diff --git a/crates/debugger_ui/src/session/running.rs b/crates/debugger_ui/src/session/running.rs
index 8f25ee7fa4cf1210ff72b577765481e1ab109cc0..7340f2591623fcf8b61916fc3aea3337bcad3149 100644
--- a/crates/debugger_ui/src/session/running.rs
+++ b/crates/debugger_ui/src/session/running.rs
@@ -386,6 +386,7 @@ pub(crate) fn new_debugger_pane(
             Default::default(),
             None,
             NoAction.boxed_clone(),
+            true,
             window,
             cx,
         );
diff --git a/crates/terminal_view/src/terminal_panel.rs b/crates/terminal_view/src/terminal_panel.rs
index cb80d58c13128fad19b647e060001e5cf63f052b..de66bb1ed64851a1101d434e3a7b54a8ae725cfb 100644
--- a/crates/terminal_view/src/terminal_panel.rs
+++ b/crates/terminal_view/src/terminal_panel.rs
@@ -1103,6 +1103,7 @@ pub fn new_terminal_pane(
             Default::default(),
             None,
             NewTerminal.boxed_clone(),
+            false,
             window,
             cx,
         );
@@ -1752,6 +1753,8 @@ impl Render for InlineAssistTabBarButton {
 
 #[cfg(test)]
 mod tests {
+    use std::num::NonZero;
+
     use super::*;
     use gpui::{TestAppContext, UpdateGlobal as _};
     use pretty_assertions::assert_eq;
@@ -1808,6 +1811,46 @@ mod tests {
             .unwrap();
     }
 
+    #[gpui::test]
+    async fn test_bypass_max_tabs_limit(cx: &mut TestAppContext) {
+        init_test(cx);
+
+        let fs = FakeFs::new(cx.executor());
+        let project = Project::test(fs, [], cx).await;
+        let workspace = cx.add_window(|window, cx| Workspace::test_new(project, window, cx));
+
+        let (window_handle, terminal_panel) = workspace
+            .update(cx, |workspace, window, cx| {
+                let window_handle = window.window_handle();
+                let terminal_panel = cx.new(|cx| TerminalPanel::new(workspace, window, cx));
+                (window_handle, terminal_panel)
+            })
+            .unwrap();
+
+        set_max_tabs(cx, Some(3));
+
+        for _ in 0..5 {
+            let task = window_handle
+                .update(cx, |_, window, cx| {
+                    terminal_panel.update(cx, |panel, cx| {
+                        panel.add_terminal_shell(None, RevealStrategy::Always, window, cx)
+                    })
+                })
+                .unwrap();
+            task.await.unwrap();
+        }
+
+        cx.run_until_parked();
+
+        let item_count =
+            terminal_panel.read_with(cx, |panel, cx| panel.active_pane.read(cx).items_len());
+
+        assert_eq!(
+            item_count, 5,
+            "Terminal panel should bypass max_tabs limit and have all 5 terminals"
+        );
+    }
+
     // A complex Unix command won't be properly parsed by the Windows terminal hence omit the test there.
     #[cfg(unix)]
     #[gpui::test]
@@ -1922,6 +1965,14 @@ mod tests {
             .unwrap();
     }
 
+    fn set_max_tabs(cx: &mut TestAppContext, value: Option<usize>) {
+        cx.update_global(|store: &mut SettingsStore, cx| {
+            store.update_user_settings(cx, |settings| {
+                settings.workspace.max_tabs = value.map(|v| NonZero::new(v).unwrap())
+            });
+        });
+    }
+
     pub fn init_test(cx: &mut TestAppContext) {
         cx.update(|cx| {
             let store = SettingsStore::test(cx);
diff --git a/crates/workspace/src/pane.rs b/crates/workspace/src/pane.rs
index 0784f30739be9ef6bf6c65f38e2f7e52c73390e8..3dcba4aa4ebc38bc7c0006c8402e38d4e12ac016 100644
--- a/crates/workspace/src/pane.rs
+++ b/crates/workspace/src/pane.rs
@@ -376,6 +376,7 @@ pub struct Pane {
     render_tab_bar: Rc<dyn Fn(&mut Pane, &mut Window, &mut Context<Pane>) -> AnyElement>,
     show_tab_bar_buttons: bool,
     max_tabs: Option<NonZeroUsize>,
+    use_max_tabs: bool,
     _subscriptions: Vec<Subscription>,
     tab_bar_scroll_handle: ScrollHandle,
     /// This is set to true if a user scroll has occurred more recently than a system scroll
@@ -473,10 +474,16 @@ impl Pane {
         next_timestamp: Arc<AtomicUsize>,
         can_drop_predicate: Option<Arc<dyn Fn(&dyn Any, &mut Window, &mut App) -> bool + 'static>>,
         double_click_dispatch_action: Box<dyn Action>,
+        use_max_tabs: bool,
         window: &mut Window,
         cx: &mut Context<Self>,
     ) -> Self {
         let focus_handle = cx.focus_handle();
+        let max_tabs = if use_max_tabs {
+            WorkspaceSettings::get_global(cx).max_tabs
+        } else {
+            None
+        };
 
         let subscriptions = vec![
             cx.on_focus(&focus_handle, window, Pane::focus_in),
@@ -498,7 +505,8 @@ impl Pane {
             zoomed: false,
             active_item_index: 0,
             preview_item_id: None,
-            max_tabs: WorkspaceSettings::get_global(cx).max_tabs,
+            max_tabs,
+            use_max_tabs,
             last_focus_handle_by_item: Default::default(),
             nav_history: NavHistory(Arc::new(Mutex::new(NavHistoryState {
                 mode: NavigationMode::Normal,
@@ -706,7 +714,7 @@ impl Pane {
             self.preview_item_id = None;
         }
 
-        if new_max_tabs != self.max_tabs {
+        if self.use_max_tabs && new_max_tabs != self.max_tabs {
             self.max_tabs = new_max_tabs;
             self.close_items_on_settings_change(window, cx);
         }
diff --git a/crates/workspace/src/workspace.rs b/crates/workspace/src/workspace.rs
index 53f416ae805e692db48b6676a3484e6f839feb99..3c8c94ce0e932dc6773c8f6c168c95563b60c879 100644
--- a/crates/workspace/src/workspace.rs
+++ b/crates/workspace/src/workspace.rs
@@ -1331,6 +1331,7 @@ impl Workspace {
                 pane_history_timestamp.clone(),
                 None,
                 NewFile.boxed_clone(),
+                true,
                 window,
                 cx,
             );
@@ -3235,6 +3236,7 @@ impl Workspace {
                 self.pane_history_timestamp.clone(),
                 None,
                 NewFile.boxed_clone(),
+                true,
                 window,
                 cx,
             );