VS Code has introduced new terminal agent tools that improve how AI agents interact with the terminal during agentic workflows. Key features include smarter prompt detection so agents know when the terminal needs input, support for both hidden background terminals and the active foreground terminal, and a new focus terminal option that lets users seamlessly take over from the agent for sensitive commands. Demonstrated with PowerShell scripts and npm init, agents can now detect multi-step prompts, collect user responses via chat, and automatically relay them back to the terminal — or hand off control to the user with a single click.

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