--- src/terminal-screen.c.orig	2008-05-24 04:54:53.000000000 +0530
+++ src/terminal-screen.c	2008-05-24 04:53:36.000000000 +0530
@@ -45,6 +45,7 @@
 #define MONOSPACE_FONT_DIR "/desktop/gnome/interface"
 #define MONOSPACE_FONT_KEY MONOSPACE_FONT_DIR "/monospace_font_name"
 #define HTTP_PROXY_DIR "/system/http_proxy"
+#define PROXY_MODE_DIR "/system/proxy"
 
 struct _TerminalScreenPrivate
 {
@@ -1152,7 +1153,9 @@
   conf = gconf_client_get_default ();
 
   if (!getenv ("http_proxy") &&
-      gconf_client_get_bool (conf, HTTP_PROXY_DIR "/use_http_proxy", NULL))
+      gconf_client_get_bool (conf, HTTP_PROXY_DIR "/use_http_proxy", NULL) &&
+      !g_ascii_strncasecmp ( 
+              gconf_client_get_string (conf, PROXY_MODE_DIR "/mode", NULL), "manual", 6))
     {
       gint port;
       GSList *ignore;
