diff --git a/src/vs/platform/terminal/common/capabilities/capabilities.ts b/src/vs/platform/terminal/common/capabilities/capabilities.ts
index 546ebc1be620b..60ce986cf4bca 100644
--- a/src/vs/platform/terminal/common/capabilities/capabilities.ts
+++ b/src/vs/platform/terminal/common/capabilities/capabilities.ts
@@ -182,6 +182,7 @@ export interface ICommandDetectionCapability {
 	readonly onCurrentCommandInvalidated: Event<ICommandInvalidationRequest>;
 	setContinuationPrompt(value: string): void;
 	setCwd(value: string): void;
+	setPromptHeight(value: number): void;
 	setIsWindowsPty(value: boolean): void;
 	setIsCommandStorageDisabled(): void;
 	/**
diff --git a/src/vs/platform/terminal/common/capabilities/commandDetection/terminalCommand.ts b/src/vs/platform/terminal/common/capabilities/commandDetection/terminalCommand.ts
index b0ecb40815559..46c68b14b1352 100644
--- a/src/vs/platform/terminal/common/capabilities/commandDetection/terminalCommand.ts
+++ b/src/vs/platform/terminal/common/capabilities/commandDetection/terminalCommand.ts
@@ -213,6 +213,7 @@ export class TerminalCommand implements ITerminalCommand {
 
 export interface ICurrentPartialCommand {
 	promptStartMarker?: IMarker;
+	promptHeight?: number;
 
 	commandStartMarker?: IMarker;
 	commandStartX?: number;
@@ -244,12 +245,23 @@ export interface ICurrentPartialCommand {
 	 */
 	isInvalid?: boolean;
 
+	/**
+	 * Whether the command start marker has been adjusted on Windows.
+	 */
+	isAdjusted?: boolean;
+
+	/**
+	 * Whether the command start marker adjustment has been attempt on new terminal input.
+	 */
+	isInputAdjusted?: boolean;
+
 	getPromptRowCount(): number;
 	getCommandRowCount(): number;
 }
 
 export class PartialTerminalCommand implements ICurrentPartialCommand {
 	promptStartMarker?: IMarker;
+	promptHeight?: number;
 
 	commandStartMarker?: IMarker;
 	commandStartX?: number;
diff --git a/src/vs/platform/terminal/common/capabilities/commandDetectionCapability.ts b/src/vs/platform/terminal/common/capabilities/commandDetectionCapability.ts
index b6f604d9e883b..6180a10172d82 100644
--- a/src/vs/platform/terminal/common/capabilities/commandDetectionCapability.ts
+++ b/src/vs/platform/terminal/common/capabilities/commandDetectionCapability.ts
@@ -154,6 +154,7 @@ export class CommandDetectionCapability extends Disposable implements ICommandDe
 		};
 		this._register(this._terminal.onResize(e => this._handleResize(e)));
 		this._register(this._terminal.onCursorMove(() => this._handleCursorMove()));
+		this._register(this._terminal.onData(() => this._handleInput()));
 	}
 
 	private _handleResize(e: { cols: number; rows: number }) {
@@ -207,6 +208,10 @@ export class CommandDetectionCapability extends Disposable implements ICommandDe
 		this._cwd = value;
 	}
 
+	setPromptHeight(value: number) {
+		this._currentCommand.promptHeight = value;
+	}
+
 	setIsWindowsPty(value: boolean) {
 		if (value && !(this._ptyHeuristics.value instanceof WindowsPtyHeuristics)) {
 			const that = this;
@@ -280,6 +285,10 @@ export class CommandDetectionCapability extends Disposable implements ICommandDe
 		return undefined;
 	}
 
+	private _handleInput(): void {
+		this._ptyHeuristics.value.handleInput();
+	}
+
 	handlePromptStart(options?: IHandleCommandOptions): void {
 		// Adjust the last command's finished marker when needed. The standard position for the
 		// finished marker `D` to appear is at the same position as the following prompt started
@@ -499,6 +508,8 @@ class UnixPtyHeuristics extends Disposable {
 		}));
 	}
 
+	handleInput() { }
+
 	handleCommandStart(options?: IHandleCommandOptions) {
 		this._hooks.commitCommandFinished();
 
