchers, this._markerService, this._modelService, this._fileService, this._logService);
 			if ((problemMatchers.length > 0) && !watchingProblemMatcher.isWatching()) {
 				this._appendOutput(nls.localize('TerminalTaskSystem.nonWatchingMatcher', 'Task {0} is a background task but uses a problem matcher without a background pattern', task._label));
 				this._showOutput();
@@ -1047,7 +1047,7 @@ export class TerminalTaskSystem extends Disposable implements ITaskSystem {
 			this._fireTaskEvent(TaskEvent.general(TaskEventKind.Active, task, terminal.instanceId));
 
 			const problemMatchers = await this._resolveMatchers(resolver, task.configurationProperties.problemMatchers);
-			const startStopProblemMatcher = new StartStopProblemCollector(problemMatchers, this._markerService, this._modelService, ProblemHandlingStrategy.Clean, this._fileService);
+			const startStopProblemMatcher = new StartStopProblemCollector(problemMatchers, this._markerService, this._modelService, ProblemHandlingStrategy.Clean, this._fileService, this._logService);
 			this._terminalStatusManager.addTerminal(task, terminal, startStopProblemMatcher);
 			this._taskProblemMonitor.addTerminal(terminal, startStopProblemMatcher);
 			const problemMatcherListener = startStopProblemMatcher.onDidStateChange((event) => {
diff --git a/src/vs/workbench/contrib/tasks/common/problemCollectors.ts b/src/vs/workbench/contrib/tasks/common/problemCollectors.ts
index 892a948cb65..8ede878caca 100644
--- a/src/vs/workbench/contrib/tasks/common/problemCollectors.ts
+++ b/src/vs/workbench/contrib/tasks/common/problemCollectors.ts
@@ -15,6 +15,7 @@ import { IMarkerService, IMarkerData, MarkerSeverity, IMarker } from '../../../.
 import { generateUuid } from '../../../../base/common/uuid.js';
 import { IFileService } from '../../../../platform/files/common/files.js';
 import { isWindows } from '../../../../base/common/platform.js';
+import { ILogService } from '../../../../platform/log/common/log.js';
 
 export const enum ProblemCollectorEventKind {
 	BackgroundProcessingBegins = 'backgroundProcessingBegins',
@@ -67,11 +68,11 @@ export abstract class AbstractProblemCollector extends Disposable implements IDi
 	protected readonly _onDidRequestInvalidateLastMarker = this._register(new Emitter<void>());
 	readonly onDidRequestInvalidateLastMarker = this._onDidRequestInvalidateLastMarker.event;
 
-	constructor(public readonly problemMatchers: ProblemMatcher[], protected markerService: IMarkerService, protected modelService: IModelService, fileService?: IFileService) {
+	constructor(public readonly problemMatchers: ProblemMatcher[], protected markerService: IMarkerService, protected modelService: IModelService, fileService?: IFileService, protected readonly logService?: ILogService) {
 		super();
 		this.matchers = Object.create(null);
 		this.bufferLength = 1;
-		problemMatchers.map(elem => createLineMatcher(elem, fileService)).forEach((matcher) => {
+		problemMatchers.map(elem => createLineMatcher(elem, fileService, logService)).forEach((matcher) => {
 			const length = matcher.matchLength;
 			if (length > this.bufferLength) {
 				this.bufferLength = length;
@@ -364,8 +365,8 @@ export class StartStopProblemCollector extends AbstractProblemCollector implemen
 
 	private _hasStarted: boolean = false;
 
-	constructor(problemMatchers: ProblemMatcher[], markerService: IMarkerService, modelService: IModelService, _strategy: ProblemHandlingStrategy = ProblemHandlingStrategy.Clean, fileService?: IFileService) {
-		super(problemMatchers, markerService, modelService, fileService);
+	constructor(problemMatchers: ProblemMatcher[], markerService: IMarkerService, modelService: IModelService, _strategy: ProblemHandlingStrategy = ProblemHandlingStrategy.Clean, fileService?: IFileService, logService?: ILogService) {
+		super(problemMatchers, markerService, modelService, fileService, logService);
 		const ownerSet: { [key: string]: boolean } = Object.create(null);
 		problemMatchers.forEach(description => ownerSet[description.owner] = true);
 		this.owners = Object.keys(ownerSet);
@@ -422,8 +423,8 @@ export class WatchingProblemCollector extends AbstractProblemCollector implement
 
