diff --git a/package.json b/package.json
index 9d3dba87a6..2b22baac1c 100644
--- a/package.json
+++ b/package.json
@@ -105,8 +105,8 @@
     "watch": "npm run compile -- --watch",
     "lint": "eslint src test --ext .ts",
     "format": "prettier --check '**/*.{ts,json,yml,mjs,code-workspace}'",
-    "package": "vsce package --out out/ --no-gitHubIssueLinking",
-    "publish": "vsce publish",
+    "package": "vsce package --out out/ --no-gitHubIssueLinking --follow-symlinks",
+    "publish": "vsce publish --follow-symlinks",
     "pretest": "npm run compile",
     "test": "vscode-test"
   },
diff --git a/vscode-powershell.build.ps1 b/vscode-powershell.build.ps1
index 4bcc737e33..0fcad12569 100644
--- a/vscode-powershell.build.ps1
+++ b/vscode-powershell.build.ps1
@@ -47,22 +47,18 @@ task RestoreEditorServices -If (Get-EditorServicesPath) {
             Invoke-Build Build (Get-EditorServicesPath) -Configuration $Configuration
         }
         "Release" {
-            # When releasing, we ensure the bits are not symlinked but copied,
-            # and only if they don't already exist.
-            if ((Get-Item ./modules -ErrorAction SilentlyContinue).LinkType -eq "SymbolicLink") {
-                Write-Build DarkRed "Deleting PSES symbolic link"
+            # With VSCE --follow-symlinks support, we can now use symlinks in Release mode too.
+            # Create symlink if it doesn't exist, ensuring it points to the correct location.
+            if ((Get-Item ./modules -ErrorAction SilentlyContinue).LinkType -ne "SymbolicLink") {
+                Write-Build DarkMagenta "Creating symbolic link to PSES"
                 Remove-BuildItem ./modules
+                New-Item -ItemType SymbolicLink -Path ./modules -Target "$(Split-Path (Get-EditorServicesPath))/module"
             }
 
-            if (!(Test-Path ./modules)) {
-                # We only build if it hasn't been built at all.
-                if (!(Test-Path "$(Split-Path (Get-EditorServicesPath))/module/PowerShellEditorServices/bin")) {
-                    Write-Build DarkGreen "Building PSES"
-                    Invoke-Build Build (Get-EditorServicesPath) -Configuration $Configuration
-                }
-
-                Write-Build DarkGreen "Copying PSES"
-                Copy-Item -Recurse -Force "$(Split-Path (Get-EditorServicesPath))/module" ./modules
+            # Only build if it hasn't been built at all.
+            if (!(Test-Path "$(Split-Path (Get-EditorServicesPath))/module/PowerShellEditorServices/bin")) {
+                Write-Build DarkGreen "Building PSES"
+                Invoke-Build Build (Get-EditorServicesPath) -Configuration $Configuration
             }
         }
     }
@@ -132,14 +128,8 @@ task Package {
 
     Assert-Build (Test-Path ./dist/extension.js) "Extension must be built!"
 
-    # Packaging requires a copy of the modules folder, not a symbolic link. But
-    # we might have built in Debug configuration, not Release, and still want to
-    # package it. So delete the symlink and copy what we just built.
-    if ((Get-Item ./modules -ErrorAction SilentlyContinue).LinkType -eq "SymbolicLink") {
-        Write-Build DarkRed "PSES is a symbolic link, replacing with copy!"
-        Remove-BuildItem ./modules
-        Copy-Item -Recurse -Force "$(Split-Path (Get-EditorServicesPath))/module" ./modules
-    }
+    # With --follow-symlinks flag, VSCE can now package symbolic links directly,
+    # so we no longer need to convert symlinks to copies.
 
     if ($version.Minor % 2 -ne 0) {
         Write-Build DarkRed "This is a pre-release!"