[BUG] VS Code extension forces session bifurcation or loss when opening a folder

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?

Workflow attempted

Working on design/architecture in a cloud Claude Code session, then opening the folder in VS Code to edit files locally while keeping the conversation visible in the web tab.

Current behavior

Opening a folder in VS Code presents three options:

• "Open folder" → Creates new empty local session, loses conversation history
• "Continue here" → Teleports/bifurcates to local, diverging from cloud session
• "Cancel" → Does nothing

Problem

No way to keep cloud session's conversation visible in VS Code web tab while editing locally. Every action either erases history or bifurcates.

What Should Happen?

Desired behavior

Extension should allow accessing current cloud session's conversation in web tab without forcing bifurcation or history loss.

Impact

Blocks hybrid workflows (design in web, code in VS Code local, conversation stays synced).

Error Messages/Logs

Steps to Reproduce

1. Open Claude Code in a browser (web session) with an active conversation on a design/architecture task
2. Open VS Code with the Claude Code extension installed
3. In VS Code, use the Claude Code extension to open a folder (e.g., File → Open Folder or Ctrl+K Ctrl+O)
4. The extension presents a modal with three options:

• "Open folder" (new empty local session)
• "Continue here" (teleport/bifurcate)
• "Cancel"

1. Select "Open folder":

• Result: A new empty local session is created; the original conversation history from step 1 is no longer visible in VS Code's web tab

1. Try to access the original cloud session's conversation:

• Expected: Conversation history visible in web tab while editing locally
• Actual: Cannot access it without switching platforms (must go back to browser web session)

1. Repeat steps 3-4, select "Continue here":

• Result: Session is bifurcated to local; browser cloud session no longer has the conversation; both diverge independently

Claude Model

_No response_

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.173

Platform

Other

Operating System

Other Linux

Terminal/Shell

VS Code integrated terminal

Additional Information

The issue specifically occurs when:

1. A cloud session has active conversation history on an architecture/design task
2. User attempts to open a local folder in VS Code via Claude Code extension
3. The extension's modal forces a binary choice: new empty session OR bifurcate/teleport

This prevents the intended workflow: keeping design discussions in Claude web while editing code locally with conversation history visible in VS Code's web tab.
Environment: Remote execution environment (cloud session), with local VS Code installation.