diff --git a/src/client/common/terminal/externalTerminalService.ts b/src/client/common/terminal/externalTerminalService.ts
new file mode 100644
index 000000000000..8e6b3475f7a9
--- /dev/null
+++ b/src/client/common/terminal/externalTerminalService.ts
@@ -0,0 +1,252 @@
+// Copyright (c) Microsoft Corporation. All rights reserved.
+// Licensed under the MIT License.
+
+import { inject, injectable } from 'inversify';
+import { CancellationToken, Disposable, Event, EventEmitter, Terminal, TerminalShellExecution, window } from 'vscode';
+import '../../common/extensions';
+import { IInterpreterService } from '../../interpreter/contracts';
+import { IServiceContainer } from '../../ioc/types';
+import { captureTelemetry } from '../../telemetry';
+import { EventName } from '../../telemetry/constants';
+import { ITerminalAutoActivation } from '../../terminals/types';
+import { ITerminalManager } from '../application/types';
+import { _SCRIPTS_DIR } from '../process/internal/scripts/constants';
+import { IConfigurationService, IDisposableRegistry } from '../types';
+import {
+    ITerminalActivator,
+    ITerminalHelper,
+    ITerminalService,
+    TerminalCreationOptions,
+    TerminalShellType,
+} from './types';
+import { traceVerbose } from '../../logging';
+import { getConfiguration } from '../vscodeApis/workspaceApis';
+import { useEnvExtension } from '../../envExt/api.internal';
+import { ensureTerminalLegacy } from '../../envExt/api.legacy';
+import { sleep } from '../utils/async';
+import { isWindows } from '../utils/platform';
+import { getPythonMinorVersion } from '../../repl/replUtils';
+import { PythonEnvironment } from '../../pythonEnvironments/info';
+
+@injectable()
+export class ExternalTerminalService implements ITerminalService, Disposable {
+    private terminal?: Terminal;
+    private ownsTerminal: boolean = false;
+    private terminalShellType!: TerminalShellType;
+    private terminalClosed = new EventEmitter<void>();
+    private terminalManager: ITerminalManager;
+    private terminalHelper: ITerminalHelper;
+    private terminalActivator: ITerminalActivator;
+    private terminalAutoActivator: ITerminalAutoActivation;
+    private readonly executeCommandListeners: Set<Disposable> = new Set();
+    private _terminalFirstLaunched: boolean = true;
+    public get onDidCloseTerminal(): Event<void> {
+        return this.terminalClosed.event.bind(this.terminalClosed);
+    }
+
+    constructor(
+        @inject(IServiceContainer) private serviceContainer: IServiceContainer,
+        private readonly options?: TerminalCreationOptions,
+    ) {
+        const disposableRegistry = this.serviceContainer.get<Disposable[]>(IDisposableRegistry);
+        disposableRegistry.push(this);
+        this.terminalHelper = this.serviceContainer.get<ITerminalHelper>(ITerminalHelper);
+        this.terminalManager = this.serviceContainer.get<ITerminalManager>(ITerminalManager);
+        this.terminalAutoActivator = this.serviceContainer.get<ITerminalAutoActivation>(ITerminalAutoActivation);
+        this.terminalManager.onDidCloseTerminal(this.terminalCloseHandler, this, disposableRegistry);
+        this.terminalActivator = this.serviceContainer.get<ITerminalActivator>(ITerminalActivator);
+    }
+    public dispose() {
+        if (this.ownsTerminal) {
+            this.terminal?.dispose();
+        }
+
+        if (this.executeCommandListeners && this.executeCommandListeners.size > 0) {
+            this.executeCommandListeners.forEach((d) => {
+                d?.dispose();
+            });
+        }
+    }
+    public async sendCommand(command: string, args: string[], _?: CancellationToken): Promise<void> {
+        await this.ensureTerminal();
+        const text = this.terminalHelper.buildCommandForTerminal(this.terminalShellType, command, args);
+        if (!this.options?.hideFromUser) {
+            this.terminal!.show(true);
+        }
+
+        await this.executeCommand(text, false);
+    }
+
+    /** @deprecated */
+    public async sendText(text: string): Promise<void> {
+        await this.ensureTerminal();
+        if (!this.options?.hideFromUser) {
+            this.terminal!.show(true);
+        }
+        this.terminal!.sendText(text);
+        this.terminal = undefined;
+    }
+
+    public async executeCommand(
+        commandLine: string,
+        isPythonShell: boolean,
+    ): Promise<TerminalShellExecution | undefined> {
+        const terminal = window.activeTerminal!;
+        if (!this.options?.hideFromUser) {
+            terminal.show(true);
+        }
+
+        // If terminal was just launched, wait some time for shell integration to onDidChangeShellIntegration.
