diff --git a/CHANGELOG.md b/CHANGELOG.md
index 80fbd17ff..567016af4 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -13,6 +13,7 @@ Bug Fixes:
 ## 1.23.52
 
 Bug Fixes:
+- Fix "Compile File" terminal closing immediately, hiding compilation output. The terminal now stays open until the user presses a key + Fix POSIX shell escape handling in `compile_commands.json` parsing so that escaped quotes (e.g., `\"`) are correctly interpreted when compiling single files. [#4896](https://github.com/microsoft/vscode-cmake-tools/issues/4896)
 - Fix `cmake.exportCompileCommandsFile` set to `false` still passing `-DCMAKE_EXPORT_COMPILE_COMMANDS:BOOL=FALSE` instead of omitting the flag entirely, which caused CMake warnings for projects with `LANGUAGES NONE`. [#4893](https://github.com/microsoft/vscode-cmake-tools/issues/4893)
 - Fix regression where Visual Studio kits with an existing Ninja-based build cache would fail due to a generator mismatch. Ninja is now preferred again when available, stale VS kits derive the correct generator at runtime as a fallback, and the build directory is auto-cleaned on generator mismatches. [#4890](https://github.com/microsoft/vscode-cmake-tools/issues/4890)
 
diff --git a/src/drivers/cmakeDriver.ts b/src/drivers/cmakeDriver.ts
index 9276a7702..eeae19406 100644
--- a/src/drivers/cmakeDriver.ts
+++ b/src/drivers/cmakeDriver.ts
@@ -566,6 +566,7 @@ export abstract class CMakeDriver implements vscode.Disposable {
         const writeEmitter = new vscode.EventEmitter<string>();
         const closeEmitter = new vscode.EventEmitter<number>();
         let activeProcess: proc.Subprocess | undefined;
+        let processExitCode: number | undefined;
 
         const pty: vscode.Pseudoterminal = {
             onDidWrite: writeEmitter.event,
@@ -581,6 +582,7 @@ export abstract class CMakeDriver implements vscode.Disposable {
                 activeProcess.result.then(result => {
                     activeProcess = undefined;
                     const retc = result.retc ?? 0;
+                    processExitCode = retc;
                     if (retc !== 0) {
                         writeEmitter.fire(localize('compile.finished.with.error',
                             'Compilation finished with error(s).') + '\r\n');
@@ -588,11 +590,18 @@ export abstract class CMakeDriver implements vscode.Disposable {
                         writeEmitter.fire(localize('compile.finished.successfully',
                             'Compilation finished successfully.') + '\r\n');
                     }
-                    closeEmitter.fire(retc);
+                    // Keep terminal open so user can see the output. Only close when
+                    // user presses a key or closes the terminal manually.
+                    // See https://github.com/microsoft/vscode-cmake-tools/issues/4896
+                    writeEmitter.fire(localize('press.any.key.to.close',
+                        'Press any key to close the terminal...') + '\r\n');
                 }, (e: any) => {
                     activeProcess = undefined;
+                    // Use positive exit code per VS Code PTY API convention
+                    processExitCode = 1;
                     writeEmitter.fire((e?.message ?? String(e)) + '\r\n');
-                    closeEmitter.fire(-1);
+                    writeEmitter.fire(localize('press.any.key.to.close',
+                        'Press any key to close the terminal...') + '\r\n');
                 });
             },
             close: () => {
@@ -602,6 +611,13 @@ export abstract class CMakeDriver implements vscode.Disposable {
                     void util.termProc(activeProcess.child);
                     activeProcess = undefined;
                 }
+            },
+            handleInput: (_data: string) => {
+                // Close the terminal when the user presses any key after the
+                // process has finished. If the process is still running, ignore input.
+                if (processExitCode !== undefined) {
+                    closeEmitter.fire(processExitCode);
+                }
             }
         };
 
