Visual Studio Code version 1.105 introduces AI-powered merge conflict resolution, OS notifications for task completion and chat responses, and native macOS authentication. The release expands MCP marketplace support for installing servers directly from the Extensions view, adds fully-qualified tool names to avoid conflicts, and improves chat features with recent session history, chain of thought display, and better edit tools for custom models. Additional enhancements include terminal dictation controls, test coverage reporting in the runTests tool, and support for nested AGENTS.md files for workspace-specific AI instructions.