diff --git a/pnpm-lock.yaml b/pnpm-lock.yaml
index 048141704e..dd1bada909 100644
--- a/pnpm-lock.yaml
+++ b/pnpm-lock.yaml
@@ -880,8 +880,8 @@ importers:
         specifier: ^5.0.5
         version: 5.0.5
       '@types/vscode':
-        specifier: ^1.84.0
-        version: 1.100.0
+        specifier: ^1.104.0
+        version: 1.104.0
       '@vscode/test-electron':
         specifier: ^2.5.2
         version: 2.5.2
@@ -4136,6 +4136,9 @@ packages:
   '@types/vscode@1.103.0':
     resolution: {integrity: sha512-o4hanZAQdNfsKecexq9L3eHICd0AAvdbLk6hA60UzGXbGH/q8b/9xv2RgR7vV3ZcHuyKVq7b37IGd/+gM4Tu+Q==}
 
+  '@types/vscode@1.104.0':
+    resolution: {integrity: sha512-0KwoU2rZ2ecsTGFxo4K1+f+AErRsYW0fsp6A0zufzGuhyczc2IoKqYqcwXidKXmy2u8YB2GsYsOtiI9Izx3Tig==}
+
   '@types/ws@8.18.1':
     resolution: {integrity: sha512-ThVF6DCVhA8kUGy+aazFQ4kXQ7E1Ty7A3ypFOe0IcJV8O/M511G99AW24irKrW56Wt44yG9+ij8FaqoBGkuBXg==}
 
@@ -13667,6 +13670,8 @@ snapshots:
 
   '@types/vscode@1.103.0': {}
 
+  '@types/vscode@1.104.0': {}
+
   '@types/ws@8.18.1':
     dependencies:
       '@types/node': 24.2.1
@@ -13842,7 +13847,7 @@ snapshots:
       sirv: 3.0.1
       tinyglobby: 0.2.14
       tinyrainbow: 2.0.0
-      vitest: 3.2.4(@types/debug@4.1.12)(@types/node@20.17.57)(@vitest/ui@3.2.4)(jiti@2.4.2)(jsdom@26.1.0)(lightningcss@1.30.1)(tsx@4.19.4)(yaml@2.8.0)
+      vitest: 3.2.4(@types/debug@4.1.12)(@types/node@20.17.50)(@vitest/ui@3.2.4)(jiti@2.4.2)(jsdom@26.1.0)(lightningcss@1.30.1)(tsx@4.19.4)(yaml@2.8.0)
 
   '@vitest/utils@3.2.4':
     dependencies:
diff --git a/src/api/providers/vscode-lm.ts b/src/api/providers/vscode-lm.ts
index d8a492f772..46f13cf9fa 100644
--- a/src/api/providers/vscode-lm.ts
+++ b/src/api/providers/vscode-lm.ts
@@ -510,7 +510,10 @@ export class VsCodeLmHandler extends BaseProvider implements SingleCompletionHan
 					typeof this.client.maxInputTokens === "number"
 						? Math.max(0, this.client.maxInputTokens)
 						: openAiModelInfoSaneDefaults.contextWindow,
-				supportsImages: false, // VSCode Language Model API currently doesn't support image inputs
+				// TODO: Enable image support when VS Code LM API provides capability detection
+				// The newer VS Code API (1.95+) includes LanguageModelChatInformation.capabilities.imageInput
+				// but it's not directly accessible from the LanguageModelChat interface yet
+				supportsImages: false,
 				supportsPromptCache: true,
 				inputPrice: 0,
 				outputPrice: 0,
diff --git a/src/api/transform/__tests__/vscode-lm-format.spec.ts b/src/api/transform/__tests__/vscode-lm-format.spec.ts
index 1f53cc5751..4fa5906912 100644
--- a/src/api/transform/__tests__/vscode-lm-format.spec.ts
+++ b/src/api/transform/__tests__/vscode-lm-format.spec.ts
@@ -170,7 +170,9 @@ describe("convertToVsCodeLmMessages", () => {
 
 		expect(result).toHaveLength(1)
 		const imagePlaceholder = result[0].content[1] as MockLanguageModelTextPart
-		expect(imagePlaceholder.value).toContain("[Image (base64): image/png not supported by VSCode LM API]")
+		expect(imagePlaceholder.value).toContain(
+			"[Image placeholder: base64 (image/png) - VS Code LM API image support pending]",
+		)
 	})
 })
 
diff --git a/src/api/transform/vscode-lm-format.ts b/src/api/transform/vscode-lm-format.ts
index 58b85f19a9..3343d73b5e 100644
--- a/src/api/transform/vscode-lm-format.ts
+++ b/src/api/transform/vscode-lm-format.ts
@@ -85,8 +85,12 @@ export function convertToVsCodeLmMessages(
 					// Convert non-tool messages to TextParts after tool messages
 					...nonToolMessages.map((part) => {
 						if (part.type === "image") {
+							// TODO: When VS Code LM API adds LanguageModelImagePart support, convert images properly
+							// For now, we provide a placeholder text description
+							const imageType = part.source?.type || "unknown"
+							const mediaType = part.source?.media_type || "unknown"
 							return new vscode.LanguageModelTextPart(
-								`[Image (${part.source?.type || "Unknown source-type"}): ${part.source?.media_type || "unknown media-type"} not supported by VSCode LM API]`,
+								`[Image placeholder: ${imageType} (${mediaType}) - VS Code LM API image support pending]`,
 							)
 						}
 						return new vscode.LanguageModelTextPart(part.text)
@@ -129,7 +133,10 @@ export function convertToVsCodeLmMessages(
 					// Convert non-tool messages to TextParts after tool messages
 					...nonToolMessages.map((part) => {
 						if (part.type === "image") {
-							return new vscode.LanguageModelTextPart("[Image generation not supported by VSCode LM API]")
+							// Assistant-generated images are not yet supported
+							return new vscode.LanguageModelTextPart(
+								"[Image generation not yet supported by VS Code LM API]",
+							)
 						}
 						return new vscode.LanguageModelTextPart(part.text)
 					}),
diff --git a/src/package.json b/src/package.json
index 4016b06f22..b26d7d1843 100644
--- a/src/package.json
+++ b/src/package.json
@@ -10,7 +10,7 @@
 		"theme": "dark"
 	},
 	"engines": {
-		"vscode": "^1.84.0",
+		"vscode": "^1.95.0",
 		"node": "20.19.2"
 	},
 	"author": {
@@ -531,7 +531,7 @@
 		"@types/string-similarity": "^4.0.2",
 		"@types/tmp": "^0.2.6",
 		"@types/turndown": "^5.0.5",
-		"@types/vscode": "^1.84.0",
+		"@types/vscode": "^1.104.0",
 		"@vscode/test-electron": "^2.5.2",
 		"@vscode/vsce": "3.3.2",
 		"esbuild": "^0.25.0",