+        if (!terminal.shellIntegration && this._terminalFirstLaunched) {
+            this._terminalFirstLaunched = false;
+            const promise = new Promise<boolean>((resolve) => {
+                const disposable = this.terminalManager.onDidChangeTerminalShellIntegration(() => {
+                    // eslint-disable-next-line @typescript-eslint/no-use-before-define
+                    clearTimeout(timer);
+                    disposable.dispose();
+                    resolve(true);
+                });
+                const TIMEOUT_DURATION = 500;
+                const timer = setTimeout(() => {
+                    disposable.dispose();
+                    resolve(true);
+                }, TIMEOUT_DURATION);
+            });
+            await promise;
+        }
+
+        const config = getConfiguration('python');
+        const pythonrcSetting = config.get<boolean>('terminal.shellIntegration.enabled');
+
+        const minorVersion = this.options?.resource
+            ? await getPythonMinorVersion(
+                  this.options.resource,
+                  this.serviceContainer.get<IInterpreterService>(IInterpreterService),
+              )
+            : undefined;
+
+        if ((isPythonShell && !pythonrcSetting) || (isPythonShell && isWindows()) || (minorVersion ?? 0) >= 13) {
+            // If user has explicitly disabled SI for Python, use sendText for inside Terminal REPL.
+            terminal.sendText(commandLine);
+            return undefined;
+        } else if (terminal.shellIntegration) {
+            const execution = terminal.shellIntegration.executeCommand(commandLine);
+            traceVerbose(`Shell Integration is enabled, executeCommand: ${commandLine}`);
+            return execution;
+        } else {
+            terminal.sendText(commandLine);
+            traceVerbose(`Shell Integration is disabled, sendText: ${commandLine}`);
+        }
+
+        this.terminal = undefined;
+        return undefined;
+    }
+
+    public async show(preserveFocus: boolean = true): Promise<void> {
+        await this.ensureTerminal(preserveFocus);
+        if (!this.options?.hideFromUser) {
+            this.terminal!.show(preserveFocus);
+        }
+        this.terminal = undefined;
+    }
+
+    private resolveInterpreterPath(
+        interpreter: PythonEnvironment | undefined,
+        settingsPythonPath: string | undefined,
+    ): string {
+        if (interpreter) {
+            if ('path' in interpreter && interpreter.path) {
+                return interpreter.path;
+            }
+            const uriFsPath = (interpreter as any).uri?.fsPath as string | undefined;
+            if (uriFsPath) {
+                return uriFsPath;
+            }
+        }
+        return settingsPythonPath ?? 'python';
+    }
+
+    private runPythonReplInActiveTerminal() {
+        const settings = this.serviceContainer
+            .get<IConfigurationService>(IConfigurationService)
+            .getSettings(this.options?.resource);
+        const interpreterPath = this.resolveInterpreterPath(this.options?.interpreter, settings.pythonPath);
+        this.terminalShellType = this.terminalHelper.identifyTerminalShell(this.terminal);
+        const launchCmd = this.terminalHelper.buildCommandForTerminal(this.terminalShellType, interpreterPath, []);
+        this.terminal!.sendText(launchCmd);
+    }
+
+    // TODO: Debt switch to Promise<Terminal> ---> breaks 20 tests
+    public async ensureTerminal(preserveFocus: boolean = true): Promise<void> {
+        this.terminal = window.activeTerminal;
+        if (this.terminal) {
+            this.ownsTerminal = false;
+            if (this.terminal.state.shell !== 'python') {
+                this.runPythonReplInActiveTerminal();
+            }
+            return;
+        }
+
