diff --git a/workspaces/mi/mi-extension/package.json b/workspaces/mi/mi-extension/package.json
index 1e780aa5954..69a4d111919 100644
--- a/workspaces/mi/mi-extension/package.json
+++ b/workspaces/mi/mi-extension/package.json
@@ -3,7 +3,7 @@
   "displayName": "WSO2 Integrator: MI",
   "description": "An extension which gives a development environment for designing, developing, debugging, and testing integration solutions.",
   "icon": "resources/images/wso2-micro-integrator-image.png",
-  "version": "3.1.5",
+  "version": "3.1.526032514",
   "publisher": "wso2",
   "engines": {
     "vscode": "^1.100.0"
diff --git a/workspaces/mi/mi-extension/src/stateMachine.ts b/workspaces/mi/mi-extension/src/stateMachine.ts
index 22d9a3f4d06..4d1e25c9990 100644
--- a/workspaces/mi/mi-extension/src/stateMachine.ts
+++ b/workspaces/mi/mi-extension/src/stateMachine.ts
@@ -323,7 +323,7 @@ const stateMachine = createMachine<MachineContext>({
         },
         newProject: {
             entry: () => logDebug("State Machine: Entering 'newProject' state"),
-            initial: "viewLoading",
+            initial: "viewReady",
             states: {
                 viewLoading: {
                     entry: () => logDebug("State Machine: Entering 'newProject.viewLoading' state"),
diff --git a/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/nonMiProjectActivation.spec.ts b/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/nonMiProjectActivation.spec.ts
new file mode 100644
index 00000000000..8b6d19ddd5e
--- /dev/null
+++ b/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/nonMiProjectActivation.spec.ts
@@ -0,0 +1,228 @@
+/**
+ * Copyright (c) 2026, WSO2 LLC. (https://www.wso2.com) All Rights Reserved.
+ *
+ * WSO2 LLC. licenses this file to you under the Apache License,
+ * Version 2.0 (the "License"); you may not use this file except
+ * in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing,
+ * software distributed under the License is distributed on an
+ * "AS IS" BASIS, WITHOUT WARRANTIES OR CONDITIONS OF ANY
+ * KIND, either express or implied. See the License for the
+ * specific language governing permissions and limitations
+ * under the License.
+ */
+
+/**
+ * E2E Tests for Issue #1371:
+ *   MI Welcome Page opens when accessing VS Code Test Explorer (even for non-MI projects)
+ *
+ * These tests verify that when the MI extension activates in a workspace that
+ * contains no WSO2 MI artefacts (no pom.xml with integration-project type,
+ * no .project file), the MI Welcome Page webview panel does NOT open
+ * automatically — specifically not when the user opens the VS Code Test
+ * Explorer view.
+ *
+ * Setup:
+ *   - VS Code is launched with a fresh, empty workspace (no pom.xml → not an MI project).
+ *   - `initTest(true, true)` cleans `newProjectPath` and starts VS Code without
+ *     creating an MI project, giving us a plain non-MI workspace.
+ *
+ * Run:
+ *   pnpm run compile-tests && pnpm exec playwright test --grep "Issue #1371"
+ */
+
+import { test, expect } from '@playwright/test';
+import * as path from 'path';
+import * as fs from 'fs';
+import { initTest, newProjectPath, page } from './Utils';
+
+export default function createTests() {
+    test.describe('Issue #1371 — Non-MI Project Activation', {
+        tag: '@issue1371',
+    }, async () => {
+        // `newProject: true`       → always start with a clean workspace directory
+        // `skipProjectCreation: true` → do NOT run createProject(); the workspace
+        //                              stays empty (no pom.xml) so the MI extension
+        //                              will not detect an MI project.
+        initTest(true, true, false, undefined, undefined, 'issue1371');
+
+        // ── Helper: populate a minimal JS project layout ─────────────────────
+
+        async function populateNonMiWorkspace(): Promise<void> {
+            // Write minimal JS project files so that VS Code's built-in Testing
+            // view controller can register a test provider (making the Testing
+            // beaker icon reliably appear in the activity bar).
+            fs.writeFileSync(
+                path.join(newProjectPath, 'package.json'),
+                JSON.stringify({ name: 'my-js-app', version: '1.0.0', scripts: { test: 'echo "no tests"' } })
+            );
+            fs.writeFileSync(
+                path.join(newProjectPath, 'index.js'),
+                'console.log("Hello World");\n'
+            );
+            // Explicitly ensure NO pom.xml is present.
