diff --git a/registry/coder/modules/vscode-web/README.md b/registry/coder/modules/vscode-web/README.md
index 43b1eb9d0..59a98de43 100644
--- a/registry/coder/modules/vscode-web/README.md
+++ b/registry/coder/modules/vscode-web/README.md
@@ -8,13 +8,13 @@ tags: [ide, vscode, web]
 
 # VS Code Web
 
-Automatically install [Visual Studio Code Server](https://code.visualstudio.com/docs/remote/vscode-server) in a workspace and create an app to access it via the dashboard.
+Automatically install the [VS Code CLI](https://code.visualstudio.com/docs/editor/command-line) and run `code serve-web` in a workspace to access VS Code via the browser.
 
 ```tf
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
   accept_license = true
 }
@@ -30,7 +30,7 @@ module "vscode-web" {
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
   install_prefix = "/home/coder/.vscode-web"
   folder         = "/home/coder"
@@ -44,7 +44,7 @@ module "vscode-web" {
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
   extensions     = ["github.copilot", "ms-python.python", "ms-toolsai.jupyter"]
   accept_license = true
@@ -59,7 +59,7 @@ Configure VS Code's [settings.json](https://code.visualstudio.com/docs/getstarte
 module "vscode-web" {
   count      = data.coder_workspace.me.start_count
   source     = "registry.coder.com/coder/vscode-web/coder"
-  version    = "1.4.3"
+  version    = "2.0.0"
   agent_id   = coder_agent.example.id
   extensions = ["dracula-theme.theme-dracula"]
   settings = {
@@ -69,32 +69,50 @@ module "vscode-web" {
 }
 ```
 
-### Pin a specific VS Code Web version
+### Open an existing workspace on startup
 
-By default, this module installs the latest. To pin a specific version, retrieve the commit ID from the [VS Code Update API](https://update.code.visualstudio.com/api/commits/stable/server-linux-x64-web) and verify its corresponding release on the [VS Code GitHub Releases](https://github.com/microsoft/vscode/releases).
+To open an existing workspace on startup the `workspace` parameter can be used to represent a path on disk to a `code-workspace` file.
+Note: Either `workspace` or `folder` can be used, but not both simultaneously. The `code-workspace` file must already be present on disk.
 
 ```tf
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
-  commit_id      = "e54c774e0add60467559eb0d1e229c6452cf8447"
+  workspace      = "/home/coder/coder.code-workspace"
   accept_license = true
 }
 ```
 
-### Open an existing workspace on startup
+### Use VS Code Insiders
 
-To open an existing workspace on startup the `workspace` parameter can be used to represent a path on disk to a `code-workspace` file.
-Note: Either `workspace` or `folder` can be used, but not both simultaneously. The `code-workspace` file must already be present on disk.
+Use the VS Code Insiders release channel to get the latest features and bug fixes:
+
+```tf
+module "vscode-web" {
+  count           = data.coder_workspace.me.start_count
+  source          = "registry.coder.com/coder/vscode-web/coder"
+  version         = "2.0.0"
+  agent_id        = coder_agent.example.id
+  release_channel = "insiders"
+  accept_license  = true
+}
+```
+
+### Pin a specific VS Code version
+
+Use the `commit_id` variable to pin a specific VS Code Server version by its commit SHA:
 
 ```tf
 module "vscode-web" {
-  count     = data.coder_workspace.me.start_count
-  source    = "registry.coder.com/coder/vscode-web/coder"
-  version   = "1.4.3"
-  agent_id  = coder_agent.example.id
-  workspace = "/home/coder/coder.code-workspace"
+  count          = data.coder_workspace.me.start_count
+  source         = "registry.coder.com/coder/vscode-web/coder"
+  version        = "2.0.0"
+  agent_id       = coder_agent.example.id
+  commit_id      = "e54c774e0add60467559eb0d1e229c6452cf8447"
+  accept_license = true
 }
 ```
+
+You can find the commit SHA for a specific VS Code version on the [VS Code releases page](https://code.visualstudio.com/updates) or by checking the "About" dialog in VS Code.
diff --git a/registry/coder/modules/vscode-web/main.test.ts b/registry/coder/modules/vscode-web/main.test.ts
index 860fc176c..2b7ad9a21 100644
--- a/registry/coder/modules/vscode-web/main.test.ts
+++ b/registry/coder/modules/vscode-web/main.test.ts
@@ -1,42 +1,784 @@
-import { describe, expect, it } from "bun:test";
-import { runTerraformApply, runTerraformInit } from "~test";
+import {
+  describe,
+  expect,
+  it,
+  beforeAll,
+  afterEach,
+  setDefaultTimeout,
+} from "bun:test";
+import {
+  runTerraformApply,
+  runTerraformInit,
+  runContainer,
+  execContainer,
+  removeContainer,
+  findResourceInstance,
+} from "~test";
+
+// Set timeout to 5 minutes for tests that download VS Code CLI
+setDefaultTimeout(5 * 60 * 1000);
+
+let cleanupContainers: string[] = [];
+
+afterEach(async () => {
+  for (const id of cleanupContainers) {
+    try {
+      await removeContainer(id);
+    } catch {
+      // Ignore cleanup errors
+    }
+  }
+  cleanupContainers = [];
+});
 
