diff --git a/src/client/common/vscodeApis/workspaceApis.ts b/src/client/common/vscodeApis/workspaceApis.ts
index 98086001fd7a..5172cc1593ce 100644
--- a/src/client/common/vscodeApis/workspaceApis.ts
+++ b/src/client/common/vscodeApis/workspaceApis.ts
@@ -2,11 +2,16 @@
 // Licensed under the MIT License.
 
 import { ConfigurationScope, workspace, WorkspaceConfiguration, WorkspaceFolder } from 'vscode';
+import { Resource } from '../types';
 
 export function getWorkspaceFolders(): readonly WorkspaceFolder[] | undefined {
     return workspace.workspaceFolders;
 }
 
+export function getWorkspaceFolder(uri: Resource): WorkspaceFolder | undefined {
+    return uri ? workspace.getWorkspaceFolder(uri) : undefined;
+}
+
 export function getWorkspaceFolderPaths(): string[] {
     return workspace.workspaceFolders?.map((w) => w.uri.fsPath) ?? [];
 }
diff --git a/src/client/proposedApi.ts b/src/client/proposedApi.ts
index 2bae98edef11..da79a3fc68e1 100644
--- a/src/client/proposedApi.ts
+++ b/src/client/proposedApi.ts
@@ -25,7 +25,7 @@ import { getEnvPath } from './pythonEnvironments/base/info/env';
 import { IDiscoveryAPI } from './pythonEnvironments/base/locator';
 import { IPythonExecutionFactory } from './common/process/types';
 import { traceError, traceVerbose } from './logging';
-import { normCasePath } from './common/platform/fs-paths';
+import { isParentPath, normCasePath } from './common/platform/fs-paths';
 import { sendTelemetryEvent } from './telemetry';
 import { EventName } from './telemetry/constants';
 import {
@@ -35,7 +35,7 @@ import {
 } from './deprecatedProposedApi';
 import { DeprecatedProposedAPI } from './deprecatedProposedApiTypes';
 import { IEnvironmentVariablesProvider } from './common/variables/types';
-import { IWorkspaceService } from './common/application/types';
+import { getWorkspaceFolder, getWorkspaceFolders } from './common/vscodeApis/workspaceApis';
 
 type ActiveEnvironmentChangeEvent = {
     resource: WorkspaceFolder | undefined;
@@ -102,6 +102,19 @@ function getEnvReference(e: Environment) {
     return envClass;
 }
 
+function filterUsingVSCodeContext(e: PythonEnvInfo) {
+    const folders = getWorkspaceFolders();
+    if (e.searchLocation) {
+        // Only return local environments that are in the currently opened workspace folders.
+        const envFolderUri = e.searchLocation;
+        if (folders) {
+            return folders.some((folder) => isParentPath(envFolderUri.fsPath, folder.uri.fsPath));
+        }
+        return false;
+    }
+    return true;
+}
+
 export function buildProposedApi(
     discoveryApi: IDiscoveryAPI,
     serviceContainer: IServiceContainer,
@@ -110,7 +123,6 @@ export function buildProposedApi(
     const configService = serviceContainer.get<IConfigurationService>(IConfigurationService);
     const disposables = serviceContainer.get<IDisposableRegistry>(IDisposableRegistry);
     const extensions = serviceContainer.get<IExtensions>(IExtensions);
-    const workspaceService = serviceContainer.get<IWorkspaceService>(IWorkspaceService);
     const envVarsProvider = serviceContainer.get<IEnvironmentVariablesProvider>(IEnvironmentVariablesProvider);
     function sendApiTelemetry(apiName: string) {
         extensions
@@ -126,6 +138,11 @@ export function buildProposedApi(
     }
     disposables.push(
         discoveryApi.onChanged((e) => {
+            const env = e.new ?? e.old;
+            if (!env || !filterUsingVSCodeContext(env)) {
+                // Filter out environments that are not in the current workspace.
+                return;
+            }
             if (e.old) {
                 if (e.new) {
                     onEnvironmentsChanged.fire({ type: 'update', env: convertEnvInfoAndGetReference(e.new) });
@@ -156,7 +173,7 @@ export function buildProposedApi(
         }),
         envVarsProvider.onDidEnvironmentVariablesChange((e) => {
             onEnvironmentVariablesChanged.fire({
-                resource: workspaceService.getWorkspaceFolder(e),
+                resource: getWorkspaceFolder(e),
                 env: envVarsProvider.getEnvironmentVariablesSync(e),
             });
         }),
@@ -235,7 +252,10 @@ export function buildProposedApi(
             },
             get known(): Environment[] {
                 sendApiTelemetry('known');
-                return discoveryApi.getEnvs().map((e) => convertEnvInfoAndGetReference(e));
+                return discoveryApi
+                    .getEnvs()
+                    .filter((e) => filterUsingVSCodeContext(e))
+                    .map((e) => convertEnvInfoAndGetReference(e));
             },
             async refreshEnvironments(options?: RefreshOptions) {
                 await discoveryApi.triggerRefresh(undefined, {
@@ -280,7 +300,7 @@ export function convertCompleteEnvInfo(env: PythonEnvInfo): ResolvedEnvironment
                   type: convertEnvType(env.type),
                   name: env.name,
                   folderUri: Uri.file(env.location),
-                  workspaceFolder: env.searchLocation,
+                  workspaceFolder: getWorkspaceFolder(env.searchLocation),
               }
             : undefined,
         version: version as ResolvedEnvironment['version'],
diff --git a/src/client/proposedApiTypes.ts b/src/client/proposedApiTypes.ts
index b2a2d3d80b97..55c6244eb791 100644
--- a/src/client/proposedApiTypes.ts
+++ b/src/client/proposedApiTypes.ts
@@ -32,6 +32,8 @@ export interface ProposedExtensionAPI {
         /**
          * Carries environments known to the extension at the time of fetching the property. Note this may not
          * contain all environments in the system as a refresh might be going on.
+         *
+         * Only reports environments in the current workspace.
          */
         readonly known: readonly Environment[];
         /**
@@ -125,7 +127,7 @@ export type Environment = EnvironmentPath & {
               /**
                * Any specific workspace folder this environment is created for.
                */
-              readonly workspaceFolder: Uri | undefined;
+              readonly workspaceFolder: WorkspaceFolder | undefined;
           }
         | undefined;
     /**
diff --git a/src/client/pythonEnvironments/index.ts b/src/client/pythonEnvironments/index.ts
index fddd647c93b1..3f7bac7d670e 100644
--- a/src/client/pythonEnvironments/index.ts
+++ b/src/client/pythonEnvironments/index.ts
@@ -3,6 +3,7 @@
 
