chore: bun fmt

- Added a function to wait for the VS Code Web server to be ready before proceeding with the installation of extensions.
- Replaced sleep commands with a conditional wait to ensure extensions are only installed after the server is confirmed to be running.

registry/coder/modules/vscode-web/README.md

@@ -8,13 +8,13 @@ tags: [ide, vscode, web]
 
 # VS Code Web
 
-Automatically install [Visual Studio Code Server](https://code.visualstudio.com/docs/remote/vscode-server) in a workspace and create an app to access it via the dashboard.
+Automatically install the [VS Code CLI](https://code.visualstudio.com/docs/editor/command-line) and run `code serve-web` in a workspace to access VS Code via the browser.
 
 ```tf
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
   accept_license = true
 }
@@ -30,7 +30,7 @@ module "vscode-web" {
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
   install_prefix = "/home/coder/.vscode-web"
   folder         = "/home/coder"
@@ -44,22 +44,22 @@ module "vscode-web" {
 module "vscode-web" {
   count          = data.coder_workspace.me.start_count
   source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
+  version        = "2.0.0"
   agent_id       = coder_agent.example.id
   extensions     = ["github.copilot", "ms-python.python", "ms-toolsai.jupyter"]
   accept_license = true
 }
 ```
 
-### Pre-configure Settings
+### Pre-configure Machine Settings
 
-Configure VS Code's [settings.json](https://code.visualstudio.com/docs/getstarted/settings#_settings-json-file) file:
+Configure VS Code's [Machine settings.json](https://code.visualstudio.com/docs/getstarted/settings#_settings-json-file). These settings are merged with any existing machine settings on startup:
 
 ```tf
 module "vscode-web" {
   count      = data.coder_workspace.me.start_count
   source     = "registry.coder.com/coder/vscode-web/coder"
-  version    = "1.4.3"
+  version    = "2.0.0"
   agent_id   = coder_agent.example.id
   extensions = ["dracula-theme.theme-dracula"]
   settings = {
@@ -69,20 +69,7 @@ module "vscode-web" {
 }
 ```
 
-### Pin a specific VS Code Web version
-
-By default, this module installs the latest. To pin a specific version, retrieve the commit ID from the [VS Code Update API](https://update.code.visualstudio.com/api/commits/stable/server-linux-x64-web) and verify its corresponding release on the [VS Code GitHub Releases](https://github.com/microsoft/vscode/releases).
-
-```tf
-module "vscode-web" {
-  count          = data.coder_workspace.me.start_count
-  source         = "registry.coder.com/coder/vscode-web/coder"
-  version        = "1.4.3"
-  agent_id       = coder_agent.example.id
-  commit_id      = "e54c774e0add60467559eb0d1e229c6452cf8447"
-  accept_license = true
-}
-```
+> **Note:** Merging settings requires `jq` or `python3`. If neither is available, existing machine settings will be preserved. User settings configured through the VS Code UI are stored in browser local storage and will not persist across different browsers or devices.
 
 ### Open an existing workspace on startup
 
@@ -91,10 +78,43 @@ Note: Either `workspace` or `folder` can be used, but not both simultaneously. T
 
 ```tf
 module "vscode-web" {
-  count     = data.coder_workspace.me.start_count
-  source    = "registry.coder.com/coder/vscode-web/coder"
-  version   = "1.4.3"
-  agent_id  = coder_agent.example.id
-  workspace = "/home/coder/coder.code-workspace"
+  count          = data.coder_workspace.me.start_count
+  source         = "registry.coder.com/coder/vscode-web/coder"
+  version        = "2.0.0"
+  agent_id       = coder_agent.example.id
+  workspace      = "/home/coder/coder.code-workspace"
+  accept_license = true
 }
 ```
+
+### Use VS Code Insiders
+
+Use the VS Code Insiders release channel to get the latest features and bug fixes:
+
+```tf
+module "vscode-web" {
+  count           = data.coder_workspace.me.start_count
+  source          = "registry.coder.com/coder/vscode-web/coder"
+  version         = "2.0.0"
+  agent_id        = coder_agent.example.id
+  release_channel = "insiders"
+  accept_license  = true
+}
+```
+
+### Pin a specific VS Code version
+
+Use the `commit_id` variable to pin a specific VS Code Server version by its commit SHA:
+
+```tf
+module "vscode-web" {
+  count          = data.coder_workspace.me.start_count
+  source         = "registry.coder.com/coder/vscode-web/coder"
+  version        = "2.0.0"
+  agent_id       = coder_agent.example.id
+  commit_id      = "e54c774e0add60467559eb0d1e229c6452cf8447"
+  accept_license = true
+}
+```
+
+You can find the commit SHA for a specific VS Code version on the [VS Code releases page](https://code.visualstudio.com/updates) or by checking the "About" dialog in VS Code.

registry/coder/modules/vscode-web/main.test.ts

@@ -1,42 +1,793 @@
-import { describe, expect, it } from "bun:test";
-import { runTerraformApply, runTerraformInit } from "~test";
+import {
+  describe,
+  expect,
+  it,
+  beforeAll,
+  afterEach,
+  setDefaultTimeout,
+} from "bun:test";
+import {
+  runTerraformApply,
+  runTerraformInit,
+  runContainer,
+  execContainer,
+  removeContainer,
+  findResourceInstance,
+} from "~test";
+
+// Set timeout to 5 minutes for tests that download VS Code CLI
+setDefaultTimeout(5 * 60 * 1000);
+
+let cleanupContainers: string[] = [];
+
+afterEach(async () => {
+  for (const id of cleanupContainers) {
+    try {
+      await removeContainer(id);
+    } catch {
+      // Ignore cleanup errors
+    }
+  }
+  cleanupContainers = [];
+});
 
 describe("vscode-web", async () => {
-  await runTerraformInit(import.meta.dir);
-
-  it("accept_license should be set to true", () => {
-    const t = async () => {
-      await runTerraformApply(import.meta.dir, {
-        agent_id: "foo",
-        accept_license: "false",
-      });
-    };
-    expect(t).toThrow("Invalid value for variable");
+  beforeAll(async () => {
+    await runTerraformInit(import.meta.dir);
   });
 
