diff --git a/src/vs/workbench/contrib/terminalContrib/links/browser/terminalLinkManager.ts b/src/vs/workbench/contrib/terminalContrib/links/browser/terminalLinkManager.ts
index 9b0622ddf75e4f..154a8eac830915 100644
--- a/src/vs/workbench/contrib/terminalContrib/links/browser/terminalLinkManager.ts
+++ b/src/vs/workbench/contrib/terminalContrib/links/browser/terminalLinkManager.ts
@@ -200,6 +200,12 @@ export class TerminalLinkManager extends DisposableStore {
 	private _setupLinkDetector(id: string, detector: ITerminalLinkDetector, isExternal: boolean = false): ILinkProvider {
 		const detectorAdapter = this.add(this._instantiationService.createInstance(TerminalLinkDetectorAdapter, detector));
 		this.add(detectorAdapter.onDidActivateLink(e => {
+			// xterm.js activates links on mouseup of any button, only the primary button should
+			// activate. Bail before preventDefault as that would block the middle click paste of
+			// the selection clipboard on Linux.
+			if (e.event && e.event.button !== 0) {
+				return;
+			}
 			// Prevent default electron link handling so Alt+Click mode works normally
 			e.event?.preventDefault();
 			// Require correct modifier on click unless event is coming from linkQuickPick selection
diff --git a/src/vs/workbench/contrib/terminalContrib/links/test/browser/terminalLinkManager.test.ts b/src/vs/workbench/contrib/terminalContrib/links/test/browser/terminalLinkManager.test.ts
index 7132cb0d596618..4a6301a8a5f191 100644
--- a/src/vs/workbench/contrib/terminalContrib/links/test/browser/terminalLinkManager.test.ts
+++ b/src/vs/workbench/contrib/terminalContrib/links/test/browser/terminalLinkManager.test.ts
@@ -20,7 +20,7 @@ import { IDetectedLinks, TerminalLinkManager } from '../../browser/terminalLinkM
 import { ITerminalCapabilityImplMap, ITerminalCapabilityStore, TerminalCapability } from '../../../../../../platform/terminal/common/capabilities/capabilities.js';
 import { ITerminalConfiguration, ITerminalProcessManager } from '../../../../terminal/common/terminal.js';
 import { TestViewDescriptorService } from '../../../../terminal/test/browser/xterm/xtermTerminal.test.js';
-import { TestStorageService } from '../../../../../test/common/workbenchTestServices.js';
+import { TestProductService, TestStorageService } from '../../../../../test/common/workbenchTestServices.js';
 import type { ILink, Terminal } from '@xterm/xterm';
 import { IXtermCore } from '../../../../terminal/browser/xterm-private.js';
 import { TerminalLinkResolver } from '../../browser/terminalLinkResolver.js';
@@ -36,6 +36,7 @@ import { IHoverService } from '../../../../../../platform/hover/browser/hover.js
 import { ILinkHoverTargetOptions } from '../../../../terminal/browser/widgets/terminalHoverWidget.js';
 import { TerminalWidgetManager } from '../../../../terminal/browser/widgets/widgetManager.js';
 import { TerminalLink } from '../../browser/terminalLink.js';
+import { IProductService } from '../../../../../../platform/product/common/productService.js';
 
 const defaultTerminalConfig: Partial<ITerminalConfiguration> = {
 	fontFamily: 'monospace',
@@ -64,6 +65,9 @@ class TestLinkManager extends TerminalLinkManager {
 	setLinks(links: IDetectedLinks): void {
 		this._links = links;
 	}
+	getDetectedLinks(y: number, type: 'word' | 'url' | 'localFile'): Promise<ILink[] | undefined> {
+		return super._getLinksForType(y, type);
+	}
 }
 
 suite('TerminalLinkManager', () => {
@@ -96,6 +100,7 @@ suite('TerminalLinkManager', () => {
 		instantiationService.stub(IStorageService, store.add(new TestStorageService()));
 		instantiationService.stub(IThemeService, themeService);
 		instantiationService.stub(IViewDescriptorService, viewDescriptorService);
+		instantiationService.stub(IProductService, TestProductService);
 
 		const TerminalCtor = (await importAMDNodeModule<typeof import('@xterm/xterm')>('@xterm/xterm', 'lib/xterm.js')).Terminal;
 		xterm = store.add(new TerminalCtor({ allowProposedApi: true, cols: 80, rows: 30, logger: TestXtermLogger }));
@@ -341,6 +346,18 @@ suite('TerminalLinkManager', () => {
 			strictEqual(fileLink, link2);
 		});
 	});
+
+	suite('link activation', () => {
+		test('should only prevent default for the primary button so middle click paste works', async () => {
+			await new Promise<void>(r => xterm.write('foo', r));
+			const [link] = (await linkManager.getDetectedLinks(1, 'word'))!;
+			const events = [0, 1, 2].map(button => new MouseEvent('mouseup', { button, cancelable: true }));
+			for (const e of events) {
+				link.activate(e, link.text);
+			}
+			deepStrictEqual(events.map(e => e.defaultPrevented), [true, false, false]);
+		});
+	});
 });
 function upcastPartial<T>(v: Partial<T>): T {
 	return v as T;