 import * as vscode from 'vscode';
 import { Uri } from 'vscode';
+import { cloneDeep } from 'lodash';
 import { getGlobalStorage, IPersistentStorage } from '../common/persistentState';
 import { getOSType, OSType } from '../common/utils/platform';
 import { ActivationResult, ExtensionState } from '../components';
@@ -34,6 +35,7 @@ import {
 } from './base/locators/composite/envsCollectionCache';
 import { EnvsCollectionService } from './base/locators/composite/envsCollectionService';
 import { IDisposable } from '../common/types';
+import { traceError } from '../logging';
 
 /**
  * Set up the Python environments component (during extension activation).'
@@ -192,6 +194,8 @@ function getFromStorage(storage: IPersistentStorage<PythonEnvInfo[]>): PythonEnv
                 e.searchLocation = Uri.parse(e.searchLocation);
             } else if ('scheme' in e.searchLocation && 'path' in e.searchLocation) {
                 e.searchLocation = Uri.parse(`${e.searchLocation.scheme}://${e.searchLocation.path}`);
+            } else {
+                traceError('Unexpected search location', JSON.stringify(e.searchLocation));
             }
         }
         return e;
@@ -200,7 +204,8 @@ function getFromStorage(storage: IPersistentStorage<PythonEnvInfo[]>): PythonEnv
 
 function putIntoStorage(storage: IPersistentStorage<PythonEnvInfo[]>, envs: PythonEnvInfo[]): Promise<void> {
     storage.set(
-        envs.map((e) => {
+        // We have to `cloneDeep()` here so that we don't overwrite the original `PythonEnvInfo` objects.
+        cloneDeep(envs).map((e) => {
             if (e.searchLocation) {
                 // Make TS believe it is string. This is temporary. We need to serialize this in
                 // a custom way.
diff --git a/src/test/proposedApi.unit.test.ts b/src/test/proposedApi.unit.test.ts
index 4b9afe8fd453..1a834d62a6a5 100644
--- a/src/test/proposedApi.unit.test.ts
+++ b/src/test/proposedApi.unit.test.ts
@@ -2,6 +2,7 @@
 // Licensed under the MIT License.
 
 import * as typemoq from 'typemoq';
+import * as sinon from 'sinon';
 import { assert, expect } from 'chai';
 import { Uri, EventEmitter, ConfigurationTarget, WorkspaceFolder } from 'vscode';
 import { cloneDeep } from 'lodash';
@@ -11,6 +12,7 @@ import {
     IExtensions,
     IInterpreterPathService,
     IPythonSettings,
+    Resource,
 } from '../client/common/types';
 import { IServiceContainer } from '../client/ioc/types';
 import {
@@ -35,8 +37,15 @@ import {
 } from '../client/proposedApiTypes';
 import { IWorkspaceService } from '../client/common/application/types';
 import { IEnvironmentVariablesProvider } from '../client/common/variables/types';
+import * as workspaceApis from '../client/common/vscodeApis/workspaceApis';
 
 suite('Proposed Extension API', () => {
+    const workspacePath = 'path/to/workspace';
+    const workspaceFolder = {
+        name: 'workspace',
+        uri: Uri.file(workspacePath),
+        index: 0,
+    };
     let serviceContainer: typemoq.IMock<IServiceContainer>;
     let discoverAPI: typemoq.IMock<IDiscoveryAPI>;
     let interpreterPathService: typemoq.IMock<IInterpreterPathService>;
@@ -52,6 +61,13 @@ suite('Proposed Extension API', () => {
 
