diff --git a/extensions/podman/package.json b/extensions/podman/package.json
index 066f7dc9d7dc0..6d30244988ae6 100644
--- a/extensions/podman/package.json
+++ b/extensions/podman/package.json
@@ -296,7 +296,7 @@
           "content": [
             [
               {
-                "value": "Podman Machines created with podman v4 are no longer supported by podman v5"
+                "value": "Podman Machines created by Podman v4 are no longer supported by v5"
               }
             ],
             [
diff --git a/extensions/podman/src/extension.spec.ts b/extensions/podman/src/extension.spec.ts
index 8da28426e01d0..f5fa2e1ac0689 100644
--- a/extensions/podman/src/extension.spec.ts
+++ b/extensions/podman/src/extension.spec.ts
@@ -142,7 +142,8 @@ beforeEach(() => {
       VMType: 'wsl',
     },
   };
-
+  vi.resetAllMocks();
+  extension.resetShouldNotifySetup();
   (extensionApi.env.createTelemetryLogger as Mock).mockReturnValue(telemetryLogger);
 
   extension.initTelemetryLogger();
@@ -259,7 +260,7 @@ vi.mock('./util', async () => {
 });
 
 beforeEach(() => {
-  vi.clearAllMocks();
+  vi.resetAllMocks();
   console.error = consoleErrorMock;
 });
 
@@ -1136,11 +1137,19 @@ test('if there are no machines, make sure checkDefaultMachine is not being ran i
   expect(spyCheckDefaultMachine).not.toBeCalled();
 });
 
-describe('initCheckAndRegisterUpdate', () => {
-  beforeEach(() => {
-    vi.resetAllMocks();
+test('Should notify clean machine if getJSONMachineList is erroring due to an invalid format on mac', async () => {
+  vi.mocked(isMac).mockReturnValue(true);
+  vi.spyOn(extensionApi.process, 'exec').mockRejectedValue({
+    name: 'name',
+    message: 'description',
+    stderr: 'cannot unmarshal string',
   });
+  await expect(extension.updateMachines(provider)).rejects.toThrow('description');
+  expect(extensionApi.window.showNotification).toBeCalled();
+  expect(extensionApi.context.setValue).toBeCalledWith(extension.CLEANUP_REQUIRED_MACHINE_KEY, true);
+});
 
+describe('initCheckAndRegisterUpdate', () => {
   test('check there is an update', async () => {
     const podmanInstall = {
       checkForUpdate: vi.fn(),
@@ -1299,6 +1308,7 @@ describe('initCheckAndRegisterUpdate', () => {
 
 describe('registerOnboardingMachineExistsCommand', () => {
   test('check with error when calling podman machine ls command', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
     vi.mocked(extensionApi.process.exec).mockRejectedValue(new Error('error'));
@@ -1324,6 +1334,8 @@ describe('registerOnboardingMachineExistsCommand', () => {
   });
 
   test('check with 2 machines', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
     // return 2 empty machines
@@ -1350,6 +1362,8 @@ describe('registerOnboardingMachineExistsCommand', () => {
   });
 
   test('check with 0 machine', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
     // return empty machine array
@@ -1378,14 +1392,21 @@ describe('registerOnboardingMachineExistsCommand', () => {
 
 describe('registerOnboardingUnsupportedPodmanMachineCommand', () => {
   test('check with v5 and previous qemu folders', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
     vi.mocked(fs.existsSync).mockReturnValue(true);
 
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
-    vi.mocked(extensionApi.process.exec).mockResolvedValue({
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
       stdout: 'podman version 5.0.0',
     } as unknown as extensionApi.RunResult);
 
+    // second call to get the machine list
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: '[]',
+    } as unknown as extensionApi.RunResult);
+
     // perform the call
     const disposable = registerOnboardingUnsupportedPodmanMachineCommand();
 
@@ -1407,15 +1428,23 @@ describe('registerOnboardingUnsupportedPodmanMachineCommand', () => {
   });
 
   test('check with v5 and no previous qemu folders', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
     // no qemu folders
     vi.mocked(fs.existsSync).mockReturnValue(false);
 