-  it("use_cached and offline can not be used together", () => {
-    const t = async () => {
-      await runTerraformApply(import.meta.dir, {
-        agent_id: "foo",
-        accept_license: "true",
-        use_cached: "true",
-        offline: "true",
-      });
-    };
-    expect(t).toThrow("Offline and Use Cached can not be used together");
+  describe("terraform validation", () => {
+    it("accept_license should be set to true", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: false,
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain("Invalid value for variable");
+      }
+    });
+
+    it("use_cached and offline can not be used together", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: true,
+          use_cached: true,
+          offline: true,
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain(
+          "Offline and Use Cached can not be used together",
+        );
+      }
+    });
+
+    it("offline and extensions can not be used together", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: true,
+          offline: true,
+          extensions: '["ms-python.python"]',
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain(
+          "Offline mode does not allow extensions to be installed",
+        );
+      }
+    });
+
+    it("workspace and folder can not be used together", async () => {
+      try {
+        await runTerraformApply(import.meta.dir, {
+          agent_id: "foo",
+          accept_license: true,
+          folder: "/home/coder",
+          workspace: "/home/coder/test.code-workspace",
+        });
+        throw new Error("Expected terraform apply to fail");
+      } catch (ex) {
+        expect((ex as Error).message).toContain(
+          "Set only one of `workspace` or `folder`",
+        );
+      }
+    });
   });
 
-  it("offline and extensions can not be used together", () => {
-    const t = async () => {
-      await runTerraformApply(import.meta.dir, {
+  describe("script generation", () => {
+    it("generates script with correct port", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
         agent_id: "foo",
-        accept_license: "true",
-        offline: "true",
-        extensions: '["1", "2"]',
+        accept_license: true,
+        port: 8080,
       });
-    };
-    expect(t).toThrow("Offline mode does not allow extensions to be installed");
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--port 8080");
+    });
+
+    it("generates script with extensions directory", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        extensions_dir: "/custom/extensions",
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--extensions-dir=/custom/extensions");
+    });
+
+    it("generates script with telemetry level", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        telemetry_level: "off",
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--telemetry-level off");
+    });
+
+    it("generates script with disable trust", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        disable_trust: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("--disable-workspace-trust");
+    });
+
+    it("generates script with serve-web command", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("serve-web");
+      expect(script.script).toContain("--accept-server-license-terms");
+      expect(script.script).toContain("--without-connection-token");
+    });
+
+    it("generates script with stable release channel by default", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("build=stable");
+    });
+
+    it("generates script with insiders release channel", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        release_channel: "insiders",
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain("build=insiders");
+    });
+
+    it("generates script without commit-id value when not specified", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+      const script = findResourceInstance(state, "coder_script");
+      // The if condition should have an empty string, so no commit-id value is passed
+      expect(script.script).toContain('if [ -n "" ]; then');
+      // Should not contain any actual commit hash
+      expect(script.script).not.toMatch(/--commit-id [a-f0-9]{40}/);
+    });
+
+    it("generates script with commit-id when specified", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        commit_id: "e54c774e0add60467559eb0d1e229c6452cf8447",
+      });
+      const script = findResourceInstance(state, "coder_script");
+      expect(script.script).toContain(
+        "--commit-id e54c774e0add60467559eb0d1e229c6452cf8447",
+      );
+    });
   });
 
