Hey, thanks for the detailed report. The environment and steps really helped.
This looks like a known issue on our side, not something wrong with your Dev Container config. In a nested setup like WSL → Reopen in Container, the agent execution provider doesn’t start in the remote extension host, so tool calls wait for a timeout and then fail with ERROR_EXTENSION_HOST_TIMEOUT. Chat keeps working, which is why only file reads, commands, and edits break. We’re also tracking the same symptom in a related thread: [WSL Remote] anysphere.cursor-agent-exec never registers — every agent prompt times out (ERROR_EXTENSION_HOST_TIMEOUT) in remote-WSL windows only; works locally and via cursor-agent CLI
There’s no fix yet, and I can’t share an ETA. The working workarounds for now, which it sounds like you already found:
- Use the
cursor-agentCLI directly inside WSL. - Work in WSL directly without Reopen in Container until we fix this.
I’ve reported this internally as a separate case for nested WSL → Dev Container. I’ll post an update in the thread when I have one.