diff --git a/packages/core/src/config/config.ts b/packages/core/src/config/config.ts
index 888ee942a1..ffa6258f11 100644
--- a/packages/core/src/config/config.ts
+++ b/packages/core/src/config/config.ts
@@ -361,7 +361,6 @@ export class Config {
   private userMemory: string;
   private geminiMdFileCount: number;
   private geminiMdFilePaths: string[];
-  private approvalMode: ApprovalMode;
   private readonly showMemoryUsage: boolean;
   private readonly accessibility: AccessibilitySettings;
   private readonly telemetrySettings: TelemetrySettings;
@@ -481,7 +480,6 @@ export class Config {
     this.userMemory = params.userMemory ?? '';
     this.geminiMdFileCount = params.geminiMdFileCount ?? 0;
     this.geminiMdFilePaths = params.geminiMdFilePaths ?? [];
-    this.approvalMode = params.approvalMode ?? ApprovalMode.DEFAULT;
     this.showMemoryUsage = params.showMemoryUsage ?? false;
     this.accessibility = params.accessibility ?? {};
     this.telemetrySettings = {
@@ -596,7 +594,11 @@ export class Config {
     this.enablePromptCompletion = params.enablePromptCompletion ?? false;
     this.fileExclusions = new FileExclusions(this);
     this.eventEmitter = params.eventEmitter;
-    this.policyEngine = new PolicyEngine(params.policyEngineConfig);
+    this.policyEngine = new PolicyEngine({
+      ...params.policyEngineConfig,
+      approvalMode:
+        params.approvalMode ?? params.policyEngineConfig?.approvalMode,
+    });
     this.messageBus = new MessageBus(this.policyEngine, this.debugMode);
     this.outputSettings = {
       format: params.output?.format ?? OutputFormat.TEXT,
@@ -1127,7 +1129,7 @@ export class Config {
   }
 
   getApprovalMode(): ApprovalMode {
-    return this.approvalMode;
+    return this.policyEngine.getApprovalMode();
   }
 
   setApprovalMode(mode: ApprovalMode): void {
@@ -1136,7 +1138,7 @@ export class Config {
         'Cannot enable privileged approval modes in an untrusted folder.',
       );
     }
-    this.approvalMode = mode;
+    this.policyEngine.setApprovalMode(mode);
   }
 
   isYoloModeDisabled(): boolean {
diff --git a/packages/core/src/policy/config.ts b/packages/core/src/policy/config.ts
index 3c6016f086..9057506ae2 100644
--- a/packages/core/src/policy/config.ts
+++ b/packages/core/src/policy/config.ts
@@ -124,7 +124,7 @@ export async function createPolicyEngineConfig(
     rules: tomlRules,
     checkers: tomlCheckers,
     errors,
-  } = await loadPoliciesFromToml(approvalMode, policyDirs, (dir) =>
+  } = await loadPoliciesFromToml(policyDirs, (dir) =>
     getPolicyTier(dir, defaultPoliciesDir),
   );
 
@@ -236,6 +236,7 @@ export async function createPolicyEngineConfig(
     rules,
     checkers,
     defaultDecision: PolicyDecision.ASK_USER,
+    approvalMode,
   };
 }
 
diff --git a/packages/core/src/policy/persistence.test.ts b/packages/core/src/policy/persistence.test.ts
index e7916b8644..4954d7280e 100644
--- a/packages/core/src/policy/persistence.test.ts
+++ b/packages/core/src/policy/persistence.test.ts
@@ -20,6 +20,7 @@ import { PolicyEngine } from './policy-engine.js';
 import { MessageBus } from '../confirmation-bus/message-bus.js';
 import { MessageBusType } from '../confirmation-bus/types.js';
 import { Storage } from '../config/storage.js';
+import { ApprovalMode } from './types.js';
 
 vi.mock('node:fs/promises');
 vi.mock('../config/storage.js');
@@ -29,7 +30,11 @@ describe('createPolicyUpdater', () => {
   let messageBus: MessageBus;
 