-  // More tests depend on shebang refactors
+  describe("container integration tests", () => {
+    it("uses existing code CLI in PATH", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that logs when serve-web is called
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "serve-web" ]; then
+  echo "MOCK_SERVER_STARTED with args: \$@"
+  exit 0
+fi
+echo "code mock called: \$@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      // Run the script - the mock will capture the serve-web call
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Found VS Code CLI");
+    });
+
+    it("offline mode fails when CLI not present", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        offline: true,
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(1);
+      expect(result.stdout).toContain(
+        "Offline mode enabled but no VS Code CLI, code-server, or cached VS Code Server found",
+      );
+    });
+
+    it("offline mode uses code-server as fallback", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        offline: true,
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install mock code-server in PATH
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code-server << 'MOCKEOF'
+#!/bin/bash
+echo "MOCK_CODE_SERVER_STARTED with args: $@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code-server`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("offline fallback");
+      expect(result.stdout).toContain("Starting code-server");
+    });
+
+    it("offline mode works with pre-installed CLI", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        offline: true,
+        install_prefix: "/tmp/vscode-web",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Pre-install mock code CLI at expected location
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /tmp/vscode-web/bin && cat > /tmp/vscode-web/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "serve-web" ]; then
+  echo "MOCK_OFFLINE_SERVER_STARTED"
+  exit 0
+fi
+exit 0
+MOCKEOF
+chmod +x /tmp/vscode-web/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Using cached VS Code CLI");
+      expect(result.stdout).toContain("Starting VS Code Web");
+    });
+
+    it("use_cached mode works with pre-installed CLI", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        use_cached: true,
+        install_prefix: "/tmp/vscode-web",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Pre-install mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /tmp/vscode-web/bin && cat > /tmp/vscode-web/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "serve-web" ]; then
+  echo "MOCK_CACHED_SERVER_STARTED"
+  exit 0
+fi
+exit 0
+MOCKEOF
+chmod +x /tmp/vscode-web/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Using cached VS Code CLI");
+    });
+
+    it("creates settings file with correct content", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: '{"editor.fontSize": 14}',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Check that settings file was created
+      const settingsResult = await execContainer(containerId, [
+        "cat",
+        "/root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(settingsResult.exitCode).toBe(0);
+      expect(settingsResult.stdout).toContain("editor.fontSize");
+      expect(settingsResult.stdout).toContain("14");
+    });
+
+    it("creates settings file with multiple settings", async () => {
+      const settings = {
+        "editor.fontSize": 16,
+        "editor.tabSize": 2,
+        "workbench.colorTheme": "Dracula",
+        "editor.formatOnSave": true,
+      };
+
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: JSON.stringify(settings),
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Check that settings file was created with all settings
+      const settingsResult = await execContainer(containerId, [
+        "cat",
+        "/root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(settingsResult.exitCode).toBe(0);
+      expect(settingsResult.stdout).toContain("editor.fontSize");
+      expect(settingsResult.stdout).toContain("16");
+      expect(settingsResult.stdout).toContain("editor.tabSize");
+      expect(settingsResult.stdout).toContain("2");
+      expect(settingsResult.stdout).toContain("workbench.colorTheme");
+      expect(settingsResult.stdout).toContain("Dracula");
+      expect(settingsResult.stdout).toContain("editor.formatOnSave");
+      expect(settingsResult.stdout).toContain("true");
+    });
+
+    it("creates settings file in correct directory structure", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: '{"test.setting": "value"}',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Verify directory structure was created
+      const dirResult = await execContainer(containerId, [
+        "ls",
+        "-la",
+        "/root/.vscode-server/data/Machine/",
+      ]);
+
+      expect(dirResult.exitCode).toBe(0);
+      expect(dirResult.stdout).toContain("settings.json");
+
+      // Verify parent directories exist
+      const parentDirResult = await execContainer(containerId, [
+        "ls",
+        "-la",
+        "/root/.vscode-server/data/",
+      ]);
+
+      expect(parentDirResult.exitCode).toBe(0);
+      expect(parentDirResult.stdout).toContain("Machine");
+    });
+
+    it("merges settings with existing settings file", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: '{"new.setting": "new_value"}',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install jq and create mock code CLI
+      await execContainer(containerId, ["apt-get", "update", "-qq"]);
+      await execContainer(containerId, [
+        "apt-get",
+        "install",
+        "-y",
+        "-qq",
+        "jq",
+      ]);
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      // Pre-create an existing settings file
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /root/.vscode-server/data/Machine && echo '{"existing.setting": "existing_value"}' > /root/.vscode-server/data/Machine/settings.json`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Check that settings were merged (both existing and new should be present)
+      const settingsResult = await execContainer(containerId, [
+        "cat",
+        "/root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(settingsResult.exitCode).toBe(0);
+      // Should contain both existing and new settings
+      expect(settingsResult.stdout).toContain("existing.setting");
+      expect(settingsResult.stdout).toContain("existing_value");
+      expect(settingsResult.stdout).toContain("new.setting");
+      expect(settingsResult.stdout).toContain("new_value");
+    });
+
+    it("creates valid JSON settings file", async () => {
+      const settings = {
+        "editor.fontSize": 14,
+        "editor.wordWrap": "on",
+        "files.autoSave": "afterDelay",
+        "files.autoSaveDelay": 1000,
+      };
+
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        settings: JSON.stringify(settings),
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install jq and create mock code CLI
+      await execContainer(containerId, ["apt-get", "update", "-qq"]);
+      await execContainer(containerId, [
+        "apt-get",
+        "install",
+        "-y",
+        "-qq",
+        "jq",
+      ]);
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Validate JSON using jq
+      const jsonValidResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+
+      expect(jsonValidResult.exitCode).toBe(0);
+
+      // Extract specific values using jq
+      const fontSizeResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.\"editor.fontSize\"' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+      expect(fontSizeResult.stdout.trim()).toBe("14");
+
+      const wordWrapResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.\"editor.wordWrap\"' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+      expect(wordWrapResult.stdout.trim()).toBe('"on"');
+
+      const autoSaveDelayResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        "jq '.\"files.autoSaveDelay\"' /root/.vscode-server/data/Machine/settings.json",
+      ]);
+      expect(autoSaveDelayResult.stdout.trim()).toBe("1000");
+    });
+
+    it("installs extensions", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        extensions: '["ms-python.python", "golang.go"]',
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that logs extension installs
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+if [ "\$1" = "--install-extension" ]; then
+  echo "MOCK_EXTENSION_INSTALL: \$2"
+fi
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      expect(result.stdout).toContain("Installing extension");
+      expect(result.stdout).toContain("ms-python.python");
+      expect(result.stdout).toContain("golang.go");
+    });
+
+    it("runs with correct server arguments", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        port: 9999,
+        telemetry_level: "off",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that captures all arguments
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+echo "MOCK_CODE_ARGS: \$@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      const result = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(result.exitCode).toBe(0);
+      // Check the output contains expected port message
+      expect(result.stdout).toContain("Starting VS Code Web on port 9999");
+    });
+
+    it("passes commit-id to code CLI when specified", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        commit_id: "abc123def456",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Create a mock code CLI that logs arguments to the log file (where output is redirected)
+      await execContainer(containerId, [
+        "bash",
+        "-c",
+        `mkdir -p /usr/local/bin && cat > /usr/local/bin/code << 'MOCKEOF'
+#!/bin/bash
+echo "MOCK_CODE_ARGS: $@"
+exit 0
+MOCKEOF
+chmod +x /usr/local/bin/code`,
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      await execContainer(containerId, ["bash", "-c", script.script]);
+
+      // Wait briefly for background process to write to log
+      await new Promise((resolve) => setTimeout(resolve, 500));
+
+      // Check the log file for the arguments (code CLI output goes there)
+      const logResult = await execContainer(containerId, [
+        "cat",
+        "/tmp/vscode-web.log",
+      ]);
+
+      expect(logResult.exitCode).toBe(0);
+      expect(logResult.stdout).toContain("--commit-id abc123def456");
+    });
+
+    // This test downloads and starts the real VS Code server
+    it("starts real VS Code CLI and responds to healthcheck (requires network)", async () => {
+      const state = await runTerraformApply(import.meta.dir, {
+        agent_id: "foo",
+        accept_license: true,
+        port: 13338,
+        install_prefix: "/tmp/vscode-web",
+      });
+
+      const containerId = await runContainer("ubuntu:22.04");
+      cleanupContainers.push(containerId);
+
+      // Install curl for downloading CLI and healthcheck
+      await execContainer(containerId, ["apt-get", "update", "-qq"]);
+      await execContainer(containerId, [
+        "apt-get",
+        "install",
+        "-y",
+        "-qq",
+        "curl",
+      ]);
+
+      const script = findResourceInstance(state, "coder_script");
+
+      // Run the script - it will start the server in background
+      const startResult = await execContainer(containerId, [
+        "bash",
+        "-c",
+        script.script,
+      ]);
+
+      expect(startResult.exitCode).toBe(0);
+      expect(startResult.stdout).toContain("Starting VS Code Web");
+
+      // Wait for server to start and check healthcheck
+      await new Promise((resolve) => setTimeout(resolve, 10000));
+
+      const healthResult = await execContainer(containerId, [
+        "curl",
+        "-s",
+        "-o",
+        "/dev/null",
+        "-w",
+        "%{http_code}",
+        "http://127.0.0.1:13338/healthz",
+      ]);
+
+      // Server should respond (200, 202, or 404 is acceptable - means server is running)
+      expect(["200", "202", "404"]).toContain(healthResult.stdout.trim());
+    });
+  });
 });

