diff --git a/registry/coder-labs/modules/copilot/README.md b/registry/coder-labs/modules/copilot/README.md
index 7c0e56935..7005e1ca3 100644
--- a/registry/coder-labs/modules/copilot/README.md
+++ b/registry/coder-labs/modules/copilot/README.md
@@ -13,12 +13,15 @@ Run [GitHub Copilot CLI](https://docs.github.com/copilot/concepts/agents/about-c
 ```tf
 module "copilot" {
   source   = "registry.coder.com/coder-labs/copilot/coder"
-  version  = "0.4.0"
+  version  = "0.5.0"
   agent_id = coder_agent.example.id
   workdir  = "/home/coder/projects"
 }
 ```
 
+> [!WARNING]
+> **Security Notice**: This module runs Copilot with `--allow-all` by default, which enables all permissions (equivalent to `--allow-all-tools --allow-all-paths --allow-all-urls`). This bypasses permission prompts and allows Copilot unrestricted access to tools, file paths, and URLs. Use this module _only_ in trusted environments.
+
 > [!IMPORTANT]
 > This example assumes you have [Coder external authentication](https://coder.com/docs/admin/external-auth) configured with `id = "github"`. If not, you can provide a direct token using the `github_token` variable or provide the correct external authentication id for GitHub by setting `external_auth_id = "my-github"`.
 
@@ -51,7 +54,7 @@ data "coder_parameter" "ai_prompt" {
 
 module "copilot" {
   source   = "registry.coder.com/coder-labs/copilot/coder"
-  version  = "0.4.0"
+  version  = "0.5.0"
   agent_id = coder_agent.example.id
   workdir  = "/home/coder/projects"
 
@@ -71,7 +74,7 @@ Customize tool permissions, MCP servers, and Copilot settings:
 ```tf
 module "copilot" {
   source   = "registry.coder.com/coder-labs/copilot/coder"
-  version  = "0.4.0"
+  version  = "0.5.0"
   agent_id = coder_agent.example.id
   workdir  = "/home/coder/projects"
 
@@ -215,6 +218,19 @@ By default, the module resumes the latest Copilot session when the workspace res
 > [!NOTE]
 > Session resumption requires persistent storage for the home directory or workspace volume. Without persistent storage, sessions will not resume across workspace restarts.
 
+## State Persistence
+
+AgentAPI can save and restore its conversation state to disk across workspace restarts. This complements `resume_session` (which resumes the Copilot CLI session) by also preserving the AgentAPI-level context. Enabled by default, requires agentapi >= v0.12.0 (older versions skip it with a warning).
+
+To disable:
+
+```tf
+module "copilot" {
+  # ... other config
+  enable_state_persistence = false
+}
+```
+
 ## Troubleshooting
 
 If you encounter any issues, check the log files in the `~/.copilot-module` directory within your workspace for detailed information.
diff --git a/registry/coder-labs/modules/copilot/copilot.tftest.hcl b/registry/coder-labs/modules/copilot/copilot.tftest.hcl
index 0ff2379a0..9fdf93708 100644
--- a/registry/coder-labs/modules/copilot/copilot.tftest.hcl
+++ b/registry/coder-labs/modules/copilot/copilot.tftest.hcl
@@ -347,3 +347,32 @@ run "aibridge_proxy_with_copilot_config" {
     error_message = "copilot_model environment variable should be set alongside proxy"
   }
 }
+
+run "enable_state_persistence_default" {
+  command = plan
+
+  variables {
+    agent_id = "test-agent"
+    workdir  = "/home/coder"
+  }
+
+  assert {
+    condition     = var.enable_state_persistence == true
+    error_message = "enable_state_persistence should default to true"
+  }
+}
+
+run "disable_state_persistence" {
+  command = plan
+
+  variables {
+    agent_id                 = "test-agent"
+    workdir                  = "/home/coder"
+    enable_state_persistence = false
+  }
+
+  assert {
+    condition     = var.enable_state_persistence == false
+    error_message = "enable_state_persistence should be false when explicitly disabled"
+  }
+}
diff --git a/registry/coder-labs/modules/copilot/main.tf b/registry/coder-labs/modules/copilot/main.tf
index 2837961f5..9194fa993 100644
--- a/registry/coder-labs/modules/copilot/main.tf
+++ b/registry/coder-labs/modules/copilot/main.tf
@@ -119,6 +119,12 @@ variable "subdomain" {
   default     = false
 }
 
+variable "enable_state_persistence" {
+  type        = bool
+  description = "Enable AgentAPI conversation state persistence across restarts."
