Sessions: Terminal and command output is not visible when the agent runs commands, showing "The terminal is no longer available"

[stevencl]

During the recent Agent Sessions UX study, participants ran into the following issue:

Problem: When the agent runs terminal commands, participants cannot see the command output after they have run. The terminal preview shows "The terminal is no longer available" or the output disappears after the command completes. This forces developers to open a separate terminal and run commands manually in order to see logs and diagnostics, which defeats the purpose of the agent-driven workflow. For example, in the image below the user wants to see the logs from running npm run dev but this is not possible:

Observed behaviour:
P2026-03-12-1530: Repeatedly encountered "No preview available." Said: "Whenever I'm clicking on Terminal, it was like 'No preview available.' The terminal is no longer available." And: "When a command is running, we just wanted to know what is happening behind it... What are the operations?"
P2026-03-11-1400: Noted partial visibility. Said: "Usually, as a developer, we are just only looking for the logs."
P2026-03-11-1100: Had to open a terminal and run the application manually to see diagnostic output, completely interrupting the agent-driven workflow.

Expected behaviour:
When the agent runs a command, the command name, status, and output should be visible inline in the session.
After a command completes, the output should remain inspectable (not disappear).
For long-running commands (e.g., dev server), streaming output should be available.

[vs-code-engineering]

Hi @stevencl. As a member of the team, you can help us triage this issue by referring to https://github.com/microsoft/vscode-copilot/wiki/Copilot-Inbox-Tracker and assigning an owner directly.