diff --git a/src/test/repl/variableProvider.test.ts b/src/test/repl/variableProvider.test.ts
index 8b45fae0c5a0..1b151d34c096 100644
--- a/src/test/repl/variableProvider.test.ts
+++ b/src/test/repl/variableProvider.test.ts
@@ -8,7 +8,7 @@ import { IVariableDescription } from '../../client/repl/variables/types';
 import { VariablesProvider } from '../../client/repl/variables/variablesProvider';
 import { VariableRequester } from '../../client/repl/variables/variableRequester';
 
-suite.only('ReplVariablesProvider', () => {
+suite('ReplVariablesProvider', () => {
     let provider: VariablesProvider;
     let varRequester: TypeMoq.IMock<VariableRequester>;
     let notebook: TypeMoq.IMock<NotebookDocument>;
diff --git a/src/test/terminals/codeExecution/smartSend.test.ts b/src/test/terminals/codeExecution/smartSend.test.ts
index 594db361f51e..6fac0cbe2eb4 100644
--- a/src/test/terminals/codeExecution/smartSend.test.ts
+++ b/src/test/terminals/codeExecution/smartSend.test.ts
@@ -1,3 +1,6 @@
+// Copyright (c) Microsoft Corporation. All rights reserved.
+// Licensed under the MIT License.
+
 import * as TypeMoq from 'typemoq';
 import * as path from 'path';
 import { TextEditor, Selection, Position, TextDocument, Uri } from 'vscode';
diff --git a/src/test/terminals/shellIntegration/pythonStartup.test.ts b/src/test/terminals/shellIntegration/pythonStartup.test.ts
new file mode 100644
index 000000000000..41388fc331c8
--- /dev/null
+++ b/src/test/terminals/shellIntegration/pythonStartup.test.ts
@@ -0,0 +1,125 @@
+// Copyright (c) Microsoft Corporation. All rights reserved.
+// Licensed under the MIT License.
+
+import * as sinon from 'sinon';
+import * as TypeMoq from 'typemoq';
+import { GlobalEnvironmentVariableCollection, Uri, WorkspaceConfiguration } from 'vscode';
+import * as workspaceApis from '../../../client/common/vscodeApis/workspaceApis';
+import { registerPythonStartup } from '../../../client/terminals/pythonStartup';
+import { IExtensionContext } from '../../../client/common/types';
+
+suite('Terminal - Shell Integration with PYTHONSTARTUP', () => {
+    let getConfigurationStub: sinon.SinonStub;
+    let pythonConfig: TypeMoq.IMock<WorkspaceConfiguration>;
+    let editorConfig: TypeMoq.IMock<WorkspaceConfiguration>;
+    let context: TypeMoq.IMock<IExtensionContext>;
+    let createDirectoryStub: sinon.SinonStub;
+    let copyStub: sinon.SinonStub;
+    let globalEnvironmentVariableCollection: TypeMoq.IMock<GlobalEnvironmentVariableCollection>;
+
+    setup(() => {
+        context = TypeMoq.Mock.ofType<IExtensionContext>();
+        globalEnvironmentVariableCollection = TypeMoq.Mock.ofType<GlobalEnvironmentVariableCollection>();
+
+        // Question: Why do we have to set up environmentVariableCollection and globalEnvironmentVariableCollection in this flip-flop way?
+        // Reference: /vscode-python/src/test/interpreters/activation/terminalEnvVarCollectionService.unit.test.ts
+        context.setup((c) => c.environmentVariableCollection).returns(() => globalEnvironmentVariableCollection.object);
+        context.setup((c) => c.storageUri).returns(() => Uri.parse('a'));
+
+        globalEnvironmentVariableCollection
+            .setup((c) => c.replace(TypeMoq.It.isAny(), TypeMoq.It.isAny(), TypeMoq.It.isAny()))
+            .returns(() => Promise.resolve());
+
+        globalEnvironmentVariableCollection.setup((c) => c.delete(TypeMoq.It.isAny())).returns(() => Promise.resolve());
+
+        getConfigurationStub = sinon.stub(workspaceApis, 'getConfiguration');
+        createDirectoryStub = sinon.stub(workspaceApis, 'createDirectory');
+        copyStub = sinon.stub(workspaceApis, 'copy');
+
+        pythonConfig = TypeMoq.Mock.ofType<WorkspaceConfiguration>();
+        editorConfig = TypeMoq.Mock.ofType<WorkspaceConfiguration>();
+        getConfigurationStub.callsFake((section: string) => {
+            if (section === 'python') {
+                return pythonConfig.object;
+            }
+            return editorConfig.object;
+        });
+
+        createDirectoryStub.callsFake((_) => Promise.resolve());
+        copyStub.callsFake((_, __, ___) => Promise.resolve());
+    });
+
+    teardown(() => {
+        sinon.restore();
+    });
+
+    test('Verify createDirectory is called when shell integration is enabled', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => true);
+
+        await registerPythonStartup(context.object);
+
+        sinon.assert.calledOnce(createDirectoryStub);
+    });
+
+    test('Verify createDirectory is not called when shell integration is disabled', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => false);
+
+        await registerPythonStartup(context.object);
+
+        sinon.assert.notCalled(createDirectoryStub);
+    });
+
+    test('Verify copy is called when shell integration is enabled', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => true);
+
+        await registerPythonStartup(context.object);
+
+        sinon.assert.calledOnce(copyStub);
+    });
+
+    test('Verify copy is not called when shell integration is disabled', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => false);
+
+        await registerPythonStartup(context.object);
+
+        sinon.assert.notCalled(copyStub);
+    });
+
+    test('PYTHONSTARTUP is set when enableShellIntegration setting is true', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => true);
+
+        await registerPythonStartup(context.object);
+
+        globalEnvironmentVariableCollection.verify(
+            (c) => c.replace('PYTHONSTARTUP', TypeMoq.It.isAny(), TypeMoq.It.isAny()),
+            TypeMoq.Times.once(),
+        );
+    });
+
+    test('environmentCollection should not remove PYTHONSTARTUP when enableShellIntegration setting is true', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => true);
+
+        await registerPythonStartup(context.object);
+
+        globalEnvironmentVariableCollection.verify((c) => c.delete('PYTHONSTARTUP'), TypeMoq.Times.never());
+    });
+
+    test('PYTHONSTARTUP is not set when enableShellIntegration setting is false', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => false);
+
+        await registerPythonStartup(context.object);
+
+        globalEnvironmentVariableCollection.verify(
+            (c) => c.replace('PYTHONSTARTUP', TypeMoq.It.isAny(), TypeMoq.It.isAny()),
+            TypeMoq.Times.never(),
+        );
+    });
+
+    test('PYTHONSTARTUP is deleted when enableShellIntegration setting is false', async () => {
+        pythonConfig.setup((p) => p.get('REPL.enableShellIntegration')).returns(() => false);
+
+        await registerPythonStartup(context.object);
+
+        globalEnvironmentVariableCollection.verify((c) => c.delete('PYTHONSTARTUP'), TypeMoq.Times.once());
+    });
+});