+        if (useEnvExtension()) {
+            this.terminal = await ensureTerminalLegacy(this.options?.resource, {
+                name: this.options?.title || 'Python',
+                hideFromUser: this.options?.hideFromUser,
+            });
+            this.ownsTerminal = true;
+        } else {
+            this.terminalShellType = this.terminalHelper.identifyTerminalShell(this.terminal);
+            this.terminal = this.terminalManager.createTerminal({
+                name: this.options?.title || 'Python',
+                hideFromUser: this.options?.hideFromUser,
+            });
+            this.ownsTerminal = true;
+            this.terminalAutoActivator.disableAutoActivation(this.terminal);
+
+            await sleep(100);
+
+            await this.terminalActivator.activateEnvironmentInTerminal(this.terminal, {
+                resource: this.options?.resource,
+                preserveFocus,
+                interpreter: this.options?.interpreter,
+                hideFromUser: this.options?.hideFromUser,
+            });
+        }
+
+        if (!this.options?.hideFromUser) {
+            this.terminal.show(preserveFocus);
+        }
+
+        this.sendTelemetry().ignoreErrors();
+        return;
+    }
+
+    private terminalCloseHandler(terminal: Terminal) {
+        if (terminal === this.terminal) {
+            this.terminalClosed.fire();
+            this.terminal = undefined;
+            this.ownsTerminal = false;
+        }
+    }
+
+    private async sendTelemetry() {
+        const pythonPath = this.serviceContainer
+            .get<IConfigurationService>(IConfigurationService)
+            .getSettings(this.options?.resource).pythonPath;
+        const interpreterInfo =
+            this.options?.interpreter ||
+            (await this.serviceContainer
+                .get<IInterpreterService>(IInterpreterService)
+                .getInterpreterDetails(pythonPath));
+        const pythonVersion = interpreterInfo && interpreterInfo.version ? interpreterInfo.version.raw : undefined;
+        const interpreterType = interpreterInfo ? interpreterInfo.envType : undefined;
+        captureTelemetry(EventName.TERMINAL_CREATE, {
+            terminal: this.terminalShellType,
+            pythonVersion,
+            interpreterType,
+        });
+    }
+
+    public hasActiveTerminal(): boolean {
+        return !!window.activeTerminal;
+    }
+}
diff --git a/src/client/common/terminal/factory.ts b/src/client/common/terminal/factory.ts
index 39cc88c4b024..882200d9475c 100644
--- a/src/client/common/terminal/factory.ts
+++ b/src/client/common/terminal/factory.ts
@@ -12,10 +12,11 @@ import { IFileSystem } from '../platform/types';
 import { TerminalService } from './service';
 import { SynchronousTerminalService } from './syncTerminalService';
 import { ITerminalService, ITerminalServiceFactory, TerminalCreationOptions } from './types';
+import { ExternalTerminalService } from './externalTerminalService';
 
 @injectable()
 export class TerminalServiceFactory implements ITerminalServiceFactory {
-    private terminalServices: Map<string, TerminalService>;
+    private terminalServices: Map<string, TerminalService | ExternalTerminalService>;
 
     constructor(
         @inject(IServiceContainer) private serviceContainer: IServiceContainer,
@@ -35,7 +36,8 @@ export class TerminalServiceFactory implements ITerminalServiceFactory {
                 terminalTitle = `${terminalTitle}: ${path.basename(resource.fsPath).replace('.py', '')}`;
             }
             options.title = terminalTitle;
-            const terminalService = new TerminalService(this.serviceContainer, options);
+            const terminalService = new ExternalTerminalService(this.serviceContainer, options);
+            // const terminalService = new TerminalService(this.serviceContainer, options);