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
-    vi.mocked(extensionApi.process.exec).mockResolvedValue({
+    // first call to get the podman version
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
       stdout: 'podman version 5.0.0',
     } as unknown as extensionApi.RunResult);
 
+    // second call to get the machine list
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: '[]',
+    } as unknown as extensionApi.RunResult);
+
     // perform the call
     const disposable = registerOnboardingUnsupportedPodmanMachineCommand();
 
@@ -1437,14 +1466,21 @@ describe('registerOnboardingUnsupportedPodmanMachineCommand', () => {
   });
 
   test('check with v4 and qemu folders', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
     vi.mocked(fs.existsSync).mockReturnValue(true);
 
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
-    vi.mocked(extensionApi.process.exec).mockResolvedValue({
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
       stdout: 'podman version 4.9.3',
     } as unknown as extensionApi.RunResult);
 
+    // second call to get the machine list
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: '[]',
+    } as unknown as extensionApi.RunResult);
+
     // perform the call
     const disposable = registerOnboardingUnsupportedPodmanMachineCommand();
 
@@ -1464,10 +1500,50 @@ describe('registerOnboardingUnsupportedPodmanMachineCommand', () => {
     // check called with false as there are qemu folders but we're with podman v4
     expect(extensionApi.context.setValue).toBeCalledWith('unsupportedPodmanMachine', false, 'onboarding');
   });
+
+  test('check with v5 and error in JSON of machines', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
+    // no qemu folders
+    vi.mocked(fs.existsSync).mockReturnValue(false);
+
+    vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
+
+    // first call to get the podman version
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: 'podman version 5.0.0',
+    } as unknown as extensionApi.RunResult);
+
+    // second call to get the machine list
+    vi.mocked(extensionApi.process.exec).mockRejectedValue({
+      stderr: 'incompatible machine config',
+    } as unknown as extensionApi.RunResult);
+
+    // perform the call
+    const disposable = registerOnboardingUnsupportedPodmanMachineCommand();
+
+    // checks
+    expect(disposable).toBeDefined();
+
+    // check command is called
+    expect(extensionApi.commands.registerCommand).toBeCalledWith(
+      'podman.onboarding.checkUnsupportedPodmanMachine',
+      expect.any(Function),
+    );
+
+    const func = vi.mocked(extensionApi.commands.registerCommand).mock.calls[0][1];
+    // call the function
+    await func();
+
+    // check it is false as there are no qemu folders
+    expect(extensionApi.context.setValue).toBeCalledWith('unsupportedPodmanMachine', true, 'onboarding');
+  });
 });
 
 describe('registerOnboardingRemoveUnsupportedMachinesCommand', () => {
   test('check with previous qemu folders', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
     vi.mocked(fs.existsSync).mockReturnValue(true);
 
     // mock confirmation window message to true
@@ -1475,10 +1551,14 @@ describe('registerOnboardingRemoveUnsupportedMachinesCommand', () => {
 
     vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
 
-    vi.mocked(extensionApi.process.exec).mockResolvedValue({
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
       stdout: 'podman version 5.0.0',
     } as unknown as extensionApi.RunResult);
 
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: '[]',
+    } as unknown as extensionApi.RunResult);
+
     // perform the call
     const disposable = extension.registerOnboardingRemoveUnsupportedMachinesCommand();
 