diff --git a/src/shlex.ts b/src/shlex.ts
index 387d99966..7418cfe87 100644
--- a/src/shlex.ts
+++ b/src/shlex.ts
@@ -5,6 +5,11 @@ export interface ShlexOptions {
 /**
  * Splits a string into an iterable of tokens, similar to how a shell would parse arguments.
  * Handles quoting and escaping according to the specified mode ('windows' or 'posix').
+ *
+ * In POSIX mode, backslash escapes the following character outside of quotes (the backslash
+ * is consumed). Inside double quotes, only $, `, ", \, and newline can be escaped.
+ * Inside single quotes, backslash has no special meaning.
+ *
  * @param str The string to split into tokens.
  * @param opt Optional options for splitting. If not provided, defaults to the platform-specific mode ('windows' or 'posix').
  * @returns An iterable of tokens.
@@ -18,20 +23,39 @@ export function* split(str: string, opt?: ShlexOptions): Iterable<string> {
     const escapeChars = '\\';
     let escapeChar: string | undefined;
     let token: string[] = [];
-    let isSubQuote: boolean = false;
+    let quoteChar: string | undefined;  // Track which quote character we're inside (for POSIX)
 
     for (let i = 0; i < str.length; ++i) {
         const char = str.charAt(i);
 
         if (escapeChar) {
             if (char === '\n') {
-                // Do nothing
-            } else if (escapeChars.includes(char)) {
-                token.push(char);
+                // Line continuation: consume both backslash and newline
+            } else if (opt.mode === 'posix') {
+                // POSIX escape handling
+                if (quoteChar === "'") {
+                    // Inside single quotes: backslash has no special meaning
+                    token.push(escapeChar, char);
+                } else if (quoteChar === '"') {
+                    // Inside double quotes: only certain chars can be escaped
+                    // $, `, ", \, and newline
+                    if (char === '$' || char === '`' || char === '"' || char === '\\') {
+                        token.push(char);
+                    } else {
+                        token.push(escapeChar, char);
+                    }
+                } else {
+                    // Outside quotes: backslash escapes any character
+                    token.push(char);
+                }
             } else {
-                token.push(escapeChar, char);  // Append escape sequence
+                // Windows mode: only backslash can be escaped
+                if (escapeChars.includes(char)) {
+                    token.push(char);
+                } else {
+                    token.push(escapeChar, char);
+                }
             }
-            // We parsed an escape seq. Reset to no escape
             escapeChar = undefined;
             continue;
         }
@@ -42,10 +66,10 @@ export function* split(str: string, opt?: ShlexOptions): Iterable<string> {
             continue;
         }
 
-        if (isSubQuote) {
-            if (quoteChars.includes(char)) {
-                // End of sub-quoted token
-                isSubQuote = false;
+        if (quoteChar) {
+            if (char === quoteChar) {
+                // End of quoted section
+                quoteChar = undefined;
                 token.push(char);
                 continue;
             }
@@ -54,13 +78,13 @@ export function* split(str: string, opt?: ShlexOptions): Iterable<string> {
         }
 
         if (quoteChars.includes(char)) {
-            // Beginning of a subquoted token
-            isSubQuote = true;
+            // Beginning of a quoted section
+            quoteChar = char;
             token.push(char);
             continue;
         }
 
