diff --git a/src/vs/platform/files/browser/htmlFileSystemProvider.ts b/src/vs/platform/files/browser/htmlFileSystemProvider.ts
index 7ee315023b7..641036c1a7f 100644
--- a/src/vs/platform/files/browser/htmlFileSystemProvider.ts
+++ b/src/vs/platform/files/browser/htmlFileSystemProvider.ts
@@ -16,6 +16,8 @@ import { extUri, extUriIgnorePathCase } from 'vs/base/common/resources';
 import { newWriteableStream, ReadableStreamEvents } from 'vs/base/common/stream';
 import { createFileSystemProviderError, FileDeleteOptions, FileOverwriteOptions, FileReadStreamOptions, FileSystemProviderCapabilities, FileSystemProviderError, FileSystemProviderErrorCode, FileType, FileWriteOptions, IFileSystemProviderWithFileReadStreamCapability, IFileSystemProviderWithFileReadWriteCapability, IStat, IWatchOptions } from 'vs/platform/files/common/files';
 import { WebFileSystemAccess } from 'vs/platform/files/browser/webFileSystemAccess';
+import { IndexedDB } from 'vs/base/browser/indexedDB';
+import { ILogService } from 'vs/platform/log/common/log';
 
 export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWriteCapability, IFileSystemProviderWithFileReadStreamCapability {
 
@@ -47,6 +49,13 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 
 	//#endregion
 
+
+	constructor(
+		private indexedDB: IndexedDB | undefined,
+		private readonly store: string,
+		private logService: ILogService
+	) { }
+
 	//#region File Metadata Resolving
 
 	async stat(resource: URI): Promise<IStat> {
@@ -289,11 +298,11 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 	private readonly _files = new Map<string, FileSystemFileHandle>();
 	private readonly _directories = new Map<string, FileSystemDirectoryHandle>();
 
-	registerFileHandle(handle: FileSystemFileHandle): URI {
+	registerFileHandle(handle: FileSystemFileHandle): Promise<URI> {
 		return this.registerHandle(handle, this._files);
 	}
 
-	registerDirectoryHandle(handle: FileSystemDirectoryHandle): URI {
+	registerDirectoryHandle(handle: FileSystemDirectoryHandle): Promise<URI> {
 		return this.registerHandle(handle, this._directories);
 	}
 
@@ -301,7 +310,7 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 		return this._directories.values();
 	}
 
-	private registerHandle(handle: FileSystemHandle, map: Map<string, FileSystemHandle>): URI {
+	private async registerHandle(handle: FileSystemHandle, map: Map<string, FileSystemHandle>): Promise<URI> {
 		let handleId = `/${handle.name}`;
 
 		// Compute a valid handle ID in case this exists already
@@ -314,13 +323,20 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 
 		map.set(handleId, handle);
 
+		// Remember in IndexDB for future lookup
+		try {
+			await this.indexedDB?.runInTransaction(this.store, 'readwrite', objectStore => objectStore.put(handle, handleId));
+		} catch (error) {
+			this.logService.error(error);
+		}
+
 		return URI.from({ scheme: Schemas.file, path: handleId });
 	}
 
 	async getHandle(resource: URI): Promise<FileSystemHandle | undefined> {
 
 		// First: try to find a well known handle first
-		let handle = this.getHandleSync(resource);
+		let handle = await this.doGetHandle(resource);
 
 		// Second: walk up parent directories and resolve handle if possible
 		if (!handle) {
@@ -342,26 +358,8 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 		return handle;
 	}
 
