diff --git a/src/vs/platform/agentHost/common/agentService.ts b/src/vs/platform/agentHost/common/agentService.ts
index d07b370326e687..802820d393c87a 100644
--- a/src/vs/platform/agentHost/common/agentService.ts
+++ b/src/vs/platform/agentHost/common/agentService.ts
@@ -1259,6 +1259,8 @@ export interface IAgentToolPendingConfirmationSignal {
 	readonly permissionKind?: 'shell' | 'write' | 'mcp' | 'read' | 'url' | 'skill' | 'custom-tool' | 'hook' | 'memory' | 'extension-management' | 'extension-permission-access';
 	/** Host-only auto-approval path target (not part of the dispatched action). */
 	readonly permissionPath?: string;
+	/** Host-only flag requiring the client to show a confirmation instead of applying host auto-approval. */
+	readonly managedApprovalRequired?: boolean;
 	/**
 	 * Host-only flag (not part of the dispatched action): the model requested
 	 * this shell command run OUTSIDE the sandbox (and the host opted in via
diff --git a/src/vs/platform/agentHost/node/agentSideEffects.ts b/src/vs/platform/agentHost/node/agentSideEffects.ts
index 86ef43860ddcbf..0f0fcbeb76dafd 100644
--- a/src/vs/platform/agentHost/node/agentSideEffects.ts
+++ b/src/vs/platform/agentHost/node/agentSideEffects.ts
@@ -1060,7 +1060,9 @@ export class AgentSideEffects extends Disposable {
 			toolInput: e.state.toolInput,
 			requestSandboxBypass: e.requestSandboxBypass,
 		};
-		const autoApproval = await this._permissionManager.getAutoApproval(approvalEvent, sessionKey);
+		const autoApproval = e.managedApprovalRequired
+			? undefined
+			: await this._permissionManager.getAutoApproval(approvalEvent, sessionKey);
 		const part = this._stateManager.getSessionState(sessionKey)?.activeTurn?.responseParts.find(part => part.kind === ResponsePartKind.ToolCall && part.toolCall.toolCallId === e.state.toolCallId);
 		const toolCall = part?.kind === ResponsePartKind.ToolCall ? part.toolCall : undefined;
 		if (toolCall
diff --git a/src/vs/platform/agentHost/node/copilot/copilotAgentSession.ts b/src/vs/platform/agentHost/node/copilot/copilotAgentSession.ts
index 5dd3914cc7a0d4..0a7b0a336213ed 100644
--- a/src/vs/platform/agentHost/node/copilot/copilotAgentSession.ts
+++ b/src/vs/platform/agentHost/node/copilot/copilotAgentSession.ts
@@ -2141,7 +2141,8 @@ export class CopilotAgentSession extends Disposable {
 				return { kind: 'reject' };
 			}
 
-			const autoApproval = this._lastAppliedPermissionMode === 'auto'
+			const managedApprovalRequired = request.managedApprovalRequired === true;
+			const autoApproval = !managedApprovalRequired && this._lastAppliedPermissionMode === 'auto'
 				? await this._takeAutoApproval(toolCallId)
 				: undefined;
 			const recommendation = autoApproval?.recommendation;
@@ -2182,14 +2183,14 @@ export class CopilotAgentSession extends Disposable {
 			const approvedSignature = this._approvedDuplicablePermissionSignatures.get(toolCallId);
 			if (approvedSignature !== undefined) {
 				this._approvedDuplicablePermissionSignatures.delete(toolCallId);
-				if ((request.kind === 'write' || request.kind === 'read') && safeStringify(request) === approvedSignature) {
+				if (!managedApprovalRequired && (request.kind === 'write' || request.kind === 'read') && safeStringify(request) === approvedSignature) {
 					this._logService.info(`[Copilot:${this.sessionId}] Auto-approving duplicate ${request.kind} permission request for tool call ${toolCallId}`);
 					return { kind: 'approve-once' };
 				}
 			}
 
