diff --git a/pythonFiles/tests/pytestadapter/.data/unittest_skiptest_file_level.py b/pythonFiles/tests/pytestadapter/.data/unittest_skiptest_file_level.py
new file mode 100644
index 000000000000..362c74cbb76f
--- /dev/null
+++ b/pythonFiles/tests/pytestadapter/.data/unittest_skiptest_file_level.py
@@ -0,0 +1,13 @@
+# Copyright (c) Microsoft Corporation. All rights reserved.
+# Licensed under the MIT License.
+
+import unittest
+from unittest import SkipTest
+
+# Due to the skip at the file level, no tests will be discovered.
+raise SkipTest("Skip all tests in this file, they should not be recognized by pytest.")
+
+
+class SimpleTest(unittest.TestCase):
+    def testadd1(self):
+        assert True
diff --git a/pythonFiles/tests/pytestadapter/expected_discovery_test_output.py b/pythonFiles/tests/pytestadapter/expected_discovery_test_output.py
index fb8234350fb4..91c1453dfc77 100644
--- a/pythonFiles/tests/pytestadapter/expected_discovery_test_output.py
+++ b/pythonFiles/tests/pytestadapter/expected_discovery_test_output.py
@@ -100,6 +100,16 @@
     "id_": TEST_DATA_PATH_STR,
 }
 
+# This is the expected output for the unittest_skip_file_level test.
+# └── unittest_skiptest_file_level.py
+unittest_skip_file_level_expected_output = {
+    "name": ".data",
+    "path": TEST_DATA_PATH_STR,
+    "type_": "folder",
+    "children": [],
+    "id_": TEST_DATA_PATH_STR,
+}
+
 # This is the expected output for the unittest_folder tests
 # └── unittest_folder
 #    ├── test_add.py
diff --git a/pythonFiles/tests/pytestadapter/test_discovery.py b/pythonFiles/tests/pytestadapter/test_discovery.py
index 02ea1ddcd871..5288c7ad769e 100644
--- a/pythonFiles/tests/pytestadapter/test_discovery.py
+++ b/pythonFiles/tests/pytestadapter/test_discovery.py
@@ -87,6 +87,10 @@ def test_parameterized_error_collect():
 @pytest.mark.parametrize(
     "file, expected_const",
     [
+        (
+            "unittest_skiptest_file_level.py",
+            expected_discovery_test_output.unittest_skip_file_level_expected_output,
+        ),
         (
             "param_same_name",
             expected_discovery_test_output.param_same_name_expected_output,
diff --git a/pythonFiles/vscode_pytest/__init__.py b/pythonFiles/vscode_pytest/__init__.py
index 072c5ef5d3ad..1ac287a8410a 100644
--- a/pythonFiles/vscode_pytest/__init__.py
+++ b/pythonFiles/vscode_pytest/__init__.py
@@ -73,6 +73,8 @@ def pytest_exception_interact(node, call, report):
     # if discovery, then add the error to error logs.
     if type(report) == pytest.CollectReport:
         if call.excinfo and call.excinfo.typename != "AssertionError":
+            if report.outcome == "skipped" and "SkipTest" in str(call):
+                return
             ERRORS.append(
                 call.excinfo.exconly() + "\n Check Python Test Logs for more details."
             )