diff --git a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/chatAttachPromptAction.ts b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/chatAttachPromptAction.ts
index 70160fb882d..cf49066429a 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/chatAttachPromptAction.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/chatAttachPromptAction.ts
@@ -25,10 +25,10 @@ import { ISelectPromptOptions, askToSelectPrompt } from './dialogs/askToSelectPr
 /**
  * Action ID for the `Attach Prompt` action.
  */
-const ATTACH_PROMPT_ACTION_ID = 'workbench.action.chat.attach.prompt';
+const ATTACH_INSTRUCTIONS_ACTION_ID = 'workbench.action.chat.attach.instructions';
 
 /**
- * Options for the {@link AttachPromptAction} action.
+ * Options for the {@link AttachInstructionsAction} action.
  */
 export interface IChatAttachPromptActionOptions extends Pick<
 	ISelectPromptOptions, 'resource' | 'widget'
@@ -51,11 +51,11 @@ export interface IChatAttachPromptActionOptions extends Pick<
 /**
  * Action to attach a prompt to a chat widget input.
  */
-class AttachPromptAction extends Action2 {
+class AttachInstructionsAction extends Action2 {
 	constructor() {
 		super({
-			id: ATTACH_PROMPT_ACTION_ID,
-			title: localize2('workbench.action.chat.attach.prompt.label', "Use Prompt"),
+			id: ATTACH_INSTRUCTIONS_ACTION_ID,
+			title: localize2('workbench.action.chat.attach.instructions.label', "Attach Instructions"),
 			f1: false,
 			precondition: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled),
 			category: CHAT_CATEGORY,
@@ -100,10 +100,11 @@ class AttachPromptAction extends Action2 {
 		}
 
 		// find all prompt files in the user workspace
-		const promptFiles = await promptsService.listPromptFiles();
+		const promptFiles = await promptsService.listPromptFiles('instructions');
 
 		await askToSelectPrompt({
 			...options,
+			type: 'instructions',
 			promptFiles,
 			fileService,
 			viewsService,
@@ -118,7 +119,7 @@ class AttachPromptAction extends Action2 {
 
 /**
  * Runs the `Attach Prompt` action with provided options. We export this
- * function instead of {@link ATTACH_PROMPT_ACTION_ID} directly to
+ * function instead of {@link ATTACH_INSTRUCTIONS_ACTION_ID} directly to
  * encapsulate/enforce the correct options to be passed to the action.
  */
 export const runAttachPromptAction = async (
@@ -126,7 +127,7 @@ export const runAttachPromptAction = async (
 	commandService: ICommandService,
 ): Promise<void> => {
 	return await commandService.executeCommand(
-		ATTACH_PROMPT_ACTION_ID,
+		ATTACH_INSTRUCTIONS_ACTION_ID,
 		options,
 	);
 };
@@ -135,5 +136,5 @@ export const runAttachPromptAction = async (
  * Helper to register the `Attach Prompt` action.
  */
 export const registerAttachPromptActions = () => {
-	registerAction2(AttachPromptAction);
+	registerAction2(AttachInstructionsAction);
 };
diff --git a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/askToSelectPrompt.ts b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/askToSelectPrompt.ts
index 3a8868e1e5b..c4b96779717 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/askToSelectPrompt.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/askToSelectPrompt.ts
@@ -3,7 +3,7 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
-import { DOCS_OPTION } from './constants.js';
+import { PROMPT_DOCS_OPTION } from './constants.js';
 import { IChatWidget } from '../../../../chat.js';
 import { attachPrompt } from './utils/attachPrompt.js';
 import { handleButtonClick } from './utils/handleButtonClick.js';
@@ -13,7 +13,7 @@ import { createPromptPickItem } from './utils/createPromptPickItem.js';
 import { createPlaceholderText } from './utils/createPlaceholderText.js';
 import { extUri } from '../../../../../../../../base/common/resources.js';
 import { WithUriValue } from '../../../../../../../../base/common/types.js';
-import { IPromptPath } from '../../../../../common/promptSyntax/service/types.js';
+import { IPromptPath, TPromptsType } from '../../../../../common/promptSyntax/service/types.js';
 import { DisposableStore } from '../../../../../../../../base/common/lifecycle.js';
 import { IFileService } from '../../../../../../../../platform/files/common/files.js';
 import { ILabelService } from '../../../../../../../../platform/label/common/label.js';
@@ -48,6 +48,11 @@ export interface ISelectPromptOptions {
 	 */
 	readonly promptFiles: readonly IPromptPath[];
 
