Building API Plugins for Microsoft 365 Copilot from Your Existing APIs

One of the questions we get most often from enterprise clients is "how do we connect Copilot to our own systems?" Microsoft 365 Copilot is useful out of the box for email summaries and document drafting, but the real value comes when it can pull data from your internal systems. Budget tracking, project management, CRM lookups, inventory checks - the stuff your teams actually need during their work day.

The answer, at least for 2026, is API plugins. If you've already got a REST API with an OpenAPI specification, you're most of the way there. Microsoft's documentation on building API plugins from existing APIs walks through the technical steps, but here's the practical perspective on what this looks like in a real project.

What API Plugins Actually Are

An API plugin is surprisingly simple in concept. It's a ZIP file containing two things: your OpenAPI specification (the JSON or YAML file that describes your API's endpoints) and a plugin manifest that tells Copilot how to use those endpoints.

When a user asks Copilot a question that relates to your plugin's domain - say, "How much budget is left for the Sydney office renovation?" - Copilot matches that intent to one of your API operations, calls it, and presents the response in the conversation.

There's an important constraint worth noting upfront. API plugins only work as actions within declarative agents. They're not enabled directly in base Microsoft 365 Copilot. You need to create a declarative agent first, then attach your API plugin as an action. This trips up teams that expect to just drop a plugin into Copilot and have it work globally.

The Prerequisites in Practice

You need a few things lined up before you start.

An OpenAPI specification for your API. If you don't have one, you'll need to create it. Most modern API frameworks generate OpenAPI specs automatically - ASP.NET, FastAPI, NestJS, and Express with swagger-jsdoc all do this. If you're working with a legacy API that doesn't have a spec, that's your first task. Writing an OpenAPI spec by hand is tedious but not difficult.

The quality of your OpenAPI spec matters. This is something Microsoft's docs mention but undersell. Copilot uses the descriptions in your spec to understand what each endpoint does and when to call it. Vague or missing descriptions mean Copilot won't match user requests to the right operations. Spend time writing clear, specific descriptions for each endpoint and parameter.

Visual Studio Code with the Microsoft 365 Agents Toolkit. The Agents Toolkit (version 6.0 as of writing) handles the packaging and deployment. You could do this manually, but the toolkit automates the fiddly bits - generating the manifest, packaging the ZIP, and sideloading for testing.

A Microsoft 365 tenant with Copilot licensing and sideloading enabled. Your admin needs to have Custom App Upload and Copilot Access enabled. This is a governance gate that catches some teams off guard, especially in larger organisations where IT policies are restrictive.

Building the Plugin Step by Step

The actual process is more straightforward than you might expect.

Open VS Code, launch the Agents Toolkit, and select "Create a New Agent/App." Choose "Declarative Agent," then "Add an Action," and point it to your OpenAPI specification file.

The toolkit presents all the operations defined in your spec and lets you pick which ones to expose to Copilot. This is worth thinking about carefully. You don't need to expose everything. In fact, you probably shouldn't. Start with the read operations that answer common questions - "what's the status of X," "show me the details for Y." Leave the write operations (create, update, delete) for later once you've validated the pattern works.

The toolkit generates the required files - the plugin manifest, the agent configuration, and the project structure. You'll get an m365agents.yml file and an appPackage folder with the manifest.

One detail worth calling out: if your identity server requires PKCE (Proof Key for Code Exchange), you'll need to uncomment a line in the m365agents.yml file. The toolkit generates it as a comment by default. We hit this with a client running Azure AD B2C with PKCE enabled, and spent a frustrating hour wondering why auth was failing before finding that commented-out line.

Authentication Setup

Authentication is where most of the complexity lives. Your API presumably requires auth, and you need to configure how the plugin handles it.

You'll need an OAuth client ID and client secret for your API's auth registration. When you provision the plugin through the Agents Toolkit, it prompts for these credentials. The plugin then handles the OAuth flow - when a user first interacts with the plugin, they're prompted to sign in.

For APIs using Azure AD, this is relatively smooth. For APIs using other identity providers, you'll need to ensure they support the OAuth 2.0 authorisation code flow. The plugin framework doesn't support API keys or basic auth - it's OAuth or nothing.

We've found that getting the auth right usually takes more time than building the actual plugin. Test it thoroughly with different user accounts and permission levels before rolling it out.

Testing and Iteration

Once you've provisioned the plugin, you can test it in Microsoft Teams. Open Copilot in the Teams chat, find your agent in the agents list, and start asking questions.

The first few interactions are always enlightening. You'll quickly discover which of your API operations Copilot maps to correctly and which ones it struggles with. This is where the quality of your OpenAPI descriptions pays off. If Copilot keeps calling the wrong endpoint or missing the right one, revisit your operation descriptions.

Something we've learned from multiple deployments: the descriptions you write for humans and the descriptions that work well for Copilot are often different. Humans read context. Copilot needs explicit, literal descriptions of what each operation does and what kind of question it answers. Don't be clever. Be obvious.

What Works Well

Read-heavy use cases are solid. Asking Copilot questions that map to GET endpoints - retrieving records, checking statuses, listing items - works reliably. The natural language understanding is good enough that users can ask the same question in different ways and get the right result.

The development experience is genuinely fast. If you already have an API with a decent OpenAPI spec, you can have a working plugin in an afternoon. The Agents Toolkit does most of the heavy lifting.

Integration into the Teams workflow is natural. Users don't have to leave their chat to look up information. They ask the question in the same window where they're already having conversations. For operations teams and project managers who live in Teams, this removes real friction.

What's Still Rough

Write operations need careful handling. Letting Copilot create or modify records through your API is powerful but risky. Users sometimes phrase things ambiguously, and Copilot might call a create endpoint when the user was just asking a hypothetical question. Confirmation prompts help, but the UX around write actions still feels early.

Debugging is limited. When something goes wrong - Copilot calls the wrong endpoint or misinterprets a parameter - the debugging tools are thin. You end up adding logging to your API and correlating requests manually. There's no equivalent of the rich debugging you get in standard web development.

Discoverability is a challenge. Users need to know the plugin exists and actively select the agent in Copilot. There's no automatic routing where Copilot figures out it should use your plugin based on the question. This means change management and user training are part of the rollout, not just the technical deployment.

Response formatting is basic. Copilot returns API responses as text. If your API returns rich structured data, Copilot does its best to present it readably, but you don't have fine-grained control over the formatting. Adaptive cards help here but add another layer of complexity.

Our Recommendation

For Australian enterprises that have existing internal APIs, this is worth exploring. Start with a read-only plugin against one well-documented API that answers questions your team asks frequently. A budget tracker, a project status system, a customer lookup - pick something where the use case is obvious.

Get that working, test it with a small group of users, and iterate on the OpenAPI descriptions based on how people actually ask questions. Once you've validated the pattern, expand to more APIs and consider adding write operations with appropriate safeguards.

If you need help building Copilot plugins for your organisation, our Microsoft 365 Copilot extensibility team has been working on these integrations since the platform launched. We can also help with the broader AI strategy around how Copilot fits into your existing technology stack.

The extensibility story for Microsoft 365 Copilot is maturing quickly. API plugins aren't perfect yet, but they're practical enough for production use today - especially for the read-heavy use cases that make up the majority of what teams actually need.