-        if (!isSubQuote && /[\t \n\r\f]/.test(char)) {
+        if (/[\t \n\r\f]/.test(char)) {
             if (token.length > 0) {
                 yield token.join('');
             }
diff --git a/test/unit-tests/backend/shlex.test.ts b/test/unit-tests/backend/shlex.test.ts
new file mode 100644
index 000000000..5a6d07bda
--- /dev/null
+++ b/test/unit-tests/backend/shlex.test.ts
@@ -0,0 +1,166 @@
+import { expect } from 'chai';
+import * as shlex from '@cmt/shlex';
+
+function splitWin(str: string): string[] {
+    return [...shlex.split(str, { mode: 'windows' })];
+}
+
+function splitUnix(str: string): string[] {
+    return [...shlex.split(str, { mode: 'posix' })];
+}
+
+suite('shlex testing (backend)', () => {
+    suite('Windows shell splitting', () => {
+        test('Basic token splitting', () => {
+            const pairs: [string, string[]][] = [
+                ['foo', ['foo']],
+                ['foo bar', ['foo', 'bar']],
+                ['', []],
+                ['""', ['""']],
+                ['    Something    ', ['Something']],
+                ['foo     bar', ['foo', 'bar']],
+                ['"C:\\Program Files" something', ['"C:\\Program Files"', 'something']],
+                ['foo "" bar', ['foo', '""', 'bar']],
+                [`\"'fo o'\" bar`, [`\"'fo o'\"`, 'bar']],
+                [`'quote arg'`, [`'quote`, `arg'`]],
+                ['"   fail"', ['"   fail"']]
+            ];
+
+            for (const [cmd, expected] of pairs) {
+                expect(splitWin(cmd)).to.deep.equal(expected, `Bad parse for string: ${cmd}`);
+            }
+        });
+
+        test('Windows mode: backslash only escapes backslash, not quotes', () => {
+            // -DAWESOME=\"\\\"'fo o' bar\\\"\" should preserve all escapes
+            const cmd = `-DAWESOME=\"\\\"'fo o' bar\\\"\"`;
+            expect(splitWin(cmd)).to.deep.equal([`-DAWESOME=\"\\\"'fo o' bar\\\"\"`]);
+        });
+    });
+
+    suite('Posix shell splitting', () => {
+        test('Basic token splitting', () => {
+            const pairs: [string, string[]][] = [
+                ['foo', ['foo']],
+                ['foo bar', ['foo', 'bar']],
+                ['', []],
+                ['""', ['""']],
+                [`''`, [`''`]],
+                ['    Something    ', ['Something']],
+                ['foo     bar', ['foo', 'bar']],
+                ['"C:\\Program Files" something', ['"C:\\Program Files"', 'something']],
+                ['foo "" bar', ['foo', '""', 'bar']],
+                [`"fo o" bar`, [`"fo o"`, 'bar']],
+                [`'quote arg'`, [`'quote arg'`]],
+                ['"   fail"', ['"   fail"']]
+            ];
+
+            for (const [cmd, expected] of pairs) {
+                expect(splitUnix(cmd)).to.deep.equal(expected, `Bad parse for string: ${cmd}`);
+            }
+        });
+    });
+
+    suite('Posix escape handling outside quotes', () => {
+        test('\\\\ -> single backslash', () => {
+            expect(splitUnix('foo\\\\bar')).to.deep.equal(['foo\\bar']);
+        });
+
+        test('\\" -> literal quote', () => {
+            expect(splitUnix('-DFOO=\\"bar\\"')).to.deep.equal(['-DFOO="bar"']);
+        });
+
+        test('\\n (not newline char) -> n', () => {
+            expect(splitUnix('foo\\nbar')).to.deep.equal(['foonbar']);
+        });
+
+        test('Escaped space keeps token together', () => {
+            expect(splitUnix('foo\\ bar')).to.deep.equal(['foo bar']);
+        });
+
+        test('Line continuation (actual newline) - backslash+newline consumed', () => {
+            expect(splitUnix('foo\\\nbar')).to.deep.equal(['foobar']);
+        });
+
+        test('Compile command with escaped quotes (issue #4896)', () => {
+            expect(splitUnix('-DIMGUI_USER_CONFIG=\\"frontends/sdl/imgui/sa2_imconfig.h\\"'))
+                .to.deep.equal(['-DIMGUI_USER_CONFIG="frontends/sdl/imgui/sa2_imconfig.h"']);