registry/coder/modules/vscode-web/main.tf

@@ -59,12 +59,6 @@ variable "install_prefix" {
   default     = "/tmp/vscode-web"
 }
 
-variable "commit_id" {
-  type        = string
-  description = "Specify the commit ID of the VS Code Web binary to pin to a specific version. If left empty, the latest stable version is used."
-  default     = ""
-}
-
 variable "extensions" {
   type        = list(string)
   description = "A list of extensions to install."
@@ -105,7 +99,7 @@ variable "group" {
 
 variable "settings" {
   type        = any
-  description = "A map of settings to apply to VS Code web."
+  description = "A map of settings to apply to VS Code Web's Machine settings. These settings are merged with any existing machine settings on startup."
   default     = {}
 }
 
@@ -148,25 +142,35 @@ variable "subdomain" {
   default     = true
 }
 
-variable "platform" {
-  type        = string
-  description = "The platform to use for the VS Code Web."
-  default     = ""
-  validation {
-    condition     = var.platform == "" || var.platform == "linux" || var.platform == "darwin" || var.platform == "alpine" || var.platform == "win32"
-    error_message = "Incorrect value. Please set either 'linux', 'darwin', or 'alpine' or 'win32'."
-  }
-}
-
 variable "workspace" {
   type        = string
   description = "Path to a .code-workspace file to open in vscode-web."
   default     = ""
 }
 
+variable "release_channel" {
+  type        = string
+  description = "The release channel for VS Code CLI (stable or insiders)."
+  default     = "stable"
+  validation {
+    condition     = var.release_channel == "stable" || var.release_channel == "insiders"
+    error_message = "Incorrect value. Please set either 'stable' or 'insiders'."
+  }
+}
+
+variable "commit_id" {
+  type        = string
+  description = "The commit SHA to use for the VS Code Server. Leave empty to use the latest version."
+  default     = ""
+}
+
 data "coder_workspace_owner" "me" {}
 data "coder_workspace" "me" {}
 
+locals {
+  settings_b64 = var.settings != {} ? base64encode(jsonencode(var.settings)) : ""
+}
+
 resource "coder_script" "vscode-web" {
   agent_id     = var.agent_id
   display_name = "VS Code Web"
@@ -177,8 +181,7 @@ resource "coder_script" "vscode-web" {
     INSTALL_PREFIX : var.install_prefix,
     EXTENSIONS : join(",", var.extensions),
     TELEMETRY_LEVEL : var.telemetry_level,
-    // This is necessary otherwise the quotes are stripped!
-    SETTINGS : replace(jsonencode(var.settings), "\"", "\\\""),
+    SETTINGS_B64 : local.settings_b64,
     OFFLINE : var.offline,
     USE_CACHED : var.use_cached,
     DISABLE_TRUST : var.disable_trust,
@@ -187,8 +190,8 @@ resource "coder_script" "vscode-web" {
     WORKSPACE : var.workspace,
     AUTO_INSTALL_EXTENSIONS : var.auto_install_extensions,
     SERVER_BASE_PATH : local.server_base_path,
+    RELEASE_CHANNEL : var.release_channel,
     COMMIT_ID : var.commit_id,
-    PLATFORM : var.platform,
   })
   run_on_start = true
 

registry/coder/modules/vscode-web/run.sh

@@ -1,138 +1,417 @@
 #!/usr/bin/env bash
 
 BOLD='\033[0;1m'
+RESET='\033[0m'
+CODE='\033[36;40;1m'
 EXTENSIONS=("${EXTENSIONS}")
-VSCODE_WEB="${INSTALL_PREFIX}/bin/code-server"
 
