diff --git a/sdks/vscode/package.json b/sdks/vscode/package.json
index a041b65223dd..12de57807ebb 100644
--- a/sdks/vscode/package.json
+++ b/sdks/vscode/package.json
@@ -78,7 +78,21 @@
         "win": "ctrl+alt+K",
         "linux": "ctrl+alt+K"
       }
-    ]
+    ],
+    "configuration": {
+      "title": "opencode",
+      "properties": {
+        "opencode.tuiLocation": {
+          "type": "string",
+          "default": "editor",
+          "enum": [
+            "editor",
+            "terminal"
+          ],
+          "description": "Where to open the opencode TUI: beside the current editor or in the terminal panel."
+        }
+      }
+    }
   },
   "scripts": {
     "vscode:prepublish": "bun run package",
diff --git a/sdks/vscode/src/extension.ts b/sdks/vscode/src/extension.ts
index 105ab0293a8a..7345ccb137e3 100644
--- a/sdks/vscode/src/extension.ts
+++ b/sdks/vscode/src/extension.ts
@@ -40,10 +40,12 @@ export function activate(context: vscode.ExtensionContext) {
     }
   })
 
-  context.subscriptions.push(openTerminalDisposable, addFilepathDisposable)
+  context.subscriptions.push(openNewTerminalDisposable, openTerminalDisposable, addFilepathDisposable)
 
   async function openTerminal() {
     // Create a new terminal in split screen
+    const config = vscode.workspace.getConfiguration("opencode")
+    const tuiLocation = config.get<string>("tuiLocation", "editor")
     const port = Math.floor(Math.random() * (65535 - 16384 + 1)) + 16384
     const terminal = vscode.window.createTerminal({
       name: TERMINAL_NAME,
@@ -51,10 +53,13 @@ export function activate(context: vscode.ExtensionContext) {
         light: vscode.Uri.file(context.asAbsolutePath("images/button-dark.svg")),
         dark: vscode.Uri.file(context.asAbsolutePath("images/button-light.svg")),
       },
-      location: {
-        viewColumn: vscode.ViewColumn.Beside,
-        preserveFocus: false,
-      },
+      location:
+        tuiLocation === "terminal"
+          ? vscode.TerminalLocation.Panel
+          : {
+              viewColumn: vscode.ViewColumn.Beside,
+              preserveFocus: false,
+            },
       env: {
         _EXTENSION_OPENCODE_PORT: port.toString(),
         OPENCODE_CALLER: "vscode",