+        });
+    });
+
+    suite('Posix escape handling inside double quotes', () => {
+        test('Inside double quotes: \\\\ -> \\', () => {
+            expect(splitUnix('"foo\\\\bar"')).to.deep.equal(['"foo\\bar"']);
+        });
+
+        test('Inside double quotes: \\" -> "', () => {
+            expect(splitUnix('"foo\\"bar"')).to.deep.equal(['"foo"bar"']);
+        });
+
+        test('Inside double quotes: \\n (not escapable) -> \\n preserved', () => {
+            expect(splitUnix('"foo\\nbar"')).to.deep.equal(['"foo\\nbar"']);
+        });
+
+        test('Inside double quotes: \\$ -> $', () => {
+            expect(splitUnix('"foo\\$bar"')).to.deep.equal(['"foo$bar"']);
+        });
+
+        test('Inside double quotes: \\` -> `', () => {
+            expect(splitUnix('"foo\\`bar"')).to.deep.equal(['"foo`bar"']);
+        });
+    });
+
+    suite('Posix escape handling inside single quotes', () => {
+        test('Inside single quotes: backslash has no special meaning', () => {
+            expect(splitUnix(`'foo\\bar'`)).to.deep.equal([`'foo\\bar'`]);
+        });
+
+        test('Inside single quotes: \\" stays as \\"', () => {
+            expect(splitUnix(`'foo\\"bar'`)).to.deep.equal([`'foo\\"bar'`]);
+        });
+
+        test('Inside single quotes: \\\\ stays as \\\\', () => {
+            expect(splitUnix(`'foo\\\\bar'`)).to.deep.equal([`'foo\\\\bar'`]);
+        });
+    });
+
+    // Cross-platform regression tests (macOS uses POSIX mode)
+    suite('Cross-platform: mixed quotes (macOS/Linux POSIX)', () => {
+        test('Double quote inside single quotes is literal', () => {
+            // 'a"b' -> single token with literal "
+            expect(splitUnix(`'a"b'`)).to.deep.equal([`'a"b'`]);
+        });
+
+        test('Single quote inside double quotes is literal', () => {
+            // "a'b" -> single token with literal '
+            expect(splitUnix(`"a'b"`)).to.deep.equal([`"a'b"`]);
+        });
+
+        test('Adjacent mixed quotes form single token', () => {
+            // "foo"'bar' -> foo and bar concatenated
+            expect(splitUnix(`"foo"'bar'`)).to.deep.equal([`"foo"'bar'`]);
+        });
+
+        test('Complex mixed quoting with spaces', () => {
+            // "foo bar"'baz qux' -> single token
+            expect(splitUnix(`"foo bar"'baz qux'`)).to.deep.equal([`"foo bar"'baz qux'`]);
+        });
+    });
+
+    suite('Cross-platform: Windows path preservation', () => {
+        test('Windows paths in Windows mode preserve backslashes', () => {
+            expect(splitWin('"C:\\Users\\test\\file.cpp"')).to.deep.equal(['"C:\\Users\\test\\file.cpp"']);
+        });
+
+        test('Windows trailing backslash in quoted path', () => {
+            // "C:\path\" arg - the backslash before closing quote escapes the quote in Windows mode,
+            // so the entire rest of the string becomes one token (this is existing behavior)
+            expect(splitWin('"C:\\path\\" arg')).to.deep.equal(['"C:\\path\\" arg']);
+        });
+
+        test('UNC paths in Windows mode', () => {
+            // In Windows mode, \\ becomes \ (backslash escapes backslash)
+            expect(splitWin('"\\\\server\\share\\file.cpp"')).to.deep.equal(['"\\server\\share\\file.cpp"']);
+        });
+    });
+});
diff --git a/test/unit-tests/shlex.test.ts b/test/unit-tests/shlex.test.ts
index 22067027f..caf35b144 100644
--- a/test/unit-tests/shlex.test.ts
+++ b/test/unit-tests/shlex.test.ts
@@ -23,6 +23,7 @@ suite('shlex testing', () => {
             [`\"'fo o'\" bar`, [`\"'fo o'\"`, 'bar']],
             [`'quote arg'`, [`'quote`, `arg'`]],
             ['"   fail"', ['"   fail"']],
+            // Windows mode: backslash only escapes backslash, not quotes
             [`-DAWESOME=\"\\\"'fo o' bar\\\"\"`, [`-DAWESOME=\"\\\"'fo o' bar\\\"\"`]]
         ];
 