   beforeEach(() => {
-    policyEngine = new PolicyEngine({ rules: [], checkers: [] });
+    policyEngine = new PolicyEngine({
+      rules: [],
+      checkers: [],
+      approvalMode: ApprovalMode.DEFAULT,
+    });
     messageBus = new MessageBus(policyEngine);
     vi.clearAllMocks();
   });
diff --git a/packages/core/src/policy/policy-engine.test.ts b/packages/core/src/policy/policy-engine.test.ts
index a58725f8f2..a362d1995a 100644
--- a/packages/core/src/policy/policy-engine.test.ts
+++ b/packages/core/src/policy/policy-engine.test.ts
@@ -12,6 +12,7 @@ import {
   type PolicyEngineConfig,
   type SafetyCheckerRule,
   InProcessCheckerType,
+  ApprovalMode,
 } from './types.js';
 import type { FunctionCall } from '@google/genai';
 import { SafetyCheckDecision } from '../safety/protocol.js';
@@ -25,7 +26,10 @@ describe('PolicyEngine', () => {
     mockCheckerRunner = {
       runChecker: vi.fn(),
     } as unknown as CheckerRunner;
-    engine = new PolicyEngine({}, mockCheckerRunner);
+    engine = new PolicyEngine(
+      { approvalMode: ApprovalMode.DEFAULT },
+      mockCheckerRunner,
+    );
   });
 
   describe('constructor', () => {
@@ -163,6 +167,41 @@ describe('PolicyEngine', () => {
         (await engine.check({ name: 'unknown-tool' }, undefined)).decision,
       ).toBe(PolicyDecision.DENY);
     });
+
+    it('should dynamically switch between modes and respect rule modes', async () => {
+      const rules: PolicyRule[] = [
+        {
+          toolName: 'edit',
+          decision: PolicyDecision.ASK_USER,
+          priority: 10,
+        },
+        {
+          toolName: 'edit',
+          decision: PolicyDecision.ALLOW,
+          priority: 20,
+          modes: [ApprovalMode.AUTO_EDIT],
+        },
+      ];
+
+      engine = new PolicyEngine({ rules });
+
+      // Default mode: priority 20 rule doesn't match, falls back to priority 10
+      expect((await engine.check({ name: 'edit' }, undefined)).decision).toBe(
+        PolicyDecision.ASK_USER,
+      );
+
+      // Switch to autoEdit mode
+      engine.setApprovalMode(ApprovalMode.AUTO_EDIT);
+      expect((await engine.check({ name: 'edit' }, undefined)).decision).toBe(
+        PolicyDecision.ALLOW,
+      );
+
+      // Switch back to default
+      engine.setApprovalMode(ApprovalMode.DEFAULT);
+      expect((await engine.check({ name: 'edit' }, undefined)).decision).toBe(
+        PolicyDecision.ASK_USER,
+      );
+    });
   });
 
   describe('addRule', () => {
diff --git a/packages/core/src/policy/policy-engine.ts b/packages/core/src/policy/policy-engine.ts
index 71a4ff232b..06e7adc00b 100644
--- a/packages/core/src/policy/policy-engine.ts
+++ b/packages/core/src/policy/policy-engine.ts
@@ -13,6 +13,7 @@ import {
   type HookCheckerRule,
   type HookExecutionContext,
   getHookSource,
+  ApprovalMode,
 } from './types.js';
 import { stableStringify } from './stable-stringify.js';
 import { debugLogger } from '../utils/debugLogger.js';
@@ -30,7 +31,15 @@ function ruleMatches(
   toolCall: FunctionCall,
   stringifiedArgs: string | undefined,
   serverName: string | undefined,
+  currentApprovalMode: ApprovalMode,
 ): boolean {
+  // Check if rule applies to current approval mode
+  if (rule.modes && rule.modes.length > 0) {
+    if (!rule.modes.includes(currentApprovalMode)) {
+      return false;
+    }
+  }
+
   // Check tool name if specified
   if (rule.toolName) {
     // Support wildcard patterns: "serverName__*" matches "serverName__anyTool"
@@ -98,6 +107,7 @@ export class PolicyEngine {
   private readonly nonInteractive: boolean;
   private readonly checkerRunner?: CheckerRunner;
   private readonly allowHooks: boolean;
+  private approvalMode: ApprovalMode;
 
   constructor(config: PolicyEngineConfig = {}, checkerRunner?: CheckerRunner) {
     this.rules = (config.rules ?? []).sort(
@@ -113,6 +123,21 @@ export class PolicyEngine {
     this.nonInteractive = config.nonInteractive ?? false;
     this.checkerRunner = checkerRunner;
     this.allowHooks = config.allowHooks ?? true;
+    this.approvalMode = config.approvalMode ?? ApprovalMode.DEFAULT;
+  }
+
+  /**
+   * Update the current approval mode.
+   */
+  setApprovalMode(mode: ApprovalMode): void {
+    this.approvalMode = mode;
+  }
+
+  /**
+   * Get the current approval mode.
+   */
+  getApprovalMode(): ApprovalMode {
+    return this.approvalMode;
   }
 