-# Set extension directory
+# Merge settings from module with existing settings file
+# Uses jq if available, falls back to Python3 for deep merge
+merge_settings() {
+  local new_settings="$1"
+  local settings_file="$2"
+
+  if [ -z "$new_settings" ] || [ "$new_settings" = "{}" ]; then
+    return 0
+  fi
+
+  if [ ! -f "$settings_file" ]; then
+    mkdir -p "$(dirname "$settings_file")"
+    printf '%s\n' "$new_settings" > "$settings_file"
+    printf "Creating settings file...\n"
+    return 0
+  fi
+
+  local tmpfile
+  tmpfile="$(mktemp)"
+
+  if command -v jq > /dev/null 2>&1; then
+    if jq -s '.[0] * .[1]' "$settings_file" <(printf '%s\n' "$new_settings") > "$tmpfile" 2> /dev/null; then
+      mv "$tmpfile" "$settings_file"
+      printf "Merging settings...\n"
+      return 0
+    fi
+  fi
+
+  if command -v python3 > /dev/null 2>&1; then
+    if python3 -c "import json,sys;m=lambda a,b:{**a,**{k:m(a[k],v)if k in a and type(a[k])==type(v)==dict else v for k,v in b.items()}};print(json.dumps(m(json.load(open(sys.argv[1])),json.loads(sys.argv[2])),indent=2))" "$settings_file" "$new_settings" > "$tmpfile" 2> /dev/null; then
+      mv "$tmpfile" "$settings_file"
+      printf "Merging settings...\n"
+      return 0
+    fi
+  fi
+
+  rm -f "$tmpfile"
+  printf "Warning: Could not merge settings. Keeping existing settings.\n"
+  return 0
+}
+
+# Set extension directory argument
 EXTENSION_ARG=""
 if [ -n "${EXTENSIONS_DIR}" ]; then
   EXTENSION_ARG="--extensions-dir=${EXTENSIONS_DIR}"
 fi
 
-# Set extension directory
+# Set server base path argument
 SERVER_BASE_PATH_ARG=""
 if [ -n "${SERVER_BASE_PATH}" ]; then
   SERVER_BASE_PATH_ARG="--server-base-path=${SERVER_BASE_PATH}"
 fi
 
-# Set disable workspace trust
+# Set disable workspace trust argument
 DISABLE_TRUST_ARG=""
 if [ "${DISABLE_TRUST}" = true ]; then
   DISABLE_TRUST_ARG="--disable-workspace-trust"
 fi
 
-run_vscode_web() {
-  echo "👷 Running $VSCODE_WEB serve-local $EXTENSION_ARG $SERVER_BASE_PATH_ARG $DISABLE_TRUST_ARG --port ${PORT} --host 127.0.0.1 --accept-server-license-terms --without-connection-token --telemetry-level ${TELEMETRY_LEVEL} in the background..."
-  echo "Check logs at ${LOG_PATH}!"
-  "$VSCODE_WEB" serve-local "$EXTENSION_ARG" "$SERVER_BASE_PATH_ARG" "$DISABLE_TRUST_ARG" --port "${PORT}" --host 127.0.0.1 --accept-server-license-terms --without-connection-token --telemetry-level "${TELEMETRY_LEVEL}" > "${LOG_PATH}" 2>&1 &
+# Check if code CLI is installed
+check_code_cli() {
+  if command -v code > /dev/null 2>&1; then
+    echo "code"
+    return 0
+  fi
+  if [ -f "${INSTALL_PREFIX}/bin/code" ]; then
+    echo "${INSTALL_PREFIX}/bin/code"
+    return 0
+  fi
+  return 1
 }
 
-# Check if the settings file exists...
-if [ ! -f ~/.vscode-server/data/Machine/settings.json ]; then
-  echo "⚙️ Creating settings file..."
-  mkdir -p ~/.vscode-server/data/Machine
-  echo "${SETTINGS}" > ~/.vscode-server/data/Machine/settings.json
-fi
-
-# Check if vscode-server is already installed for offline or cached mode
-if [ -f "$VSCODE_WEB" ]; then
-  if [ "${OFFLINE}" = true ] || [ "${USE_CACHED}" = true ]; then
-    echo "🥳 Found a copy of VS Code Web"
-    run_vscode_web
-    exit 0
+# Check if code-server is installed (fallback option)
+check_code_server() {
+  if command -v code-server > /dev/null 2>&1; then
+    echo "code-server"
+    return 0
   fi
-fi
-# Offline mode always expects a copy of vscode-server to be present
-if [ "${OFFLINE}" = true ]; then
-  echo "Failed to find a copy of VS Code Web"
-  exit 1
-fi
-
-# Create install prefix
-mkdir -p ${INSTALL_PREFIX}
-
-printf "$${BOLD}Installing Microsoft Visual Studio Code Server!\n"
-
-# Download and extract vscode-server
-ARCH=$(uname -m)
-case "$ARCH" in
-  x86_64) ARCH="x64" ;;
-  aarch64) ARCH="arm64" ;;
-  *)
-    echo "Unsupported architecture"
-    exit 1
-    ;;
-esac
-
-# Detect the platform
-if [ -n "${PLATFORM}" ]; then
-  DETECTED_PLATFORM="${PLATFORM}"
-elif [ -f /etc/alpine-release ] || grep -qi 'ID=alpine' /etc/os-release 2> /dev/null || command -v apk > /dev/null 2>&1; then
-  DETECTED_PLATFORM="alpine"
-elif [ "$(uname -s)" = "Darwin" ]; then
-  DETECTED_PLATFORM="darwin"
-else
-  DETECTED_PLATFORM="linux"
-fi
-
-# Check if a specific VS Code Web commit ID was provided
-if [ -n "${COMMIT_ID}" ]; then
-  HASH="${COMMIT_ID}"
-else
-  HASH=$(curl -fsSL https://update.code.visualstudio.com/api/commits/stable/server-$DETECTED_PLATFORM-$ARCH-web | cut -d '"' -f 2)
-fi
-printf "$${BOLD}VS Code Web commit id version $HASH.\n"
-
-output=$(curl -fsSL "https://vscode.download.prss.microsoft.com/dbazure/download/stable/$HASH/vscode-server-$DETECTED_PLATFORM-$ARCH-web.tar.gz" | tar -xz -C "${INSTALL_PREFIX}" --strip-components 1)
-
-if [ $? -ne 0 ]; then
-  echo "Failed to install Microsoft Visual Studio Code Server: $output"
-  exit 1
-fi
-printf "$${BOLD}VS Code Web has been installed.\n"
-
-# Install each extension...
-IFS=',' read -r -a EXTENSIONLIST <<< "$${EXTENSIONS}"
-# shellcheck disable=SC2066
-for extension in "$${EXTENSIONLIST[@]}"; do
-  if [ -z "$extension" ]; then
-    continue
+  if [ -f "${INSTALL_PREFIX}/bin/code-server" ]; then
+    echo "${INSTALL_PREFIX}/bin/code-server"
+    return 0
   fi
-  printf "🧩 Installing extension $${CODE}$extension$${RESET}...\n"
-  output=$($VSCODE_WEB "$EXTENSION_ARG" --install-extension "$extension" --force)
-  if [ $? -ne 0 ]; then
-    echo "Failed to install extension: $extension: $output"
-  fi
-done
+  return 1
+}
 
