diff --git a/src/client/envExt/api.internal.ts b/src/client/envExt/api.internal.ts
index a47193d3cd95..7d511eac49ea 100644
--- a/src/client/envExt/api.internal.ts
+++ b/src/client/envExt/api.internal.ts
@@ -1,7 +1,7 @@
 // Copyright (c) Microsoft Corporation. All rights reserved.
 // Licensed under the MIT License.
 
-import { Terminal, Uri } from 'vscode';
+import { EventEmitter, Terminal, Uri, Disposable, ConfigurationTarget } from 'vscode';
 import { getExtension } from '../common/vscodeApis/extensionsApi';
 import {
     GetEnvironmentScope,
@@ -10,8 +10,10 @@ import {
     PythonEnvironmentApi,
     PythonProcess,
     RefreshEnvironmentsScope,
+    DidChangeEnvironmentEventArgs,
 } from './types';
 import { executeCommand } from '../common/vscodeApis/commandApis';
+import { IInterpreterPathService } from '../common/types';
 
 export const ENVS_EXTENSION_ID = 'ms-python.vscode-python-envs';
 
@@ -24,6 +26,17 @@ export function useEnvExtension(): boolean {
     return _useExt;
 }
 
+const onDidChangeEnvironmentEnvExtEmitter: EventEmitter<DidChangeEnvironmentEventArgs> = new EventEmitter<
+    DidChangeEnvironmentEventArgs
+>();
+export function onDidChangeEnvironmentEnvExt(
+    listener: (e: DidChangeEnvironmentEventArgs) => unknown,
+    thisArgs?: unknown,
+    disposables?: Disposable[],
+): Disposable {
+    return onDidChangeEnvironmentEnvExtEmitter.event(listener, thisArgs, disposables);
+}
+
 let _extApi: PythonEnvironmentApi | undefined;
 export async function getEnvExtApi(): Promise<PythonEnvironmentApi> {
     if (_extApi) {
@@ -33,14 +46,15 @@ export async function getEnvExtApi(): Promise<PythonEnvironmentApi> {
     if (!extension) {
         throw new Error('Python Environments extension not found.');
     }
-    if (extension?.isActive) {
-        _extApi = extension.exports as PythonEnvironmentApi;
-        return _extApi;
+    if (!extension?.isActive) {
+        await extension.activate();
     }
 
-    await extension.activate();
-
     _extApi = extension.exports as PythonEnvironmentApi;
+    _extApi.onDidChangeEnvironment((e) => {
+        onDidChangeEnvironmentEnvExtEmitter.fire(e);
+    });
+
     return _extApi;
 }
 
@@ -106,3 +120,32 @@ export async function clearCache(): Promise<void> {
         await executeCommand('python-envs.clearCache');
     }
 }
+
+export function registerEnvExtFeatures(
+    disposables: Disposable[],
+    interpreterPathService: IInterpreterPathService,
+): void {
+    if (useEnvExtension()) {
+        disposables.push(
+            onDidChangeEnvironmentEnvExt(async (e: DidChangeEnvironmentEventArgs) => {
+                const previousPath = interpreterPathService.get(e.uri);
+
+                if (previousPath !== e.new?.environmentPath.fsPath) {
+                    if (e.uri) {
+                        await interpreterPathService.update(
+                            e.uri,
+                            ConfigurationTarget.WorkspaceFolder,
+                            e.new?.environmentPath.fsPath,
+                        );
+                    } else {
+                        await interpreterPathService.update(
+                            undefined,
+                            ConfigurationTarget.Global,
+                            e.new?.environmentPath.fsPath,
+                        );
+                    }
+                }
+            }),
+        );
+    }
+}
diff --git a/src/client/environmentApi.ts b/src/client/environmentApi.ts
index 558938d7d0b7..ecd8eef21845 100644
--- a/src/client/environmentApi.ts
+++ b/src/client/environmentApi.ts
@@ -11,7 +11,7 @@ import { PythonEnvInfo, PythonEnvKind, PythonEnvType } from './pythonEnvironment
 import { getEnvPath } from './pythonEnvironments/base/info/env';
 import { IDiscoveryAPI, ProgressReportStage } from './pythonEnvironments/base/locator';
 import { IPythonExecutionFactory } from './common/process/types';
-import { traceError, traceVerbose } from './logging';
+import { traceError, traceInfo, traceVerbose } from './logging';
 import { isParentPath, normCasePath } from './common/platform/fs-paths';
 import { sendTelemetryEvent } from './telemetry';
 import { EventName } from './telemetry/constants';
@@ -42,7 +42,13 @@ type ActiveEnvironmentChangeEvent = {
 };
 
