TLDR

Must run the .sh script with source instead of the script solely

source your-script.sh

and not
your-script.sh

Details

sh is not the same as bash (although some systems simply link sh to bash, so running sh actually runs bash). You can think of sh as a watered down version of bash. One thing that bash has that sh does not is the “source” command. This is why you’re getting that error… source runs fine in your bash shell. But when you start your script using sh, you run the script in an shell in a subprocess. Since that script is running in sh, “source” is not found.

The solution is to run the script in bash instead. Change the first line to…

#!/bin/bash

Then run with…

./virtualenv_activate.sh

…or…

/bin/bash virtualenv_activate.sh

Edit:

If you want the activation of the virtualenv to change the shell that you call the script from, you need to use the “source” or “dot operator”. This ensures that the script is run in the current shell (and therefore changes the current environment)…

source virtualenv_activate.sh

…or…

. virtualenv_activate.sh

As a side note, this is why virtualenv always says you need to use “source” to run it’s activate script.