-if [ "${AUTO_INSTALL_EXTENSIONS}" = true ]; then
-  if ! command -v jq > /dev/null; then
-    echo "jq is required to install extensions from a workspace file."
-  else
-    # Prefer WORKSPACE if set and points to a file
-    if [ -n "${WORKSPACE}" ] && [ -f "${WORKSPACE}" ]; then
-      printf "🧩 Installing extensions from %s...\n" "${WORKSPACE}"
-      # Strip single-line comments then parse .extensions.recommendations[]
-      extensions=$(sed 's|//.*||g' "${WORKSPACE}" | jq -r '(.extensions.recommendations // [])[]')
-      for extension in $extensions; do
-        $VSCODE_WEB "$EXTENSION_ARG" --install-extension "$extension" --force
-      done
-    else
-      # Fallback to folder-based .vscode/extensions.json (existing behavior)
-      WORKSPACE_DIR="$HOME"
-      if [ -n "${FOLDER}" ]; then
-        WORKSPACE_DIR="${FOLDER}"
+# Find existing vscode-server binary (used by code serve-web internally)
+find_vscode_server() {
+  # Check common locations for pre-downloaded vscode-server
+  local server_dirs=(
+    "$HOME/.vscode-server/bin"
+    "$HOME/.vscode/cli/serve-web"
+  )
+  for dir in "$${server_dirs[@]}"; do
+    if [ -d "$dir" ]; then
+      # Find the most recent server version
+      local latest
+      latest=$(ls -t "$dir" 2> /dev/null | head -1)
+      if [ -n "$latest" ] && [ -f "$dir/$latest/bin/code-server" ]; then
+        echo "$dir/$latest/bin/code-server"
+        return 0
       fi
-      if [ -f "$WORKSPACE_DIR/.vscode/extensions.json" ]; then
-        printf "🧩 Installing extensions from %s/.vscode/extensions.json...\n" "$WORKSPACE_DIR"
-        extensions=$(sed 's|//.*||g' "$WORKSPACE_DIR/.vscode/extensions.json" | jq -r '.recommendations[]')
+      if [ -n "$latest" ] && [ -f "$dir/$latest/code-server" ]; then
+        echo "$dir/$latest/code-server"
+        return 0
+      fi
+    fi
+  done
+  return 1
+}
+
+# Install VS Code CLI if not present
+install_code_cli() {
+  printf "$${BOLD}Installing VS Code CLI...$${RESET}\n"
+
+  # Detect architecture
+  ARCH=$(uname -m)
+  case "$ARCH" in
+    x86_64) ARCH="x64" ;;
+    aarch64 | arm64) ARCH="arm64" ;;
+    armv7l) ARCH="armhf" ;;
+    *)
+      echo "Unsupported architecture: $ARCH"
+      exit 1
+      ;;
+  esac
+
+  # Detect platform
+  # Note: VS Code CLI uses 'alpine' for all Linux distributions
+  PLATFORM=$(uname -s)
+  case "$PLATFORM" in
+    Linux)
+      PLATFORM="alpine"
+      ;;
+    Darwin)
+      PLATFORM="darwin"
+      ;;
+    *)
+      echo "Unsupported platform: $PLATFORM"
+      exit 1
+      ;;
+  esac
+
+  # Create install directory
+  mkdir -p "${INSTALL_PREFIX}/bin"
+
+  # Download VS Code CLI
+  CLI_URL="https://code.visualstudio.com/sha/download?build=${RELEASE_CHANNEL}&os=cli-$PLATFORM-$ARCH"
+  printf "Downloading VS Code CLI from %s\n" "$CLI_URL"
+
+  if command -v curl > /dev/null 2>&1; then
+    curl -fsSL "$CLI_URL" -o "/tmp/vscode-cli.tar.gz"
+  elif command -v wget > /dev/null 2>&1; then
+    wget -q "$CLI_URL" -O "/tmp/vscode-cli.tar.gz"
+  else
+    echo "Neither curl nor wget is available. Please install one of them."
+    exit 1
+  fi
+
+  # Extract CLI
+  tar -xzf /tmp/vscode-cli.tar.gz -C "${INSTALL_PREFIX}/bin"
+  rm -f /tmp/vscode-cli.tar.gz
+
+  # The CLI binary is named 'code'
+  if [ -f "${INSTALL_PREFIX}/bin/code" ]; then
+    chmod +x "${INSTALL_PREFIX}/bin/code"
+    export PATH="${INSTALL_PREFIX}/bin:$PATH"
+    printf "$${BOLD}VS Code CLI installed successfully.$${RESET}\n"
+  else
+    echo "Failed to install VS Code CLI"
+    exit 1
+  fi
+}
+
+# Run VS Code Web using the code CLI (serve-web command)
+run_vscode_web_cli() {
+  local CODE_CMD="$1"
+
+  # Build the command arguments
+  ARGS="serve-web --port ${PORT} --host 127.0.0.1 --accept-server-license-terms --without-connection-token --telemetry-level ${TELEMETRY_LEVEL}"
+
+  if [ -n "$EXTENSION_ARG" ]; then
+    ARGS="$ARGS $EXTENSION_ARG"
+  fi
+
+  if [ -n "$SERVER_BASE_PATH_ARG" ]; then
+    ARGS="$ARGS $SERVER_BASE_PATH_ARG"
+  fi
+
+  if [ -n "$DISABLE_TRUST_ARG" ]; then
+    ARGS="$ARGS $DISABLE_TRUST_ARG"
+  fi
+
+  if [ -n "${COMMIT_ID}" ]; then
+    ARGS="$ARGS --commit-id ${COMMIT_ID}"
+  fi
+
+  printf "Starting VS Code Web on port ${PORT}...\n"
+  printf "Check logs at ${LOG_PATH}\n"
+
+  # shellcheck disable=SC2086
+  "$CODE_CMD" $ARGS > "${LOG_PATH}" 2>&1 &
+}
+
+# Run VS Code Web using code-server (fallback for offline mode)
+run_code_server() {
+  local SERVER_CMD="$1"
+
+  printf "Starting code-server on port ${PORT}...\n"
+  printf "Check logs at ${LOG_PATH}\n"
+
+  # Build arguments for code-server
+  ARGS="--port ${PORT} --host 127.0.0.1 --auth none"
+
+  if [ -n "$EXTENSION_ARG" ]; then
+    ARGS="$ARGS $EXTENSION_ARG"
+  fi
+
+  # shellcheck disable=SC2086
+  "$SERVER_CMD" $ARGS > "${LOG_PATH}" 2>&1 &
+}
+
+# Run VS Code Web using vscode-server binary directly
+run_vscode_server() {
+  local SERVER_CMD="$1"
+
+  printf "Starting VS Code Server on port ${PORT}...\n"
+  printf "Check logs at ${LOG_PATH}\n"
+
+  # Build arguments for vscode-server
+  ARGS="--port ${PORT} --host 127.0.0.1 --without-connection-token --accept-server-license-terms --telemetry-level ${TELEMETRY_LEVEL}"
+
+  if [ -n "$EXTENSION_ARG" ]; then
+    ARGS="$ARGS $EXTENSION_ARG"
+  fi
+
+  if [ -n "$SERVER_BASE_PATH_ARG" ]; then
+    ARGS="$ARGS $SERVER_BASE_PATH_ARG"
+  fi
+
+  # shellcheck disable=SC2086
+  "$SERVER_CMD" serve-local $ARGS > "${LOG_PATH}" 2>&1 &
+}
+
+# Install a single extension by downloading VSIX from marketplace
+install_extension_vsix() {
+  local ext_id="$1"
+  local publisher
+  local ext_name
+  publisher="$${ext_id%%.*}"
+  ext_name="$${ext_id#*.}"
+
+  # Download VSIX from marketplace
+  local vsix_url="https://$publisher.gallery.vsassets.io/_apis/public/gallery/publisher/$publisher/extension/$ext_name/latest/assetbyname/Microsoft.VisualStudio.Services.VSIXPackage"
+  local tmp_vsix="/tmp/ext-$ext_id.vsix"
+  local tmp_dir="/tmp/ext-$ext_id"
+
+  if command -v curl > /dev/null 2>&1; then
+    curl -fsSL "$vsix_url" -o "$tmp_vsix" 2> /dev/null
+  elif command -v wget > /dev/null 2>&1; then
+    wget -q "$vsix_url" -O "$tmp_vsix" 2> /dev/null
+  else
+    echo "Failed to install extension $ext_id: neither curl nor wget available"
+    return 1
+  fi
+
+  if [ ! -f "$tmp_vsix" ]; then
+    echo "Failed to download extension: $ext_id"
+    return 1
+  fi
+
+  # Extract VSIX (it's a ZIP file)
+  rm -rf "$tmp_dir"
+  mkdir -p "$tmp_dir"
+  if ! unzip -q "$tmp_vsix" -d "$tmp_dir" 2> /dev/null; then
+    echo "Failed to extract extension: $ext_id"
+    rm -f "$tmp_vsix"
+    return 1
+  fi
+
+  # Get version from package.json
+  local version=""
+  if [ -f "$tmp_dir/extension/package.json" ]; then
+    version=$(grep -o '"version"[[:space:]]*:[[:space:]]*"[^"]*"' "$tmp_dir/extension/package.json" | head -1 | cut -d'"' -f4)
+  fi
+  if [ -z "$version" ]; then
+    version="0.0.0"
+  fi
+
+  # Install to extensions directory
+  local ext_dir="$HOME/.vscode-server/extensions/$ext_id-$version"
+  mkdir -p "$HOME/.vscode-server/extensions"
+  rm -rf "$ext_dir"
+  mv "$tmp_dir/extension" "$ext_dir"
+
+  # Cleanup
+  rm -rf "$tmp_vsix" "$tmp_dir"
+  printf "Extension $ext_id v$version installed successfully.\n"
+  return 0
+}
+
+install_extensions() {
+  # Install specified extensions
+  IFS=',' read -r -a EXTENSIONLIST <<< "$${EXTENSIONS}"
+  for extension in "$${EXTENSIONLIST[@]}"; do
+    if [ -z "$extension" ]; then
+      continue
+    fi
+    printf "Installing extension $extension...\n"
+    install_extension_vsix "$extension"
+  done
+
+  # Auto-install extensions from workspace or folder
+  if [ "${AUTO_INSTALL_EXTENSIONS}" = true ]; then
+    if ! command -v jq > /dev/null; then
+      echo "jq is required to install extensions from a workspace file."
+    else
+      if [ -n "${WORKSPACE}" ] && [ -f "${WORKSPACE}" ]; then
+        printf "Installing extensions from %s...\n" "${WORKSPACE}"
+        extensions=$(sed 's|//.*||g' "${WORKSPACE}" | jq -r '(.extensions.recommendations // [])[]')
         for extension in $extensions; do
-          $VSCODE_WEB "$EXTENSION_ARG" --install-extension "$extension" --force
+          install_extension_vsix "$extension"
         done
+      else
+        WORKSPACE_DIR="$HOME"
+        if [ -n "${FOLDER}" ]; then
+          WORKSPACE_DIR="${FOLDER}"
+        fi
+        if [ -f "$WORKSPACE_DIR/.vscode/extensions.json" ]; then
+          printf "Installing extensions from %s/.vscode/extensions.json...\n" "$WORKSPACE_DIR"
+          extensions=$(sed 's|//.*||g' "$WORKSPACE_DIR/.vscode/extensions.json" | jq -r '.recommendations[]')
+          for extension in $extensions; do
+            install_extension_vsix "$extension"
+          done
+        fi
       fi
     fi
   fi
+}
+
+# Apply machine settings (merge with existing if present)
+SETTINGS_B64='${SETTINGS_B64}'
+if [ -n "$SETTINGS_B64" ]; then
+  SETTINGS_JSON="$(echo -n "$SETTINGS_B64" | base64 -d)"
+  merge_settings "$SETTINGS_JSON" ~/.vscode-server/data/Machine/settings.json
 fi
 