+  default     = true
+}
+
 variable "order" {
   type        = number
   description = "The order determines the position of app in the UI presentation."
@@ -155,6 +161,12 @@ variable "cli_app_display_name" {
   default     = "Copilot"
 }
 
+variable "allow_all" {
+  type        = bool
+  description = "Allow all tools without prompting (equivalent to --allow-all)."
+  default     = true
+}
+
 variable "resume_session" {
   type        = bool
   description = "Whether to automatically resume the latest Copilot session on workspace restart."
@@ -271,25 +283,26 @@ resource "coder_env" "github_token" {
 
 module "agentapi" {
   source  = "registry.coder.com/coder/agentapi/coder"
-  version = "2.0.0"
-
-  agent_id             = var.agent_id
-  folder               = local.workdir
-  web_app_slug         = local.app_slug
-  web_app_order        = var.order
-  web_app_group        = var.group
-  web_app_icon         = var.icon
-  web_app_display_name = var.web_app_display_name
-  cli_app              = var.cli_app
-  cli_app_slug         = var.cli_app ? "${local.app_slug}-cli" : null
-  cli_app_icon         = var.cli_app ? var.icon : null
-  cli_app_display_name = var.cli_app ? var.cli_app_display_name : null
-  agentapi_subdomain   = var.subdomain
-  module_dir_name      = local.module_dir_name
-  install_agentapi     = var.install_agentapi
-  agentapi_version     = var.agentapi_version
-  pre_install_script   = var.pre_install_script
-  post_install_script  = var.post_install_script
+  version = "2.2.0"
+
+  agent_id                 = var.agent_id
+  folder                   = local.workdir
+  web_app_slug             = local.app_slug
+  web_app_order            = var.order
+  web_app_group            = var.group
+  web_app_icon             = var.icon
+  web_app_display_name     = var.web_app_display_name
+  cli_app                  = var.cli_app
+  cli_app_slug             = var.cli_app ? "${local.app_slug}-cli" : null
+  cli_app_icon             = var.cli_app ? var.icon : null
+  cli_app_display_name     = var.cli_app ? var.cli_app_display_name : null
+  agentapi_subdomain       = var.subdomain
+  module_dir_name          = local.module_dir_name
+  install_agentapi         = var.install_agentapi
+  agentapi_version         = var.agentapi_version
+  enable_state_persistence = var.enable_state_persistence
+  pre_install_script       = var.pre_install_script
+  post_install_script      = var.post_install_script
 
   start_script = <<-EOT
     #!/bin/bash
@@ -299,6 +312,7 @@ module "agentapi" {
     chmod +x /tmp/start.sh
 
     ARG_WORKDIR='${local.workdir}' \
+    ARG_ALLOW_ALL='${var.allow_all}' \
     ARG_AI_PROMPT='${base64encode(var.ai_prompt)}' \
     ARG_SYSTEM_PROMPT='${base64encode(local.final_system_prompt)}' \
     ARG_COPILOT_MODEL='${var.copilot_model}' \
diff --git a/registry/coder-labs/modules/copilot/scripts/install.sh b/registry/coder-labs/modules/copilot/scripts/install.sh
index 44c480e3a..4609376c3 100644
--- a/registry/coder-labs/modules/copilot/scripts/install.sh
+++ b/registry/coder-labs/modules/copilot/scripts/install.sh
@@ -1,11 +1,9 @@
 #!/bin/bash
 
-if [ -f "$HOME/.bashrc" ]; then
-  source "$HOME"/.bashrc
-fi
-
 set -euo pipefail
 
+export PATH="$HOME/.local/bin:$PATH"
+
 command_exists() {
   command -v "$1" > /dev/null 2>&1
 }
@@ -19,34 +17,13 @@ ARG_EXTERNAL_AUTH_ID=${ARG_EXTERNAL_AUTH_ID:-github}
 ARG_COPILOT_VERSION=${ARG_COPILOT_VERSION:-0.0.334}
 ARG_COPILOT_MODEL=${ARG_COPILOT_MODEL:-claude-sonnet-4.5}
 
-validate_prerequisites() {
-  if ! command_exists node; then
-    echo "ERROR: Node.js not found. Copilot requires Node.js v22+."
