diff --git a/news/2 Fixes/11264.md b/news/2 Fixes/11264.md
new file mode 100644
index 000000000000..36873e9c5dd7
--- /dev/null
+++ b/news/2 Fixes/11264.md	
@@ -0,0 +1 @@
+Allow user modules import when discovering tests.
diff --git a/src/client/testing/unittest/services/discoveryService.ts b/src/client/testing/unittest/services/discoveryService.ts
index a1a246634978..f09901e37f5f 100644
--- a/src/client/testing/unittest/services/discoveryService.ts
+++ b/src/client/testing/unittest/services/discoveryService.ts
@@ -29,7 +29,9 @@ export class TestDiscoveryService implements ITestDiscoveryService {
         const pythonScript = this.getDiscoveryScript(options);
         const unitTestOptions = this.translateOptions(options);
         const runOptions: Options = {
-            args: internalPython.execCode(pythonScript),
+            // unittest needs to load modules in the workspace
+            // isolating it breaks unittest discovery
+            args: internalPython.execCode(pythonScript, false),
             cwd: options.cwd,
             workspaceFolder: options.workspaceFolder,
             token: options.token,
diff --git a/src/test/testing/unittest/unittest.discovery.unit.test.ts b/src/test/testing/unittest/unittest.discovery.unit.test.ts
index 32ebaa77f22f..1d03baada13e 100644
--- a/src/test/testing/unittest/unittest.discovery.unit.test.ts
+++ b/src/test/testing/unittest/unittest.discovery.unit.test.ts
@@ -71,8 +71,8 @@ suite('Unit Tests - Unittest - Discovery', () => {
             .setup((r) => r.run(typeMoq.It.isValue(UNITTEST_PROVIDER), typeMoq.It.isAny()))
             .callback((_, opts: Options) => {
                 expect(opts.args).to.include('-c');
-                expect(opts.args[2]).to.contain(dir);
-                expect(opts.args[2]).to.not.contain('loader.discover("."');
+                expect(opts.args[1]).to.contain(dir);
+                expect(opts.args[1]).to.not.contain('loader.discover("."');
             })
             .returns(() => Promise.resolve(runOutput))
             .verifiable(typeMoq.Times.once());
@@ -117,8 +117,8 @@ suite('Unit Tests - Unittest - Discovery', () => {
             .setup((r) => r.run(typeMoq.It.isValue(UNITTEST_PROVIDER), typeMoq.It.isAny()))
             .callback((_, opts: Options) => {
                 expect(opts.args).to.include('-c');
-                expect(opts.args[2]).to.contain(dir);
-                expect(opts.args[2]).to.not.contain('loader.discover("."');
+                expect(opts.args[1]).to.contain(dir);
+                expect(opts.args[1]).to.not.contain('loader.discover("."');
             })
             .returns(() => Promise.resolve(runOutput))
             .verifiable(typeMoq.Times.once());
@@ -163,8 +163,8 @@ suite('Unit Tests - Unittest - Discovery', () => {
             .setup((r) => r.run(typeMoq.It.isValue(UNITTEST_PROVIDER), typeMoq.It.isAny()))
             .callback((_, opts: Options) => {
                 expect(opts.args).to.include('-c');
-                expect(opts.args[2]).to.not.contain(dir);
-                expect(opts.args[2]).to.contain('loader.discover("."');
+                expect(opts.args[1]).to.not.contain(dir);
+                expect(opts.args[1]).to.contain('loader.discover("."');
             })
             .returns(() => Promise.resolve(runOutput))
             .verifiable(typeMoq.Times.once());
@@ -205,8 +205,8 @@ suite('Unit Tests - Unittest - Discovery', () => {
             .setup((r) => r.run(typeMoq.It.isValue(UNITTEST_PROVIDER), typeMoq.It.isAny()))
             .callback((_, opts: Options) => {
                 expect(opts.args).to.include('-c');
-                expect(opts.args[2]).to.contain(pattern);
-                expect(opts.args[2]).to.not.contain('test*.py');
+                expect(opts.args[1]).to.contain(pattern);
+                expect(opts.args[1]).to.not.contain('test*.py');
             })
             .returns(() => Promise.resolve(runOutput))
             .verifiable(typeMoq.Times.once());
@@ -251,8 +251,8 @@ suite('Unit Tests - Unittest - Discovery', () => {
             .setup((r) => r.run(typeMoq.It.isValue(UNITTEST_PROVIDER), typeMoq.It.isAny()))
             .callback((_, opts: Options) => {
                 expect(opts.args).to.include('-c');
-                expect(opts.args[2]).to.contain(pattern);
-                expect(opts.args[2]).to.not.contain('test*.py');
+                expect(opts.args[1]).to.contain(pattern);
+                expect(opts.args[1]).to.not.contain('test*.py');
             })
             .returns(() => Promise.resolve(runOutput))
             .verifiable(typeMoq.Times.once());
@@ -297,8 +297,8 @@ suite('Unit Tests - Unittest - Discovery', () => {
             .setup((r) => r.run(typeMoq.It.isValue(UNITTEST_PROVIDER), typeMoq.It.isAny()))
             .callback((_, opts: Options) => {
                 expect(opts.args).to.include('-c');
-                expect(opts.args[2]).to.not.contain(pattern);
-                expect(opts.args[2]).to.contain('test*.py');
+                expect(opts.args[1]).to.not.contain(pattern);
+                expect(opts.args[1]).to.contain('test*.py');
             })
             .returns(() => Promise.resolve(runOutput))
             .verifiable(typeMoq.Times.once());
diff --git a/src/test/testing/unittest/unittest.run.test.ts b/src/test/testing/unittest/unittest.run.test.ts
index 8cb304a05f1b..85428c185634 100644
--- a/src/test/testing/unittest/unittest.run.test.ts
+++ b/src/test/testing/unittest/unittest.run.test.ts
@@ -145,11 +145,10 @@ suite('Unit Tests - unittest - run with mocked process output', () => {
             .create()) as MockProcessService;
         procService.onExecObservable((_file, args, _options, callback) => {
             if (
-                //args[0] is pyvsc-run-isolated.py.
                 args.length > 1 &&
-                args[1] === '-c' &&
-                args[2].includes('import unittest') &&
-                args[2].includes('loader = unittest.TestLoader()')
+                args[0] === '-c' &&
+                args[1].includes('import unittest') &&
+                args[1].includes('loader = unittest.TestLoader()')
             ) {
                 callback({
                     // Ensure any spaces added during code formatting or the like are removed