For Microsoft Copilot file upload, .md is supported but .txt is not listed as a supported format. Supported text and markup formats are TXT, TEXT, JSON, CSV, MD, and files must be 50 MB or smaller, with up to 20 files per conversation.
If Copilot says it cannot read the file, use this check path:
- Confirm the file is under 50 MB.
- Try uploading the file again with Open (+) > Add images or files.
- Test with a simple supported file such as a small .md or .pdf file.
- If the file is from a local path in Microsoft 365 Copilot scenarios, move it to a supported uploaded or cloud-hosted location, because local paths are unsupported there.
- If the document is large or complex, split it into smaller files.
If the goal is to create a Word document from another file in Word with Copilot, file referencing in Word is available for users with a Microsoft 365 Copilot license, and the Reference a file option allows including up to three existing files. In Word, / plus the file name can also be used to reference a file.
Also note these Word limitations:
- Copilot in Word can help draft content in the currently open document.
- Edit with Copilot in Word cannot create new files.
- Integration with external tools is not supported.
If this is happening specifically in Word, the issue may be the file reference method, license availability for that feature, or the file itself. If this is happening in Microsoft Copilot chat, .md should upload if it meets the supported format and size requirements.