@@ -1505,4 +1585,72 @@ describe('registerOnboardingRemoveUnsupportedMachinesCommand', () => {
     // check called with true as there are qemu folders
     expect(extensionApi.context.setValue).toBeCalledWith('unsupportedMachineRemoved', 'ok', 'onboarding');
   });
+
+  test('check with previous podman v4 config files', async () => {
+    vi.mocked(isMac).mockReturnValue(true);
+
+    // mock confirmation window message to true
+    vi.mocked(extensionApi.window.showWarningMessage).mockResolvedValue('Yes');
+
+    vi.mocked(extensionApi.commands.registerCommand).mockReturnValue({ dispose: vi.fn() });
+
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: 'podman version 5.0.0',
+    } as unknown as extensionApi.RunResult);
+    // two times false (no qemu folders)
+    vi.mocked(fs.existsSync).mockReturnValueOnce(false);
+    vi.mocked(fs.existsSync).mockReturnValueOnce(false);
+
+    // return an error when trying to list output
+    vi.mocked(fs.existsSync).mockReturnValueOnce(true);
+    vi.mocked(extensionApi.process.exec).mockResolvedValueOnce({
+      stdout: '[]',
+      stderr: 'incompatible machine config',
+    } as unknown as extensionApi.RunResult);
+
+    vi.mocked(fs.promises.readdir).mockResolvedValue(['foo.json'] as unknown as fs.Dirent[]);
+
+    // mock readfile
+    vi.mocked(fs.promises.readFile).mockResolvedValueOnce('{"Driver": "podman"}');
+
+    // perform the call
+    const disposable = extension.registerOnboardingRemoveUnsupportedMachinesCommand();
+
+    // checks
+    expect(disposable).toBeDefined();
+
+    // check command is called
+    expect(extensionApi.commands.registerCommand).toBeCalledWith(
+      'podman.onboarding.removeUnsupportedMachines',
+      expect.any(Function),
+    );
+
+    const func = vi.mocked(extensionApi.commands.registerCommand).mock.calls[0][1];
+    // call the function
+    await func();
+
+    // expect rm to be called
+    expect(fs.promises.rm).toBeCalledWith(expect.stringContaining('foo.json'), {
+      recursive: true,
+      maxRetries: 3,
+      retryDelay: 1000,
+    });
+
+    // check called with true as there are qemu folders
+    expect(extensionApi.context.setValue).toBeCalledWith('unsupportedMachineRemoved', 'ok', 'onboarding');
+  });
+});
+
+test('isIncompatibleMachineOutput', () => {
+  const emptyResponse = extension.isIncompatibleMachineOutput(undefined);
+  expect(emptyResponse).toBeFalsy();
+
+  const unknownErrorResponse = extension.isIncompatibleMachineOutput('unknown error');
+  expect(unknownErrorResponse).toBeFalsy();
+
+  const wslErrorResponse = extension.isIncompatibleMachineOutput('cannot unmarshal string');
+  expect(wslErrorResponse).toBeTruthy();
+
+  const applehvErrorResponse = extension.isIncompatibleMachineOutput('incompatible machine config');
+  expect(applehvErrorResponse).toBeTruthy();
 });
diff --git a/extensions/podman/src/extension.ts b/extensions/podman/src/extension.ts
index 90f3414a946d7..028306dd4d559 100644
--- a/extensions/podman/src/extension.ts
+++ b/extensions/podman/src/extension.ts
@@ -125,12 +125,33 @@ export type MachineListOutput = {
   stderr: string;
 };
 
+export function isIncompatibleMachineOutput(output: string | undefined): boolean {
+  // apple HV v4 to v5 machine config error
+  const APPLE_HV_V4_V5_ERROR = 'incompatible machine config';
+
+  // wsl v4 to v5 machine config error
+  const WSL_V4_V5_ERROR = 'cannot unmarshal string';
+
+  if (output) {
+    return output.includes(APPLE_HV_V4_V5_ERROR) || output.includes(WSL_V4_V5_ERROR);
+  } else {
+    return false;
+  }
+}
+
 export async function updateMachines(provider: extensionApi.Provider): Promise<void> {
   // init machines available
   let machineListOutput: MachineListOutput;
   try {
     machineListOutput = await getJSONMachineList();
   } catch (error) {
+    let shouldCleanMachine = false;
+    // check if field stderr is present in the error object
+    if (error.stderr) {
+      shouldCleanMachine = isIncompatibleMachineOutput(error.stderr);
+    }
+    extensionApi.context.setValue(CLEANUP_REQUIRED_MACHINE_KEY, shouldCleanMachine);
+
     // Only on macOS and Windows should we show the setup notification
     // if for some reason doing getJSONMachineList fails..
     if (shouldNotifySetup && !isLinux()) {
@@ -150,6 +171,18 @@ export async function updateMachines(provider: extensionApi.Provider): Promise<v
   if (installedPodman) {
     shouldCleanMachine = shouldNotifyQemuMachinesWithV5(installedPodman);
   }
+  // check if the machine needs to be cleaned for v4 --> v5 format
+  if (!shouldCleanMachine) {
+    shouldCleanMachine = isIncompatibleMachineOutput(machineListOutput.stderr);
+  }
+
+  // invalid machines is not making the provider working properly so always notify
+  if (shouldCleanMachine && shouldNotifySetup && !isLinux()) {
+    // push setup notification
+    notificationDisposable = extensionApi.window.showNotification(setupPodmanNotification);
+    shouldCleanMachine = false;
+  }
+
   extensionApi.context.setValue(CLEANUP_REQUIRED_MACHINE_KEY, shouldCleanMachine);
 