   /**
@@ -145,7 +170,15 @@ export class PolicyEngine {
     let decision: PolicyDecision | undefined;
 
     for (const rule of this.rules) {
-      if (ruleMatches(rule, toolCall, stringifiedArgs, serverName)) {
+      if (
+        ruleMatches(
+          rule,
+          toolCall,
+          stringifiedArgs,
+          serverName,
+          this.approvalMode,
+        )
+      ) {
         debugLogger.debug(
           `[PolicyEngine.check] MATCHED rule: toolName=${rule.toolName}, decision=${rule.decision}, priority=${rule.priority}, argsPattern=${rule.argsPattern?.source || 'none'}`,
         );
@@ -225,7 +258,15 @@ export class PolicyEngine {
     // If decision is not DENY, run safety checkers
     if (decision !== PolicyDecision.DENY && this.checkerRunner) {
       for (const checkerRule of this.checkers) {
-        if (ruleMatches(checkerRule, toolCall, stringifiedArgs, serverName)) {
+        if (
+          ruleMatches(
+            checkerRule,
+            toolCall,
+            stringifiedArgs,
+            serverName,
+            this.approvalMode,
+          )
+        ) {
           debugLogger.debug(
             `[PolicyEngine.check] Running safety checker: ${checkerRule.checker.name}`,
           );
diff --git a/packages/core/src/policy/shell-safety.test.ts b/packages/core/src/policy/shell-safety.test.ts
index 89c8362f5d..bcc9f562d9 100644
--- a/packages/core/src/policy/shell-safety.test.ts
+++ b/packages/core/src/policy/shell-safety.test.ts
@@ -6,7 +6,7 @@
 
 import { describe, it, expect, beforeEach } from 'vitest';
 import { PolicyEngine } from './policy-engine.js';
-import { PolicyDecision } from './types.js';
+import { PolicyDecision, ApprovalMode } from './types.js';
 import type { FunctionCall } from '@google/genai';
 
 describe('Shell Safety Policy', () => {
@@ -25,6 +25,7 @@ describe('Shell Safety Policy', () => {
         },
       ],
       defaultDecision: PolicyDecision.ASK_USER,
+      approvalMode: ApprovalMode.DEFAULT,
     });
   });
 
diff --git a/packages/core/src/policy/toml-loader.test.ts b/packages/core/src/policy/toml-loader.test.ts
index 75c743dfd7..1bb41fdfd6 100644
--- a/packages/core/src/policy/toml-loader.test.ts
+++ b/packages/core/src/policy/toml-loader.test.ts
@@ -5,7 +5,7 @@
  */
 
 import { describe, it, expect, beforeEach, afterEach } from 'vitest';
-import { ApprovalMode, PolicyDecision } from './types.js';
+import { PolicyDecision } from './types.js';
 import * as fs from 'node:fs/promises';
 import * as path from 'node:path';
 import * as os from 'node:os';
@@ -36,7 +36,7 @@ describe('policy-toml-loader', () => {
   ): Promise<PolicyLoadResult> {
     await fs.writeFile(path.join(tempDir, fileName), tomlContent);
     const getPolicyTier = (_dir: string) => 1;
-    return loadPoliciesFromToml(ApprovalMode.DEFAULT, [tempDir], getPolicyTier);
+    return loadPoliciesFromToml([tempDir], getPolicyTier);
   }
 
   describe('loadPoliciesFromToml', () => {
@@ -133,7 +133,7 @@ priority = 100
       expect(result.errors).toHaveLength(0);
     });
 
-    it('should filter rules by mode', async () => {
+    it('should NOT filter rules by mode at load time but preserve modes property', async () => {
       const result = await runLoadPoliciesFromToml(`
 [[rule]]
 toolName = "glob"
@@ -148,12 +148,39 @@ priority = 100
 modes = ["yolo"]
 `);
 
-      // Only the first rule should be included (modes includes "default")
-      expect(result.rules).toHaveLength(1);
+      // Both rules should be included
+      expect(result.rules).toHaveLength(2);
       expect(result.rules[0].toolName).toBe('glob');
+      expect(result.rules[0].modes).toEqual(['default', 'yolo']);
+      expect(result.rules[1].toolName).toBe('grep');
+      expect(result.rules[1].modes).toEqual(['yolo']);
       expect(result.errors).toHaveLength(0);
     });
 
