VS Code just dropped version 1.129, and this one isn't your typical "we fixed some stuff" release. 🚀
This update brings a completely rearchitected agent system, a brand-new editor panel inside the Agents window, a slick quality-of-life shortcut for running terminal commands, and — possibly the most talked-about thing — a first look at a modernized VS Code UI.
If you've been using GitHub Copilot, Claude, or Codex inside VS Code, you're going to want to read this. Things are changing in a big way, and mostly for the better.
So, what actually landed in VS Code 1.129, and which features are worth turning on today?
What Is VS Code 1.129?
Visual Studio Code 1.129 is the July 2026 release of Microsoft's free, open-source code editor. It shipped on July 15, 2026, with a gradual rollout to all users (you can force the update right now by going to Help → Check for Updates).
This release is heavy on AI and agent improvements, which makes sense given how central Copilot and third-party AI tools have become to the daily dev workflow. But it also adds some genuinely useful editor-level changes that don't require any AI setup at all.
Let's break it all down.
Why This Release Matters
VS Code has been steadily evolving from a code editor into something closer to an AI-powered development environment. Version 1.129 makes the biggest structural bet on that direction yet.
The agent host — the flagship feature of this release — fundamentally changes how AI agent sessions run inside VS Code. Instead of being tightly coupled to a single editor window, agent sessions now live in their own dedicated process. That means you can open the same agent session across multiple windows simultaneously.
Think of it like this: before, your AI session was tied to one browser tab. Now it's more like a shared Google Doc — multiple windows, same live session.
For developers juggling multiple projects, reviewing agent-generated code across workspaces, or just working across monitors, this is a meaningful upgrade.
The Big Features in VS Code 1.129
🤖 The Agent Host — A New Architecture for AI Sessions
The agent host is the core infrastructure change in this release. Instead of running agent sessions inside the editor process itself, VS Code now spins up a separate dedicated process called the agent host. This process runs agent harnesses — Copilot, Claude, and Codex — based on a new open protocol called the Agent Host Protocol (AHP).
Here's why that matters in practice:
- Multiple windows, one session. You can connect to and render the same agent session from multiple VS Code windows at once. No more duplicating your context across tabs.
- Aligned behavior across products. The Copilot agent on the agent host is powered by the Copilot SDK, which means it behaves consistently with the Copilot CLI, the standalone Copilot app, and other Copilot products. Less "why does it work here but not there" confusion.
To try it, enable the chat.agentHost.enabled setting and select an agent host harness from the harness dropdown in the editor window.
Worth noting: not every feature in this release works with every harness. Some features are agent-host-only, and some have extra settings to enable specific agents (like chat.agents.claude.preferAgentHost for Claude on the agent host).
🗂️ New Editor Panel in the Agents Window (Experimental)
If you use the Agents window, you've probably felt the friction of switching back and forth between the chat panel and the file-review panel. The new editor panel fixes that.
It merges the editor and the detail area into a single docked pane with a shared tab bar. You get:
- Files and diffs opening directly next to your chat conversation — no separate panels to juggle.
- An improved diff experience with toggle between inline and side-by-side views, collapse/expand all, and a more compact diff representation that shows more change on screen.
- The next action (like "Create Pull Request") right in the editor tab title — no hunting through menus.
- Session state persistence. Each session remembers its side-pane width, open editors, active file, and collapsed state across session switches and reloads.
To enable it, turn on the sessions.layout.singlePaneDetailPanel setting and reload your window (it's read at startup, so the reload is required).
This is experimental, but it feels like the kind of change that becomes the default pretty quickly.
⚡ Run Terminal Commands with ! from Chat
Here's the shortcut you didn't know you needed.
You can now prefix any chat message with ! to run its contents as a terminal command directly — no need to copy, switch to the terminal, paste, and run.
! npm run build
! git status
! python manage.py migrate
It works in agent host sessions in both the editor window and the Agents window. Small feature on paper, but when you're deep in a conversation with an agent and need to quickly verify something in the terminal, it saves more context-switching than you'd expect.
🎨 Modern UI Preview (Experimental)
This is the one people have been waiting for. 👀
VS Code 1.129 introduces a modernized workbench UI — updated look and feel across the editor, available as an experimental opt-in via the workbench.experimental.modernUI setting. It's already enabled by default in Insiders builds.
Details on exactly what's changing are still rolling out as this is a preview, but if you want to see where VS Code's visual direction is heading, enable it and take a look.
🔑 Session-Management Tools for Agents
Agents on the agent host now have access to a suite of session-management tools. This means an agent can — with your permission — list your active sessions, read another session's recent conversation, create a new session to hand off a sub-task, and even send a message to a session it created.
A few important guardrails are baked in: sending a message to another session always asks for your confirmation first, an agent can't message its own chat, and the number of sends per request is capped to prevent runaway session spawning.
