@@ -689,7 +689,9 @@ export class ChatView extends AbstractChatView {
 			const draftLoaded = isEqual(this._loadedChatResource.read(reader), resource);
 			const failure = this._loadFailure.read(reader);
 			const loadStatus = failure && isEqual(failure.resource, resource) ? failure.status : undefined;
-			this._widget.setReadOnly(interactivity !== ChatInteractivity.Full || loading || modelReadOnly || !!loadStatus, !loadStatus && interactivity !== ChatInteractivity.ReadOnly && !modelReadOnly && (((draftOnly || loading) && draftLoaded) || this.isInputBlocked.read(reader)), loadStatus);
+			const keepInputVisible = !loadStatus && interactivity !== ChatInteractivity.ReadOnly
+				&& (this.isInputBlocked.read(reader) || (!modelReadOnly && (draftOnly || loading) && draftLoaded));
+			this._widget.setReadOnly(interactivity !== ChatInteractivity.Full || loading || modelReadOnly || !!loadStatus, keepInputVisible, loadStatus);
 		});
 
 		// Skip loading if we're already showing this chat
 
@@ -805,6 +805,7 @@ suite('Sessions - Chat View', () => {
 		const interactivity = observableValue('interactivity', ChatInteractivity.DraftOnly);
 		const liveModelReady = observableValue('liveModelReady', false);
 		const modelReadOnly = observableValue('modelReadOnly', false);
+		const inputBlocked = observableValue('inputBlocked', false);
 		const loading = observableValue('loading', false);
 		const loadedChatResource = observableValue<URI | undefined>('loadedChatResource', undefined);
 		const loadFailure = observableValue<{ resource: URI; status: IChatSessionHistoryStatus } | undefined>('loadFailure', undefined);
@@ -830,25 +831,39 @@ suite('Sessions - Chat View', () => {
 			_loadedChatResource: loadedChatResource,
 			_loadFailure: loadFailure,
 			historyStatus: constObservable(undefined),
-			isInputBlocked: constObservable(false),
+			isInputBlocked: inputBlocked,
 			chatPillsDebugService: { clear: () => { } },
 			_externalSessionBanner: { setSession: () => { } },
 			_chatPills: { setChat: () => { } },
 			_selectionSideChatController: { setChat: () => { } },
 			_banners: { setDebugData: () => { } },
 			_applyHistoryKey: () => { },
-			_widget: { setReadOnly: (readOnly: boolean, keepInputVisible: boolean, status?: IChatSessionHistoryStatus) => { inputState = { readOnly, keepInputVisible }; displayedHistoryStatus = status; } },
+			_widget: {
+				setReadOnly: (readOnly: boolean, keepInputVisible: boolean, status?: IChatSessionHistoryStatus) => {
+					inputState = { readOnly, keepInputVisible };
+					displayedHistoryStatus = status;
+				}
+			},
 		});
 		view.setChat(chat, undefined, session, () => attempts++);
 		const restoringSavedDraft = inputState;
 		view._handleDraftInput();
 		loadedChatResource.set(resource, undefined);
 		const offline = { inputState, attempts };
 		view._handleDraftInput();
+		transaction(tx => {
+			modelReadOnly.set(true, tx);
+			inputBlocked.set(true, tx);
+		});
+		const recordedHistory = inputState;
 		interactivity.set(ChatInteractivity.Full, undefined);
 		view.setChat(chat, undefined, session);
 		const waitingForLiveContent = inputState;
-		liveModelReady.set(true, undefined);
+		transaction(tx => {
+			modelReadOnly.set(false, tx);
+			inputBlocked.set(false, tx);
+			liveModelReady.set(true, tx);
+		});
 		const ready = inputState;
 		loadFailure.set({ resource, status: { kind: 'history', message: 'Saved history is unavailable' } }, undefined);
 		const failedLoad = { inputState, message: displayedHistoryStatus?.message };
@@ -858,13 +873,15 @@ suite('Sessions - Chat View', () => {
 		modelReadOnly.set(false, undefined);
 		loading.set(true, undefined);
 		const authenticating = inputState;
+		inputBlocked.set(true, undefined);
 		interactivity.set(ChatInteractivity.ReadOnly, undefined);
 		view.setChat(chat, undefined, session);
 		view._handleDraftInput();
 
