diff --git a/packages/cli/src/commands/extensions/install.test.ts b/packages/cli/src/commands/extensions/install.test.ts
index e44cf2375c..c971e3213b 100644
--- a/packages/cli/src/commands/extensions/install.test.ts
+++ b/packages/cli/src/commands/extensions/install.test.ts
@@ -4,7 +4,7 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
-import { describe, it, expect, type MockInstance } from 'vitest';
+import { describe, it, expect, vi, type MockInstance } from 'vitest';
 import { handleInstall, installCommand } from './install.js';
 import yargs from 'yargs';
 
@@ -32,6 +32,15 @@ describe('extensions install command', () => {
       validationParser.parse('install some-url --path /some/path'),
     ).toThrow('Arguments source and path are mutually exclusive');
   });
+
+  it('should fail if both auto update and local path are provided', () => {
+    const validationParser = yargs([]).command(installCommand).fail(false);
+    expect(() =>
+      validationParser.parse(
+        'install some-url --path /some/path --auto-update',
+      ),
+    ).toThrow('Arguments path and auto-update are mutually exclusive');
+  });
 });
 
 describe('handleInstall', () => {
diff --git a/packages/cli/src/commands/extensions/install.ts b/packages/cli/src/commands/extensions/install.ts
index e82864d34e..44fad4dbba 100644
--- a/packages/cli/src/commands/extensions/install.ts
+++ b/packages/cli/src/commands/extensions/install.ts
@@ -14,6 +14,7 @@ interface InstallArgs {
   source?: string;
   path?: string;
   ref?: string;
+  autoUpdate?: boolean;
 }
 
 export async function handleInstall(args: InstallArgs) {
@@ -32,6 +33,7 @@ export async function handleInstall(args: InstallArgs) {
           source,
           type: 'git',
           ref: args.ref,
+          autoUpdate: args.autoUpdate,
         };
       } else {
         throw new Error(`The source "${source}" is not a valid URL format.`);
@@ -40,6 +42,7 @@ export async function handleInstall(args: InstallArgs) {
       installMetadata = {
         source: args.path,
         type: 'local',
+        autoUpdate: args.autoUpdate,
       };
     } else {
       // This should not be reached due to the yargs check.
@@ -71,8 +74,13 @@ export const installCommand: CommandModule = {
         describe: 'The git ref to install from.',
         type: 'string',
       })
+      .option('auto-update', {
+        describe: 'Enable auto-update for this extension.',
+        type: 'boolean',
+      })
       .conflicts('source', 'path')
       .conflicts('path', 'ref')
+      .conflicts('path', 'auto-update')
       .check((argv) => {
         if (!argv.source && !argv.path) {
           throw new Error('Either source or --path must be provided.');
@@ -84,6 +92,7 @@ export const installCommand: CommandModule = {
       source: argv['source'] as string | undefined,
       path: argv['path'] as string | undefined,
       ref: argv['ref'] as string | undefined,
+      autoUpdate: argv['auto-update'] as boolean | undefined,
     });
   },
 };
diff --git a/packages/cli/src/commands/extensions/update.ts b/packages/cli/src/commands/extensions/update.ts
index 03fa4aa7f3..1cda6c36f3 100644
--- a/packages/cli/src/commands/extensions/update.ts
+++ b/packages/cli/src/commands/extensions/update.ts
@@ -6,14 +6,18 @@
 
 import type { CommandModule } from 'yargs';
 import {
-  updateExtensionByName,
-  updateAllUpdatableExtensions,
-  type ExtensionUpdateInfo,
   loadExtensions,
   annotateActiveExtensions,
-  checkForAllExtensionUpdates,
 } from '../../config/extension.js';
+import {
+  updateAllUpdatableExtensions,
+  type ExtensionUpdateInfo,
+  checkForAllExtensionUpdates,
+  updateExtension,
+} from '../../config/extensions/update.js';
+import { checkForExtensionUpdate } from '../../config/extensions/github.js';
 import { getErrorMessage } from '../../utils/errors.js';
+import { ExtensionUpdateState } from '../../ui/state/extensions.js';
 
 interface UpdateArgs {
   name?: string;
@@ -37,7 +41,7 @@ export async function handleUpdate(args: UpdateArgs) {
       let updateInfos = await updateAllUpdatableExtensions(
         workingDir,
         extensions,
-        await checkForAllExtensionUpdates(extensions, (_) => {}),
+        await checkForAllExtensionUpdates(extensions, new Map(), (_) => {}),
         () => {},
       );
       updateInfos = updateInfos.filter(
@@ -54,13 +58,34 @@ export async function handleUpdate(args: UpdateArgs) {
   }
   if (args.name)
     try {
-      // TODO(chrstnb): we should list extensions if the requested extension is not installed.
-      const updatedExtensionInfo = await updateExtensionByName(
-        args.name,
-        workingDir,
-        extensions,
-        () => {},
+      const extension = extensions.find(
+        (extension) => extension.name === args.name,
       );
+      if (!extension) {
+        console.log(`Extension "${args.name}" not found.`);
+        return;
+      }
+      let updateState: ExtensionUpdateState | undefined;
+      if (!extension.installMetadata) {
+        console.log(
+          `Unable to install extension "${args.name}" due to missing install metadata`,
+        );
+        return;
+      }
+      await checkForExtensionUpdate(extension, (newState) => {
+        updateState = newState;
+      });
+      if (updateState !== ExtensionUpdateState.UPDATE_AVAILABLE) {
+        console.log(`Extension "${args.name}" is already up to date.`);
+        return;
+      }
+      // TODO(chrstnb): we should list extensions if the requested extension is not installed.
+      const updatedExtensionInfo = (await updateExtension(
+        extension,
+        workingDir,
+        updateState,
+        () => {},
+      ))!;
       if (
         updatedExtensionInfo.originalVersion !==
         updatedExtensionInfo.updatedVersion
@@ -69,7 +94,7 @@ export async function handleUpdate(args: UpdateArgs) {
           `Extension "${args.name}" successfully updated: ${updatedExtensionInfo.originalVersion} → ${updatedExtensionInfo.updatedVersion}.`,
         );
       } else {
-        console.log(`Extension "${args.name}" already up to date.`);
+        console.log(`Extension "${args.name}" is already up to date.`);
       }
     } catch (error) {
       console.error(getErrorMessage(error));
diff --git a/packages/cli/src/config/extension.test.ts b/packages/cli/src/config/extension.test.ts
index 28ea16bf1c..a7e32fe8b0 100644
--- a/packages/cli/src/config/extension.test.ts
+++ b/packages/cli/src/config/extension.test.ts
@@ -12,7 +12,6 @@ import {
   EXTENSIONS_CONFIG_FILENAME,
   INSTALL_METADATA_FILENAME,
   annotateActiveExtensions,
-  checkForAllExtensionUpdates,
   disableExtension,
   enableExtension,
   installExtension,
@@ -20,22 +19,19 @@ import {
   loadExtensions,
   performWorkspaceExtensionMigration,
   uninstallExtension,
-  updateExtension,
   type Extension,
 } from './extension.js';
 import {
   GEMINI_DIR,
   type GeminiCLIExtension,
-  type MCPServerConfig,
   ClearcutLogger,
   type Config,
   ExtensionUninstallEvent,
-  type ExtensionInstallMetadata,
 } from '@google/gemini-cli-core';
 import { execSync } from 'node:child_process';
 import { SettingScope } from './settings.js';
 import { isWorkspaceTrusted } from './trustedFolders.js';
-import { ExtensionUpdateState } from '../ui/state/extensions.js';
+import { createExtension } from '../test-utils/createExtension.js';
 import { ExtensionEnablementManager } from './extensions/extensionEnablement.js';
 
 const mockGit = {
@@ -58,9 +54,9 @@ vi.mock('simple-git', () => ({
 }));
 
 vi.mock('os', async (importOriginal) => {
-  const os = await importOriginal<typeof os>();
+  const mockedOs = await importOriginal<typeof os>();
   return {
-    ...os,
+    ...mockedOs,
     homedir: vi.fn(),
   };
 });
@@ -454,6 +450,86 @@ describe('extension tests', () => {
       expect(consoleSpy).toHaveBeenCalledWith('Extension not found: ext4');
       consoleSpy.mockRestore();
     });
+
+    describe('autoUpdate', () => {
+      it('should be false if autoUpdate is not set in install metadata', () => {
+        const activeExtensions = annotateActiveExtensions(
+          extensions,
+          [],
+          tempHomeDir,
+        );
+        expect(
+          activeExtensions.every(
+            (e) => e.installMetadata?.autoUpdate === false,
+          ),
+        ).toBe(false);
+      });
+
+      it('should be true if autoUpdate is true in install metadata', () => {
+        const extensionsWithAutoUpdate: Extension[] = extensions.map((e) => ({
+          ...e,
+          installMetadata: {
+            ...e.installMetadata!,
+            autoUpdate: true,
+          },
+        }));
+        const activeExtensions = annotateActiveExtensions(
+          extensionsWithAutoUpdate,
+          [],
+          tempHomeDir,
+        );
+        expect(
+          activeExtensions.every((e) => e.installMetadata?.autoUpdate === true),
+        ).toBe(true);
+      });
+
+      it('should respect the per-extension settings from install metadata', () => {
+        const extensionsWithAutoUpdate: Extension[] = [
+          {
+            path: '/path/to/ext1',
+            config: { name: 'ext1', version: '1.0.0' },
+            contextFiles: [],
+            installMetadata: {
+              source: 'test',
+              type: 'local',
+              autoUpdate: true,
+            },
+          },
+          {
+            path: '/path/to/ext2',
+            config: { name: 'ext2', version: '1.0.0' },
+            contextFiles: [],
+            installMetadata: {
+              source: 'test',
+              type: 'local',
+              autoUpdate: false,
+            },
+          },
+          {
+            path: '/path/to/ext3',
+            config: { name: 'ext3', version: '1.0.0' },
+            contextFiles: [],
+          },
+        ];
+        const activeExtensions = annotateActiveExtensions(
+          extensionsWithAutoUpdate,
+          [],
+          tempHomeDir,
+        );
+        expect(
+          activeExtensions.find((e) => e.name === 'ext1')?.installMetadata
+            ?.autoUpdate,
+        ).toBe(true);
+        expect(
+          activeExtensions.find((e) => e.name === 'ext2')?.installMetadata
+            ?.autoUpdate,
+        ).toBe(false);
+        expect(
+          activeExtensions.find((e) => e.name === 'ext3')?.installMetadata
+            ?.autoUpdate,
+        ).toBe(undefined);
+      });
+    });
   });
 
   describe('installExtension', () => {
@@ -662,6 +738,32 @@ describe('extension tests', () => {
       );
     });
 
