diff --git a/src/azure-cli-core/azure/cli/core/extension/operations.py b/src/azure-cli-core/azure/cli/core/extension/operations.py
index e20aed58b03..10c73ace448 100644
--- a/src/azure-cli-core/azure/cli/core/extension/operations.py
+++ b/src/azure-cli-core/azure/cli/core/extension/operations.py
@@ -46,9 +46,11 @@
 
 def _run_pip(pip_exec_args, extension_path=None):
     cmd = [sys.executable, '-m', 'pip'] + pip_exec_args + ['--disable-pip-version-check', '--no-cache-dir']
+    env = os.environ.copy()
+    env.pop('PIP_REQUIRE_VIRTUALENV', None)
     logger.debug('Running: %s', cmd)
     try:
-        log_output = check_output(cmd, stderr=STDOUT, universal_newlines=True)
+        log_output = check_output(cmd, stderr=STDOUT, universal_newlines=True, env=env)
         logger.debug(log_output)
         returncode = 0
     except CalledProcessError as e:
diff --git a/src/azure-cli-core/azure/cli/core/extension/tests/latest/test_extension_commands.py b/src/azure-cli-core/azure/cli/core/extension/tests/latest/test_extension_commands.py
index 2f81268935d..6b0b00e5529 100644
--- a/src/azure-cli-core/azure/cli/core/extension/tests/latest/test_extension_commands.py
+++ b/src/azure-cli-core/azure/cli/core/extension/tests/latest/test_extension_commands.py
@@ -174,6 +174,18 @@ def test_add_extension_verify_no_pip_proxy(self):
             if '--proxy' in pip_cmd:
                 raise AssertionError("proxy parameter in check_output args although no proxy specified")
 
+    def test_add_extension_unset_pip_require_virtualenv(self):
+        extension_name = MY_EXT_NAME
+        computed_extension_sha256 = _compute_file_hash(MY_EXT_SOURCE)
+        with mock.patch.dict(os.environ, {'PIP_REQUIRE_VIRTUALENV': 'true', 'DUMMY_ENV_VAR': 'dummy-value'}), \
+                mock.patch('azure.cli.core.extension.operations.resolve_from_index', return_value=(MY_EXT_SOURCE, computed_extension_sha256)), \
+                mock.patch('azure.cli.core.extension.operations.shutil'), \
+                mock.patch('azure.cli.core.extension.operations.check_output') as check_output:
+            add_extension(cmd=self.cmd, extension_name=extension_name)
+            kwargs = check_output.call_args[1]
+            self.assertNotIn('PIP_REQUIRE_VIRTUALENV', kwargs['env'])
+            self.assertEqual(kwargs['env'].get('DUMMY_ENV_VAR'), 'dummy-value')
+
     def test_add_extension_with_specific_version(self):
         extension_name = MY_EXT_NAME
         extension1 = 'myfirstcliextension-0.0.3+dev-py2.py3-none-any.whl'