diff --git a/docs/extensions/reference.md b/docs/extensions/reference.md
index d36df94d78..2c2b730126 100644
--- a/docs/extensions/reference.md
+++ b/docs/extensions/reference.md
@@ -227,6 +227,42 @@ skill definitions in a `skills/` directory. For example,
 Provide [sub-agents](../core/subagents.md) that users can delegate tasks to. Add
 agent definition files (`.md`) to an `agents/` directory in your extension root.
 
+### <a id="policy-engine"></a>Policy Engine
+
+Extensions can contribute policy rules and safety checkers to the Gemini CLI
+[Policy Engine](../reference/policy-engine.md). These rules are defined in
+`.toml` files and take effect when the extension is activated.
+
+To add policies, create a `policies/` directory in your extension's root and
+place your `.toml` policy files inside it. Gemini CLI automatically loads all
+`.toml` files from this directory.
+
+Rules contributed by extensions run in their own tier (tier 2), alongside
+workspace-defined policies. This tier has higher priority than the default rules
+but lower priority than user or admin policies.
+
+> **Warning:** For security, Gemini CLI ignores any `allow` decisions or `yolo`
+> mode configurations in extension policies. This ensures that an extension
+> cannot automatically approve tool calls or bypass security measures without
+> your confirmation.
+
+**Example `policies.toml`**
+
+```toml
+[[rule]]
+toolName = "my_server__dangerous_tool"
+decision = "ask_user"
+priority = 100
+
+[[safety_checker]]
+toolName = "my_server__write_data"
+priority = 200
+[safety_checker.checker]
+type = "in-process"
+name = "allowed-path"
+required_context = ["environment"]
+```
+
 ### Themes
 
 Extensions can provide custom themes to personalize the CLI UI. Themes are
diff --git a/docs/reference/policy-engine.md b/docs/reference/policy-engine.md
index a123634581..810c591c24 100644
--- a/docs/reference/policy-engine.md
+++ b/docs/reference/policy-engine.md
@@ -97,9 +97,10 @@ has a designated number that forms the base of the final priority calculation.
 | Tier      | Base | Description                                                                |
 | :-------- | :--- | :------------------------------------------------------------------------- |
 | Default   | 1    | Built-in policies that ship with the Gemini CLI.                           |
-| Workspace | 2    | Policies defined in the current workspace's configuration directory.       |
-| User      | 3    | Custom policies defined by the user.                                       |
-| Admin     | 4    | Policies managed by an administrator (e.g., in an enterprise environment). |
+| Extension | 2    | Policies defined in extensions.                                            |
+| Workspace | 3    | Policies defined in the current workspace's configuration directory.       |
+| User      | 4    | Custom policies defined by the user.                                       |
+| Admin     | 5    | Policies managed by an administrator (e.g., in an enterprise environment). |
 
