diff --git a/src/vs/workbench/contrib/terminal/common/terminal.ts b/src/vs/workbench/contrib/terminal/common/terminal.ts
index c5951189a8000..f113bb4360be7 100644
--- a/src/vs/workbench/contrib/terminal/common/terminal.ts
+++ b/src/vs/workbench/contrib/terminal/common/terminal.ts
@@ -623,6 +623,9 @@ export const DEFAULT_COMMANDS_TO_SKIP_SHELL: string[] = [
 	'workbench.action.togglePanel',
 	'workbench.action.quickOpenView',
 	'workbench.action.toggleMaximizedPanel',
+	'workbench.action.zoomIn',
+	'workbench.action.zoomOut',
+	'workbench.action.zoomReset',
 	'notification.acceptPrimaryAction',
 	'runCommands',
 	'workbench.action.terminal.chat.start',
diff --git a/src/vs/workbench/contrib/terminal/test/browser/terminalInstance.test.ts b/src/vs/workbench/contrib/terminal/test/browser/terminalInstance.test.ts
index f614bdea09cf1..834904a62033c 100644
--- a/src/vs/workbench/contrib/terminal/test/browser/terminalInstance.test.ts
+++ b/src/vs/workbench/contrib/terminal/test/browser/terminalInstance.test.ts
@@ -14,6 +14,7 @@ import { ensureNoDisposablesAreLeakedInTestSuite } from '../../../../../base/tes
 import { IConfigurationService } from '../../../../../platform/configuration/common/configuration.js';
 import { TestConfigurationService } from '../../../../../platform/configuration/test/common/testConfigurationService.js';
 import { TestInstantiationService } from '../../../../../platform/instantiation/test/common/instantiationServiceMock.js';
+import { ResultKind } from '../../../../../platform/keybinding/common/keybindingResolver.js';
 import { TerminalCapability, type ICwdDetectionCapability } from '../../../../../platform/terminal/common/capabilities/capabilities.js';
 import { TerminalCapabilityStore } from '../../../../../platform/terminal/common/capabilities/terminalCapabilityStore.js';
 import { GeneralShellType, ITerminalChildProcess, ITerminalProfile, TerminalLocation, TitleEventSource, type IShellLaunchConfig, type ITerminalBackend, type ITerminalProcessOptions } from '../../../../../platform/terminal/common/terminal.js';
@@ -27,7 +28,7 @@ import { TerminalConfigurationService } from '../../browser/terminalConfiguratio
 import { parseExitResult, TerminalInstance, TerminalInstanceColorProvider, TerminalLabelComputer } from '../../browser/terminalInstance.js';
 import { IEnvironmentVariableService } from '../../common/environmentVariable.js';
 import { EnvironmentVariableService } from '../../common/environmentVariableService.js';
-import { ITerminalProfileResolverService, ProcessState } from '../../common/terminal.js';
+import { ITerminalProfileResolverService, ProcessState, DEFAULT_COMMANDS_TO_SKIP_SHELL } from '../../common/terminal.js';
 import { TERMINAL_BACKGROUND_COLOR } from '../../common/terminalColorRegistry.js';
 import { TestViewDescriptorService } from './xterm/xtermTerminal.test.js';
 import { fixPath } from '../../../../services/search/test/browser/queryBuilder.test.js';
@@ -128,7 +129,8 @@ suite('Workbench - TerminalInstance', () => {
 
 	suite('TerminalInstance', () => {
 		let terminalInstance: ITerminalInstance;
-		test('should create an instance of TerminalInstance with env from default profile', async () => {
+
+		async function createTerminalInstance(): Promise<TerminalInstance> {
 			const instantiationService = workbenchInstantiationService({
 				configurationService: () => new TestConfigurationService({
 					files: {},
@@ -152,8 +154,14 @@ suite('Workbench - TerminalInstance', () => {
 			instantiationService.stub(IEnvironmentVariableService, store.add(instantiationService.createInstance(EnvironmentVariableService)));
 			instantiationService.stub(ITerminalInstanceService, store.add(new TestTerminalInstanceService()));
 			instantiationService.stub(ITerminalService, { setNextCommandId: async () => { } } as Partial<ITerminalService>);
-			terminalInstance = store.add(instantiationService.createInstance(TerminalInstance, terminalShellTypeContextKey, {}));
-			// //Wait for the teminalInstance._xtermReadyPromise to resolve
+			const instance = store.add(instantiationService.createInstance(TerminalInstance, terminalShellTypeContextKey, {}));
+			await instance.xtermReadyPromise;
+			return instance;
+		}
+
+		test('should create an instance of TerminalInstance with env from default profile', async () => {
+			terminalInstance = await createTerminalInstance();
+			// Wait for the terminal instance to resolve shell launch config env.
