Native Terminal Streaming for Claude Code Extension

Type: <b>Feature Request</b>

Description: Currently, when using the Claude Code extension in the VS Code sidebar, terminal commands and processes are executed in an "isolated shell" or background process. While this allows the agent to parse output effectively, it creates a "black box" experience for the developer. Unlike GitHub Copilot’s agentic chat, which streams commands directly into a visible integrated terminal, Claude Code requires manual intervention (like /bashes or verbose mode) to see what is happening in real-time.

Proposed Solution: Introduce a "Native Terminal Bridge" mode. When the agent initiates a command from the sidebar:

It should optionally target a visible, dedicated VS Code terminal tab (e.g., Claude: Terminal).

The output should stream in real-time to this terminal, allowing the developer to see logs, progress bars, and errors as they happen.

This would align the "Agentic Sidebar" experience with the "Terminal CLI" experience, providing a unified workflow.

Why this is important:

Trust & Transparency: Developers need to verify what the agent is executing on their machine instantly.

Debuggability: Long-running tasks (like npm install or test suites) are easier to monitor via a standard terminal output rather than a chat bubble.

Consistency: It bridges the gap between the VS Code Sidebar UI and the native developer workflow, matching the standard set by other major AI coding assistants.

Extension version: 2.1.29
VS Code version: Code 1.108.2 (c9d77990917f3102ada88be140d28b038d1dd7c7, 2026-01-21T13:52:09.270Z)
OS version: Windows_NT x64 10.0.26200
Modes:

<!-- generated by issue reporter -->