diff --git a/src/vs/platform/terminal/common/terminal.ts b/src/vs/platform/terminal/common/terminal.ts
index 3ae78ec6ef7..ce490c34cb8 100644
--- a/src/vs/platform/terminal/common/terminal.ts
+++ b/src/vs/platform/terminal/common/terminal.ts
@@ -395,6 +395,7 @@ export interface ICreateContributedTerminalProfileOptions {
 	icon?: URI | string | { light: URI, dark: URI };
 	color?: string;
 	splitActiveTerminal?: boolean;
+	location?: TerminalLocation | { viewColumn: number, preserveState?: boolean };
 }
 
 export enum TerminalLocation {
diff --git a/src/vs/workbench/api/browser/mainThreadTerminalService.ts b/src/vs/workbench/api/browser/mainThreadTerminalService.ts
index 7029bcd3855..78918977c74 100644
--- a/src/vs/workbench/api/browser/mainThreadTerminalService.ts
+++ b/src/vs/workbench/api/browser/mainThreadTerminalService.ts
@@ -149,7 +149,7 @@ export class MainThreadTerminalService implements MainThreadTerminalServiceShape
 		}));
 	}
 
-	private async _deserializeParentTerminal(location?: TerminalLocation | TerminalEditorLocationOptions | { parentTerminal: ExtHostTerminalIdentifier } | { splitActiveTerminal: boolean }): Promise<TerminalLocation | TerminalEditorLocationOptions | { parentTerminal: ITerminalInstance } | { splitActiveTerminal: boolean } | undefined> {
+	private async _deserializeParentTerminal(location?: TerminalLocation | TerminalEditorLocationOptions | { parentTerminal: ExtHostTerminalIdentifier } | { splitActiveTerminal: boolean, location?: TerminalLocation }): Promise<TerminalLocation | TerminalEditorLocationOptions | { parentTerminal: ITerminalInstance } | { splitActiveTerminal: boolean } | undefined> {
 		if (typeof location === 'object' && 'parentTerminal' in location) {
 			const parentTerminal = await this._extHostTerminals.get(location.parentTerminal.toString());
 			return parentTerminal ? { parentTerminal } : undefined;
diff --git a/src/vs/workbench/api/common/extHostTerminalService.ts b/src/vs/workbench/api/common/extHostTerminalService.ts
index f78b6ec3ac3..187de79a5cc 100644
--- a/src/vs/workbench/api/common/extHostTerminalService.ts
+++ b/src/vs/workbench/api/common/extHostTerminalService.ts
@@ -53,6 +53,7 @@ export interface ITerminalInternalOptions {
 	useShellEnvironment?: boolean;
 	resolvedExtHostIdentifier?: ExtHostTerminalIdentifier;
 	splitActiveTerminal?: boolean;
+	location?: TerminalLocation | { viewColumn: number, preserveState?: boolean } | { splitActiveTerminal: boolean };
 }
 
 export const IExtHostTerminalService = createDecorator<IExtHostTerminalService>('IExtHostTerminalService');
@@ -147,7 +148,7 @@ export class ExtHostTerminal {
 			isFeatureTerminal: withNullAsUndefined(internalOptions?.isFeatureTerminal),
 			isExtensionOwnedTerminal: true,
 			useShellEnvironment: withNullAsUndefined(internalOptions?.useShellEnvironment),
-			location: this._serializeParentTerminal(options.location, internalOptions?.resolvedExtHostIdentifier, internalOptions?.splitActiveTerminal)
+			location: internalOptions?.location || this._serializeParentTerminal(options.location, internalOptions?.resolvedExtHostIdentifier, internalOptions?.location)
 		});
 	}
 
@@ -170,11 +171,11 @@ export class ExtHostTerminal {
 		return this._id;
 	}
 
-	private _serializeParentTerminal(location?: TerminalLocation | vscode.TerminalEditorLocationOptions | vscode.TerminalSplitLocationOptions, parentTerminal?: ExtHostTerminalIdentifier, splitActiveTerminal?: boolean): TerminalLocation | vscode.TerminalEditorLocationOptions | { parentTerminal: ExtHostTerminalIdentifier } | { splitActiveTerminal: boolean } | undefined {
+	private _serializeParentTerminal(location?: TerminalLocation | vscode.TerminalEditorLocationOptions | vscode.TerminalSplitLocationOptions | { splitActiveTerminal: boolean }, parentTerminal?: ExtHostTerminalIdentifier, internalLocation?: TerminalLocation | { viewColumn: number, preserveState?: boolean } | { splitActiveTerminal: boolean }): TerminalLocation | vscode.TerminalEditorLocationOptions | { parentTerminal: ExtHostTerminalIdentifier } | { splitActiveTerminal: boolean, location?: TerminalLocation } | vscode.TerminalEditorLocationOptions | undefined {
 		if (typeof location === 'object' && 'parentTerminal' in location) {
 			return parentTerminal ? { parentTerminal } : undefined;
-		} else if (splitActiveTerminal) {
-			return { splitActiveTerminal: true };
+		} else if (internalLocation) {
+			location = internalLocation;
 		}
 		return location;
 	}
diff --git a/src/vs/workbench/api/node/extHostTerminalService.ts b/src/vs/workbench/api/node/extHostTerminalService.ts
index dadc49d7e45..0bf428ab07c 100644
--- a/src/vs/workbench/api/node/extHostTerminalService.ts
+++ b/src/vs/workbench/api/node/extHostTerminalService.ts
@@ -6,6 +6,7 @@
 import { generateUuid } from 'vs/base/common/uuid';
 import { IExtHostRpcService } from 'vs/workbench/api/common/extHostRpcService';
 import { BaseExtHostTerminalService, ExtHostTerminal, ITerminalInternalOptions } from 'vs/workbench/api/common/extHostTerminalService';
+import { TerminalLocation } from 'vs/workbench/api/common/extHostTypes';
 import type * as vscode from 'vscode';
 
