Copilot Studio + SharePoint: Markdown (.md) Files in Doc Libraries Supported as Knowledge Sources?

Hi all,

We’ve been doing some deeper testing with Copilot Studio agents grounded in SharePoint knowledge sources, and I’m hoping to clarify whether what we’re seeing is a known limitation or an undocumented gap.

Scenario

• A Copilot Studio agent uses SharePoint document libraries as a knowledge source
• The library contains Markdown (.md) files that are intentionally used as canonical design references
• The same .md files:
  • ✅ Work well when uploaded directly to the agent
  • ❌ Are not retrievable or citable when stored in a SharePoint library and added as a SharePoint knowledge source

To help with grounding, we created modern SharePoint index pages that:

• Explain what the markdown collections are (Patterns, ADRs, Guardrails)
• Link directly to the canonical folders and files
• Explicitly state that the .md files are the source of truth

The agent can:

• Discover and summarize the index pages correctly
• Understand that .md artifacts exist and where they live

But it cannot:

• Read the content of the individual .md files
• Apply a specific pattern or ADR from those files in a design conversation
• Cite them as sources, even when permissions and search indexing are confirmed

What We’ve Checked

• Permissions (agent user has access)
• Folder depth (kept shallow)
• Search results (markdown files appear in SharePoint search)
• SharePoint indexing status
• Work IQ enabled
• Same content works when attached directly to the agent

This behavior also seems consistent with what others have reported here:

• Markdown works when uploaded directly
• Markdown retrieval degrades when hosted in SharePoint libraries

Questions for the Product Team / Community

1. Are Markdown (.md) files in SharePoint document libraries officially supported as Copilot Studio knowledge sources today?
2. If yes, are there specific constraints (file size, rendering, parsing, indexing) that differ from Word/PDF?
3. If no (or “not yet”), is this a known limitation on the roadmap?
4. Is the recommended pattern to:
   • Convert important markdown files into .aspx pages, or
   • Use thin “index / summary” pages and keep markdown canonical until retrieval improves?

We’re happy to adapt our information architecture — just trying to align with the intended platform direction rather than work against it.

Thanks in advance for any guidance or clarification. This capability is extremely powerful, and clearer expectations here would help a lot of teams make the right design tradeoffs.