-	private getHandleSync(resource: URI): FileSystemHandle | undefined {
-
-		// We store file system handles with the `handle.name`
-		// and as such require the resource to be on the root
-		if (this.extUri.dirname(resource).path !== '/') {
-			return undefined;
-		}
-
-		const handleId = resource.path.replace(/\/$/, ''); // remove potential slash from the end of the path
-		const handle = this._files.get(handleId) ?? this._directories.get(handleId);
-
-		if (!handle) {
-			throw this.createFileSystemProviderError(resource, 'No file system handle registered', FileSystemProviderErrorCode.Unavailable);
-		}
-
-		return handle;
-	}
-
 	private async getFileHandle(resource: URI): Promise<FileSystemFileHandle | undefined> {
-		const handle = this.getHandleSync(resource);
+		const handle = await this.doGetHandle(resource);
 		if (handle instanceof FileSystemFileHandle) {
 			return handle;
 		}
@@ -376,7 +374,7 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 	}
 
 	private async getDirectoryHandle(resource: URI): Promise<FileSystemDirectoryHandle | undefined> {
-		const handle = this.getHandleSync(resource);
+		const handle = await this.doGetHandle(resource);
 		if (handle instanceof FileSystemDirectoryHandle) {
 			return handle;
 		}
@@ -390,6 +388,49 @@ export class HTMLFileSystemProvider implements IFileSystemProviderWithFileReadWr
 		}
 	}
 
+	private async doGetHandle(resource: URI): Promise<FileSystemHandle | undefined> {
+
+		// We store file system handles with the `handle.name`
+		// and as such require the resource to be on the root
+		if (this.extUri.dirname(resource).path !== '/') {
+			return undefined;
+		}
+
+		const handleId = resource.path.replace(/\/$/, ''); // remove potential slash from the end of the path
+
+		// First: check if we have a known handle stored in memory
+		const inMemoryHandle = this._files.get(handleId) ?? this._directories.get(handleId);
+		if (inMemoryHandle) {
+			return inMemoryHandle;
+		}
+
+		// Second: check if we have a persisted handle in IndexedDB
+		const persistedHandle = await this.indexedDB?.runInTransaction(this.store, 'readonly', store => store.get(handleId));
+		if (WebFileSystemAccess.isFileSystemHandle(persistedHandle)) {
+			let hasPermissions = await persistedHandle.queryPermission() === 'granted';
+			try {
+				if (!hasPermissions) {
+					hasPermissions = await persistedHandle.requestPermission() === 'granted';
+				}
+			} catch (error) {
+				this.logService.error(error); // this can fail with a DOMException
+			}
+
+			if (hasPermissions) {
+				if (WebFileSystemAccess.isFileSystemFileHandle(persistedHandle)) {
+					this._files.set(handleId, persistedHandle);
+				} else if (WebFileSystemAccess.isFileSystemDirectoryHandle(persistedHandle)) {
+					this._directories.set(handleId, persistedHandle);
+				}
+
+				return persistedHandle;
+			}
+		}
+
+		// Third: fail with an error
+		throw this.createFileSystemProviderError(resource, 'No file system handle registered', FileSystemProviderErrorCode.Unavailable);
+	}
+
 	//#endregion
 
 	private toFileSystemProviderError(error: Error): FileSystemProviderError {
diff --git a/src/vs/platform/workspace/common/virtualWorkspace.ts b/src/vs/platform/workspace/common/virtualWorkspace.ts
index 4960b8eb356..77ccb98eaf2 100644
--- a/src/vs/platform/workspace/common/virtualWorkspace.ts
+++ b/src/vs/platform/workspace/common/virtualWorkspace.ts
@@ -4,7 +4,6 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { Schemas } from 'vs/base/common/network';
-import { isWeb } from 'vs/base/common/platform';
 import { URI } from 'vs/base/common/uri';
 import { IWorkspace } from 'vs/platform/workspace/common/workspace';
 
@@ -28,11 +27,3 @@ export function getVirtualWorkspaceScheme(workspace: IWorkspace): string | undef
 export function isVirtualWorkspace(workspace: IWorkspace): boolean {
 	return getVirtualWorkspaceLocation(workspace) !== undefined;
 }
-
-export function isTemporaryWorkspace(workspace: IWorkspace): boolean {
-	if (!isWeb) {
-		return false; // this concept only exists in web currently
-	}
-
-	return workspace.configuration?.scheme === Schemas.tmp;
-}
diff --git a/src/vs/platform/workspace/common/workspace.ts b/src/vs/platform/workspace/common/workspace.ts
index 5b04e130c25..a0bd1b77d70 100644
--- a/src/vs/platform/workspace/common/workspace.ts
+++ b/src/vs/platform/workspace/common/workspace.ts
@@ -12,6 +12,7 @@ import { extname as resourceExtname, basenameOrAuthority, joinPath, extUriBiased
 import { URI, UriComponents } from 'vs/base/common/uri';
 import { createDecorator } from 'vs/platform/instantiation/common/instantiation';
 import { IEnvironmentService } from 'vs/platform/environment/common/environment';
+import { Schemas } from 'vs/base/common/network';
 
