diff --git a/crates/oxc_language_server/src/main.rs b/crates/oxc_language_server/src/main.rs
index e6c2f24dcda06..4572f8efb8f9b 100644
--- a/crates/oxc_language_server/src/main.rs
+++ b/crates/oxc_language_server/src/main.rs
@@ -543,15 +543,15 @@ impl Backend {
         let Ok(root_path) = uri.to_file_path() else {
             return None;
         };
-        let mut config_path = None;
-        let config = root_path.join(self.options.lock().await.get_config_path().unwrap());
-        if config.exists() {
-            config_path = Some(config);
-        }
+        let relative_config_path = self.options.lock().await.get_config_path();
+        let oxlintrc = if relative_config_path.is_some() {
+            let config = root_path.join(relative_config_path.unwrap());
+            config.try_exists().expect("Invalid config file path");
+            Oxlintrc::from_file(&config).expect("Failed to initialize oxlintrc config")
+        } else {
+            Oxlintrc::default()
+        };
 
-        let config_path = config_path?;
-        let oxlintrc = Oxlintrc::from_file(&config_path)
-            .expect("should have initialized linter with new options");
         let config_store = ConfigStoreBuilder::from_oxlintrc(true, oxlintrc.clone())
             .expect("failed to build config")
             .build()
diff --git a/editors/vscode/client/Config.ts b/editors/vscode/client/Config.ts
index 917d8036bbbe3..3a6326f846664 100644
--- a/editors/vscode/client/Config.ts
+++ b/editors/vscode/client/Config.ts
@@ -10,6 +10,7 @@ export class Config implements ConfigInterface {
   private _trace!: TraceLevel;
   private _configPath!: string;
   private _binPath: string | undefined;
+  private _flags!: Record<string, string>;
 
   constructor() {
     this.refresh();
@@ -17,12 +18,15 @@ export class Config implements ConfigInterface {
 
   public refresh(): void {
     const conf = workspace.getConfiguration(Config._namespace);
+    const flags = conf.get<Record<string, string>>('flags') ?? {};
+    const useNestedConfigs = !('disable_nested_config' in flags);
 
     this._runTrigger = conf.get<Trigger>('lint.run') || 'onType';
     this._enable = conf.get<boolean>('enable') ?? true;
     this._trace = conf.get<TraceLevel>('trace.server') || 'off';
-    this._configPath = conf.get<string>('configPath') || oxlintConfigFileName;
+    this._configPath = conf.get<string>('configPath') || (useNestedConfigs ? '' : oxlintConfigFileName);
     this._binPath = conf.get<string>('path.server');
+    this._flags = flags;
   }
 
   get runTrigger(): Trigger {
@@ -80,11 +84,23 @@ export class Config implements ConfigInterface {
       .update('path.server', value);
   }
 
+  get flags(): Record<string, string> {
+    return this._flags;
+  }
+
+  updateFlags(value: Record<string, string>): PromiseLike<void> {
+    this._flags = value;
+    return workspace
+      .getConfiguration(Config._namespace)
+      .update('flags', value);
+  }
+
   public toLanguageServerConfig(): LanguageServerConfig {
     return {
       run: this.runTrigger,
       enable: this.enable,
       configPath: this.configPath,
+      flags: this.flags,
     };
   }
 }
@@ -93,6 +109,7 @@ interface LanguageServerConfig {
   configPath: string;
   enable: boolean;
   run: Trigger;
+  flags: Record<string, string>;
 }
 
 export type Trigger = 'onSave' | 'onType';
diff --git a/editors/vscode/client/config.spec.ts b/editors/vscode/client/config.spec.ts
index 4522361c86de0..f8be07976b6ac 100644
--- a/editors/vscode/client/config.spec.ts
+++ b/editors/vscode/client/config.spec.ts
@@ -1,11 +1,11 @@
-import { strictEqual } from 'assert';
+import { deepStrictEqual, strictEqual } from 'assert';
 import { workspace } from 'vscode';
 import { Config } from './Config.js';
 
 suite('Config', () => {
   setup(async () => {
     const wsConfig = workspace.getConfiguration('oxc');
-    const keys = ['lint.run', 'enable', 'trace.server', 'configPath', 'path.server'];
+    const keys = ['lint.run', 'enable', 'trace.server', 'configPath', 'path.server', 'flags'];
 