+            const pomPath = path.join(newProjectPath, 'pom.xml');
+            if (fs.existsSync(pomPath)) {
+                fs.unlinkSync(pomPath);
+            }
+        }
+
+        // ── Helper: collect all visible tab titles in the editor area ────────
+
+        async function getEditorTabTitles(): Promise<string[]> {
+            const tabLabels = page.page.locator('.tab-label');
+            const count = await tabLabels.count();
+            const titles: string[] = [];
+            for (let i = 0; i < count; i++) {
+                const title = await tabLabels.nth(i).textContent();
+                if (title) {
+                    titles.push(title.trim());
+                }
+            }
+            return titles;
+        }
+
+        // ── Helper: check all webview iframes for MI Welcome content ─────────
+
+        async function miWelcomeFoundInWebviews(): Promise<boolean> {
+            const iframes = page.page.locator('iframe.webview');
+            const count = await iframes.count();
+            for (let i = 0; i < count; i++) {
+                try {
+                    const frame = iframes.nth(i).contentFrame();
+                    if (!frame) {
+                        continue;
+                    }
+                    const welcomeLocator = frame.locator('text=Welcome to WSO2 Integrator: MI');
+                    const welcomeCount = await welcomeLocator.count();
+                    if (welcomeCount > 0) {
+                        return true;
+                    }
+                } catch {
+                    // Frame might be cross-origin or not yet ready; skip it.
+                }
+            }
+            return false;
+        }
+
+        // ────────────────────────────────────────────────────────────────────
+
+        test(
+            'MI Welcome Page does not appear when Test Explorer is opened on a non-MI project',
+            async ({}, testInfo) => {
+                console.log(`>>> Test attempt: ${testInfo.retry + 1}`);
+
+                // Ensure the workspace is a plain JS project (no MI artefacts).
+                await populateNonMiWorkspace();
+
+                // ── Step 1: Open the VS Code Test Explorer ───────────────────
+                // The Testing view is a built-in VS Code container.  Clicking its
+                // activity bar icon fires the implicit `onView:MI.mock-services`
+                // activation event (because the MI extension registers a view in
+                // the `test` container via package.json → contributes.views.test).
+                // This is exactly the trigger described in Issue #1371.
+                await test.step('Open VS Code Test Explorer via command palette', async () => {
+                    console.log('Opening VS Code Test Explorer');
+                    await page.executePaletteCommand('View: Show Testing');
+                    // Brief wait for the view to render and for any extension
+                    // activation triggered by revealing the Testing container.
+                    await page.page.waitForTimeout(4000);
+                    console.log('Test Explorer command issued; waiting for extension activation to settle');
+                });
+
+                // ── Step 2: Also try clicking the Testing activity bar tab ───
+                // In addition to the palette command, directly clicking the
+                // Testing beaker in the activity bar can independently fire the
+                // `onView` activation event.
+                await test.step('Click Testing activity bar tab if visible', async () => {
+                    const testingTab = page.page.getByRole('tab', { name: 'Testing' });
+                    const isVisible = await testingTab.isVisible().catch(() => false);
+                    if (isVisible) {
+                        console.log('Testing activity bar tab found; clicking it');
+                        const tabBtn = testingTab.locator('a');
+                        await tabBtn.click({ timeout: 5000 }).catch(() => {
+                            console.log('Tab click timed out; continuing');
+                        });
+                        await page.page.waitForTimeout(3000);
+                    } else {
+                        console.log('Testing activity bar tab not visible in this session; skipping direct click');
+                    }
+                });
+
+                // ── Step 3: Assert — no MI Welcome Page tab in editor area ───
+                await test.step('Assert no MI Welcome Page tab is visible in the editor', async () => {
+                    const tabTitles = await getEditorTabTitles();
+                    console.log('Editor tab titles found:', tabTitles);
+
+                    const miWelcomeTabs = tabTitles.filter(t =>
+                        t.includes('WSO2 Integrator: MI') ||
+                        t.includes('Welcome to WSO2') ||
+                        // MACHINE_VIEW.Welcome is 'WSO2 Integrator: MI'
+                        t === 'WSO2 Integrator: MI'
+                    );
+
+                    expect(miWelcomeTabs).toHaveLength(0);
+                    console.log('PASS: No MI Welcome Page tab found in the editor — Issue #1371 regression guard passed');
+                });
+
+                // ── Step 4: Assert — no MI Welcome content in any webview ────
+                await test.step('Assert MI Welcome Page content is absent from all webview frames', async () => {
+                    const miWelcomeInWebview = await miWelcomeFoundInWebviews();
+                    expect(miWelcomeInWebview).toBe(false);
+                    console.log('PASS: No MI Welcome Page content found in any webview iframe');
+                });
+
+                // ── Step 5: Assert — MI status context is unknownProject ─────
+                // As a secondary verification, confirm the Test Explorer sidebar
+                // does NOT show the MI Mock Services section (which only appears
+                // when MI.status == 'projectLoaded').
