diff --git a/extensions/positron-python/positron-dts/positron.d.ts b/extensions/positron-python/positron-dts/positron.d.ts
index 77995183987..3606e91fa0f 100644
--- a/extensions/positron-python/positron-dts/positron.d.ts
+++ b/extensions/positron-python/positron-dts/positron.d.ts
@@ -1087,6 +1087,17 @@ declare module 'positron' {
 		 * Returns the current width of the console input, in characters.
 		 */
 		export function getConsoleWidth(): Thenable<number>;
+
+		/**
+		 * Create and show a new preview panel for a URL. This is a convenience
+		 * method that creates a new webview panel and sets its content to the
+		 * given URL.
+		 *
+		 * @param url The URL to preview
+		 *
+		 * @return New preview panel.
+		 */
+		export function previewUrl(url: vscode.Uri): PreviewPanel;
 	}
 
 	namespace runtime {
diff --git a/extensions/positron-python/src/client/positron/extension.ts b/extensions/positron-python/src/client/positron/extension.ts
index fb1cfb6247a..ae58f4dfcc2 100644
--- a/extensions/positron-python/src/client/positron/extension.ts
+++ b/extensions/positron-python/src/client/positron/extension.ts
@@ -4,6 +4,7 @@
 
 // eslint-disable-next-line import/no-unresolved
 import * as positron from 'positron';
+import * as vscode from 'vscode';
 import { PythonExtension } from '../api/types';
 import { IDisposableRegistry } from '../common/types';
 import { IInterpreterService } from '../interpreter/contracts';
@@ -11,6 +12,7 @@ import { IServiceContainer } from '../ioc/types';
 import { traceError, traceInfo } from '../logging';
 import { PythonRuntimeManager } from './manager';
 import { createPythonRuntimeMetadata } from './runtime';
+import { provideTerminalLinks, handleTerminalLink } from './linkProvider';
 
 export async function activatePositron(
     activatedPromise: Promise<void>,
@@ -29,6 +31,8 @@ export async function activatePositron(
         traceInfo('activatePositron: awaiting extension activation');
         await activatedPromise;
 
+        vscode.window.registerTerminalLinkProvider({ provideTerminalLinks, handleTerminalLink });
+
         const registerRuntime = async (interpreterPath: string) => {
             if (!manager.registeredPythonRuntimes.has(interpreterPath)) {
                 // Get the interpreter corresponding to the new runtime.
diff --git a/extensions/positron-python/src/client/positron/linkProvider.ts b/extensions/positron-python/src/client/positron/linkProvider.ts
new file mode 100644
index 00000000000..9899888e52d
--- /dev/null
+++ b/extensions/positron-python/src/client/positron/linkProvider.ts
@@ -0,0 +1,84 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (C) 2023 Posit Software, PBC. All rights reserved.
+ *--------------------------------------------------------------------------------------------*/
+
+// eslint-disable-next-line import/no-unresolved
+import * as positron from 'positron';
+import * as vscode from 'vscode';
+
+// Assuming localHosts is an array of localhost URLs
+const localHosts: string[] = [
+    'localhost',
+    '127.0.0.1',
+    '[0:0:0:0:0:0:0:1]',
+    '[::1]',
+    '0.0.0.0',
+    '[0:0:0:0:0:0:0:0]',
+    '[::]',
+];
+
+const urlPattern = /(http|https):\/\/([\w_-]+(?:(?:\.[\w_-]+)+)|(localhost))([\w.,@?^=%&:\/~+#-]*[\w@?^=%&\/~+#-])/gi;
+const localHostsPattern = new RegExp(
+    `(?:https?:\/\/)(${localHosts.join('|')})([\\w.,@?^=%&:/~+#-]*[\\w@?^=%&/~/+#-])`,
+    'gi',
+);
+
+interface PositronTerminalLink extends vscode.TerminalLink {
+    data: string;
+    openInViewer: boolean;
+}
+
+const _links: Map<Thenable<number | undefined>, string> = new Map();
+
+export function provideTerminalLinks(
+    context: vscode.TerminalLinkContext,
+    _token: vscode.CancellationToken,
+): vscode.ProviderResult<PositronTerminalLink[]> {
+    const matches = [...context.line.matchAll(urlPattern)];
+
+    if (matches.length === 0) {
+        return [];
+    }
+
+    return matches.map((match) => {
+        const startIndex = context.line.indexOf(match[0]);
+
+        // if localhost, preview through viewer
+        if (localHostsPattern.test(match[0])) {
+            const pid = context.terminal.processId;
+            if (!_links.has(pid) || _links.get(pid) !== match[0]) {
+                positron.window.previewUrl(vscode.Uri.parse(match[0]));
+
+                // set pid to latest localhost address
+                _links.set(pid, match[0]);
+
+                return {
+                    startIndex,
+                    length: match[0].length,
+                    tooltip: 'Open link in Viewer',
+                    data: match[0],
+                    openInViewer: true,
+                } as PositronTerminalLink;
+            }
+        }
+        // otherwise, treat as external link
+        return {
+            startIndex,
+            length: match[0].length,
+            tooltip: 'Open link in browser',
+            data: match[0],
+            openInViewer: false,
+        } as PositronTerminalLink;
+    });
+}
+
+export function handleTerminalLink(link: PositronTerminalLink): void {
+    const config = vscode.workspace.getConfiguration('positron.viewer');
+
+    if (link.openInViewer && config.get<boolean>('openLocalhostUrls')) {
+        const uri = vscode.Uri.parse(link.data);
+        positron.window.previewUrl(uri);
+    } else {
+        vscode.commands.executeCommand('vscode.open', vscode.Uri.parse(link.data));
+    }
+}