 describe("vscode-web", async () => {
-  await runTerraformInit(import.meta.dir);
+  beforeAll(async () => {
+    await runTerraformInit(import.meta.dir);
+  });
+
+  describe("terraform validation", () => {
+    it("accept_license should be set to true", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: false,
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain("Invalid value for variable");
+      }
+    });
+
+    it("use_cached and offline can not be used together", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: true,
+          use_cached: true,
+          offline: true,
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain(
+          "Offline and Use Cached can not be used together",
+        );
+      }
+    });
+
+    it("offline and extensions can not be used together", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: true,
+          offline: true,
+          extensions: '["ms-python.python"]',
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain(
+          "Offline mode does not allow extensions to be installed",
+        );
+      }
+    });
+
+    it("workspace and folder can not be used together", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: true,
+          folder: "/home/coder",
+          workspace: "/home/coder/test.code-workspace",
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain(
+          "Set only one of `workspace` or `folder`",
+        );
+      }
+    });
+  });
 
-  it("accept_license should be set to true", () => {
-    const t = async () => {
-      await runTerraformApply(import.meta.dir, {
+  describe("script generation", () => {
+    it("generates script with correct port", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
         agent_id: "foo",
-        accept_license: "false",
+        accept_license: true,
+        port: 8080,
       });
-    };
-    expect(t).toThrow("Invalid value for variable");
-  });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--port 8080");
+    });
 
-  it("use_cached and offline can not be used together", () => {
-    const t = async () => {
-      await runTerraformApply(import.meta.dir, {
+    it("generates script with extensions directory", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
         agent_id: "foo",
-        accept_license: "true",
-        use_cached: "true",
-        offline: "true",
+        accept_license: true,
+        extensions_dir: "/custom/extensions",
       });
-    };
-    expect(t).toThrow("Offline and Use Cached can not be used together");
-  });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--extensions-dir=/custom/extensions");
+    });
+
+    it("generates script with telemetry level", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        telemetry_level: "off",
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--telemetry-level off");
+    });
+
+    it("generates script with disable trust", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        disable_trust: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--disable-workspace-trust");
+    });
+
+    it("generates script with serve-web command", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("serve-web");
+      expect(script.script).toContain("--accept-server-license-terms");
+      expect(script.script).toContain("--without-connection-token");
+    });
+
+    it("generates script with stable release channel by default", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("build=stable");
+    });
+
+    it("generates script with insiders release channel", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        release_channel: "insiders",
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("build=insiders");
+    });
+
+    it("generates script without commit-id value when not specified", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      // The if condition should have an empty string, so no commit-id value is passed
+      expect(script.script).toContain('if [ -n "" ]; then');
+      // Should not contain any actual commit hash
+      expect(script.script).not.toMatch(/--commit-id [a-f0-9]{40}/);
+    });
 
-  it("offline and extensions can not be used together", () => {
-    const t = async () => {
-      await runTerraformApply(import.meta.dir, {
+    it("generates script with commit-id when specified", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
         agent_id: "foo",
-        accept_license: "true",
-        offline: "true",
-        extensions: '["1", "2"]',
+        accept_license: true,
+        commit_id: "e54c774e0add60467559eb0d1e229c6452cf8447",
       });
-    };
-    expect(t).toThrow("Offline mode does not allow extensions to be installed");
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain(
+        "--commit-id e54c774e0add60467559eb0d1e229c6452cf8447",
+      );
+    });
   });
 
