[BUG] Claude Code cannot access any file or folder in the VSCode Projects with extension 2.0

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?

After reloading extensions, running /init and attempting to have Claude Claude VSCode extension fix access, the new extension cannot access any files or folders in the current project. Alll @ mentions are not functioning.

What Should Happen?

@file should attach or mention the file from the project root

Error Messages/Logs

No files found

Steps to Reproduce

@<filename>

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.0.1

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_