diff --git a/src/extension/prompts/node/panel/chatVariables.tsx b/src/extension/prompts/node/panel/chatVariables.tsx
index cb7a79b6f..f0b34c979 100644
--- a/src/extension/prompts/node/panel/chatVariables.tsx
+++ b/src/extension/prompts/node/panel/chatVariables.tsx
@@ -187,7 +187,7 @@ export async function renderChatVariables(chatVariables: ChatVariablesCollection
 				</Tag>
 			);
 		} else if (variableValue instanceof ChatReferenceBinaryData) {
-			elements.push(<Image variableName={variableName} variableValue={await variableValue.data()} reference={variableValue.reference} omitReferences={omitReferences}></Image>);
+			elements.push(<Image variableName={variableName} variableValue={await variableValue.data()} reference={variableValue.reference} omitReferences={omitReferences} url={variableValue.url}></Image>);
 		} else if (typeof ChatReferenceDiagnostic !== 'undefined' && variableValue instanceof ChatReferenceDiagnostic) { // check undefined to avoid breaking old Insiders versions
 			elements.push(<DiagnosticVariable diagnostics={variableValue.diagnostics} />);
 		}
diff --git a/src/extension/prompts/node/panel/image.tsx b/src/extension/prompts/node/panel/image.tsx
index 137ad58a3..3c8843fce 100644
--- a/src/extension/prompts/node/panel/image.tsx
+++ b/src/extension/prompts/node/panel/image.tsx
@@ -4,7 +4,7 @@
  *--------------------------------------------------------------------------------------------*/
 
 import * as l10n from '@vscode/l10n';
-import { BasePromptElementProps, ChatResponseReferencePartStatusKind, PromptElement, PromptReference, PromptSizing, UserMessage, Image as BaseImage } from '@vscode/prompt-tsx';
+import { Image as BaseImage, BasePromptElementProps, ChatResponseReferencePartStatusKind, PromptElement, PromptReference, PromptSizing, UserMessage } from '@vscode/prompt-tsx';
 import { Uri } from '../../../../vscodeTypes';
 import { IPromptEndpoint } from '../base/promptRenderer';
 
@@ -12,6 +12,7 @@ export interface ImageProps extends BasePromptElementProps {
 	variableName: string;
 	variableValue: Uint8Array | Promise<Uint8Array>;
 	omitReferences?: boolean;
+	url?: string;
 	reference?: Uri;
 }
 
@@ -48,6 +49,10 @@ export class Image extends PromptElement<ImageProps, unknown> {
 				decoded = decodedString;
 			}
 
+			if (this.props.url) {
+				decoded = this.props.url;
+			}
+
 			return (
 				<UserMessage priority={0}>
 					<BaseImage src={decoded} detail='high' />
diff --git a/src/extension/prompts/node/panel/toolCalling.tsx b/src/extension/prompts/node/panel/toolCalling.tsx
index 8e990c01a..49a022f73 100644
--- a/src/extension/prompts/node/panel/toolCalling.tsx
+++ b/src/extension/prompts/node/panel/toolCalling.tsx
@@ -13,7 +13,7 @@ import { ITokenizer } from '../../../../util/common/tokenizer';
 import { CancellationToken } from '../../../../util/vs/base/common/cancellation';
 import { toErrorMessage } from '../../../../util/vs/base/common/errorMessage';
 import { isCancellationError } from '../../../../util/vs/base/common/errors';
-import { LanguageModelDataPart, LanguageModelPromptTsxPart, ToolResultAudience, LanguageModelTextPart, LanguageModelToolResult, LanguageModelTextPart2, LanguageModelDataPart2 } from '../../../../vscodeTypes';
+import { LanguageModelDataPart, LanguageModelDataPart2, LanguageModelPromptTsxPart, LanguageModelTextPart, LanguageModelTextPart2, LanguageModelToolResult, ToolResultAudience } from '../../../../vscodeTypes';
 import { isImageDataPart } from '../../../conversation/common/languageModelChatMessageHelpers';
 import { IResultMetadata } from '../../../prompt/common/conversation';
 import { IBuildPromptContext, IToolCall, IToolCallRound } from '../../../prompt/common/intents';
@@ -295,7 +295,13 @@ enum ToolInvocationOutcome {
 export function imageDataPartToTSX(part: LanguageModelDataPart) {
 	if (isImageDataPart(part)) {
 		const base64 = Buffer.from(part.data).toString('base64');
-		return <Image src={`data:${part.mimeType};base64,${base64}`} />;
+		const decodedString = new TextDecoder().decode(part.data);
+
+		// Check if the decoded data is a URL
+		const isUrl = /^https?:\/\/.+/.test(decodedString);
+		const src = isUrl ? decodedString : `data:${part.mimeType};base64,${base64}`;
+
+		return <Image src={src} />;
 	}
 }
 
diff --git a/src/extension/vscode.proposed.chatBinaryReferenceData.d.ts b/src/extension/vscode.proposed.chatBinaryReferenceData.d.ts
index 50789bde8..197cef56a 100644
--- a/src/extension/vscode.proposed.chatBinaryReferenceData.d.ts
+++ b/src/extension/vscode.proposed.chatBinaryReferenceData.d.ts
@@ -5,9 +5,6 @@
 
 declare module 'vscode' {
 
-	/**
-		 * A reference to a value that the user added to their chat request.
-		 */
 	export interface ChatPromptReference {
 		/**
 		 * The value of this reference. The `string | Uri | Location` types are used today, but this could expand in the future.
@@ -23,10 +20,17 @@ declare module 'vscode' {
 
 		/**
 		 * Retrieves the binary data of the reference. This is primarily used to receive image attachments from the chat.
+		 * Note: base64 will only be used as a fallback if upload fails.
 		 * @returns A promise that resolves to the binary data as a Uint8Array.
 		 */
 		data(): Thenable<Uint8Array>;
 
+		/**
+		 * URL of image that was uploaded to GitHub
+		 */
+		url: string;
+
+
 		/**
 		 * Retrieves a URI reference to the binary data, if available.
 		 */
@@ -36,6 +40,6 @@ declare module 'vscode' {
 		 * @param mimeType The MIME type of the binary data.
 		 * @param data The binary data of the reference.
 		 */
-		constructor(mimeType: string, data: () => Thenable<Uint8Array>);
+		constructor(mimeType: string, data: () => Thenable<Uint8Array>, url: string, reference?: Uri);
 	}
 }
diff --git a/src/util/common/test/shims/chatTypes.ts b/src/util/common/test/shims/chatTypes.ts
index 7b82d924d..f5781c986 100644
--- a/src/util/common/test/shims/chatTypes.ts
+++ b/src/util/common/test/shims/chatTypes.ts
@@ -242,7 +242,8 @@ export class ChatReferenceDiagnostic {
 export class ChatReferenceBinaryData {
 	constructor(
 		readonly mimeType: string,
-		readonly data: () => Thenable<Uint8Array>
+		readonly data: () => Thenable<Uint8Array>,
+		readonly url: string
 	) { }
 }