-  // More tests depend on shebang refactors
+  describe("container integration tests", () => {
+    it("uses existing code CLI in PATH", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that logs when serve-web is called
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "serve-web" ]; then
+  echo "MOCK_SERVER_STARTED with args: \$@"
+  exit 0
+fi
+echo "code mock called: \$@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      // Run the script - the mock will capture the serve-web call
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Found VS Code CLI");
+    });
+
+    it("offline mode fails when CLI not present", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        offline: true,
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(1);
+      expect(result.stdout).toContain(
+        "Offline mode enabled but no VS Code CLI, code-server, or cached VS Code Server found",
+      );
+    });
+
+    it("offline mode uses code-server as fallback", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        offline: true,
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install mock code-server in PATH
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code-server << 'MOCKEOF'
+#!/bin/bash
+echo "MOCK_CODE_SERVER_STARTED with args: $@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code-server`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("offline fallback");
+      expect(result.stdout).toContain("Starting code-server");
+    });
+
+    it("offline mode works with pre-installed CLI", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        offline: true,
+        install_prefix: "/tmp/vscode-web",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Pre-install mock code CLI at expected location
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /tmp/vscode-web/bin && cat > /tmp/vscode-web/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "serve-web" ]; then
+  echo "MOCK_OFFLINE_SERVER_STARTED"
+  exit 0
+fi
+exit 0
+MOCKEOF
+chmod +x /tmp/vscode-web/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Using cached VS Code CLI");
+      expect(result.stdout).toContain("Starting VS Code Web");
+    });
+
+    it("use_cached mode works with pre-installed CLI", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        use_cached: true,
+        install_prefix: "/tmp/vscode-web",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Pre-install mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /tmp/vscode-web/bin && cat > /tmp/vscode-web/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "serve-web" ]; then
+  echo "MOCK_CACHED_SERVER_STARTED"
+  exit 0
+fi
+exit 0
+MOCKEOF
+chmod +x /tmp/vscode-web/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Using cached VS Code CLI");
+    });
+
+    it("creates settings file with correct content", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: '{"editor.fontSize": 14}',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Check that settings file was created
+      const settingsResult = await execContainer(containerId, [
+        "cat",
+        "/root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(settingsResult.exitCode).toBe(0);
+      expect(settingsResult.stdout).toContain("editor.fontSize");
+      expect(settingsResult.stdout).toContain("14");
+    });
+
+    it("creates settings file with multiple settings", async () => {
+      const settings = {
+        "editor.fontSize": 16,
+        "editor.tabSize": 2,
+        "workbench.colorTheme": "Dracula",
+        "editor.formatOnSave": true,
+      };
+
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: JSON.stringify(settings),
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Check that settings file was created with all settings
+      const settingsResult = await execContainer(containerId, [
+        "cat",
+        "/root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(settingsResult.exitCode).toBe(0);
+      expect(settingsResult.stdout).toContain("editor.fontSize");
+      expect(settingsResult.stdout).toContain("16");
+      expect(settingsResult.stdout).toContain("editor.tabSize");
+      expect(settingsResult.stdout).toContain("2");
+      expect(settingsResult.stdout).toContain("workbench.colorTheme");
+      expect(settingsResult.stdout).toContain("Dracula");
+      expect(settingsResult.stdout).toContain("editor.formatOnSave");
+      expect(settingsResult.stdout).toContain("true");
+    });
+
+    it("creates settings file in correct directory structure", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: '{"test.setting": "value"}',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Verify directory structure was created
+      const dirResult = await execContainer(containerId, [
+        "ls",
+        "-la",
+        "/root/.vscode-server/data/Machine/",
+      ]);
+
+      expect(dirResult.exitCode).toBe(0);
+      expect(dirResult.stdout).toContain("settings.json");
+
+      // Verify parent directories exist
+      const parentDirResult = await execContainer(containerId, [
+        "ls",
+        "-la",
+        "/root/.vscode-server/data/",
+      ]);
+
+      expect(parentDirResult.exitCode).toBe(0);
+      expect(parentDirResult.stdout).toContain("Machine");
+    });
+
+    it("does not overwrite existing settings file", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: '{"new.setting": "new_value"}',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      // Pre-create an existing settings file
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /root/.vscode-server/data/Machine && echo '{"existing.setting": "existing_value"}' > /root/.vscode-server/data/Machine/settings.json`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Check that existing settings file was NOT overwritten
+      const settingsResult = await execContainer(containerId, [
+        "cat",
+        "/root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(settingsResult.exitCode).toBe(0);
+      // Should contain existing setting, not the new one
+      expect(settingsResult.stdout).toContain("existing.setting");
+      expect(settingsResult.stdout).toContain("existing_value");
+      expect(settingsResult.stdout).not.toContain("new.setting");
+    });
+
+    it("creates valid JSON settings file", async () => {
+      const settings = {
+        "editor.fontSize": 14,
+        "editor.wordWrap": "on",
+        "files.autoSave": "afterDelay",
+        "files.autoSaveDelay": 1000,
+      };
+
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: JSON.stringify(settings),
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install jq and create mock code CLI
+      await execContainer(containerId, ["apt-get", "update", "-qq"]);
+      await execContainer(containerId, [
+        "apt-get",
+        "install",
+        "-y",
+        "-qq",
+        "jq",
+      ]);
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Validate JSON using jq
+      const jsonValidResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(jsonValidResult.exitCode).toBe(0);
+
+      // Extract specific values using jq
+      const fontSizeResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.\"editor.fontSize\"' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+      expect(fontSizeResult.stdout.trim()).toBe("14");
+
+      const wordWrapResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.\"editor.wordWrap\"' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+      expect(wordWrapResult.stdout.trim()).toBe('"on"');
+
+      const autoSaveDelayResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.\"files.autoSaveDelay\"' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+      expect(autoSaveDelayResult.stdout.trim()).toBe("1000");
+    });
+
+    it("installs extensions", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        extensions: '["ms-python.python", "golang.go"]',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that logs extension installs
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "--install-extension" ]; then
+  echo "MOCK_EXTENSION_INSTALL: \$2"
+fi
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Installing extension");
+      expect(result.stdout).toContain("ms-python.python");
+      expect(result.stdout).toContain("golang.go");
+    });
+
+    it("runs with correct server arguments", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        port: 9999,
+        telemetry_level: "off",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that captures all arguments
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+echo "MOCK_CODE_ARGS: \$@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      // Check the output contains expected port message
+      expect(result.stdout).toContain("Starting VS Code Web on port 9999");
+    });
+
+    it("passes commit-id to code CLI when specified", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        commit_id: "abc123def456",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that logs arguments to the log file (where output is redirected)
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+echo "MOCK_CODE_ARGS: $@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Wait briefly for background process to write to log
+      await new Promise((resolve) => setTimeout(resolve, 500));
+
+      // Check the log file for the arguments (code CLI output goes there)
+      const logResult = await execContainer(containerId, [
+        "cat",
+        "/tmp/vscode-web.log",
+      ]);
+
+      expect(logResult.exitCode).toBe(0);
+      expect(logResult.stdout).toContain("--commit-id abc123def456");
+    });
+
+    // This test downloads and starts the real VS Code server
+    it("starts real VS Code CLI and responds to healthcheck (requires network)", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        port: 13338,
+        install_prefix: "/tmp/vscode-web",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install curl for downloading CLI and healthcheck
+      await execContainer(containerId, ["apt-get", "update", "-qq"]);
+      await execContainer(containerId, [
+        "apt-get",
+        "install",
+        "-y",
+        "-qq",
+        "curl",
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      // Run the script - it will start the server in background
+      const startResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(startResult.exitCode).toBe(0);
+      expect(startResult.stdout).toContain("Starting VS Code Web");
+
+      // Wait for server to start and check healthcheck
+      await new Promise((resolve) => setTimeout(resolve, 10000));
+
+      const healthResult = await execContainer(containerId, [
+        "curl",
+        "-s",
+        "-o",
+        "/dev/null",
+        "-w",
+        "%{http_code}",
+        "http://127.0.0.1:13338/healthz",
+      ]);
+
+      // Server should respond (200, 202, or 404 is acceptable - means server is running)
+      expect(["200", "202", "404"]).toContain(healthResult.stdout.trim());
+    });
+  });
 });
diff --git a/registry/coder/modules/vscode-web/main.tf b/registry/coder/modules/vscode-web/main.tf
index 7a2029c87..88c312109 100644
--- a/registry/coder/modules/vscode-web/main.tf
+++ b/registry/coder/modules/vscode-web/main.tf
@@ -59,12 +59,6 @@ variable "install_prefix" {
   default     = "/tmp/vscode-web"
 }
 