   // Only show the notification on macOS and Windows
@@ -920,40 +953,128 @@ export function registerOnboardingUnsupportedPodmanMachineCommand(): extensionAp
       isUnsupported = shouldNotifyQemuMachinesWithV5(installedPodman);
     }
 
+    // check if the machine needs to be cleaned for v4 --> v5 format
+    if (!isUnsupported) {
+      try {
+        const machineListOutput = await getJSONMachineList();
+        isUnsupported = isIncompatibleMachineOutput(machineListOutput.stderr);
+      } catch (error) {
+        // check if stderr in the error object
+        if (error.stderr) {
+          isUnsupported = isIncompatibleMachineOutput(error.stderr);
+        }
+      }
+    }
+
     extensionApi.context.setValue('unsupportedPodmanMachine', isUnsupported, 'onboarding');
   });
 }
 
 export function registerOnboardingRemoveUnsupportedMachinesCommand(): extensionApi.Disposable {
   return extensionApi.commands.registerCommand('podman.onboarding.removeUnsupportedMachines', async () => {
-    // only on macOS
-    // do not check if version is v5 as it is being checked by the command that triggers this one
-    if (extensionApi.env.isMac) {
+    const fileAndFoldersToRemove = [];
+    const wslMachinesToUnregister = [];
+
+    const installedPodman = await getPodmanInstallation();
+
+    if (extensionApi.env.isMac && installedPodman?.version.startsWith('5.')) {
       // remove the qemu machines folder
       const qemuSharePath = path.resolve(os.homedir(), appHomeDir(), 'machine', 'qemu');
       const qemuConfigPath = path.resolve(os.homedir(), appConfigDir(), 'machine', 'qemu');
 
       // remove folders if exists
-      const foldersToRemove = [];
       if (fs.existsSync(qemuSharePath)) {
-        foldersToRemove.push(qemuSharePath);
+        fileAndFoldersToRemove.push(qemuSharePath);
       }
       if (fs.existsSync(qemuConfigPath)) {
-        foldersToRemove.push(qemuConfigPath);
+        fileAndFoldersToRemove.push(qemuConfigPath);
       }
 