This is the kind of feature that starts to feel like working with a team of agents rather than a single assistant.
🏢 GitHub Enterprise Support for Copilot in the Agent Host
If your Copilot access comes through a GitHub Enterprise (GHE) instance, you can now sign in and use Copilot in VS Code through the agent host. Previously, only github.com accounts could complete the sign-in flow in the agent host — GHE users were effectively locked out.
With 1.129, VS Code runs the OAuth flow and requests Copilot tokens from your GHE host instead. This works in both the editor window and the Agents window, with both the Copilot and Claude agents.
To use it, make sure chat.agentHost.enabled is on, then sign in and choose your GHE instance.
📁 Other Improvements Worth Knowing
Reopen Editor from the Toolbar — When a file supports multiple editors (like a Markdown file that can open as raw text or a preview), you can now switch directly from the editor toolbar via the ... menu → Reopen Editor With. No need to open the Command Palette for this anymore.
Migrate Prompt Files to Skills — If you have custom prompt files (*.prompt.md) for slash commands, VS Code now offers a migration interface to convert them into skills for compatibility with agent host harnesses. Enable chat.customizations.promptMigration.enabled to access it.
BYOK Models in the Agents Window — You can now use Bring Your Own Key (BYOK) models in the Agents window when using the Copilot harness on the agent host.
Agents Window UX Improvements — The new-session flow now remembers your last agent mode and approvals settings as defaults. Plus, the worktree/folder isolation option is now a simple checkbox instead of a dropdown.
Comparison: Agent Sessions Before vs After 1.129
| Before 1.129 | After 1.129 | |
|---|---|---|
| Session process | Tied to the editor process | Dedicated agent host process |
| Multi-window support | Not available | Same session across multiple windows |
| Copilot behavior alignment | Varied by surface | Aligned via Copilot SDK |
| GitHub Enterprise support | Not supported in agent host | Fully supported |
| Diff review in Agents window | Separate panels | Unified docked editor (experimental) |
| Terminal from chat | Copy → switch → paste |
! prefix, done |
Best Tips for Getting the Most Out of 1.129
✅ Enable the agent host gradually. Turn on chat.agentHost.enabled first, get comfortable with it, then layer in features like the single-pane editor panel or session-management tools. Don't flip every experimental toggle at once.
✅ Use ! for quick terminal checks during chat. It's most useful when you're mid-conversation with an agent and want to verify something fast — think ! git log --oneline -5 or ! node -v.
✅ Try the modern UI on Insiders. If you want to preview it with the least friction, switch to the VS Code Insiders build where it's already the default.
✅ GHE users: update and sign in fresh. If you've been unable to use Copilot on the agent host with a GHE account, this release fixes that. You may need to sign out and sign back in to pick up the new authentication flow.
✅ Migrate your prompt files. If you have .prompt.md files for custom slash commands, the new migration tool in the AI Customizations overview is the easiest path to cross-harness compatibility.
Common Mistakes to Avoid
🚫 Expecting all new features to work on every harness. Several 1.129 features — like session-management tools and some agent-host-specific options — only work when an agent is running on the agent host. If a feature isn't showing up, check whether chat.agentHost.enabled is on and the right harness is selected.
🚫 Forgetting to reload after enabling the new editor panel. The sessions.layout.singlePaneDetailPanel setting is read once at startup. Enabling it without reloading means you won't see any change — and then you'll wonder why the setting "doesn't work."
🚫 Treating the modern UI preview as production-ready. It's experimental. Great to explore, but probably not the time to rely on it in a high-stakes client demo just yet.
🚫 Missing the gradual rollout. VS Code 1.129 is rolling out gradually. If you don't see it yet, go to Help → Check for Updates to pull it immediately instead of waiting for the rollout to reach you.
Wrapping Up
VS Code 1.129 is a meaningful step forward — not just a collection of bug fixes and small tweaks, but a release that actually reshapes how AI-assisted development works inside the editor.
The agent host is the biggest structural change: agent sessions in their own process, connectable from multiple windows, aligned with the broader Copilot ecosystem. The new editor panel in the Agents window makes reviewing AI-generated code feel natural rather than clunky. The ! prefix is the tiny shortcut you'll use every single day once you know it exists. And the modern UI preview gives us a glimpse of where VS Code's look is heading.
Not everything in 1.129 is production-ready yet — several features are explicitly experimental. But the direction is clear, and it's a good one.
Update, explore the new settings, and let the agent host do some of the heavy lifting for you. 💡
Want more write-ups like this? I cover VS Code releases, frontend dev, and developer tools at *hamidrazadev.com*. Drop a comment if there's a feature you want me to dig into deeper — or share this post if it saved you time!
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