diff --git a/src/vs/workbench/api/node/extHostTerminalService.ts b/src/vs/workbench/api/node/extHostTerminalService.ts
index c8198dbb93b..cd1a75c5406 100644
--- a/src/vs/workbench/api/node/extHostTerminalService.ts
+++ b/src/vs/workbench/api/node/extHostTerminalService.ts
@@ -182,7 +182,7 @@ export class ExtHostTerminalService extends BaseExtHostTerminalService {
 			this._variableResolver,
 			isWorkspaceShellAllowed,
 			pkg.version,
-			terminalConfig.get<boolean>('setLocaleVariables', false),
+			terminalConfig.get<string>('detectLocale', 'auto'),
 			baseEnv
 		);
 
diff --git a/src/vs/workbench/contrib/terminal/browser/terminal.contribution.ts b/src/vs/workbench/contrib/terminal/browser/terminal.contribution.ts
index db587f13986..9b8d567520c 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminal.contribution.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminal.contribution.ts
@@ -194,10 +194,16 @@ configurationRegistry.registerConfiguration({
 			type: 'number',
 			default: 1000
 		},
-		'terminal.integrated.setLocaleVariables': {
-			markdownDescription: nls.localize('terminal.integrated.setLocaleVariables', "Controls whether locale variables are set at startup of the terminal."),
-			type: 'boolean',
-			default: true
+		'terminal.integrated.detectLocale': {
+			markdownDescription: nls.localize('terminal.integrated.detectLocale', "Controls whether to detect and set the `$LANG` environment variable."),
+			type: 'string',
+			enum: ['auto', 'off', 'on'],
+			enumDescriptions: [
+				nls.localize('terminal.integrated.detectLocale.auto', "Set the `$LANG` environment variable if the existing variable does not exist or it does not end in `'.UTF-8'`."),
+				nls.localize('terminal.integrated.detectLocale.off', "Do not set the `$LANG` environment variable."),
+				nls.localize('terminal.integrated.detectLocale.on', "Always set the `$LANG` environment variable.")
+			],
+			default: 'auto'
 		},
 		'terminal.integrated.rendererType': {
 			type: 'string',
diff --git a/src/vs/workbench/contrib/terminal/common/terminal.ts b/src/vs/workbench/contrib/terminal/common/terminal.ts
index fc6b1f3faf3..0f7bb6b9ff5 100644
--- a/src/vs/workbench/contrib/terminal/common/terminal.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminal.ts
@@ -100,7 +100,7 @@ export interface ITerminalConfiguration {
 	fontSize: number;
 	letterSpacing: number;
 	lineHeight: number;
-	setLocaleVariables: boolean;
+	detectLocale: 'auto' | 'off' | 'on';
 	scrollback: number;
 	commandsToSkipShell: string[];
 	cwd: string;
diff --git a/src/vs/workbench/contrib/terminal/common/terminalEnvironment.ts b/src/vs/workbench/contrib/terminal/common/terminalEnvironment.ts
index d51d317da5e..69a3ea4c9f3 100644
--- a/src/vs/workbench/contrib/terminal/common/terminalEnvironment.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminalEnvironment.ts
@@ -51,12 +51,12 @@ function _mergeEnvironmentValue(env: ITerminalEnvironment, key: string, value: s
 	}
 }
 
-export function addTerminalEnvironmentKeys(env: platform.IProcessEnvironment, version: string | undefined, locale: string | undefined, setLocaleVariables: boolean): void {
+export function addTerminalEnvironmentKeys(env: platform.IProcessEnvironment, version: string | undefined, locale: string | undefined, detectLocale: 'auto' | 'off' | 'on'): void {
 	env['TERM_PROGRAM'] = 'vscode';
 	if (version) {
 		env['TERM_PROGRAM_VERSION'] = version;
 	}
-	if (setLocaleVariables) {
+	if (_shouldSetLangEnvVariable(env, detectLocale)) {
 		env['LANG'] = _getLangEnvVariable(locale);
 	}
 	env['COLORTERM'] = 'truecolor';
@@ -88,6 +88,16 @@ function resolveConfigurationVariables(configurationResolverService: IConfigurat
 	return env;
 }
 
+function _shouldSetLangEnvVariable(env: platform.IProcessEnvironment, detectLocale: 'auto' | 'off' | 'on'): boolean {
+	if (detectLocale === 'on') {
+		return true;
+	}
+	if (detectLocale === 'auto') {
+		return !env['LANG'] || env['LANG'].search(/\.UTF\-8$/) === -1;
+	}
+	return false; // 'off'
+}
+
 function _getLangEnvVariable(locale?: string): string {
 	const parts = locale ? locale.split('-') : [];
 	const n = parts.length;
@@ -334,7 +344,7 @@ export function createTerminalEnvironment(
 	configurationResolverService: IConfigurationResolverService | undefined,
 	isWorkspaceShellAllowed: boolean,
 	version: string | undefined,
-	setLocaleVariables: boolean,
+	detectLocale: 'auto' | 'off' | 'on',
 	baseEnv: platform.IProcessEnvironment
 ): platform.IProcessEnvironment {
 	// Create a terminal environment based on settings, launch config and permissions
@@ -369,7 +379,7 @@ export function createTerminalEnvironment(
 		mergeEnvironments(env, shellLaunchConfig.env);
 
 		// Adding other env keys necessary to create the process
-		addTerminalEnvironmentKeys(env, version, platform.locale, setLocaleVariables);
+		addTerminalEnvironmentKeys(env, version, platform.locale, detectLocale);
 	}
 	return env;
 }