Claude Code process exited with code 126 - chat panel not working on Windows

Type: <b>Bug</b>

1. Install Claude Code extension v2.1.87 on Windows 11 (AMD64)
2. Install Git for Windows with default settings
3. Set CLAUDE_CODE_GIT_BASH_PATH environment variable to C:\Program Files\Git\bin\bash.exe
4. Open VS Code and click the Claude Code icon
5. Sign in with Claude.ai account
6. Click "+ New Session"
7. Observe: "Error: Claude Code process exited with code 126" appears
8. Chat panel does not respond to any input
9. Note: Running "claude" in PowerShell terminal works correctly

Expected: Chat panel connects and allows sending messages
Actual: Error code 126, panel is non-functional

Extension version: 2.1.87
VS Code version: Code 1.113.0 (cfbea10c5ffb233ea9177d34726e6056e89913dc, 2026-03-24T15:07:18+01:00)
OS version: Windows_NT x64 10.0.26100
Modes:

<details>
<summary>System Info</summary>

|Item|Value|
|---|---|
|CPUs|Intel(R) Core(TM) i7-1065G7 CPU @ 1.30GHz (8 x 1498)|
|GPU Status|2d_canvas: enabled<br>GPU0: VENDOR= 0x8086, DEVICE=0x8a52 [Intel(R) Iris(R) Plus Graphics], DRIVER_VENDOR=Intel, DRIVER_VERSION=30.0.100.9864 ACTIVE<br>GPU1: VENDOR= 0x1414, DEVICE=0x008c [Microsoft Basic Render Driver], DRIVER_VERSION=10.0.26100.7309<br>Machine model name: <br>Machine model version: <br>direct_rendering_display_compositor: disabled_off_ok<br>gpu_compositing: enabled<br>multiple_raster_threads: enabled_on<br>opengl: enabled_on<br>rasterization: enabled<br>raw_draw: disabled_off_ok<br>skia_graphite: disabled_off<br>trees_in_viz: disabled_off<br>video_decode: enabled<br>video_encode: enabled<br>webgl: enabled<br>webgl2: enabled<br>webgpu: enabled<br>webnn: disabled_off|
|Load (avg)|undefined|
|Memory (System)|15.74GB (5.30GB free)|
|Process Argv|--crash-reporter-id c5e5017d-497a-436c-95b2-6b3b24185bc9|
|Screen Reader|no|
|VM|0%|
</details><details>
<summary>A/B Experiments</summary>

vsliv368cf:30146710
binariesv615:30325510
nativeloc1:31344060
dwcopilot:31170013
dwoutputs:31242946
copilot_t_ci:31333650
e5gg6876:31282496
pythonrdcb7:31342333
6518g693:31463988
aj953862:31281341
b6b4d950:31327385
6abeh943:31336334
envsdeactivate2:31464701
cloudbuttont:31379625
aihoversummaries_t:31469308
3efgi100_wstrepl:31403338
use-responses-api:31390855
ec5jj548:31422691
cp_cls_t_966_ss:31454198
4je02754:31466945
8hhj4413:31478653
cp_cls_c_1081:31454833
ia-use-proxy-models-svc:31452481
e9c30283:31461165
test_treatment2:31471001
g_63ac8346:31467999
idci7584:31464702
nes-ftch-ctrl:31485414
showingstats:31481873
534a6447:31478749
nes-extended-on:31455476
chat:31457767
8hig5102:31480529
67jbj424:31486320
bg_compact_c:31481651
c-off:31484755
cpptoolson-v2:31475363
db0gd219:31481871
ddid_t:31478206
jah3f675:31485061

</details>

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