Will a running process in an EC2 instance accessed through Session Manager be terminated if my local machine shuts down?

I am using Windows and connecting to a Linux EC2 instance via Session Manager.

The instance has an S3 bucket mounted, I am running a heavy decompression operation which writes output to the S3 bucket, and this could take over a day to complete. (Clarifying: This operation is taking place inside the EC2 instance)

I have not used session manager before so I am unsure about this: If my Windows PC shuts down, will the decompression operation also get cancelled or will it keep running as long as the instance is in active status?

Yes, it will get canceled when you disconnect. Therefore, you could use tmux or screen. Having those, you lunch your program in these "shells" and it will keep running after you log out or loose connection.

There is also nohup and pm2 which could also be helpful.