+                await test.step('Assert MI Mock Services section is not visible in Test Explorer', async () => {
+                    const mockServicesSection = page.page.locator('[aria-label*="Mock Services"]');
+                    const count = await mockServicesSection.count();
+                    expect(count).toBe(0);
+                    console.log('PASS: MI Mock Services section is not visible in Test Explorer (correct for non-MI workspace)');
+                });
+            }
+        );
+
+        // ── Negative/edge case: non-MI Maven project ─────────────────────────
+
+        test(
+            'MI Welcome Page does not appear when a non-MI Maven pom.xml is present and Test Explorer opens',
+            async ({}, testInfo) => {
+                console.log(`>>> Test attempt: ${testInfo.retry + 1}`);
+
+                // Write a plain Maven pom.xml (no MI projectType).
+                fs.writeFileSync(
+                    path.join(newProjectPath, 'pom.xml'),
+                    '<project><groupId>com.example</groupId><artifactId>plain-maven-app</artifactId></project>'
+                );
+
+                await test.step('Open VS Code Test Explorer', async () => {
+                    await page.executePaletteCommand('View: Show Testing');
+                    await page.page.waitForTimeout(4000);
+                });
+
+                await test.step('Assert no MI Welcome Page tab appears', async () => {
+                    const tabTitles = await getEditorTabTitles();
+                    const miWelcomeTabs = tabTitles.filter(t =>
+                        t.includes('WSO2 Integrator: MI') || t.includes('Welcome to WSO2')
+                    );
+                    expect(miWelcomeTabs).toHaveLength(0);
+                });
+
+                await test.step('Cleanup: remove non-MI pom.xml', async () => {
+                    const pomPath = path.join(newProjectPath, 'pom.xml');
+                    if (fs.existsSync(pomPath)) {
+                        fs.unlinkSync(pomPath);
+                    }
+                });
+            }
+        );
+    });
+}
+
diff --git a/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/test.list.ts b/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/test.list.ts
index 2e0491645de..46fcc4405b6 100644
--- a/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/test.list.ts
+++ b/workspaces/mi/mi-extension/src/test/e2e-playwright-tests/test.list.ts
@@ -35,6 +35,7 @@ import overviewPageTests from './overviewPageTests/projectSettingPage.spec';
 import openEntryPointArtifact from './overviewPageTests/openEntryPointArtifact.spec';
 import multiWorkspaceTests from './multiWorkspaceTests/multiWorkspace.spec';
 import unitTestSuitTests from './unitTestSuite.spec';
+import nonMiProjectActivationTests from './nonMiProjectActivation.spec';
 import { page } from './Utils';
 const fs = require('fs');
 const path = require('path');
@@ -68,6 +69,7 @@ test.describe(validateMediatorTests);
 test.describe(dataMapperMediatorTests);
 test.describe(unitTestSuitTests);
 test.describe(dbReportMediatorTests);
+test.describe(nonMiProjectActivationTests);
 test.describe(artifact430Tests);
 
 test.afterAll(async () => {
diff --git a/workspaces/mi/mi-extension/src/test/suite/nonMiProjectActivation.test.ts b/workspaces/mi/mi-extension/src/test/suite/nonMiProjectActivation.test.ts
new file mode 100644
index 00000000000..9e1c26da7ad
--- /dev/null
+++ b/workspaces/mi/mi-extension/src/test/suite/nonMiProjectActivation.test.ts
@@ -0,0 +1,266 @@
+/**
+ * Copyright (c) 2026, WSO2 LLC. (https://www.wso2.com) All Rights Reserved.
+ *
+ * WSO2 LLC. licenses this file to you under the Apache License,
+ * Version 2.0 (the "License"); you may not use this file except
+ * in compliance with the License.
+ * You may obtain a copy of the License at
+ *
+ *     http://www.apache.org/licenses/LICENSE-2.0
+ *
+ * Unless required by applicable law or agreed to in writing,
+ * software distributed under the License is distributed on an
+ * "AS IS" BASIS, WITHOUT WARRANTIES OR CONDITIONS OF ANY
+ * KIND, either express or implied. See the License for the
+ * specific language governing permissions and limitations
+ * under the License.