+    it('should save the autoUpdate flag to the install metadata', async () => {
+      const sourceExtDir = createExtension({
+        extensionsDir: tempHomeDir,
+        name: 'my-local-extension',
+        version: '1.0.0',
+      });
+      const targetExtDir = path.join(userExtensionsDir, 'my-local-extension');
+      const metadataPath = path.join(targetExtDir, INSTALL_METADATA_FILENAME);
+
+      await installExtension({
+        source: sourceExtDir,
+        type: 'local',
+        autoUpdate: true,
+      });
+
+      expect(fs.existsSync(targetExtDir)).toBe(true);
+      expect(fs.existsSync(metadataPath)).toBe(true);
+      const metadata = JSON.parse(fs.readFileSync(metadataPath, 'utf-8'));
+      expect(metadata).toEqual({
+        source: sourceExtDir,
+        type: 'local',
+        autoUpdate: true,
+      });
+      fs.rmSync(targetExtDir, { recursive: true, force: true });
+    });
+
     it('should ignore consent flow if not required', async () => {
       const sourceExtDir = createExtension({
         extensionsDir: tempHomeDir,
@@ -914,265 +1016,6 @@ describe('extension tests', () => {
     });
   });
 
-  describe('updateExtension', () => {
-    it('should update a git-installed extension', async () => {
-      const gitUrl = 'https://github.com/google/gemini-extensions.git';
-      const extensionName = 'gemini-extensions';
-      const targetExtDir = path.join(userExtensionsDir, extensionName);
-      const metadataPath = path.join(targetExtDir, INSTALL_METADATA_FILENAME);
-
-      fs.mkdirSync(targetExtDir, { recursive: true });
-      fs.writeFileSync(
-        path.join(targetExtDir, EXTENSIONS_CONFIG_FILENAME),
-        JSON.stringify({ name: extensionName, version: '1.0.0' }),
-      );
-      fs.writeFileSync(
-        metadataPath,
-        JSON.stringify({ source: gitUrl, type: 'git' }),
-      );
-
-      mockGit.clone.mockImplementation(async (_, destination) => {
-        fs.mkdirSync(path.join(mockGit.path(), destination), {
-          recursive: true,
-        });
-        fs.writeFileSync(
-          path.join(mockGit.path(), destination, EXTENSIONS_CONFIG_FILENAME),
-          JSON.stringify({ name: extensionName, version: '1.1.0' }),
-        );
-      });
-      mockGit.getRemotes.mockResolvedValue([{ name: 'origin' }]);
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir: targetExtDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-      const updateInfo = await updateExtension(
-        extension,
-        tempHomeDir,
-        () => {},
-      );
-
-      expect(updateInfo).toEqual({
-        name: 'gemini-extensions',
-        originalVersion: '1.0.0',
-        updatedVersion: '1.1.0',
-      });
-
-      const updatedConfig = JSON.parse(
-        fs.readFileSync(
-          path.join(targetExtDir, EXTENSIONS_CONFIG_FILENAME),
-          'utf-8',
-        ),
-      );
-      expect(updatedConfig.version).toBe('1.1.0');
-    });
-
-    it('should call setExtensionUpdateState with UPDATING and then UPDATED_NEEDS_RESTART on success', async () => {
-      const extensionName = 'test-extension';
-      const extensionDir = createExtension({
-        extensionsDir: userExtensionsDir,
-        name: extensionName,
-        version: '1.0.0',
-        installMetadata: {
-          source: 'https://some.git/repo',
-          type: 'git',
-        },
-      });
-
-      mockGit.clone.mockImplementation(async (_, destination) => {
-        fs.mkdirSync(path.join(mockGit.path(), destination), {
-          recursive: true,
-        });
-        fs.writeFileSync(
-          path.join(mockGit.path(), destination, EXTENSIONS_CONFIG_FILENAME),
-          JSON.stringify({ name: extensionName, version: '1.1.0' }),
-        );
-      });
-      mockGit.getRemotes.mockResolvedValue([{ name: 'origin' }]);
-
-      const setExtensionUpdateState = vi.fn();
-
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-      await updateExtension(extension, tempHomeDir, setExtensionUpdateState);
-
-      expect(setExtensionUpdateState).toHaveBeenCalledWith(
-        ExtensionUpdateState.UPDATING,
-      );
-      expect(setExtensionUpdateState).toHaveBeenCalledWith(
-        ExtensionUpdateState.UPDATED_NEEDS_RESTART,
-      );
-    });
-
-    it('should call setExtensionUpdateState with ERROR on failure', async () => {
-      const extensionName = 'test-extension';
-      const extensionDir = createExtension({
-        extensionsDir: userExtensionsDir,
-        name: extensionName,
-        version: '1.0.0',
-        installMetadata: {
-          source: 'https://some.git/repo',
-          type: 'git',
-        },
-      });
-
-      mockGit.clone.mockRejectedValue(new Error('Git clone failed'));
-      mockGit.getRemotes.mockResolvedValue([{ name: 'origin' }]);
-
-      const setExtensionUpdateState = vi.fn();
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-      await expect(
-        updateExtension(extension, tempHomeDir, setExtensionUpdateState),
-      ).rejects.toThrow();
-
-      expect(setExtensionUpdateState).toHaveBeenCalledWith(
-        ExtensionUpdateState.UPDATING,
-      );
-      expect(setExtensionUpdateState).toHaveBeenCalledWith(
-        ExtensionUpdateState.ERROR,
-      );
-    });
-  });
-
-  describe('checkForAllExtensionUpdates', () => {
-    it('should return UpdateAvailable for a git extension with updates', async () => {
-      const extensionDir = createExtension({
-        extensionsDir: userExtensionsDir,
-        name: 'test-extension',
-        version: '1.0.0',
-        installMetadata: {
-          source: 'https://some.git/repo',
-          type: 'git',
-        },
-      });
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-
-      mockGit.getRemotes.mockResolvedValue([
-        { name: 'origin', refs: { fetch: 'https://some.git/repo' } },
-      ]);
-      mockGit.listRemote.mockResolvedValue('remoteHash	HEAD');
-      mockGit.revparse.mockResolvedValue('localHash');
-
-      const results = await checkForAllExtensionUpdates([extension], () => {});
-      const result = results.get('test-extension');
-      expect(result).toBe(ExtensionUpdateState.UPDATE_AVAILABLE);
-    });
-
-    it('should return UpToDate for a git extension with no updates', async () => {
-      const extensionDir = createExtension({
-        extensionsDir: userExtensionsDir,
-        name: 'test-extension',
-        version: '1.0.0',
-        installMetadata: {
-          source: 'https://some.git/repo',
-          type: 'git',
-        },
-      });
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-
-      mockGit.getRemotes.mockResolvedValue([
-        { name: 'origin', refs: { fetch: 'https://some.git/repo' } },
-      ]);
-      mockGit.listRemote.mockResolvedValue('sameHash	HEAD');
-      mockGit.revparse.mockResolvedValue('sameHash');
-
-      const results = await checkForAllExtensionUpdates([extension], () => {});
-      const result = results.get('test-extension');
-      expect(result).toBe(ExtensionUpdateState.UP_TO_DATE);
-    });
-
-    it('should return NotUpdatable for a non-git extension', async () => {
-      const extensionDir = createExtension({
-        extensionsDir: userExtensionsDir,
-        name: 'local-extension',
-        version: '1.0.0',
-        installMetadata: { source: '/local/path', type: 'local' },
-      });
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-
-      const results = await checkForAllExtensionUpdates([extension], () => {});
-      const result = results.get('local-extension');
-      expect(result).toBe(ExtensionUpdateState.NOT_UPDATABLE);
-    });
-
-    it('should return Error when git check fails', async () => {
-      const extensionDir = createExtension({
-        extensionsDir: userExtensionsDir,
-        name: 'error-extension',
-        version: '1.0.0',
-        installMetadata: {
-          source: 'https://some.git/repo',
-          type: 'git',
-        },
-      });
-      const extension = annotateActiveExtensions(
-        [
-          loadExtension({
-            extensionDir,
-            workspaceDir: tempWorkspaceDir,
-          })!,
-        ],
-        [],
-        process.cwd(),
-      )[0];
-
-      mockGit.getRemotes.mockRejectedValue(new Error('Git error'));
-
-      const results = await checkForAllExtensionUpdates([extension], () => {});
-      const result = results.get('error-extension');
-      expect(result).toBe(ExtensionUpdateState.ERROR);
-    });
-  });
-
   describe('disableExtension', () => {
     it('should disable an extension at the user scope', () => {
       disableExtension('my-extension', SettingScope.User);
@@ -1275,39 +1118,6 @@ describe('extension tests', () => {
   });
 });
 