 const onDidActiveInterpreterChangedEvent = new EventEmitter<ActiveEnvironmentPathChangeEvent>();
+const previousEnvMap = new Map<string, string>();
 export function reportActiveInterpreterChanged(e: ActiveEnvironmentChangeEvent): void {
+    const oldPath = previousEnvMap.get(e.resource?.uri.fsPath ?? '');
+    if (oldPath === e.path) {
+        return;
+    }
+    previousEnvMap.set(e.resource?.uri.fsPath ?? '', e.path);
     onDidActiveInterpreterChangedEvent.fire({ id: getEnvID(e.path), path: e.path, resource: e.resource });
     reportActiveInterpreterChangedDeprecated({ path: e.path, resource: e.resource?.uri });
 }
@@ -172,6 +178,13 @@ export function buildEnvironmentApi(
     }
 
     disposables.push(
+        onDidActiveInterpreterChangedEvent.event((e) => {
+            let scope = 'global';
+            if (e.resource) {
+                scope = e.resource instanceof Uri ? e.resource.fsPath : e.resource.uri.fsPath;
+            }
+            traceInfo(`Active interpreter [${scope}]: `, e.path);
+        }),
         discoveryApi.onProgress((e) => {
             if (e.stage === ProgressReportStage.discoveryFinished) {
                 knownCache = initKnownCache();
diff --git a/src/client/extensionActivation.ts b/src/client/extensionActivation.ts
index 4a1acca62da5..362fcf8468ad 100644
--- a/src/client/extensionActivation.ts
+++ b/src/client/extensionActivation.ts
@@ -56,6 +56,7 @@ import { registerTriggerForTerminalREPL } from './terminals/codeExecution/termin
 import { registerPythonStartup } from './terminals/pythonStartup';
 import { registerPixiFeatures } from './pythonEnvironments/common/environmentManagers/pixi';
 import { registerCustomTerminalLinkProvider } from './terminals/pythonStartupLinkProvider';
+import { registerEnvExtFeatures } from './envExt/api.internal';
 
 export async function activateComponents(
     // `ext` is passed to any extra activation funcs.
@@ -101,6 +102,7 @@ export function activateFeatures(ext: ExtensionState, _components: Components):
     const interpreterService: IInterpreterService = ext.legacyIOC.serviceContainer.get<IInterpreterService>(
         IInterpreterService,
     );
+    registerEnvExtFeatures(ext.disposables, interpreterPathService);
     const pathUtils = ext.legacyIOC.serviceContainer.get<IPathUtils>(IPathUtils);
     registerPixiFeatures(ext.disposables);
     registerAllCreateEnvironmentFeatures(
diff --git a/src/test/common/persistentState.unit.test.ts b/src/test/common/persistentState.unit.test.ts
index 9af28e2f5860..a77ee571559e 100644
--- a/src/test/common/persistentState.unit.test.ts
+++ b/src/test/common/persistentState.unit.test.ts
@@ -5,6 +5,7 @@
 
 import { assert, expect } from 'chai';
 import * as TypeMoq from 'typemoq';
+import * as sinon from 'sinon';
 import { Memento } from 'vscode';
 import { ICommandManager } from '../../client/common/application/types';
 import { Commands } from '../../client/common/constants';
@@ -17,17 +18,25 @@ import {
 import { IDisposable } from '../../client/common/types';
 import { sleep } from '../core';
 import { MockMemento } from '../mocks/mementos';
+import * as apiInt from '../../client/envExt/api.internal';
 
 suite('Persistent State', () => {
     let cmdManager: TypeMoq.IMock<ICommandManager>;
     let persistentStateFactory: PersistentStateFactory;
     let workspaceMemento: Memento;
     let globalMemento: Memento;
+    let useEnvExtensionStub: sinon.SinonStub;
     setup(() => {
         cmdManager = TypeMoq.Mock.ofType<ICommandManager>();
         workspaceMemento = new MockMemento();
         globalMemento = new MockMemento();
         persistentStateFactory = new PersistentStateFactory(globalMemento, workspaceMemento, cmdManager.object);
+
+        useEnvExtensionStub = sinon.stub(apiInt, 'useEnvExtension');
+        useEnvExtensionStub.returns(false);
+    });
+    teardown(() => {
+        sinon.restore();
     });
 
     test('Global states created are restored on invoking clean storage command', async () => {