diff --git a/crates/terminal/src/terminal.rs b/crates/terminal/src/terminal.rs
index caca93eac5b862450cdaa2aede0fd5491eaaf58f..e6bb454fa296b65de60c25f326bba28f484450f0 100644
--- a/crates/terminal/src/terminal.rs
+++ b/crates/terminal/src/terminal.rs
@@ -420,6 +420,10 @@ impl TerminalBuilder {
     ) -> Task<Result<TerminalBuilder>> {
         let version = release_channel::AppVersion::global(cx);
         let fut = async move {
+            // Remove SHLVL so the spawned shell initializes it to 1, matching
+            // the behavior of standalone terminal emulators like iTerm2/Kitty/Alacritty.
+            env.remove("SHLVL");
+
             // If the parent environment doesn't have a locale set
             // (As is the case when launched from a .app on MacOS),
             // and the Project doesn't have a locale set, then