-function createExtension({
-  extensionsDir = 'extensions-dir',
-  name = 'my-extension',
-  version = '1.0.0',
-  addContextFile = false,
-  contextFileName = undefined as string | undefined,
-  mcpServers = {} as Record<string, MCPServerConfig>,
-  installMetadata = undefined as ExtensionInstallMetadata | undefined,
-} = {}): string {
-  const extDir = path.join(extensionsDir, name);
-  fs.mkdirSync(extDir, { recursive: true });
-  fs.writeFileSync(
-    path.join(extDir, EXTENSIONS_CONFIG_FILENAME),
-    JSON.stringify({ name, version, contextFileName, mcpServers }),
-  );
-
-  if (addContextFile) {
-    fs.writeFileSync(path.join(extDir, 'GEMINI.md'), 'context');
-  }
-
-  if (contextFileName) {
-    fs.writeFileSync(path.join(extDir, contextFileName), 'context');
-  }
-
-  if (installMetadata) {
-    fs.writeFileSync(
-      path.join(extDir, INSTALL_METADATA_FILENAME),
-      JSON.stringify(installMetadata),
-    );
-  }
-  return extDir;
-}
-
 function isEnabled(options: {
   name: string;
   configDir: string;
diff --git a/packages/cli/src/config/extension.ts b/packages/cli/src/config/extension.ts
index 8205efa011..282cf62b62 100644
--- a/packages/cli/src/config/extension.ts
+++ b/packages/cli/src/config/extension.ts
@@ -26,10 +26,8 @@ import { recursivelyHydrateStrings } from './extensions/variables.js';
 import { isWorkspaceTrusted } from './trustedFolders.js';
 import { resolveEnvVarsInObject } from '../utils/envVarResolver.js';
 import { randomUUID } from 'node:crypto';
-import { ExtensionUpdateState } from '../ui/state/extensions.js';
 import {
   cloneFromGit,
-  checkForExtensionUpdate,
   downloadFromGitHubRelease,
 } from './extensions/github.js';
 import type { LoadExtensionContext } from './extensions/variableSchema.js';
@@ -99,7 +97,7 @@ export function getWorkspaceExtensions(workspaceDir: string): Extension[] {
   return loadExtensionsFromDir(workspaceDir);
 }
 
-async function copyExtension(
+export async function copyExtension(
   source: string,
   destination: string,
 ): Promise<void> {
@@ -263,7 +261,7 @@ export function loadExtension(context: LoadExtensionContext): Extension | null {
   }
 }
 
-function loadInstallMetadata(
+export function loadInstallMetadata(
   extensionDir: string,
 ): ExtensionInstallMetadata | undefined {
   const metadataFilePath = path.join(extensionDir, INSTALL_METADATA_FILENAME);
@@ -633,77 +631,6 @@ export function toOutputString(extension: Extension): string {
   return output;
 }
 
-export async function updateExtensionByName(
-  extensionName: string,
-  cwd: string = process.cwd(),
-  extensions: GeminiCLIExtension[],
-  setExtensionUpdateState: (updateState: ExtensionUpdateState) => void,
-): Promise<ExtensionUpdateInfo> {
-  const extension = extensions.find(
-    (installed) => installed.name === extensionName,
-  );
-  if (!extension) {
-    throw new Error(
-      `Extension "${extensionName}" not found. Run gemini extensions list to see available extensions.`,
-    );
-  }
-  return await updateExtension(extension, cwd, setExtensionUpdateState);
-}
-
-export async function updateExtension(
-  extension: GeminiCLIExtension,
-  cwd: string = process.cwd(),
-  setExtensionUpdateState: (updateState: ExtensionUpdateState) => void,
-): Promise<ExtensionUpdateInfo> {
-  const installMetadata = loadInstallMetadata(extension.path);
-
-  if (!installMetadata?.type) {
-    setExtensionUpdateState(ExtensionUpdateState.ERROR);
-    throw new Error(
-      `Extension ${extension.name} cannot be updated, type is unknown.`,
-    );
-  }
-  if (installMetadata?.type === 'link') {
-    setExtensionUpdateState(ExtensionUpdateState.UP_TO_DATE);
-    throw new Error(`Extension is linked so does not need to be updated`);
-  }
-  setExtensionUpdateState(ExtensionUpdateState.UPDATING);
-  const originalVersion = extension.version;
-
-  const tempDir = await ExtensionStorage.createTmpDir();
-  try {
-    await copyExtension(extension.path, tempDir);
-    await uninstallExtension(extension.name, cwd);
-    await installExtension(installMetadata, false, cwd);
-
-    const updatedExtensionStorage = new ExtensionStorage(extension.name);
-    const updatedExtension = loadExtension({
-      extensionDir: updatedExtensionStorage.getExtensionDir(),
-      workspaceDir: cwd,
-    });
-    if (!updatedExtension) {
-      setExtensionUpdateState(ExtensionUpdateState.ERROR);
-      throw new Error('Updated extension not found after installation.');
-    }
-    const updatedVersion = updatedExtension.config.version;
-    setExtensionUpdateState(ExtensionUpdateState.UPDATED_NEEDS_RESTART);
-    return {
-      name: extension.name,
-      originalVersion,
-      updatedVersion,
-    };
-  } catch (e) {
-    console.error(
-      `Error updating extension, rolling back. ${getErrorMessage(e)}`,
-    );
-    setExtensionUpdateState(ExtensionUpdateState.ERROR);
-    await copyExtension(tempDir, extension.path);
-    throw e;
-  } finally {
-    await fs.promises.rm(tempDir, { recursive: true, force: true });
-  }
-}
-
 export function disableExtension(
   name: string,
   scope: SettingScope,
@@ -734,54 +661,3 @@ export function enableExtension(
   const scopePath = scope === SettingScope.Workspace ? cwd : os.homedir();
   manager.enable(name, true, scopePath);
 }
-
-export async function updateAllUpdatableExtensions(
-  cwd: string = process.cwd(),
-  extensions: GeminiCLIExtension[],
-  extensionsState: Map<string, ExtensionUpdateState>,
-  setExtensionsUpdateState: (
-    updateState: Map<string, ExtensionUpdateState>,
-  ) => void,
-): Promise<ExtensionUpdateInfo[]> {
-  return await Promise.all(
-    extensions
-      .filter(
-        (extension) =>
-          extensionsState.get(extension.name) ===
-          ExtensionUpdateState.UPDATE_AVAILABLE,
-      )
-      .map((extension) =>
-        updateExtension(extension, cwd, (updateState) => {
-          const newState = new Map(extensionsState);
-          newState.set(extension.name, updateState);
-          setExtensionsUpdateState(newState);
-        }),
-      ),
-  );
-}
-
-export interface ExtensionUpdateCheckResult {
-  state: ExtensionUpdateState;
-  error?: string;
-}
-
-export async function checkForAllExtensionUpdates(
-  extensions: GeminiCLIExtension[],
-  setExtensionsUpdateState: (
-    updateState: Map<string, ExtensionUpdateState>,
-  ) => void,
-): Promise<Map<string, ExtensionUpdateState>> {
-  const finalState = new Map<string, ExtensionUpdateState>();
-  for (const extension of extensions) {
-    if (!extension.installMetadata) {
-      finalState.set(extension.name, ExtensionUpdateState.NOT_UPDATABLE);
-      continue;
-    }
-    finalState.set(
-      extension.name,
-      await checkForExtensionUpdate(extension.installMetadata),
-    );
-  }
-  setExtensionsUpdateState(finalState);
-  return finalState;
-}
diff --git a/packages/cli/src/config/extensions/github.test.ts b/packages/cli/src/config/extensions/github.test.ts
index b5d66d190b..5afacd1551 100644
--- a/packages/cli/src/config/extensions/github.test.ts
+++ b/packages/cli/src/config/extensions/github.test.ts
@@ -14,7 +14,7 @@ import {
 import { simpleGit, type SimpleGit } from 'simple-git';
 import { ExtensionUpdateState } from '../../ui/state/extensions.js';
 import type * as os from 'node:os';
-import type { ExtensionInstallMetadata } from '@google/gemini-cli-core';
+import type { GeminiCLIExtension } from '@google/gemini-cli-core';
 
 const mockPlatform = vi.hoisted(() => vi.fn());
 const mockArch = vi.hoisted(() => vi.fn());
@@ -122,28 +122,54 @@ describe('git extension helpers', () => {
     });
 
     it('should return NOT_UPDATABLE for non-git extensions', async () => {
-      const installMetadata: ExtensionInstallMetadata = {
-        type: 'local',
-        source: '',
+      const extension: GeminiCLIExtension = {
+        name: 'test',
+        path: '/ext',
+        version: '1.0.0',
+        isActive: true,
+        installMetadata: {
+          type: 'local',
+          source: '',
+        },
       };
-      const result = await checkForExtensionUpdate(installMetadata);
+      let result: ExtensionUpdateState | undefined = undefined;
+      await checkForExtensionUpdate(
+        extension,
+        (newState) => (result = newState),
+      );
       expect(result).toBe(ExtensionUpdateState.NOT_UPDATABLE);
     });
 
     it('should return ERROR if no remotes found', async () => {
-      const installMetadata: ExtensionInstallMetadata = {
-        type: 'git',
-        source: '',
+      const extension: GeminiCLIExtension = {
+        name: 'test',
+        path: '/ext',
+        version: '1.0.0',
+        isActive: true,
+        installMetadata: {
+          type: 'git',
+          source: '',
+        },
       };
       mockGit.getRemotes.mockResolvedValue([]);
-      const result = await checkForExtensionUpdate(installMetadata);
+      let result: ExtensionUpdateState | undefined = undefined;
+      await checkForExtensionUpdate(
+        extension,
+        (newState) => (result = newState),
+      );
       expect(result).toBe(ExtensionUpdateState.ERROR);
     });
 
     it('should return UPDATE_AVAILABLE when remote hash is different', async () => {
-      const installMetadata: ExtensionInstallMetadata = {
-        type: 'git',
-        source: '/ext',
+      const extension: GeminiCLIExtension = {
+        name: 'test',
+        path: '/ext',
+        version: '1.0.0',
+        isActive: true,
+        installMetadata: {
+          type: 'git',
+          source: 'my/ext',
+        },
       };
       mockGit.getRemotes.mockResolvedValue([
         { name: 'origin', refs: { fetch: 'http://my-repo.com' } },
@@ -151,14 +177,24 @@ describe('git extension helpers', () => {
       mockGit.listRemote.mockResolvedValue('remote-hash\tHEAD');
       mockGit.revparse.mockResolvedValue('local-hash');
 
