diff --git a/apps/vs-code-designer/package.json b/apps/vs-code-designer/package.json
index 50078a08104..f5739494f3b 100644
--- a/apps/vs-code-designer/package.json
+++ b/apps/vs-code-designer/package.json
@@ -60,11 +60,11 @@
   },
   "private": true,
   "scripts": {
-    "build:extension": "tsup && pnpm run copyFiles && cd dist && npm install --ignore-scripts",
+    "build:extension": "tsup && pnpm run copyFiles && node scripts/install-dist-dependencies.js --ignore-scripts",
     "build:ui": "tsup --config tsup.e2e.test.config.ts",
     "copyFiles": "node extension-copy-svgs.js",
     "vscode:designer:pack": "pnpm run vscode:designer:pack:step1 && pnpm run vscode:designer:pack:step2",
-    "vscode:designer:pack:step1": "cd ./dist && npm install",
+    "vscode:designer:pack:step1": "node scripts/install-dist-dependencies.js",
     "vscode:designer:pack:step2": "cd ./dist && vsce package",
     "lint": "eslint . --report-unused-disable-directives --max-warnings 0",
     "test:extension-unit": "vitest run --retry=3",
diff --git a/apps/vs-code-designer/scripts/install-dist-dependencies.js b/apps/vs-code-designer/scripts/install-dist-dependencies.js
new file mode 100644
index 00000000000..e997e2d82a0
--- /dev/null
+++ b/apps/vs-code-designer/scripts/install-dist-dependencies.js
@@ -0,0 +1,42 @@
+/*---------------------------------------------------------------------------------------------
+ *  Copyright (c) Microsoft Corporation. All rights reserved.
+ *  Licensed under the MIT License. See License.txt in the project root for license information.
+ *--------------------------------------------------------------------------------------------*/
+const { spawnSync } = require('child_process');
+const { existsSync } = require('fs');
+const { join } = require('path');
+
+const distPath = join(__dirname, '..', 'dist');
+if (!existsSync(distPath)) {
+  console.error(`Extension dist folder does not exist: ${distPath}`);
+  process.exit(1);
+}
+
+const args = ['install', ...process.argv.slice(2)];
+const npmUserConfig = process.env.NPM_CONFIG_USERCONFIG?.trim();
+if (npmUserConfig) {
+  if (!existsSync(npmUserConfig)) {
+    console.error('NPM_CONFIG_USERCONFIG is set, but the configured npm userconfig file does not exist.');
+    process.exit(1);
+  }
+
+  console.log('Using npm userconfig from NPM_CONFIG_USERCONFIG.');
+  args.push('--userconfig', npmUserConfig);
+}
+
+const npmCliPath = join(process.execPath, '..', 'node_modules', 'npm', 'bin', 'npm-cli.js');
+const command = existsSync(npmCliPath) ? process.execPath : process.platform === 'win32' ? 'npm.cmd' : 'npm';
+const commandArgs = existsSync(npmCliPath) ? [npmCliPath, ...args] : args;
+
+const result = spawnSync(command, commandArgs, {
+  cwd: distPath,
+  stdio: 'inherit',
+  shell: false,
+});
+
+if (result.error) {
+  console.error(result.error.message);
+  process.exit(1);
+}
+
+process.exit(result.status ?? 1);