-variable "commit_id" {
-  type        = string
-  description = "Specify the commit ID of the VS Code Web binary to pin to a specific version. If left empty, the latest stable version is used."
-  default     = ""
-}
-
 variable "extensions" {
   type        = list(string)
   description = "A list of extensions to install."
@@ -148,19 +142,25 @@ variable "subdomain" {
   default     = true
 }
 
-variable "platform" {
+variable "workspace" {
   type        = string
-  description = "The platform to use for the VS Code Web."
+  description = "Path to a .code-workspace file to open in vscode-web."
   default     = ""
+}
+
+variable "release_channel" {
+  type        = string
+  description = "The release channel for VS Code CLI (stable or insiders)."
+  default     = "stable"
   validation {
-    condition     = var.platform == "" || var.platform == "linux" || var.platform == "darwin" || var.platform == "alpine" || var.platform == "win32"
-    error_message = "Incorrect value. Please set either 'linux', 'darwin', or 'alpine' or 'win32'."
+    condition     = var.release_channel == "stable" || var.release_channel == "insiders"
+    error_message = "Incorrect value. Please set either 'stable' or 'insiders'."
   }
 }
 
-variable "workspace" {
+variable "commit_id" {
   type        = string
-  description = "Path to a .code-workspace file to open in vscode-web."
+  description = "The commit SHA to use for the VS Code Server. Leave empty to use the latest version."
   default     = ""
 }
 
@@ -187,8 +187,8 @@ resource "coder_script" "vscode-web" {
     WORKSPACE : var.workspace,
     AUTO_INSTALL_EXTENSIONS : var.auto_install_extensions,
     SERVER_BASE_PATH : local.server_base_path,
+    RELEASE_CHANNEL : var.release_channel,
     COMMIT_ID : var.commit_id,
-    PLATFORM : var.platform,
   })
   run_on_start = true
 
diff --git a/registry/coder/modules/vscode-web/run.sh b/registry/coder/modules/vscode-web/run.sh
index 57bb760f9..6029053c0 100644
--- a/registry/coder/modules/vscode-web/run.sh
+++ b/registry/coder/modules/vscode-web/run.sh
@@ -1,138 +1,326 @@
 #!/usr/bin/env bash
 
 BOLD='\033[0;1m'
+RESET='\033[0m'
+CODE='\033[36;40;1m'
 EXTENSIONS=("${EXTENSIONS}")
-VSCODE_WEB="${INSTALL_PREFIX}/bin/code-server"
 
-# Set extension directory
+# Set extension directory argument
 EXTENSION_ARG=""
 if [ -n "${EXTENSIONS_DIR}" ]; then
   EXTENSION_ARG="--extensions-dir=${EXTENSIONS_DIR}"
 fi
 
-# Set extension directory
+# Set server base path argument
 SERVER_BASE_PATH_ARG=""
 if [ -n "${SERVER_BASE_PATH}" ]; then
   SERVER_BASE_PATH_ARG="--server-base-path=${SERVER_BASE_PATH}"
 fi
 
