[BUG] [VS Code Extension] LLM Gateway/Custom ANTHROPIC_BASE_URL not working in v2.0.0+

[Koobah]

Preflight Checklist

• I have searched existing issues and this hasn't been reported yet
• This is a single bug report (please file separate reports for different bugs)
• I am using the latest version of Claude Code

What's Wrong?

The VS Code extension fails to work with custom LLM Gateway configurations that work perfectly with the Claude Code CLI.
This appears to be a regression introduced in version 2.0.0. The extension ignores custom ANTHROPIC_BASE_URL settings and attempts to use default cloud provider authentication instead of respecting custom gateway endpoints.

What Should Happen?

VS Code extension should support the same LLM Gateway configurations as the CLI, including:

• Custom ANTHROPIC_BASE_URL endpoints for internal/proxy gateways
• API key helper scripts for dynamic authentication
• Third-party proxy configurations without requiring cloud provider credentials
• Automatic inheritance of working CLI configurations

Error Messages/Logs

With Vertex configuration:
  API Error: Could not load the default credentials. Browse to https://cloud.google.com/docs/authentication/getting-started for more information.

With Bedrock configuration:
API Error: No projectId was given and it could not be resolved from credentials. The client should be instantiated with the projectId option or the ANTHROPIC_VERTEX_PROJECT_ID environment variable should be set.

Steps to Reproduce

1. Working CLI Setup: Configure Claude Code CLI with custom gateway:
   {
   "apiKeyHelper": "npx @company/auth-token@latest get_token",
   "env": {
   "ANTHROPIC_MODEL": "custom-model-endpoint",
   "ANTHROPIC_BASE_URL": "https://internal-gateway.company.com/api/v1/anthropic",
   "CLAUDE_CODE_API_KEY_HELPER_TTL_MS": "360000000"
   }
   }
2. Verify CLI Works: Confirm Claude Code CLI successfully connects and works with custom gateway
3. Configure VS Code Extension: Add environment variables to VS Code settings.json:
   "claude-code.environmentVariables": [
   {"name": "ANTHROPIC_BASE_URL", "value": "https://internal-gateway.company.com/api/v1/anthropic"},
   {"name": "ANTHROPIC_MODEL", "value": "custom-model-endpoint"},
   {"name": "CLAUDE_CODE_USE_BEDROCK", "value": "true"},
   {"name": "CLAUDE_CODE_SKIP_BEDROCK_AUTH", "value": "true"}
   ]
4. Attempt to Use Extension: Try to use Claude Code in VS Code
5. Observe Failure: Extension attempts default cloud authentication instead of using custom gateway or Claude keeps "thinking" without any response.

Claude Model

Other

Is this a regression?

Yes, this worked in a previous version

Last Working Version

<2.0.0

Claude Code Version

2.0.8

Platform

Other

Operating System

macOS

Terminal/Shell

VS Code integrated terminal

Additional Information

• This worked in pre-2.0.0 versions but broke after the extension rewrite
• Related to issues [BUG] New VS Code Extension does not recognize ANTHROPIC_BASE_URL and shows login screen #8522 (ANTHROPIC_BASE_URL not recognized) and [BUG] Environment Variables No Longer Override settings.json in v2.0.1 #8500 (environment variables don't override settings)
• LLM Gateway documentation exists for CLI but has no VS Code extension instructions
• Currently forced to use CLI exclusively as workaround

[github-actions]

Found 3 possible duplicate issues:

1. [BUG] New VS Code Extension does not recognize ANTHROPIC_BASE_URL and shows login screen #8522
2. [BUG] Environment Variables No Longer Override settings.json in v2.0.1 #8500
3. [BUG] Setting DISABLE_PROMPT_CACHING Environment Variable Causes 401 Unauthorized Errors #8632

This issue will be automatically closed as a duplicate in 3 days.

• If your issue is a duplicate, please close it and 👍 the existing issue instead
• To prevent auto-closure, add a comment or 👎 this comment

🤖 Generated with Claude Code

[tomgabay]

Same for me, it just gets stuck on "thinking" animation, and does nothing

[tttturtle-russ]

Same for me, it just gets stuck on "thinking" animation, and does nothing

Same here, I set the env variables in settings.json but doesn't work

[github-actions]

This issue has been automatically locked since it was closed and has not had any activity for 7 days. If you're experiencing a similar issue, please file a new issue and reference this one if it's relevant.