       // prompt the user to confirm
-      const result = await extensionApi.window.showWarningMessage(
-        'Removing old unsupported Podman machines will delete all of their data. Confirm approval?',
-        'Yes',
-        'No',
+      if (fileAndFoldersToRemove.length > 0) {
+        const result = await extensionApi.window.showWarningMessage(
+          'Removing old unsupported provider Podman machines will delete all of their data. Confirm approval?',
+          'Yes',
+          'No',
+        );
+        if (result === 'No') {
+          return;
+        }
+      }
+    }
+
+    // check if unmarshalling errors
+    let machineListError = '';
+    try {
+      const machineListOutput = await getJSONMachineList();
+      machineListError = machineListOutput.stderr;
+    } catch (error) {
+      machineListError = error.stderr;
+    }
+
+    let machineFolderToCheck: string | undefined;
+    // check invalid config files only with v5
+    if (installedPodman?.version.startsWith('5.')) {
+      if (isMac()) {
+        machineFolderToCheck = path.resolve(os.homedir(), appConfigDir(), 'machine', 'applehv');
+      } else if (isWindows()) {
+        machineFolderToCheck = path.resolve(os.homedir(), appConfigDir(), 'machine', 'wsl');
+      }
+    }
+
+    if (machineFolderToCheck && isIncompatibleMachineOutput(machineListError) && fs.existsSync(machineFolderToCheck)) {
+      // check for JSON files in the folder
+      const files = await fs.promises.readdir(machineFolderToCheck);
+      const machineFilesToAnalyze = files.filter(file => file.endsWith('.json'));
+      let machineConfigJson: { GvProxy?: string } = {};
+      const allMachines = await Promise.all(
+        machineFilesToAnalyze.map(async file => {
+          // read content of the file
+          const absoluteFile = path.join(machineFolderToCheck, file);
+          try {
+            const machineConfigJsonRaw = await fs.promises.readFile(absoluteFile, 'utf-8');
+            machineConfigJson = JSON.parse(machineConfigJsonRaw);
+          } catch (error: unknown) {
+            console.error('Error reading machine file', file, error);
+          }
+          const machineName = file.replace('.json', '');
+          return {
+            file,
+            machineName,
+            machineFile: absoluteFile,
+            json: machineConfigJson,
+          };
+        }),
       );
-      if (result === 'No') {
-        return;
+
+      const invalidMachines = allMachines.filter(machine => {
+        // check if the machine has GvProxy field, if it doesn't, it's an invalid machine
+        return !machine.json.GvProxy;
+      });
+
+      // prompt to remove these invalid machines
+      if (invalidMachines.length > 0) {
+        const result = await extensionApi.window.showWarningMessage(
+          `Removing old unsupported Podman machines "${invalidMachines.map(m => m.machineName).join(', ')}" will delete all of their data. Confirm approval?`,
+          'Yes',
+          'No',
+        );
+        if (result === 'No') {
+          return;
+        }
+        for (const machine of invalidMachines) {
+          fileAndFoldersToRemove.push(machine.machineFile);
+          if (machine.machineFile.includes('wsl') && isWindows()) {
+            wslMachinesToUnregister.push(machine.machineName);
+          }
+        }
       }
+    }
 
-      const errors: string[] = [];
-      for (const folder of foldersToRemove) {
+    const errors: string[] = [];
+
+    if (fileAndFoldersToRemove.length > 0) {
+      for (const folder of fileAndFoldersToRemove) {
         try {
           await fs.promises.rm(folder, { recursive: true, retryDelay: 1000, maxRetries: 3 });
         } catch (error) {
@@ -961,10 +1082,23 @@ export function registerOnboardingRemoveUnsupportedMachinesCommand(): extensionA
           errors.push(`Unable to remove the folder ${folder}: ${String(error)}`);
         }
       }
-      if (errors.length > 0) {
-        await extensionApi.window.showErrorMessage(`Error removing unsupported Podman machines. ${errors.join('\n')}`);
+
+      shouldNotifySetup = true;
+      // notification is no more required
+      notificationDisposable?.dispose();
+    }
+
+    for (const wslMachineName of wslMachinesToUnregister) {
+      try {
+        await extensionApi.process.exec('wsl', ['--unregister', wslMachineName]);
+      } catch (error) {
+        console.error('Error removing WSL machine', wslMachineName, error);
+        errors.push(`Unable to remove the WSL machine ${wslMachineName}: ${String(error)}`);
       }
     }
+    if (errors.length > 0) {
+      await extensionApi.window.showErrorMessage(`Error removing unsupported Podman machines. ${errors.join('\n')}`);
+    }
 
     extensionApi.context.setValue('unsupportedMachineRemoved', 'ok', 'onboarding');
   });
@@ -1656,6 +1790,10 @@ export async function createMachine(
   notificationDisposable?.dispose();
 }
 
+export function resetShouldNotifySetup(): void {
+  shouldNotifySetup = true;
+}
+
 function setupDisguisedPodmanSocketWatcher(
   provider: extensionApi.Provider,
   socketFile: string,