 	private lines: string[] = [];
 	public beginPatterns: RegExp[] = [];
-	constructor(problemMatchers: ProblemMatcher[], markerService: IMarkerService, modelService: IModelService, fileService?: IFileService) {
-		super(problemMatchers, markerService, modelService, fileService);
+	constructor(problemMatchers: ProblemMatcher[], markerService: IMarkerService, modelService: IModelService, fileService?: IFileService, logService?: ILogService) {
+		super(problemMatchers, markerService, modelService, fileService, logService);
 		this.resetCurrentResource();
 		this.backgroundPatterns = [];
 		this._activeBackgroundMatchers = new Set<string>();
@@ -514,7 +515,12 @@ export class WatchingProblemCollector extends AbstractProblemCollector implement
 	private async tryBegin(line: string): Promise<boolean> {
 		let result = false;
 		for (const background of this.backgroundPatterns) {
+			const start = Date.now();
 			const matches = background.begin.regexp.exec(line);
+			const elapsed = Date.now() - start;
+			if (elapsed > 5) {
+				this.logService?.trace(`ProblemMatcher: slow begin regexp took ${elapsed}ms to execute`, background.begin.regexp.source);
+			}
 			if (matches) {
 				if (this._activeBackgroundMatchers.has(background.key)) {
 					continue;
@@ -543,7 +549,12 @@ export class WatchingProblemCollector extends AbstractProblemCollector implement
 	private tryFinish(line: string): boolean {
 		let result = false;
 		for (const background of this.backgroundPatterns) {
+			const start = Date.now();
 			const matches = background.end.regexp.exec(line);
+			const elapsed = Date.now() - start;
+			if (elapsed > 5) {
+				this.logService?.trace(`ProblemMatcher: slow end regexp took ${elapsed}ms to execute`, background.end.regexp.source);
+			}
 			if (matches) {
 				if (this._numberOfMatches > 0) {
 					this._onDidFindErrors.fire(this.markerService.read({ owner: background.matcher.owner }));
diff --git a/src/vs/workbench/contrib/tasks/common/problemMatcher.ts b/src/vs/workbench/contrib/tasks/common/problemMatcher.ts
index fad04dd91be..479c93d6ce1 100644
--- a/src/vs/workbench/contrib/tasks/common/problemMatcher.ts
+++ b/src/vs/workbench/contrib/tasks/common/problemMatcher.ts
@@ -24,6 +24,7 @@ import { IMarkerData, MarkerSeverity } from '../../../../platform/markers/common
 import { ExtensionsRegistry, ExtensionMessageCollector } from '../../../services/extensions/common/extensionsRegistry.js';
 import { Event, Emitter } from '../../../../base/common/event.js';
 import { FileType, IFileService, IFileStatWithPartialMetadata, IFileSystemProvider } from '../../../../platform/files/common/files.js';
+import { ILogService } from '../../../../platform/log/common/log.js';
 
 export enum FileLocationKind {
 	Default,
@@ -301,12 +302,12 @@ export interface ILineMatcher {
 	handle(lines: string[], start?: number): IHandleResult;
 }
 
-export function createLineMatcher(matcher: ProblemMatcher, fileService?: IFileService): ILineMatcher {
+export function createLineMatcher(matcher: ProblemMatcher, fileService?: IFileService, logService?: ILogService): ILineMatcher {
 	const pattern = matcher.pattern;
 	if (Array.isArray(pattern)) {
-		return new MultiLineMatcher(matcher, fileService);
+		return new MultiLineMatcher(matcher, fileService, logService);
 	} else {
-		return new SingleLineMatcher(matcher, fileService);
+		return new SingleLineMatcher(matcher, fileService, logService);
 	}
 }
 
@@ -315,10 +316,12 @@ const endOfLine: string = Platform.OS === Platform.OperatingSystem.Windows ? '\r
 abstract class AbstractLineMatcher implements ILineMatcher {
 	private matcher: ProblemMatcher;
 	private fileService?: IFileService;
+	private logService?: ILogService;
 
