diff --git a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
index 858a6486cdc..2377fc9bbd0 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
@@ -46,7 +46,7 @@ import { TypeAheadAddon } from 'vs/workbench/contrib/terminal/browser/terminalTy
 import { BrowserFeatures } from 'vs/base/browser/canIUse';
 import { IPreferencesService } from 'vs/workbench/services/preferences/common/preferences';
 import { IEnvironmentVariableInfo } from 'vs/workbench/contrib/terminal/common/environmentVariable';
-import { IProcessDataEvent, IShellLaunchConfig, ITerminalDimensionsOverride, ITerminalLaunchError, TerminalShellType, TerminalSettingId, TitleEventSource, TerminalIcon, TerminalSettingPrefix } from 'vs/platform/terminal/common/terminal';
+import { IProcessDataEvent, IShellLaunchConfig, ITerminalDimensionsOverride, ITerminalLaunchError, TerminalShellType, TerminalSettingId, TitleEventSource, TerminalIcon, TerminalSettingPrefix, ITerminalProfileObject } from 'vs/platform/terminal/common/terminal';
 import { IProductService } from 'vs/platform/product/common/productService';
 import { formatMessageForTerminal } from 'vs/workbench/contrib/terminal/common/terminalStrings';
 import { AutoOpenBarrier } from 'vs/base/common/async';
@@ -373,14 +373,22 @@ export class TerminalInstance extends Disposable implements ITerminalInstance {
 							const shell = this._configurationService.getValue(TerminalSettingPrefix.Shell + platform);
 							const shellArgs = this._configurationService.getValue(TerminalSettingPrefix.ShellArgs + platform);
 							const profile = await this._terminalProfileResolverService.createProfileFromShellAndShellArgs(shell, shellArgs);
-							if (profile) {
-								this._configurationService.updateValue(TerminalSettingPrefix.DefaultProfile + platform, profile.profileName);
-								this._configurationService.updateValue(TerminalSettingPrefix.Shell + platform, undefined);
-								this._configurationService.updateValue(TerminalSettingPrefix.ShellArgs + platform, undefined);
-								this._logService.trace(`migrated from shell/shellArgs, ${shell} ${shellArgs} to profile ${JSON.stringify(profile)}`);
+							if (typeof profile === 'string') {
+								await this._configurationService.updateValue(TerminalSettingPrefix.DefaultProfile + platform, profile);
+								this._logService.trace(`migrated from shell/shellArgs, using existing profile ${profile}`);
 							} else {
-								this._logService.trace('migration from shell/shellArgs to profile did not occur bc created profile was an exact match for existing one', shell, shellArgs);
+								const profiles = this._configurationService.inspect<{ [key: string]: ITerminalProfileObject }>(TerminalSettingPrefix.Profiles + platform).userValue || {};
+								const profileConfig: ITerminalProfileObject = { path: profile.path };
+								if (profile.args) {
+									profileConfig.args = profile.args;
+								}
+								profiles[profile.profileName] = profileConfig;
+								await this._configurationService.updateValue(TerminalSettingPrefix.Profiles + platform, profiles);
+								await this._configurationService.updateValue(TerminalSettingPrefix.DefaultProfile + platform, profile.profileName);
+								this._logService.trace(`migrated from shell/shellArgs, ${shell} ${shellArgs} to profile ${JSON.stringify(profile)}`);
 							}
+							await this._configurationService.updateValue(TerminalSettingPrefix.Shell + platform, undefined);
+							await this._configurationService.updateValue(TerminalSettingPrefix.ShellArgs + platform, undefined);
 						}
 					} as IPromptChoice,
 				],
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalProfileResolverService.ts b/src/vs/workbench/contrib/terminal/browser/terminalProfileResolverService.ts
index d569aabfae4..d139954dc87 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalProfileResolverService.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalProfileResolverService.ts
@@ -21,6 +21,7 @@ import { IRemoteAgentService } from 'vs/workbench/services/remote/common/remoteA
 import { debounce } from 'vs/base/common/decorators';
 import { ThemeIcon } from 'vs/platform/theme/common/themeService';
 import { URI, UriComponents } from 'vs/base/common/uri';
+import { equals } from 'vs/base/common/arrays';
 
 export interface IProfileContextProvider {
 	getDefaultSystemShell: (remoteAuthority: string | undefined, os: OperatingSystem) => Promise<string>;
@@ -392,12 +393,21 @@ export abstract class BaseTerminalProfileResolverService implements ITerminalPro
 		return false;
 	}
 
-	async createProfileFromShellAndShellArgs(shell?: unknown, shellArgs?: unknown): Promise<ITerminalProfile | undefined> {
-		const detectedProfile = this._terminalService.availableProfiles?.find(p => p.path === shell);
+	async createProfileFromShellAndShellArgs(shell?: unknown, shellArgs?: unknown): Promise<ITerminalProfile | string> {
+		const detectedProfile = this._terminalService.availableProfiles?.find(p => {
+			if (p.path !== shell) {
+				return false;
+			}
+			if (p.args === undefined || typeof p.args === 'string') {
+				return p.args === shellArgs;
+			}
+			return p.path === shell && equals(p.args, (shellArgs || []) as string[]);
+		});
 		const fallbackProfile = (await this.getDefaultProfile({
 			remoteAuthority: this._remoteAgentService.getConnection()?.remoteAuthority,
 			os: this._primaryBackendOs!
 		}));
+		fallbackProfile.profileName = `${fallbackProfile.path} (migrated)`;
 		const profile = detectedProfile || fallbackProfile;
 		const args = this._isValidShellArgs(shellArgs, this._primaryBackendOs!) ? shellArgs : profile.args;
 		const createdProfile = {
@@ -407,7 +417,7 @@ export abstract class BaseTerminalProfileResolverService implements ITerminalPro
 			isDefault: true
 		};
 		if (detectedProfile && detectedProfile.profileName === createdProfile.profileName && detectedProfile.path === createdProfile.path && this._argsMatch(detectedProfile.args, createdProfile.args)) {
-			return undefined;
+			return detectedProfile.profileName;
 		}
 		return createdProfile;
 	}
diff --git a/src/vs/workbench/contrib/terminal/common/terminal.ts b/src/vs/workbench/contrib/terminal/common/terminal.ts
index 9c76b60ebf3..fb62f0be0a7 100644
--- a/src/vs/workbench/contrib/terminal/common/terminal.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminal.ts
@@ -112,7 +112,7 @@ export interface ITerminalProfileResolverService {
 	getDefaultShell(options: IShellLaunchConfigResolveOptions): Promise<string>;
 	getDefaultShellArgs(options: IShellLaunchConfigResolveOptions): Promise<string | string[]>;
 	getEnvironment(remoteAuthority: string | undefined): Promise<IProcessEnvironment>;
-	createProfileFromShellAndShellArgs(shell?: unknown, shellArgs?: unknown): Promise<ITerminalProfile | undefined>;
+	createProfileFromShellAndShellArgs(shell?: unknown, shellArgs?: unknown): Promise<ITerminalProfile | string>;
 }
 
 export interface IShellLaunchConfigResolveOptions {