VS stopped activating conda environment in its terminal

[mieszkomularczyk]

Type: Bug

1. Open VS Code
2. Open directory/project with conda virtual environment created
3. VS Code properly recognizes this env and I see in bottom left corner 3.2.17('conda') and if I run the any python code from VS it runs indeed in its environment
4. However the terminal (Powershell) is completely unaware. Running "python --version" show the system-wide python not the conda env one. Also running "conda" or "jupyter notebook" reports command not found
   It used to work earlier this year and it stopped with one of the recent updates. Please note I do not have this problem with venv (it activates perfectly in the terminal as well.

The only workround is to launch first Anaconda prompt, activate the conda environment in my target directory and then typing "code ." so launching VSCode from the Anaconda command prompt.

However this is mess. I would like my old, easier way to start working again. If I have anything wrong in the config, please let me know.
Here is the screenshot. Again, it used to work great like with venv.

VS Code version: Code 1.95.3 (f1a4fb1, 2024-11-13T14:50:04.152Z)
OS version: Windows_NT x64 10.0.22631
Modes:

System Info

Item	Value
CPUs	13th Gen Intel(R) Core(TM) i9-13900H (20 x 2995)
GPU Status	2d_canvas: enabled canvas_oop_rasterization: enabled_on 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 video_decode: enabled video_encode: enabled vulkan: disabled_off webgl: enabled webgl2: enabled webgpu: enabled webnn: disabled_off
Load (avg)	undefined
Memory (System)	31.69GB (17.09GB free)
Process Argv	--crash-reporter-id c64e8498-961b-4637-9e8b-d67b151abcfe
Screen Reader	no
VM	0%

Extensions (13)

Extension	Author (truncated)	Version
vscode-docker	ms-	1.29.3
debugpy	ms-	2024.12.0
python	ms-	2024.20.0
vscode-pylance	ms-	2024.12.1
jupyter	ms-	2024.10.0
jupyter-keymap	ms-	1.1.2
jupyter-renderers	ms-	1.0.21
vscode-jupyter-cell-tags	ms-	0.1.9
vscode-jupyter-powertoys	ms-	0.1.1
vscode-jupyter-slideshow	ms-	0.1.6
remote-wsl	ms-	0.88.5
intellicode-api-usage-examples	Vis	0.2.9
vscodeintellicode	Vis	1.3.2

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[karthiknadig]

Duplicate microsoft/vscode-python#24472