-	constructor(matcher: ProblemMatcher, fileService?: IFileService) {
+	constructor(matcher: ProblemMatcher, fileService?: IFileService, logService?: ILogService) {
 		this.matcher = matcher;
 		this.fileService = fileService;
+		this.logService = logService;
 	}
 
 	public handle(lines: string[], start: number = 0): IHandleResult {
@@ -331,6 +334,16 @@ abstract class AbstractLineMatcher implements ILineMatcher {
 
 	public abstract get matchLength(): number;
 
+	protected regexpExec(regexp: RegExp, line: string): RegExpExecArray | null {
+		const start = Date.now();
+		const result = regexp.exec(line);
+		const elapsed = Date.now() - start;
+		if (elapsed > 5) {
+			this.logService?.trace(`ProblemMatcher: slow regexp took ${elapsed}ms to execute`, regexp.source);
+		}
+		return result;
+	}
+
 	protected fillProblemData(data: IProblemData | undefined, pattern: IProblemPattern, matches: RegExpExecArray): data is IProblemData {
 		if (data) {
 			this.fillProperty(data, 'file', pattern, matches, true);
@@ -482,8 +495,8 @@ class SingleLineMatcher extends AbstractLineMatcher {
 
 	private pattern: IProblemPattern;
 
-	constructor(matcher: ProblemMatcher, fileService?: IFileService) {
-		super(matcher, fileService);
+	constructor(matcher: ProblemMatcher, fileService?: IFileService, logService?: ILogService) {
+		super(matcher, fileService, logService);
 		this.pattern = <IProblemPattern>matcher.pattern;
 	}
 
@@ -497,7 +510,7 @@ class SingleLineMatcher extends AbstractLineMatcher {
 		if (this.pattern.kind !== undefined) {
 			data.kind = this.pattern.kind;
 		}
-		const matches = this.pattern.regexp.exec(lines[start]);
+		const matches = this.regexpExec(this.pattern.regexp, lines[start]);
 		if (matches) {
 			this.fillProblemData(data, this.pattern, matches);
 			if (data.kind === ProblemLocationKind.Location && !data.location && !data.line && data.file) {
@@ -521,8 +534,8 @@ class MultiLineMatcher extends AbstractLineMatcher {
 	private patterns: IProblemPattern[];
 	private data: IProblemData | undefined;
 
-	constructor(matcher: ProblemMatcher, fileService?: IFileService) {
-		super(matcher, fileService);
+	constructor(matcher: ProblemMatcher, fileService?: IFileService, logService?: ILogService) {
+		super(matcher, fileService, logService);
 		this.patterns = <IProblemPattern[]>matcher.pattern;
 	}
 
@@ -537,7 +550,7 @@ class MultiLineMatcher extends AbstractLineMatcher {
 		data.kind = this.patterns[0].kind;
 		for (let i = 0; i < this.patterns.length; i++) {
 			const pattern = this.patterns[i];
-			const matches = pattern.regexp.exec(lines[i + start]);
+			const matches = this.regexpExec(pattern.regexp, lines[i + start]);
 			if (!matches) {
 				return { match: null, continue: false };
 			} else {
@@ -559,7 +572,7 @@ class MultiLineMatcher extends AbstractLineMatcher {
 	public override next(line: string): IProblemMatch | null {
 		const pattern = this.patterns[this.patterns.length - 1];
 		Assert.ok(pattern.loop === true && this.data !== null);
-		const matches = pattern.regexp.exec(line);
+		const matches = this.regexpExec(pattern.regexp, line);
 		if (!matches) {
 			this.data = undefined;
 			return null;
diff --git a/src/vs/workbench/contrib/terminal/browser/remotePty.ts b/src/vs/workbench/contrib/terminal/browser/remotePty.ts
index e27137d903c..68d16e842f8 100644
--- a/src/vs/workbench/contrib/terminal/browser/remotePty.ts
+++ b/src/vs/workbench/contrib/terminal/browser/remotePty.ts
@@ -80,14 +80,14 @@ export class RemotePty extends BasePty implements ITerminalChildProcess {
 		return this._remoteTerminalChannel.processBinary(this.id, e);
 	}
 