     setup(() => {
         serviceContainer = typemoq.Mock.ofType<IServiceContainer>();
+        sinon.stub(workspaceApis, 'getWorkspaceFolders').returns([workspaceFolder]);
+        sinon.stub(workspaceApis, 'getWorkspaceFolder').callsFake((resource: Resource) => {
+            if (resource?.fsPath === workspaceFolder.uri.fsPath) {
+                return workspaceFolder;
+            }
+            return undefined;
+        });
         discoverAPI = typemoq.Mock.ofType<IDiscoveryAPI>();
         extensions = typemoq.Mock.ofType<IExtensions>();
         workspaceService = typemoq.Mock.ofType<IWorkspaceService>();
@@ -85,21 +101,20 @@ suite('Proposed Extension API', () => {
     teardown(() => {
         // Verify each API method sends telemetry regarding who called the API.
         extensions.verifyAll();
+        sinon.restore();
     });
 
     test('Provide an event to track when environment variables change', async () => {
-        const resource = Uri.file('x');
-        const folder = ({ uri: resource } as unknown) as WorkspaceFolder;
+        const resource = workspaceFolder.uri;
         const envVars = { PATH: 'path' };
         envVarsProvider.setup((e) => e.getEnvironmentVariablesSync(resource)).returns(() => envVars);
-        workspaceService.setup((w) => w.getWorkspaceFolder(resource)).returns(() => folder);
         const events: EnvironmentVariablesChangeEvent[] = [];
         proposed.environments.onDidEnvironmentVariablesChange((e) => {
             events.push(e);
         });
         onDidChangeEnvironmentVariables.fire(resource);
         await sleep(1);
-        assert.deepEqual(events, [{ env: envVars, resource: folder }]);
+        assert.deepEqual(events, [{ env: envVars, resource: workspaceFolder }]);
     });
 
     test('getEnvironmentVariables: No resource', async () => {
@@ -196,7 +211,7 @@ suite('Proposed Extension API', () => {
             kind: PythonEnvKind.System,
             arch: Architecture.x64,
             sysPrefix: 'prefix/path',
-            searchLocation: Uri.file('path/to/project'),
+            searchLocation: Uri.file(workspacePath),
         });
         discoverAPI.setup((p) => p.resolveEnv(pythonPath)).returns(() => Promise.resolve(env));
 
@@ -216,13 +231,13 @@ suite('Proposed Extension API', () => {
             kind: PythonEnvKind.System,
             arch: Architecture.x64,
             sysPrefix: 'prefix/path',
-            searchLocation: Uri.file('path/to/project'),
+            searchLocation: Uri.file(workspacePath),
         });
         const partialEnv = buildEnvInfo({
             executable: pythonPath,
             kind: PythonEnvKind.System,
             sysPrefix: 'prefix/path',
-            searchLocation: Uri.file('path/to/project'),
+            searchLocation: Uri.file(workspacePath),
         });
         discoverAPI.setup((p) => p.resolveEnv(pythonPath)).returns(() => Promise.resolve(env));
 
@@ -237,7 +252,7 @@ suite('Proposed Extension API', () => {
     });
 
     test('environments: python found', async () => {
-        const envs = [
+        const expectedEnvs = [
             {
                 executable: {
                     filename: 'this/is/a/test/python/path1',
@@ -281,12 +296,37 @@ suite('Proposed Extension API', () => {
                 },
             },
         ];
+        const envs = [
+            ...expectedEnvs,
+            {
+                executable: {
+                    filename: 'this/is/a/test/python/path3',
+                    ctime: 1,
+                    mtime: 2,
+                    sysPrefix: 'prefix/path',
+                },
+                version: {
+                    major: 3,
+                    minor: -1,
+                    micro: -1,
+                },
+                kind: PythonEnvKind.Venv,
+                arch: Architecture.x64,
+                name: '',
+                location: '',
+                source: [PythonEnvSource.PathEnvVar],
+                distro: {
+                    org: '',
+                },
+                searchLocation: Uri.file('path/outside/workspace'),
+            },
+        ];
         discoverAPI.setup((d) => d.getEnvs()).returns(() => envs);
         const actual = proposed.environments.known;
         const actualEnvs = actual?.map((a) => (a as EnvironmentReference).internal);
         assert.deepEqual(
             actualEnvs?.sort((a, b) => a.id.localeCompare(b.id)),
-            envs.map((e) => convertEnvInfo(e)).sort((a, b) => a.id.localeCompare(b.id)),
+            expectedEnvs.map((e) => convertEnvInfo(e)).sort((a, b) => a.id.localeCompare(b.id)),
         );
     });
 
@@ -302,7 +342,7 @@ suite('Proposed Extension API', () => {
                 executable: 'pythonPath',
                 kind: PythonEnvKind.System,
                 sysPrefix: 'prefix/path',
-                searchLocation: Uri.file('path/to/project'),
+                searchLocation: Uri.file(workspacePath),
             }),
             {
                 executable: {