+    it('should return error if modes property is used for Tier 2 and Tier 3 policies', async () => {
+      await fs.writeFile(
+        path.join(tempDir, 'tier2.toml'),
+        `
+[[rule]]
+toolName = "tier2-tool"
+decision = "allow"
+priority = 100
+modes = ["autoEdit"]
+`,
+      );
+
+      const getPolicyTier = (_dir: string) => 2; // Tier 2
+      const result = await loadPoliciesFromToml([tempDir], getPolicyTier);
+
+      // It still transforms the rule, but it should also report an error
+      expect(result.rules).toHaveLength(1);
+      expect(result.rules[0].toolName).toBe('tier2-tool');
+      expect(result.rules[0].modes).toBeUndefined(); // Should be restricted
+      expect(result.errors).toHaveLength(1);
+      expect(result.errors[0].errorType).toBe('rule_validation');
+      expect(result.errors[0].message).toContain('Restricted property "modes"');
+    });
+
     it('should handle TOML parse errors', async () => {
       const result = await runLoadPoliciesFromToml(`
 [[rule]
@@ -267,11 +294,7 @@ priority = -1
       );
 
       const getPolicyTier = (_dir: string) => 1;
-      const result = await loadPoliciesFromToml(
-        ApprovalMode.DEFAULT,
-        [tempDir],
-        getPolicyTier,
-      );
+      const result = await loadPoliciesFromToml([tempDir], getPolicyTier);
 
       expect(result.rules).toHaveLength(1);
       expect(result.rules[0].toolName).toBe('glob');
@@ -439,11 +462,7 @@ priority = 100
       await fs.writeFile(filePath, 'content');
 
       const getPolicyTier = (_dir: string) => 1;
-      const result = await loadPoliciesFromToml(
-        ApprovalMode.DEFAULT,
-        [filePath],
-        getPolicyTier,
-      );
+      const result = await loadPoliciesFromToml([filePath], getPolicyTier);
 
       expect(result.errors).toHaveLength(1);
       const error = result.errors[0];
diff --git a/packages/core/src/policy/toml-loader.ts b/packages/core/src/policy/toml-loader.ts
index 79454c2e98..162a250906 100644
--- a/packages/core/src/policy/toml-loader.ts
+++ b/packages/core/src/policy/toml-loader.ts
@@ -7,7 +7,7 @@
 import {
   type PolicyRule,
   PolicyDecision,
-  type ApprovalMode,
+  ApprovalMode,
   type SafetyCheckerConfig,
   type SafetyCheckerRule,
   InProcessCheckerType,
@@ -43,7 +43,7 @@ const PolicyRuleSchema = z.object({
       message:
         'priority must be <= 999 to prevent tier overflow. Priorities >= 1000 would jump to the next tier.',
     }),
-  modes: z.array(z.string()).optional(),
+  modes: z.array(z.nativeEnum(ApprovalMode)).optional(),
 });
 
 /**
@@ -56,7 +56,7 @@ const SafetyCheckerRuleSchema = z.object({
   commandPrefix: z.union([z.string(), z.array(z.string())]).optional(),
   commandRegex: z.string().optional(),
   priority: z.number().int().default(0),
-  modes: z.array(z.string()).optional(),
+  modes: z.array(z.nativeEnum(ApprovalMode)).optional(),
   checker: z.discriminatedUnion('type', [
     z.object({
       type: z.literal('in-process'),
@@ -216,16 +216,13 @@ function transformPriority(priority: number, tier: number): number {
  * 1. Scans directories for .toml files
  * 2. Parses and validates each file
  * 3. Transforms rules (commandPrefix, arrays, mcpName, priorities)
- * 4. Filters rules by approval mode
- * 5. Collects detailed error information for any failures
+ * 4. Collects detailed error information for any failures
  *
- * @param approvalMode The current approval mode (for filtering rules by mode)
  * @param policyDirs Array of directory paths to scan for policy files
  * @param getPolicyTier Function to determine tier (1-3) for a directory
  * @returns Object containing successfully parsed rules and any errors encountered
  */
 export async function loadPoliciesFromToml(
-  approvalMode: ApprovalMode,
   policyDirs: string[],
   getPolicyTier: (dir: string) => number,
 ): Promise<PolicyLoadResult> {
@@ -305,6 +302,8 @@ export async function loadPoliciesFromToml(
 
