diff --git a/src/features/terminal/shellStartupSetupHandlers.ts b/src/features/terminal/shellStartupSetupHandlers.ts
index b9da1e8d..0a818ee2 100644
--- a/src/features/terminal/shellStartupSetupHandlers.ts
+++ b/src/features/terminal/shellStartupSetupHandlers.ts
@@ -55,6 +55,10 @@ export async function handleSettingUpShellProfile(
             });
             providers.forEach((provider) => callback(provider, false));
         }
+    } else {
+        traceInfo(`User declined shell profile setup for ${shells}, switching to command activation`);
+        await Promise.all(providers.map((provider) => provider.teardownScripts()));
+        await setAutoActivationType(ACT_TYPE_COMMAND);
     }
 }
 
diff --git a/src/features/terminal/shells/common/shellUtils.ts b/src/features/terminal/shells/common/shellUtils.ts
index 0d74e31e..1264c188 100644
--- a/src/features/terminal/shells/common/shellUtils.ts
+++ b/src/features/terminal/shells/common/shellUtils.ts
@@ -161,3 +161,23 @@ export async function getShellIntegrationEnabledCache(): Promise<boolean> {
     await persistentState.set(SHELL_INTEGRATION_STATE_KEY, shellIntegrationEnabled);
     return shellIntegrationEnabled;
 }
+
+// Shells that support shell integration way of environment activation.
+// CMD is not listed here, but we still want to support activation via profile modification.
+export const shellIntegrationSupportedShells = [
+    ShellConstants.PWSH,
+    ShellConstants.BASH,
+    ShellConstants.GITBASH,
+    ShellConstants.FISH,
+    ShellConstants.ZSH,
+];
+
+/**
+ * Determines whether profile-based activation should be used instead of shell integration.
+ * Profile activation is preferred when:
+ * - Running in WSL
+ * - The shell type doesn't support shell integration (e.g., cmd)
+ */
+export function shouldUseProfileActivation(shellType: string): boolean {
+    return isWsl() || !shellIntegrationSupportedShells.includes(shellType);
+}
diff --git a/src/features/terminal/terminalManager.ts b/src/features/terminal/terminalManager.ts
index d73e498a..394cc8db 100644
--- a/src/features/terminal/terminalManager.ts
+++ b/src/features/terminal/terminalManager.ts
@@ -16,7 +16,12 @@ import { getConfiguration, onDidChangeConfiguration } from '../../common/workspa
 import { isActivatableEnvironment } from '../common/activation';
 import { identifyTerminalShell } from '../common/shellDetector';
 import { getPythonApi } from '../pythonApi';
-import { getShellIntegrationEnabledCache, isWsl, shellIntegrationForActiveTerminal } from './shells/common/shellUtils';
+import {
+    getShellIntegrationEnabledCache,
+    isWsl,
+    shellIntegrationForActiveTerminal,
+    shouldUseProfileActivation,
+} from './shells/common/shellUtils';
 import { ShellEnvsProvider, ShellSetupState, ShellStartupScriptProvider } from './shells/startupProvider';
 import { handleSettingUpShellProfile } from './shellStartupSetupHandlers';
 import {
@@ -166,19 +171,20 @@ export class TerminalManagerImpl implements TerminalManager {
             await Promise.all(
                 providers.map(async (p) => {
                     const state = await p.isSetup();
-                    const shellIntegrationEnabled = await getShellIntegrationEnabledCache();
+                    const shellIntegrationEnabledSetting = await getShellIntegrationEnabledCache();
+                    const shellIntegrationActiveTerminal = await shellIntegrationForActiveTerminal(p.name);
+                    const shellIntegrationLikelyAvailable =
+                        shellIntegrationEnabledSetting || shellIntegrationActiveTerminal;
                     traceVerbose(`Checking shell profile for ${p.shellType}, with state: ${state}`);
+
                     if (state === ShellSetupState.NotSetup) {
                         traceVerbose(
-                            `WSL detected: ${isWsl()}, Shell integration available from setting, or active terminal: ${shellIntegrationEnabled}, or ${await shellIntegrationForActiveTerminal(
+                            `WSL detected: ${isWsl()}, Shell integration available from setting, or active terminal: ${shellIntegrationEnabledSetting}, or ${await shellIntegrationForActiveTerminal(
                                 p.name,
                             )}`,
                         );
 
-                        if (
-                            (shellIntegrationEnabled || (await shellIntegrationForActiveTerminal(p.name))) &&
-                            !isWsl()
-                        ) {
+                        if (shellIntegrationLikelyAvailable && !shouldUseProfileActivation(p.shellType)) {
                             // Shell integration available and NOT in WSL - skip setup
                             await p.teardownScripts();
                             this.shellSetup.set(p.shellType, true);
@@ -194,10 +200,7 @@ export class TerminalManagerImpl implements TerminalManager {
                             );
                         }
                     } else if (state === ShellSetupState.Setup) {
-                        if (
-                            (shellIntegrationEnabled || (await shellIntegrationForActiveTerminal(p.name))) &&
-                            !isWsl()
-                        ) {
+                        if (shellIntegrationLikelyAvailable && !shouldUseProfileActivation(p.shellType)) {
                             await p.teardownScripts();
                             traceVerbose(
                                 `Shell integration available for ${p.shellType}, removed profile script in favor of shell integration.`,