+ */
+
+/**
+ * Tests for Issue #1371: MI Welcome Page opens when accessing VS Code Test
+ * Explorer even for non-MI projects.
+ *
+ * Root cause: The state machine's `newProject` state previously used
+ * `initial: "viewLoading"`, which immediately invoked `openWebPanel` on every
+ * non-MI activation.  The fix sets `initial: "viewReady"` so that
+ * `openWebPanel` is only called in response to an explicit `OPEN_VIEW` event.
+ *
+ * These tests are regression guards that will fail if the initial substate of
+ * `newProject` is ever reverted to `viewLoading`, or if any other code path
+ * causes the VisualizerWebview (Welcome Page) to be created without user
+ * interaction for a non-MI workspace.
+ */
+
+import * as assert from 'assert';
+import * as path from 'path';
+import * as os from 'os';
+import * as fs from 'fs';
+import { isOldProjectOrWorkspace, getStateMachine, deleteStateMachine } from '../../stateMachine';
+import { webviews } from '../../visualizer/webview';
+
+// Maximum time (ms) we wait for the state machine to settle after starting.
+const STATE_SETTLE_TIMEOUT_MS = 8000;
+
+/**
+ * Resolves when the state machine reaches the given top-level state.
+ * Rejects with a descriptive error if it has not arrived within
+ * STATE_SETTLE_TIMEOUT_MS milliseconds.
+ */
+function waitForTopState(
+    sm: ReturnType<typeof getStateMachine>,
+    targetState: string
+): Promise<void> {
+    return new Promise<void>((resolve, reject) => {
+        const timeoutHandle = setTimeout(
+            () =>
+                reject(
+                    new Error(
+                        `State machine did not reach '${targetState}' within ` +
+                        `${STATE_SETTLE_TIMEOUT_MS} ms. ` +
+                        `Current state: ${JSON.stringify(sm.state())}`
+                    )
+                ),
+            STATE_SETTLE_TIMEOUT_MS
+        );
+
+        const service = sm.service();
+        service.onTransition((state: any) => {
+            const val = state.value;
+            const topState = typeof val === 'object' ? Object.keys(val)[0] : val;
+            if (topState === targetState) {
+                clearTimeout(timeoutHandle);
+                resolve();
+            }
+        });
+    });
+}
+
+// ─────────────────────────────────────────────────────────────────────────────
+
+suite('Issue #1371 — Non-MI Project Activation', () => {
+    let tempDir: string;
+
+    setup(() => {
+        // Create a fresh temp directory that has NO pom.xml and NO .project
+        // file — this simulates a plain JavaScript / Maven project that is
+        // NOT a WSO2 MI integration project.
+        tempDir = path.join(os.tmpdir(), `mi-test-non-mi-1371-${Date.now()}`);
+        fs.mkdirSync(tempDir, { recursive: true });
+    });
+
+    teardown(async () => {
+        // Stop and remove the state machine entry to avoid polluting other tests.
+        deleteStateMachine(tempDir);
+
+        // Dispose any webview that might have been accidentally created.
+        const webview = webviews.get(tempDir);
+        if (webview) {
+            webview.dispose();
+            webviews.delete(tempDir);
+        }
+
+        // Remove the temp directory.
+        try {
+            fs.rmSync(tempDir, { recursive: true, force: true });
+        } catch {
+            // Best-effort; ignore cleanup errors.
+        }
+    });
+
+    // ── isOldProjectOrWorkspace ──────────────────────────────────────────────
+
+    test('isOldProjectOrWorkspace returns false for an empty (non-MI) directory', async () => {
+        // Empty directory — no pom.xml, no .project.
+        const result = await isOldProjectOrWorkspace(tempDir);
+        assert.strictEqual(
+            result,
+            false,
+            'An empty directory must not be classified as an old Integration Studio project or workspace'
+        );
+    });
+
+    test('isOldProjectOrWorkspace returns false for a plain Maven pom.xml', async () => {
+        // A Maven pom.xml that does NOT contain MI-specific content.