 export const IWorkspaceContextService = createDecorator<IWorkspaceContextService>('contextService');
 
@@ -418,6 +419,19 @@ export function isUntitledWorkspace(path: URI, environmentService: IEnvironmentS
 	return extUriBiasedIgnorePathCase.isEqualOrParent(path, environmentService.untitledWorkspacesHome);
 }
 
+export function isTemporaryWorkspace(workspace: IWorkspace): boolean;
+export function isTemporaryWorkspace(path: URI): boolean;
+export function isTemporaryWorkspace(arg1: IWorkspace | URI): boolean {
+	let path: URI | null | undefined;
+	if (URI.isUri(arg1)) {
+		path = arg1;
+	} else {
+		path = arg1.configuration;
+	}
+
+	return path?.scheme === Schemas.tmp;
+}
+
 export function hasWorkspaceFileExtension(path: string | URI) {
 	const ext = (typeof path === 'string') ? extname(path) : resourceExtname(path);
 
diff --git a/src/vs/workbench/browser/layout.ts b/src/vs/workbench/browser/layout.ts
index 5038f5e002c..bd5dadb880e 100644
--- a/src/vs/workbench/browser/layout.ts
+++ b/src/vs/workbench/browser/layout.ts
@@ -14,7 +14,7 @@ import { SideBySideEditorInput } from 'vs/workbench/common/editor/sideBySideEdit
 import { SidebarPart } from 'vs/workbench/browser/parts/sidebar/sidebarPart';
 import { PanelPart } from 'vs/workbench/browser/parts/panel/panelPart';
 import { Position, Parts, PanelOpensMaximizedOptions, IWorkbenchLayoutService, positionFromString, positionToString, panelOpensMaximizedFromString, PanelAlignment } from 'vs/workbench/services/layout/browser/layoutService';
-import { IWorkspaceContextService, WorkbenchState } from 'vs/platform/workspace/common/workspace';
+import { isTemporaryWorkspace, IWorkspaceContextService, WorkbenchState } from 'vs/platform/workspace/common/workspace';
 import { IStorageService, StorageScope, WillSaveStateReason } from 'vs/platform/storage/common/storage';
 import { IConfigurationService } from 'vs/platform/configuration/common/configuration';
 import { ITitleService } from 'vs/workbench/services/title/common/titleService';
@@ -45,7 +45,6 @@ import { IExtensionService } from 'vs/workbench/services/extensions/common/exten
 import { ILogService } from 'vs/platform/log/common/log';
 import { DeferredPromise, Promises } from 'vs/base/common/async';
 import { IBannerService } from 'vs/workbench/services/banner/browser/bannerService';
-import { isTemporaryWorkspace } from 'vs/platform/workspace/common/virtualWorkspace';
 import { IPaneCompositePartService } from 'vs/workbench/services/panecomposite/browser/panecomposite';
 import { ActivitybarPart } from 'vs/workbench/browser/parts/activitybar/activitybarPart';
 import { AuxiliaryBarPart } from 'vs/workbench/browser/parts/auxiliarybar/auxiliaryBarPart';
diff --git a/src/vs/workbench/browser/web.main.ts b/src/vs/workbench/browser/web.main.ts
index ba4776a3a6b..5cfebbd665b 100644
--- a/src/vs/workbench/browser/web.main.ts
+++ b/src/vs/workbench/browser/web.main.ts
@@ -298,8 +298,9 @@ export class BrowserMain extends Disposable {
 		let indexedDB: IndexedDB | undefined;
 		const userDataStore = 'vscode-userdata-store';
 		const logsStore = 'vscode-logs-store';
+		const handlesStore = 'vscode-filehandles-store';
 		try {
-			indexedDB = await IndexedDB.create('vscode-web-db', 2, [userDataStore, logsStore]);
+			indexedDB = await IndexedDB.create('vscode-web-db', 3, [userDataStore, logsStore, handlesStore]);
 
