diff --git a/CONTRIBUTORS.md b/CONTRIBUTORS.md
index ef4e31403198..2324bd3986ae 100644
--- a/CONTRIBUTORS.md
+++ b/CONTRIBUTORS.md
@@ -205,6 +205,7 @@ Guidelines for modifications:
 * Xu Li
 * Yang Jin
 * Yanzi Zhu
+* Yichao Gan
 * Yijie Guo
 * Yize Wang
 * Yohan Choi
diff --git a/source/isaaclab/changelog.d/rx-02333-fix-sigterm-shutdown.rst b/source/isaaclab/changelog.d/rx-02333-fix-sigterm-shutdown.rst
new file mode 100644
index 000000000000..627ec7765cae
--- /dev/null
+++ b/source/isaaclab/changelog.d/rx-02333-fix-sigterm-shutdown.rst
@@ -0,0 +1,5 @@
+Fixed
+^^^^^
+
+* Fixed :class:`~isaaclab.app.AppLauncher` leaving Python processes
+  running after receiving ``SIGTERM``.
diff --git a/source/isaaclab/isaaclab/app/app_launcher.py b/source/isaaclab/isaaclab/app/app_launcher.py
index fdb3f321900b..207d60cd20f2 100644
--- a/source/isaaclab/isaaclab/app/app_launcher.py
+++ b/source/isaaclab/isaaclab/app/app_launcher.py
@@ -332,7 +332,7 @@ def _atexit_close(app=self._app):
 
         # Set up signal handlers for graceful shutdown
         # -- during explicit `kill` commands
-        signal.signal(signal.SIGTERM, self._abort_signal_handle_callback)
+        signal.signal(signal.SIGTERM, self._terminate_signal_handle_callback)
         # -- during aborts
         signal.signal(signal.SIGABRT, self._abort_signal_handle_callback)
         # -- during segfaults
@@ -1376,6 +1376,11 @@ def _interrupt_signal_handle_callback(self, signal, frame):
         # raise the error for keyboard interrupt
         raise KeyboardInterrupt
 
+    @staticmethod
+    def _terminate_signal_handle_callback(signum, _frame):
+        """Terminate the process while preserving Python cleanup handlers."""
+        raise SystemExit(128 + signum)
+
     def is_isaac_sim_version_5(self) -> bool:
         if not hasattr(self, "_is_sim_ver_5"):
             # 1) Try to read the VERSION file (for manual / binary installs)
diff --git a/source/isaaclab/test/app/test_signal_handling.py b/source/isaaclab/test/app/test_signal_handling.py
new file mode 100644
index 000000000000..481434e5cbc1
--- /dev/null
+++ b/source/isaaclab/test/app/test_signal_handling.py
@@ -0,0 +1,18 @@
+# Copyright (c) 2022-2026, The Isaac Lab Project Developers (https://github.com/isaac-sim/IsaacLab/blob/main/CONTRIBUTORS.md).
+# All rights reserved.
+#
+# SPDX-License-Identifier: BSD-3-Clause
+
+import signal
+
+import pytest
+
+from isaaclab.app import AppLauncher
+
+
+def test_sigterm_handler_terminates_process():
+    """SIGTERM must terminate Python instead of resuming after the handler."""
+    with pytest.raises(SystemExit) as exc_info:
+        AppLauncher._terminate_signal_handle_callback(signal.SIGTERM, None)
+
+    assert exc_info.value.code == 128 + signal.SIGTERM