Relative file references in copilot-instructions.md are resolved incorrectly.

[nozaq]

Type: Bug

In copilot-instructions.md , relative paths in #file: directives are resolved relative to the workspace root, not to the directory of the instruction file, which is where Copilot Chat actually resolves them.

I've created a PoC repo at https://github.com/nozaq/vscode-file-ref-poc

Steps to Reproduce

1. Open the PoC repo in Dev Container.
2. Open .github/copilot-instructions.md in the editor tab.

Expected Result

• #file:./docs/foo.md is not rendered as a valid file reference.
• #file:../docs/bar.md is rendered as a valid file reference.

Actual Result

• #file:./docs/foo.md is rendered as a valid file reference.
• #file:../docs/bar.md is not rendered as a valid file reference.

Additional Context

The expected result above matches the actual Copilot Chat behavior. When you open the Chat panel and send any prompt, you’ll see that bar.md appears in the references, whereas foo.md does not.

VS Code version: Code 1.100.2 (Universal) (848b80a, 2025-05-14T21:47:40.416Z)
OS version: Darwin arm64 24.5.0
Modes:
Remote OS version: Linux arm64 6.10.14-linuxkit

System Info

Item	Value
CPUs	Apple M2 Pro (10 x 2400)
GPU Status	2d_canvas: enabled canvas_oop_rasterization: enabled_on direct_rendering_display_compositor: disabled_off_ok gpu_compositing: enabled multiple_raster_threads: enabled_on opengl: enabled_on rasterization: enabled raw_draw: disabled_off_ok skia_graphite: disabled_off video_decode: enabled video_encode: enabled webgl: enabled webgl2: enabled webgpu: enabled webnn: disabled_off
Load (avg)	5, 6, 4
Memory (System)	32.00GB (0.08GB free)
Process Argv
Screen Reader	no
VM	0%

Item	Value
Remote	Dev Container: Debian @ desktop-linux
OS	Linux arm64 6.10.14-linuxkit
CPUs	unknown (10 x 0)
Memory (System)	15.60GB (6.71GB free)
VM	0%

Extensions (4)

Extension	Author (truncated)	Version
vscode-graphql-syntax	Gra	1.3.8
remote-containers	ms-	0.413.0
copilot	Git	1.323.0
copilot-chat	Git	0.27.2