-		assert.deepStrictEqual({ restoringSavedDraft, offline, waitingForLiveContent, ready, failedLoad, authenticating, revoked, archived: inputState, attempts }, {
+		assert.deepStrictEqual({ restoringSavedDraft, offline, recordedHistory, waitingForLiveContent, ready, failedLoad, authenticating, revoked, archived: inputState, attempts }, {
 			restoringSavedDraft: { readOnly: true, keepInputVisible: false },
 			offline: { inputState: { readOnly: true, keepInputVisible: true }, attempts: 0 },
+			recordedHistory: { readOnly: true, keepInputVisible: true },
 			waitingForLiveContent: { readOnly: true, keepInputVisible: true },
 			ready: { readOnly: false, keepInputVisible: false },
 			failedLoad: { inputState: { readOnly: true, keepInputVisible: false }, message: 'Saved history is unavailable' },
 
@@ -30,7 +30,7 @@ In the Agents Window, renaming a discovered sandbox session updates its owning M
 
 In the Agents Window, opening or restoring a sandbox chat starts connecting or waking its environment in the background by default. Disabling `chat.agentHost.cloudSandbox.autoConnectOnOpen` leaves the environment disconnected until the user starts composing or explicitly connects. Both provider open preparation and content activation honor this preference; it does not cancel existing connections or prevent explicit attempts. Provider open preparation starts the connection without blocking, including for cached chats that skip content activation. Chat content activation shares that attempt and serves cached or recorded history independently. A history-backed content provider retains the session resource and chat model through its first live attachment; later live snapshots promote recorded history in place. Recorded peer and subagent transcripts follow the requested chat identity. Later live-provider replacement retains the existing reload lifecycle.
 
-Normally interactive chats retain an editable local draft after their saved input has loaded. Connection progress and live-content failures remain hidden until the user types, pastes, or attaches context; input joins the existing attempt rather than starting another. Failed attempts retain the draft and require explicit Retry. Sending waits for the live chat model, and session settings wait for the authenticated connection. Archived and host-read-only chats remain read-only. Connecting never submits a draft automatically. The Editor Window retains its online-only connection-on-open policy without an offline-draft handoff.
+Normally interactive chats retain an editable local draft after their saved input has loaded. Connection progress and live-content failures remain hidden until the user types, pastes, or attaches context; input joins the existing attempt rather than starting another. Failed attempts retain the draft and require explicit Retry. Sending waits for the live chat model, and session settings wait for the authenticated connection. Archived and host-read-only chats remain read-only. Connecting never submits a draft automatically. The Editor Window retains its online-only connection-on-open policy, but keeps offline drafts editable while sending is unavailable.
 
 The window's Mission Control API service owns a bounded, account- and task-scoped memory cache of replayed history, independent of chat model disposal. Cached previews refresh silently. If recorded retrieval fails and live content cannot replace the preview, the existing status banner offers Refresh, which retries only the history API without waking compute or replacing the model. Connection feedback takes precedence when interaction requires it. Missing or incomplete refresh data cannot erase an already displayed transcript; authorization loss or a missing task instead surfaces the access error. Live attachment preserves cached data only when the transcript matches; differences and observed live changes invalidate it, and superseded in-flight reads cannot refill it. Authentication changes, feature teardown, task removal, and service disposal clear the relevant cache and cancel pending reads. Concurrent readers share a task read with independent cancellation. The cache stores neither credentials, raw event streams, nor live models, and survives neither restart nor account changes.
 
