diff --git a/pythonFiles/tests/unittestadapter/.data/unittest_skip/unittest_skip_file.py b/pythonFiles/tests/unittestadapter/.data/unittest_skip/unittest_skip_file.py
new file mode 100644
index 000000000000..927a56bc920b
--- /dev/null
+++ b/pythonFiles/tests/unittestadapter/.data/unittest_skip/unittest_skip_file.py
@@ -0,0 +1,10 @@
+# Copyright (c) Microsoft Corporation. All rights reserved.
+# Licensed under the MIT License.
+
+from unittest import SkipTest
+
+raise SkipTest("This is unittest.SkipTest calling")
+
+
+def test_example():
+    assert 1 == 1
diff --git a/pythonFiles/tests/unittestadapter/.data/unittest_skip/unittest_skip_function.py b/pythonFiles/tests/unittestadapter/.data/unittest_skip/unittest_skip_function.py
new file mode 100644
index 000000000000..59e66e9a1d40
--- /dev/null
+++ b/pythonFiles/tests/unittestadapter/.data/unittest_skip/unittest_skip_function.py
@@ -0,0 +1,18 @@
+# Copyright (c) Microsoft Corporation. All rights reserved.
+# Licensed under the MIT License.
+
+import unittest
+
+
+def add(x, y):
+    return x + y
+
+
+class SimpleTest(unittest.TestCase):
+    @unittest.skip("demonstrating skipping")
+    def testadd1(self):
+        self.assertEquals(add(4, 5), 9)
+
+
+if __name__ == "__main__":
+    unittest.main()
diff --git a/pythonFiles/tests/unittestadapter/expected_discovery_test_output.py b/pythonFiles/tests/unittestadapter/expected_discovery_test_output.py
new file mode 100644
index 000000000000..3043ec158a2e
--- /dev/null
+++ b/pythonFiles/tests/unittestadapter/expected_discovery_test_output.py
@@ -0,0 +1,68 @@
+# Copyright (c) Microsoft Corporation. All rights reserved.
+# Licensed under the MIT License.
+
+import os
+from unittestadapter.utils import TestNodeTypeEnum
+from .helpers import TEST_DATA_PATH
+
+skip_unittest_folder_discovery_output = {
+    "path": os.fspath(TEST_DATA_PATH / "unittest_skip"),
+    "name": "unittest_skip",
+    "type_": TestNodeTypeEnum.folder,
+    "children": [
+        {
+            "path": os.fspath(
+                TEST_DATA_PATH / "unittest_skip" / "unittest_skip_file.py"
+            ),
+            "name": "unittest_skip_file.py",
+            "type_": TestNodeTypeEnum.file,
+            "children": [],
+            "id_": os.fspath(
+                TEST_DATA_PATH / "unittest_skip" / "unittest_skip_file.py"
+            ),
+        },
+        {
+            "path": os.fspath(
+                TEST_DATA_PATH / "unittest_skip" / "unittest_skip_function.py"
+            ),
+            "name": "unittest_skip_function.py",
+            "type_": TestNodeTypeEnum.file,
+            "children": [
+                {
+                    "path": os.fspath(
+                        TEST_DATA_PATH / "unittest_skip" / "unittest_skip_function.py"
+                    ),
+                    "name": "SimpleTest",
+                    "type_": TestNodeTypeEnum.class_,
+                    "children": [
+                        {
+                            "name": "testadd1",
+                            "path": os.fspath(
+                                TEST_DATA_PATH
+                                / "unittest_skip"
+                                / "unittest_skip_function.py"
+                            ),
+                            "lineno": "13",
+                            "type_": TestNodeTypeEnum.test,
+                            "id_": os.fspath(
+                                TEST_DATA_PATH
+                                / "unittest_skip"
+                                / "unittest_skip_function.py"
+                            )
+                            + "\\SimpleTest\\testadd1",
+                            "runID": "unittest_skip_function.SimpleTest.testadd1",
+                        }
+                    ],
+                    "id_": os.fspath(
+                        TEST_DATA_PATH / "unittest_skip" / "unittest_skip_function.py"
+                    )
+                    + "\\SimpleTest",
+                }
+            ],
+            "id_": os.fspath(
+                TEST_DATA_PATH / "unittest_skip" / "unittest_skip_function.py"
+            ),
+        },
+    ],
+    "id_": os.fspath(TEST_DATA_PATH / "unittest_skip"),
+}
diff --git a/pythonFiles/tests/unittestadapter/test_discovery.py b/pythonFiles/tests/unittestadapter/test_discovery.py
index 28dc51f55dcd..c4778aa85852 100644
--- a/pythonFiles/tests/unittestadapter/test_discovery.py
+++ b/pythonFiles/tests/unittestadapter/test_discovery.py
@@ -12,7 +12,7 @@
     parse_discovery_cli_args,
 )
 from unittestadapter.utils import TestNodeTypeEnum, parse_unittest_args
-
+from . import expected_discovery_test_output
 from .helpers import TEST_DATA_PATH, is_same_tree
 
 
@@ -214,3 +214,22 @@ def test_error_discovery() -> None:
     assert actual["status"] == "error"
     assert is_same_tree(expected, actual.get("tests"))
     assert len(actual.get("error", [])) == 1
+
+
+def test_unit_skip() -> None:
+    """The discover_tests function should return a dictionary with a "success" status, a uuid, no errors, and test tree.
+    if unittest discovery was performed and found a test in one file marked as skipped and another file marked as skipped.
+    """
+    start_dir = os.fsdecode(TEST_DATA_PATH / "unittest_skip")
+    pattern = "unittest_*"
+
+    uuid = "some-uuid"
+    actual = discover_tests(start_dir, pattern, None, uuid)
+
+    assert actual["status"] == "success"
+    assert "tests" in actual
+    assert is_same_tree(
+        actual.get("tests"),
+        expected_discovery_test_output.skip_unittest_folder_discovery_output,
+    )
+    assert "error" not in actual
diff --git a/pythonFiles/unittestadapter/utils.py b/pythonFiles/unittestadapter/utils.py
index a461baf7d870..78000e2a945f 100644
--- a/pythonFiles/unittestadapter/utils.py
+++ b/pythonFiles/unittestadapter/utils.py
@@ -159,6 +159,14 @@ def build_test_tree(
         test_id = test_case.id()
         if test_id.startswith("unittest.loader._FailedTest"):
             error.append(str(test_case._exception))  # type: ignore
+        elif test_id.startswith("unittest.loader.ModuleSkipped"):
+            components = test_id.split(".")
+            class_name = f"{components[-1]}.py"
+            # Find/build class node.
+            file_path = os.fsdecode(os.path.join(directory_path, class_name))
+            current_node = get_child_node(
+                class_name, file_path, TestNodeTypeEnum.file, root
+            )
         else:
             # Get the static test path components: filename, class name and function name.
             components = test_id.split(".")