-      const result = await checkForExtensionUpdate(installMetadata);
+      let result: ExtensionUpdateState | undefined = undefined;
+      await checkForExtensionUpdate(
+        extension,
+        (newState) => (result = newState),
+      );
       expect(result).toBe(ExtensionUpdateState.UPDATE_AVAILABLE);
     });
 
     it('should return UP_TO_DATE when remote and local hashes are the same', async () => {
-      const installMetadata: ExtensionInstallMetadata = {
-        type: 'git',
-        source: '/ext',
+      const extension: GeminiCLIExtension = {
+        name: 'test',
+        path: '/ext',
+        version: '1.0.0',
+        isActive: true,
+        installMetadata: {
+          type: 'git',
+          source: 'my/ext',
+        },
       };
       mockGit.getRemotes.mockResolvedValue([
         { name: 'origin', refs: { fetch: 'http://my-repo.com' } },
@@ -166,17 +202,32 @@ describe('git extension helpers', () => {
       mockGit.listRemote.mockResolvedValue('same-hash\tHEAD');
       mockGit.revparse.mockResolvedValue('same-hash');
 
-      const result = await checkForExtensionUpdate(installMetadata);
+      let result: ExtensionUpdateState | undefined = undefined;
+      await checkForExtensionUpdate(
+        extension,
+        (newState) => (result = newState),
+      );
       expect(result).toBe(ExtensionUpdateState.UP_TO_DATE);
     });
 
     it('should return ERROR on git error', async () => {
-      const installMetadata: ExtensionInstallMetadata = {
-        type: 'git',
-        source: '/ext',
+      const extension: GeminiCLIExtension = {
+        name: 'test',
+        path: '/ext',
+        version: '1.0.0',
+        isActive: true,
+        installMetadata: {
+          type: 'git',
+          source: 'my/ext',
+        },
       };
       mockGit.getRemotes.mockRejectedValue(new Error('git error'));
-      const result = await checkForExtensionUpdate(installMetadata);
+
+      let result: ExtensionUpdateState | undefined = undefined;
+      await checkForExtensionUpdate(
+        extension,
+        (newState) => (result = newState),
+      );
       expect(result).toBe(ExtensionUpdateState.ERROR);
     });
   });
diff --git a/packages/cli/src/config/extensions/github.ts b/packages/cli/src/config/extensions/github.ts
index f77e54edc9..471945c507 100644
--- a/packages/cli/src/config/extensions/github.ts
+++ b/packages/cli/src/config/extensions/github.ts
@@ -6,7 +6,10 @@
 
 import { simpleGit } from 'simple-git';
 import { getErrorMessage } from '../../utils/errors.js';
-import type { ExtensionInstallMetadata } from '@google/gemini-cli-core';
+import type {
+  ExtensionInstallMetadata,
+  GeminiCLIExtension,
+} from '@google/gemini-cli-core';
 import { ExtensionUpdateState } from '../../ui/state/extensions.js';
 import * as os from 'node:os';
 import * as https from 'node:https';
@@ -110,39 +113,44 @@ async function fetchFromGithub(
 }
 
 export async function checkForExtensionUpdate(
-  installMetadata: ExtensionInstallMetadata,
-): Promise<ExtensionUpdateState> {
+  extension: GeminiCLIExtension,
+  setExtensionUpdateState: (updateState: ExtensionUpdateState) => void,
+): Promise<void> {
+  setExtensionUpdateState(ExtensionUpdateState.CHECKING_FOR_UPDATES);
+  const installMetadata = extension.installMetadata;
   if (
-    installMetadata.type !== 'git' &&
-    installMetadata.type !== 'github-release'
+    !installMetadata ||
+    (installMetadata.type !== 'git' &&
+      installMetadata.type !== 'github-release')
   ) {
-    return ExtensionUpdateState.NOT_UPDATABLE;
+    setExtensionUpdateState(ExtensionUpdateState.NOT_UPDATABLE);
+    return;
   }
   try {
     if (installMetadata.type === 'git') {
-      const git = simpleGit(installMetadata.source);
+      const git = simpleGit(extension.path);
       const remotes = await git.getRemotes(true);
       if (remotes.length === 0) {
         console.error('No git remotes found.');
-        return ExtensionUpdateState.ERROR;
+        setExtensionUpdateState(ExtensionUpdateState.ERROR);
+        return;
       }
       const remoteUrl = remotes[0].refs.fetch;
       if (!remoteUrl) {
         console.error(`No fetch URL found for git remote ${remotes[0].name}.`);
-        return ExtensionUpdateState.ERROR;
+        setExtensionUpdateState(ExtensionUpdateState.ERROR);
+        return;
       }
 
       // Determine the ref to check on the remote.
       const refToCheck = installMetadata.ref || 'HEAD';
 
-      const lsRemoteOutput = await git.listRemote([
-        remotes[0].name,
-        refToCheck,
-      ]);
+      const lsRemoteOutput = await git.listRemote([remoteUrl, refToCheck]);
 
       if (typeof lsRemoteOutput !== 'string' || lsRemoteOutput.trim() === '') {
         console.error(`Git ref ${refToCheck} not found.`);
-        return ExtensionUpdateState.ERROR;
+        setExtensionUpdateState(ExtensionUpdateState.ERROR);
+        return;
       }
 
       const remoteHash = lsRemoteOutput.split('\t')[0];
@@ -152,16 +160,21 @@ export async function checkForExtensionUpdate(
         console.error(
           `Unable to parse hash from git ls-remote output "${lsRemoteOutput}"`,
         );
-        return ExtensionUpdateState.ERROR;
+        setExtensionUpdateState(ExtensionUpdateState.ERROR);
+        return;
       }
       if (remoteHash === localHash) {
-        return ExtensionUpdateState.UP_TO_DATE;
+        setExtensionUpdateState(ExtensionUpdateState.UP_TO_DATE);
+        return;
       }
-      return ExtensionUpdateState.UPDATE_AVAILABLE;
+      setExtensionUpdateState(ExtensionUpdateState.UPDATE_AVAILABLE);
+      return;
     } else {
       const { source, ref } = installMetadata;
       if (!source) {
-        return ExtensionUpdateState.ERROR;
+        console.error(`No "source" provided for extension.`);
+        setExtensionUpdateState(ExtensionUpdateState.ERROR);
+        return;
       }
       const { owner, repo } = parseGitHubRepoForReleases(source);
 
@@ -171,15 +184,18 @@ export async function checkForExtensionUpdate(
         installMetadata.ref,
       );
       if (releaseData.tag_name !== ref) {
-        return ExtensionUpdateState.UPDATE_AVAILABLE;
+        setExtensionUpdateState(ExtensionUpdateState.UPDATE_AVAILABLE);
+        return;
       }
-      return ExtensionUpdateState.UP_TO_DATE;
+      setExtensionUpdateState(ExtensionUpdateState.UP_TO_DATE);
+      return;
     }
   } catch (error) {
     console.error(
       `Failed to check for updates for extension "${installMetadata.source}": ${getErrorMessage(error)}`,
     );
-    return ExtensionUpdateState.ERROR;
+    setExtensionUpdateState(ExtensionUpdateState.ERROR);
+    return;
   }
 }
 
