VS Code 1.127.0 appears to fix MCP tool enablement and unify the agent permission model

[slankka]

Today (2026‑07‑02 GMT+8), after updating to VS Code v1.127.0, I noticed a significant change:
the tool‑enablement pipeline for Copilot Chat finally works end‑to‑end.

In multiple daily workflows, MCP tools would frequently become unusable mid‑conversation: Copilot Chat would suddenly block tool calls and display the misleading “disabled by the user” status. This happened not only with my own custom MCP tools, but also with mature SaaS MCP integrations such as Linear. The behavior was consistent across sessions and made MCP tools unreliable for any serious use.

Before v1.127.0:

Editing tool checkboxes in Copilot Chat → Configure Tools had no effect

MCP tools were frequently shown as “disabled by the user” even when they weren’t

The .agent.md tools header never synchronized with the UI

Tool enablement state was cached incorrectly on the VS Code client side

After v1.127.0:

Clicking tool checkboxes immediately opens .agent.md and updates the tools header

Editing .agent.md updates the UI in return

Tool enablement behaves consistently across sessions

MCP tools no longer get silently disabled( not verified it works for now )

The permission model appears to have been redesigned

The relevant change seems to be here:
microsoft/vscode@63ba2ff

And the release notes:
https://code.visualstudio.com/updates/v1_127#_agent-tools-are-generally-available
state that “Agent tools are generally available”, which suggests this is more than just the Browser Tool GA — it looks like MCP tool permissions were unlocked as part of the same underlying change.

The key line is:

“Your testing directly shaped the per-session tab isolation, explicit page-sharing controls, and permission model that ship in this release.”

This strongly implies that the root cause of the “disabled by the user” behavior — the old tool‑permission model — was replaced in v1.127.0.
As a result, both Browser Tool and MCP tools now operate under the new unified agent permission model.

If this interpretation is correct, v1.127.0 quietly resolves a long‑standing issue and makes custom .agent.md tool definitions fully reliable for the first time.