vscode python extension not recognizing poetry cached venv

[kompre]

Hi,

I have problem with the python extension not recognizing poetry cached venv anymore since at least python extension version 2024.10.0 (last that I know it worked).

I've already opened an issue in microsoft/vscode-python#24525 but I have no good solution so far and it's becoming a burden:

• I've tried keeping the 2024.10.0, but it's breaking other stuff that get updated
• As of now, it works if I feed the venv's path to "Python: select interpreter", but it's seen as a global environment... it's not a very smooth experience.

Sadly, I didn't find much more on the greater internet, so I'm here to ask if somebody has had the same problem and already found a solution?

[Meyyappan-AL]

Why this happens

In recent releases, the VS Code Python extension updated its environment discovery pipeline. Instead of running broad filesystem scans across global directories, it relies primarily on workspace-local inspection or explicit path configurations to improve performance.

Because Poetry creates virtual environments inside a global, hidden cache folder by default
( ~/.cache/pypoetry/virtualenvs on Linux/macOS or %LOCALAPPDATA%\pypoetry\Cache\virtualenvs on Windows ),
the extension fails to automatically link the cached environment to your specific project workspace. Manually selecting the interpreter binary works temporarily, but VS Code misidentifies it as a global environment rather than a project-bound environment.

The cleanest fix is to tell Poetry to store the virtual environment inside a .venv directory in your project root. VS Code automatically detects root .venv directories without requiring any extension settings changes.

1. Set the global Poetry configuration:

poetry config virtualenvs.in-project true

2. Re-create your project environment:

poetry env remove --all
poetry install

3. Verify:
Check your project folder for the .venv directory. VS Code will detect it immediately and prompt you to select it as the workspace interpreter.