 
@@ -1180,7 +1180,7 @@ suite('CloudSandboxAgentHostContribution', () => {
 		const provider = harness.contentProviders.get(sessionType)!;
 		const resource = URI.from({ scheme: sessionType, path: '/sess-1' });
 		const session = store.add(await provider.provideChatSessionContent(resource, CancellationToken.None));
-		const before = { readOnly: session.isReadOnly?.get(), connected: [...harness.connectedTo], status: session.historyStatus?.get() };
+		const before = { readOnly: session.isReadOnly?.get(), blocked: session.isInputBlocked?.get(), connected: [...harness.connectedTo], status: session.historyStatus?.get() };
 		const live = store.add(new ReadOnlyChatSession(resource, [{
 			id: 'turn', type: 'request', prompt: 'Live history', participant: sessionType,
 		}], 'Live title', constObservable(false)));
@@ -1193,10 +1193,10 @@ suite('CloudSandboxAgentHostContribution', () => {
 			activated, before, sameProvider: harness.contentProviders.get(sessionType) === provider,
 			independentReference: reference !== session,
 			sameSession: reference.isReadOnly === session.isReadOnly && reference.history === session.history,
-			readOnly: session.isReadOnly?.get(), history: session.history, historyRequests: harness.historyRequests,
+			readOnly: session.isReadOnly?.get(), blocked: session.isInputBlocked?.get(), history: session.history, historyRequests: harness.historyRequests,
 		}, {
-			activated: true, before: { readOnly: true, connected: ['env-1'], status: undefined }, sameProvider: true,
-			independentReference: true, sameSession: true, readOnly: false, history: live.history, historyRequests: ['task-1'],
+			activated: true, before: { readOnly: true, blocked: true, connected: ['env-1'], status: undefined }, sameProvider: true,
+			independentReference: true, sameSession: true, readOnly: false, blocked: false, history: live.history, historyRequests: ['task-1'],
 		});
 	});
 
 
@@ -134,7 +134,7 @@ class PromotableCloudSandboxChatSession extends Disposable implements IChatSessi
 				const progress = source.progressObs?.read(reader);
 				const complete = source.isCompleteObs?.read(reader);
 				const readOnly = source.isReadOnly?.read(reader) ?? false;
-				const blocked = source.isInputBlocked?.read(reader) ?? false;
+				const blocked = !live || (source.isInputBlocked?.read(reader) ?? false);
 				const backgroundShellCount = source.backgroundShellCount?.read(reader);
 				const canvasContext = source.canvasContext?.read(reader);
 				if (live && (previousProgress !== progress || previousComplete !== complete)) {
 