@@ -652,6 +663,28 @@ class WindowsPtyHeuristics extends Disposable {
 		}
 	}
 
+	/**
+	 * Attempt to adjust the command start marker when input is handled for the first time.
+	 */
+	handleInput() {
+		const currentY = this._terminal.buffer.active.baseY + this._terminal.buffer.active.cursorY;
+
+		const hasWrappingInPrompt = Array.from({ length: (this._capability.currentCommand.promptHeight ?? 0) + 1 }, (_, i) => currentY - i).find(y => this._terminal.buffer.active.getLine(y)?.isWrapped) !== undefined;
+		const hasActiveCommand = this._capability.currentCommand.commandStartX !== undefined && this._capability.currentCommand.commandExecutedX === undefined;
+		const hasAdjusted = this._capability.currentCommand.isAdjusted === true || this._capability.currentCommand.isInputAdjusted === true;
+
+		if (!hasActiveCommand || hasAdjusted || hasWrappingInPrompt) {
+			return;
+		}
+		this._capability.currentCommand.isInputAdjusted = true;
+		this._logService.debug('CommandDetectionCapability#handleInput attempting start marker adjustment');
+
+		this._tryAdjustCommandStartMarkerScannedLineCount = 0;
+		this._tryAdjustCommandStartMarkerPollCount = 0;
+		this._tryAdjustCommandStartMarkerScheduler = new RunOnceScheduler(() => this._tryAdjustCommandStartMarker(this._terminal.registerMarker(0)!), AdjustCommandStartMarkerConstants.Interval);
+		this._tryAdjustCommandStartMarkerScheduler.schedule();
+	}
+
 	handleCommandStart() {
 		this._capability.currentCommand.commandStartX = this._terminal.buffer.active.cursorX;
 
@@ -713,21 +746,24 @@ class WindowsPtyHeuristics extends Disposable {
 				if (prompt) {
 					const adjustedPrompt = typeof prompt === 'string' ? prompt : prompt.prompt;
 					this._capability.currentCommand.commandStartMarker = this._terminal.registerMarker(0)!;
-					if (typeof prompt === 'object' && prompt.likelySingleLine) {
-						this._logService.debug('CommandDetectionCapability#_tryAdjustCommandStartMarker adjusted promptStart', `${this._capability.currentCommand.promptStartMarker?.line} -> ${this._capability.currentCommand.commandStartMarker.line}`);
-						this._capability.currentCommand.promptStartMarker?.dispose();
-						this._capability.currentCommand.promptStartMarker = cloneMarker(this._terminal, this._capability.currentCommand.commandStartMarker);
-						// Adjust the last command if it's not in the same position as the following
-						// prompt start marker
-						const lastCommand = this._capability.commands.at(-1);
-						if (lastCommand && this._capability.currentCommand.commandStartMarker.line !== lastCommand.endMarker?.line) {
-							lastCommand.endMarker?.dispose();
-							lastCommand.endMarker = cloneMarker(this._terminal, this._capability.currentCommand.commandStartMarker);
-						}
+
+					// Adjust the prompt start marker to the command start marker
+					this._logService.debug('CommandDetectionCapability#_tryAdjustCommandStartMarker adjusted promptStart', `${this._capability.currentCommand.promptStartMarker?.line} -> ${this._capability.currentCommand.commandStartMarker.line}`);
+					this._capability.currentCommand.promptStartMarker?.dispose();
+					this._capability.currentCommand.promptStartMarker = cloneMarker(this._terminal, this._capability.currentCommand.commandStartMarker, -((this._capability.currentCommand.promptHeight ?? 1) - 1));
+
+					// Adjust the last command if it's not in the same position as the following
+					// prompt start marker
+					const lastCommand = this._capability.commands.at(-1);
+					if (lastCommand && this._capability.currentCommand.commandStartMarker.line !== lastCommand.endMarker?.line) {
+						lastCommand.endMarker?.dispose();
+						lastCommand.endMarker = cloneMarker(this._terminal, this._capability.currentCommand.commandStartMarker, -((this._capability.currentCommand.promptHeight ?? 1) - 1));
 					}
+
 					// use the regex to set the position as it's possible input has occurred
 					this._capability.currentCommand.commandStartX = adjustedPrompt.length;
 					this._logService.debug('CommandDetectionCapability#_tryAdjustCommandStartMarker adjusted commandStart', `${start.line} -> ${this._capability.currentCommand.commandStartMarker.line}:${this._capability.currentCommand.commandStartX}`);
+					this._capability.currentCommand.isAdjusted = true;
 					this._flushPendingHandleCommandStartTask();
 					return;
 				}
@@ -1049,5 +1085,7 @@ function getXtermLineContent(buffer: IBuffer, lineStart: number, lineEnd: number
 }
 