+        fs.writeFileSync(
+            path.join(tempDir, 'pom.xml'),
+            '<project><groupId>com.example</groupId><artifactId>my-app</artifactId></project>'
+        );
+        const result = await isOldProjectOrWorkspace(tempDir);
+        assert.strictEqual(
+            result,
+            false,
+            'A plain Maven project without Integration Studio multi-module nature must not be classified as an old MI project'
+        );
+    });
+
+    // ── State machine transitions ────────────────────────────────────────────
+
+    test('state machine transitions to newProject state for a non-MI directory', async () => {
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        const state = sm.state() as any;
+        const topState = typeof state === 'object' ? Object.keys(state)[0] : state;
+        assert.strictEqual(
+            topState,
+            'newProject',
+            'State machine must enter the newProject state when the workspace contains no MI artefacts'
+        );
+    });
+
+    test('newProject state machine context carries Welcome view type', async () => {
+        // After transitioning to newProject, context.view should be set to
+        // MACHINE_VIEW.Welcome — but the webview must NOT be opened yet.
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        const ctx = sm.context() as any;
+        assert.ok(
+            ctx.view !== undefined,
+            'State machine context must have a view property after entering newProject'
+        );
+    });
+
+    // ── viewReady vs. viewLoading initial substate ───────────────────────────
+
+    test('newProject initial substate is viewReady, not viewLoading', async () => {
+        // This is the PRIMARY regression guard for Issue #1371.
+        //
+        // With the bug: initial substate was `viewLoading`, causing `openWebPanel`
+        // to fire immediately → MI Welcome Page appeared without user action.
+        //
+        // With the fix: initial substate is `viewReady` → `openWebPanel` is
+        // only invoked after an explicit OPEN_VIEW event from the user.
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        const state = sm.state() as any;
+        assert.ok(
+            typeof state === 'object',
+            'State value should be an object when inside the newProject compound state'
+        );
+        assert.strictEqual(
+            state.newProject,
+            'viewReady',
+            'newProject must start in the viewReady substate; ' +
+            'viewLoading (which invokes openWebPanel) must only be reached via an explicit OPEN_VIEW event'
+        );
+    });
+
+    test('state machine does not auto-transition to newProject.viewLoading without OPEN_VIEW', async () => {
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        // Allow the machine a brief period to settle in case it spontaneously
+        // transitions further.
+        await new Promise<void>(r => setTimeout(r, 600));
+
+        const state = sm.state() as any;
+        const substate = typeof state === 'object' ? state.newProject : state;
+        assert.notStrictEqual(
+            substate,
+            'viewLoading',
+            'State machine must not enter newProject.viewLoading without an explicit OPEN_VIEW event; ' +
+            'doing so would open the MI Welcome Page without user interaction'
+        );
+    });
+
+    // ── No webview created on activation ────────────────────────────────────
+
+    test('no VisualizerWebview panel is created on activation for an empty non-MI directory', async () => {
+        // THE CORE BUG GUARD: The MI Welcome Page must never be opened
+        // automatically when the extension activates on a non-MI workspace.
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        assert.strictEqual(
+            webviews.has(tempDir),
+            false,
+            'A VisualizerWebview (MI Welcome Page) must NOT be created automatically ' +
+            'when the extension activates on a non-MI workspace; ' +
+            'it must only appear after an explicit user action'
+        );
+    });
+
+    test('no VisualizerWebview panel is created for a non-MI directory with a plain pom.xml', async () => {
+        // Edge case: directory has pom.xml but it is not an MI integration project.
+        fs.writeFileSync(
+            path.join(tempDir, 'pom.xml'),
+            '<project><groupId>com.example</groupId><artifactId>plain-app</artifactId></project>'
+        );
+
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        assert.strictEqual(
+            webviews.has(tempDir),
+            false,
+            'A plain Maven project (pom.xml without MI projectType) must not cause the ' +
+            'MI Welcome webview to open automatically'
+        );
+    });
+
+    test('no VisualizerWebview panel is created for a non-MI JS project layout', async () => {
+        // Simulates a JavaScript project that would host a jest test controller,
+        // which is the exact scenario that triggers onView:MI.mock-services
+        // activation in VS Code desktop (the bug trigger from Issue #1371).
+        fs.writeFileSync(
+            path.join(tempDir, 'package.json'),
+            JSON.stringify({ name: 'my-js-app', version: '1.0.0', scripts: { test: 'jest' } })
+        );
+        fs.writeFileSync(
+            path.join(tempDir, 'jest.config.js'),
+            'module.exports = { testEnvironment: "node" };'
+        );
+
+        const sm = getStateMachine(tempDir);
+        await waitForTopState(sm, 'newProject');
+
+        assert.strictEqual(
+            webviews.has(tempDir),
+            false,
+            'A JavaScript project with jest config must not open the MI Welcome Page ' +
+            'when the MI extension is activated (e.g., via the VS Code Test Explorer)'
+        );
+    });
+});