     await Promise.all(keys.map(key => wsConfig.update(key, undefined)));
   });
@@ -18,6 +18,29 @@ suite('Config', () => {
     strictEqual(config.trace, 'off');
     strictEqual(config.configPath, '.oxlintrc.json');
     strictEqual(config.binPath, '');
+    deepStrictEqual(config.flags, {});
+  });
+
+  test('configPath defaults to empty string when using nested configs and configPath is empty', async () => {
+    const wsConfig = workspace.getConfiguration('oxc');
+    await wsConfig.update('configPath', '');
+    await wsConfig.update('flags', {});
+
+    const config = new Config();
+
+    deepStrictEqual(config.flags, {});
+    strictEqual(config.configPath, '');
+  });
+
+  test('configPath defaults to .oxlintrc.json when not using nested configs and configPath is empty', async () => {
+    const wsConfig = workspace.getConfiguration('oxc');
+    await wsConfig.update('configPath', '');
+    await wsConfig.update('flags', { disable_nested_config: '' });
+
+    const config = new Config();
+
+    deepStrictEqual(config.flags, { disable_nested_config: '' });
+    strictEqual(config.configPath, '.oxlintrc.json');
   });
 
   test('updating values updates the workspace configuration', async () => {
@@ -29,6 +52,7 @@ suite('Config', () => {
       config.updateTrace('messages'),
       config.updateConfigPath('./somewhere'),
       config.updateBinPath('./binary'),
+      config.updateFlags({ test: 'value' }),
     ]);
 
     const wsConfig = workspace.getConfiguration('oxc');
@@ -38,5 +62,6 @@ suite('Config', () => {
     strictEqual(wsConfig.get('trace.server'), 'messages');
     strictEqual(wsConfig.get('configPath'), './somewhere');
     strictEqual(wsConfig.get('path.server'), './binary');
+    deepStrictEqual(wsConfig.get('flags'), { test: 'value' });
   });
 });
diff --git a/editors/vscode/client/extension.ts b/editors/vscode/client/extension.ts
index 026b57c5326e6..085cdd6c53217 100644
--- a/editors/vscode/client/extension.ts
+++ b/editors/vscode/client/extension.ts
@@ -7,11 +7,18 @@ import {
   StatusBarAlignment,
   StatusBarItem,
   ThemeColor,
+  Uri,
   window,
   workspace,
 } from 'vscode';
 
-import { ExecuteCommandRequest, MessageType, ShowMessageNotification } from 'vscode-languageclient';
+import {
+  DidChangeWatchedFilesNotification,
+  ExecuteCommandRequest,
+  FileChangeType,
+  MessageType,
+  ShowMessageNotification,
+} from 'vscode-languageclient';
 
 import { Executable, LanguageClient, LanguageClientOptions, ServerOptions } from 'vscode-languageclient/node';
 
@@ -231,7 +238,10 @@ export async function activate(context: ExtensionContext) {
     if (event.affectsConfiguration('oxc.configPath')) {
       client.clientOptions.synchronize = client.clientOptions.synchronize ?? {};
       client.clientOptions.synchronize.fileEvents = createFileEventWatchers(configService.config.configPath);
-      client.restart();
+      client.restart().then(async () => {
+        const configFiles = await findOxlintrcConfigFiles();
+        await sendDidChangeWatchedFilesNotificationWith(client, configFiles);
+      });
     }
   };
 
@@ -255,7 +265,10 @@ export async function activate(context: ExtensionContext) {
     myStatusBarItem.backgroundColor = bgColor;
   }
   updateStatsBar(configService.config.enable);
-  client.start();
+  await client.start();
+
+  const configFiles = await findOxlintrcConfigFiles();
+  await sendDidChangeWatchedFilesNotificationWith(client, configFiles);
 }
 
 export function deactivate(): Thenable<void> | undefined {
@@ -277,3 +290,15 @@ function createFileEventWatchers(configRelativePath: string) {
     }),
   ];
 }
+
+async function findOxlintrcConfigFiles() {
+  return workspace.findFiles(`**/${oxlintConfigFileName}`);
+}
+
+async function sendDidChangeWatchedFilesNotificationWith(languageClient: LanguageClient, files: Uri[]) {
+  await languageClient.sendNotification(DidChangeWatchedFilesNotification.type, {
+    changes: files.map(file => {
+      return { uri: file.toString(), type: FileChangeType.Created };
+    }),
+  });
+}
diff --git a/editors/vscode/package.json b/editors/vscode/package.json
index 81809d0fa0b40..0c3763dda2e73 100644
--- a/editors/vscode/package.json
+++ b/editors/vscode/package.json
@@ -104,6 +104,12 @@
           "type": "string",
           "scope": "window",
           "description": "Path to Oxc language server binary."
+        },
+        "oxc.flags": {
+          "type": "object",
+          "scope": "window",
+          "default": {},
+          "description": "Oxc options that would normally be passed when executing on the command line."
         }
       }
     },