diff --git a/src/vs/workbench/contrib/terminal/browser/terminal.ts b/src/vs/workbench/contrib/terminal/browser/terminal.ts
index a74f1024b79ec..1dcaecd333a0d 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminal.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminal.ts
@@ -690,6 +690,7 @@ export interface ITerminalInstance extends IBaseTerminalInstance {
 	onDidExecuteText: Event<void>;
 	onDidChangeTarget: Event<TerminalLocation | undefined>;
 	onDidSendText: Event<string>;
+	onDidChangeShellType: Event<TerminalShellType>;
 
 	/**
 	 * An event that fires when a terminal is dropped on this instance via drag and drop.
diff --git a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
index 70bd126a25899..63899c8c3c60b 100644
--- a/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
+++ b/src/vs/workbench/contrib/terminal/browser/terminalInstance.ts
@@ -341,6 +341,8 @@ export class TerminalInstance extends Disposable implements ITerminalInstance {
 	readonly onDidChangeTarget = this._onDidChangeTarget.event;
 	private readonly _onDidSendText = this._register(new Emitter<string>());
 	readonly onDidSendText = this._onDidSendText.event;
+	private readonly _onDidChangeShellType = this._register(new Emitter<TerminalShellType>());
+	readonly onDidChangeShellType = this._onDidChangeShellType.event;
 
 	constructor(
 		private readonly _terminalShellTypeContextKey: IContextKey<string>,
@@ -1896,9 +1898,13 @@ export class TerminalInstance extends Disposable implements ITerminalInstance {
 	}
 
 	setShellType(shellType: TerminalShellType | undefined) {
-		this._shellType = shellType;
+		if (this._shellType === shellType) {
+			return;
+		}
 		if (shellType) {
+			this._shellType = shellType;
 			this._terminalShellTypeContextKey.set(shellType?.toString());
+			this._onDidChangeShellType.fire(shellType);
 		}
 	}
 
diff --git a/src/vs/workbench/contrib/terminalContrib/suggest/browser/terminal.suggest.contribution.ts b/src/vs/workbench/contrib/terminalContrib/suggest/browser/terminal.suggest.contribution.ts
index 7a781570251a5..ab39f57b9e9d9 100644
--- a/src/vs/workbench/contrib/terminalContrib/suggest/browser/terminal.suggest.contribution.ts
+++ b/src/vs/workbench/contrib/terminalContrib/suggest/browser/terminal.suggest.contribution.ts
@@ -5,6 +5,7 @@
 
 import type { Terminal as RawXtermTerminal } from '@xterm/xterm';
 import * as dom from 'vs/base/browser/dom';
+import { Event } from 'vs/base/common/event';
 import { KeyCode } from 'vs/base/common/keyCodes';
 import { DisposableStore, MutableDisposable, toDisposable } from 'vs/base/common/lifecycle';
 import { localize2 } from 'vs/nls';
@@ -39,7 +40,7 @@ class TerminalSuggestContribution extends DisposableStore implements ITerminalCo
 
 	constructor(
 		private readonly _instance: ITerminalInstance,
-		_processManager: ITerminalProcessManager,
+		processManager: ITerminalProcessManager,
 		widgetManager: TerminalWidgetManager,
 		@IContextKeyService private readonly _contextKeyService: IContextKeyService,
 		@IConfigurationService private readonly _configurationService: IConfigurationService,
@@ -51,7 +52,9 @@ class TerminalSuggestContribution extends DisposableStore implements ITerminalCo
 	}
 
 	xtermOpen(xterm: IXtermTerminal & { raw: RawXtermTerminal }): void {
-		this._loadSuggestAddon(xterm.raw);
+		this.add(Event.runAndSubscribe(this._instance.onDidChangeShellType, async () => {
+			this._loadSuggestAddon(xterm.raw);
+		}));
 		this.add(this._contextKeyService.onDidChangeContext(e => {
 			if (e.affectsSome(this._terminalSuggestWidgetContextKeys)) {
 				this._loadSuggestAddon(xterm.raw);
@@ -66,8 +69,8 @@ class TerminalSuggestContribution extends DisposableStore implements ITerminalCo
 
 	private _loadSuggestAddon(xterm: RawXtermTerminal): void {
 		const sendingKeybindingsToShell = this._configurationService.getValue<ITerminalConfiguration>(TERMINAL_CONFIG_SECTION).sendKeybindingsToShell;
-		if (sendingKeybindingsToShell) {
-			this._addon.dispose();
+		if (sendingKeybindingsToShell || this._instance.shellType !== 'pwsh') {
+			this._addon.clear();
 			return;
 		}
 		if (this._terminalSuggestWidgetVisibleContextKey) {