             this.terminalServices.set(id, terminalService);
         }
 
@@ -49,7 +51,8 @@ export class TerminalServiceFactory implements ITerminalServiceFactory {
     }
     public createTerminalService(resource?: Uri, title?: string): ITerminalService {
         title = typeof title === 'string' && title.trim().length > 0 ? title.trim() : 'Python';
-        return new TerminalService(this.serviceContainer, { resource, title });
+        return new ExternalTerminalService(this.serviceContainer, { resource, title });
+        // return new TerminalService(this.serviceContainer, { resource, title });
     }
     private getTerminalId(
         title: string,
diff --git a/src/client/common/terminal/service.ts b/src/client/common/terminal/service.ts
index e92fbd3d494f..cfdbc1b49008 100644
--- a/src/client/common/terminal/service.ts
+++ b/src/client/common/terminal/service.ts
@@ -200,4 +200,8 @@ export class TerminalService implements ITerminalService, Disposable {
             interpreterType,
         });
     }
+
+    public hasActiveTerminal(): boolean {
+        return !!this.terminal;
+    }
 }
diff --git a/src/client/common/terminal/syncTerminalService.ts b/src/client/common/terminal/syncTerminalService.ts
index 0b46a86ee51e..05e77e9c7a50 100644
--- a/src/client/common/terminal/syncTerminalService.ts
+++ b/src/client/common/terminal/syncTerminalService.ts
@@ -15,6 +15,7 @@ import { createDeferred, Deferred } from '../utils/async';
 import { noop } from '../utils/misc';
 import { TerminalService } from './service';
 import { ITerminalService } from './types';
+import { ExternalTerminalService } from './externalTerminalService';
 
 enum State {
     notStarted = 0,
@@ -101,7 +102,7 @@ export class SynchronousTerminalService implements ITerminalService, Disposable
     constructor(
         @inject(IFileSystem) private readonly fs: IFileSystem,
         @inject(IInterpreterService) private readonly interpreter: IInterpreterService,
-        public readonly terminalService: TerminalService,
+        public readonly terminalService: TerminalService | ExternalTerminalService,
         private readonly pythonInterpreter?: PythonEnvironment,
     ) {}
     public dispose() {
@@ -158,4 +159,8 @@ export class SynchronousTerminalService implements ITerminalService, Disposable
             return l;
         });
     }
+
+    public hasActiveTerminal(): boolean {
+        return this.terminalService.hasActiveTerminal();
+    }
 }
diff --git a/src/client/common/terminal/types.ts b/src/client/common/terminal/types.ts
index 3e54458a57fd..1fed66d46705 100644
--- a/src/client/common/terminal/types.ts
+++ b/src/client/common/terminal/types.ts
@@ -56,6 +56,7 @@ export interface ITerminalService extends IDisposable {
     sendText(text: string): Promise<void>;
     executeCommand(commandLine: string, isPythonShell: boolean): Promise<TerminalShellExecution | undefined>;
     show(preserveFocus?: boolean): Promise<void>;
+    hasActiveTerminal(): boolean;
 }
 
 export const ITerminalServiceFactory = Symbol('ITerminalServiceFactory');
diff --git a/src/client/terminals/codeExecution/terminalCodeExecution.ts b/src/client/terminals/codeExecution/terminalCodeExecution.ts
index ea444af4d89e..62206d26513f 100644
--- a/src/client/terminals/codeExecution/terminalCodeExecution.ts
+++ b/src/client/terminals/codeExecution/terminalCodeExecution.ts
@@ -65,7 +65,7 @@ export class TerminalCodeExecutionProvider implements ICodeExecutionService {
 
     public async initializeRepl(resource: Resource) {
         const terminalService = this.getTerminalService(resource);
-        if (this.replActive && (await this.replActive)) {
+        if (terminalService.hasActiveTerminal()) {
             await terminalService.show();
             return;
         }