@@ -44,7 +45,64 @@ suite('shlex testing', () => {
             [`"fo o" bar`, [`"fo o"`, 'bar']],
             [`'quote arg'`, [`'quote arg'`]],
             ['"   fail"', ['"   fail"']],
-            [`-DAWESOME=\"\\\"fo o bar\\\"\"`, [`-DAWESOME=\"\\\"fo o bar\\\"\"`]]
+            // POSIX mode: backslash outside quotes escapes any character (backslash consumed)
+            // Input: -DAWESOME=\"\"fo o bar\"\"  (escaped quotes outside quotes)
+            // After escape processing: -DAWESOME=""fo o bar""
+            // But the inner "" is an empty double-quoted section, so we get:
+            [`-DAWESOME=\"\"fo o bar\"\"`, [`-DAWESOME=""fo`, 'o', 'bar""']]
+        ];
+
+        for (const [cmd, expected] of pairs) {
+            expect(splitUnix(cmd)).to.eql(expected, `Bad parse for string: ${cmd}`);
+        }
+    });
+
+    test('Posix escape handling outside quotes', () => {
+        const pairs: [string, string[]][] = [
+            // \\ -> single backslash
+            ['foo\\\\bar', ['foo\\bar']],
+            // \" -> literal quote
+            ['-DFOO=\\"bar\\"', ['-DFOO="bar"']],
+            // \n (not newline char) -> n
+            ['foo\\nbar', ['foonbar']],
+            // Escaped space keeps token together
+            ['foo\\ bar', ['foo bar']],
+            // Line continuation (actual newline) - backslash+newline consumed
+            ['foo\\\nbar', ['foobar']],
+            // Compile command with escaped quotes (issue #4896)
+            ['-DIMGUI_USER_CONFIG=\\"frontends/sdl/imgui/sa2_imconfig.h\\"', ['-DIMGUI_USER_CONFIG="frontends/sdl/imgui/sa2_imconfig.h"']]
+        ];
+
+        for (const [cmd, expected] of pairs) {
+            expect(splitUnix(cmd)).to.eql(expected, `Bad parse for string: ${cmd}`);
+        }
+    });
+
+    test('Posix escape handling inside double quotes', () => {
+        const pairs: [string, string[]][] = [
+            // Inside double quotes: \\ -> \
+            ['"foo\\\\bar"', ['"foo\\bar"']],
+            // Inside double quotes: \" -> "
+            ['"foo\\"bar"', ['"foo"bar"']],
+            // Inside double quotes: \n (not escapable) -> \n preserved
+            ['"foo\\nbar"', ['"foo\\nbar"']],
+            // Inside double quotes: \$ -> $
+            ['"foo\\$bar"', ['"foo$bar"']],
+            // Inside double quotes: \` -> `
+            ['"foo\\`bar"', ['"foo`bar"']]
+        ];
+
+        for (const [cmd, expected] of pairs) {
+            expect(splitUnix(cmd)).to.eql(expected, `Bad parse for string: ${cmd}`);
+        }
+    });
+
+    test('Posix escape handling inside single quotes', () => {
+        const pairs: [string, string[]][] = [
+            // Inside single quotes: backslash has no special meaning
+            [`'foo\\bar'`, [`'foo\\bar'`]],
+            [`'foo\\"bar'`, [`'foo\\"bar'`]],
+            [`'foo\\\\bar'`, [`'foo\\\\bar'`]]
         ];
 
         for (const [cmd, expected] of pairs) {