It seems you tried to enter this

terminal.integrated.env.linux

into the terminal prompt itself, which treated it as a literal command.

What that guide on PYTHONPATH meant when it said "through the terminal settings" was Visual Studio Code's Integrated Terminal settings: https://code.visualstudio.com/docs/getstarted/settings. Specifically the settings under Terminal (filtered on terminal.integrated.env):

Depending on your OS/platform, you put a terminal.integrated.env.<os> block in your VS Code's settings.json file to specify the environment variables to inject when using VS Code's integrated terminal:

From https://code.visualstudio.com/docs/getstarted/settings#_default-settings:

// Object with environment variables that will be added to the
// VS Code process to be used by the terminal on Linux. Set to  
// `null` to delete the environment variable.
"terminal.integrated.env.linux": {},

So if you are on Linux:

"terminal.integrated.env.linux": {
  "PYTHONPATH": "<absolute path>"
},

Note: see the Python docs on PYTHONPATH on what exactly needs to be specified here.

Or, as the guide says, you can also specify a .env file.

In Visual Studio Code open Settings (JSON) from the command palete (⇧⌘P), and at the end of the file add the following

"terminal.integrated.env.osx": {
        "PATH": ""
}

Restart VSCode and you are all set.

Taken from https://github.com/Microsoft/vscode-python/issues/4434

Finally, yume-chan answer by question in Ref: https://github.com/Microsoft/vscode/issues/34420#issuecomment-329705397

It's should be echo $Env:foo instead of echo $foo

If you only need the $PATH to be set in the integrated terminal, you can use VS Code's terminal.integrated.env.<platform> setting (added in version 1.15). Find the setting for your platform in the settings, click "Edit in settings.json", and add a "PATH" field like so:

"terminal.integrated.env.osx": {
  "PATH": "${env:PATH}:/my/path"
}

(Replace .osx with .linux or .windows as needed.)

The expression ${env:PATH} causes the existing contents of the $PATH environment variable to be inserted. This way you can extend it without hard-coding it.

As for having the $PATH available everwhere in VS Code, so that it will be used by extensions that call binaries, the only workaround I've found so far is this:

1. Configure your shell to have the $PATH you want. For example, I'm using Bash, and my ~/.bash_profile has the following line:

    PATH="$PATH:$HOME/bin"
   

2. In VS Code, press ⇧⌘P and type install 'code' command if you haven't done so before.

3. Quit VS Code.

4. Launch VS Code not by clicking its icon in the dock, but by opening Terminal.app and typing code. Your newly set path will be active in VS Code until you quit it.

5. If VS Code restarts, for example due to an upgrade, the $PATH will reset to the system default. In that case, quit VS Code and re-launch it by typing code.

Update: VS Code on Mac and Linux now apparently tries to automatically resolve the shell environment when it is started by clicking the icon (rather than via code). It does this by temporarily starting a shell and reading the environment variables. I haven't tested this though.

Yes, you can use one of these settings (depending in your platform):

"terminal.integrated.env.linux": {},
"terminal.integrated.env.windows": {},
"terminal.integrated.env.osx": {
    "PYTHONPATH": "${workspaceFolder}/src:${env:PYTHONPATH}"
},

However, they will only work for the integrated terminal, not for any other processes the vs code python extension might spawn (tests, linting, debugger). For those you need to use the .env file.

Edit:

It is worth noting that if you start VS Code from the terminal it should inherit any env variables from terminal environment (at least for all the spawned subprocesses, probably not for the integrated terminal).

You need to run the following line in a new window of one of your terminals (Command Prompt, Powershell, ...):

code

It will open 'VS Code' once from them.
Now you can close and re-open 'VS Code' again as many time as you want using its normal shortcuts and have your environment variables.