On Windows, the integrated PowerShell terminal gets a PATH with broken vscode CLI when started using Code.exe

[mpapirkovskyy]

Type: Bug

Observed behavior:

• If VS Code is fully closed and then launched from the Start menu (or directly via Code.exe), the integrated PowerShell terminal resolves code to Code.exe instead of bin\code.cmd.
• In this state, commands like code --version open a new VS Code window instead of behaving like the CLI.
• If VS Code is fully closed and then launched from code.cmd from a terminal, the integrated PowerShell terminal PATH is correct and code resolves to ...\Microsoft VS Code\bin\code.cmd.
• After launching once via code.cmd, opening additional VS Code windows keeps the good behavior.

Steps to Reproduce:

1. Fully exit all VS Code windows/processes.
2. Launch VS Code from Start menu (or directly from C:\Users\<user>\AppData\Local\Programs\Microsoft VS Code\Code.exe).
3. Open a new integrated PowerShell terminal.
4. Run:
   Get-Command code -All
5. Observe that code resolves to ...\Microsoft VS Code\Code.exe before ...\Microsoft VS Code\bin\code.cmd.
6. Optionally run code --version and observe that it opens a new VS Code window instead of printing version info.

Control case:

1. Fully exit all VS Code windows/processes.
2. Launch VS Code from terminal via code.cmd / code ..
3. Open a new integrated PowerShell terminal.
4. Run:
   Get-Command code -All
5. Observe that code resolves correctly to ...\Microsoft VS Code\bin\code.cmd.

Expected:
The integrated terminal should get consistent PATH / command resolution regardless of whether VS Code was launched from Start menu / Code.exe or from code.cmd.

Actual:
The integrated terminal inherits or constructs a different PATH depending on launch method, causing code to resolve to Code.exe in one case and code.cmd in the other.

VS Code version: Code 1.111.0 (ce099c1, 2026-03-06T23:06:10Z)
OS version: Windows_NT x64 10.0.26200
Modes:

System Info

Item	Value
CPUs	Intel(R) Core(TM) i9-10850K CPU @ 3.60GHz (20 x 3600)
GPU Status	2d_canvas: enabled GPU0: VENDOR= 0x10de, DEVICE=0x2705 [NVIDIA GeForce RTX 4070 Ti SUPER], DRIVER_VENDOR=NVIDIA, DRIVER_VERSION=32.0.15.9144 ACTIVE GPU1: VENDOR= 0x8086, DEVICE=0x9bc5 [Intel(R) UHD Graphics 630], DRIVER_VERSION=31.0.101.2111 GPU2: VENDOR= 0x1414, DEVICE=0x008c [Microsoft Basic Render Driver], DRIVER_VERSION=10.0.26100.7309 Machine model name: Machine model version: direct_rendering_display_compositor: disabled_off_ok gpu_compositing: enabled multiple_raster_threads: enabled_on opengl: enabled_on rasterization: enabled raw_draw: disabled_off_ok skia_graphite: disabled_off trees_in_viz: disabled_off video_decode: enabled video_encode: enabled webgl: enabled webgl2: enabled webgpu: enabled webnn: disabled_off
Load (avg)	undefined
Memory (System)	63.85GB (25.92GB free)
Process Argv	--crash-reporter-id d5268291-c5d9-48b9-bc4d-ec80f13f4317
Screen Reader	no
VM	0%

Extensions (22)

Extension	Author (truncated)	Version
docker	doc	0.18.0
copilot-chat	Git	0.39.1
vscode-github-actions	git	0.31.0
lyrebird-language-extension	lyr	4.6.4
vscode-containers	ms-	2.4.1
vscode-docker	ms-	2.0.0
csdevkit	ms-	2.10.3
csharp	ms-	2.120.3
vscode-dotnet-runtime	ms-	3.0.0
debugpy	ms-	2025.18.0
python	ms-	2026.4.0
vscode-pylance	ms-	2026.1.1
vscode-python-envs	ms-	1.22.0
remote-containers	ms-	0.447.0
remote-wsl	ms-	0.104.3
cmake-tools	ms-	1.22.28
cpp-devtools	ms-	0.3.6
cpptools	ms-	1.30.5
cpptools-extension-pack	ms-	1.5.1
vscode-xml	red	0.29.0
vscode-taskexplorer	spm	3.0.11
code-spell-checker	str	4.5.6

(1 theme extensions excluded)

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cp_cls_t_966_ss:31454198
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subagent_3ccgc321:31467997
idci7584:31464702
edit_mode_hidden:31461530
864ei723_large_tool_results_to_disk:31460878
notips:31471632
55364912:31471672
nes-extended-on:31455476
chat:31457767
0h66b693:31473807
nes-rcnt-ctrl:31471618
8a2c4887_5_3_codex_prompt:31475326
cpptoolsoff-v2:31475362
f0268191:31471593
editor1:31474144
thinking_c:31471065
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newsessionicon:31473927
h08i8180_copy:31475368
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[deepak1556]

Merging to #300231