The short answer
Yes. Rebuilt or re-downloaded automatically when needed.
What is it?
~/Library/Application Support/Code/CachedExtensionVSIXs holds copies of the .vsix packages VS Code downloaded when installing or updating extensions. Installed extensions themselves live in ~/.vscode/extensions. Typically tens to hundreds of MB.
What happens if you delete it?
VS Code downloads packages again when it next installs or updates an extension. Your installed extensions keep working.
How to remove it properly
Quit VS Code, then move the folder to the Trash in Finder (Go › Go to Folder… ~/Library/Application Support/Code/CachedExtensionVSIXs).
Quit the app that uses it, then move it to the Trash. Empty the Trash when you’re sure.
How MoreRoom helps
MoreRoom recognises this item, shows its real size and when it was last used, and labels it “Safe to remove”. In the free version you can move it to the Trash in one click, with Undo; Pro collects every safe item at once.
Frequently asked questions
Can I delete VS Code’s CachedExtensionVSIXs folder?
Yes. Rebuilt or re-downloaded automatically when needed. VS Code downloads packages again when it next installs or updates an extension. Your installed extensions keep working.
Will VS Code extension downloads come back after I delete it?
Yes. VS Code downloads packages again when it next installs or updates an extension. Your installed extensions keep working.
How do I remove VS Code extension downloads properly?
Quit VS Code, then move the folder to the Trash in Finder (Go › Go to Folder… ~/Library/Application Support/Code/CachedExtensionVSIXs).