[BUG] MCP tools connected in VS Code extension but not available to model

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?

Environment:

Claude Code VS Code extension (version: check Extensions panel)
macOS 14.x
MCP server: claude.ai Atlassian (remote/HTTP)
Description:

When an MCP server is connected via the VS Code extension and shows as connected in /mcp, the server's tools are not available to the model within that session. The only tool that registers is the authenticate tool — the actual server tools (e.g. Jira search, get issue, create issue) never appear.

The same MCP server works correctly when using Claude Code via the CLI.

Workaround: Use Claude Code CLI (claude in terminal) — MCP tools work correctly there.

What Should Happen?

All tools exposed by the MCP server should be available to the model once the server shows as connected.

Error Messages/Logs

Steps to Reproduce

Add the claude.ai Atlassian MCP server via the VS Code extension
Run /mcp and complete OAuth authentication
Server shows as ✅ connected
Ask Claude to use a Jira tool (e.g. fetch issue PROJ-123)
Claude reports the tools are unavailable / only authenticate is registered

Claude Model

Opus

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.94 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_