SharePoint Folder Not Working as Knowledge Source in M365 Copilot Agent Builder (Files Work Fine)

(1) Share

Report

Posted on by CU19070608-0

Hi everyone,

I’m experiencing an issue with SharePoint folder-based knowledge sources in Microsoft 365 Copilot Agent Builder.
Scenario:

I added a SharePoint folder URL (document library subfolder) as a knowledge source in the agent.
The agent is unable to retrieve any information from that folder and typically responds with:

“This information is not available in the current project documents.”

However:

When I add individual files from the same folder, the agent works perfectly and retrieves the expected answers.

Additional Context:

The files inside the folder are:

Accessible to me (permissions are correct)
Text-based documents (Word/PDF)

“Only use specified sources” is enabled
The folder is part of a standard SharePoint document library

🔹 Questions:

Is SharePoint folder-level support still fully supported as a knowledge source in M365 Copilot Agent Builder?
Does the agent rely on Microsoft Search indexing for folder content discovery, and could indexing delays or scope affect this behaviour?
Are there any known limitations or best practices when using folder URLs (e.g., avoiding nested folders, using site/library-level URLs instead)?
Is it recommended to use individual files or entire libraries/sites instead of folders for reliable retrieval?

🔹 Expected Behaviour:
The agent should be able to retrieve and answer based on documents within the selected folder, similar to how it behaves when individual files are added.

🔹 Current Behaviour:

Folder → ❌ No retrieval
Files from same folder → ✅ Works correctly

Any insights or official guidance would be greatly appreciated.
Thanks!

Categories:

Building Copilot Studio chatbots in Microsoft Teams

I have the same question (0)

All responses (3)

Answers (0)

Sort by

Suggested answer

Valantis 6,735 on at

Like
a
(1)

Report
Copy link

Link copied!

Hi @CU19070608-0,

There are two confirmed reasons why folders fail while individual files work.

1. URL format restriction: Microsoft docs confirm SharePoint links added via URL must be "two levels deep and without query parameters." If your folder URL is deeply nested (e.g. /sites/site/library/folder1/subfolder), the agent may not index it correctly. Try pointing to the library root or a top-level folder instead.

2. Microsoft Search indexing dependency: folder-level knowledge sources rely on Microsoft Search indexing to discover the contents. Individual files bypass this since they're directly referenced. If the folder content isn't fully indexed in Microsoft Search, the agent returns nothing. This explains why files from the same folder work but the folder URL doesn't.

To fix:

- Try using the Browse option (Attach cloud files picker) instead of entering the URL directly. This uses a different resolution path.
- Remove the folder knowledge source, wait 10 minutes, and re-add it
- Use the SharePoint site or library URL instead of the subfolder URL then enable Work IQ (Settings > Generative AI > Work IQ) which Microsoft confirms "provides better knowledge retrieval and response quality" for SharePoint knowledge sources

- If Work IQ is enabled, SharePoint folder retrieval is significantly more reliable

Ref: https://learn.microsoft.com/en-us/microsoft-365/copilot/extensibility/agent-builder-add-knowledge

Best regards,

Valantis

✅ If this helped solve your issue, please Accept as Solution so others can find it quickly.

❤️ If it didn’t fully solve it but was still useful, please click “Yes” on “Was this reply helpful?” or leave a Like :).

🏷️ For follow-ups @Valantis.

📝 https://valantisond365.com/

💼 LinkedIn

▶️ YouTube

Was this reply helpful? Yes No
Suggested answer

11manish 3,333 on at

Like
a
(0)

Report
Copy link

Link copied!
I would treat this as either:

A current limitation of folder-based knowledge sources, or

A Microsoft Search indexing/scope issue.

For production scenarios, I would recommend:

Document Library or Individual Files

instead of relying on specific SharePoint folder URLs.

If folder-level retrieval is business critical, I would also recommend opening a Microsoft support case, as there have been multiple reports of inconsistent

behavior with SharePoint folder knowledge sources in Microsoft 365 Copilot Agent Builder.

Was this reply helpful? Yes No
Suggested answer

RaghavMishra 261 on at

Like
a
(0)

Report
Copy link

Link copied!
Hi there,

Good, well-structured question - this is almost always down to how the folder is added rather than a folder-level feature being unsupported. Let me take your questions in order.

1. Is folder-level support still supported?

Yes. The documentation explicitly lists SharePoint files, folders, and sites as supported knowledge sources, so folders are a valid choice - the behavior you're seeing is a configuration/resolution issue rather than a removed capability.

2. The most likely cause - how the folder URL was added

When you add a SharePoint source with the Enter URL method, the link must be "two levels deep and without query parameters." A deeply nested subfolder URL (or one carrying query parameters) won't resolve correctly, which fits your symptom exactly - the folder yields nothing, but a directly attached file works because it bypasses that URL resolution.

The fix: add the folder using Browse (the Attach cloud files picker) instead of pasting the URL. The picker lets you select SharePoint files or folders directly and isn't subject to the URL-format restriction.

3. A second cause worth checking - Restricted SharePoint Search

If Restricted SharePoint Search is enabled in your tenant, SharePoint can't be used as a knowledge source. That's a common, easy-to-miss reason a folder returns nothing while an individually attached file still works, so it's worth confirming with your admin.

4. Limits and best practices

A few documented points that help reliability: you can select up to 100 SharePoint files per agent; the agent respects existing permissions and sensitivity labels; and it can only reason over specific supported file types, so make sure everything in the folder is a supported type. Keeping documents concise also improves retrieval quality.

So, files vs. folders vs. sites?

Folders are fine to use - just add them through Browse rather than a nested URL. If you want broader coverage, a site or library URL (kept to the two-levels rule) also works, since the agent searches the URL and its subpaths. Individual files remain the most predictable option when you only need a handful of documents.

References:

Add knowledge sources to your declarative agent in Microsoft 365 Copilot

Found this helpful? Please mark ✅ "Does this answer your question?" so others searching for the same issue can find it quickly. A 👍 on "Was this reply helpful?" or a ♥ Like is also much appreciated!

Raghav Mishra - LinkedIn | PowerAI Labs

Was this reply helpful? Yes No