Unable to use --allow-tool with --prompt and --additional-mcp-config (works only with --yolo) #1592

Unable to use --allow-tool iot-local-debug with --prompt and --additional-mcp-config (works only with --yolo)

Description

When running copilot.exe (version 0.0.414) with the --prompt and --additional-mcp-config flags, I am not able to use the MCP iot-local-debug (defined in my $mcp_config). All attempts to allow the tool with --allow-tool (including different variations) fail, but using --yolo works.

Notably, when using --interactive mode instead of --prompt, --allow-tool iot-local-debug works as expected. This suggests the issue is specific to non-interactive (--prompt) mode.

How to Reproduce

The MCP config:

$mcp_config = '{"mcpServers":{"iot-local-debug":{"type":"http","url":"http://localhost:8080/mcp","headers":{},"tools":["*"]}}}'

The quick test script for --prompt:

$p_quick = @'
IMPORTANT: You are ONLY allowed to use MCP tools for testing. Do NOT use direct REST API calls (curl, Invoke-RestMethod, etc.).

Use mcp iot-local-debug to interact with the local MCP server.

Quick Test: Generate Key Pair Only

Step 1: "Generate a key pair for my IoT device"
↓
MCP calls: generate_key_pair (no parameters needed)
↓
Expected: Receive {"upload_key": "...", "download_key": "..."}

CONSTRAINT: You MUST use only the MCP tool generate_key_pair from the iot-local-debug server.

Please execute the step using MCP tools only and confirm the expected outcome.
'@

The main command (failing with --prompt):

& copilot.exe @(
    "--prompt"
    $p_quick
    "--additional-mcp-config"
    $mcp_config
    "--model"
    "gpt-5-mini"
    "--allow-all-paths"
    "--no-ask-user"
    "--no-auto-update"
    "--no-custom-instructions"
    "--allow-tool"
    "iot-local-debug"
    "--allow-tool"
    "iot-local-debug-generate_key_pair"
    "--allow-tool"
    "iot-local-debug(*)"
    "--allow-tool"
    "generate_key_pair"
    # "--yolo"  # Uncommenting this is the only thing that works
)

The equivalent command (working with --interactive):

& copilot.exe @(
    "--interactive"
    "--additional-mcp-config"
    $mcp_config
    "--model"
    "gpt-5-mini"
    "--allow-all-paths"
    "--no-ask-user"
    "--no-auto-update"
    "--no-custom-instructions"
    "--allow-tool"
    "iot-local-debug"
)

Observed Behavior

All --allow-tool variations fail in --prompt mode and produce the following output:

(This may take a minute as the AI processes the request)

Running MCP iot-local-debug generate_key_pair to create an upload/download key pair for the IoT device using the local MCP tool. I'll also report intent "Generating keypair" alongside the MCP call.

✗ iot-local-debug-generate_key_pair
  Permission denied and could not request permission from user

Requesting user's permission to allow MCP generate_key_pair because the MCP tool reported permission denied.

Expected Behavior

Passing --allow-tool iot-local-debug (or any of the other variations) in --prompt mode should allow the MCP tool to execute, consistent with the behavior in --interactive mode — and without requiring --yolo.

Workarounds

Version

copilot --version
GitHub Copilot CLI 0.0.414

Additional Context

• $mcp_config defines the iot-local-debug MCP server as an HTTP server at http://localhost:8080/mcp with a wildcard tools allowlist ("tools": ["*"]).
• The failure occurs regardless of which --allow-tool pattern is used in --prompt mode.
• --yolo works as a workaround, but is not desirable for security reasons.

Questions / Possible Bug

• Is --allow-tool handled differently between --prompt and --interactive modes?
• Is the correct format for --allow-tool with MCP tools <server-name>-<tool-name>, <server-name>(<tool-name>), or something else entirely?
• Is there a known incompatibility between --additional-mcp-config and --allow-tool in --prompt mode?
• Why does --yolo succeed where explicit --allow-tool patterns do not in --prompt mode?
• Does the "tools": ["*"] wildcard in $mcp_config conflict with or get overridden by --allow-tool resolution?