 			// Close onWillShutdown
 			this.onWillShutdownDisposables.add(toDisposable(() => indexedDB?.close()));
@@ -336,7 +337,7 @@ export class BrowserMain extends Disposable {
 
 		// Local file access (if supported by browser)
 		if (WebFileSystemAccess.supported(window)) {
-			fileService.registerProvider(Schemas.file, new HTMLFileSystemProvider());
+			fileService.registerProvider(Schemas.file, new HTMLFileSystemProvider(indexedDB, handlesStore, logService));
 		}
 
 		// In-memory
diff --git a/src/vs/workbench/services/dialogs/browser/abstractFileDialogService.ts b/src/vs/workbench/services/dialogs/browser/abstractFileDialogService.ts
index 02a494b146f..9726657c6bf 100644
--- a/src/vs/workbench/services/dialogs/browser/abstractFileDialogService.ts
+++ b/src/vs/workbench/services/dialogs/browser/abstractFileDialogService.ts
@@ -193,7 +193,7 @@ export abstract class AbstractFileDialogService implements IFileDialogService {
 		}
 	}
 
-	private addFileToRecentlyOpened(uri: URI): void {
+	protected addFileToRecentlyOpened(uri: URI): void {
 		// add the picked file into the list of recently opened
 		// only if it is outside the currently opened workspace
 		if (!this.contextService.isInsideWorkspace(uri)) {
diff --git a/src/vs/workbench/services/dialogs/browser/fileDialogService.ts b/src/vs/workbench/services/dialogs/browser/fileDialogService.ts
index 12efd7c86ec..eed8dff1901 100644
--- a/src/vs/workbench/services/dialogs/browser/fileDialogService.ts
+++ b/src/vs/workbench/services/dialogs/browser/fileDialogService.ts
@@ -35,7 +35,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 		}
 
 		if (this.shouldUseSimplified(schema)) {
-			return this.pickFileFolderAndOpenSimplified(schema, options, false);
+			return super.pickFileFolderAndOpenSimplified(schema, options, false);
 		}
 
 		throw new Error(localize('pickFolderAndOpen', "Can't open folders, try adding a folder to the workspace instead."));
@@ -54,7 +54,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 		}
 
 		if (this.shouldUseSimplified(schema)) {
-			return this.pickFileAndOpenSimplified(schema, options, false);
+			return super.pickFileAndOpenSimplified(schema, options, false);
 		}
 
 		if (!WebFileSystemAccess.supported(window)) {
@@ -72,7 +72,9 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 			return;
 		}
 
-		const uri = this.fileSystemProvider.registerFileHandle(fileHandle);
+		const uri = await this.fileSystemProvider.registerFileHandle(fileHandle);
+
+		this.addFileToRecentlyOpened(uri);
 
 		await this.openerService.open(uri, { fromUserGesture: true, editorOptions: { pinned: true } });
 	}
@@ -85,7 +87,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 		}
 
 		if (this.shouldUseSimplified(schema)) {
-			return this.pickFolderAndOpenSimplified(schema, options);
+			return super.pickFolderAndOpenSimplified(schema, options);
 		}
 
 		throw new Error(localize('pickFolderAndOpen', "Can't open folders, try adding a folder to the workspace instead."));
@@ -100,7 +102,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 		}
 
 		if (this.shouldUseSimplified(schema)) {
-			return this.pickWorkspaceAndOpenSimplified(schema, options);
+			return super.pickWorkspaceAndOpenSimplified(schema, options);
 		}
 
