We examine how the expansion of work-from-home (WFH) arrangements affects entrepreneurial entry, leveraging the natural experiment provided by the COVID-19 pandemic and related stay-at-home mandates. Pandemic-driven widespread adoption of remote work leads to an overall increase in entrepreneurial entry, but also reveals a significant substitution effect. Areas with higher ex ante telework potential experienced notably smaller increases in new businesses. We propose and test a conceptual framework that emphasizes the substitution between employer-provided flexibility and entrepreneurship’s traditional advantage in offering autonomy, finding empirical evidence consistent with the model. Survey evidence further confirms that employer-provided flexibility reduces entrepreneurial intent, especially among those primarily motivated by autonomy or flexible schedules. These findings highlight a critical policy tradeoff: while greater flexibility in traditional employment enhances job satisfaction and work-life balance, it may simultaneously dampen entrepreneurial dynamism, particularly in small-business sectors essential for inclusive economic growth.