diff --git a/packages/cli/src/config/extensions/update.test.ts b/packages/cli/src/config/extensions/update.test.ts
new file mode 100644
index 0000000000..371e5ae279
--- /dev/null
+++ b/packages/cli/src/config/extensions/update.test.ts
@@ -0,0 +1,416 @@
+/**
+ * @license
+ * Copyright 2025 Google LLC
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+import { vi } from 'vitest';
+import * as fs from 'node:fs';
+import * as os from 'node:os';
+import * as path from 'node:path';
+import {
+  EXTENSIONS_CONFIG_FILENAME,
+  INSTALL_METADATA_FILENAME,
+  annotateActiveExtensions,
+  loadExtension,
+} from '../extension.js';
+import { checkForAllExtensionUpdates, updateExtension } from './update.js';
+import { GEMINI_DIR } from '@google/gemini-cli-core';
+import { isWorkspaceTrusted } from '../trustedFolders.js';
+import { ExtensionUpdateState } from '../../ui/state/extensions.js';
+import { createExtension } from '../../test-utils/createExtension.js';
+
+const mockGit = {
+  clone: vi.fn(),
+  getRemotes: vi.fn(),
+  fetch: vi.fn(),
+  checkout: vi.fn(),
+  listRemote: vi.fn(),
+  revparse: vi.fn(),
+  // Not a part of the actual API, but we need to use this to do the correct
+  // file system interactions.
+  path: vi.fn(),
+};
+
+vi.mock('simple-git', () => ({
+  simpleGit: vi.fn((path: string) => {
+    mockGit.path.mockReturnValue(path);
+    return mockGit;
+  }),
+}));
+
+vi.mock('os', async (importOriginal) => {
+  const mockedOs = await importOriginal<typeof os>();
+  return {
+    ...mockedOs,
+    homedir: vi.fn(),
+  };
+});
+
+vi.mock('../trustedFolders.js', async (importOriginal) => {
+  const actual = await importOriginal<typeof import('../trustedFolders.js')>();
+  return {
+    ...actual,
+    isWorkspaceTrusted: vi.fn(),
+  };
+});
+
+vi.mock('@google/gemini-cli-core', async (importOriginal) => {
+  const actual =
+    await importOriginal<typeof import('@google/gemini-cli-core')>();
+  const mockLogExtensionInstallEvent = vi.fn();
+  const mockLogExtensionUninstallEvent = vi.fn();
+  return {
+    ...actual,
+    ClearcutLogger: {
+      getInstance: vi.fn(() => ({
+        logExtensionInstallEvent: mockLogExtensionInstallEvent,
+        logExtensionUninstallEvent: mockLogExtensionUninstallEvent,
+      })),
+    },
+    Config: vi.fn(),
+    ExtensionInstallEvent: vi.fn(),
+    ExtensionUninstallEvent: vi.fn(),
+  };
+});
+
+describe('update tests', () => {
+  let tempHomeDir: string;
+  let tempWorkspaceDir: string;
+  let userExtensionsDir: string;
+
+  beforeEach(() => {
+    tempHomeDir = fs.mkdtempSync(
+      path.join(os.tmpdir(), 'gemini-cli-test-home-'),
+    );
+    tempWorkspaceDir = fs.mkdtempSync(
+      path.join(tempHomeDir, 'gemini-cli-test-workspace-'),
+    );
+    vi.mocked(os.homedir).mockReturnValue(tempHomeDir);
+    userExtensionsDir = path.join(tempHomeDir, GEMINI_DIR, 'extensions');
+    // Clean up before each test
+    fs.rmSync(userExtensionsDir, { recursive: true, force: true });
+    fs.mkdirSync(userExtensionsDir, { recursive: true });
+    vi.mocked(isWorkspaceTrusted).mockReturnValue(true);
+    vi.spyOn(process, 'cwd').mockReturnValue(tempWorkspaceDir);
+    Object.values(mockGit).forEach((fn) => fn.mockReset());
+  });
+
+  afterEach(() => {
+    fs.rmSync(tempHomeDir, { recursive: true, force: true });
+    fs.rmSync(tempWorkspaceDir, { recursive: true, force: true });
+  });
+
+  describe('updateExtension', () => {
+    it('should update a git-installed extension', async () => {
+      const gitUrl = 'https://github.com/google/gemini-extensions.git';
+      const extensionName = 'gemini-extensions';
+      const targetExtDir = path.join(userExtensionsDir, extensionName);
+      const metadataPath = path.join(targetExtDir, INSTALL_METADATA_FILENAME);
+
+      fs.mkdirSync(targetExtDir, { recursive: true });
+      fs.writeFileSync(
+        path.join(targetExtDir, EXTENSIONS_CONFIG_FILENAME),
+        JSON.stringify({ name: extensionName, version: '1.0.0' }),
+      );
+      fs.writeFileSync(
+        metadataPath,
+        JSON.stringify({ source: gitUrl, type: 'git' }),
+      );
+
+      mockGit.clone.mockImplementation(async (_, destination) => {
+        fs.mkdirSync(path.join(mockGit.path(), destination), {
+          recursive: true,
+        });
+        fs.writeFileSync(
+          path.join(mockGit.path(), destination, EXTENSIONS_CONFIG_FILENAME),
+          JSON.stringify({ name: extensionName, version: '1.1.0' }),
+        );
+      });
+      mockGit.getRemotes.mockResolvedValue([{ name: 'origin' }]);
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir: targetExtDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+      const updateInfo = await updateExtension(
+        extension,
+        tempHomeDir,
+        ExtensionUpdateState.UPDATE_AVAILABLE,
+        () => {},
+      );
+
+      expect(updateInfo).toEqual({
+        name: 'gemini-extensions',
+        originalVersion: '1.0.0',
+        updatedVersion: '1.1.0',
+      });
+
+      const updatedConfig = JSON.parse(
+        fs.readFileSync(
+          path.join(targetExtDir, EXTENSIONS_CONFIG_FILENAME),
+          'utf-8',
+        ),
+      );
+      expect(updatedConfig.version).toBe('1.1.0');
+    });
+
+    it('should call setExtensionUpdateState with UPDATING and then UPDATED_NEEDS_RESTART on success', async () => {
+      const extensionName = 'test-extension';
+      const extensionDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: extensionName,
+        version: '1.0.0',
+        installMetadata: {
+          source: 'https://some.git/repo',
+          type: 'git',
+        },
+      });
+
+      mockGit.clone.mockImplementation(async (_, destination) => {
+        fs.mkdirSync(path.join(mockGit.path(), destination), {
+          recursive: true,
+        });
+        fs.writeFileSync(
+          path.join(mockGit.path(), destination, EXTENSIONS_CONFIG_FILENAME),
+          JSON.stringify({ name: extensionName, version: '1.1.0' }),
+        );
+      });
+      mockGit.getRemotes.mockResolvedValue([{ name: 'origin' }]);
+
+      const setExtensionUpdateState = vi.fn();
+
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+      await updateExtension(
+        extension,
+        tempHomeDir,
+        ExtensionUpdateState.UPDATE_AVAILABLE,
+        setExtensionUpdateState,
+      );
+
+      expect(setExtensionUpdateState).toHaveBeenCalledWith(
+        ExtensionUpdateState.UPDATING,
+      );
+      expect(setExtensionUpdateState).toHaveBeenCalledWith(
+        ExtensionUpdateState.UPDATED_NEEDS_RESTART,
+      );
+    });
+
+    it('should call setExtensionUpdateState with ERROR on failure', async () => {
+      const extensionName = 'test-extension';
+      const extensionDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: extensionName,
+        version: '1.0.0',
+        installMetadata: {
+          source: 'https://some.git/repo',
+          type: 'git',
+        },
+      });
+
+      mockGit.clone.mockRejectedValue(new Error('Git clone failed'));
+      mockGit.getRemotes.mockResolvedValue([{ name: 'origin' }]);
+
+      const setExtensionUpdateState = vi.fn();
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+      await expect(
+        updateExtension(
+          extension,
+          tempHomeDir,
+          ExtensionUpdateState.UPDATE_AVAILABLE,
+          setExtensionUpdateState,
+        ),
+      ).rejects.toThrow();
+
+      expect(setExtensionUpdateState).toHaveBeenCalledWith(
+        ExtensionUpdateState.UPDATING,
+      );
+      expect(setExtensionUpdateState).toHaveBeenCalledWith(
+        ExtensionUpdateState.ERROR,
+      );
+    });
+  });
+
+  describe('checkForAllExtensionUpdates', () => {
+    it('should return UpdateAvailable for a git extension with updates', async () => {
+      const extensionDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'test-extension',
+        version: '1.0.0',
+        installMetadata: {
+          source: 'https://some.git/repo',
+          type: 'git',
+        },
+      });
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+
+      mockGit.getRemotes.mockResolvedValue([
+        { name: 'origin', refs: { fetch: 'https://some.git/repo' } },
+      ]);
+      mockGit.listRemote.mockResolvedValue('remoteHash	HEAD');
+      mockGit.revparse.mockResolvedValue('localHash');
+
+      let extensionState = new Map();
+      const results = await checkForAllExtensionUpdates(
+        [extension],
+        extensionState,
+        (newState) => {
+          if (typeof newState === 'function') {
+            newState(extensionState);
+          } else {
+            extensionState = newState;
+          }
+        },
+      );
+      const result = results.get('test-extension');
+      expect(result).toBe(ExtensionUpdateState.UPDATE_AVAILABLE);
+    });
+
+    it('should return UpToDate for a git extension with no updates', async () => {
+      const extensionDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'test-extension',
+        version: '1.0.0',
+        installMetadata: {
+          source: 'https://some.git/repo',
+          type: 'git',
+        },
+      });
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+
+      mockGit.getRemotes.mockResolvedValue([
+        { name: 'origin', refs: { fetch: 'https://some.git/repo' } },
+      ]);
+      mockGit.listRemote.mockResolvedValue('sameHash	HEAD');
+      mockGit.revparse.mockResolvedValue('sameHash');
+
+      let extensionState = new Map();
+      const results = await checkForAllExtensionUpdates(
+        [extension],
+        extensionState,
+        (newState) => {
+          if (typeof newState === 'function') {
+            newState(extensionState);
+          } else {
+            extensionState = newState;
+          }
+        },
+      );
+      const result = results.get('test-extension');
+      expect(result).toBe(ExtensionUpdateState.UP_TO_DATE);
+    });
+
+    it('should return NotUpdatable for a non-git extension', async () => {
+      const extensionDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'local-extension',
+        version: '1.0.0',
+        installMetadata: { source: '/local/path', type: 'local' },
+      });
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+      let extensionState = new Map();
+      const results = await checkForAllExtensionUpdates(
+        [extension],
+        extensionState,
+        (newState) => {
+          if (typeof newState === 'function') {
+            newState(extensionState);
+          } else {
+            extensionState = newState;
+          }
+        },
+      );
+      const result = results.get('local-extension');
+      expect(result).toBe(ExtensionUpdateState.NOT_UPDATABLE);
+    });
+
+    it('should return Error when git check fails', async () => {
+      const extensionDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'error-extension',
+        version: '1.0.0',
+        installMetadata: {
+          source: 'https://some.git/repo',
+          type: 'git',
+        },
+      });
+      const extension = annotateActiveExtensions(
+        [
+          loadExtension({
+            extensionDir,
+            workspaceDir: tempWorkspaceDir,
+          })!,
+        ],
+        [],
+        process.cwd(),
+      )[0];
+
+      mockGit.getRemotes.mockRejectedValue(new Error('Git error'));
+
+      let extensionState = new Map();
+      const results = await checkForAllExtensionUpdates(
+        [extension],
+        extensionState,
+        (newState) => {
+          if (typeof newState === 'function') {
+            newState(extensionState);
+          } else {
+            extensionState = newState;
+          }
+        },
+      );
+      const result = results.get('error-extension');
+      expect(result).toBe(ExtensionUpdateState.ERROR);
+    });
+  });
+});
diff --git a/packages/cli/src/config/extensions/update.ts b/packages/cli/src/config/extensions/update.ts
new file mode 100644
index 0000000000..acb930aee0
--- /dev/null
+++ b/packages/cli/src/config/extensions/update.ts
@@ -0,0 +1,156 @@
+/**
+ * @license
+ * Copyright 2025 Google LLC
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+import type { GeminiCLIExtension } from '@google/gemini-cli-core';
+import * as fs from 'node:fs';
+import { getErrorMessage } from '../../utils/errors.js';
+import { ExtensionUpdateState } from '../../ui/state/extensions.js';
+import { type Dispatch, type SetStateAction } from 'react';
+import {
+  copyExtension,
+  installExtension,
+  uninstallExtension,
+  loadExtension,
+  loadInstallMetadata,
+  ExtensionStorage,
+} from '../extension.js';
+import { checkForExtensionUpdate } from './github.js';
+
+export interface ExtensionUpdateInfo {
+  name: string;
+  originalVersion: string;
+  updatedVersion: string;
+}
+
+export async function updateExtension(
+  extension: GeminiCLIExtension,
+  cwd: string = process.cwd(),
+  currentState: ExtensionUpdateState,
+  setExtensionUpdateState: (updateState: ExtensionUpdateState) => void,
+): Promise<ExtensionUpdateInfo | undefined> {
+  if (currentState === ExtensionUpdateState.UPDATING) {
+    return undefined;
+  }
+  setExtensionUpdateState(ExtensionUpdateState.UPDATING);
+  const installMetadata = loadInstallMetadata(extension.path);
+
+  if (!installMetadata?.type) {
+    setExtensionUpdateState(ExtensionUpdateState.ERROR);
+    throw new Error(
+      `Extension ${extension.name} cannot be updated, type is unknown.`,
+    );
+  }
+  if (installMetadata?.type === 'link') {
+    setExtensionUpdateState(ExtensionUpdateState.UP_TO_DATE);
+    throw new Error(`Extension is linked so does not need to be updated`);
+  }
+  const originalVersion = extension.version;
+
+  const tempDir = await ExtensionStorage.createTmpDir();
+  try {
+    await copyExtension(extension.path, tempDir);
+    await uninstallExtension(extension.name, cwd);
+    await installExtension(installMetadata, false, cwd);
+
+    const updatedExtensionStorage = new ExtensionStorage(extension.name);
+    const updatedExtension = loadExtension({
+      extensionDir: updatedExtensionStorage.getExtensionDir(),
+      workspaceDir: cwd,
+    });
+    if (!updatedExtension) {
+      setExtensionUpdateState(ExtensionUpdateState.ERROR);
+      throw new Error('Updated extension not found after installation.');
+    }
+    const updatedVersion = updatedExtension.config.version;
+    setExtensionUpdateState(ExtensionUpdateState.UPDATED_NEEDS_RESTART);
+    return {
+      name: extension.name,
+      originalVersion,
+      updatedVersion,
+    };
+  } catch (e) {
+    console.error(
+      `Error updating extension, rolling back. ${getErrorMessage(e)}`,
+    );
+    setExtensionUpdateState(ExtensionUpdateState.ERROR);
+    await copyExtension(tempDir, extension.path);
+    throw e;
+  } finally {
+    await fs.promises.rm(tempDir, { recursive: true, force: true });
+  }
+}
+
+export async function updateAllUpdatableExtensions(
+  cwd: string = process.cwd(),
+  extensions: GeminiCLIExtension[],
+  extensionsState: Map<string, ExtensionUpdateState>,
+  setExtensionsUpdateState: Dispatch<
+    SetStateAction<Map<string, ExtensionUpdateState>>
+  >,
+): Promise<ExtensionUpdateInfo[]> {
+  return (
+    await Promise.all(
+      extensions
+        .filter(
+          (extension) =>
+            extensionsState.get(extension.name) ===
+            ExtensionUpdateState.UPDATE_AVAILABLE,
+        )
+        .map((extension) =>
+          updateExtension(
+            extension,
+            cwd,
+            extensionsState.get(extension.name)!,
+            (updateState) => {
+              setExtensionsUpdateState((prev) => {
+                const finalState = new Map(prev);
+                finalState.set(extension.name, updateState);
+                return finalState;
+              });
+            },
+          ),
+        ),
+    )
+  ).filter((updateInfo) => !!updateInfo);
+}
+
+export interface ExtensionUpdateCheckResult {
+  state: ExtensionUpdateState;
+  error?: string;
+}
+
+export async function checkForAllExtensionUpdates(
+  extensions: GeminiCLIExtension[],
+  extensionsUpdateState: Map<string, ExtensionUpdateState>,
+  setExtensionsUpdateState: Dispatch<
+    SetStateAction<Map<string, ExtensionUpdateState>>
+  >,
+): Promise<Map<string, ExtensionUpdateState>> {
+  for (const extension of extensions) {
+    const initialState = extensionsUpdateState.get(extension.name);
+    if (initialState === undefined) {
+      if (!extension.installMetadata) {
+        setExtensionsUpdateState((prev) => {
+          extensionsUpdateState = new Map(prev);
+          extensionsUpdateState.set(
+            extension.name,
+            ExtensionUpdateState.NOT_UPDATABLE,
+          );
+          return extensionsUpdateState;
+        });
+        continue;
+      }
+      await checkForExtensionUpdate(extension, (updatedState) => {
+        setExtensionsUpdateState((prev) => {
+          extensionsUpdateState = new Map(prev);
+          extensionsUpdateState.set(extension.name, updatedState);
+          return extensionsUpdateState;
+        });
+      });
+    }
+  }
+  return extensionsUpdateState;
+}
diff --git a/packages/cli/src/test-utils/createExtension.ts b/packages/cli/src/test-utils/createExtension.ts
new file mode 100644
index 0000000000..6500a6d1f5
--- /dev/null
+++ b/packages/cli/src/test-utils/createExtension.ts
@@ -0,0 +1,49 @@
+/**
+ * @license
+ * Copyright 2025 Google LLC
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+import * as fs from 'node:fs';
+import * as path from 'node:path';
+import {
+  EXTENSIONS_CONFIG_FILENAME,
+  INSTALL_METADATA_FILENAME,
+} from '../config/extension.js';
+import {
+  type MCPServerConfig,
+  type ExtensionInstallMetadata,
+} from '@google/gemini-cli-core';
+
+export function createExtension({
+  extensionsDir = 'extensions-dir',
+  name = 'my-extension',
+  version = '1.0.0',
+  addContextFile = false,
+  contextFileName = undefined as string | undefined,
+  mcpServers = {} as Record<string, MCPServerConfig>,
+  installMetadata = undefined as ExtensionInstallMetadata | undefined,
+} = {}): string {
+  const extDir = path.join(extensionsDir, name);
+  fs.mkdirSync(extDir, { recursive: true });
+  fs.writeFileSync(
+    path.join(extDir, EXTENSIONS_CONFIG_FILENAME),
+    JSON.stringify({ name, version, contextFileName, mcpServers }),
+  );
+
+  if (addContextFile) {
+    fs.writeFileSync(path.join(extDir, 'GEMINI.md'), 'context');
+  }
+
+  if (contextFileName) {
+    fs.writeFileSync(path.join(extDir, contextFileName), 'context');
+  }
+
+  if (installMetadata) {
+    fs.writeFileSync(
+      path.join(extDir, INSTALL_METADATA_FILENAME),
+      JSON.stringify(installMetadata),
+    );
+  }
+  return extDir;
+}
diff --git a/packages/cli/src/test-utils/mockCommandContext.ts b/packages/cli/src/test-utils/mockCommandContext.ts
index 648e3c8fd6..b07bccaacf 100644
--- a/packages/cli/src/test-utils/mockCommandContext.ts
+++ b/packages/cli/src/test-utils/mockCommandContext.ts
@@ -54,6 +54,8 @@ export const createMockCommandContext = (
       loadHistory: vi.fn(),
       toggleCorgiMode: vi.fn(),
       toggleVimEnabled: vi.fn(),
+      extensionsUpdateState: new Map(),
+      setExtensionsUpdateState: vi.fn(),
       // eslint-disable-next-line @typescript-eslint/no-explicit-any
     } as any,
     session: {
diff --git a/packages/cli/src/ui/AppContainer.tsx b/packages/cli/src/ui/AppContainer.tsx
index d637952934..cca13d5dfe 100644
--- a/packages/cli/src/ui/AppContainer.tsx
+++ b/packages/cli/src/ui/AppContainer.tsx
@@ -85,9 +85,8 @@ import { useAutoAcceptIndicator } from './hooks/useAutoAcceptIndicator.js';
 import { useWorkspaceMigration } from './hooks/useWorkspaceMigration.js';
 import { useSessionStats } from './contexts/SessionContext.js';
 import { useGitBranchName } from './hooks/useGitBranchName.js';
+import { useExtensionUpdates } from './hooks/useExtensionUpdates.js';
 import { FocusContext } from './contexts/FocusContext.js';
-import type { ExtensionUpdateState } from './state/extensions.js';
-import { checkForAllExtensionUpdates } from '../config/extension.js';
 
