diff --git a/jupyter_server_terminals/app.py b/jupyter_server_terminals/app.py
index 8ccbc4f..e10a5b4 100644
--- a/jupyter_server_terminals/app.py
+++ b/jupyter_server_terminals/app.py
@@ -37,6 +37,7 @@ class TerminalsExtensionApp(ExtensionApp):
     def initialize_settings(self) -> None:
         """Initialize settings."""
         if not self.serverapp or not self.serverapp.terminals_enabled:
+            self.settings.update({"terminals_available": False})
             return
         self.initialize_configurables()
         self.settings.update(
@@ -73,8 +74,15 @@ def initialize_configurables(self) -> None:
 
     def initialize_handlers(self) -> None:
         """Initialize handlers."""
-        if not self.serverapp or not self.serverapp.terminals_enabled:
-            # Checking self.terminals_available instead breaks enabling terminals
+        if not self.serverapp:
+            # Already set `terminals_available` as `False` in `initialize_settings`
+            return
+
+        if not self.serverapp.terminals_enabled:
+            # webapp settings for backwards compat (used by nbclassic), #12
+            self.serverapp.web_app.settings["terminals_available"] = self.settings[
+                "terminals_available"
+            ]
             return
         self.handlers.append(
             (
diff --git a/tests/test_disable_app.py b/tests/test_disable_app.py
new file mode 100644
index 0000000..6538602
--- /dev/null
+++ b/tests/test_disable_app.py
@@ -0,0 +1,13 @@
+import pytest
+from traitlets.config.loader import Config
+
+
+@pytest.fixture()
+def jp_server_config():
+    return Config({"ServerApp": {"terminals_enabled": False}})
+
+
+async def test_not_enabled(jp_configurable_serverapp):
+    assert jp_configurable_serverapp().terminals_enabled is False
+    assert jp_configurable_serverapp().web_app.settings["terminals_available"] is False
+    assert "terminal_manager" not in jp_configurable_serverapp().web_app.settings
diff --git a/tests/test_terminal.py b/tests/test_terminal.py
index 6516eb7..ef96907 100644
--- a/tests/test_terminal.py
+++ b/tests/test_terminal.py
@@ -236,6 +236,12 @@ async def test_terminal_create_with_bad_cwd(jp_fetch, jp_ws_fetch):
     assert non_existing_path not in message_stdout
 
 
+async def test_app_config(jp_configurable_serverapp):
+    assert jp_configurable_serverapp().terminals_enabled is True
+    assert jp_configurable_serverapp().web_app.settings["terminals_available"] is True
+    assert jp_configurable_serverapp().web_app.settings["terminal_manager"]
+
+
 async def test_culling_config(jp_configurable_serverapp):
     terminal_mgr_config = jp_configurable_serverapp().config.ServerApp.TerminalManager
     assert terminal_mgr_config.cull_inactive_timeout == CULL_TIMEOUT