-    echo "Install with: curl -fsSL https://deb.nodesource.com/setup_22.x | sudo -E bash - && sudo apt-get install -y nodejs"
-    exit 1
-  fi
-
-  if ! command_exists npm; then
-    echo "ERROR: npm not found. Copilot requires npm v10+."
-    exit 1
-  fi
-
-  node_version=$(node --version | sed 's/v//' | cut -d. -f1)
-  if [ "$node_version" -lt 22 ]; then
-    echo "WARNING: Node.js v$node_version detected. Copilot requires v22+."
-  fi
-}
-
 install_copilot() {
   if ! command_exists copilot; then
     echo "Installing GitHub Copilot CLI (version: ${ARG_COPILOT_VERSION})..."
-    if [ "$ARG_COPILOT_VERSION" = "latest" ]; then
-      npm install -g @github/copilot
-    else
-      npm install -g "@github/copilot@${ARG_COPILOT_VERSION}"
-    fi
+    curl -fsSL https://gh.io/copilot-install | VERSION="${ARG_COPILOT_VERSION}" bash
 
     if ! command_exists copilot; then
+      echo "PATH after installation: $PATH"
       echo "ERROR: Failed to install Copilot"
       exit 1
     fi
@@ -95,7 +72,7 @@ setup_copilot_configurations() {
 }
 
 setup_copilot_config() {
-  export XDG_CONFIG_HOME="${XDG_CONFIG_HOME:-$HOME/.config}"
+  export XDG_CONFIG_HOME="${XDG_CONFIG_HOME:-$HOME}"
   local copilot_config_dir="$XDG_CONFIG_HOME/.copilot"
   local copilot_config_file="$copilot_config_dir/config.json"
   local mcp_config_file="$copilot_config_dir/mcp-config.json"
@@ -190,27 +167,15 @@ add_custom_mcp_servers() {
     local updated_config
     updated_config=$(jq --argjson custom "$custom_servers" '.mcpServers += $custom' "$mcp_config_file")
     echo "$updated_config" > "$mcp_config_file"
-  elif command_exists node; then
-    node -e "
-      const fs = require('fs');
-      const existing = JSON.parse(fs.readFileSync('$mcp_config_file', 'utf8'));
-      const input = JSON.parse(\`$ARG_MCP_CONFIG\`);
-      const custom = input.mcpServers || {};
-      existing.mcpServers = {...existing.mcpServers, ...custom};
-      fs.writeFileSync('$mcp_config_file', JSON.stringify(existing, null, 2));
-    "
   else
-    echo "WARNING: jq and node not available, cannot merge custom MCP servers"
+    echo "WARNING: jq not available, cannot merge custom MCP servers"
   fi
 }
 
 configure_copilot_model() {
-  if [ -n "$ARG_COPILOT_MODEL" ] && [ "$ARG_COPILOT_MODEL" != "claude-sonnet-4.5" ]; then
-    echo "Setting Copilot model to: $ARG_COPILOT_MODEL"
-    copilot config model "$ARG_COPILOT_MODEL" || {
-      echo "WARNING: Failed to set model via copilot config, will use environment variable fallback"
-      export COPILOT_MODEL="$ARG_COPILOT_MODEL"
-    }
+  if [[ -n "${ARG_COPILOT_MODEL}" ]]; then
+    echo "Setting Copilot model to: ${ARG_COPILOT_MODEL}"
+    export COPILOT_MODEL="${ARG_COPILOT_MODEL}"
   fi
 }
 
@@ -227,7 +192,6 @@ configure_coder_integration() {
   fi
 }
 
-validate_prerequisites
 install_copilot
 check_github_authentication
 setup_copilot_configurations
diff --git a/registry/coder-labs/modules/copilot/scripts/start.sh b/registry/coder-labs/modules/copilot/scripts/start.sh
index 0aecb1feb..7c5d21c5b 100644