 const CTRL_EXIT_PROMPT_DURATION_MS = 1000;
 
@@ -149,9 +148,14 @@ export const AppContainer = (props: AppContainerProps) => {
   const [isTrustedFolder, setIsTrustedFolder] = useState<boolean | undefined>(
     config.isTrustedFolder(),
   );
-  const [extensionsUpdateState, setExtensionsUpdateState] = useState(
-    new Map<string, ExtensionUpdateState>(),
-  );
+
+  const extensions = config.getExtensions();
+  const { extensionsUpdateState, setExtensionsUpdateState } =
+    useExtensionUpdates(
+      extensions,
+      historyManager.addItem,
+      config.getWorkingDir(),
+    );
 
   // Helper to determine the effective model, considering the fallback state.
   const getEffectiveModel = useCallback(() => {
@@ -1196,11 +1200,6 @@ Logging in with Google... Please restart Gemini CLI to continue.
     ],
   );
 
-  const extensions = config.getExtensions();
-  useEffect(() => {
-    checkForAllExtensionUpdates(extensions, setExtensionsUpdateState);
-  }, [extensions, setExtensionsUpdateState]);
-
   return (
     <UIStateContext.Provider value={uiState}>
       <UIActionsContext.Provider value={uiActions}>
diff --git a/packages/cli/src/ui/commands/extensionsCommand.test.ts b/packages/cli/src/ui/commands/extensionsCommand.test.ts
index 85a717eb77..947d77734a 100644
--- a/packages/cli/src/ui/commands/extensionsCommand.test.ts
+++ b/packages/cli/src/ui/commands/extensionsCommand.test.ts
@@ -4,10 +4,11 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
+import type { GeminiCLIExtension } from '@google/gemini-cli-core';
 import {
   updateAllUpdatableExtensions,
-  updateExtensionByName,
-} from '../../config/extension.js';
+  updateExtension,
+} from '../../config/extensions/update.js';
 import { createMockCommandContext } from '../../test-utils/mockCommandContext.js';
 import { MessageType } from '../types.js';
 import { extensionsCommand } from './extensionsCommand.js';
@@ -20,14 +21,15 @@ import {
   beforeEach,
   type MockedFunction,
 } from 'vitest';
+import { ExtensionUpdateState } from '../state/extensions.js';
 
-vi.mock('../../config/extension.js', () => ({
-  updateExtensionByName: vi.fn(),
+vi.mock('../../config/extensions/update.js', () => ({
+  updateExtension: vi.fn(),
   updateAllUpdatableExtensions: vi.fn(),
 }));
 
