diff --git a/demo/src/setup.ts b/demo/src/setup.ts
index 834c64ff..15eb5e98 100644
--- a/demo/src/setup.ts
+++ b/demo/src/setup.ts
@@ -83,7 +83,7 @@ await Promise.all([
 // Override services
 await initializeMonacoService({
   ...getExtensionServiceOverride(toWorkerConfig(ExtensionHostWorker)),
-  ...getExtensionGalleryServiceOverride(),
+  ...getExtensionGalleryServiceOverride({ webOnly: false }),
   ...getModelServiceOverride(),
   ...getNotificationServiceOverride(),
   ...getDialogsServiceOverride(),
diff --git a/src/service-override/extensionGallery.ts b/src/service-override/extensionGallery.ts
index 924a6b88..3f261d6f 100644
--- a/src/service-override/extensionGallery.ts
+++ b/src/service-override/extensionGallery.ts
@@ -24,7 +24,6 @@ import { RemoteExtensionsScannerService } from 'vs/workbench/services/remote/com
 import { ExtensionRecommendationNotificationService } from 'vs/workbench/contrib/extensions/browser/extensionRecommendationNotificationService'
 import { ExtensionTipsService } from 'vs/platform/extensionManagement/common/extensionTipsService'
 import { ExtensionManagementService } from 'vs/workbench/services/extensionManagement/common/extensionManagementService'
-import { WebExtensionManagementService } from 'vs/workbench/services/extensionManagement/common/webExtensionManagementService'
 import 'vs/workbench/contrib/extensions/browser/extensions.contribution'
 import 'vs/workbench/contrib/extensions/browser/extensions.web.contribution'
 import 'vs/workbench/contrib/logs/common/logs.contribution'
@@ -33,11 +32,34 @@ import { ExtensionEnablementService } from 'vs/workbench/services/extensionManag
 import 'vs/workbench/services/extensionManagement/browser/extensionBisect'
 import { changeUrlDomain } from './tools/url'
 import { registerAssets } from '../assets'
+import { IInstantiationService, ILabelService, IRemoteAgentService } from '../services'
 
 registerAssets({
   'vs/workbench/services/extensions/worker/webWorkerExtensionHostIframe.html': () => changeUrlDomain(new URL('../assets/webWorkerExtensionHostIframe.html', import.meta.url).href, undefined)
 })
 
+class ExtensionManagementServerServiceOverride extends ExtensionManagementServerService {
+  constructor (
+    private isWebOnly: boolean,
+    @IRemoteAgentService readonly remoteAgentService: IRemoteAgentService,
+    @ILabelService readonly labelService: ILabelService,
+    @IInstantiationService readonly instantiationService: IInstantiationService
+  ) {
+    super(remoteAgentService, labelService, instantiationService)
+
+    if (this.isWebOnly) {
+      /**
+      * If `isWebOnly` is set to true, we explicitly set the remote extension management server to `null`, even if
+      * we're connected to a remote server.
+      */
+      // Cannot override read-only property, but this is the only way we can override it to be null,
+      // overriding the field doesn't work and setting a getter is not allowed.
+      // @ts-ignore
+      this.remoteExtensionManagementServer = null
+    }
+  }
+}
+
 export interface ExtensionGalleryOptions {
   /**
    * Whether we should only allow for web extensions to be installed, this is generally
@@ -52,16 +74,14 @@ export default function getServiceOverride (options: ExtensionGalleryOptions = {
     [IExtensionGalleryService.toString()]: new SyncDescriptor(ExtensionGalleryService, [], true),
     [IGlobalExtensionEnablementService.toString()]: new SyncDescriptor(GlobalExtensionEnablementService, [], true),
     [IExtensionsWorkbenchService.toString()]: new SyncDescriptor(ExtensionsWorkbenchService, [], true),
-    [IExtensionManagementServerService.toString()]: new SyncDescriptor(ExtensionManagementServerService, [], true),
+    [IExtensionManagementServerService.toString()]: new SyncDescriptor(ExtensionManagementServerServiceOverride, [options.webOnly], true),
     [IExtensionRecommendationsService.toString()]: new SyncDescriptor(ExtensionRecommendationsService, [], true),
     [IExtensionRecommendationNotificationService.toString()]: new SyncDescriptor(ExtensionRecommendationNotificationService, [], true),
     [IWebExtensionsScannerService.toString()]: new SyncDescriptor(WebExtensionsScannerService, [], true),
     [IExtensionIgnoredRecommendationsService.toString()]: new SyncDescriptor(ExtensionIgnoredRecommendationsService, [], true),
     [IIgnoredExtensionsManagementService.toString()]: new SyncDescriptor(IgnoredExtensionsManagementService, [], true),
     [IExtensionManifestPropertiesService.toString()]: new SyncDescriptor(ExtensionManifestPropertiesService, [], true),
-    [IExtensionManagementService.toString()]: options.webOnly
-      ? new SyncDescriptor(WebExtensionManagementService, [], true)
-      : new SyncDescriptor(ExtensionManagementService, [], true),
+    [IExtensionManagementService.toString()]: new SyncDescriptor(ExtensionManagementService, [], true),
     [IBuiltinExtensionsScannerService.toString()]: new SyncDescriptor(BuiltinExtensionsScannerService, [], true),
     [IWorkspaceExtensionsConfigService.toString()]: new SyncDescriptor(WorkspaceExtensionsConfigService, [], true),
     [IRemoteExtensionsScannerService.toString()]: new SyncDescriptor(RemoteExtensionsScannerService, [], true),