diff --git a/packages/cli/src/config/settings.test.ts b/packages/cli/src/config/settings.test.ts
index 029d2988b5..ff201bcfe8 100644
--- a/packages/cli/src/config/settings.test.ts
+++ b/packages/cli/src/config/settings.test.ts
@@ -1961,6 +1961,57 @@ describe('Settings Loading and Merging', () => {
         }),
       );
     });
+
+    it('should migrate disableUpdateNag to enableAutoUpdateNotification in system and system defaults settings', () => {
+      const systemSettingsContent = {
+        general: {
+          disableUpdateNag: true,
+        },
+      };
+      const systemDefaultsContent = {
+        general: {
+          disableUpdateNag: false,
+        },
+      };
+
+      vi.mocked(fs.existsSync).mockReturnValue(true);
+      (fs.readFileSync as Mock).mockImplementation(
+        (p: fs.PathOrFileDescriptor) => {
+          if (p === getSystemSettingsPath()) {
+            return JSON.stringify(systemSettingsContent);
+          }
+          if (p === getSystemDefaultsPath()) {
+            return JSON.stringify(systemDefaultsContent);
+          }
+          return '{}';
+        },
+      );
+
+      const settings = loadSettings(MOCK_WORKSPACE_DIR);
+
+      // Verify system settings were migrated
+      expect(settings.system.settings.general).toHaveProperty(
+        'enableAutoUpdateNotification',
+      );
+      expect(
+        (settings.system.settings.general as Record<string, unknown>)[
+          'enableAutoUpdateNotification'
+        ],
+      ).toBe(false);
+
+      // Verify system defaults settings were migrated
+      expect(settings.systemDefaults.settings.general).toHaveProperty(
+        'enableAutoUpdateNotification',
+      );
+      expect(
+        (settings.systemDefaults.settings.general as Record<string, unknown>)[
+          'enableAutoUpdateNotification'
+        ],
+      ).toBe(true);
+
+      // Merged should also reflect it (system overrides defaults, but both are migrated)
+      expect(settings.merged.general?.enableAutoUpdateNotification).toBe(false);
+    });
   });
 
   describe('saveSettings', () => {
diff --git a/packages/cli/src/config/settings.ts b/packages/cli/src/config/settings.ts
index f8b88b910a..a9d29e56a4 100644
--- a/packages/cli/src/config/settings.ts
+++ b/packages/cli/src/config/settings.ts
@@ -808,6 +808,8 @@ export function migrateDeprecatedSettings(
 
   processScope(SettingScope.User);
   processScope(SettingScope.Workspace);
+  processScope(SettingScope.System);
+  processScope(SettingScope.SystemDefaults);
 
   return anyModified;
 }