[BUG] `/compact` not working in the newly updated Visual Studio Code extension (v2.1.238)

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?

Hi,

I've been using Claude Code visual studio extension and it has been working great. Yesterday, VSC updated the Claude Code plugin. And now /compact does nothing. The agent just ignores it and sometimes treat it like a regular message treating it like an update to my task and starts searching my code for what's not there.

Costs are rising at 750k tokens and now I have to wait for auto-compact which I'm hoping will work.

Regards

What Should Happen?

The session should get compacted!

Error Messages/Logs

Steps to Reproduce

For me it gets reproduced everytime I type /compact. I don't know about others.

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.237

Claude Code Version

2.1.238

Platform

Anthropic API

Operating System

Ubuntu/Debian Linux

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_