-	resize(cols: number, rows: number): void {
+	resize(cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): void {
 		if (this._inReplay || this._lastDimensions.cols === cols && this._lastDimensions.rows === rows) {
 			return;
 		}
 		this._startBarrier.wait().then(_ => {
 			this._lastDimensions.cols = cols;
 			this._lastDimensions.rows = rows;
-			this._remoteTerminalChannel.resize(this.id, cols, rows);
+			this._remoteTerminalChannel.resize(this.id, cols, rows, pixelWidth, pixelHeight);
 		});
 	}
 
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
index 7a71b3c59e1..a9fd028211a 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
@@ -2006,7 +2006,11 @@ export class TerminalInstance extends Disposable implements ITerminalInstance {
 	}
 
 	private async _updatePtyDimensions(rawXterm: XTermTerminal): Promise<void> {
-		await this._processManager.setDimensions(rawXterm.cols, rawXterm.rows);
+		const pixelWidth = rawXterm.dimensions?.css.canvas.width;
+		const pixelHeight = rawXterm.dimensions?.css.canvas.height;
+		const roundedPixelWidth = pixelWidth ? Math.round(pixelWidth) : undefined;
+		const roundedPixelHeight = pixelHeight ? Math.round(pixelHeight) : undefined;
+		await this._processManager.setDimensions(rawXterm.cols, rawXterm.rows, undefined, roundedPixelWidth, roundedPixelHeight);
 	}
 
 	setShellType(shellType: TerminalShellType | undefined) {
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalProcessManager.ts b/src/vs/workbench/contrib/terminal/browser/terminalProcessManager.ts
index 251a94fd3e6..2cc3d43b763 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalProcessManager.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalProcessManager.ts
@@ -581,16 +581,16 @@ export class TerminalProcessManager extends Disposable implements ITerminalProce
 		return os;
 	}
 
-	setDimensions(cols: number, rows: number): Promise<void>;
-	setDimensions(cols: number, rows: number, sync: false): Promise<void>;
-	setDimensions(cols: number, rows: number, sync: true): void;
-	setDimensions(cols: number, rows: number, sync?: boolean): MaybePromise<void> {
+	setDimensions(cols: number, rows: number, sync?: undefined, pixelWidth?: number, pixelHeight?: number): Promise<void>;
+	setDimensions(cols: number, rows: number, sync: false, pixelWidth?: number, pixelHeight?: number): Promise<void>;
+	setDimensions(cols: number, rows: number, sync: true, pixelWidth?: number, pixelHeight?: number): void;
+	setDimensions(cols: number, rows: number, sync?: boolean, pixelWidth?: number, pixelHeight?: number): MaybePromise<void> {
 		if (sync) {
-			this._resize(cols, rows);
+			this._resize(cols, rows, pixelWidth, pixelHeight);
 			return;
 		}
 
-		return this.ptyProcessReady.then(() => this._resize(cols, rows));
+		return this.ptyProcessReady.then(() => this._resize(cols, rows, pixelWidth, pixelHeight));
 	}
 
 	async setUnicodeVersion(version: '6' | '11'): Promise<void> {
@@ -606,13 +606,13 @@ export class TerminalProcessManager extends Disposable implements ITerminalProce
 		await this._terminalService.setNextCommandId(process.id, commandLine, commandId);
 	}
 
