diff --git a/extensions/vscode-api-tests/src/singlefolder-tests/terminal.test.ts b/extensions/vscode-api-tests/src/singlefolder-tests/terminal.test.ts
index df71e4f6b62..c8c01392dce 100644
--- a/extensions/vscode-api-tests/src/singlefolder-tests/terminal.test.ts
+++ b/extensions/vscode-api-tests/src/singlefolder-tests/terminal.test.ts
@@ -25,6 +25,8 @@ import { assertNoRpc } from '../utils';
 		await config.update('showExitAlert', false, ConfigurationTarget.Global);
 		// Canvas may cause problems when running in a container
 		await config.update('rendererType', 'dom', ConfigurationTarget.Global);
+		// Disable env var relaunch for tests to prevent terminals relaunching themselves
+		await config.update('environmentChangesRelaunch', false, ConfigurationTarget.Global);
 	});
 
 	suite('Terminal', () => {
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
index c782675bc61..f5e2c96180b 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
@@ -1566,7 +1566,15 @@ export class TerminalInstance extends Disposable implements ITerminalInstance {
 
 		// Recreate the process if the terminal has not yet been interacted with and it's not a
 		// special terminal (eg. task, extension terminal)
-		if (info.requiresAction && !this._processManager.hasWrittenData && !this._shellLaunchConfig.isFeatureTerminal && !this._shellLaunchConfig.isExtensionCustomPtyTerminal && !this._shellLaunchConfig.isExtensionOwnedTerminal && !this._shellLaunchConfig.attachPersistentProcess) {
+		if (
+			info.requiresAction &&
+			this._configHelper.config.environmentChangesRelaunch &&
+			!this._processManager.hasWrittenData &&
+			!this._shellLaunchConfig.isFeatureTerminal &&
+			!this._shellLaunchConfig.isExtensionCustomPtyTerminal
+			&& !this._shellLaunchConfig.isExtensionOwnedTerminal &&
+			!this._shellLaunchConfig.attachPersistentProcess
+		) {
 			this.relaunch();
 			return;
 		}
diff --git a/src/vs/workbench/contrib/terminal/common/terminal.ts b/src/vs/workbench/contrib/terminal/common/terminal.ts
index dff256e9500..004f39ba065 100644
--- a/src/vs/workbench/contrib/terminal/common/terminal.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminal.ts
@@ -130,6 +130,7 @@ export interface ITerminalConfiguration {
 		windows: { [key: string]: string };
 	};
 	environmentChangesIndicator: 'off' | 'on' | 'warnonly';
+	environmentChangesRelaunch: boolean;
 	showExitAlert: boolean;
 	splitCwd: 'workspaceRoot' | 'initial' | 'inherited';
 	windowsEnableConpty: boolean;
diff --git a/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts b/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts
index d275d0afa00..b4ddfa8a6d4 100644
--- a/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminalConfiguration.ts
@@ -311,6 +311,11 @@ export const terminalConfiguration: IConfigurationNode = {
 			],
 			default: 'warnonly'
 		},
+		'terminal.integrated.environmentChangesRelaunch': {
+			markdownDescription: localize('terminal.integrated.environmentChangesRelaunch', "Whether to relaunch terminals automatically if extension want to contribute to their environment and have not been interacted with yet."),
+			type: 'boolean',
+			default: true
+		},
 		'terminal.integrated.showExitAlert': {
 			description: localize('terminal.integrated.showExitAlert', "Controls whether to show the alert \"The terminal process terminated with exit code\" when exit code is non-zero."),
 			type: 'boolean',