diff --git a/package.json b/package.json
index a368ba51..9dc7176b 100644
--- a/package.json
+++ b/package.json
@@ -520,6 +520,7 @@
         "chatParticipantPrivate",
         "chatParticipantAdditions",
         "chatVariableResolver",
+        "terminalShellEnv",
         "terminalShellType"
     ]
 }
diff --git a/src/features/terminal/terminalManager.ts b/src/features/terminal/terminalManager.ts
index f68ca198..6ae69405 100644
--- a/src/features/terminal/terminalManager.ts
+++ b/src/features/terminal/terminalManager.ts
@@ -375,6 +375,11 @@ export class TerminalManagerImpl implements TerminalManager {
     }
 
     public isActivated(terminal: Terminal, environment?: PythonEnvironment): boolean {
+        const envVar = terminal.shellIntegration?.env;
+        if (envVar) {
+            return !!envVar['VIRTUAL_ENV'];
+        }
+
         if (!environment) {
             return this.activatedTerminals.has(terminal);
         }
diff --git a/src/vscode.proposed.terminalShellEnv.d.ts b/src/vscode.proposed.terminalShellEnv.d.ts
new file mode 100644
index 00000000..ffe0b76e
--- /dev/null
+++ b/src/vscode.proposed.terminalShellEnv.d.ts
@@ -0,0 +1,18 @@
+/*---------------------------------------------------------------------------------------------
+ *  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' {
+    // @anthonykim1 @tyriar https://github.com/microsoft/vscode/issues/227467
+
+    export interface TerminalShellIntegration {
+        /**
+         * The environment of the shell process. This is undefined if the shell integration script
+         * does not send the environment.
+         */
+        readonly env: { [key: string]: string | undefined } | undefined;
+    }
+
+    // TODO: Is it fine that this shares onDidChangeTerminalShellIntegration with cwd and the shellIntegration object itself?
+}