 		throw new Error(localize('pickWorkspaceAndOpen', "Can't open workspaces, try adding a folder to the workspace instead."));
@@ -111,7 +113,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 
 		const options = this.getPickFileToSaveDialogOptions(defaultUri, availableFileSystems);
 		if (this.shouldUseSimplified(schema)) {
-			return this.pickFileToSaveSimplified(schema, options);
+			return super.pickFileToSaveSimplified(schema, options);
 		}
 
 		if (!WebFileSystemAccess.supported(window)) {
@@ -152,7 +154,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 		const schema = this.getFileSystemSchema(options);
 
 		if (this.shouldUseSimplified(schema)) {
-			return this.showSaveDialogSimplified(schema, options);
+			return super.showSaveDialogSimplified(schema, options);
 		}
 
 		if (!WebFileSystemAccess.supported(window)) {
@@ -179,7 +181,7 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 		const schema = this.getFileSystemSchema(options);
 
 		if (this.shouldUseSimplified(schema)) {
-			return this.showOpenDialogSimplified(schema, options);
+			return super.showOpenDialogSimplified(schema, options);
 		}
 
 		if (!WebFileSystemAccess.supported(window)) {
@@ -193,11 +195,11 @@ export class FileDialogService extends AbstractFileDialogService implements IFil
 			if (options.canSelectFiles) {
 				const handle = await window.showOpenFilePicker({ multiple: false, types: this.getFilePickerTypes(options.filters), ...{ startIn } });
 				if (handle.length === 1 && WebFileSystemAccess.isFileSystemFileHandle(handle[0])) {
-					uri = this.fileSystemProvider.registerFileHandle(handle[0]);
+					uri = await this.fileSystemProvider.registerFileHandle(handle[0]);
 				}
 			} else {
 				const handle = await window.showDirectoryPicker({ ...{ startIn } });
-				uri = this.fileSystemProvider.registerDirectoryHandle(handle);
+				uri = await this.fileSystemProvider.registerDirectoryHandle(handle);
 			}
 		} catch (error) {
 			// ignore - `showOpenFilePicker` / `showDirectoryPicker` will throw an error when the user cancels
diff --git a/src/vs/workbench/services/host/browser/browserHostService.ts b/src/vs/workbench/services/host/browser/browserHostService.ts
index 32d1d654628..cdc63895e27 100644
--- a/src/vs/workbench/services/host/browser/browserHostService.ts
+++ b/src/vs/workbench/services/host/browser/browserHostService.ts
@@ -9,14 +9,13 @@ import { registerSingleton } from 'vs/platform/instantiation/common/extensions';
 import { ILayoutService } from 'vs/platform/layout/browser/layoutService';
 import { IEditorService } from 'vs/workbench/services/editor/common/editorService';
 import { IConfigurationService } from 'vs/platform/configuration/common/configuration';
-import { IWindowSettings, IWindowOpenable, IOpenWindowOptions, isFolderToOpen, isWorkspaceToOpen, isFileToOpen, IOpenEmptyWindowOptions, IPathData, IFileToOpen } from 'vs/platform/window/common/window';
+import { IWindowSettings, IWindowOpenable, IOpenWindowOptions, isFolderToOpen, isWorkspaceToOpen, isFileToOpen, IOpenEmptyWindowOptions, IPathData, IFileToOpen, IWorkspaceToOpen, IFolderToOpen } from 'vs/platform/window/common/window';
 import { pathsToEditors } from 'vs/workbench/common/editor';
 import { whenEditorClosed } from 'vs/workbench/browser/editor';
 import { IFileService } from 'vs/platform/files/common/files';
 import { ILabelService } from 'vs/platform/label/common/label';
 import { ModifierKeyEmitter, trackFocus } from 'vs/base/browser/dom';
 import { Disposable } from 'vs/base/common/lifecycle';
-import { URI } from 'vs/base/common/uri';
 import { IBrowserWorkbenchEnvironmentService } from 'vs/workbench/services/environment/browser/environmentService';
 import { memoize } from 'vs/base/common/decorators';
 import { parseLineAndColumnAware } from 'vs/base/common/extpath';
@@ -32,6 +31,9 @@ import Severity from 'vs/base/common/severity';
 import { IDialogService } from 'vs/platform/dialogs/common/dialogs';
 import { DomEmitter } from 'vs/base/browser/event';
 import { isUndefined } from 'vs/base/common/types';
+import { isTemporaryWorkspace, IWorkspaceContextService } from 'vs/platform/workspace/common/workspace';
+import { ServicesAccessor } from 'vs/editor/browser/editorExtensions';
+import { Schemas } from 'vs/base/common/network';
 
