diff --git a/src/vs/workbench/api/browser/mainThreadTerminalService.ts b/src/vs/workbench/api/browser/mainThreadTerminalService.ts
index 28bc27cbb12..5e6c7e8c1fe 100644
--- a/src/vs/workbench/api/browser/mainThreadTerminalService.ts
+++ b/src/vs/workbench/api/browser/mainThreadTerminalService.ts
@@ -84,6 +84,11 @@ export class MainThreadTerminalService implements MainThreadTerminalServiceShape
 		this._store.add(_terminalService.onDidChangeActiveInstance(instance => this._onActiveTerminalChanged(instance ? instance.instanceId : null)));
 		this._store.add(_terminalService.onAnyInstanceTitleChange(instance => instance && this._onTitleChanged(instance.instanceId, instance.title)));
 		this._store.add(_terminalService.onAnyInstanceDataInput(instance => this._proxy.$acceptTerminalInteraction(instance.instanceId)));
+		this._store.add(_terminalService.onDidChangeInstanceCapability(instance => {
+			if (instance.capabilities.has(TerminalCapability.CommandDetection)) {
+				this._proxy.$acceptTerminalShellIntegrationActivation(instance.instanceId);
+			}
+		}));
 		this._store.add(_terminalService.onAnyInstanceSelectionChange(instance => this._proxy.$acceptTerminalSelection(instance.instanceId, instance.selection)));
 
 		// Set initial ext host state
diff --git a/src/vs/workbench/api/common/extHost.protocol.ts b/src/vs/workbench/api/common/extHost.protocol.ts
index 9055bfa9aea..61deb70f334 100644
--- a/src/vs/workbench/api/common/extHost.protocol.ts
+++ b/src/vs/workbench/api/common/extHost.protocol.ts
@@ -2238,6 +2238,7 @@ export interface ExtHostTerminalServiceShape {
 	$acceptTerminalDimensions(id: number, cols: number, rows: number): void;
 	$acceptTerminalMaximumDimensions(id: number, cols: number, rows: number): void;
 	$acceptTerminalInteraction(id: number): void;
+	$acceptTerminalShellIntegrationActivation(id: number): void;
 	$acceptTerminalSelection(id: number, selection: string | undefined): void;
 	$startExtensionTerminal(id: number, initialDimensions: ITerminalDimensionsDto | undefined): Promise<ITerminalLaunchError | undefined>;
 	$acceptProcessAckDataEvent(id: number, charCount: number): void;
diff --git a/src/vs/workbench/api/common/extHostTerminalService.ts b/src/vs/workbench/api/common/extHostTerminalService.ts
index cbe28de19ca..d1a0144fe98 100644
--- a/src/vs/workbench/api/common/extHostTerminalService.ts
+++ b/src/vs/workbench/api/common/extHostTerminalService.ts
@@ -82,7 +82,10 @@ export class ExtHostTerminal {
 	private _pidPromiseComplete: ((value: number | undefined) => any) | undefined;
 	private _rows: number | undefined;
 	private _exitStatus: vscode.TerminalExitStatus | undefined;
-	private _state: vscode.TerminalState = { isInteractedWith: false };
+	private _state: Readonly<vscode.TerminalState> = {
+		isInteractedWith: false,
+		isShellIntegrationActivated: false,
+	};
 	private _selection: string | undefined;
 
 	public isOpen: boolean = false;
@@ -240,7 +243,21 @@ export class ExtHostTerminal {
 
 	public setInteractedWith(): boolean {
 		if (!this._state.isInteractedWith) {
-			this._state = { isInteractedWith: true };
+			this._state = {
+				...this._state,
+				isInteractedWith: true,
+			};
+			return true;
+		}
+		return false;
+	}
+
+	public setShellIntegrationActivated(): boolean {
+		if (!this._state.isShellIntegrationActivated) {
+			this._state = {
+				...this._state,
+				isShellIntegrationActivated: true,
+			};
 			return true;
 		}
 		return false;
@@ -671,6 +688,13 @@ export abstract class BaseExtHostTerminalService extends Disposable implements I
 		}
 	}
 
+	public $acceptTerminalShellIntegrationActivation(id: number): void {
+		const terminal = this._getTerminalById(id);
+		if (terminal?.setShellIntegrationActivated()) {
+			this._onDidChangeTerminalState.fire(terminal.value);
+		}
+	}
+
 	public $acceptTerminalSelection(id: number, selection: string | undefined): void {
 		this._getTerminalById(id)?.setSelection(selection);
 	}
diff --git a/src/vscode-dts/vscode.proposed.terminalShellIntegrationActivated.ts b/src/vscode-dts/vscode.proposed.terminalShellIntegrationActivated.ts
new file mode 100644
index 00000000000..e9a01f00aed
--- /dev/null
+++ b/src/vscode-dts/vscode.proposed.terminalShellIntegrationActivated.ts
@@ -0,0 +1,17 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+
+declare module 'vscode' {
+
+	// https://github.com/microsoft/vscode/issues/205058
+
+	export interface TerminalState {
+		/**
+		 * Whether the {@link Terminal} has had [shell integration](https://code.visualstudio.com/docs/terminal/shell-integration)
+		 * activated. This typically happens shortly after the terminal has been created.
+		 */
+		readonly isShellIntegrationActivated: boolean;
+	}
+}