 function cloneMarker(xterm: Terminal, marker: IXtermMarker, offset: number = 0): IXtermMarker | undefined {
-	return xterm.registerMarker(marker.line - (xterm.buffer.active.baseY + xterm.buffer.active.cursorY) + offset);
+	const cursorY = xterm.buffer.active.baseY + xterm.buffer.active.cursorY;
+	const cursorYOffset = marker.line - cursorY + offset;
+	return xterm.registerMarker((cursorY + cursorYOffset) < 0 ? -cursorY : cursorYOffset);
 }
diff --git a/src/vs/platform/terminal/common/xterm/shellIntegrationAddon.ts b/src/vs/platform/terminal/common/xterm/shellIntegrationAddon.ts
index 249e67ab44dd2..e6cf5eb2de25f 100644
--- a/src/vs/platform/terminal/common/xterm/shellIntegrationAddon.ts
+++ b/src/vs/platform/terminal/common/xterm/shellIntegrationAddon.ts
@@ -403,6 +403,10 @@ export class ShellIntegrationAddon extends Disposable implements IShellIntegrati
 						this.capabilities.get(TerminalCapability.CommandDetection)?.setIsCommandStorageDisabled();
 						return true;
 					}
+					case 'PromptHeight': {
+						this.capabilities.get(TerminalCapability.CommandDetection)?.setPromptHeight(parseInt(value));
+						return true;
+					}
 				}
 			}
 			case VSCodeOscPt.SetMark: {
diff --git a/src/vs/workbench/contrib/terminal/browser/media/shellIntegration-bash.sh b/src/vs/workbench/contrib/terminal/browser/media/shellIntegration-bash.sh
index cd03a920dbc9b..e226b9a28b991 100755
--- a/src/vs/workbench/contrib/terminal/browser/media/shellIntegration-bash.sh
+++ b/src/vs/workbench/contrib/terminal/browser/media/shellIntegration-bash.sh
@@ -182,6 +182,11 @@ __vsc_update_cwd() {
 	builtin printf '\e]633;P;Cwd=%s\a' "$(__vsc_escape_value "$__vsc_cwd")"
 }
 
+__vsc_update_prompt_height() {
+	__vsc_prompt_height="$(("$(builtin printf "%s" "${PS1@P}" | wc -l)" + 1))"
+	builtin printf '\e]633;P;PromptHeight=%s\a' "$(__vsc_escape_value "$__vsc_prompt_height")"
+}
+
 __vsc_command_output_start() {
 	builtin printf '\e]633;E;%s;%s\a' "$(__vsc_escape_value "${__vsc_current_command}")" $__vsc_nonce
 	builtin printf '\e]633;C\a'
@@ -229,6 +234,7 @@ __vsc_precmd() {
 	__vsc_command_complete "$__vsc_status"
 	__vsc_current_command=""
 	__vsc_update_prompt
+	__vsc_update_prompt_height
 	__vsc_first_prompt=1
 }
 
diff --git a/src/vs/workbench/contrib/terminal/browser/media/shellIntegration.ps1 b/src/vs/workbench/contrib/terminal/browser/media/shellIntegration.ps1
index 0a620fb4dbcca..90bc9f74efeca 100644
--- a/src/vs/workbench/contrib/terminal/browser/media/shellIntegration.ps1
+++ b/src/vs/workbench/contrib/terminal/browser/media/shellIntegration.ps1
@@ -52,17 +52,12 @@ if ($env:VSCODE_ENV_APPEND) {
 function Global:__VSCode-Escape-Value([string]$value) {
 	# NOTE: In PowerShell v6.1+, this can be written `$value -replace '…', { … }` instead of `[regex]::Replace`.
 	# Replace any non-alphanumeric characters.
-	$Result = [regex]::Replace($value, '[\\\n;]', { param($match)
+	[regex]::Replace($value, "[$([char]0x1b)\\\n;]", { param($match)
 			# Encode the (ascii) matches as `\x<hex>`
 			-Join (
 				[System.Text.Encoding]::UTF8.GetBytes($match.Value) | ForEach-Object { '\x{0:x2}' -f $_ }
 			)
 		})
-	# `e is only availabel in pwsh 6+
-	if ($PSVersionTable.PSVersion.Major -lt 6) {
-		$Result = $Result -replace "`e", '\x1b'
-	}
-	$Result
 }
 
 function Global:Prompt() {
@@ -95,7 +90,13 @@ function Global:Prompt() {
 		Write-Error "failure" -ea ignore
 	}
 	# Run the original prompt
-	$Result += $Global:__VSCodeOriginalPrompt.Invoke()
+	$OriginalPrompt += $Global:__VSCodeOriginalPrompt.Invoke()
+	$Result += $OriginalPrompt
+
+	# Prompt height
+	# OSC 633 ; <Property>=<Value> ST
+	$Result += "$([char]0x1b)]633;P;PromptHeight=$(__VSCode-Escape-Value ($OriginalPrompt -Split '\n').Count)`a"
+
 	# Write command started
 	$Result += "$([char]0x1b)]633;B`a"
 	$Global:__LastHistoryId = $LastHistoryEntry.Id