 /**
  * A workspace to open in the workbench can either be:
@@ -39,7 +41,7 @@ import { isUndefined } from 'vs/base/common/types';
  * - a single folder (via `folderUri`)
  * - empty (via `undefined`)
  */
-export type IWorkspace = { workspaceUri: URI } | { folderUri: URI } | undefined;
+export type IWorkspace = IWorkspaceToOpen | IFolderToOpen | undefined;
 
 export interface IWorkspaceProvider {
 
@@ -108,7 +110,8 @@ export class BrowserHostService extends Disposable implements IHostService {
 		@IInstantiationService private readonly instantiationService: IInstantiationService,
 		@ILifecycleService private readonly lifecycleService: BrowserLifecycleService,
 		@ILogService private readonly logService: ILogService,
-		@IDialogService private readonly dialogService: IDialogService
+		@IDialogService private readonly dialogService: IDialogService,
+		@IWorkspaceContextService private readonly contextService: IWorkspaceContextService
 	) {
 		super();
 
@@ -239,16 +242,16 @@ export class BrowserHostService extends Disposable implements IHostService {
 
 		// Handle Folders to Add
 		if (foldersToAdd.length > 0) {
-			this.instantiationService.invokeFunction(accessor => {
-				const workspaceEditingService: IWorkspaceEditingService = accessor.get(IWorkspaceEditingService);  // avoid heavy dependencies (https://github.com/microsoft/vscode/issues/108522)
+			this.withServices(accessor => {
+				const workspaceEditingService: IWorkspaceEditingService = accessor.get(IWorkspaceEditingService);
 				workspaceEditingService.addFolders(foldersToAdd);
 			});
 		}
 
 		// Handle Files
 		if (fileOpenables.length > 0) {
-			this.instantiationService.invokeFunction(async accessor => {
-				const editorService = accessor.get(IEditorService); // avoid heavy dependencies (https://github.com/microsoft/vscode/issues/108522)
+			this.withServices(async accessor => {
+				const editorService = accessor.get(IEditorService);
 
 				// Support diffMode
 				if (options?.diffMode && fileOpenables.length === 2) {
@@ -328,6 +331,13 @@ export class BrowserHostService extends Disposable implements IHostService {
 		}
 	}
 
+	private withServices(fn: (accessor: ServicesAccessor) => unknown): void {
+		// Host service is used in a lot of contexts and some services
+		// need to be resolved dynamically to avoid cyclic dependencies
+		// (https://github.com/microsoft/vscode/issues/108522)
+		this.instantiationService.invokeFunction(accessor => fn(accessor));
+	}
+
 	private preservePayload(): Array<unknown> | undefined {
 
 		// Selectively copy payload: for now only extension debugging properties are considered
@@ -383,6 +393,20 @@ export class BrowserHostService extends Disposable implements IHostService {
 
 	private async doOpen(workspace: IWorkspace, options?: { reuse?: boolean; payload?: object }): Promise<void> {
 
