Azure · M-Hietala · Feb 2, 2026 · Feb 2, 2026 · Feb 3, 2026 · Feb 3, 2026
@@ -5,6 +5,7 @@
 ### Features Added
 
 * Tracing: included agent ID in response generation traces when available.
+* Tracing: Added support for opt-in trace context propagation.
 
 ### Breaking changes
 
@@ -23,6 +24,10 @@
 * Rename class `ItemParam` to `InputItem`.
 * Tracing: workflow actions in conversation item listings are now emitted as "gen_ai.conversation.item" events (with role="workflow") instead of "gen_ai.workflow.action" events in the list_conversation_items span.
 * Tracing: response generation span names changed from "responses {model_name}" to "chat {model_name}" for model calls and from "responses {agent_name}" to "invoke_agent {agent_name}" for agent calls.
+* Tracing: response generation operation names changed from "responses" to "chat" for model calls and from "responses" to "invoke_agent" for agent calls.
+* Tracing: response generation uses gen_ai.input.messages and gen_ai.output.messages attributes directly under the span instead of events.
+* Tracing: agent creation uses gen_ai.system.instructions attribute directly under the span instead of an event.
+* Tracing: "gen_ai.provider.name" attribute value changed to "microsoft.foundry".
 
 ## 2.0.0b3 (2026-01-06)
 

@@ -1017,11 +1017,52 @@ AIProjectInstrumentor().instrument()
 
 See the full sample in file `\agents\telemetry\sample_agent_basic_with_console_tracing.py` in the [Samples][samples] folder.
 
+### Enabling trace context propagation
+
+Trace context propagation allows client-side spans generated by the Projects SDK to be correlated with server-side spans from Azure OpenAI and other Azure services. When enabled, the SDK automatically injects W3C Trace Context headers (`traceparent` and `tracestate`) into HTTP requests made by OpenAI clients obtained via `get_openai_client()`.
+
+This feature ensures that all operations within a distributed trace share the same trace ID, providing end-to-end visibility across your application and Azure services in your observability backend (such as Azure Monitor).
+
+To enable trace context propagation, set the `AZURE_TRACING_GEN_AI_ENABLE_TRACE_CONTEXT_PROPAGATION` environment variable to `true`:
+
+If no value is provided for the `enable_trace_context_propagation` parameter with the AIProjectInstrumentor.instrument()` call and the environment variable is not set, trace context propagation defaults to `false` (opt-in).
+
+**Important Security and Privacy Considerations:**
+
+- **Trace IDs**: When trace context propagation is enabled, trace IDs are sent to Azure OpenAI and other external services.
+- **Request Correlation**: Trace IDs allow Azure services to correlate requests from the same session or user across multiple API calls, which may have privacy implications depending on your use case.
+- **Opt-in by Design**: This feature is disabled by default to give you explicit control over when trace context is propagated to external services.
+
+Only enable trace context propagation after carefully reviewing your observability, privacy and security requirements.
+
+#### Controlling baggage propagation
+
+When trace context propagation is enabled, you can separately control whether the baggage header is included. By default, only `traceparent` and `tracestate` headers are propagated. To also include the `baggage` header, set the `AZURE_TRACING_GEN_AI_TRACE_CONTEXT_PROPAGATION_INCLUDE_BAGGAGE` environment variable to `true`:
+
+If no value is provided for the `enable_baggage_propagation` parameter with the `AIProjectInstrumentor.instrument()` call and the environment variable is not set, the value defaults to `false` and baggage is not included.
+
+**Why is baggage propagation separate?**
+
+The baggage header can contain arbitrary key-value pairs added anywhere in your application's trace context. Unlike trace IDs (which are randomly generated identifiers), baggage may contain:
+- User identifiers or session information
+- Authentication tokens or credentials
+- Business-specific data or metadata
+- Personally identifiable information (PII)
+
+Baggage is automatically propagated through your entire application's call chain, meaning data added in one part of your application will be included in requests to Azure OpenAI unless explicitly controlled.
+
+**Important Security Considerations:**
+
+- **Review Baggage Contents**: Before enabling baggage propagation, audit what data your application (and any third-party libraries) adds to OpenTelemetry baggage.
+- **Sensitive Data Risk**: Baggage is sent to Azure OpenAI and may be logged or processed by Microsoft services. Never add sensitive information to baggage when baggage propagation is enabled.
+- **Opt-in by Design**: Baggage propagation is disabled by default (even when trace context propagation is enabled) to prevent accidental exposure of sensitive data.
+- **Minimal Propagation**: `traceparent` and `tracestate` headers are generally sufficient for distributed tracing. Only enable baggage propagation if your specific observability requirements demand it.
+
 ### Enabling content recording
 
 Content recording controls whether message contents and tool call related details, such as parameters and return values, are captured with the traces. This data may include sensitive user information.
 
-To enable content recording, set the `OTEL_INSTRUMENTATION_GENAI_CAPTURE_MESSAGE_CONTENT` environment variable to `true`. If the environment variable is not set, content recording defaults to `false`.
+To enable content recording, set the `OTEL_INSTRUMENTATION_GENAI_CAPTURE_MESSAGE_CONTENT` environment variable to `true`. If the environment variable is not set  and no value is provided with the `AIProjectInstrumentor().instrument()` call for the content recording parameter, content recording defaults to `false`.
 
 **Important:** The environment variable only controls content recording for built-in traces. When you use custom tracing decorators on your own functions, all parameters and return values are always traced.
 

@@ -2,5 +2,5 @@
   "AssetsRepo": "Azure/azure-sdk-assets",
   "AssetsRepoPrefixPath": "python",
   "TagPrefix": "python/ai/azure-ai-projects",
-  "Tag": "python/ai/azure-ai-projects_212aab4d9b"
+  "Tag": "python/ai/azure-ai-projects_92b666ecb8"
 }