 			const sessionResourcePath = this._getInternalSessionResourcePath(request);
-			if (sessionResourcePath) {
+			if (!managedApprovalRequired && sessionResourcePath) {
 				this._logService.info(`[Copilot:${this.sessionId}] Auto-approving internal session resource ${sessionResourcePath}`);
 				return { kind: 'approve-once' };
 			}
@@ -2201,7 +2202,7 @@ export class CopilotAgentSession extends Disposable {
 			// read those same files back, and prompting the user to
 			// approve a read of bytes they themselves attached is
 			// redundant.
-			if (request.kind === 'read' && typeof request.path === 'string'
+			if (!managedApprovalRequired && request.kind === 'read' && typeof request.path === 'string'
 				&& this._isSessionAttachmentPath(request.path)
 			) {
 				this._logService.info(`[Copilot:${this.sessionId}] Auto-approving session attachment ${request.path}`);
@@ -2212,7 +2213,7 @@ export class CopilotAgentSession extends Disposable {
 			// Copilot SDK itself. The SDK spills oversized tool results to
 			// `os.tmpdir()/copilot-tool-output-…txt` and then asks the model
 			// to read them back in a follow-up turn — no need to confirm.
-			if (request.kind === 'read' && typeof request.path === 'string') {
+			if (!managedApprovalRequired && request.kind === 'read' && typeof request.path === 'string') {
 				if (isCopilotSdkToolOutputTempFile(request.path, this._environmentService.tmpDir.fsPath)) {
 					this._logService.info(`[Copilot:${this.sessionId}] Auto-approving Copilot SDK tool-output temp file ${request.path}`);
 					return { kind: 'approve-once' };
@@ -2224,7 +2225,7 @@ export class CopilotAgentSession extends Disposable {
 			// workspace, shell, or network, so prompting for them is redundant
 			// noise. Tools that explicitly require confirmation (e.g. revealing
 			// unreviewed review comments) are excluded so the user is prompted.
-			if (request.kind === 'custom-tool' && typeof request.toolName === 'string'
+			if (!managedApprovalRequired && request.kind === 'custom-tool' && typeof request.toolName === 'string'
 				&& this._serverToolHost?.toolNames.includes(request.toolName)
 				&& !this._serverToolHost.requiresConfirmation(request.toolName)
 			) {
@@ -2235,7 +2236,7 @@ export class CopilotAgentSession extends Disposable {
 			const isShellRequest = request.kind === 'shell'
 				|| (request.kind === 'custom-tool' && typeof request.toolName === 'string' && isShellTool(request.toolName));
 
-			if (request.kind === 'custom-tool'
+			if (!managedApprovalRequired && request.kind === 'custom-tool'
 				&& typeof request.toolName === 'string'
 				&& this._clientToolNames.has(this._clientToolName(request.toolName))
 				&& this._pendingClientToolCalls.hasBufferedResult(toolCallId)
@@ -2255,7 +2256,7 @@ export class CopilotAgentSession extends Disposable {
 			// fall through to the normal confirmation flow — otherwise enabling
 			// `sandbox.allowBypass` would let the model escape the sandbox with no
 			// prompt at all.
-			if (isShellRequest && !request.requestSandboxBypass && await this._isShellSandboxedByDefault()) {
+			if (!managedApprovalRequired && isShellRequest && !request.requestSandboxBypass && await this._isShellSandboxedByDefault()) {
 				// Session may have been disposed while we awaited the engine
 				// check; if so the deferred has already been settled and
 				// removed, so leave it alone.
@@ -2315,13 +2316,14 @@ export class CopilotAgentSession extends Disposable {
 				},
 				permissionKind,
 				permissionPath,
+				managedApprovalRequired,
 				requestSandboxBypass: request.requestSandboxBypass,
 				parentToolCallId,
 			});
 
 			const result = await deferred.p;
 			this._logService.info(`[Copilot:${this.sessionId}] Permission response: toolCallId=${toolCallId}, result=${result.kind}`);
-			if (result.kind === 'approve-once' && (request.kind === 'write' || request.kind === 'read')) {
+			if (!managedApprovalRequired && result.kind === 'approve-once' && (request.kind === 'write' || request.kind === 'read')) {
 				this._approvedDuplicablePermissionSignatures.set(toolCallId, safeStringify(request));
 			}
 			return result;
diff --git a/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts b/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts
index a1a4a498621ccb..4f76a9a10915d9 100644
--- a/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts
+++ b/src/vs/platform/agentHost/node/copilot/copilotToolDisplay.ts
@@ -1051,6 +1051,8 @@ export function tryStringify(value: unknown): string | undefined {
 export interface ITypedPermissionRequest {
 	/** Permission kind discriminator from the SDK. */
 	kind: PermissionRequest['kind'];
+	/** Whether managed policy requires a human response and forbids host auto-approval. */
+	managedApprovalRequired?: boolean;
 	/** Tool call ID that triggered this permission request, when available. */
 	toolCallId?: string;
 	/** File path — set for `read` permission requests. */
diff --git a/src/vs/platform/agentHost/test/node/agentSideEffects.test.ts b/src/vs/platform/agentHost/test/node/agentSideEffects.test.ts
index 84cfbf2aaff2b8..e1fb538f59ff07 100644
--- a/src/vs/platform/agentHost/test/node/agentSideEffects.test.ts
+++ b/src/vs/platform/agentHost/test/node/agentSideEffects.test.ts
@@ -4745,6 +4745,54 @@ suite('AgentSideEffects', () => {
 			]);
 		});
 
