diff --git a/scripts/vscode.patch b/scripts/vscode.patch
index 4b9b245de..9a884753a 100644
--- a/scripts/vscode.patch
+++ b/scripts/vscode.patch
@@ -202,19 +202,20 @@ index e09049c5b9..d93ffa527a 100644
 \ No newline at end of file
 +}
 diff --git a/src/vs/workbench/browser/web.main.ts b/src/vs/workbench/browser/web.main.ts
-index 1986fb6642..7c66b644f2 100644
+index 1986fb6642..afbe385af6 100644
 --- a/src/vs/workbench/browser/web.main.ts
 +++ b/src/vs/workbench/browser/web.main.ts
-@@ -115,6 +115,8 @@ class CodeRendererMain extends Disposable {
+@@ -115,6 +115,9 @@ class CodeRendererMain extends Disposable {
  			const remoteFileSystemProvider = this._register(new RemoteExtensionsFileSystemProvider(channel, remoteAgentService.getEnvironment()));
 
  			fileService.registerProvider(Schemas.vscodeRemote, remoteFileSystemProvider);
 +			fileService.registerProvider(Schemas.http, remoteFileSystemProvider);
 +			fileService.registerProvider(Schemas.https, remoteFileSystemProvider);
++			fileService.registerProvider(Schemas.file, remoteFileSystemProvider);
  		}
 
  		const payload = await this.resolveWorkspaceInitializationPayload();
-@@ -170,4 +172,4 @@ export function main(domElement: HTMLElement, options: IWorkbenchConstructionOpt
+@@ -170,4 +173,4 @@ export function main(domElement: HTMLElement, options: IWorkbenchConstructionOpt
  	const renderer = new CodeRendererMain(domElement, options);
 
  	return renderer.open();
diff --git a/src/channel.ts b/src/channel.ts
index 72d16854b..fa6e606f3 100644
--- a/src/channel.ts
+++ b/src/channel.ts
@@ -49,7 +49,10 @@ export class FileProviderChannel implements IServerChannel, IDisposable {
 	private readonly provider: DiskFileSystemProvider;
 	private readonly watchers = new Map<string, Watcher>();
 
-	public constructor(private readonly logService: ILogService) {
+	public constructor(
+		private readonly environmentService: IEnvironmentService,
+		private readonly logService: ILogService,
+	) {
 		this.provider = new DiskFileSystemProvider(this.logService);
 	}
 
@@ -113,11 +116,11 @@ export class FileProviderChannel implements IServerChannel, IDisposable {
 	}
 
 	private async stat(resource: UriComponents): Promise<IStat> {
-		return this.provider.stat(URI.from(resource));
+		return this.provider.stat(this.transform(resource));
 	}
 
 	private async open(resource: UriComponents, opts: FileOpenOptions): Promise<number> {
-		return this.provider.open(URI.from(resource), opts);
+		return this.provider.open(this.transform(resource), opts);
 	}
 
 	private async close(fd: number): Promise<void> {
@@ -135,32 +138,40 @@ export class FileProviderChannel implements IServerChannel, IDisposable {
 	}
 
 	private async delete(resource: UriComponents, opts: FileDeleteOptions): Promise<void> {
-		return this.provider.delete(URI.from(resource), opts);
+		return this.provider.delete(this.transform(resource), opts);
 	}
 
 	private async mkdir(resource: UriComponents): Promise<void> {
-		return this.provider.mkdir(URI.from(resource));
+		return this.provider.mkdir(this.transform(resource));
 	}
 
 	private async readdir(resource: UriComponents): Promise<[string, FileType][]> {
-		return this.provider.readdir(URI.from(resource));
+		return this.provider.readdir(this.transform(resource));
 	}
 
 	private async rename(resource: UriComponents, target: UriComponents, opts: FileOverwriteOptions): Promise<void> {
-		return this.provider.rename(URI.from(resource), URI.from(target), opts);
+		return this.provider.rename(this.transform(resource), URI.from(target), opts);
 	}
 
 	private copy(resource: UriComponents, target: UriComponents, opts: FileOverwriteOptions): Promise<void> {
-		return this.provider.copy(URI.from(resource), URI.from(target), opts);
+		return this.provider.copy(this.transform(resource), URI.from(target), opts);
 	}
 
 	private async watch(session: string, req: number, resource: UriComponents, opts: IWatchOptions): Promise<void> {
-		this.watchers.get(session)!._watch(req, URI.from(resource), opts);
+		this.watchers.get(session)!._watch(req, this.transform(resource), opts);
 	}
 
 	private async unwatch(session: string, req: number): Promise<void> {
 		this.watchers.get(session)!.unwatch(req);
 	}
+
+	private transform(resource: UriComponents): URI {
+		// HACK: for now assume /out is relative to the build.
+		if (resource.path.indexOf("/out") === 0) {
+			resource.path = this.environmentService.appRoot + resource.path;
+		}
+		return URI.from(resource);
+	}
 }
 
 /**
diff --git a/src/server.ts b/src/server.ts
index 50054c582..50e9dd4d5 100644
--- a/src/server.ts
+++ b/src/server.ts
@@ -402,7 +402,7 @@ export class MainServer extends Server {
 
 		instantiationService.invokeFunction(() => {
 			instantiationService.createInstance(LogsDataCleaner);
-			this.ipc.registerChannel(REMOTE_FILE_SYSTEM_CHANNEL_NAME, new FileProviderChannel(logService));
+			this.ipc.registerChannel(REMOTE_FILE_SYSTEM_CHANNEL_NAME, new FileProviderChannel(environmentService, logService));
 			this.ipc.registerChannel("remoteextensionsenvironment", new ExtensionEnvironmentChannel(environmentService, logService));
 			const extensionsService = this.services.get(IExtensionManagementService) as IExtensionManagementService;
 			const extensionsChannel = new ExtensionManagementChannel(extensionsService, (context) => getUriTransformer(context.remoteAuthority));