I started facing this issue suddenly after vscode upgrades and resolved the issue by following approach.

Follow these instruction one by one until it resolves the issue. You may have to restart your vscode multiple times during the process.

  • Upgrade vscode

  • Point $SHELL to correct shell path
    Find which shell you have, echo $SHELL mine is /bin/zsh after that I checked where my zsh shell is installed

## Find shell
$ echo $SHELL

## Check where zsh is installed or working from
$ which zsh

I got /usr/local/bin/zsh after that I updated my SHELL to correct zsh

## Filename: ~/.zshrc
$ export SHELL=/usr/local/bin/zsh
  • Update vscode terminal shell profile
    Open settings and scroll down in terminal section and set to your shell.

Restart vscode

  • Restart vscode in verbose mode to check for further details
$ code --verbose --log debug

see if anything is unusual and share those logs here

$ export SHELL=/usr/local/bin/bash

References

https://github.com/Microsoft/vscode/issues/62041