-	private _resize(cols: number, rows: number) {
+	private _resize(cols: number, rows: number, pixelWidth?: number, pixelHeight?: number) {
 		if (!this._process) {
 			return;
 		}
 		// The child process could already be terminated
 		try {
-			this._process.resize(cols, rows);
+			this._process.resize(cols, rows, pixelWidth, pixelHeight);
 		} catch (error) {
 			// We tried to write to a closed pipe / channel.
 			if (error.code !== 'EPIPE' && error.code !== 'ERR_IPC_CHANNEL_CLOSED') {
diff --git a/src/vs/workbench/contrib/terminal/browser/xterm/xtermTerminal.ts b/src/vs/workbench/contrib/terminal/browser/xterm/xtermTerminal.ts
index d66f1c39a38..be33e2b306b 100644
--- a/src/vs/workbench/contrib/terminal/browser/xterm/xtermTerminal.ts
+++ b/src/vs/workbench/contrib/terminal/browser/xterm/xtermTerminal.ts
@@ -256,6 +256,7 @@ export class XtermTerminal extends Disposable implements IXtermTerminal, IDetach
 				kittyKeyboard: config.enableKittyKeyboardProtocol,
 				win32InputMode: config.enableWin32InputMode,
 			},
+			allowTransparency: config.enableImages,
 			windowOptions: {
 				getWinSizePixels: true,
 				getCellSizePixels: true,
@@ -551,6 +552,7 @@ export class XtermTerminal extends Disposable implements IXtermTerminal, IDetach
 		this.raw.options.wordSeparator = config.wordSeparators;
 		this.raw.options.ignoreBracketedPasteMode = config.ignoreBracketedPasteMode;
 		this.raw.options.rescaleOverlappingGlyphs = config.rescaleOverlappingGlyphs;
+		this.raw.options.allowTransparency = config.enableImages;
 		this.raw.options.vtExtensions = {
 			kittyKeyboard: config.enableKittyKeyboardProtocol,
 			win32InputMode: config.enableWin32InputMode,
diff --git a/src/vs/workbench/contrib/terminal/common/remote/remoteTerminalChannel.ts b/src/vs/workbench/contrib/terminal/common/remote/remoteTerminalChannel.ts
index b728f908338..6b6e849e344 100644
--- a/src/vs/workbench/contrib/terminal/common/remote/remoteTerminalChannel.ts
+++ b/src/vs/workbench/contrib/terminal/common/remote/remoteTerminalChannel.ts
@@ -231,8 +231,8 @@ export class RemoteTerminalChannelClient implements IPtyHostController {
 	shutdown(id: number, immediate: boolean): Promise<void> {
 		return this._channel.call(RemoteTerminalChannelRequest.Shutdown, [id, immediate]);
 	}
-	resize(id: number, cols: number, rows: number): Promise<void> {
-		return this._channel.call(RemoteTerminalChannelRequest.Resize, [id, cols, rows]);
+	resize(id: number, cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): Promise<void> {
+		return this._channel.call(RemoteTerminalChannelRequest.Resize, [id, cols, rows, pixelWidth, pixelHeight]);
 	}
 	clearBuffer(id: number): Promise<void> {
 		return this._channel.call(RemoteTerminalChannelRequest.ClearBuffer, [id]);
diff --git a/src/vs/workbench/contrib/terminal/common/terminal.ts b/src/vs/workbench/contrib/terminal/common/terminal.ts
index 19a1d971cdb..12fa676c314 100644
--- a/src/vs/workbench/contrib/terminal/common/terminal.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminal.ts
@@ -300,9 +300,9 @@ export interface ITerminalProcessManager extends IDisposable, ITerminalProcessIn
 	relaunch(shellLaunchConfig: IShellLaunchConfig, cols: number, rows: number, reset: boolean): Promise<ITerminalLaunchError | ITerminalLaunchResult | undefined>;
 	write(data: string): Promise<void>;
 	sendSignal(signal: string): Promise<void>;
-	setDimensions(cols: number, rows: number): Promise<void>;
-	setDimensions(cols: number, rows: number, sync: false): Promise<void>;
-	setDimensions(cols: number, rows: number, sync: true): void;
+	setDimensions(cols: number, rows: number, sync?: undefined, pixelWidth?: number, pixelHeight?: number): Promise<void>;
+	setDimensions(cols: number, rows: number, sync: false, pixelWidth?: number, pixelHeight?: number): Promise<void>;
+	setDimensions(cols: number, rows: number, sync: true, pixelWidth?: number, pixelHeight?: number): void;
 	clearBuffer(): Promise<void>;
 	setUnicodeVersion(version: '6' | '11'): Promise<void>;
 	setNextCommandId(commandLine: string, commandId: string): Promise<void>;
diff --git a/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts b/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts
index e97facbaa35..3500a7243e1 100644
--- a/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts
@@ -342,7 +342,7 @@ const terminalConfiguration: IStringDictionary<IConfigurationPropertySchema> = {
 	},
 	[TerminalSettingId.TerminalTitle]: {
 		'type': 'string',
-		'default': '${sequence}',
+		'default': '${process}',
 		'markdownDescription': terminalTitle
 	},
 	[TerminalSettingId.TerminalDescription]: {
@@ -654,7 +654,7 @@ const terminalConfiguration: IStringDictionary<IConfigurationPropertySchema> = {
 	},
 	[TerminalSettingId.EnableImages]: {
 		restricted: true,
-		markdownDescription: localize('terminal.integrated.enableImages', "Enables image support in the terminal, this will only work when {0} is enabled. Both sixel and iTerm's inline image protocol are supported on Linux and macOS. This will only work on Windows for versions of ConPTY >= v2 which is shipped with Windows itself, see also {1}. Images will currently not be restored between window reloads/reconnects.", `\`#${TerminalSettingId.GpuAcceleration}#\``, `\`#${TerminalSettingId.WindowsUseConptyDll}#\``),
+		markdownDescription: localize('terminal.integrated.enableImages', "Enables image support in the terminal, this will only work when {0} is enabled. Both sixel and iTerm's inline image protocol are supported on Linux and macOS. This will only work on Windows for versions of ConPTY >= v2 which is shipped with Windows itself, see also {1}. Images will currently not be restored between window reloads/reconnects. When enabled, transparency mode is also turned on in the terminal.", `\`#${TerminalSettingId.GpuAcceleration}#\``, `\`#${TerminalSettingId.WindowsUseConptyDll}#\``),
 		type: 'boolean',
 		default: false
 	},
diff --git a/src/vs/workbench/contrib/terminal/electron-browser/localPty.ts b/src/vs/workbench/contrib/terminal/electron-browser/localPty.ts
index 6405af52054..eed9c7fa8e1 100644
--- a/src/vs/workbench/contrib/terminal/electron-browser/localPty.ts
+++ b/src/vs/workbench/contrib/terminal/electron-browser/localPty.ts
@@ -52,13 +52,13 @@ export class LocalPty extends BasePty implements ITerminalChildProcess {
 		this._proxy.sendSignal(this.id, signal);
 	}
 
