diff --git a/extensions/positron-supervisor/src/KallichoreAdapterApi.ts b/extensions/positron-supervisor/src/KallichoreAdapterApi.ts
index 7efbe2602dd..358f8d3f0ba 100644
--- a/extensions/positron-supervisor/src/KallichoreAdapterApi.ts
+++ b/extensions/positron-supervisor/src/KallichoreAdapterApi.ts
@@ -102,7 +102,7 @@ export class KCApi implements KallichoreAdapterApi {
 	 *
 	 * @returns A promise that resolves when the Kallichore server is online.
 	 */
-	async ensureStarted(): Promise<void> {
+	public async ensureStarted(): Promise<void> {
 
 		// If the server is already started, we're done
 		if (this._started.isOpen()) {
@@ -290,6 +290,16 @@ export class KCApi implements KallichoreAdapterApi {
 		// Wait for the terminal to start and get the PID
 		await terminal.processId;
 
+		// If an HTTP proxy is set, exempt the supervisor from it; since this
+		// is a local server, we generally don't want to route it through a
+		// proxy
+		if (process.env.http_proxy) {
+			// Add the server's port to the no_proxy list, amending it if it
+			// already exists
+			process.env.no_proxy = (process.env.no_proxy ? process.env.no_proxy + ',' : '') + `localhost:${port}`;
+			this._log.appendLine(`HTTP proxy set to ${process.env.http_proxy}; setting no_proxy to ${process.env.no_proxy} to exempt supervisor`);
+		}
+
 		// Establish the API
 		this._api.basePath = `http://localhost:${port}`;
 		this._api.setDefaultAuthentication(bearer);
diff --git a/extensions/positron-supervisor/src/test/README.md b/extensions/positron-supervisor/src/test/README.md
index 57c2d187ca5..b8d6b1dbfd0 100644
--- a/extensions/positron-supervisor/src/test/README.md
+++ b/extensions/positron-supervisor/src/test/README.md
@@ -1,5 +1,5 @@
 Launch tests by running this from the repository root:
 
 ```sh
-yarn test-extension -l positron-supervisor
+npm run test-extension -l positron-supervisor
 ```
diff --git a/extensions/positron-supervisor/src/test/server.test.ts b/extensions/positron-supervisor/src/test/server.test.ts
index ecfe9bfdcfa..e0441e088aa 100644
--- a/extensions/positron-supervisor/src/test/server.test.ts
+++ b/extensions/positron-supervisor/src/test/server.test.ts
@@ -9,8 +9,35 @@ import { API_INSTANCE } from '../extension';
 // Basic test to ensure the server can start and return status, and is the
 // correct version as specified in the package.json.
 suite('Server', () => {
-	test('Server starts and connects', async () => {
+	// Ensure that the server connects even when the http_proxy environment
+	// variable is set.
+	//
+	// NOTE: This test must run first because we only examine this value when
+	// the server is started; subsequent tests will use the warm server. We
+	// could improve this by adding some scaffolding to use a fresh server
+	// instance for every test.
+	test('Server connects when http_proxy is set', async () => {
+		// Set the http_proxy environment variable to a non-existent proxy
+		const oldHttpProxy = process.env.http_proxy;
+		process.env.http_proxy = 'http://example.com:234';
+
 		// Start the server and connect to it
+		try {
+			await API_INSTANCE.ensureStarted();
+			const status = await API_INSTANCE.serverStatus();
+
+			// Sanity check a response field
+			assert.strictEqual(status.sessions, 0);
+		} finally {
+			// Reset the http_proxy environment variable
+			process.env.http_proxy = oldHttpProxy;
+		}
+	});
+
+	test('Server version is correct', async () => {
+
+		// Start the server and connect to it
+		await API_INSTANCE.ensureStarted();
 		const status = await API_INSTANCE.serverStatus();
 
 		// Read the package.json file to get the version
@@ -20,4 +47,5 @@ suite('Server', () => {
 		// package.json version
 		assert.strictEqual(status.version, pkg.positron.binaryDependencies.kallichore);
 	});
+
 });