[BUG] Invalid API key · Please run /login in VSCode Plugin

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

I am unable to use the VSCode Plugin, I keep getting an error message about: Invalid API key · Please run /login. Running /Login doesn't resolve the issue. however, using Claude from terminal works fine with no issues

What Should Happen?

I should be able to use the plugin from within VS Code

Error Messages/Logs

Steps to Reproduce

Open Plugin panel in VS Code

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.0.49

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_