diff --git a/src/features/terminal/TerminalView.tsx b/src/features/terminal/TerminalView.tsx
index 52cf0fee4..4c57a74ad 100644
--- a/src/features/terminal/TerminalView.tsx
+++ b/src/features/terminal/TerminalView.tsx
@@ -128,7 +128,9 @@ function paneMenu(e: MouseEvent, key: string) {
       icon: "close",
       run: () =>
         void requestCloseSession(key).then((closed) => {
-          if (closed) requestAnimationFrame(() => activeSession()?.focus());
+          if (!closed) return;
+          if (useTerminals.getState().tabs.length === 0) toolWindowService().hide("terminal");
+          else requestAnimationFrame(() => activeSession()?.focus());
         }),
     },
   ];
diff --git a/src/features/terminal/closeLastTab.test.ts b/src/features/terminal/closeLastTab.test.ts
new file mode 100644
index 000000000..10b8282d1
--- /dev/null
+++ b/src/features/terminal/closeLastTab.test.ts
@@ -0,0 +1,97 @@
+import { afterEach, beforeEach, describe, expect, it, vi } from "vitest";
+import { provideToolWindowService, type ToolWindowService } from "@/workbench/contributions";
+import { closeAll, getSession, newTab, useTerminals } from "./store";
+
+const { focused } = vi.hoisted(() => ({ focused: [] as string[] }));
+
+vi.mock("./session", () => ({
+  TerminalSession: class {
+    key: string;
+    state = { cwd: "/repo" };
+    host = document.createElement("div");
+    private readonly onExit: ((key: string) => void) | undefined;
+    constructor(opts: { key: string; onExit?: (key: string) => void }) {
+      this.key = opts.key;
+      this.onExit = opts.onExit;
+    }
+    exited() {
+      this.onExit?.(this.key);
+    }
+    focus() {
+      focused.push(this.key);
+    }
+    dispose() {}
+  },
+}));
+
+const hide = vi.fn();
+beforeEach(() => {
+  hide.mockClear();
+  focused.length = 0;
+  vi.stubGlobal("requestAnimationFrame", (cb: FrameRequestCallback) => {
+    cb(0);
+    return 0;
+  });
+  provideToolWindowService({ hide } as unknown as ToolWindowService);
+  closeAll();
+});
+afterEach(() => vi.unstubAllGlobals());
+
+function shellExit(key: string) {
+  (getSession(key) as unknown as { exited(): void }).exited();
+}
+
+describe("shell exit closes the last tab", () => {
+  it("hides the Terminal tool window", () => {
+    const tab = newTab("/repo");
+    shellExit(tab.session);
+    expect(useTerminals.getState().tabs).toHaveLength(0);
+    expect(hide).toHaveBeenCalledWith("terminal");
+  });
+
+  it("keeps it open while another session is running", () => {
+    const a = newTab("/repo");
+    newTab("/repo");
+    shellExit(a.session);
+    expect(hide).not.toHaveBeenCalled();
+  });
+});
+
+describe("shell exit with sessions left", () => {
+  /** Puts the caret in `key`'s terminal, as typing into it would. */
+  function typeInto(key: string) {
+    const host = (getSession(key) as unknown as { host: HTMLDivElement }).host;
+    const input = document.createElement("textarea");
+    host.appendChild(input);
+    document.body.appendChild(host);
+    input.focus();
+  }
+
+  it("focuses the session that takes over the active tab", () => {
+    const a = newTab("/repo");
+    const b = newTab("/repo");
+    typeInto(b.session);
+    shellExit(b.session);
+    expect(useTerminals.getState().activeTab).toBe(a.id);
+    expect(focused).toContain(a.session);
+  });
+
+  it("refocuses the active session when the terminal has the caret and a background shell exits", () => {
+    const a = newTab("/repo");
+    const b = newTab("/repo");
+    typeInto(b.session);
+    shellExit(a.session);
+    expect(focused).toContain(b.session);
+  });
+
+  it("leaves the caret where it is when the terminal does not have it", () => {
+    const a = newTab("/repo");
+    newTab("/repo");
+    const editor = document.createElement("input");
+    document.body.appendChild(editor);
+    editor.focus();
+    shellExit(a.session);
+    expect(focused).toEqual([]);
+    expect(document.activeElement).toBe(editor);
+  });
+});
diff --git a/src/features/terminal/store.ts b/src/features/terminal/store.ts
index d35feaafb..899c8a694 100644
--- a/src/features/terminal/store.ts
+++ b/src/features/terminal/store.ts
@@ -8,6 +8,7 @@ import { setContext } from "@/platform/context";
 import { t } from "@/platform/i18n";
 import { basename } from "@/platform/project";
 import { workflowSettings } from "@/platform/workflowSettings";
+import { toolWindowService } from "@/workbench/contributions";
 import { confirm } from "@/workbench/messages";
 import { readStored, writeStored, type StoredTerminals } from "./persist";
 import { TerminalSession, type SessionOptions, type SessionSnapshot } from "./session";
@@ -96,7 +97,15 @@ function createSession(cwd: string, command?: SessionOptions["command"], fallbac
     },
     onExit: (k) => {
       const tab = tabOfSession(k);
-      if (tab && workflowSettings().terminal.closeOnExit) closeTab(tab.id);
+      if (!tab || !workflowSettings().terminal.closeOnExit) return;
+      // A session ending on its own only takes the caret back when the terminal had it: a
+      // background shell exiting must not pull focus out of the editor.
+      const focus = document.activeElement;
+      const hadFocus = !!focus && [...sessions.values()].some((s) => s.host?.contains(focus));
+      closeTab(tab.id);
+      if (useTerminals.getState().tabs.length === 0) toolWindowService().hide("terminal");
+      // Wait for the surviving pane to re-mount before giving xterm the caret.
+      else if (hadFocus) requestAnimationFrame(() => activeSession()?.focus());
     },
   });
   sessions.set(key, session);