diff --git a/packages/cli/src/config/extension.test.ts b/packages/cli/src/config/extension.test.ts
index 0597d441ec..aa8416a574 100644
--- a/packages/cli/src/config/extension.test.ts
+++ b/packages/cli/src/config/extension.test.ts
@@ -94,6 +94,15 @@ vi.mock('child_process', async (importOriginal) => {
   };
 });
 
+const mockQuestion = vi.hoisted(() => vi.fn());
+const mockClose = vi.hoisted(() => vi.fn());
+vi.mock('node:readline', () => ({
+  createInterface: vi.fn(() => ({
+    question: mockQuestion,
+    close: mockClose,
+  })),
+}));
+
 const EXTENSIONS_DIRECTORY_NAME = path.join(GEMINI_DIR, 'extensions');
 
 describe('loadExtensions', () => {
@@ -244,6 +253,7 @@ describe('loadExtensions', () => {
       source: sourceExtDir,
       type: 'link',
     });
+
     expect(extensionName).toEqual('my-linked-extension');
     const extensions = loadExtensions();
     expect(extensions).toHaveLength(1);
@@ -434,6 +444,7 @@ describe('installExtension', () => {
   let userExtensionsDir: string;
 
   beforeEach(() => {
+    mockQuestion.mockImplementation((_query, callback) => callback('y'));
     tempHomeDir = fs.mkdtempSync(
       path.join(os.tmpdir(), 'gemini-cli-test-home-'),
     );
@@ -448,6 +459,8 @@ describe('installExtension', () => {
   });
 
   afterEach(() => {
+    mockQuestion.mockClear();
+    mockClose.mockClear();
     fs.rmSync(tempHomeDir, { recursive: true, force: true });
     fs.rmSync(userExtensionsDir, { recursive: true, force: true });
   });
@@ -565,6 +578,56 @@ describe('installExtension', () => {
     const logger = ClearcutLogger.getInstance({} as Config);
     expect(logger?.logExtensionInstallEvent).toHaveBeenCalled();
   });
+
+  it('should continue installation if user accepts prompt for local extension with mcp servers', async () => {
+    const sourceExtDir = createExtension({
+      extensionsDir: tempHomeDir,
+      name: 'my-local-extension',
+      version: '1.0.0',
+      mcpServers: {
+        'test-server': {
+          command: 'node',
+          args: ['server.js'],
+        },
+      },
+    });
+
+    mockQuestion.mockImplementation((_query, callback) => callback('y'));
+
+    await expect(
+      installExtension({ source: sourceExtDir, type: 'local' }),
+    ).resolves.toBe('my-local-extension');
+
+    expect(mockQuestion).toHaveBeenCalledWith(
+      expect.stringContaining('Do you want to continue? (y/n)'),
+      expect.any(Function),
+    );
+  });
+
+  it('should cancel installation if user declines prompt for local extension with mcp servers', async () => {
+    const sourceExtDir = createExtension({
+      extensionsDir: tempHomeDir,
+      name: 'my-local-extension',
+      version: '1.0.0',
+      mcpServers: {
+        'test-server': {
+          command: 'node',
+          args: ['server.js'],
+        },
+      },
+    });
+
+    mockQuestion.mockImplementation((_query, callback) => callback('n'));
+
+    await expect(
+      installExtension({ source: sourceExtDir, type: 'local' }),
+    ).rejects.toThrow('Installation cancelled by user.');
+
+    expect(mockQuestion).toHaveBeenCalledWith(
+      expect.stringContaining('Do you want to continue? (y/n)'),
+      expect.any(Function),
+    );
+  });
 });
 
 describe('uninstallExtension', () => {
@@ -807,6 +870,7 @@ describe('updateExtension', () => {
 
   afterEach(() => {
     fs.rmSync(tempHomeDir, { recursive: true, force: true });
+    mockClose.mockClear();
   });
 
   it('should update a git-installed extension', async () => {
diff --git a/packages/cli/src/config/extension.ts b/packages/cli/src/config/extension.ts
index b03a815621..8cdfaba52c 100644
--- a/packages/cli/src/config/extension.ts
+++ b/packages/cli/src/config/extension.ts
@@ -372,6 +372,26 @@ async function cloneFromGit(
   }
 }
 
+/**
+ * Asks users a prompt and awaits for a y/n response
+ * @param prompt A yes/no prompt to ask the user
+ * @returns Whether or not the user answers 'y' (yes)
+ */
+async function promptForContinuation(prompt: string): Promise<boolean> {
+  const readline = await import('node:readline');
+  const rl = readline.createInterface({
+    input: process.stdin,
+    output: process.stdout,
+  });
+
+  return new Promise((resolve) => {
+    rl.question(prompt, (answer) => {
+      rl.close();
+      resolve(answer.toLowerCase() === 'y');
+    });
+  });
+}
+
 export async function installExtension(
   installMetadata: ExtensionInstallMetadata,
   cwd: string = process.cwd(),
@@ -443,6 +463,26 @@ export async function installExtension(
         );
       }
 
+      const mcpServerEntries = Object.entries(
+        newExtensionConfig.mcpServers || {},
+      );
+      if (mcpServerEntries.length) {
+        console.info('This extension will run the following MCP servers: ');
+        for (const [key, value] of mcpServerEntries) {
+          console.info(`  * ${key}: ${value.description}`);
+        }
+        console.info(
+          'The extension will append info to your gemini.md context',
+        );
+
+        const shouldContinue = await promptForContinuation(
+          'Do you want to continue? (y/n): ',
+        );
+        if (!shouldContinue) {
+          throw new Error('Installation cancelled by user.');
+        }
+      }
+
       await fs.promises.mkdir(destinationPath, { recursive: true });
 
       if (installMetadata.type === 'local' || installMetadata.type === 'git') {
@@ -599,7 +639,6 @@ export async function updateExtension(
     await copyExtension(extension.path, tempDir);
     await uninstallExtension(extension.config.name, cwd);
     await installExtension(extension.installMetadata, cwd);
-
     const updatedExtensionStorage = new ExtensionStorage(extension.config.name);
     const updatedExtension = loadExtension(
       updatedExtensionStorage.getExtensionDir(),