-	resize(cols: number, rows: number): void {
+	resize(cols: number, rows: number, pixelWidth?: number, pixelHeight?: number): void {
 		if (this._inReplay || this._lastDimensions.cols === cols && this._lastDimensions.rows === rows) {
 			return;
 		}
 		this._lastDimensions.cols = cols;
 		this._lastDimensions.rows = rows;
-		this._proxy.resize(this.id, cols, rows);
+		this._proxy.resize(this.id, cols, rows, pixelWidth, pixelHeight);
 	}
 
 	async clearBuffer(): Promise<void> {
diff --git a/src/vs/workbench/services/actions/common/menusExtensionPoint.ts b/src/vs/workbench/services/actions/common/menusExtensionPoint.ts
index ad7aa09f9ea..7f5c8e64d14 100644
--- a/src/vs/workbench/services/actions/common/menusExtensionPoint.ts
+++ b/src/vs/workbench/services/actions/common/menusExtensionPoint.ts
@@ -503,7 +503,7 @@ const apiMenus: IAPIMenu[] = [
 	},
 	{
 		key: 'chat/editor/inlineGutter',
-		id: MenuId.ChatEditorInlineGutter,
+		id: MenuId.ChatEditorInlineMenu,
 		description: localize('menus.chatEditorInlineGutter', "The inline gutter menu in the chat editor."),
 		supportsSubmenus: false,
 		proposed: 'contribChatEditorInlineGutterMenu',
diff --git a/src/vs/workbench/services/browserElements/browser/browserElementsService.ts b/src/vs/workbench/services/browserElements/browser/browserElementsService.ts
index 7e7ae683bff..0f56a1edf3a 100644
--- a/src/vs/workbench/services/browserElements/browser/browserElementsService.ts
+++ b/src/vs/workbench/services/browserElements/browser/browserElementsService.ts
@@ -17,4 +17,8 @@ export interface IBrowserElementsService {
 	getElementData(rect: IRectangle, token: CancellationToken, locator: IBrowserTargetLocator | undefined): Promise<IElementData | undefined>;
 
