diff --git a/vscode-extension/src/util.ts b/vscode-extension/src/util.ts
index aab45e262..754fbba28 100644
--- a/vscode-extension/src/util.ts
+++ b/vscode-extension/src/util.ts
@@ -310,17 +310,12 @@ export async function setupEnvironmentVariables(
 ) {
   const homedir = require("os").homedir(); // This is cross-platform: https://stackoverflow.com/a/9081436
   const defaultEnvPath = path.join(homedir, ".env");
-
-  // TODO: If there are multiple workspace folders, use common lowest
-  // ancestor as workspacePath: https://github.com/lastmile-ai/aiconfig/issues/1299
-  const workspacePath = vscode.workspace.workspaceFolders
-    ? vscode.workspace.workspaceFolders[0].uri.fsPath
-    : null;
+  const lowestCommonWorkspacePath = getLowestCommonAncestorAcrossWorkspaces();
 
   const envPath = await vscode.window.showInputBox({
     prompt: "Enter the path of your .env file",
     value: defaultEnvPath,
-    validateInput: (input) => validateEnvPath(input, workspacePath),
+    validateInput: (input) => validateEnvPath(input, lowestCommonWorkspacePath),
   });
 
   if (!envPath) {
@@ -403,15 +398,53 @@ export function validateNewConfigName(name: string, mode: "json" | "yaml") {
   return null;
 }
 
+/**
+ * Some VS Code setups can have multiple workspaces, in which
+ * case we should take the lowest common ancestor path that is shared
+ * across all of them so that the same .env file can be used for multiple
+ * AIConfig files
+ * @returns lowestCommonAncestorPath (string | undefined)
+ *    -> string of path to lowest common ancestor: empty means no shared path
+ *    -> undefined if no workspaces are defined in VS Code session
+ */
+function getLowestCommonAncestorAcrossWorkspaces(): string | undefined {
+  const workspaceFolders = vscode.workspace.workspaceFolders;
+  if (workspaceFolders === undefined || workspaceFolders.length === 0) {
+    return undefined;
+  }
+
+  const workspacePaths = workspaceFolders.map((folder) =>
+    path.normalize(folder.uri.fsPath)
+  );
+  let lowestCommonAncestorPath: string;
+  const separator = path.sep; // Handles Windows and Linux
+  lowestCommonAncestorPath = workspacePaths.reduce(
+    (currLowestCommonAncestorPath, currPath) => {
+      const ancestorFolders = currLowestCommonAncestorPath.split(separator);
+      const currPathFolders = currPath.split(separator);
+      const commonPathFolders: Array<string> = [];
+      for (var i = 0; i < ancestorFolders.length; i++) {
+        if (ancestorFolders[i] === currPathFolders[i]) {
+          commonPathFolders.push(ancestorFolders[i]);
+        } else {
+          break;
+        }
+      }
+      return commonPathFolders.join(separator);
+    }
+  );
+  return lowestCommonAncestorPath;
+}
+
 function validateEnvPath(
   inputPath: string,
-  workspacePath: string | null
+  workspacePath: string | undefined
 ): string | null {
   if (!inputPath) {
     return "File path is required";
   } else if (path.basename(inputPath) !== ".env") {
     return 'Filename must be ".env"';
-  } else if (workspacePath !== null) {
+  } else if (workspacePath != null && workspacePath !== "") {
     // loadenv() from Python checks each folder from the file/program where
     // it's invoked for the presence of an `.env` file. Therefore, the `.env
     // file must be saved either at the top-level directory of the workspace