Latest Visual Studio Code Version Adds Shared AI Canvases and Markdown Upgrades

Microsoft has released Visual Studio Code 1.142, introducing interactive AI canvases, portable chat sessions, improvements to Markdown editing, and new security controls for AI agents.

The update expands how developers work with AI agents while improving document editing and navigation. Microsoft is also making the Copilot harness the default for new agent sessions following positive user feedback.

Shared AI canvases let developers and agents work together

One of the biggest additions is interactive canvases, which allow developers and AI agents to collaborate on the same interface alongside the chat window.

The new Kanban Canvas lets users create, organize, and move task cards, while AI agents can divide projects into smaller tasks, update their progress, and add new work as needed.

Visual Studio Code 1.142 also introduces portable chat sessions, allowing developers to move existing AI conversations between folders and Git worktrees without losing their chat history.

This means developers can continue working on a task in another repository or worktree without restarting the conversation or explaining the context again.

Markdown editing gets several improvements

Microsoft has also improved the Markdown editor, making it easier to write, organize, and navigate documents directly within Visual Studio Code.

The editor now displays each Markdown source line on a separate visual line, improving readability and making longer documents easier to edit.

Users can also paste images directly into Markdown documents, while a new file-link renaming feature lets them press F2 to rename links and automatically update references throughout the document.

Additional improvements include document navigation through headings, outlines, and breadcrumbs. Code blocks now show a copy button when users hover over them.

The read-only Markdown experience remains unchanged.

Microsoft strengthens AI agent security controls

Visual Studio Code 1.142 also introduces changes to how organizations manage AI agents and their permissions.

Microsoft will automatically migrate policy-managed chat sessions to the Copilot harness in Agent Host to enforce sandboxing requirements.

Administrators can temporarily opt out of this migration or restrict permission modes such as Allow All while retaining the more controlled Assisted mode.

The Copilot harness also supports background agent sessions, allowing agents to continue running while developers focus on other tasks.

Meanwhile, Microsoft has deprecated Windows terminal sandboxing for Local agent sessions as it moves toward the newer agent security model.

The update is available through Visual Studio Code’s regular update mechanism.

Microsoft has also been improving its broader development ecosystem, recently bringing native Python support to Windows on Arm PCs. Meanwhile, Hugging Face has introduced a Llama Windows app that makes running AI models locally on Windows 11 easier.

Beyond development tools, Microsoft has also announced improvements to its AI services, claiming that new SharePoint knowledge bases can make Copilot up to four times faster while reducing token usage by 30%.

These developments highlight Microsoft’s continued focus on improving AI performance and integrating AI capabilities into everyday workflows.