+	/**
+	 * Type of the prompt files to select.
+	 */
+	readonly type: TPromptsType;
+
 	readonly fileService: IFileService;
 	readonly labelService: ILabelService;
 	readonly viewsService: IViewsService;
@@ -66,7 +71,7 @@ export interface ISelectPromptOptions {
 export const askToSelectPrompt = async (
 	options: ISelectPromptOptions,
 ): Promise<void> => {
-	const { promptFiles, resource, quickInputService, labelService } = options;
+	const { promptFiles, resource, quickInputService, labelService, type } = options;
 
 	const fileOptions = promptFiles.map((promptFile) => {
 		return createPromptPickItem(promptFile, labelService);
@@ -75,7 +80,7 @@ export const askToSelectPrompt = async (
 	/**
 	 * Add a link to the documentation to the end of prompts list.
 	 */
-	fileOptions.push(DOCS_OPTION);
+	fileOptions.push(PROMPT_DOCS_OPTION);
 
 	// if a resource is provided, create an `activeItem` for it to pre-select
 	// it in the UI, and sort the list so the active item appears at the top
@@ -94,7 +99,8 @@ export const askToSelectPrompt = async (
 				uri: resource,
 				// "user" prompts are always registered in the prompts list, hence it
 				// should be safe to assume that `resource` is not "user" prompt here
-				type: 'local',
+				storage: 'local',
+				type,
 			}, labelService);
 			fileOptions.push(activeItem);
 		}
@@ -164,7 +170,7 @@ export const askToSelectPrompt = async (
 			const selectedOption = selectedItems[0];
 
 			// whether user selected the docs link option
-			const docsSelected = (selectedOption === DOCS_OPTION);
+			const docsSelected = (selectedOption === PROMPT_DOCS_OPTION);
 
 			// if documentation item was selected, open its link in a browser
 			if (docsSelected) {
diff --git a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/constants.ts b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/constants.ts
index a7b1de1c72d..70ab1ce6266 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/constants.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/constants.ts
@@ -8,7 +8,7 @@ import { URI } from '../../../../../../../../base/common/uri.js';
 import { Codicon } from '../../../../../../../../base/common/codicons.js';
 import { WithUriValue } from '../../../../../../../../base/common/types.js';
 import { ThemeIcon } from '../../../../../../../../base/common/themables.js';
-import { DOCUMENTATION_URL } from '../../../../../common/promptSyntax/constants.js';
+import { INSTRUCTIONS_DOCUMENTATION_URL, PROMPT_DOCUMENTATION_URL } from '../../../../../common/promptSyntax/constants.js';
 import { isLinux, isWindows } from '../../../../../../../../base/common/platform.js';
 import { IQuickInputButton, IQuickPickItem } from '../../../../../../../../platform/quickinput/common/quickInput.js';
 
@@ -25,15 +25,29 @@ export const ALT_KEY_NAME = (isWindows || isLinux) ? 'Alt' : '⌥';
 /**
  * A special quick pick item that links to the documentation.
  */
-export const DOCS_OPTION: WithUriValue<IQuickPickItem> = Object.freeze({
+export const PROMPT_DOCS_OPTION: WithUriValue<IQuickPickItem> = Object.freeze({
 	type: 'item',
 	label: localize(
 		'commands.prompts.use.select-dialog.docs-label',
 		'Learn how to create reusable prompts',
 	),
-	description: DOCUMENTATION_URL,
-	tooltip: DOCUMENTATION_URL,
-	value: URI.parse(DOCUMENTATION_URL),
+	description: PROMPT_DOCUMENTATION_URL,
+	tooltip: PROMPT_DOCUMENTATION_URL,
+	value: URI.parse(PROMPT_DOCUMENTATION_URL),
+});
+
+/**
+ * A special quick pick item that links to the documentation.
+ */
+export const INSTRUCTIONS_DOCS_OPTION: WithUriValue<IQuickPickItem> = Object.freeze({
+	type: 'item',
+	label: localize(
+		'commands.instructions.use.select-dialog.docs-label',
+		'Learn how to create custom instructions',
+	),
+	description: INSTRUCTIONS_DOCUMENTATION_URL,
+	tooltip: INSTRUCTIONS_DOCUMENTATION_URL,
+	value: URI.parse(INSTRUCTIONS_DOCUMENTATION_URL),
 });
 