+		// When we are in a temporary workspace and are asked to open a local folder
+		// we swap that folder into the workspace to avoid a window reload. Access
+		// to local resources is only possible without a window reload because it
+		// needs user activation.
+		if (workspace && isFolderToOpen(workspace) && workspace.folderUri.scheme === Schemas.file && isTemporaryWorkspace(this.contextService.getWorkspace())) {
+			this.withServices(async accessor => {
+				const workspaceEditingService: IWorkspaceEditingService = accessor.get(IWorkspaceEditingService);
+
+				await workspaceEditingService.updateFolders(0, this.contextService.getWorkspace().folders.length, [{ uri: workspace.folderUri }]);
+			});
+
+			return;
+		}
+
 		// We know that `workspaceProvider.open` will trigger a shutdown
 		// with `options.reuse` so we handle this expected shutdown
 		if (options?.reuse) {
diff --git a/src/vs/workbench/services/workspaces/browser/workspacesService.ts b/src/vs/workbench/services/workspaces/browser/workspacesService.ts
index 9de46e5df04..64c1d2d19c9 100644
--- a/src/vs/workbench/services/workspaces/browser/workspacesService.ts
+++ b/src/vs/workbench/services/workspaces/browser/workspacesService.ts
@@ -4,11 +4,11 @@
  *--------------------------------------------------------------------------------------------*/
 
 import { registerSingleton } from 'vs/platform/instantiation/common/extensions';
-import { IWorkspacesService, IWorkspaceFolderCreationData, IEnterWorkspaceResult, IRecentlyOpened, restoreRecentlyOpened, IRecent, isRecentFile, isRecentFolder, toStoreData, IStoredWorkspaceFolder, getStoredWorkspaceFolder, IStoredWorkspace } from 'vs/platform/workspaces/common/workspaces';
+import { IWorkspacesService, IWorkspaceFolderCreationData, IEnterWorkspaceResult, IRecentlyOpened, restoreRecentlyOpened, IRecent, isRecentFile, isRecentFolder, toStoreData, IStoredWorkspaceFolder, getStoredWorkspaceFolder, IStoredWorkspace, isRecentWorkspace } from 'vs/platform/workspaces/common/workspaces';
 import { URI } from 'vs/base/common/uri';
 import { Emitter } from 'vs/base/common/event';
-import { IStorageService, StorageScope, StorageTarget } from 'vs/platform/storage/common/storage';
-import { IWorkspaceContextService, IWorkspaceIdentifier, WorkbenchState, WORKSPACE_EXTENSION } from 'vs/platform/workspace/common/workspace';
+import { IStorageService, IStorageValueChangeEvent, StorageScope, StorageTarget } from 'vs/platform/storage/common/storage';
+import { isTemporaryWorkspace, IWorkspaceContextService, IWorkspaceFoldersChangeEvent, IWorkspaceIdentifier, WorkbenchState, WORKSPACE_EXTENSION } from 'vs/platform/workspace/common/workspace';
 import { ILogService } from 'vs/platform/log/common/log';
 import { Disposable } from 'vs/base/common/lifecycle';
 import { getWorkspaceIdentifier } from 'vs/workbench/services/workspaces/browser/workspaces';
@@ -19,6 +19,7 @@ import { VSBuffer } from 'vs/base/common/buffer';
 import { isWindows } from 'vs/base/common/platform';
 import { IUriIdentityService } from 'vs/platform/uriIdentity/common/uriIdentity';
 import { IWorkspaceBackupInfo, IFolderBackupInfo } from 'vs/platform/backup/common/backup';
+import { Schemas } from 'vs/base/common/network';
 
 export class BrowserWorkspacesService extends Disposable implements IWorkspacesService {
 
@@ -31,7 +32,7 @@ export class BrowserWorkspacesService extends Disposable implements IWorkspacesS
 
 	constructor(
 		@IStorageService private readonly storageService: IStorageService,
-		@IWorkspaceContextService private readonly workspaceService: IWorkspaceContextService,
+		@IWorkspaceContextService private readonly contextService: IWorkspaceContextService,
 		@ILogService private readonly logService: ILogService,
 		@IFileService private readonly fileService: IFileService,
 		@IWorkbenchEnvironmentService private readonly environmentService: IWorkbenchEnvironmentService,
@@ -47,17 +48,37 @@ export class BrowserWorkspacesService extends Disposable implements IWorkspacesS
 	}
 
