Microsoft Launches Open-Source GitHub Copilot Chat for VS Code

On June 30, 2025, Microsoft officially announced a significant shift in its approach to software development by open-sourcing the GitHub Copilot Chat extension for Visual Studio Code (VS Code) under the MIT license. This move, described as a commitment to transparency and developer-centric tools, marks Microsoft's first step towards transforming VS Code into an open-source AI editor. The announcement was made on the VS Code team's official blog, emphasizing the importance of community contributions and feedback in enhancing the development process.

The open-sourced version of the Copilot Chat extension reveals intricate details regarding its functionality, including agent mode, context engineering, and telemetry data. "Everything, from our system prompts to the telemetry we capture, is available in all transparency," stated the VS Code team in their blog post. This initiative aligns with Microsoft CEO Satya Nadella's vision outlined during his keynote speech at Build 2025, where he reaffirmed the company's dedication to integrating AI capabilities into the core of VS Code.

Erich Gamma, the creator of VS Code, underscored the significance of this development, noting that many organizations prefer open-source Integrated Development Environments (IDEs). He highlighted that VS Code's open-source nature would cater to this demand effectively. Additionally, Microsoft has committed to open-sourcing its prompt testing infrastructure, which will further empower third-party developers to create extensions for the platform.

The decision to adopt an open-source model comes amid increasing calls for transparency in developer tooling. Microsoft has acknowledged that the rapid advancement in large language models (LLMs) and the convergence of best practices across AI coding interfaces have lessened the necessity for proprietary tools. However, while the GitHub Copilot extension for inline code completions remains closed-source for the time being, plans are underway to integrate this functionality into the open-sourced Chat extension in the near future.

Critics have drawn comparisons between Microsoft’s strategy and that of AI-centric VS Code forks like Cursor and Windsurf, both of which have garnered substantial valuations. One user humorously remarked on social media, "Is it just me or is it kinda funny that OpenAI bought Windsurf for $3B and then Microsoft just open-sourced Copilot?"

This strategic pivot by Microsoft not only reflects a growing trend towards community-driven software development but also positions the company to redefine developer interactions with AI on their own terms. As the demand for open-source solutions continues to rise, Microsoft's efforts to integrate AI capabilities into a widely-loved development tool could reshape the landscape of software development.

In conclusion, the open-sourcing of GitHub Copilot Chat is a pivotal moment for Microsoft, signaling a broader shift towards openness in the tech industry. As developers embrace this change, the implications for software development practices could be profound, fostering innovation and collaboration in an increasingly AI-driven world.