How Are Copilot Chat and Microsoft 365 Copilot Different?

Updated as of September 2026

Microsoft has been making moves lately, and after some backlash with their Copilot product, they've been steadily updating Microsoft Copilot in 2026. What started as a chatbot has morphed into a family of AI tools that help users research and draft content as well as build custom agents you can use to automate those pesky repetitive tasks. Today, we're all very aware of what AI is. What we're discovering is which AI experience makes the most sense for our respective business. As of 2026, Microsoft now offers multiple Copilot experiences, including Copilot Chat and M365 Copilot. There are 2 major differences built into Copilot tiers with varying complexities like cost and knowledge bases. We're here to clear up those blurry little lines. (Deep breath). Let's dig in. 

Featured in this article:

1. What is Basic Copilot and Copilot Chat? How are They Different? 
2. Chart Breakdown: Copilot Chat With and Without an Add-On License
3. Microsoft 365 Copilot License: What You Get and How It's Changed
4. What About Copilot Studio? Where Does That Fit In?
5. Still Scratching Your Head? Contact Us for More Information

What's The Key Difference between Copilot and Microsoft m365 Copilot?

Copilot Chat Is Included with Most M365 Subscriptions

Just after ChatGPT launched in 2022, Microsoft introduced Bing Chat, but in March 2023 rebranded it as Copilot, and as of late 2025, Copilot is now deeply integrated into Microsoft 365 apps like Word, Excel, PowerPoint, and Teams, powered by its Work IQ intelligence layer.

Over the past year, Microsoft's has focus on making Copilot Chat the starting point for businesses adopting AI. Eligible Microsoft 365 users can access secure AI chat with enterprise protections, GPT-5-powered reasoning, file uploads, image generation, and web-grounded responses without purchasing a separate Microsoft 365 Copilot license. Microsoft positions Copilot Chat as a secure AI assistant for everyday work.

The distinction between Chat versions and licensed versions comes down to where the AI gets its information. Copilot Chat primarily works with information from the web and any files users upload during a conversation. Access to Microsoft Graph data allows Microsoft 365 Copilot to reference emails, meetings, Teams conversations, calendars, and documents while respecting existing permissions and security controls.

Main Takeaways:

• Basic Copilot Chat is free. As long as you have a Microsoft account, you can access basic Copilot at no extra cost.
• Enterprise accounts unlock Copilot Chat. Enterprise users receive additional capabilities beyond the free Copilot LLM, similar to how ChatGPT Plus expands on the free tier.
• Licensed Microsoft 365 Copilot goes further with Microsoft Graph and Work IQ grounding and is the most expensive. More on that below.
• Responses in Copilot Chat are primarily grounded in web content and uploaded files rather than organizational data.
• Knowledge-bases differ by tier. Free Copilot uses GPT‑5 and Bing for internet access, while Copilot Chat combines internet access with user-uploaded attachments.
• Copilot Studio enables custom assistants. Microsoft introduced Copilot Studio in 2025, letting licensed users create personalized assistants within their account . This, however, if only available to licensed members with either a pay-as-you-go version on Copilot Chat or full access with a  M365 Copilot license.
  
  

WARNING: As always, consider the security measures you have in place before using ANY artificial intelligence. Microsoft equips all tiers  with enterprise level security, but since Copilot functions as a LLM and largely the input of humans, be careful what information you give it to work with. 

(click on table above to go to the Microsoft Support page)

Microsoft 365 Copilot is a Licensed Integration Into Your M365 Applications

Microsoft launched its licensed Copilot integration in November 2023, later expanding access to educational staff and introducing Pro accounts in early 2024. However, in 2025, Microsoft discontinued Copilot Pro as a standalone subscription and bundled all advanced AI features into Microsoft 365 Premium, which now includes Copilot capabilities across Word, Excel, PowerPoint, Outlook, and Teams.  Copilot for Microsoft 365 also introduced features such as AI-powered video creation, centralized content libraries, and scheduled prompts to automate routine tasks, making it the most intelligent way to streamline work. 

Main Takeaways

Here are a couple specifics on how Microsoft 365 Copilot is different from basic Copilot and Copilot Chat accounts:

• Microsoft 365 Copilot is a separate add-on license that extends AI capabilities across Microsoft 365 applications including Word, Excel, PowerPoint, Outlook, and Teams.
• Pricing now includes SMB discounts and flexible billing. The standard price is still $30 per user per month (annual term), but as of December 2025, small and mid-sized businesses (under 300 employees) pay $21 per user per month. 
• M365 Copilot builds on Microsoft Graph and Work IQ. Copilot leverages organizational data like emails, documents, and chats, via Microsoft Graph, and now uses Work IQ, an intelligence layer that adds memory and context-awareness for personalized outputs.
• It has different "modes" you're working in. The “Work” mode accesses internal Microsoft Graph data, while the “Web” mode pulls from the internet for external research. Work mode applies enterprise-grade security and compliance controls, making it ideal for sensitive information.
• You'll also have access to Copilot Studio for creating your own assistants at no additional cost. 

WARNING: Be careful of who you've given access to your licensed Microsoft 365 Copilot. Especially your Microsoft Graph. Make sure you have clear guidelines in place noting who has access to what and when. Copilot for Microsoft 365 is secure, but make sure you're only allowing trusted individuals to access it.

What About Copilot Studio? What do agents do?

Standard AI chats answer questions and respond to prompts. Agents go a step further by helping complete workflows and carrying out tasks you don't have time for. Microsoft's recent investments focus on helping organizations use AI beyond content creation and into day-to-day operations.

For example, a support agent could answer common employee questions. A project management agent could gather updates from multiple teams. A sales agent could review customer interactions and prepare account summaries before meetings. Rather than starting every interaction with a new prompt, employees work with assistants built around specific roles and functions.

Copilot Studio lets you build these experiences using low-code tools. Depending on licensing and configuration, agents can work with web-based information or internal organizational data, depending on it there are specialized processes.

Agents Will Become the Future of AI Interactions

• Repetitive business processes are automated.
• Department-specific knowledge is easier to access.
• Your information becomes more useful when connected to business workflows.
• Expertise is distributed across teams without requiring direct access to SMEs.
• Microsoft's AI roadmap places a heavy emphasis on agent development and adoption.

Still need help? Let us know. 

There is a lot we can still learn about Copilot and Copilot integrations. But Centre Technologies is experienced with helping businesses figure out if either one of those solutions fits your goals. 

If you need help understanding or want to license Copilot for 365, let us know. Even if you just want to know about how to use it, contact us today and get all your questions answered. We're here for you 24x7. 

To learn more about how AI and Managed Services can impact your business, check it our on the website.