diff --git a/.changeset/add-pi-web-terminal-environment.md b/.changeset/add-pi-web-terminal-environment.md
new file mode 100644
index 00000000..16df1e5b
--- /dev/null
+++ b/.changeset/add-pi-web-terminal-environment.md
@@ -0,0 +1,5 @@
+---
+"@jmfederico/pi-web": patch
+---
+
+Set `PI_WEB_TERMINAL=1` in PI WEB terminal shells.
diff --git a/src/server/terminals/terminalService.test.ts b/src/server/terminals/terminalService.test.ts
index 0b55d1ae..75f3957b 100644
--- a/src/server/terminals/terminalService.test.ts
+++ b/src/server/terminals/terminalService.test.ts
@@ -1,4 +1,4 @@
-import { describe, expect, it } from "vitest";
+import { afterEach, beforeEach, describe, expect, it } from "vitest";
 import type { RealtimeEvent, TerminalInfo } from "../../shared/apiTypes.js";
 import type { WorkspaceActivityService } from "../activity/workspaceActivityService.js";
 import { SessionEventHub } from "../realtime/sessionEventHub.js";
@@ -22,6 +22,73 @@ describe.skipIf(process.platform === "win32")("TerminalService command runs", ()
     }
   });
 
+  describe("PI_WEB_TERMINAL propagation", () => {
+    let originalPiWebTerminal: string | undefined;
+
+    beforeEach(() => {
+      originalPiWebTerminal = process.env["PI_WEB_TERMINAL"];
+      process.env["PI_WEB_TERMINAL"] = "conflicting-parent-value";
+    });
+
+    afterEach(() => {
+      if (originalPiWebTerminal === undefined) {
+        delete process.env["PI_WEB_TERMINAL"];
+      } else {
+        process.env["PI_WEB_TERMINAL"] = originalPiWebTerminal;
+      }
+    });
+
+    it("sets PI_WEB_TERMINAL for terminal commands", async () => {
+      const service = new TerminalService();
+      try {
+        const frame = "__PI_WEB_RUN_ENV_7F3A9C__";
+        const run = service.runCommand({
+          origin: "core",
+          projectId: "p1",
+          workspaceId: "w1",
+          cwd: process.cwd(),
+          title: "Environment check",
+          command: `printf '${frame}%s${frame}\\n' "$PI_WEB_TERMINAL"`,
+        });
+
+        expect(await terminalExit(service, run.terminalId)).toContain(`${frame}1${frame}`);
+      } finally {
+        service.dispose();
+      }
+    });
+
+    it("sets PI_WEB_TERMINAL in a continued interactive shell", async () => {
+      const service = new TerminalService();
+      try {
+        const run = service.runCommand({
+          origin: "core",
+          projectId: "p1",
+          workspaceId: "w1",
+          cwd: process.cwd(),
+          title: "Done command",
+          command: "true",
+        });
+        await terminalExit(service, run.terminalId);
+
+        const continued = service.continue(run.terminalId);
+
+        expect(continued).toMatchObject({ id: run.terminalId, exited: false });
+        expect(continued.commandRunId).toBeUndefined();
+        expect(service.get(run.terminalId)?.commandRunId).toBeUndefined();
+
+        const frame = "__PI_WEB_CONTINUE_ENV_42D8B1__";
+        const exit = terminalExit(service, run.terminalId);
+        service.write(run.terminalId, `printf '${frame}%s${frame}\\n' "$PI_WEB_TERMINAL"\nexit\n`);
+
+        const output = await exit;
+        expect(output).toContain("[continued in interactive shell]");
+        expect(output).toContain(`${frame}1${frame}`);
+      } finally {
+        service.dispose();
+      }
+    });
+  });
+
   it("tracks dedicated terminal command runs through completion", async () => {
     const service = new TerminalService();
     try {
@@ -50,30 +117,6 @@ describe.skipIf(process.platform === "win32")("TerminalService command runs", ()
     }
   });
 
-  it("continues an exited command-run terminal as an interactive shell", async () => {
-    const service = new TerminalService();
-    try {
-      const run = service.runCommand({
-        origin: "core",
-        projectId: "p1",
-        workspaceId: "w1",
-        cwd: process.cwd(),
-        title: "Done command",
-        command: "true",
-      });
-      await terminalExit(service, run.terminalId);
-
-      const continued = service.continue(run.terminalId);
-
-      expect(continued).toMatchObject({ id: run.terminalId, exited: false });
-      expect(continued.commandRunId).toBeUndefined();
-      expect(service.get(run.terminalId)?.commandRunId).toBeUndefined();
-      expect(await terminalReplay(service, run.terminalId)).toContain("[continued in interactive shell]");
-    } finally {
-      service.dispose();
-    }
-  });
-
   it("marks failed command runs when the command exits non-zero", async () => {
     const service = new TerminalService();
     try {
@@ -180,16 +223,6 @@ function requireTerminal(service: TerminalService, terminalId: string): Terminal
   return terminal;
 }
 
-function terminalReplay(service: TerminalService, terminalId: string): Promise<string> {
-  let output = "";
-  const detach = service.attach(terminalId, {
-    output: (data) => { output += data; },
-    exit: () => undefined,
-  });
-  detach();
-  return Promise.resolve(output);
-}
-
 function terminalExit(service: TerminalService, terminalId: string): Promise<string> {
   const output: string[] = [];
   return new Promise((resolve, reject) => {
diff --git a/src/server/terminals/terminalService.ts b/src/server/terminals/terminalService.ts
index 63204ffd..7186893e 100644
--- a/src/server/terminals/terminalService.ts
+++ b/src/server/terminals/terminalService.ts
@@ -163,7 +163,7 @@ export class TerminalService {
       cwd: record.cwd,
       cols: 100,
       rows: 30,
-      env: { ...process.env, TERM: "xterm-256color" },
+      env: { ...process.env, TERM: "xterm-256color", PI_WEB_TERMINAL: "1" },
     });
     this.attachPtyEvents(record);
     const info = toInfo(record);
@@ -196,7 +196,7 @@ export class TerminalService {
       cwd: options.cwd,
       cols: options.cols ?? 100,
       rows: options.rows ?? 30,
-      env: { ...process.env, TERM: "xterm-256color" },
+      env: { ...process.env, TERM: "xterm-256color", PI_WEB_TERMINAL: "1" },
     });
     const requestedName = options.name?.trim();
     const record: TerminalRecord = {