After fresh installation of Visual Studio Code I decided install Python extension, but faced with an error "Unable to open 'Extension: Python': XHR failed.".
I don't use proxy, but I use custom hosts file and firewall.
Process monitor shows that Visual Studio Code (code.exe) read the hosts file while starting, but when the file was empty the issues still exist.
I found nothing in Visual Studio Code logs "%AppData%\Code\logs".
Than I looked into Windows Firewall logs (which must first be turned on) and found the source of the issue - Firewall bloked connections to "68.232.34.200". After disabling relevant rules the issue is gone.
The 68.232.34.200 was blocked by rules that should prevent sending telemetry to Microsoft.
So, if you are faced with "XHR failed" issue, check network requirements, hosts file and firewall rules.
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