 Within a TOML policy file, you assign a priority value from **0 to 999**. The
 engine transforms this into a final priority using the following formula:
diff --git a/packages/cli/src/commands/extensions/examples/policies/README.md b/packages/cli/src/commands/extensions/examples/policies/README.md
new file mode 100644
index 0000000000..d1c06de6e3
--- /dev/null
+++ b/packages/cli/src/commands/extensions/examples/policies/README.md
@@ -0,0 +1,41 @@
+# Policy engine example extension
+
+This extension demonstrates how to contribute security rules and safety checkers
+to the Gemini CLI Policy Engine.
+
+## Description
+
+The extension uses a `policies/` directory containing `.toml` files to define:
+
+- A rule that requires user confirmation for `rm -rf` commands.
+- A rule that denies searching for sensitive files (like `.env`) using `grep`.
+- A safety checker that validates file paths for all write operations.
+
+## Structure
+
+- `gemini-extension.json`: The manifest file.
+- `policies/`: Contains the `.toml` policy files.
+
+## How to use
+
+1.  Link this extension to your local Gemini CLI installation:
+
+    ```bash
+    gemini extensions link packages/cli/src/commands/extensions/examples/policies
+    ```
+
+2.  Restart your Gemini CLI session.
+
+3.  **Observe the policies:**
+    - Try asking the model to delete a directory: The policy engine will prompt
+      you for confirmation due to the `rm -rf` rule.
+    - Try asking the model to search for secrets: The `grep` rule will deny the
+      request and display the custom deny message.
+    - Any file write operation will now be processed through the `allowed-path`
+      safety checker.
+
+## Security note
+
+For security, Gemini CLI ignores any `allow` decisions or `yolo` mode
+configurations contributed by extensions. This ensures that extensions can
+strengthen security but cannot bypass user confirmation.
diff --git a/packages/cli/src/commands/extensions/examples/policies/gemini-extension.json b/packages/cli/src/commands/extensions/examples/policies/gemini-extension.json
new file mode 100644
index 0000000000..2a2b992532
--- /dev/null
+++ b/packages/cli/src/commands/extensions/examples/policies/gemini-extension.json
@@ -0,0 +1,5 @@
+{
+  "name": "policy-example",
+  "version": "1.0.0",
+  "description": "An example extension demonstrating Policy Engine support."
+}
diff --git a/packages/cli/src/commands/extensions/examples/policies/policies/policies.toml b/packages/cli/src/commands/extensions/examples/policies/policies/policies.toml
new file mode 100644
index 0000000000..d89d5e5737
--- /dev/null
+++ b/packages/cli/src/commands/extensions/examples/policies/policies/policies.toml
@@ -0,0 +1,28 @@
+# Example Policy Rules for Gemini CLI Extension
+#
+# Extensions run in Tier 2 (Extension Tier).
+# Security Note: 'allow' decisions and 'yolo' mode configurations are ignored.
+
+# Rule: Always ask the user before running a specific dangerous shell command.
+[[rule]]
+toolName = "run_shell_command"
+commandPrefix = "rm -rf"
+decision = "ask_user"
+priority = 100
+
+# Rule: Deny access to sensitive files using the grep tool.
+[[rule]]
+toolName = "grep_search"
+argsPattern = "(\.env|id_rsa|passwd)"
+decision = "deny"
+priority = 200
+deny_message = "Access to sensitive credentials or system files is restricted by the policy-example extension."
+
+# Safety Checker: Apply path validation to all write operations.
+[[safety_checker]]
+toolName = ["write_file", "replace"]
+priority = 300
+[safety_checker.checker]
+type = "in-process"
+name = "allowed-path"
+required_context = ["environment"]
diff --git a/packages/cli/src/config/extension-manager.ts b/packages/cli/src/config/extension-manager.ts
index 93ad3f3536..56152cd6e1 100644
--- a/packages/cli/src/config/extension-manager.ts
+++ b/packages/cli/src/config/extension-manager.ts
@@ -52,6 +52,10 @@ import {
   applyAdminAllowlist,
   getAdminBlockedMcpServersMessage,
   CoreToolCallStatus,
+  loadExtensionPolicies,
+  isSubpath,
+  type PolicyRule,
+  type SafetyCheckerRule,
   HookType,
 } from '@google/gemini-cli-core';
 import { maybeRequestConsentOrFail } from './extensions/consent.js';
@@ -764,9 +768,18 @@ Would you like to attempt to install via "git clone" instead?`,
       }
 
       const contextFiles = getContextFileNames(config)
-        .map((contextFileName) =>
-          path.join(effectiveExtensionPath, contextFileName),
-        )
+        .map((contextFileName) => {
+          const contextFilePath = path.join(
+            effectiveExtensionPath,
+            contextFileName,
+          );
+          if (!isSubpath(effectiveExtensionPath, contextFilePath)) {
+            throw new Error(
+              `Invalid context file path: "${contextFileName}". Context files must be within the extension directory.`,
+            );
+          }
+          return contextFilePath;
+        })
         .filter((contextFilePath) => fs.existsSync(contextFilePath));
 
       const hydrationContext: VariableContext = {
@@ -820,6 +833,24 @@ Would you like to attempt to install via "git clone" instead?`,
         recursivelyHydrateStrings(skill, hydrationContext),
       );
 
+      let rules: PolicyRule[] | undefined;
+      let checkers: SafetyCheckerRule[] | undefined;
+
+      const policyDir = path.join(effectiveExtensionPath, 'policies');
+      if (fs.existsSync(policyDir)) {
+        const result = await loadExtensionPolicies(config.name, policyDir);
+        rules = result.rules;
+        checkers = result.checkers;
+
+        if (result.errors.length > 0) {
+          for (const error of result.errors) {
+            debugLogger.warn(
+              `[ExtensionManager] Error loading policies from ${config.name}: ${error.message}${error.details ? `\nDetails: ${error.details}` : ''}`,
+            );
+          }
+        }
+      }
+
       const agentLoadResult = await loadAgentsFromDirectory(
         path.join(effectiveExtensionPath, 'agents'),
       );
@@ -853,6 +884,8 @@ Would you like to attempt to install via "git clone" instead?`,
         skills,
         agents: agentLoadResult.agents,
         themes: config.themes,
+        rules,
+        checkers,
       };
     } catch (e) {
       debugLogger.error(
diff --git a/packages/cli/src/config/extension.test.ts b/packages/cli/src/config/extension.test.ts
index affcd0cef0..f8e66bf8e2 100644
--- a/packages/cli/src/config/extension.test.ts
+++ b/packages/cli/src/config/extension.test.ts
@@ -239,6 +239,27 @@ describe('extension tests', () => {
       expect(extensions[0].name).toBe('test-extension');
     });
 
