diff --git a/src/client/terminals/envCollectionActivation/service.ts b/src/client/terminals/envCollectionActivation/service.ts
index 491ae786754b..aaa4ccf23bea 100644
--- a/src/client/terminals/envCollectionActivation/service.ts
+++ b/src/client/terminals/envCollectionActivation/service.ts
@@ -353,7 +353,16 @@ export class TerminalEnvVarCollectionService implements IExtensionActivationServ
 
     private async handleMicroVenv(resource: Resource) {
         try {
+            const settings = this.configurationService.getSettings(resource);
             const workspaceFolder = this.getWorkspaceFolder(resource);
+            if (!settings.terminal.activateEnvironment) {
+                this.getEnvironmentVariableCollection({ workspaceFolder }).clear();
+                traceVerbose(
+                    'Do not activate microvenv as activating environments in terminal is disabled for',
+                    resource?.fsPath,
+                );
+                return;
+            }
             const interpreter = await this.interpreterService.getActiveInterpreter(resource);
             if (interpreter?.envType === EnvironmentType.Venv) {
                 const activatePath = path.join(path.dirname(interpreter.path), 'activate');