 /**
diff --git a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/utils/createPromptPickItem.ts b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/utils/createPromptPickItem.ts
index 5203dddcd34..1f12bbf5cea 100644
--- a/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/utils/createPromptPickItem.ts
+++ b/src/vs/workbench/contrib/chat/browser/actions/reusablePromptActions/dialogs/askToSelectPrompt/utils/createPromptPickItem.ts
@@ -19,19 +19,19 @@ export const createPromptPickItem = (
 	promptFile: IPromptPath,
 	labelService: ILabelService,
 ): WithUriValue<IQuickPickItem> => {
-	const { uri, type } = promptFile;
+	const { uri, storage } = promptFile;
 	const fileWithoutExtension = getCleanPromptName(uri);
 
 	// if a "user" prompt, don't show its filesystem path in
 	// the user interface, but do that for all the "local" ones
-	const description = (type === 'user')
+	const description = (storage === 'user')
 		? localize(
 			'user-prompt.capitalized',
 			'User prompt',
 		)
 		: labelService.getUriLabel(dirname(uri), { relative: true });
 
-	const tooltip = (type === 'user')
+	const tooltip = (storage === 'user')
 		? description
 		: uri.fsPath;
 
diff --git a/src/vs/workbench/contrib/chat/browser/chat.contribution.ts b/src/vs/workbench/contrib/chat/browser/chat.contribution.ts
index 56220de100a..4084fff59f4 100644
--- a/src/vs/workbench/contrib/chat/browser/chat.contribution.ts
+++ b/src/vs/workbench/contrib/chat/browser/chat.contribution.ts
@@ -48,7 +48,7 @@ import { ILanguageModelIgnoredFilesService, LanguageModelIgnoredFilesService } f
 import { ILanguageModelsService, LanguageModelsService } from '../common/languageModels.js';
 import { ILanguageModelStatsService, LanguageModelStatsService } from '../common/languageModelStats.js';
 import { ILanguageModelToolsService } from '../common/languageModelToolsService.js';
-import { DOCUMENTATION_URL } from '../common/promptSyntax/constants.js';
+import { PROMPT_DOCUMENTATION_URL } from '../common/promptSyntax/constants.js';
 import { registerReusablePromptLanguageFeatures } from '../common/promptSyntax/languageFeatures/providers/index.js';
 import { PromptsService } from '../common/promptSyntax/service/promptsService.js';
 import { IPromptsService } from '../common/promptSyntax/service/types.js';
@@ -282,7 +282,7 @@ configurationRegistry.registerConfiguration({
 				'chat.reusablePrompts.config.enabled.description',
 				"Enable reusable prompt files (`*{0}`) in Chat, Edits, and Inline Chat sessions. [Learn More]({1}).",
 				PROMPT_FILE_EXTENSION,
-				DOCUMENTATION_URL,
+				PROMPT_DOCUMENTATION_URL,
 			),
 			default: true,
 			restricted: true,
@@ -306,7 +306,7 @@ configurationRegistry.registerConfiguration({
 				'chat.reusablePrompts.config.locations.description',
 				"Specify location(s) of reusable prompt files (`*{0}`) that can be attached in Chat, Edits, and Inline Chat sessions. [Learn More]({1}).\n\nRelative paths are resolved from the root folder(s) of your workspace.",
 				PROMPT_FILE_EXTENSION,
-				DOCUMENTATION_URL,
+				PROMPT_DOCUMENTATION_URL,
 			),
 			default: {
 				[PROMPT_FILES_DEFAULT_SOURCE_FOLDER]: true,
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/createPromptCommand.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/createPromptCommand.ts
index 2cde08cb946..ce9cd956fd3 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/createPromptCommand.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/createPromptCommand.ts
@@ -17,7 +17,7 @@ import { PromptsConfig } from '../../../../../../../platform/prompts/common/conf
 import { ICommandService } from '../../../../../../../platform/commands/common/commands.js';
 import { ContextKeyExpr } from '../../../../../../../platform/contextkey/common/contextkey.js';
 import { MenuId, MenuRegistry } from '../../../../../../../platform/actions/common/actions.js';
-import { IPromptPath, IPromptsService } from '../../../../common/promptSyntax/service/types.js';
+import { IPromptsService, TPromptsStorage, TPromptsType } from '../../../../common/promptSyntax/service/types.js';
 import { IQuickInputService } from '../../../../../../../platform/quickinput/common/quickInput.js';
 import { ServicesAccessor } from '../../../../../../../platform/instantiation/common/instantiation.js';
 import { IWorkspaceContextService } from '../../../../../../../platform/workspace/common/workspace.js';
@@ -26,37 +26,13 @@ import { IUserDataSyncEnablementService, SyncResource } from '../../../../../../
 import { KeybindingsRegistry, KeybindingWeight } from '../../../../../../../platform/keybinding/common/keybindingsRegistry.js';
 import { INotificationService, NeverShowAgainScope, Severity } from '../../../../../../../platform/notification/common/notification.js';
 