         // Validate shell command convenience syntax
         const tomlRules = validationResult.data.rule ?? [];
+        const tomlCheckers = validationResult.data.safety_checker ?? [];
+
         for (let i = 0; i < tomlRules.length; i++) {
           const rule = tomlRules[i];
           const validationError = validateShellCommandSyntax(rule, i);
@@ -320,17 +319,40 @@ export async function loadPoliciesFromToml(
             });
             // Continue to next rule, don't skip the entire file
           }
+
+          if (tier > 1 && rule.modes && rule.modes.length > 0) {
+            errors.push({
+              filePath,
+              fileName: file,
+              tier: tierName,
+              ruleIndex: i,
+              errorType: 'rule_validation',
+              message: 'Restricted property "modes"',
+              details: `Rule #${i + 1}: The "modes" property is currently reserved for Tier 1 (system) policies and cannot be used in ${tierName} policies.`,
+              suggestion: 'Remove the "modes" property from this rule.',
+            });
+          }
+        }
+
+        for (let i = 0; i < tomlCheckers.length; i++) {
+          const checker = tomlCheckers[i];
+          if (tier > 1 && checker.modes && checker.modes.length > 0) {
+            errors.push({
+              filePath,
+              fileName: file,
+              tier: tierName,
+              ruleIndex: i,
+              errorType: 'rule_validation',
+              message: 'Restricted property "modes" in safety checker',
+              details: `Safety Checker #${i + 1}: The "modes" property is currently reserved for Tier 1 (system) policies and cannot be used in ${tierName} policies.`,
+              suggestion:
+                'Remove the "modes" property from this safety checker.',
+            });
+          }
         }
 
         // Transform rules
         const parsedRules: PolicyRule[] = (validationResult.data.rule ?? [])
-          .filter((rule) => {
-            // Filter by mode
-            if (!rule.modes || rule.modes.length === 0) {
-              return true;
-            }
-            return rule.modes.includes(approvalMode);
-          })
           .flatMap((rule) => {
             // Transform commandPrefix/commandRegex to argsPattern
             let effectiveArgsPattern = rule.argsPattern;
@@ -377,6 +399,7 @@ export async function loadPoliciesFromToml(
                   toolName: effectiveToolName,
                   decision: rule.decision,
                   priority: transformPriority(rule.priority, tier),
+                  modes: tier === 1 ? rule.modes : undefined,
                 };
 
                 // Compile regex pattern
@@ -412,12 +435,6 @@ export async function loadPoliciesFromToml(
         const parsedCheckers: SafetyCheckerRule[] = (
           validationResult.data.safety_checker ?? []
         )
-          .filter((checker) => {
-            if (!checker.modes || checker.modes.length === 0) {
-              return true;
-            }
-            return checker.modes.includes(approvalMode);
-          })
           .flatMap((checker) => {
             let effectiveArgsPattern = checker.argsPattern;
             const commandPrefixes: string[] = [];
@@ -459,6 +476,7 @@ export async function loadPoliciesFromToml(
                   toolName: effectiveToolName,
                   priority: checker.priority,
                   checker: checker.checker as SafetyCheckerConfig,
+                  modes: tier === 1 ? checker.modes : undefined,
                 };
 
                 if (argsPattern) {
diff --git a/packages/core/src/policy/types.ts b/packages/core/src/policy/types.ts
index 410d9ff1c9..426fdaac9c 100644
--- a/packages/core/src/policy/types.ts
+++ b/packages/core/src/policy/types.ts
@@ -117,6 +117,12 @@ export interface PolicyRule {
    * Default is 0.
    */
   priority?: number;
+
+  /**
+   * Approval modes this rule applies to.
+   * If undefined or empty, it applies to all modes.
+   */
+  modes?: ApprovalMode[];
 }
 
 export interface SafetyCheckerRule {
@@ -143,6 +149,12 @@ export interface SafetyCheckerRule {
    * additional validation of a tool call.
    */
   checker: SafetyCheckerConfig;
+
+  /**
+   * Approval modes this rule applies to.
+   * If undefined or empty, it applies to all modes.
+   */
+  modes?: ApprovalMode[];
 }
 
 export interface HookExecutionContext {
@@ -215,6 +227,12 @@ export interface PolicyEngineConfig {
    * Defaults to true.
    */
   allowHooks?: boolean;
+
+  /**
+   * Current approval mode.
+   * Used to filter rules that have specific 'modes' defined.
+   */
+  approvalMode?: ApprovalMode;
 }
 
 export interface PolicySettings {