 	startDebugSession(token: CancellationToken, locator: IBrowserTargetLocator): Promise<void>;
+
+	startConsoleSession(token: CancellationToken, locator: IBrowserTargetLocator): Promise<void>;
+
+	getConsoleLogs(locator: IBrowserTargetLocator): Promise<string | undefined>;
 }
diff --git a/src/vs/workbench/services/browserElements/browser/webBrowserElementsService.ts b/src/vs/workbench/services/browserElements/browser/webBrowserElementsService.ts
index 337987925cb..a98c4de1ba5 100644
--- a/src/vs/workbench/services/browserElements/browser/webBrowserElementsService.ts
+++ b/src/vs/workbench/services/browserElements/browser/webBrowserElementsService.ts
@@ -21,6 +21,14 @@ class WebBrowserElementsService implements IBrowserElementsService {
 	async startDebugSession(token: CancellationToken, locator: IBrowserTargetLocator): Promise<void> {
 		throw new Error('Not implemented');
 	}
+
+	async startConsoleSession(token: CancellationToken, locator: IBrowserTargetLocator): Promise<void> {
+		throw new Error('Not implemented');
+	}
+
+	async getConsoleLogs(locator: IBrowserTargetLocator): Promise<string | undefined> {
+		throw new Error('Not implemented');
+	}
 }
 
 registerSingleton(IBrowserElementsService, WebBrowserElementsService, InstantiationType.Delayed);
diff --git a/src/vs/workbench/services/browserElements/electron-browser/browserElementsService.ts b/src/vs/workbench/services/browserElements/electron-browser/browserElementsService.ts
index 021dad4e4c9..fa2ddc77288 100644
--- a/src/vs/workbench/services/browserElements/electron-browser/browserElementsService.ts
+++ b/src/vs/workbench/services/browserElements/electron-browser/browserElementsService.ts
@@ -33,6 +33,27 @@ class WorkbenchBrowserElementsService implements IBrowserElementsService {
 		@INativeBrowserElementsService private readonly simpleBrowser: INativeBrowserElementsService
 	) { }
 
+	async getConsoleLogs(locator: IBrowserTargetLocator): Promise<string | undefined> {
+		return await this.simpleBrowser.getConsoleLogs(locator);
+	}
+
+	async startConsoleSession(token: CancellationToken, locator: IBrowserTargetLocator): Promise<void> {
+		const cancelAndDetachId = cancelAndDetachIdPool++;
+		const onCancelChannel = `vscode:cancelConsoleSession${cancelAndDetachId}`;
+
+		const disposable = token.onCancellationRequested(() => {
+			ipcRenderer.send(onCancelChannel, cancelAndDetachId);
+			disposable.dispose();
+		});
+		try {
+			await this.simpleBrowser.startConsoleSession(token, locator, cancelAndDetachId);
+		} catch (error) {
+			throw new Error('Failed to start console session', { cause: error });
+		} finally {
+			disposable.dispose();
+		}
+	}
+
 	async startDebugSession(token: CancellationToken, locator: IBrowserTargetLocator): Promise<void> {
 		const cancelAndDetachId = cancelAndDetachIdPool++;
 		const onCancelChannel = `vscode:cancelCurrentSession${cancelAndDetachId}`;
@@ -44,8 +65,9 @@ class WorkbenchBrowserElementsService implements IBrowserElementsService {
 		try {
 			await this.simpleBrowser.startDebugSession(token, locator, cancelAndDetachId);
 		} catch (error) {
+			throw new Error('No debug session target found', { cause: error });
+		} finally {
 			disposable.dispose();
-			throw new Error('No debug session target found', error);
 		}
 	}
 
diff --git a/src/vs/workbench/services/chat/common/chatEntitlementService.ts b/src/vs/workbench/services/chat/common/chatEntitlementService.ts
index adca06c9c5a..919d79dc291 100644
--- a/src/vs/workbench/services/chat/common/chatEntitlementService.ts
+++ b/src/vs/workbench/services/chat/common/chatEntitlementService.ts
@@ -164,6 +164,8 @@ export interface IChatEntitlementService {
 	readonly anonymous: boolean;
 	readonly anonymousObs: IObservable<boolean>;
 
+	markAnonymousRateLimited(): void;
+
 	update(token: CancellationToken): Promise<void>;
 }
 
@@ -511,6 +513,15 @@ export class ChatEntitlementService extends Disposable implements IChatEntitleme
 