-/**
- * Base command ID prefix.
- */
-const BASE_COMMAND_ID = 'workbench.command.prompts.create';
-
-/**
- * Command ID for creating a 'local' prompt.
- */
-const LOCAL_COMMAND_ID = `${BASE_COMMAND_ID}.local`;
-
-/**
- * Command ID for creating a 'user' prompt.
- */
-const USER_COMMAND_ID = `${BASE_COMMAND_ID}.user`;
-
-/**
- * Title of the 'create local prompt' command.
- */
-const LOCAL_COMMAND_TITLE = localize('commands.prompts.create.title.local', "Create Prompt");
-
-/**
- * Title of the 'create user prompt' command.
- */
-const USER_COMMAND_TITLE = localize('commands.prompts.create.title.user', "Create User Prompt");
-
 /**
  * The command implementation.
  */
 const command = async (
 	accessor: ServicesAccessor,
-	type: IPromptPath['type'],
+	type: TPromptsType,
+	storage: TPromptsStorage
 ): Promise<void> => {
 	const logService = accessor.get(ILogService);
 	const fileService = accessor.get(IFileService);
@@ -69,13 +45,14 @@ const command = async (
 	const workspaceService = accessor.get(IWorkspaceContextService);
 	const userDataSyncEnablementService = accessor.get(IUserDataSyncEnablementService);
 
-	const fileName = await askForPromptName(type, quickInputService);
+	const fileName = await askForPromptName(storage, quickInputService);
 	if (!fileName) {
 		return;
 	}
 
 	const selectedFolder = await askForPromptSourceFolder({
 		type: type,
+		storage: storage,
 		labelService,
 		openerService,
 		promptsService,
@@ -101,7 +78,7 @@ const command = async (
 
 	await openerService.open(promptUri);
 
-	if (type !== 'user') {
+	if (storage !== 'user') {
 		return;
 	}
 
@@ -148,55 +125,33 @@ const command = async (
 	);
 };
 
-/**
- * Factory for creating the command handler with specific prompt `type`.
- */
-const commandFactory = (type: 'local' | 'user') => {
-	return async (accessor: ServicesAccessor): Promise<void> => {
-		return command(accessor, type);
-	};
-};
+function register(type: TPromptsType, storage: TPromptsStorage, id: string, title: string) {
+	/**
+	 * Register the command.
+	 */
+	KeybindingsRegistry.registerCommandAndKeybindingRule({
+		id,
+		weight: KeybindingWeight.WorkbenchContrib,
+		handler: async (accessor: ServicesAccessor): Promise<void> => {
+			return command(accessor, type, storage);
+		},
+		when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled),
+	});
 
-/**
- * Register the "Create Prompt" command.
- */
-KeybindingsRegistry.registerCommandAndKeybindingRule({
-	id: LOCAL_COMMAND_ID,
-	weight: KeybindingWeight.WorkbenchContrib,
-	handler: commandFactory('local'),
-	when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled),
-});
+	/**
+	 * Register the command in the command palette.
+	 */
+	MenuRegistry.appendMenuItem(MenuId.CommandPalette, {
+		command: {
+			id,
+			title,
+			category: CHAT_CATEGORY
+		},
+		when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled)
+	});
+}
 
