diff --git a/scripts/machine_health.py b/scripts/machine_health.py
index a3f4bca2b4d..d5a7176e922 100644
--- a/scripts/machine_health.py
+++ b/scripts/machine_health.py
@@ -196,8 +196,24 @@ def _write_semaphore_with_new_venv(machine_name: str, reason: str) -> bool:
         if not os.path.exists(python_exe):  # Windows layout (not expected here, but be safe)
             python_exe = os.path.join(venv_dir, "Scripts", "python.exe")
 
-        subprocess.run([python_exe, "-m", "pip", "install", "-q", "-U", "pip"], check=True, timeout=300)
-        subprocess.run([python_exe, "-m", "pip", "install", "-q", *_AZURE_PACKAGES], check=True, timeout=600)
+        # Helix sets PYTHONPATH to its own scripts, which include an incompatible partial ``azure``
+        # package. Let the temporary interpreter use only its virtual environment packages.
+        venv_environment = dict(os.environ)
+        venv_environment.pop("PYTHONHOME", None)
+        venv_environment.pop("PYTHONPATH", None)
+
+        subprocess.run(
+            [python_exe, "-m", "pip", "install", "-q", "-U", "pip"],
+            check=True,
+            env=venv_environment,
+            timeout=300,
+        )
+        subprocess.run(
+            [python_exe, "-m", "pip", "install", "-q", *_AZURE_PACKAGES],
+            check=True,
+            env=venv_environment,
+            timeout=600,
+        )
 
         # Re-run this module inside the venv to do just the upload, now that azure is available.
         result = subprocess.run(
@@ -208,7 +224,7 @@ def _write_semaphore_with_new_venv(machine_name: str, reason: str) -> bool:
                 "--machine", machine_name,
                 "--reason", reason,
             ],
-            env=dict(os.environ),
+            env=venv_environment,
             timeout=300,
         )
         return result.returncode == 0
diff --git a/scripts/run_performance_job.py b/scripts/run_performance_job.py
index f3b8393240f..67f614a312d 100644
--- a/scripts/run_performance_job.py
+++ b/scripts/run_performance_job.py
@@ -387,8 +387,8 @@ def get_pre_commands(
                 # If prereqs failed, check for a non-transient corrupted dpkg/apt state. If found,
                 # machine_health takes the machine out of Helix rotation and notifies the perf team.
                 # Runs directly from the correlation payload since the venv/PYTHONPATH are not set up
-                # yet at this point. Never allowed to change the (already failing) exit code.
-                'if [ "x$PERF_PREREQS_INSTALL_FAILED" = "x1" ]; then python3 "$HELIX_CORRELATION_PAYLOAD/performance/scripts/machine_health.py" check || true; fi'
+                # yet at this point. Preserve the prerequisite failure after the best-effort check.
+                'if [ "x$PERF_PREREQS_INSTALL_FAILED" = "x1" ]; then python3 "$HELIX_CORRELATION_PAYLOAD/performance/scripts/machine_health.py" check || true; exit 1; fi'
             ]
 
     # Set MONO_ENV_OPTIONS with for Mono Interpreter runs
diff --git a/scripts/tests/test_machine_health.py b/scripts/tests/test_machine_health.py
new file mode 100644
index 00000000000..de195560479
--- /dev/null
+++ b/scripts/tests/test_machine_health.py
@@ -0,0 +1,30 @@
+import os
+from unittest.mock import Mock
+
+from scripts import machine_health
+
+
+def test_fallback_venv_does_not_inherit_python_path(monkeypatch, tmp_path):
+    venv_dir = tmp_path / "machine-health-venv"
+    python_exe = venv_dir / "bin" / "python"
+    python_exe.parent.mkdir(parents=True)
+    python_exe.touch()
+
+    monkeypatch.setenv("PYTHONHOME", "/helix/python")
+    monkeypatch.setenv("PYTHONPATH", "/etc/helix/scripts")
+    monkeypatch.setattr(machine_health.tempfile, "mkdtemp", lambda **_: str(venv_dir))
+    monkeypatch.setattr("venv.create", Mock())
+    monkeypatch.setattr(machine_health.shutil, "rmtree", Mock())
+
+    completed = Mock(returncode=0)
+    run = Mock(return_value=completed)
+    monkeypatch.setattr(machine_health.subprocess, "run", run)
+
+    assert machine_health._write_semaphore_with_new_venv("PERFVIPER001", "reason")
+
+    assert run.call_count == 3
+    for call in run.call_args_list:
+        environment = call.kwargs["env"]
+        assert "PYTHONHOME" not in environment
+        assert "PYTHONPATH" not in environment
+        assert environment["PATH"] == os.environ["PATH"]
diff --git a/scripts/tests/test_run_performance_job.py b/scripts/tests/test_run_performance_job.py
index b2d942de79f..aa789318d0e 100644
--- a/scripts/tests/test_run_performance_job.py
+++ b/scripts/tests/test_run_performance_job.py
@@ -59,3 +59,20 @@ def test_generated_prerequisites_do_not_poll_dpkg_lock():
     prerequisites = "\n".join(pre_commands)
     assert "fuser" not in prerequisites
     assert "Waiting for dpkg" not in prerequisites
+
+
+def test_linux_prerequisite_failure_remains_failed_after_health_check():
+    pre_commands = get_pre_commands(
+        os_group="linux",
+        os_distro="ubuntu",
+        internal=True,
+        runtime_type="coreclr",
+        codegen_type="jit",
+        build_config="Release",
+        v8_version="12.0.0",
+    )
+
+    health_check = next(
+        command for command in pre_commands if "machine_health.py" in command
+    )
+    assert health_check.endswith("check || true; exit 1; fi")