 	//#endregion
 
+	markAnonymousRateLimited(): void {
+		if (!this.anonymous) {
+			return;
+		}
+
+		this.chatQuotaExceededContextKey.set(true);
+		this._onDidChangeQuotaExceeded.fire();
+	}
+
 	async update(token: CancellationToken): Promise<void> {
 		await this.requests?.value.forceResolveEntitlement(token);
 	}
diff --git a/src/vs/workbench/services/configurationResolver/browser/baseConfigurationResolverService.ts b/src/vs/workbench/services/configurationResolver/browser/baseConfigurationResolverService.ts
index 9277723a595..2b7e6c69b2a 100644
--- a/src/vs/workbench/services/configurationResolver/browser/baseConfigurationResolverService.ts
+++ b/src/vs/workbench/services/configurationResolver/browser/baseConfigurationResolverService.ts
@@ -145,7 +145,12 @@ export abstract class BaseConfigurationResolverService extends AbstractVariableR
 
 	override async resolveWithInteractionReplace(folder: IWorkspaceFolderData | undefined, config: unknown, section?: string, variables?: IStringDictionary<string>, target?: ConfigurationTarget): Promise<unknown> {
 		const parsed = ConfigurationResolverExpression.parse(config);
-		await this.resolveWithInteraction(folder, parsed, section, variables, target);
+		const resolved = await this.resolveWithInteraction(folder, parsed, section, variables, target);
+
+		// Skip if input variable was canceled
+		if (resolved === undefined) {
+			return undefined;
+		}
 
 		return parsed.toObject();
 	}
diff --git a/src/vs/workbench/services/configurationResolver/test/electron-browser/configurationResolverService.test.ts b/src/vs/workbench/services/configurationResolver/test/electron-browser/configurationResolverService.test.ts
index 9d33b6e6d5e..76db1269702 100644
--- a/src/vs/workbench/services/configurationResolver/test/electron-browser/configurationResolverService.test.ts
+++ b/src/vs/workbench/services/configurationResolver/test/electron-browser/configurationResolverService.test.ts
@@ -752,6 +752,23 @@ suite('Configuration Resolver Service', () => {
 			assert.strictEqual(0, mockCommandService.callCount);
 		});
 	});
+
+	test('canceled input', async () => {
+		stub(quickInputService, 'input').resolves(undefined);
+
+		const configuration = {
+			'name': 'Attach to Process',
+			'type': 'node',
+			'request': 'attach',
+			'processId': '${input:input1}',
+			'port': 5858,
+			'sourceMaps': false,
+			'outDir': null
+		};
+
+		const result = await configurationResolverService!.resolveWithInteractionReplace(workspace, configuration, 'tasks');
+		assert.strictEqual(result, undefined);
+	});
 });
 
 
diff --git a/src/vs/workbench/test/common/workbenchTestServices.ts b/src/vs/workbench/test/common/workbenchTestServices.ts
index 25ebf2bcc52..e625aa79e5b 100644
--- a/src/vs/workbench/test/common/workbenchTestServices.ts
+++ b/src/vs/workbench/test/common/workbenchTestServices.ts
@@ -806,6 +806,8 @@ export class TestChatEntitlementService implements IChatEntitlementService {
 	onDidChangeAnonymous = Event.None;
 	readonly anonymousObs = observableValue({}, false);
 
+	markAnonymousRateLimited(): void { }
+
 	readonly previewFeaturesDisabled = false;
 }
 
diff --git a/src/vscode-dts/vscode.proposed.chatParticipantAdditions.d.ts b/src/vscode-dts/vscode.proposed.chatParticipantAdditions.d.ts
index 603f8a6fcb8..b23503fa232 100644
--- a/src/vscode-dts/vscode.proposed.chatParticipantAdditions.d.ts
+++ b/src/vscode-dts/vscode.proposed.chatParticipantAdditions.d.ts
@@ -1020,8 +1020,6 @@ declare module 'vscode' {
 		readonly rawInput?: unknown;
 
 		readonly chatRequestId?: string;
-		/** @deprecated Use {@link chatSessionResource} instead */
-		readonly chatSessionId?: string;
 		readonly chatSessionResource?: Uri;
 		readonly chatInteractionId?: string;
 	}