Proposed Change

Default to not loading any .env file instead of checking for and loading one at the workspace root if present. This is a potential breaking change for any developers implicitly relying on the current default value of "${workspaceFolder}/.env".

Why

vscode-python implements it's own version of dotenv support based on https://github.com/motdotla/dotenv (implementation references this in comments in multiple places).

This implementation is incompatible with the python-dotenv library, namely that python-dotenv supports multiline quoted values, but vscode-python does not. Inline comments are also not supported by vscode-python (see #23799).

We repeatedly run into this issue at my company, where VsCode is loading incomplete strings into env vars, making it impossible for python-dotenv to load them correctly afterwards (since python-dotenv won't overwrite already set variables to support easier overwriting for tests, etc).

In general I think that it is very unexpected that the vscode-python extension will load .env files using a different and incompatible implementation to the Python dotenv libraries. I think this is evidenced by various issues, such as #23575.

Long term, even if there is a goal to support automatic .env file loading within VsCode itself, IMO it makes more sense for this to be supported in VsCode itself or via a dedicated extension. Having a custom implementation embedded in the Python extension is almost certainly wrong, and disabling this by default is almost certainly a good start to eventually being able to sunset this logic in this extension.