diff --git a/src/client/common/application/commands/reportIssueCommand.ts b/src/client/common/application/commands/reportIssueCommand.ts
index e5633f4a4389..ec97e0493b81 100644
--- a/src/client/common/application/commands/reportIssueCommand.ts
+++ b/src/client/common/application/commands/reportIssueCommand.ts
@@ -118,17 +118,21 @@ export class ReportIssueCommandHandler implements IExtensionSingleActivationServ
                 return `|${extension.packageJSON.name}|${publisher}|${extension.packageJSON.version}|`;
             });
 
+        const formattedDiagnosticData = userTemplate.format(
+            pythonVersion,
+            virtualEnvKind,
+            languageServer,
+            hasMultipleFoldersText,
+            userSettings,
+            installedExtensions.join('\n'),
+        );
+
+        // Replace the XXX placeholder in the diagnostic data section with the formatted diagnostic data
+        const issueBodyWithDiagnostics = template.replace('XXX', formattedDiagnosticData);
+
         await this.commandManager.executeCommand('workbench.action.openIssueReporter', {
             extensionId: 'ms-python.python',
-            issueBody: template,
-            data: userTemplate.format(
-                pythonVersion,
-                virtualEnvKind,
-                languageServer,
-                hasMultipleFoldersText,
-                userSettings,
-                installedExtensions.join('\n'),
-            ),
+            issueBody: issueBodyWithDiagnostics,
         });
         sendTelemetryEvent(EventName.USE_REPORT_ISSUE_COMMAND, undefined, {});
     }
diff --git a/src/test/common/application/commands/reportIssueCommand.unit.test.ts b/src/test/common/application/commands/reportIssueCommand.unit.test.ts
index b1884fa83c21..fecb08bcf223 100644
--- a/src/test/common/application/commands/reportIssueCommand.unit.test.ts
+++ b/src/test/common/application/commands/reportIssueCommand.unit.test.ts
@@ -125,18 +125,20 @@ suite('Report Issue Command', () => {
             'issueUserDataTemplateVenv1.md',
         );
         const expectedData = fs.readFileSync(userDataTemplatePath, 'utf8');
+        
+        // The expected result should be the template with XXX replaced by diagnostic data
+        const expectedCombinedIssueBody = expectedIssueBody.replace('XXX', expectedData);
 
-        const args: [string, { extensionId: string; issueBody: string; data: string }] = capture<
+        const args: [string, { extensionId: string; issueBody: string }] = capture<
             AllCommands,
-            { extensionId: string; issueBody: string; data: string }
+            { extensionId: string; issueBody: string }
         >(cmdManager.executeCommand).last();
 
         verify(cmdManager.registerCommand(Commands.ReportIssue, anything(), anything())).once();
         verify(cmdManager.executeCommand('workbench.action.openIssueReporter', anything())).once();
         expect(args[0]).to.be.equal('workbench.action.openIssueReporter');
-        const { issueBody, data } = args[1];
-        expect(issueBody).to.be.equal(expectedIssueBody);
-        expect(data).to.be.equal(expectedData);
+        const { issueBody } = args[1];
+        expect(issueBody).to.be.equal(expectedCombinedIssueBody);
     });
 
     test('Test if issue body is filled when only including settings which are explicitly set', async () => {
@@ -166,17 +168,19 @@ suite('Report Issue Command', () => {
             'issueUserDataTemplateVenv2.md',
         );
         const expectedData = fs.readFileSync(userDataTemplatePath, 'utf8');
+        
+        // The expected result should be the template with XXX replaced by diagnostic data
+        const expectedCombinedIssueBody = expectedIssueBody.replace('XXX', expectedData);
 
-        const args: [string, { extensionId: string; issueBody: string; data: string }] = capture<
+        const args: [string, { extensionId: string; issueBody: string }] = capture<
             AllCommands,
-            { extensionId: string; issueBody: string; data: string }
+            { extensionId: string; issueBody: string }
         >(cmdManager.executeCommand).last();
 
         verify(cmdManager.executeCommand('workbench.action.openIssueReporter', anything())).once();
         expect(args[0]).to.be.equal('workbench.action.openIssueReporter');
-        const { issueBody, data } = args[1];
-        expect(issueBody).to.be.equal(expectedIssueBody);
-        expect(data).to.be.equal(expectedData);
+        const { issueBody } = args[1];
+        expect(issueBody).to.be.equal(expectedCombinedIssueBody);
     });
     test('Should send telemetry event when run Report Issue Command', async () => {
         const sendTelemetryStub = sinon.stub(Telemetry, 'sendTelemetryEvent');