-run_vscode_web
+# Determine which command to use
+CODE_CMD=""
+RUN_MODE=""
+
+# Check for code CLI first (preferred)
+if CODE_CMD=$(check_code_cli); then
+  printf "$${BOLD}Found VS Code CLI at $CODE_CMD$${RESET}\n"
+  RUN_MODE="cli"
+fi
+
+# Handle offline mode
+if [ "${OFFLINE}" = true ]; then
+  if [ -n "$CODE_CMD" ]; then
+    # Check if vscode-server is already downloaded (code serve-web won't need to download)
+    if VSCODE_SERVER=$(find_vscode_server); then
+      printf "Found cached VS Code Server at $VSCODE_SERVER\n"
+      printf "Using cached VS Code CLI.\n"
+      run_vscode_web_cli "$CODE_CMD"
+      exit 0
+    fi
+    # Code CLI exists but vscode-server not cached - try using it anyway
+    # (it might work if server was pre-downloaded, or fail gracefully)
+    printf "Warning: VS Code Server may not be cached. Attempting to start...\n"
+    printf "Using cached VS Code CLI.\n"
+    run_vscode_web_cli "$CODE_CMD"
+    exit 0
+  fi
+
+  # Try code-server as fallback for offline mode
+  if SERVER_CMD=$(check_code_server); then
+    printf "$${BOLD}Found code-server at $SERVER_CMD (offline fallback)$${RESET}\n"
+    run_code_server "$SERVER_CMD"
+    exit 0
+  fi
+
+  # Try vscode-server binary directly
+  if VSCODE_SERVER=$(find_vscode_server); then
+    printf "$${BOLD}Found VS Code Server at $VSCODE_SERVER (offline fallback)$${RESET}\n"
+    run_vscode_server "$VSCODE_SERVER"
+    exit 0
+  fi
+
+  echo "Offline mode enabled but no VS Code CLI, code-server, or cached VS Code Server found."
+  exit 1
+fi
+
+# Handle use_cached mode
+if [ "${USE_CACHED}" = true ] && [ -n "$CODE_CMD" ]; then
+  printf "Using cached VS Code CLI.\n"
+  install_extensions
+  run_vscode_web_cli "$CODE_CMD"
+  exit 0
+fi
+
+# Install VS Code CLI if not present
+if [ -z "$CODE_CMD" ]; then
+  install_code_cli
+  CODE_CMD="${INSTALL_PREFIX}/bin/code"
+  RUN_MODE="cli"
+fi
+
+# Install extensions and run VS Code Web
+install_extensions
+run_vscode_web_cli "$CODE_CMD"

