diff --git a/src/managers/conda/condaUtils.ts b/src/managers/conda/condaUtils.ts
index 418fb62e..056a5db2 100644
--- a/src/managers/conda/condaUtils.ts
+++ b/src/managers/conda/condaUtils.ts
@@ -547,9 +547,11 @@ async function windowsExceptionGenerateConfig(
 
     const ps1Hook = await getCondaHookPs1Path(condaFolder);
     traceVerbose(`PS1 hook path: ${ps1Hook ?? 'not found'}`);
-    const activation = ps1Hook ? ps1Hook : sourceInitPath;
 
-    const pwshActivate = [{ executable: activation }, { executable: 'conda', args: ['activate', prefix] }];
+    // For PowerShell, we need to dot-source the conda-hook.ps1 script if available
+    const pwshActivate = ps1Hook 
+        ? [{ executable: '.', args: [ps1Hook] }, { executable: 'conda', args: ['activate', prefix] }]
+        : [{ executable: sourceInitPath }, { executable: 'conda', args: ['activate', prefix] }];
     const cmdActivate = [{ executable: sourceInitPath }, { executable: 'conda', args: ['activate', prefix] }];
 
     const bashActivate = [{ executable: 'source', args: [sourceInitPath.replace(/\\/g, '/'), prefix] }];
diff --git a/src/test/features/terminal/shells/common/shellUtils.unit.test.ts b/src/test/features/terminal/shells/common/shellUtils.unit.test.ts
index 12eedfdb..effcf119 100644
--- a/src/test/features/terminal/shells/common/shellUtils.unit.test.ts
+++ b/src/test/features/terminal/shells/common/shellUtils.unit.test.ts
@@ -1,9 +1,11 @@
 import * as assert from 'assert';
 import {
     extractProfilePath,
+    getShellCommandAsString,
     PROFILE_TAG_END,
     PROFILE_TAG_START,
 } from '../../../../../features/terminal/shells/common/shellUtils';
+import { ShellConstants } from '../../../../../features/common/shellConstants';
 
 suite('Shell Utils', () => {
     suite('extractProfilePath', () => {
@@ -77,4 +79,41 @@ suite('Shell Utils', () => {
             assert.strictEqual(result, expectedPath);
         });
     });
+
+    suite('getShellCommandAsString PowerShell Conda Activation', () => {
+        test('should format PowerShell conda activation with dot-sourcing correctly', () => {
+            const command = [
+                { executable: '.', args: ['/path/to/conda-hook.ps1'] },
+                { executable: 'conda', args: ['activate', 'myenv'] }
+            ];
+            const result = getShellCommandAsString(ShellConstants.PWSH, command);
+            assert.strictEqual(result, '(. /path/to/conda-hook.ps1) ; (conda activate myenv)');
+        });
+
+        test('should format PowerShell conda activation with spaces in path correctly', () => {
+            const command = [
+                { executable: '.', args: ['/path with spaces/conda-hook.ps1'] },
+                { executable: 'conda', args: ['activate', 'my env'] }
+            ];
+            const result = getShellCommandAsString(ShellConstants.PWSH, command);
+            assert.strictEqual(result, '(. "/path with spaces/conda-hook.ps1") ; (conda activate "my env")');
+        });
+
+        test('should format PowerShell conda activation fallback correctly', () => {
+            const command = [
+                { executable: '/path/to/activate.bat' },
+                { executable: 'conda', args: ['activate', 'myenv'] }
+            ];
+            const result = getShellCommandAsString(ShellConstants.PWSH, command);
+            assert.strictEqual(result, '(/path/to/activate.bat) ; (conda activate myenv)');
+        });
+
+        test('should format single PowerShell command without parentheses', () => {
+            const command = [
+                { executable: 'conda', args: ['activate', 'myenv'] }
+            ];
+            const result = getShellCommandAsString(ShellConstants.PWSH, command);
+            assert.strictEqual(result, 'conda activate myenv');
+        });
+    });
 });