-const mockUpdateExtensionByName = updateExtensionByName as MockedFunction<
-  typeof updateExtensionByName
+const mockUpdateExtension = updateExtension as MockedFunction<
+  typeof updateExtension
 >;
 
 const mockUpdateAllUpdatableExtensions =
@@ -35,6 +37,8 @@ const mockUpdateAllUpdatableExtensions =
     typeof updateAllUpdatableExtensions
   >;
 
+const mockGetExtensions = vi.fn();
+
 describe('extensionsCommand', () => {
   let mockContext: CommandContext;
 
@@ -43,7 +47,7 @@ describe('extensionsCommand', () => {
     mockContext = createMockCommandContext({
       services: {
         config: {
-          getExtensions: () => [],
+          getExtensions: mockGetExtensions,
           getWorkingDir: () => '/test/dir',
         },
       },
@@ -147,36 +151,73 @@ describe('extensionsCommand', () => {
     });
 
     it('should update a single extension by name', async () => {
-      mockUpdateExtensionByName.mockResolvedValue({
+      const extension: GeminiCLIExtension = {
         name: 'ext-one',
-        originalVersion: '1.0.0',
+        type: 'git',
+        version: '1.0.0',
+        isActive: true,
+        path: '/test/dir/ext-one',
+        autoUpdate: false,
+      };
+      mockUpdateExtension.mockResolvedValue({
+        name: extension.name,
+        originalVersion: extension.version,
         updatedVersion: '1.0.1',
       });
+      mockGetExtensions.mockReturnValue([extension]);
+      mockContext.ui.extensionsUpdateState.set(
+        extension.name,
+        ExtensionUpdateState.UPDATE_AVAILABLE,
+      );
       await updateAction(mockContext, 'ext-one');
-      expect(mockUpdateExtensionByName).toHaveBeenCalledWith(
-        'ext-one',
+      expect(mockUpdateExtension).toHaveBeenCalledWith(
+        extension,
         '/test/dir',
-        [],
+        ExtensionUpdateState.UPDATE_AVAILABLE,
         expect.any(Function),
       );
     });
 
     it('should handle errors when updating a single extension', async () => {
-      mockUpdateExtensionByName.mockRejectedValue(
-        new Error('Extension not found'),
-      );
+      mockUpdateExtension.mockRejectedValue(new Error('Extension not found'));
+      mockGetExtensions.mockReturnValue([]);
       await updateAction(mockContext, 'ext-one');
       expect(mockContext.ui.addItem).toHaveBeenCalledWith(
         {
           type: MessageType.ERROR,
-          text: 'Extension not found',
+          text: 'Extension ext-one not found.',
         },
         expect.any(Number),
       );
     });
 
     it('should update multiple extensions by name', async () => {
-      mockUpdateExtensionByName
+      const extensionOne: GeminiCLIExtension = {
+        name: 'ext-one',
+        type: 'git',
+        version: '1.0.0',
+        isActive: true,
+        path: '/test/dir/ext-one',
+        autoUpdate: false,
+      };
+      const extensionTwo: GeminiCLIExtension = {
+        name: 'ext-two',
+        type: 'git',
+        version: '1.0.0',
+        isActive: true,
+        path: '/test/dir/ext-two',
+        autoUpdate: false,
+      };
+      mockGetExtensions.mockReturnValue([extensionOne, extensionTwo]);
+      mockContext.ui.extensionsUpdateState.set(
+        extensionOne.name,
+        ExtensionUpdateState.UPDATE_AVAILABLE,
+      );
+      mockContext.ui.extensionsUpdateState.set(
+        extensionTwo.name,
+        ExtensionUpdateState.UPDATE_AVAILABLE,
+      );
+      mockUpdateExtension
         .mockResolvedValueOnce({
           name: 'ext-one',
           originalVersion: '1.0.0',
@@ -188,7 +229,7 @@ describe('extensionsCommand', () => {
           updatedVersion: '2.0.1',
         });
       await updateAction(mockContext, 'ext-one ext-two');
-      expect(mockUpdateExtensionByName).toHaveBeenCalledTimes(2);
+      expect(mockUpdateExtension).toHaveBeenCalledTimes(2);
       expect(mockContext.ui.setPendingItem).toHaveBeenCalledWith({
         type: MessageType.EXTENSIONS_LIST,
       });
diff --git a/packages/cli/src/ui/commands/extensionsCommand.ts b/packages/cli/src/ui/commands/extensionsCommand.ts
index 8552a49237..c50143192a 100644
--- a/packages/cli/src/ui/commands/extensionsCommand.ts
+++ b/packages/cli/src/ui/commands/extensionsCommand.ts
@@ -5,11 +5,12 @@
  */
 
 import {
-  updateExtensionByName,
   updateAllUpdatableExtensions,
   type ExtensionUpdateInfo,
-} from '../../config/extension.js';
+  updateExtension,
+} from '../../config/extensions/update.js';
 import { getErrorMessage } from '../../utils/errors.js';
+import { ExtensionUpdateState } from '../state/extensions.js';
 import { MessageType } from '../types.js';
 import {
   type CommandContext,
@@ -55,19 +56,36 @@ async function updateAction(context: CommandContext, args: string) {
         context.ui.setExtensionsUpdateState,
       );
     } else if (names?.length) {
+      const workingDir = context.services.config!.getWorkingDir();
+      const extensions = context.services.config!.getExtensions();
       for (const name of names) {
-        updateInfos.push(
-          await updateExtensionByName(
-            name,
-            context.services.config!.getWorkingDir(),
-            context.services.config!.getExtensions(),
-            (updateState) => {
-              const newState = new Map(context.ui.extensionsUpdateState);
-              newState.set(name, updateState);
-              context.ui.setExtensionsUpdateState(newState);
-            },
-          ),
+        const extension = extensions.find(
+          (extension) => extension.name === name,
         );
+        if (!extension) {
+          context.ui.addItem(
+            {
+              type: MessageType.ERROR,
+              text: `Extension ${name} not found.`,
+            },
+            Date.now(),
+          );
+          continue;
+        }
+        const updateInfo = await updateExtension(
+          extension,
+          workingDir,
+          context.ui.extensionsUpdateState.get(extension.name) ??
+            ExtensionUpdateState.UNKNOWN,
+          (updateState) => {
+            context.ui.setExtensionsUpdateState((prev) => {
+              const newState = new Map(prev);
+              newState.set(name, updateState);
+              return newState;
+            });
+          },
+        );
+        if (updateInfo) updateInfos.push(updateInfo);
       }
     }
 
diff --git a/packages/cli/src/ui/commands/types.ts b/packages/cli/src/ui/commands/types.ts
index 8a5d35ad54..755b28993a 100644
--- a/packages/cli/src/ui/commands/types.ts
+++ b/packages/cli/src/ui/commands/types.ts
@@ -4,7 +4,7 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
-import type { ReactNode } from 'react';
+import type { Dispatch, ReactNode, SetStateAction } from 'react';
 import type { Content, PartListUnion } from '@google/genai';
 import type { HistoryItemWithoutId, HistoryItem } from '../types.js';
 import type { Config, GitService, Logger } from '@google/gemini-cli-core';
@@ -63,9 +63,9 @@ export interface CommandContext {
     setGeminiMdFileCount: (count: number) => void;
     reloadCommands: () => void;
     extensionsUpdateState: Map<string, ExtensionUpdateState>;
-    setExtensionsUpdateState: (
-      updateState: Map<string, ExtensionUpdateState>,
-    ) => void;
+    setExtensionsUpdateState: Dispatch<
+      SetStateAction<Map<string, ExtensionUpdateState>>
+    >;
   };
   // Session-specific data
   session: {
diff --git a/packages/cli/src/ui/hooks/slashCommandProcessor.ts b/packages/cli/src/ui/hooks/slashCommandProcessor.ts
index 5b22f5d198..acb43286cb 100644
--- a/packages/cli/src/ui/hooks/slashCommandProcessor.ts
+++ b/packages/cli/src/ui/hooks/slashCommandProcessor.ts
@@ -4,7 +4,14 @@
  * SPDX-License-Identifier: Apache-2.0
  */
 
-import { useCallback, useMemo, useEffect, useState } from 'react';
+import {
+  useCallback,
+  useMemo,
+  useEffect,
+  useState,
+  type Dispatch,
+  type SetStateAction,
+} from 'react';
 import { type PartListUnion } from '@google/genai';
 import process from 'node:process';
 import type { UseHistoryManagerReturn } from './useHistoryManager.js';
@@ -45,9 +52,9 @@ interface SlashCommandProcessorActions {
   quit: (messages: HistoryItem[]) => void;
   setDebugMessage: (message: string) => void;
   toggleCorgiMode: () => void;
-  setExtensionsUpdateState: (
-    updateState: Map<string, ExtensionUpdateState>,
-  ) => void;
+  setExtensionsUpdateState: Dispatch<
+    SetStateAction<Map<string, ExtensionUpdateState>>
+  >;
 }
 
