diff --git a/assets/settings/default.json b/assets/settings/default.json
index b30eee9621176469a99cfea32875551a61febde8..ad331dbb79a6c1c4caabf41659b4599f4d0aa7ce 100644
--- a/assets/settings/default.json
+++ b/assets/settings/default.json
@@ -1112,6 +1112,11 @@
     //
     // Default: true
     "expand_terminal_card": true,
+    // Whether clicking the stop button on a running terminal tool should also cancel the agent's generation.
+    // Note that this only applies to the stop button, not to ctrl+c inside the terminal.
+    //
+    // Default: true
+    "cancel_generation_on_terminal_stop": true,
     // Whether to always use cmd-enter (or ctrl-enter on Linux or Windows) to send messages in the agent panel.
     //
     // Default: false
diff --git a/crates/agent_settings/src/agent_settings.rs b/crates/agent_settings/src/agent_settings.rs
index 7d466a2be69b4e6841a81edb8ab0bdae3ad8f2b2..9b5960eed27c07528d8dd04ef605064fb1695c2f 100644
--- a/crates/agent_settings/src/agent_settings.rs
+++ b/crates/agent_settings/src/agent_settings.rs
@@ -46,6 +46,7 @@ pub struct AgentSettings {
     pub enable_feedback: bool,
     pub expand_edit_card: bool,
     pub expand_terminal_card: bool,
+    pub cancel_generation_on_terminal_stop: bool,
     pub use_modifier_to_send: bool,
     pub message_editor_min_lines: usize,
     pub show_turn_stats: bool,
@@ -256,6 +257,7 @@ impl Settings for AgentSettings {
             enable_feedback: agent.enable_feedback.unwrap(),
             expand_edit_card: agent.expand_edit_card.unwrap(),
             expand_terminal_card: agent.expand_terminal_card.unwrap(),
+            cancel_generation_on_terminal_stop: agent.cancel_generation_on_terminal_stop.unwrap(),
             use_modifier_to_send: agent.use_modifier_to_send.unwrap(),
             message_editor_min_lines: agent.message_editor_min_lines.unwrap(),
             show_turn_stats: agent.show_turn_stats.unwrap(),
diff --git a/crates/agent_ui/src/acp/thread_view.rs b/crates/agent_ui/src/acp/thread_view.rs
index 75bb3716d8abfd6f1399a7011e04f86f97060313..b38348ed3f29722687039199cc7ea669c548d266 100644
--- a/crates/agent_ui/src/acp/thread_view.rs
+++ b/crates/agent_ui/src/acp/thread_view.rs
@@ -4633,7 +4633,9 @@ impl AcpThreadView {
                                 terminal.update(cx, |terminal, cx| {
                                     terminal.stop_by_user(cx);
                                 });
-                                this.cancel_generation(cx);
+                                if AgentSettings::get_global(cx).cancel_generation_on_terminal_stop {
+                                    this.cancel_generation(cx);
+                                }
                             })
                         }),
                     )
diff --git a/crates/agent_ui/src/agent_ui.rs b/crates/agent_ui/src/agent_ui.rs
index 5da5bababb69ceaece575ba0bcb771fb528a076f..6ed8f73f22332324aaa47a310502ca6940904b46 100644
--- a/crates/agent_ui/src/agent_ui.rs
+++ b/crates/agent_ui/src/agent_ui.rs
@@ -538,6 +538,7 @@ mod tests {
             enable_feedback: false,
             expand_edit_card: true,
             expand_terminal_card: true,
+            cancel_generation_on_terminal_stop: true,
             use_modifier_to_send: true,
             message_editor_min_lines: 1,
             tool_permissions: Default::default(),
diff --git a/crates/settings_content/src/agent.rs b/crates/settings_content/src/agent.rs
index 8d8331ec262b0f738e64f7e64f7affa6f684ff25..56a7efaa6ebfc52446673010a0f8d882e22782cb 100644
--- a/crates/settings_content/src/agent.rs
+++ b/crates/settings_content/src/agent.rs
@@ -109,6 +109,11 @@ pub struct AgentSettingsContent {
     ///
     /// Default: true
     pub expand_terminal_card: Option<bool>,
+    /// Whether clicking the stop button on a running terminal tool should also cancel the agent's generation.
+    /// Note that this only applies to the stop button, not to ctrl+c inside the terminal.
+    ///
+    /// Default: true
+    pub cancel_generation_on_terminal_stop: Option<bool>,
     /// Whether to always use cmd-enter (or ctrl-enter on Linux or Windows) to send messages in the agent panel.
     ///
     /// Default: false
diff --git a/crates/settings_ui/src/page_data.rs b/crates/settings_ui/src/page_data.rs
index dc9d1d81aed51da52e15cc030630d9d73991bac3..d82fdf338a9e0f8b139a5ccfcb0eb40114b7d41f 100644
--- a/crates/settings_ui/src/page_data.rs
+++ b/crates/settings_ui/src/page_data.rs
@@ -6830,7 +6830,7 @@ fn ai_page() -> SettingsPage {
         ]
     }
 
-    fn agent_configuration_section() -> [SettingsPageItem; 11] {
+    fn agent_configuration_section() -> [SettingsPageItem; 12] {
         [
             SettingsPageItem::SectionHeader("Agent Configuration"),
             SettingsPageItem::SettingItem(SettingItem {
@@ -6975,6 +6975,28 @@ fn ai_page() -> SettingsPage {
                 metadata: None,
                 files: USER,
             }),
+            SettingsPageItem::SettingItem(SettingItem {
+                title: "Cancel Generation On Terminal Stop",
+                description: "Whether clicking the stop button on a running terminal tool should also cancel the agent's generation. Note that this only applies to the stop button, not to ctrl+c inside the terminal.",
+                field: Box::new(SettingField {
+                    json_path: Some("agent.cancel_generation_on_terminal_stop"),
+                    pick: |settings_content| {
+                        settings_content
+                            .agent
+                            .as_ref()?
+                            .cancel_generation_on_terminal_stop
+                            .as_ref()
+                    },
+                    write: |settings_content, value| {
+                        settings_content
+                            .agent
+                            .get_or_insert_default()
+                            .cancel_generation_on_terminal_stop = value;
+                    },
+                }),
+                metadata: None,
+                files: USER,
+            }),
             SettingsPageItem::SettingItem(SettingItem {
                 title: "Use Modifier To Send",
                 description: "Whether to always use cmd-enter (or ctrl-enter on Linux or Windows) to send messages.",