diff --git a/packages/amplify-cli-core/src/overrides-manager/override-skeleton-generator.ts b/packages/amplify-cli-core/src/overrides-manager/override-skeleton-generator.ts
index 018898bdef0..2ef3baa4f0d 100644
--- a/packages/amplify-cli-core/src/overrides-manager/override-skeleton-generator.ts
+++ b/packages/amplify-cli-core/src/overrides-manager/override-skeleton-generator.ts
@@ -2,8 +2,9 @@ import { printer, prompter } from '@aws-amplify/amplify-prompts';
 import execa from 'execa';
 import * as fs from 'fs-extra';
 import * as path from 'path';
-import { $TSContext, AmplifyError, getPackageManager, pathManager, skipHooks } from '../index';
+import { $TSContext, AmplifyError, getPackageManager, pathManager, skipHooks, stateManager } from '../index';
 import { JSONUtilities } from '../jsonUtilities';
+import { merge } from 'lodash';
 
 /**
  * This method generates the default/template overrides file
@@ -63,6 +64,10 @@ export const buildOverrideDir = async (cwd: string, destDirPath: string): Promis
     const overrideSampleTsconfigJsonPath = path.join(__dirname, '..', '..', 'resources', 'overrides-resource', 'tsconfig.json');
     fs.writeFileSync(overrideBackendTsConfigJson, fs.readFileSync(overrideSampleTsconfigJsonPath));
   }
+
+  // ensure awscloudformation folder is not excluded in vscode
+  setSettingsJsonAwscloudformationFlagFalse();
+
   const packageManager = await getPackageManager(cwd);
 
   if (packageManager === null) {
@@ -154,3 +159,27 @@ export const generateTsConfigforProject = (srcResourceDirPath: string, destDirPa
   fs.writeFileSync(overrideFileName, fs.readFileSync(path.join(srcResourceDirPath, 'override.ts.sample')));
   fs.writeFileSync(resourceTsConfigFileName, fs.readFileSync(path.join(srcResourceDirPath, 'tsconfig.resource.json')));
 };
+
+/**
+ * this method sets the flag to false in vscode settings.json to show awscloudformation folder in vscode
+ */
+const setSettingsJsonAwscloudformationFlagFalse = (): void => {
+  if (stateManager.getLocalEnvInfo().defaultEditor !== 'vscode') {
+    return;
+  }
+
+  const workspaceSettingsPath = '.vscode/settings.json';
+  const exclusionRules = {
+    'files.exclude': {
+      'amplify/backend/awscloudformation': false,
+    },
+  };
+
+  try {
+    // if settings file exists, safely add exclude settings to it
+    const settings = JSONUtilities.readJson(workspaceSettingsPath);
+    JSONUtilities.writeJson(workspaceSettingsPath, merge(settings, exclusionRules));
+  } catch (error) {
+    // workspace settings file does not exist, noop
+  }
+};
diff --git a/packages/amplify-e2e-tests/src/__tests__/init_e.test.ts b/packages/amplify-e2e-tests/src/__tests__/init_e.test.ts
index 56bbe4a00ca..d7ceec14f7e 100644
--- a/packages/amplify-e2e-tests/src/__tests__/init_e.test.ts
+++ b/packages/amplify-e2e-tests/src/__tests__/init_e.test.ts
@@ -40,6 +40,11 @@ describe('amplify init e', () => {
     expect(meta.Region).toBeDefined();
     const { AuthRoleName, UnauthRoleName, UnauthRoleArn, AuthRoleArn, DeploymentBucketName } = meta;
 
+    // test default vscode settings.json for awscloudformation folder
+    const editorSettingsPath = path.join(projRoot, '.vscode', 'settings.json');
+    const editorSettings = fs.readJSONSync(editorSettingsPath);
+    expect(editorSettings['files.exclude']['amplify/backend/awscloudformation']).toEqual(true);
+
     await expect(UnauthRoleName).toBeIAMRoleWithArn(UnauthRoleArn);
     await expect(AuthRoleName).toBeIAMRoleWithArn(AuthRoleArn);
     await expect(DeploymentBucketName).toBeAS3Bucket(DeploymentBucketName);
@@ -47,6 +52,10 @@ describe('amplify init e', () => {
     // override new env
     await amplifyOverrideRoot(projRoot, { testingWithLatestCodebase: false });
 
+    // test awscloudformation folder is not excluded in vscode settings.json after override
+    const editorSettingsAfterOverride = fs.readJSONSync(editorSettingsPath);
+    expect(editorSettingsAfterOverride['files.exclude']['amplify/backend/awscloudformation']).toEqual(false);
+
     // this is where we will write overrides to
     const destOverrideFilePath = path.join(projRoot, 'amplify', 'backend', 'awscloudformation', 'override.ts');