 /**
diff --git a/packages/cli/src/ui/hooks/useExtensionUpdates.test.ts b/packages/cli/src/ui/hooks/useExtensionUpdates.test.ts
new file mode 100644
index 0000000000..d06f9038d0
--- /dev/null
+++ b/packages/cli/src/ui/hooks/useExtensionUpdates.test.ts
@@ -0,0 +1,211 @@
+/**
+ * @license
+ * Copyright 2025 Google LLC
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+import { vi } from 'vitest';
+import * as fs from 'node:fs';
+import * as os from 'node:os';
+import * as path from 'node:path';
+import {
+  EXTENSIONS_CONFIG_FILENAME,
+  annotateActiveExtensions,
+  loadExtension,
+} from '../../config/extension.js';
+import { createExtension } from '../../test-utils/createExtension.js';
+import { useExtensionUpdates } from './useExtensionUpdates.js';
+import { GEMINI_DIR, type GeminiCLIExtension } from '@google/gemini-cli-core';
+import { isWorkspaceTrusted } from '../../config/trustedFolders.js';
+import { renderHook, waitFor } from '@testing-library/react';
+import { MessageType } from '../types.js';
+
+const mockGit = {
+  clone: vi.fn(),
+  getRemotes: vi.fn(),
+  fetch: vi.fn(),
+  checkout: vi.fn(),
+  listRemote: vi.fn(),
+  revparse: vi.fn(),
+  // Not a part of the actual API, but we need to use this to do the correct
+  // file system interactions.
+  path: vi.fn(),
+};
+
+vi.mock('simple-git', () => ({
+  simpleGit: vi.fn((path: string) => {
+    mockGit.path.mockReturnValue(path);
+    return mockGit;
+  }),
+}));
+
+vi.mock('os', async (importOriginal) => {
+  const mockedOs = await importOriginal<typeof os>();
+  return {
+    ...mockedOs,
+    homedir: vi.fn(),
+  };
+});
+
+vi.mock('../../config/trustedFolders.js', async (importOriginal) => {
+  const actual =
+    await importOriginal<typeof import('../../config/trustedFolders.js')>();
+  return {
+    ...actual,
+    isWorkspaceTrusted: vi.fn(),
+  };
+});
+
+vi.mock('@google/gemini-cli-core', async (importOriginal) => {
+  const actual =
+    await importOriginal<typeof import('@google/gemini-cli-core')>();
+  const mockLogExtensionInstallEvent = vi.fn();
+  const mockLogExtensionUninstallEvent = vi.fn();
+  return {
+    ...actual,
+    ClearcutLogger: {
+      getInstance: vi.fn(() => ({
+        logExtensionInstallEvent: mockLogExtensionInstallEvent,
+        logExtensionUninstallEvent: mockLogExtensionUninstallEvent,
+      })),
+    },
+    Config: vi.fn(),
+    ExtensionInstallEvent: vi.fn(),
+    ExtensionUninstallEvent: vi.fn(),
+  };
+});
+
+vi.mock('child_process', async (importOriginal) => {
+  const actual = await importOriginal<typeof import('child_process')>();
+  return {
+    ...actual,
+    execSync: vi.fn(),
+  };
+});
+
+const mockQuestion = vi.hoisted(() => vi.fn());
+const mockClose = vi.hoisted(() => vi.fn());
+vi.mock('node:readline', () => ({
+  createInterface: vi.fn(() => ({
+    question: mockQuestion,
+    close: mockClose,
+  })),
+}));
+
+describe('useExtensionUpdates', () => {
+  let tempHomeDir: string;
+  let userExtensionsDir: string;
+
+  beforeEach(() => {
+    tempHomeDir = fs.mkdtempSync(
+      path.join(os.tmpdir(), 'gemini-cli-test-home-'),
+    );
+    vi.mocked(os.homedir).mockReturnValue(tempHomeDir);
+    userExtensionsDir = path.join(tempHomeDir, GEMINI_DIR, 'extensions');
+    fs.mkdirSync(userExtensionsDir, { recursive: true });
+    Object.values(mockGit).forEach((fn) => fn.mockReset());
+  });
+
+  afterEach(() => {
+    fs.rmSync(tempHomeDir, { recursive: true, force: true });
+  });
+
+  it('should check for updates and log a message if an update is available', async () => {
+    const extensions = [
+      {
+        name: 'test-extension',
+        type: 'git',
+        version: '1.0.0',
+        path: '/some/path',
+        isActive: true,
+        installMetadata: {
+          type: 'git',
+          source: 'https://some/repo',
+          autoUpdate: false,
+        },
+      },
+    ];
+    const addItem = vi.fn();
+    const cwd = '/test/cwd';
+
+    mockGit.getRemotes.mockResolvedValue([
+      {
+        name: 'origin',
+        refs: {
+          fetch: 'https://github.com/google/gemini-cli.git',
+        },
+      },
+    ]);
+    mockGit.revparse.mockResolvedValue('local-hash');
+    mockGit.listRemote.mockResolvedValue('remote-hash\tHEAD');
+
+    renderHook(() =>
+      useExtensionUpdates(extensions as GeminiCLIExtension[], addItem, cwd),
+    );
+
+    await waitFor(() => {
+      expect(addItem).toHaveBeenCalledWith(
+        {
+          type: MessageType.INFO,
+          text: 'Extension test-extension has an update available, run "/extensions update test-extension" to install it.',
+        },
+        expect.any(Number),
+      );
+    });
+  });
+
+  it('should check for updates and automatically update if autoUpdate is true', async () => {
+    const extensionDir = createExtension({
+      extensionsDir: userExtensionsDir,
+      name: 'test-extension',
+      version: '1.0.0',
+      installMetadata: {
+        source: 'https://some.git/repo',
+        type: 'git',
+        autoUpdate: true,
+      },
+    });
+    const extension = annotateActiveExtensions(
+      [loadExtension({ extensionDir, workspaceDir: tempHomeDir })!],
+      [],
+      tempHomeDir,
+    )[0];
+
+    const addItem = vi.fn();
+    mockGit.getRemotes.mockResolvedValue([
+      {
+        name: 'origin',
+        refs: {
+          fetch: 'https://github.com/google/gemini-cli.git',
+        },
+      },
+    ]);
+    mockGit.revparse.mockResolvedValue('local-hash');
+    mockGit.listRemote.mockResolvedValue('remote-hash\tHEAD');
+    mockGit.clone.mockImplementation(async (_, destination) => {
+      fs.mkdirSync(path.join(mockGit.path(), destination), {
+        recursive: true,
+      });
+      fs.writeFileSync(
+        path.join(mockGit.path(), destination, EXTENSIONS_CONFIG_FILENAME),
+        JSON.stringify({ name: 'test-extension', version: '1.1.0' }),
+      );
+    });
+    vi.mocked(isWorkspaceTrusted).mockReturnValue(true);
+
+    renderHook(() => useExtensionUpdates([extension], addItem, tempHomeDir));
+
+    await waitFor(
+      () => {
+        expect(addItem).toHaveBeenCalledWith(
+          {
+            type: MessageType.INFO,
+            text: 'Extension "test-extension" successfully updated: 1.0.0 → 1.1.0.',
+          },
+          expect.any(Number),
+        );
+      },
+      { timeout: 2000 },
+    );
+  });
+});
diff --git a/packages/cli/src/ui/hooks/useExtensionUpdates.ts b/packages/cli/src/ui/hooks/useExtensionUpdates.ts
new file mode 100644
index 0000000000..03aa1e10cc
--- /dev/null
+++ b/packages/cli/src/ui/hooks/useExtensionUpdates.ts
@@ -0,0 +1,88 @@
+/**
+ * @license
+ * Copyright 2025 Google LLC
+ * SPDX-License-Identifier: Apache-2.0
+ */
+
+import type { GeminiCLIExtension } from '@google/gemini-cli-core';
+import { getErrorMessage } from '../../utils/errors.js';
+import { ExtensionUpdateState } from '../state/extensions.js';
+import { useMemo, useState } from 'react';
+import type { UseHistoryManagerReturn } from './useHistoryManager.js';
+import { MessageType } from '../types.js';
+import {
+  checkForAllExtensionUpdates,
+  updateExtension,
+} from '../../config/extensions/update.js';
+
+export const useExtensionUpdates = (
+  extensions: GeminiCLIExtension[],
+  addItem: UseHistoryManagerReturn['addItem'],
+  cwd: string,
+) => {
+  const [extensionsUpdateState, setExtensionsUpdateState] = useState(
+    new Map<string, ExtensionUpdateState>(),
+  );
+  useMemo(() => {
+    const checkUpdates = async () => {
+      const updateState = await checkForAllExtensionUpdates(
+        extensions,
+        extensionsUpdateState,
+        setExtensionsUpdateState,
+      );
+      for (const extension of extensions) {
+        const prevState = extensionsUpdateState.get(extension.name);
+        const currentState = updateState.get(extension.name);
+        if (
+          prevState === currentState ||
+          currentState !== ExtensionUpdateState.UPDATE_AVAILABLE
+        ) {
+          continue;
+        }
+        if (extension.installMetadata?.autoUpdate) {
+          updateExtension(extension, cwd, currentState, (newState) => {
+            setExtensionsUpdateState((prev) => {
+              const finalState = new Map(prev);
+              finalState.set(extension.name, newState);
+              return finalState;
+            });
+          })
+            .then((result) => {
+              if (!result) return;
+              addItem(
+                {
+                  type: MessageType.INFO,
+                  text: `Extension "${extension.name}" successfully updated: ${result.originalVersion} → ${result.updatedVersion}.`,
+                },
+                Date.now(),
+              );
+            })
+            .catch((error) => {
+              console.error(
+                `Error updating extension "${extension.name}": ${getErrorMessage(error)}.`,
+              );
+            });
+        } else {
+          addItem(
+            {
+              type: MessageType.INFO,
+              text: `Extension ${extension.name} has an update available, run "/extensions update ${extension.name}" to install it.`,
+            },
+            Date.now(),
+          );
+        }
+      }
+    };
+    checkUpdates();
+  }, [
+    extensions,
+    extensionsUpdateState,
+    setExtensionsUpdateState,
+    addItem,
+    cwd,
+  ]);
+  return {
+    extensionsUpdateState,
+    setExtensionsUpdateState,
+  };
+};
diff --git a/packages/cli/src/ui/state/extensions.ts b/packages/cli/src/ui/state/extensions.ts
index 3bc625f133..8b02af1919 100644
--- a/packages/cli/src/ui/state/extensions.ts
+++ b/packages/cli/src/ui/state/extensions.ts
@@ -12,4 +12,5 @@ export enum ExtensionUpdateState {
   UP_TO_DATE = 'up to date',
   ERROR = 'error checking for updates',
   NOT_UPDATABLE = 'not updatable',
+  UNKNOWN = 'unknown',
 }
diff --git a/packages/core/src/config/config.ts b/packages/core/src/config/config.ts
index 9ba06e3e06..2d1a686016 100644
--- a/packages/core/src/config/config.ts
+++ b/packages/core/src/config/config.ts
@@ -124,6 +124,7 @@ export interface ExtensionInstallMetadata {
   source: string;
   type: 'git' | 'local' | 'link' | 'github-release';
   ref?: string;
+  autoUpdate?: boolean;
 }
 
 export interface FileFilteringOptions {