--- a/registry/coder-labs/modules/copilot/scripts/start.sh
+++ b/registry/coder-labs/modules/copilot/scripts/start.sh
@@ -1,9 +1,5 @@
 #!/bin/bash
 
-if [ -f "$HOME/.bashrc" ]; then
-  source "$HOME"/.bashrc
-fi
-
 set -euo pipefail
 
 export PATH="$HOME/.local/bin:$PATH"
@@ -13,6 +9,7 @@ command_exists() {
 }
 
 ARG_WORKDIR=${ARG_WORKDIR:-"$HOME"}
+ARG_ALLOW_ALL=${ARG_ALLOW_ALL:-true}
 ARG_AI_PROMPT=$(echo -n "${ARG_AI_PROMPT:-}" | base64 -d 2> /dev/null || echo "")
 ARG_SYSTEM_PROMPT=$(echo -n "${ARG_SYSTEM_PROMPT:-}" | base64 -d 2> /dev/null || echo "")
 ARG_COPILOT_MODEL=${ARG_COPILOT_MODEL:-}
@@ -28,7 +25,7 @@ ARG_AIBRIDGE_PROXY_CERT_PATH=${ARG_AIBRIDGE_PROXY_CERT_PATH:-}
 
 validate_copilot_installation() {
   if ! command_exists copilot; then
-    echo "ERROR: Copilot not installed. Run: npm install -g @github/copilot"
+    echo "ERROR: Copilot not installed or not in PATH. Please ensure Copilot CLI is installed and accessible."
     exit 1
   fi
 }
@@ -73,6 +70,20 @@ build_copilot_args() {
       fi
     done
   fi
+
+  if [ "$ARG_ALLOW_ALL" = "true" ]; then
+    COPILOT_ARGS+=(--allow-all)
+  fi
+
+  if check_existing_session; then
+    COPILOT_ARGS+=(--continue)
+  else
+    local initial_prompt
+    initial_prompt=$(build_initial_prompt)
+    if [[ -n "${initial_prompt}" ]]; then
+      COPILOT_ARGS+=(-i "${initial_prompt}")
+    fi
+  fi
 }
 
 check_existing_session() {
@@ -169,35 +180,11 @@ start_agentapi() {
 
   build_copilot_args
 
-  if check_existing_session; then
-    echo "Continuing latest Copilot session..."
-    if [ ${#COPILOT_ARGS[@]} -gt 0 ]; then
-      echo "Copilot arguments: ${COPILOT_ARGS[*]}"
-      agentapi server --type copilot --term-width 120 --term-height 40 -- copilot --continue "${COPILOT_ARGS[@]}"
-    else
-      agentapi server --type copilot --term-width 120 --term-height 40 -- copilot --continue
-    fi
+  if [ ${#COPILOT_ARGS[@]} -gt 0 ]; then
+    echo "Copilot arguments: ${COPILOT_ARGS[*]}"
+    agentapi server --type copilot --term-width 67 --term-height 1190 -- copilot "${COPILOT_ARGS[@]}"
   else
-    echo "Starting new Copilot session..."
-    local initial_prompt
-    initial_prompt=$(build_initial_prompt)
-
-    if [ -n "$initial_prompt" ]; then
-      echo "Using initial prompt with system context"
-      if [ ${#COPILOT_ARGS[@]} -gt 0 ]; then
-        echo "Copilot arguments: ${COPILOT_ARGS[*]}"
-        agentapi server -I="$initial_prompt" --type copilot --term-width 120 --term-height 40 -- copilot "${COPILOT_ARGS[@]}"
-      else
-        agentapi server -I="$initial_prompt" --type copilot --term-width 120 --term-height 40 -- copilot
-      fi
-    else
-      if [ ${#COPILOT_ARGS[@]} -gt 0 ]; then
-        echo "Copilot arguments: ${COPILOT_ARGS[*]}"
-        agentapi server --type copilot --term-width 120 --term-height 40 -- copilot "${COPILOT_ARGS[@]}"
-      else
-        agentapi server --type copilot --term-width 120 --term-height 40 -- copilot
-      fi
-    fi
+    agentapi server --type copilot --term-width 67 --term-height 1190 -- copilot
   fi
 }