-# Set disable workspace trust
+# Set disable workspace trust argument
 DISABLE_TRUST_ARG=""
 if [ "${DISABLE_TRUST}" = true ]; then
   DISABLE_TRUST_ARG="--disable-workspace-trust"
 fi
 
-run_vscode_web() {
-  echo "👷 Running $VSCODE_WEB serve-local $EXTENSION_ARG $SERVER_BASE_PATH_ARG $DISABLE_TRUST_ARG --port ${PORT} --host 127.0.0.1 --accept-server-license-terms --without-connection-token --telemetry-level ${TELEMETRY_LEVEL} in the background..."
-  echo "Check logs at ${LOG_PATH}!"
-  "$VSCODE_WEB" serve-local "$EXTENSION_ARG" "$SERVER_BASE_PATH_ARG" "$DISABLE_TRUST_ARG" --port "${PORT}" --host 127.0.0.1 --accept-server-license-terms --without-connection-token --telemetry-level "${TELEMETRY_LEVEL}" > "${LOG_PATH}" 2>&1 &
+# Check if code CLI is installed
+check_code_cli() {
+  if command -v code > /dev/null 2>&1; then
+    echo "code"
+    return 0
+  fi
+  if [ -f "${INSTALL_PREFIX}/bin/code" ]; then
+    echo "${INSTALL_PREFIX}/bin/code"
+    return 0
+  fi
+  return 1
 }
 
-# Check if the settings file exists...
-if [ ! -f ~/.vscode-server/data/Machine/settings.json ]; then
-  echo "⚙️ Creating settings file..."
-  mkdir -p ~/.vscode-server/data/Machine
-  echo "${SETTINGS}" > ~/.vscode-server/data/Machine/settings.json
-fi
-
-# Check if vscode-server is already installed for offline or cached mode
-if [ -f "$VSCODE_WEB" ]; then
-  if [ "${OFFLINE}" = true ] || [ "${USE_CACHED}" = true ]; then
-    echo "🥳 Found a copy of VS Code Web"
-    run_vscode_web
-    exit 0
+# Check if code-server is installed (fallback option)
+check_code_server() {
+  if command -v code-server > /dev/null 2>&1; then
+    echo "code-server"
+    return 0
   fi
-fi
-# Offline mode always expects a copy of vscode-server to be present
-if [ "${OFFLINE}" = true ]; then
-  echo "Failed to find a copy of VS Code Web"
-  exit 1
-fi
+  if [ -f "${INSTALL_PREFIX}/bin/code-server" ]; then
+    echo "${INSTALL_PREFIX}/bin/code-server"
+    return 0
+  fi
+  return 1
+}
 
-# Create install prefix
-mkdir -p ${INSTALL_PREFIX}
+# Find existing vscode-server binary (used by code serve-web internally)
+find_vscode_server() {
+  # Check common locations for pre-downloaded vscode-server
+  local server_dirs=(
+    "$HOME/.vscode-server/bin"
+    "$HOME/.vscode/cli/serve-web"
+  )
+  for dir in "$${server_dirs[@]}"; do
+    if [ -d "$dir" ]; then
+      # Find the most recent server version
+      local latest
+      latest=$(ls -t "$dir" 2> /dev/null | head -1)
+      if [ -n "$latest" ] && [ -f "$dir/$latest/bin/code-server" ]; then
+        echo "$dir/$latest/bin/code-server"
+        return 0
+      fi
+      if [ -n "$latest" ] && [ -f "$dir/$latest/code-server" ]; then
+        echo "$dir/$latest/code-server"
+        return 0
+      fi
+    fi
+  done
+  return 1
+}
 
-printf "$${BOLD}Installing Microsoft Visual Studio Code Server!\n"
+# Install VS Code CLI if not present
+install_code_cli() {
+  printf "$${BOLD}Installing VS Code CLI...$${RESET}\n"
 
-# Download and extract vscode-server
-ARCH=$(uname -m)
-case "$ARCH" in
-  x86_64) ARCH="x64" ;;
-  aarch64) ARCH="arm64" ;;
-  *)
-    echo "Unsupported architecture"
+  # Detect architecture
+  ARCH=$(uname -m)
+  case "$ARCH" in
+    x86_64) ARCH="x64" ;;
+    aarch64 | arm64) ARCH="arm64" ;;
+    armv7l) ARCH="armhf" ;;
+    *)
+      echo "Unsupported architecture: $ARCH"
+      exit 1
+      ;;
+  esac
+
+  # Detect platform
+  # Note: VS Code CLI uses 'alpine' for all Linux distributions
+  PLATFORM=$(uname -s)
+  case "$PLATFORM" in
+    Linux)
+      PLATFORM="alpine"
+      ;;
+    Darwin)
+      PLATFORM="darwin"
+      ;;
+    *)
+      echo "Unsupported platform: $PLATFORM"
+      exit 1
+      ;;
+  esac
+
+  # Create install directory
+  mkdir -p "${INSTALL_PREFIX}/bin"
+
+  # Download VS Code CLI
+  CLI_URL="https://code.visualstudio.com/sha/download?build=${RELEASE_CHANNEL}&os=cli-$PLATFORM-$ARCH"
+  printf "Downloading VS Code CLI from %s\n" "$CLI_URL"
+
+  if command -v curl > /dev/null 2>&1; then
+    curl -fsSL "$CLI_URL" -o "/tmp/vscode-cli.tar.gz"
+  elif command -v wget > /dev/null 2>&1; then
+    wget -q "$CLI_URL" -O "/tmp/vscode-cli.tar.gz"
+  else
+    echo "Neither curl nor wget is available. Please install one of them."
     exit 1
-    ;;
-esac
-
-# Detect the platform
-if [ -n "${PLATFORM}" ]; then
-  DETECTED_PLATFORM="${PLATFORM}"
-elif [ -f /etc/alpine-release ] || grep -qi 'ID=alpine' /etc/os-release 2> /dev/null || command -v apk > /dev/null 2>&1; then
-  DETECTED_PLATFORM="alpine"
-elif [ "$(uname -s)" = "Darwin" ]; then
-  DETECTED_PLATFORM="darwin"
-else
-  DETECTED_PLATFORM="linux"
-fi
+  fi
 