 			await new Promise(resolve => setTimeout(resolve, 100));
 			deepStrictEqual(terminalInstance.shellLaunchConfig.env, { TEST: 'TEST' });
 		});
@@ -198,6 +206,67 @@ suite('Workbench - TerminalInstance', () => {
 			// Verify that the task name is preserved
 			strictEqual(taskTerminal.title, 'Test Task Name', 'Task terminal should preserve API-set title');
 		});
+
+		test('custom key event handler should handle commands in DEFAULT_COMMANDS_TO_SKIP_SHELL in VS Code and not xterm when sendKeybindingsToShell is disabled', async () => {
+			const instance = await createTerminalInstance();
+			const keybindingService = instance['_keybindingService'];
+			const originalSoftDispatch = keybindingService.softDispatch;
+			keybindingService.softDispatch = () => ({ kind: ResultKind.KbFound, commandId: 'workbench.action.zoomIn', commandArgs: undefined, isBubble: false });
+
+			let capturedHandler: ((e: KeyboardEvent) => boolean) | undefined;
+			instance.xterm!.raw.attachCustomKeyEventHandler = handler => { capturedHandler = handler; };
+			const container = document.createElement('div');
+			document.body.appendChild(container);
+			instance.attachToElement(container);
+			instance.setVisible(true);
+
+			const event = new KeyboardEvent('keydown', { key: '=', cancelable: true });
+			try {
+				deepStrictEqual(
+					{ result: capturedHandler?.(event), defaultPrevented: event.defaultPrevented },
+					{ result: false, defaultPrevented: true }
+				);
+			} finally {
+				keybindingService.softDispatch = originalSoftDispatch;
+				container.remove();
+			}
+		});
+
+		test('custom key event handler should intercept Meta-modified keys that resolve to a command when sendKeybindingsToShell is disabled', async () => {
+			const instance = await createTerminalInstance();
+			const keybindingService = instance['_keybindingService'];
+			const originalSoftDispatch = keybindingService.softDispatch;
+			strictEqual(DEFAULT_COMMANDS_TO_SKIP_SHELL.includes('test.metaKeyInterceptCommand'), false);
+			keybindingService.softDispatch = () => ({ kind: ResultKind.KbFound, commandId: 'test.metaKeyInterceptCommand', commandArgs: undefined, isBubble: false });
+
+			let capturedHandler: ((e: KeyboardEvent) => boolean) | undefined;
+			instance.xterm!.raw.attachCustomKeyEventHandler = handler => { capturedHandler = handler; };
+			const container = document.createElement('div');
+			document.body.appendChild(container);
+			instance.attachToElement(container);
+			instance.setVisible(true);
+
+			const event = new KeyboardEvent('keydown', { key: '=', metaKey: true, cancelable: true });
+			try {
+				deepStrictEqual(
+					{ result: capturedHandler?.(event), defaultPrevented: event.defaultPrevented },
+					{ result: false, defaultPrevented: true }
+				);
+			} finally {
+				keybindingService.softDispatch = originalSoftDispatch;
+				container.remove();
+			}
+		});
+	});
+	suite('DEFAULT_COMMANDS_TO_SKIP_SHELL', () => {
+		test('should include zoom commands so they are not consumed by kitty keyboard protocol', () => {
+			deepStrictEqual(
+				['workbench.action.zoomIn', 'workbench.action.zoomOut', 'workbench.action.zoomReset'].every(
+					cmd => DEFAULT_COMMANDS_TO_SKIP_SHELL.includes(cmd)
+				),
+				true
+			);
+		});
 	});
 	suite('parseExitResult', () => {
 		test('should return no message for exit code = undefined', () => {