@@ -81,7 +81,7 @@ import { IChatTodoListService } from '../../common/tools/chatTodoListService.js'
 import { ChatRequestVariableSet, IChatRequestTranscriptContextVariableEntry, IChatRequestVariableEntry, isPastedTextArtifact, isPromptFileVariableEntry, isPromptTextVariableEntry, isWorkspaceVariableEntry, PromptFileVariableKind, toPromptFileVariableEntry } from '../../common/attachments/chatVariableEntries.js';
 import { ChatViewModel, IChatResponseViewModel, isRequestVM, isResponseVM } from '../../common/model/chatViewModel.js';
 import { ChatMessageRole, IChatMessage } from '../../common/languageModels.js';
-import { ChatAgentLocation, ChatConfiguration, ChatModeKind, ChatPermissionLevel, CONTINUE_CHAT_IN_COPILOT_ACTION_ID, IResolvedNewChatSessionType, isLocalChatSessionSubjectToManagedPolicy, managedPolicyRequiresAgentHostMessage, ThinkingDisplayMode } from '../../common/constants.js';
+import { ChatAgentLocation, ChatConfiguration, ChatModeKind, ChatPermissionLevel, CONTINUE_CHAT_IN_COPILOT_ACTION_ID, getAgentHostSessionResource, IResolvedNewChatSessionType, isLocalChatSessionSubjectToManagedPolicy, managedPolicyRequiresAgentHostMessage, ThinkingDisplayMode } from '../../common/constants.js';
 import { IManagedSettingsService, requiresCopilotAgentHost } from '../../../../../platform/policy/common/copilotManagedSettings.js';
 import { ICommandService } from '../../../../../platform/commands/common/commands.js';
 import { MarshalledId } from '../../../../../base/common/marshallingIds.js';
@@ -2156,8 +2156,13 @@ export class ChatWidget extends Disposable implements IChatWidget {
 				$mid: MarshalledId.ChatViewContext, sessionResource: resource, inputUri: this.input.inputUri,
 			}),
 		} : historyStatus?.action);
-		this.readOnlyBanner?.setVisible(readOnly && !keepInputVisible);
-		this.setInputVisible(!readOnly || keepInputVisible);
+		const wasBannerVisible = this.readOnlyBanner?.visible;
+		this.readOnlyBanner?.setVisible(readOnly && (!keepInputVisible || !!historyStatus));
+		const inputVisible = !readOnly || keepInputVisible;
+		if (this._inputVisible === inputVisible && wasBannerVisible !== this.readOnlyBanner?.visible) {
+			this._layoutListForInputHeight();
+		}
+		this.setInputVisible(inputVisible);
 		// Authoritative over the lock/unlock `editable` toggles below.
 		this._applyRendererEditable(!readOnly);
 		this.rerenderListIfConnected();
@@ -2189,15 +2194,19 @@ export class ChatWidget extends Disposable implements IChatWidget {
 	}
 
 	private observeSessionArchived(model: IChatModel): IObservable<boolean> {
-		return isLocalChatSessionSubjectToManagedPolicy(model.sessionResource, model.initialLocation) || model.sessionResource.scheme === 'agent-host-claude' || model.sessionResource.scheme === 'agent-host-codex'
-			? observableFromEvent(this, this.agentSessionsService.model.onDidChangeSessions, () => this.agentSessionsService.getSession(model.sessionResource)?.isArchived() === true)
+		const agentHost = isAgentHostTarget(getChatSessionType(model.sessionResource));
+		return isLocalChatSessionSubjectToManagedPolicy(model.sessionResource, model.initialLocation) || agentHost
+			? observableFromEvent(this, this.agentSessionsService.model.onDidChangeSessions, () =>
+				this.agentSessionsService.getSession(model.sessionResource)?.isArchived() === true
+				|| (agentHost && this.agentSessionsService.getSession(getAgentHostSessionResource(model.sessionResource))?.isArchived() === true))
 			: constObservable(false);
 	}
 
 	private updateReadOnlyState(model: IChatModel, archived: boolean, reader: IReader): void {
 		const policyRequired = isLocalChatSessionSubjectToManagedPolicy(model.sessionResource, model.initialLocation) && this.policyRequiresAgentHost.read(reader);
 		this.policyReadOnly = policyRequired && !archived;
-		this.setReadOnly(model.isReadOnly.read(reader) || policyRequired, !policyRequired && model.isInputBlocked.read(reader), model.historyStatus?.read(reader));
+		const readOnly = model.isReadOnly.read(reader) || policyRequired || (archived && isAgentHostTarget(getChatSessionType(model.sessionResource)));
+		this.setReadOnly(readOnly, !policyRequired && !archived && model.isInputBlocked.read(reader), model.historyStatus?.read(reader));
 	}
 
 	private autoMigratePolicySession(model: IChatModel, archived: IObservable<boolean>): IDisposable {
 
@@ -287,6 +287,35 @@ suite('CloudSandboxSessionHandler', () => {
 		});
 	});
 
