Hey, thanks for the report.
This is a known issue with Azure OpenAI BYOK and code editing features. Cursor sends requests in a format that isn’t compatible with the Azure OpenAI API. It uses the wrong tools schema for file operations. Chat works, but applying code changes fails with this error.
Related threads with the same issue:
- Cursor Agent Mode cannot modify files when using Azure-deployed GPT-5 mini (communication works but no file editing)
- Azure OpenAI Chat Works, but Cursor “Apply” Fails (404) Due to Hardcoded /v1/responses Endpoint Mismatch
The team is aware and is working on improving BYOK support. A few related fixes have already shipped, but the issue still affects GPT-5.2.
I’ll pass this to the team.