-# Check if a specific VS Code Web commit ID was provided
-if [ -n "${COMMIT_ID}" ]; then
-  HASH="${COMMIT_ID}"
-else
-  HASH=$(curl -fsSL https://update.code.visualstudio.com/api/commits/stable/server-$DETECTED_PLATFORM-$ARCH-web | cut -d '"' -f 2)
-fi
-printf "$${BOLD}VS Code Web commit id version $HASH.\n"
+  # Extract CLI
+  tar -xzf /tmp/vscode-cli.tar.gz -C "${INSTALL_PREFIX}/bin"
+  rm -f /tmp/vscode-cli.tar.gz
 
-output=$(curl -fsSL "https://vscode.download.prss.microsoft.com/dbazure/download/stable/$HASH/vscode-server-$DETECTED_PLATFORM-$ARCH-web.tar.gz" | tar -xz -C "${INSTALL_PREFIX}" --strip-components 1)
+  # The CLI binary is named 'code'
+  if [ -f "${INSTALL_PREFIX}/bin/code" ]; then
+    chmod +x "${INSTALL_PREFIX}/bin/code"
+    export PATH="${INSTALL_PREFIX}/bin:$PATH"
+    printf "$${BOLD}VS Code CLI installed successfully.$${RESET}\n"
+  else
+    echo "Failed to install VS Code CLI"
+    exit 1
+  fi
+}
 
-if [ $? -ne 0 ]; then
-  echo "Failed to install Microsoft Visual Studio Code Server: $output"
-  exit 1
-fi
-printf "$${BOLD}VS Code Web has been installed.\n"
+# Run VS Code Web using the code CLI (serve-web command)
+run_vscode_web_cli() {
+  local CODE_CMD="$1"
+
+  # Build the command arguments
+  ARGS="serve-web --port ${PORT} --host 127.0.0.1 --accept-server-license-terms --without-connection-token --telemetry-level ${TELEMETRY_LEVEL}"
+
+  if [ -n "$EXTENSION_ARG" ]; then
+    ARGS="$ARGS $EXTENSION_ARG"
+  fi
 
-# Install each extension...
-IFS=',' read -r -a EXTENSIONLIST <<< "$${EXTENSIONS}"
-# shellcheck disable=SC2066
-for extension in "$${EXTENSIONLIST[@]}"; do
-  if [ -z "$extension" ]; then
-    continue
+  if [ -n "$SERVER_BASE_PATH_ARG" ]; then
+    ARGS="$ARGS $SERVER_BASE_PATH_ARG"
   fi
-  printf "🧩 Installing extension $${CODE}$extension$${RESET}...\n"
-  output=$($VSCODE_WEB "$EXTENSION_ARG" --install-extension "$extension" --force)
-  if [ $? -ne 0 ]; then
-    echo "Failed to install extension: $extension: $output"
+
+  if [ -n "$DISABLE_TRUST_ARG" ]; then
+    ARGS="$ARGS $DISABLE_TRUST_ARG"
   fi
-done
 
