diff --git a/package.json b/package.json
index 0e3be63f1..912f235c9 100644
--- a/package.json
+++ b/package.json
@@ -115,14 +115,6 @@
           "default": false,
           "description": "%configuration.playwright.showTrace%"
         },
-        "playwright.useTestServer": {
-          "type": "boolean",
-          "default": false
-        },
-        "playwright.allowWatchingFiles": {
-          "type": "boolean",
-          "default": false
-        },
         "playwright.workspaceSettings": {
           "type": "object",
           "default": {}
diff --git a/src/extension.ts b/src/extension.ts
index 89c74187b..32aaeda95 100644
--- a/src/extension.ts
+++ b/src/extension.ts
@@ -104,7 +104,7 @@ export class Extension implements RunHooks {
     this._testController = vscode.tests.createTestController('playwright', 'Playwright');
     this._testController.resolveHandler = item => this._resolveChildren(item);
     this._testController.refreshHandler = () => this._rebuildModels(true).then(() => {});
-    const supportsContinuousRun = this._settingsModel.allowWatchingFiles.get();
+    const supportsContinuousRun = true;
     this._runProfile = this._testController.createRunProfile('playwright-run', this._vscode.TestRunProfileKind.Run, this._handleTestRun.bind(this, false), true, undefined, supportsContinuousRun);
     this._debugProfile = this._testController.createRunProfile('playwright-debug', this._vscode.TestRunProfileKind.Debug, this._handleTestRun.bind(this, true), true, undefined, supportsContinuousRun);
     this._testTree = new TestTree(vscode, this._models, this._testController);
diff --git a/src/settingsModel.ts b/src/settingsModel.ts
index 78e29bf42..c27a3b017 100644
--- a/src/settingsModel.ts
+++ b/src/settingsModel.ts
@@ -40,7 +40,6 @@ export class SettingsModel extends DisposableBase {
   private _onChange: vscodeTypes.EventEmitter<void>;
   showBrowser: Setting<boolean>;
   showTrace: Setting<boolean>;
-  allowWatchingFiles: Setting<boolean>;
   workspaceSettings: Setting<WorkspaceSettings>;
 
   constructor(vscode: vscodeTypes.VSCode) {
@@ -51,7 +50,6 @@ export class SettingsModel extends DisposableBase {
 
     this.showBrowser = this._createSetting('reuseBrowser');
     this.showTrace = this._createSetting('showTrace');
-    this.allowWatchingFiles = this._createSetting('allowWatchingFiles');
     this.workspaceSettings = this._createSetting('workspaceSettings', true);
 
     this.showBrowser.onChange(enabled => {
diff --git a/src/settingsView.ts b/src/settingsView.ts
index ded2232ee..abd6eebaa 100644
--- a/src/settingsView.ts
+++ b/src/settingsView.ts
@@ -234,6 +234,8 @@ export class SettingsView extends DisposableBase implements vscodeTypes.WebviewV
           continue;
         this._models.setModelEnabled(model.config.configFile, !!result?.includes(modelItem), true);
       }
+      this._models.ensureHasEnabledModels();
+      this._updateModels();
     });
   }
 }
diff --git a/src/testModel.ts b/src/testModel.ts
index 68f15ab93..09b13e676 100644
--- a/src/testModel.ts
+++ b/src/testModel.ts
@@ -698,10 +698,17 @@ export class TestModelCollection extends DisposableBase {
   }
 
   selectedModel(): TestModel | undefined {
-    const model = this._models.find(m => m.config.configFile === this._selectedConfigFile);
+    const enabledModels = this.enabledModels();
+    if (!enabledModels.length) {
+      this._selectedConfigFile = undefined;
+      return undefined;
+    }
+
+    const model = enabledModels.find(m => m.config.configFile === this._selectedConfigFile);
     if (model)
       return model;
-    return this._models.find(m => m.isEnabled);
+    this._selectedConfigFile = enabledModels[0].config.configFile;
+    return enabledModels[0];
   }
 
   selectModel(configFile: string) {
diff --git a/tests/watch.spec.ts b/tests/watch.spec.ts
index 7b8075a95..34ef998cf 100644
--- a/tests/watch.spec.ts
+++ b/tests/watch.spec.ts
@@ -20,11 +20,6 @@ import path from 'path';
 
 test.skip(({ overridePlaywrightVersion }) => !!overridePlaywrightVersion);
 
-test.beforeEach(async ({ vscode }) => {
-  const configuration = vscode.workspace.getConfiguration('playwright');
-  configuration.update('allowWatchingFiles', true);
-});
-
 test('should watch all tests', async ({ activate }) => {
   const { vscode, testController, workspaceFolder } = await activate({
     'playwright.config.js': `module.exports = { testDir: 'tests' }`,