They overlap a bit, but they’re optimized for different jobs. VSCode treats files mostly as code/project assets. It’s great when the folder structure maps to a repo, app, config, scripts, docs, etc. The editor is built around development: search, git, terminals, extensions, refactors, debugging. Obsidian treats files as a knowledge base. The files are still just Markdown in folders, but Obsidian adds things like backlinks, graph view, tags, embedded notes, daily notes, templates, and a writing/thinking workflow around them. So the simple version is: VSCode = best when the files are part of something you’re building. Obsidian = best when the files are part of something you’re understanding, documenting, or connecting. I use both on the same folder if it’s plain Markdown. I do think the difference becomes clearer once you start linking notes together in Obsidian instead of only organizing them by folders. Shorter Version They can use the same files, especially Markdown, but the mindset is different. VSCode is built around projects/code: git, terminal, search, debugging, extensions. Obsidian is built around knowledge, meaning backlinks, tags, graph view, templates, daily notes, and connecting ideas. So folders may look the same, but Obsidian gives you a layer for thinking and linking, while VSCode gives you a layer for building and editing projects.