🚀 AI Toolkit for VS Code — March 2026 Update

AI Toolkit 0.32.0 consolidates AI Toolkit and Foundry in VS Code, unifies resource and agent workflows, adds a Create Agent view with code and no-code paths, integrates GitHub Copilot skills, improves Agent Builder usability, and announces Foundry sidebar retirement June 1, 2026.

AI Toolkit for VS Code version 0.32.0 consolidates the AI Toolkit and Foundry extension experiences. The update adds a unified tree view, Create Agent View, and deeper GitHub Copilot integration for agent development.

Main feature and impact

The primary change is sidebar consolidation, merging Foundry into AI Toolkit. The unified My Resources view groups local and Foundry remote resources under a single tree. Developers now see Foundry icons and license metadata inline. The Create Agent View provides side-by-side paths for code scaffolding or no-code Agent Builder workflows. This reduces context switching and centralizes agent project workflows inside VS Code.

Practical implications

Agent Builder gains Conversations view, auto-save, and direct Foundry prompt editing. The toolkit auto-installs the Foundry skill used by GitHub Copilot for Azure, removing manual setup. Evaluation tooling now uses pytest-agent-evals for agent tests. MCP tool approval and View Code for Foundry scaffolds enable controlled tool invocation and faster project bootstrapping. Teams can standardize agent development and CI workflows inside VS Code.

“Ship production ready AI agents with unified experience across AI Toolkit and Foundry extension. This release brings a unified tree view experience, Agent Builder enhancements, and streamlined GitHub Copilot integration.”

This release reduces extension fragmentation and simplifies onboarding for agent development. Next steps: install AI Toolkit 0.32.0, migrate Foundry sidebar workflows into AI Toolkit, and validate existing agent CI and eval pipelines.

Key points from the article:

Unified sidebar merges AI Toolkit and Foundry resource views.

Create Agent view offers code and no-code agent paths.

GitHub Copilot uses the open-source Foundry skill integration.

Agent Builder adds auto-save and Conversations view for Foundry.

Foundry sidebar will retire on June 1, 2026.

Related Coverage:

• Many agents, one team: Scaling modernization on Azure
• From Prototype to Production: Building a Hosted Agent with AI Toolkit & Microsoft Foundry
• How teachers in Indonesia are using AI to transform learning

From the Microsoft Developer Community Blog articles

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