registry/coder/modules/vscode-web/vscode-web.tftest.hcl

@@ -0,0 +1,151 @@
+run "required_vars" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+  }
+}
+
+run "accept_license_required" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = false
+  }
+
+  expect_failures = [
+    var.accept_license
+  ]
+}
+
+run "offline_and_use_cached_conflict" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    use_cached     = true
+    offline        = true
+  }
+
+  expect_failures = [
+    resource.coder_script.vscode-web
+  ]
+}
+
+run "offline_disallows_extensions" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    offline        = true
+    extensions     = ["ms-python.python", "golang.go"]
+  }
+
+  expect_failures = [
+    resource.coder_script.vscode-web
+  ]
+}
+
+run "workspace_and_folder_conflict" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    folder         = "/home/coder/project"
+    workspace      = "/home/coder/project.code-workspace"
+  }
+
+  expect_failures = [
+    resource.coder_script.vscode-web
+  ]
+}
+
+run "url_with_folder_query" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    folder         = "/home/coder/project"
+    port           = 13338
+  }
+
+  assert {
+    condition     = resource.coder_app.vscode-web.url == "http://localhost:13338?folder=%2Fhome%2Fcoder%2Fproject"
+    error_message = "coder_app URL must include encoded folder query param"
+  }
+}
+
+run "url_with_workspace_query" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    workspace      = "/home/coder/project.code-workspace"
+    port           = 13338
+  }
+
+  assert {
+    condition     = resource.coder_app.vscode-web.url == "http://localhost:13338?workspace=%2Fhome%2Fcoder%2Fproject.code-workspace"
+    error_message = "coder_app URL must include encoded workspace query param"
+  }
+}
+
+run "release_channel_stable" {
+  command = plan
+
+  variables {
+    agent_id        = "foo"
+    accept_license  = true
+    release_channel = "stable"
+  }
+}
+
+run "release_channel_insiders" {
+  command = plan
+
+  variables {
+    agent_id        = "foo"
+    accept_license  = true
+    release_channel = "insiders"
+  }
+}
+
+run "release_channel_invalid" {
+  command = plan
+
+  variables {
+    agent_id        = "foo"
+    accept_license  = true
+    release_channel = "invalid"
+  }
+
+  expect_failures = [
+    var.release_channel
+  ]
+}
+
+run "commit_id_empty_by_default" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+  }
+}
+
+run "commit_id_with_value" {
+  command = plan
+
+  variables {
+    agent_id       = "foo"
+    accept_license = true
+    commit_id      = "e54c774e0add60467559eb0d1e229c6452cf8447"
+  }
+}