 export class ExtHostTerminalService extends BaseExtHostTerminalService {
@@ -37,6 +38,10 @@ export class ExtHostTerminalService extends BaseExtHostTerminalService {
 					internalOptions.resolvedExtHostIdentifier = parentExtHostTerminal._id;
 				}
 			}
+		} else if (!internalOptions.splitActiveTerminal && options.location === TerminalLocation.Editor || options.location === TerminalLocation.Panel) {
+			internalOptions.location = options.location;
+		} else if (internalOptions.splitActiveTerminal) {
+			internalOptions.location = { splitActiveTerminal: true };
 		}
 		return internalOptions;
 	}
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalMenus.ts b/src/vs/workbench/contrib/terminal/browser/terminalMenus.ts
index a761fa1bae4..1266ccb3b01 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalMenus.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalMenus.ts
@@ -619,7 +619,7 @@ export function getTerminalActionBarArgs(location: ITerminalLocationOptions, pro
 			},
 			location
 		})));
-		const splitLocation = (location === TerminalLocation.Editor || location === { viewColumn: ACTIVE_GROUP }) ? { viewColumn: SIDE_GROUP } : { splitActiveTerminal: true };
+		const splitLocation = location === TerminalLocation.Editor ? { viewColumn: SIDE_GROUP } : { splitActiveTerminal: true };
 		submenuActions.push(new Action(TerminalCommandId.NewWithProfile, title, undefined, true, () => terminalService.createTerminal({
 			config: {
 				extensionIdentifier: contributed.extensionIdentifier,
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalService.ts b/src/vs/workbench/contrib/terminal/browser/terminalService.ts
index ac2187b50c0..6ab7d405950 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalService.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalService.ts
@@ -48,7 +48,7 @@ import { IWorkbenchEnvironmentService } from 'vs/workbench/services/environment/
 import { IExtensionService } from 'vs/workbench/services/extensions/common/extensions';
 import { ILifecycleService, ShutdownReason, WillShutdownEvent } from 'vs/workbench/services/lifecycle/common/lifecycle';
 import { IRemoteAgentService } from 'vs/workbench/services/remote/common/remoteAgentService';
-import { ACTIVE_GROUP } from 'vs/workbench/services/editor/common/editorService';
+import { ACTIVE_GROUP, SIDE_GROUP } from 'vs/workbench/services/editor/common/editorService';
 import { IEditorGroupsService } from 'vs/workbench/services/editor/common/editorGroupsService';
 
 export class TerminalService implements ITerminalService {
@@ -951,7 +951,8 @@ export class TerminalService implements ITerminalService {
 				await this._createContributedTerminalProfile(value.profile.extensionIdentifier, value.profile.id, {
 					splitActiveTerminal: !!(keyMods?.alt && activeInstance),
 					icon: value.profile.icon,
-					color: value.profile.color
+					color: value.profile.color,
+					location: this.defaultLocation
 				});
 				return;
 			} else {
@@ -1156,10 +1157,13 @@ export class TerminalService implements ITerminalService {
 
 		// Launch the contributed profile
 		if (contributedProfile) {
+			const resolvedLocation = this._resolveLocation(options?.location);
+			const split = typeof options?.location === 'object' && 'splitActiveTerminal' in options.location ? options.location.splitActiveTerminal : false;
 			await this._createContributedTerminalProfile(contributedProfile.extensionIdentifier, contributedProfile.id, {
 				icon: contributedProfile.icon,
 				color: contributedProfile.color,
-				splitActiveTerminal: typeof options?.location === 'object' && 'splitActiveTerminal' in options.location ? true : false
+				splitActiveTerminal: split,
+				location: resolvedLocation === TerminalLocation.Editor && split ? { viewColumn: SIDE_GROUP } : resolvedLocation
 			});
 			const instanceHost = this._resolveLocation(options?.location) === TerminalLocation.Editor ? this._terminalEditorService : this._terminalGroupService;
 			const instance = instanceHost.instances[instanceHost.instances.length - 1];