DevContainers: cannot rebuild and reopen container ; devcontainer.json not found when file is located deeper than 1 subfolder (.devcontainer/myfolder1/myfolder2/devcontainer.json)

• VSCode Version: 1.79.2 (2023-06-14)
• Local OS Version: Ubuntu 22.04
• Remote OS Version: Ubuntu 22.04
• Remote Extension/Connection Type: Dev Containers

• Logs: /

The following works:

Can open devcontainer with the following paths:

• .devcontainer/devcontainer.json
• .devcontainer/myfolder1/devcontainer.json

The following breaks:

Steps to Reproduce:

Cannot open devcontainer with the following path:

• .devcontainer/myfolder1/myfolder2/devcontainer.json

Why does this need to work? (use case)

When working with multiple projects inside a repo you must split up everything by a clean folder structure.
First by project, then by development/production
Support for multiple devcontainers configs is a must! It works with 1 subfolder, why not multiple?

Examples:

• .devcontainer/project_a/dev/devcontainer.json
• .devcontainer/project_b/dev/devcontainer.json

There are also folders with "prod", no devcontainer.json files are there, only production containers:

Examples:

• .devcontainer/project_a/prod/docker-compose.yaml
• .devcontainer/project_a/prod/Dockerfile.ServiceA
• .devcontainer/project_a/prod/Dockerfile.ServiceB
• ...

Does this issue occur when you try this locally?: Yes
Does this issue occur when you try this locally and all extensions are disabled?: Yes, using dev containers extension

Start by reproducing the failure with .devcontainer/project_a/dev/devcontainer.json and compare it with the working one-level path .devcontainer/myfolder1/devcontainer.json. Trace how the Dev Containers extension discovers devcontainer.json files; done means nested configurations can be opened, rebuilt, and reopened successfully.