-/**
- * Register the "Create User Prompt" command.
- */
-KeybindingsRegistry.registerCommandAndKeybindingRule({
-	id: USER_COMMAND_ID,
-	weight: KeybindingWeight.WorkbenchContrib,
-	handler: commandFactory('user'),
-	when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled),
-});
-
-/**
- * Register the "Create Prompt" command in the command palette.
- */
-MenuRegistry.appendMenuItem(MenuId.CommandPalette, {
-	command: {
-		id: LOCAL_COMMAND_ID,
-		title: LOCAL_COMMAND_TITLE,
-		category: CHAT_CATEGORY
-	},
-	when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled)
-});
-
-/**
- * Register the "Create User Prompt" command in the command palette.
- */
-MenuRegistry.appendMenuItem(MenuId.CommandPalette, {
-	command: {
-		id: USER_COMMAND_ID,
-		title: USER_COMMAND_TITLE,
-		category: CHAT_CATEGORY,
-	},
-	when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled)
-});
+register('instructions', 'local', 'workbench.command.instructions.create.local', localize('commands.instructions.create.title.local', "Create Instructions File"));
+register('instructions', 'user', 'workbench.command.instructions.create.user', localize('commands.instructions.create.title.user', "Create User Instructions File"));
+register('prompt', 'local', 'workbench.command.prompts.create.local', localize('commands.prompts.create.title.local', "Create Prompt File"));
+register('prompt', 'user', 'workbench.command.prompts.create.user', localize('commands.prompts.create.title.user', "Create User Prompt File"));
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/dialogs/askForPromptSourceFolder.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/dialogs/askForPromptSourceFolder.ts
index 2f446a81472..9a11c1c99d7 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/dialogs/askForPromptSourceFolder.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/createPromptCommand/dialogs/askForPromptSourceFolder.ts
@@ -6,9 +6,9 @@
 import { localize } from '../../../../../../../../nls.js';
 import { URI } from '../../../../../../../../base/common/uri.js';
 import { WithUriValue } from '../../../../../../../../base/common/types.js';
-import { DOCUMENTATION_URL } from '../../../../../common/promptSyntax/constants.js';
+import { PROMPT_DOCUMENTATION_URL } from '../../../../../common/promptSyntax/constants.js';
 import { basename, extUri } from '../../../../../../../../base/common/resources.js';
-import { IPromptsService } from '../../../../../common/promptSyntax/service/types.js';
+import { IPromptsService, TPromptsStorage, TPromptsType } from '../../../../../common/promptSyntax/service/types.js';
 import { ILabelService } from '../../../../../../../../platform/label/common/label.js';
 import { IOpenerService } from '../../../../../../../../platform/opener/common/opener.js';
 import { IWorkspaceContextService } from '../../../../../../../../platform/workspace/common/workspace.js';
@@ -18,10 +18,9 @@ import { IPickOptions, IQuickInputService, IQuickPickItem } from '../../../../..
  * Options for {@link askForPromptSourceFolder} dialog.
  */
 interface IAskForFolderOptions {
-	/**
-	 * Prompt type.
-	 */
-	readonly type: 'local' | 'user';
+
+	readonly type: TPromptsType;
+	readonly storage: TPromptsStorage;
 
 	readonly labelService: ILabelService;
 	readonly openerService: IOpenerService;
@@ -37,10 +36,10 @@ interface IAskForFolderOptions {
 export const askForPromptSourceFolder = async (
 	options: IAskForFolderOptions,
 ): Promise<URI | undefined> => {
-	const { type, promptsService, quickInputService, labelService, openerService, workspaceService } = options;
+	const { storage, type, promptsService, quickInputService, labelService, openerService, workspaceService } = options;
 
 	// get prompts source folders based on the prompt type
-	const folders = promptsService.getSourceFolders(type);
+	const folders = promptsService.getSourceFolders(type, storage);
 