-if [ "${AUTO_INSTALL_EXTENSIONS}" = true ]; then
-  if ! command -v jq > /dev/null; then
-    echo "jq is required to install extensions from a workspace file."
-  else
-    # Prefer WORKSPACE if set and points to a file
-    if [ -n "${WORKSPACE}" ] && [ -f "${WORKSPACE}" ]; then
-      printf "🧩 Installing extensions from %s...\n" "${WORKSPACE}"
-      # Strip single-line comments then parse .extensions.recommendations[]
-      extensions=$(sed 's|//.*||g' "${WORKSPACE}" | jq -r '(.extensions.recommendations // [])[]')
-      for extension in $extensions; do
-        $VSCODE_WEB "$EXTENSION_ARG" --install-extension "$extension" --force
-      done
+  if [ -n "${COMMIT_ID}" ]; then
+    ARGS="$ARGS --commit-id ${COMMIT_ID}"
+  fi
+
+  printf "Starting VS Code Web on port ${PORT}...\n"
+  printf "Check logs at ${LOG_PATH}\n"
+
+  # shellcheck disable=SC2086
+  "$CODE_CMD" $ARGS > "${LOG_PATH}" 2>&1 &
+}
+
+# Run VS Code Web using code-server (fallback for offline mode)
+run_code_server() {
+  local SERVER_CMD="$1"
+
+  printf "Starting code-server on port ${PORT}...\n"
+  printf "Check logs at ${LOG_PATH}\n"
+
+  # Build arguments for code-server
+  ARGS="--port ${PORT} --host 127.0.0.1 --auth none"
+
+  if [ -n "$EXTENSION_ARG" ]; then
+    ARGS="$ARGS $EXTENSION_ARG"
+  fi
+
+  # shellcheck disable=SC2086
+  "$SERVER_CMD" $ARGS > "${LOG_PATH}" 2>&1 &
+}
+
+# Run VS Code Web using vscode-server binary directly
+run_vscode_server() {
+  local SERVER_CMD="$1"
+
+  printf "Starting VS Code Server on port ${PORT}...\n"
+  printf "Check logs at ${LOG_PATH}\n"
+
+  # Build arguments for vscode-server
+  ARGS="--port ${PORT} --host 127.0.0.1 --without-connection-token --accept-server-license-terms --telemetry-level ${TELEMETRY_LEVEL}"
+
+  if [ -n "$EXTENSION_ARG" ]; then
+    ARGS="$ARGS $EXTENSION_ARG"
+  fi
+
+  if [ -n "$SERVER_BASE_PATH_ARG" ]; then
+    ARGS="$ARGS $SERVER_BASE_PATH_ARG"
+  fi
+
+  # shellcheck disable=SC2086
+  "$SERVER_CMD" serve-local $ARGS > "${LOG_PATH}" 2>&1 &
+}
+
+install_extensions() {
+  local CODE_CMD="$1"
+
+  # Install specified extensions
+  IFS=',' read -r -a EXTENSIONLIST <<< "$${EXTENSIONS}"
+  for extension in "$${EXTENSIONLIST[@]}"; do
+    if [ -z "$extension" ]; then
+      continue
+    fi
+    printf "Installing extension $${CODE}$extension$${RESET}...\n"
+    output=$("$CODE_CMD" $EXTENSION_ARG --install-extension "$extension" --force 2>&1)
+    if [ $? -ne 0 ]; then
+      echo "Failed to install extension: $extension: $output"
+    fi
+  done
+
+  # Auto-install extensions from workspace or folder
+  if [ "${AUTO_INSTALL_EXTENSIONS}" = true ]; then
+    if ! command -v jq > /dev/null; then
+      echo "jq is required to install extensions from a workspace file."
     else
-      # Fallback to folder-based .vscode/extensions.json (existing behavior)
-      WORKSPACE_DIR="$HOME"
-      if [ -n "${FOLDER}" ]; then
-        WORKSPACE_DIR="${FOLDER}"
-      fi
-      if [ -f "$WORKSPACE_DIR/.vscode/extensions.json" ]; then
-        printf "🧩 Installing extensions from %s/.vscode/extensions.json...\n" "$WORKSPACE_DIR"
-        extensions=$(sed 's|//.*||g' "$WORKSPACE_DIR/.vscode/extensions.json" | jq -r '.recommendations[]')
+      if [ -n "${WORKSPACE}" ] && [ -f "${WORKSPACE}" ]; then
+        printf "Installing extensions from %s...\n" "${WORKSPACE}"
+        extensions=$(sed 's|//.*||g' "${WORKSPACE}" | jq -r '(.extensions.recommendations // [])[]')
         for extension in $extensions; do
-          $VSCODE_WEB "$EXTENSION_ARG" --install-extension "$extension" --force
+          "$CODE_CMD" $EXTENSION_ARG --install-extension "$extension" --force
         done
+      else
+        WORKSPACE_DIR="$HOME"
+        if [ -n "${FOLDER}" ]; then
+          WORKSPACE_DIR="${FOLDER}"
+        fi
+        if [ -f "$WORKSPACE_DIR/.vscode/extensions.json" ]; then
+          printf "Installing extensions from %s/.vscode/extensions.json...\n" "$WORKSPACE_DIR"
+          extensions=$(sed 's|//.*||g' "$WORKSPACE_DIR/.vscode/extensions.json" | jq -r '.recommendations[]')
+          for extension in $extensions; do
+            "$CODE_CMD" $EXTENSION_ARG --install-extension "$extension" --force
+          done
+        fi
       fi
     fi
   fi
+}
+
+# Create settings file if it doesn't exist
+if [ ! -f ~/.vscode-server/data/Machine/settings.json ]; then
+  printf "Creating settings file...\n"
+  mkdir -p ~/.vscode-server/data/Machine
+  echo "${SETTINGS}" > ~/.vscode-server/data/Machine/settings.json
 fi
 
