Copilot *.instructions.md files are not attached to the context

[atachh]

Does this issue occur when all extensions are disabled?: Not applicable (related to Copilot extensions)

• VS Code Version: 1.100.2
• OS Version: MacOS 15.3.2 (24D81)

Steps to Reproduce:

1. Open a fresh workspace
2. Create a new Instructions file using the Command Palette -> Chat: New Instructions file
3. Leave the applyTo as default value (all files) and add your rules (for me that was "Say 'hey' when the user starts a conversation")
4. Create any file in the workspace, such as index.js and leave it empty
5. Open Copilot Chat window and write any prompt

Expected result:
The prompt file is attached to the context

Actual result:
The prompt file is ignored

It used to work for everyone in our team last week and this week it doesn't work for any of us. It's worth noting that if you create a .github/copilot-instructions.md file, it will always be attached as expected.