 	// if no source folders found, show 'learn more' dialog
 	// note! this is a temporary solution and must be replaced with a dialog to select
@@ -122,9 +121,9 @@ const showNoFoldersDialog = async (
 			'commands.prompts.create.ask-folder.empty.docs-label',
 			'Learn how to configure reusable prompts',
 		),
-		description: DOCUMENTATION_URL,
-		tooltip: DOCUMENTATION_URL,
-		value: URI.parse(DOCUMENTATION_URL),
+		description: PROMPT_DOCUMENTATION_URL,
+		tooltip: PROMPT_DOCUMENTATION_URL,
+		value: URI.parse(PROMPT_DOCUMENTATION_URL),
 	};
 
 	const result = await quickInputService.pick(
diff --git a/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/usePromptCommand.ts b/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/usePromptCommand.ts
index 88721eb9795..a1674948e4e 100644
--- a/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/usePromptCommand.ts
+++ b/src/vs/workbench/contrib/chat/browser/promptSyntax/contributions/usePromptCommand.ts
@@ -22,19 +22,19 @@ import { IActiveCodeEditor, isCodeEditor, isDiffEditor } from '../../../../../..
 import { KeybindingsRegistry, KeybindingWeight } from '../../../../../../platform/keybinding/common/keybindingsRegistry.js';
 
 /**
- * Command ID of the "Use Prompt" command.
+ * Command ID of the "Use Instructions" command.
  */
-export const COMMAND_ID = 'workbench.command.prompts.use';
+export const COMMAND_ID = 'workbench.command.instructions.use';
 
 /**
- * Keybinding of the "Use Prompt" command.
+ * Keybinding of the "Use Instructions" command.
  * The `cmd + /` is the current keybinding for 'attachment', so we use
- * the `alt` key modifier to convey the "prompt attachment" action.
+ * the `alt` key modifier to convey the "instructions attachment" action.
  */
 const COMMAND_KEY_BINDING = KeyMod.CtrlCmd | KeyCode.Slash | KeyMod.Alt;
 
 /**
- * Implementation of the "Use Prompt" command. The command works in the following way.
+ * Implementation of the "Use Instructions" command. The command works in the following way.
  *
  * When executed, it tries to see if a `prompt file` was open in the active code editor
  * (see {@link IChatAttachPromptActionOptions.resource resource}), and if a chat input
@@ -139,12 +139,12 @@ KeybindingsRegistry.registerCommandAndKeybindingRule({
 });
 
 /**
- * Register the "Use Prompt" command in the `command palette`.
+ * Register the "Use Instructions" command in the `command palette`.
  */
 MenuRegistry.appendMenuItem(MenuId.CommandPalette, {
 	command: {
 		id: COMMAND_ID,
-		title: localize('commands.prompts.use.title', "Use Prompt"),
+		title: localize('commands.prompts.use.title', "Use Instructions"),
 		category: CHAT_CATEGORY
 	},
 	when: ContextKeyExpr.and(PromptsConfig.enabledCtx, ChatContextKeys.enabled)
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/constants.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/constants.ts
index 0f25d3da6e6..f3a390da4ae 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/constants.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/constants.ts
@@ -8,7 +8,8 @@ import { LanguageFilter } from '../../../../../editor/common/languageSelector.js
 /**
  * Documentation link for the reusable prompts feature.
  */
-export const DOCUMENTATION_URL = 'https://aka.ms/vscode-ghcp-prompt-snippets';
+export const PROMPT_DOCUMENTATION_URL = 'https://aka.ms/vscode-ghcp-prompt-snippets';
+export const INSTRUCTIONS_DOCUMENTATION_URL = PROMPT_DOCUMENTATION_URL; // TODO: instructions specific link
 
 /**
  * Language ID for the reusable prompt syntax.
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsService.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsService.ts
index 000bc70a9c9..1907980c2ed 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsService.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/service/promptsService.ts
@@ -3,7 +3,7 @@
  *  Licensed under the MIT License. See License.txt in the project root for license information.
  *--------------------------------------------------------------------------------------------*/
 
-import { IPromptPath, IPromptsService } from './types.js';
+import { IPromptPath, IPromptsService, TPromptsStorage, TPromptsType } from './types.js';
 import { URI } from '../../../../../../base/common/uri.js';
 import { assert } from '../../../../../../base/common/assert.js';
 import { PromptFilesLocator } from '../utils/promptFilesLocator.js';
@@ -83,34 +83,35 @@ export class PromptsService extends Disposable implements IPromptsService {
 		return this.cache.get(model);
 	}
 
