Where does the bug appear (feature/product)?
Cursor IDE
Describe the Bug
When using a .code-workspace file with multiple folders, the agent treats files inside workspace folders as “external” and prompts “Allow all edits in [directory]”.
Steps to Reproduce
Steps to reproduce:
Open a .code-workspace file with multiple folder entries
Start an agent chat that edits files in one of the workspace folders
The agent prompts for “Allow all edits in…” even though the file is inside a workspace folder
Expected Behavior
Expected: Files inside any folder defined in the .code-workspace should be considered internal and not trigger the external file edit protection prompt.
Actual: The prompt appears as if the file is external.
Example: workspace defines my-project as a folder, but editing a file under my-project/service/internal/util/ triggers the external edit prompt.
Screenshots / Screen Recordings

Operating System
MacOS
Version Information
Version: 3.5.33 (Universal)
VSCode Version: 1.105.1
Commit: aac81804b986d739acab348ed96b8bea6e83cc50
Date: 2026-05-22T06:47:48.039Z
Layout: editor
Build Type: Stable
Release Track: Default
Electron: 39.8.1
Chromium: 142.0.7444.265
Node.js: 22.22.1
V8: 14.2.231.22-electron.0
OS: Darwin arm64 25.2.0
Does this stop you from using Cursor
No - Cursor works, but with this issue