I had this same issue, but only in a specific set of circumstances, and now have a work-around. Here’s what I observed:

• Scroll doesn’t work in Settings tab only (works in Terminal tabs)
• Only with an external mouse (Evoluent VerticalMouse2; not tested with other external mice). Trackpad scrolling works on two different laptops.
• Only when I have X-Mouse Button Control enabled and have the (default) option to “scroll window under cursor”. Note that the behaviour is the same whether or not Windows Terminal is the active window.

That last point indicates that it’s something going on with XMBC. If it were a problem, I could take it up with them. But actually it’s easier just to “Disable Scroll Window Under Cursor”. That option doesn’t seem to do anything - I guess Windows now has this behaviour built-in, so there’s no need to have XMBC do it. I didn’t see a problem like this before I saw it in Windows Terminal Settings, so there is some funny interaction between the two programs.

I hope that gives a clue as to what’s going on for other people who aren’t so lucky to have an easy fix as (it looks like) I have. It might be possible for a developer to reproduce the issue by installing XMBC (making sure that option is not selected) and using an external mouse.

So this isn’t a problem for me, but I hope my observation helps. Tim.

Windows Terminal v1.9.1942.0. X-Mouse Button Control v2.19.2. Windows 10 20H2.

Well, you’re absolutely right. I’ve run XMBC for so long, I didn’t even consider it. 😑

So disabling the relevant Global Setting: or (as you mentioned, also) disabling it on a matched profile sorts this issue out.

Cheers, Tim!

I also use X-Mouse Button Control and @timadye’s workaround resolved the issue for me. @jackemerson’s option also worked and is a less error prone solution in the long run. Same results for PowerToys settings scroll issue https://github.com/microsoft/PowerToys/issues/3400