-	public async listPromptFiles(): Promise<readonly IPromptPath[]> {
+	public async listPromptFiles(type: TPromptsType): Promise<readonly IPromptPath[]> {
 		const userLocations = [this.userDataService.currentProfile.promptsHome];
 
 		const prompts = await Promise.all([
 			this.fileLocator.listFilesIn(userLocations)
-				.then(withType('user')),
+				.then(withType('user', type)),
 			this.fileLocator.listFiles()
-				.then(withType('local')),
+				.then(withType('local', type)),
 		]);
 
 		return prompts.flat();
 	}
 
 	public getSourceFolders(
-		type: IPromptPath['type'],
+		type: TPromptsType,
+		storage: TPromptsStorage,
 	): readonly IPromptPath[] {
 		// sanity check to make sure we don't miss a new
 		// prompt type that could be added in the future
 		assert(
-			type === 'local' || type === 'user',
-			`Unknown prompt type '${type}'.`,
+			storage === 'local' || storage === 'user',
+			`Unknown prompt storage '${storage}'.`,
 		);
 
-		const prompts = (type === 'user')
+		const prompts = (storage === 'user')
 			? [this.userDataService.currentProfile.promptsHome]
 			: this.fileLocator.getConfigBasedSourceFolders();
 
-		return prompts.map(addType(type));
+		return prompts.map(addType(storage, type));
 	}
 }
 
@@ -118,10 +119,11 @@ export class PromptsService extends Disposable implements IPromptsService {
  * Utility to add a provided prompt `type` to a prompt URI.
  */
 const addType = (
-	type: 'local' | 'user',
+	storage: TPromptsStorage,
+	type: TPromptsType,
 ): (uri: URI) => IPromptPath => {
 	return (uri) => {
-		return { uri, type: type };
+		return { uri, storage, type };
 	};
 };
 
@@ -129,10 +131,11 @@ const addType = (
  * Utility to add a provided prompt `type` to a list of prompt URIs.
  */
 const withType = (
-	type: 'local' | 'user',
+	storage: TPromptsStorage,
+	type: TPromptsType,
 ): (uris: readonly URI[]) => (readonly IPromptPath[]) => {
 	return (uris) => {
 		return uris
-			.map(addType(type));
+			.map(addType(storage, type));
 	};
 };
diff --git a/src/vs/workbench/contrib/chat/common/promptSyntax/service/types.ts b/src/vs/workbench/contrib/chat/common/promptSyntax/service/types.ts
index ca6bec78b6d..50d89b00249 100644
--- a/src/vs/workbench/contrib/chat/common/promptSyntax/service/types.ts
+++ b/src/vs/workbench/contrib/chat/common/promptSyntax/service/types.ts
@@ -15,11 +15,14 @@ import { createDecorator } from '../../../../../../platform/instantiation/common
 export const IPromptsService = createDecorator<IPromptsService>('IPromptsService');
 
 /**
-* Supported prompt types.
-*  - `local` means the prompt is a local file.
-*  - `user` means a "roam-able" prompt file (similar to snippets).
-*/
-type TPromptsType = 'local' | 'user';
+ * Where the prompt is stored.
+ */
+export type TPromptsStorage = 'local' | 'user';
+
+/**
+ * What the prompt is used for.
+ */
+export type TPromptsType = 'instructions' | 'prompt';
 
 /**
  * Represents a prompt path with its type.
@@ -32,11 +35,17 @@ export interface IPromptPath {
 	readonly uri: URI;
 
 	/**
-	 * Type of the prompt.
+	 * Storage of the prompt.
+	 */
+	readonly storage: TPromptsStorage;
+
+	/**
+	 * Type
 	 */
 	readonly type: TPromptsType;
 }
 
+
 /**
  * Provides prompt services.
  */
@@ -54,12 +63,12 @@ export interface IPromptsService extends IDisposable {
 	/**
 	 * List all available prompt files.
 	 */
-	listPromptFiles(): Promise<readonly IPromptPath[]>;
+	listPromptFiles(type: TPromptsType): Promise<readonly IPromptPath[]>;
 
 	/**
-	 * Get a list of prompt source folders based on the provided prompt type.
+	 * Get a list of prompt source folders based on the provided prompt type and storage.
 	 */
-	getSourceFolders(type: TPromptsType): readonly IPromptPath[];
+	getSourceFolders(type: TPromptsType, storage: TPromptsStorage): readonly IPromptPath[];
 }
 
 /**