 	private registerListeners(): void {
-		this._register(this.storageService.onDidChangeValue(event => {
-			if (event.key === BrowserWorkspacesService.RECENTLY_OPENED_KEY && event.scope === StorageScope.GLOBAL) {
-				this._onRecentlyOpenedChange.fire();
-			}
-		}));
+
+		// Storage
+		this._register(this.storageService.onDidChangeValue(e => this.onDidChangeStorage(e)));
+
+		// Workspace
+		this._register(this.contextService.onDidChangeWorkspaceFolders(e => this.onDidChangeWorkspaceFolders(e)));
+	}
+
+	private onDidChangeStorage(e: IStorageValueChangeEvent): void {
+		if (e.key === BrowserWorkspacesService.RECENTLY_OPENED_KEY && e.scope === StorageScope.GLOBAL) {
+			this._onRecentlyOpenedChange.fire();
+		}
+	}
+
+	private onDidChangeWorkspaceFolders(e: IWorkspaceFoldersChangeEvent): void {
+		if (!isTemporaryWorkspace(this.contextService.getWorkspace())) {
+			return;
+		}
+
+		// When in a temporary workspace, make sure to track folder changes
+		// in the history so that these can later be restored.
+
+		for (const folder of e.added) {
+			this.addRecentlyOpened([{ folderUri: folder.uri }]);
+		}
 	}
 
 	private addWorkspaceToRecentlyOpened(): void {
-		const workspace = this.workspaceService.getWorkspace();
+		const workspace = this.contextService.getWorkspace();
 		const remoteAuthority = this.environmentService.remoteAuthority;
-		switch (this.workspaceService.getWorkbenchState()) {
+		switch (this.contextService.getWorkbenchState()) {
 			case WorkbenchState.FOLDER:
 				this.addRecentlyOpened([{ folderUri: workspace.folders[0].uri, remoteAuthority }]);
 				break;
@@ -72,7 +93,26 @@ export class BrowserWorkspacesService extends Disposable implements IWorkspacesS
 	async getRecentlyOpened(): Promise<IRecentlyOpened> {
 		const recentlyOpenedRaw = this.storageService.get(BrowserWorkspacesService.RECENTLY_OPENED_KEY, StorageScope.GLOBAL);
 		if (recentlyOpenedRaw) {
-			return restoreRecentlyOpened(JSON.parse(recentlyOpenedRaw), this.logService);
+			const recentlyOpened = restoreRecentlyOpened(JSON.parse(recentlyOpenedRaw), this.logService);
+			recentlyOpened.workspaces = recentlyOpened.workspaces.filter(recent => {
+
+				// In web, unless we are in a temporary workspace, we cannot support
+				// to switch to local folders because this would require a window
+				// reload and local file access only works with explicit user gesture
+				// from the current session.
+				if (isRecentFolder(recent) && recent.folderUri.scheme === Schemas.file && !isTemporaryWorkspace(this.contextService.getWorkspace())) {
+					return false;
+				}
+
+				// Never offer temporary workspaces in the history
+				if (isRecentWorkspace(recent) && isTemporaryWorkspace(recent.workspace.configPath)) {
+					return false;
+				}
+
+				return true;
+			});
+
+			return recentlyOpened;
 		}
 
 		return { workspaces: [], files: [] };
@@ -81,7 +121,7 @@ export class BrowserWorkspacesService extends Disposable implements IWorkspacesS
 	async addRecentlyOpened(recents: IRecent[]): Promise<void> {
 		const recentlyOpened = await this.getRecentlyOpened();
 
-		recents.forEach(recent => {
+		for (const recent of recents) {
 			if (isRecentFile(recent)) {
 				this.doRemoveRecentlyOpened(recentlyOpened, [recent.fileUri]);
 				recentlyOpened.files.unshift(recent);
@@ -92,7 +132,7 @@ export class BrowserWorkspacesService extends Disposable implements IWorkspacesS
 				this.doRemoveRecentlyOpened(recentlyOpened, [recent.workspace.configPath]);
 				recentlyOpened.workspaces.unshift(recent);
 			}
-		});
+		}
 
 		return this.saveRecentlyOpened(recentlyOpened);
 	}