Microsoft makes Visual Studio Code (VS Code) an open source AI editor, ushering in a new era of developer tools

The team behind Visual Studio Code shared a major update: VS Code is officially becoming an open-source AI editor. Microsoft is making the GitHub Copilot Chat extension open source and bringing AI features directly into the core editor, all under the MIT license.

In an announcement on X, the VS Code team wrote:

“Today, we’re announcing plans to make VS Code an open-source AI editor. We believe AI development should stay true to VS Code’s core principles: open, collaborative, and community-driven. Let’s build the future of software development together.”

Today, we’re announcing plans to make VS Code an open source AI editor.

We believe AI development should stay true to VS Code’s core principles: open, collaborative, and community-driven. Let’s build the future of software development together.https://t.co/C3ffio6X88 pic.twitter.com/sZj9VJxvlE

— Visual Studio Code (@code) May 19, 2025

VS Code Just Became the First Fully Open-Source AI-Powered Code Editor

This move deepens Microsoft’s ties to the open source community and signals a shift in how it’s thinking about AI in developer tools. The announcement, shared on the official VS Code site, outlines the reasons behind the change, what’s coming next, and how they’re planning to involve the community.

Why now?

VS Code has been one of the most successful open-source projects on GitHub for years. A huge part of that success comes from its community. As AI starts to play a bigger role in software development, Microsoft wants to keep that same openness at the center of its strategy.

Several things pushed them in this direction:

• Language models have improved to the point where you don’t need to rely on secret prompt tricks to get good results. That makes it possible to open-source key AI components without losing quality.

• AI interaction patterns have stabilized. Most editors now follow similar approaches for AI-assisted coding. Microsoft sees this as a chance to share a common base others can build on.

• Extension developers have been asking for it. Many devs have been building AI-powered extensions without access to Copilot Chat’s source code. Open sourcing it should make life easier for them.

• Data transparency matters. Developers have raised concerns about how AI tools collect and use data. Making the source public lets users inspect what’s going on behind the scenes.

• Security matters too. As more AI tools get targeted by bad actors, Microsoft is betting that community visibility will help spot issues faster—something open source has always been good at.

What’s happening next

Microsoft says it will open-source the GitHub Copilot Chat extension under the MIT license and begin moving key AI features into the core VS Code codebase. They’re also making their prompt testing tools available, so contributors can more easily test how AI features respond to inputs.

This isn’t just about transparency. The goal is to make contributing AI features just as straightforward as working on any other part of VS Code.

New features are already rolling out

Microsoft also previewed several AI-focused tools that are either live or coming soon:

• Copilot Agent Mode (Preview): A new way to interact with Copilot for multi-step coding tasks.

• Copilot Next Edit Suggestions (Preview): Inline AI edit ideas that help streamline coding.

• Copilot Free in VS Code: A no-cost tier of Copilot, opening the door to more users.

• Copilot Extensions: A growing library of extensions that plug into the Copilot ecosystem.

Other updates include features like Custom Instructions, which let developers shape how Copilot responds, and tighter integration with Azure through GitHub Copilot. Microsoft also teased Copilot Edits and Multi-Context Prompting (MCP)—features aimed at making AI more context-aware.

Big picture

Microsoft isn’t just adding AI to VS Code. It’s pushing for a future where AI coding tools are part of the open source ecosystem, not just something delivered through a black box. By opening up Copilot Chat and folding AI into the core experience, Microsoft is placing a bet on transparency, developer trust, and community involvement.

For developers, it means more flexibility, more access, and fewer unknowns behind the tools they use every day.