-run_vscode_web
+# Determine which command to use
+CODE_CMD=""
+RUN_MODE=""
+
+# Check for code CLI first (preferred)
+if CODE_CMD=$(check_code_cli); then
+  printf "$${BOLD}Found VS Code CLI at $CODE_CMD$${RESET}\n"
+  RUN_MODE="cli"
+fi
+
+# Handle offline mode
+if [ "${OFFLINE}" = true ]; then
+  if [ -n "$CODE_CMD" ]; then
+    # Check if vscode-server is already downloaded (code serve-web won't need to download)
+    if VSCODE_SERVER=$(find_vscode_server); then
+      printf "Found cached VS Code Server at $VSCODE_SERVER\n"
+      printf "Using cached VS Code CLI.\n"
+      run_vscode_web_cli "$CODE_CMD"
+      exit 0
+    fi
+    # Code CLI exists but vscode-server not cached - try using it anyway
+    # (it might work if server was pre-downloaded, or fail gracefully)
+    printf "Warning: VS Code Server may not be cached. Attempting to start...\n"
+    printf "Using cached VS Code CLI.\n"
+    run_vscode_web_cli "$CODE_CMD"
+    exit 0
+  fi
+
+  # Try code-server as fallback for offline mode
+  if SERVER_CMD=$(check_code_server); then
+    printf "$${BOLD}Found code-server at $SERVER_CMD (offline fallback)$${RESET}\n"
+    run_code_server "$SERVER_CMD"
+    exit 0
+  fi
+
+  # Try vscode-server binary directly
+  if VSCODE_SERVER=$(find_vscode_server); then
+    printf "$${BOLD}Found VS Code Server at $VSCODE_SERVER (offline fallback)$${RESET}\n"
+    run_vscode_server "$VSCODE_SERVER"
+    exit 0
+  fi
+
+  echo "Offline mode enabled but no VS Code CLI, code-server, or cached VS Code Server found."
+  exit 1
+fi
+
+# Handle use_cached mode
+if [ "${USE_CACHED}" = true ] && [ -n "$CODE_CMD" ]; then
+  printf "Using cached VS Code CLI.\n"
+  install_extensions "$CODE_CMD"
+  run_vscode_web_cli "$CODE_CMD"
+  exit 0
+fi
+
+# Install VS Code CLI if not present
+if [ -z "$CODE_CMD" ]; then
+  install_code_cli
+  CODE_CMD="${INSTALL_PREFIX}/bin/code"
+  RUN_MODE="cli"
+fi
+
+# Install extensions
+install_extensions "$CODE_CMD"
+
+# Run VS Code Web
+run_vscode_web_cli "$CODE_CMD"
diff --git a/registry/coder/modules/vscode-web/vscode-web.tftest.hcl b/registry/coder/modules/vscode-web/vscode-web.tftest.hcl
new file mode 100644
index 000000000..5a2d8d98e
--- /dev/null
+++ b/registry/coder/modules/vscode-web/vscode-web.tftest.hcl
@@ -0,0 +1,151 @@
+run "required_vars" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+  }
+}
+
+run "accept_license_required" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = false
+  }
+
+  expect_failures = [
+    var.accept_license
+  ]
+}
+
+run "offline_and_use_cached_conflict" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    use_cached     = true
+    offline        = true
+  }
+
+  expect_failures = [
+    resource.coder_script.vscode-web
+  ]
+}
+
+run "offline_disallows_extensions" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    offline        = true
+    extensions     = ["ms-python.python", "golang.go"]
+  }
+
+  expect_failures = [
+    resource.coder_script.vscode-web
+  ]
+}
+
+run "workspace_and_folder_conflict" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    folder         = "/home/coder/project"
+    workspace      = "/home/coder/project.code-workspace"
+  }
+
+  expect_failures = [
+    resource.coder_script.vscode-web
+  ]
+}
+
+run "url_with_folder_query" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    folder         = "/home/coder/project"
+    port           = 13338
+  }
+
+  assert {
+    condition     = resource.coder_app.vscode-web.url == "http://localhost:13338?folder=%2Fhome%2Fcoder%2Fproject"
+    error_message = "coder_app URL must include encoded folder query param"
+  }
+}
+
+run "url_with_workspace_query" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    workspace      = "/home/coder/project.code-workspace"
+    port           = 13338
+  }
+
+  assert {
+    condition     = resource.coder_app.vscode-web.url == "http://localhost:13338?workspace=%2Fhome%2Fcoder%2Fproject.code-workspace"
+    error_message = "coder_app URL must include encoded workspace query param"
+  }
+}
+
+run "release_channel_stable" {
+  command = plan
+
+  variables {
+    agent_id        = "foo"
+    accept_license  = true
+    release_channel = "stable"
+  }
+}
+
+run "release_channel_insiders" {
+  command = plan
+
+  variables {
+    agent_id        = "foo"
+    accept_license  = true
+    release_channel = "insiders"
+  }
+}
+
+run "release_channel_invalid" {
+  command = plan
+
+  variables {
+    agent_id        = "foo"
+    accept_license  = true
+    release_channel = "invalid"
+  }
+
+  expect_failures = [
+    var.release_channel
+  ]
+}
+
+run "commit_id_empty_by_default" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+  }
+}
+
+run "commit_id_with_value" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    commit_id      = "e54c774e0add60467559eb0d1e229c6452cf8447"
+  }
+}