+	test('keeps recorded input blocked through cache refresh until live content is ready', async () => {
+		const fresh = new DeferredPromise<IReplayedTaskHistory>();
+		const pendingLive = new DeferredPromise<IChatSession>();
+		const connection = observableValue<RemoteAgentHostConnectionStatus>('connection', RemoteAgentHostConnectionStatus.connecting);
+		const handler = createHandler((_token, _diagnosticId, onCachedHistory) => {
+			onCachedHistory?.(recordedHistory());
+			return fresh.p;
+		}, undefined, undefined, undefined, undefined, connection);
+		const session = store.add(await handler.provideChatSessionContent(resource, CancellationToken.None));
+		const inputState = () => ({ readOnly: session.isReadOnly?.get(), blocked: session.isInputBlocked?.get() });
+		const cached = inputState();
+		const historyChanged = Event.toPromise(session.onDidChangeHistory!);
+		await fresh.complete(recordedHistory('Refreshed title'));
+		await historyChanged;
+		const refreshed = inputState();
+		connection.set(RemoteAgentHostConnectionStatus.connected, undefined);
+		handler.setLiveProvider({ provideChatSessionContent: () => pendingLive.p });
+		const waitingForLiveContent = inputState();
+		await pendingLive.complete(store.add(new LiveSession()));
+		await waitForState(session.isInputBlocked!, value => !value);
+
+		assert.deepStrictEqual({ cached, refreshed, waitingForLiveContent, live: inputState() }, {
+			cached: { readOnly: true, blocked: true },
+			refreshed: { readOnly: true, blocked: true },
+			waitingForLiveContent: { readOnly: true, blocked: true },
+			live: { readOnly: false, blocked: false },
+		});
+	});
+
 	test('a cached peer miss waits for fresh history instead of showing the default conversation', async () => {
 		const fresh = new DeferredPromise<IReplayedTaskHistory>();
 		const cached = recordedHistory();
@@ -656,7 +685,8 @@ suite('CloudSandboxSessionHandler', () => {
 			assert.deepStrictEqual({
 				prompts: session.history.filter(item => item.type === 'request').map(item => item.prompt),
 				error: session.history.find(item => item.type === 'response')?.errorDetails?.message,
-			}, { prompts: [''], error: `HTTP ${status}` });
+				readOnly: session.isReadOnly?.get(), blocked: session.isInputBlocked?.get(),
+			}, { prompts: [''], error: `HTTP ${status}`, readOnly: true, blocked: true });
 		});
 	}
 
@@ -933,7 +963,7 @@ suite('CloudSandboxSessionHandler', () => {
 		live.isReadOnly.set(true, undefined);
 		handler.setLiveProvider({ provideChatSessionContent: async () => live });
 		await timeout(0);
-		assert.deepStrictEqual({ readOnly: session.isReadOnly?.get(), history: session.history }, { readOnly: true, history: live.history });
+		assert.deepStrictEqual({ readOnly: session.isReadOnly?.get(), blocked: session.isInputBlocked?.get(), history: session.history }, { readOnly: true, blocked: false, history: live.history });
 	});
 
 	test('a late live result is disposed after its recorded session is closed', async () => {
 
@@ -2157,7 +2157,7 @@ suite('Editor cloud sandbox discovery', () => {
 		});
 	});
 
-	test('opens original offline history without waking or replacing the sandbox', async () => {
+	test('opens original offline history for drafting without waking or replacing the sandbox', async () => {
 		const h = createHarness(store);
 		await h.refresh();
 		await h.contribution.activate();
@@ -2166,12 +2166,13 @@ suite('Editor cloud sandbox discovery', () => {
 			resource: session.sessionResource.toString(),
 			title: session.title,
 			readOnly: session.isReadOnly?.get(),
+			blocked: session.isInputBlocked?.get(),
 			requests: session.history.filter(item => item.type === 'request').map(item => item.prompt),
 			history: h.calls.history,
 			connected: h.calls.connected,
 			created: h.calls.created,
 		}, {
-			resource: resource.toString(), title: discovered.name, readOnly: true,
+			resource: resource.toString(), title: discovered.name, readOnly: true, blocked: true,
 			requests: ['Original request'], history: [discovered.taskId], connected: [], created: 0,
 		});
 	});