+		test('managed approval bypasses session auto-approval and reaches the client confirmation UI', async () => {
+			setupSession();
+			stateManager.setSessionConfig(sessionUri.toString(), {
+				schema: { type: 'object', properties: {} },
+				values: { permissions: { allow: ['CustomTool'], deny: [] } },
+			});
+			startTurn('turn-1');
+			disposables.add(sideEffects.registerProgressListener(agent));
+
+			agent.fireProgress({
+				kind: 'action', resource: URI.parse(defaultChatUri),
+				action: {
+					type: ActionType.ChatToolCallStart, turnId: 'turn-1',
+					toolCallId: 'tc-managed', toolName: 'CustomTool', displayName: 'Custom Tool', contributor: undefined,
+				},
+			});
+			agent.fireProgress({
+				kind: 'pending_confirmation', chat: URI.parse(defaultChatUri),
+				state: {
+					status: ToolCallStatus.PendingConfirmation,
+					toolCallId: 'tc-managed', toolName: 'CustomTool', displayName: 'Custom Tool',
+					invocationMessage: 'Run managed custom tool', toolInput: undefined,
+					confirmationTitle: 'Run managed custom tool', edits: undefined,
+				},
+				permissionKind: 'custom-tool',
+				managedApprovalRequired: true,
+			});
+
+			const toolCall = await waitForState(stateManager, () => {
+				const part = stateManager.getSessionState(sessionUri.toString())?.activeTurn?.responseParts.find(
+					responsePart => responsePart.kind === ResponsePartKind.ToolCall && responsePart.toolCall.toolCallId === 'tc-managed'
+				);
+				return part?.kind === ResponsePartKind.ToolCall && part.toolCall.status === ToolCallStatus.PendingConfirmation
+					? part.toolCall
+					: undefined;
+			});
+
+			assert.deepStrictEqual({
+				status: toolCall.status,
+				options: toolCall.options?.map(option => option.id),
+				responses: agent.respondToPermissionCalls,
+			}, {
+				status: ToolCallStatus.PendingConfirmation,
+				options: ['allow-session', 'allow-once', 'skip'],
+				responses: [],
+			});
+		});
+
 		test('subagent tool calls inherit parent session permissions', async () => {
 			setupSession();
 			stateManager.setSessionConfig(sessionUri.toString(), {
diff --git a/src/vs/platform/agentHost/test/node/copilotAgentSession.test.ts b/src/vs/platform/agentHost/test/node/copilotAgentSession.test.ts
index ca27d36791478a..e22d73f792fc31 100644
--- a/src/vs/platform/agentHost/test/node/copilotAgentSession.test.ts
+++ b/src/vs/platform/agentHost/test/node/copilotAgentSession.test.ts
@@ -2146,6 +2146,44 @@ suite('CopilotAgentSession', () => {
 			});
 		});
 
+		test('managed approval requires confirmation despite an approve recommendation', async () => {
+			const { session, runtime, mockSession, signals, waitForSignal } = await createAgentSession(disposables, {
+				configValues: { [SessionConfigKey.AutoApprove]: 'assisted' },
+			});
+			await session.syncPermissionMode('turn-start');
+			mockSession.fire('permission.requested', {
+				requestId: 'request-managed',
+				permissionRequest: {
+					kind: 'read',
+					path: '/workspace/src/file.ts',
+					intention: 'Read the file',
+					toolCallId: 'tc-managed',
+					managedApprovalRequired: true,
+				},
+				promptRequest: {
+					kind: 'path',
+					accessKind: 'read',
+					paths: ['/workspace/src/file.ts'],
+					toolCallId: 'tc-managed',
+					managedApprovalRequired: true,
+					autoApproval: { recommendation: 'approve', reason: 'Low risk' },
+				},
+			});
+
+			const resultPromise = runtime.handlePermissionRequest({
+				kind: 'read',
+				path: '/workspace/src/file.ts',
+				toolCallId: 'tc-managed',
+				managedApprovalRequired: true,
+			});
+
+			await waitForSignal(signal => signal.kind === 'pending_confirmation');
+			assert.strictEqual(signals.length, 1);
+			assert.strictEqual(signals[0].kind === 'pending_confirmation' && signals[0].managedApprovalRequired, true);
+			assert.ok(session.respondToPermissionRequest('tc-managed', true));
+			assert.strictEqual((await resultPromise).kind, 'approve-once');
+		});
+
 		test('Approve When Safe correlates a recommendation event that arrives after the permission callback', async () => {
 			const { session, runtime, mockSession, signals } = await createAgentSession(disposables, {
 				configValues: { [SessionConfigKey.AutoApprove]: 'assisted' },