+    it('should throw an error if a context file path is outside the extension directory', async () => {
+      const consoleSpy = vi
+        .spyOn(console, 'error')
+        .mockImplementation(() => {});
+      createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'traversal-extension',
+        version: '1.0.0',
+        contextFileName: '../secret.txt',
+      });
+
+      const extensions = await extensionManager.loadExtensions();
+      expect(extensions).toHaveLength(0);
+      expect(consoleSpy).toHaveBeenCalledWith(
+        expect.stringContaining(
+          'traversal-extension: Invalid context file path: "../secret.txt"',
+        ),
+      );
+      consoleSpy.mockRestore();
+    });
+
     it('should load context file path when GEMINI.md is present', async () => {
       createExtension({
         extensionsDir: userExtensionsDir,
@@ -363,6 +384,111 @@ describe('extension tests', () => {
       ]);
     });
 
+    it('should load extension policies from the policies directory', async () => {
+      const extDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'policy-extension',
+        version: '1.0.0',
+      });
+
+      const policiesDir = path.join(extDir, 'policies');
+      fs.mkdirSync(policiesDir);
+
+      const policiesContent = `
+[[rule]]
+toolName = "deny_tool"
+decision = "deny"
+priority = 500
+
+[[rule]]
+toolName = "ask_tool"
+decision = "ask_user"
+priority = 100
+`;
+      fs.writeFileSync(
+        path.join(policiesDir, 'policies.toml'),
+        policiesContent,
+      );
+
+      const extensions = await extensionManager.loadExtensions();
+      expect(extensions).toHaveLength(1);
+      const extension = extensions[0];
+
+      expect(extension.rules).toBeDefined();
+      expect(extension.rules).toHaveLength(2);
+      expect(
+        extension.rules!.find((r) => r.toolName === 'deny_tool')?.decision,
+      ).toBe('deny');
+      expect(
+        extension.rules!.find((r) => r.toolName === 'ask_tool')?.decision,
+      ).toBe('ask_user');
+      // Verify source is prefixed
+      expect(extension.rules![0].source).toContain(
+        'Extension (policy-extension):',
+      );
+    });
+
+    it('should ignore ALLOW rules and YOLO mode from extension policies for security', async () => {
+      const consoleSpy = vi.spyOn(console, 'warn').mockImplementation(() => {});
+      const extDir = createExtension({
+        extensionsDir: userExtensionsDir,
+        name: 'security-test-extension',
+        version: '1.0.0',
+      });
+
+      const policiesDir = path.join(extDir, 'policies');
+      fs.mkdirSync(policiesDir);
+
+      const policiesContent = `
+[[rule]]
+toolName = "allow_tool"
+decision = "allow"
+priority = 100
+
+[[rule]]
+toolName = "yolo_tool"
+decision = "ask_user"
+priority = 100
+modes = ["yolo"]
+
+[[safety_checker]]
+toolName = "yolo_check"
+priority = 100
+modes = ["yolo"]
+[safety_checker.checker]
+type = "external"
+name = "yolo-checker"
+`;
+      fs.writeFileSync(
+        path.join(policiesDir, 'policies.toml'),
+        policiesContent,
+      );
+
+      const extensions = await extensionManager.loadExtensions();
+      expect(extensions).toHaveLength(1);
+      const extension = extensions[0];
+
+      // ALLOW rules and YOLO rules/checkers should be filtered out
+      expect(extension.rules).toBeDefined();
+      expect(extension.rules).toHaveLength(0);
+      expect(extension.checkers).toBeDefined();
+      expect(extension.checkers).toHaveLength(0);
+
+      // Should have logged warnings
+      expect(consoleSpy).toHaveBeenCalledWith(
+        expect.stringContaining('attempted to contribute an ALLOW rule'),
+      );
+      expect(consoleSpy).toHaveBeenCalledWith(
+        expect.stringContaining('attempted to contribute a rule for YOLO mode'),
+      );
+      expect(consoleSpy).toHaveBeenCalledWith(
+        expect.stringContaining(
+          'attempted to contribute a safety checker for YOLO mode',
+        ),
+      );
+      consoleSpy.mockRestore();
+    });
+
     it('should hydrate ${extensionPath} correctly for linked extensions', async () => {
       const sourceExtDir = getRealPath(
         createExtension({
@@ -540,7 +666,7 @@ describe('extension tests', () => {
 
       // Bad extension
       const badExtDir = path.join(userExtensionsDir, 'bad-ext');
-      fs.mkdirSync(badExtDir);
+      fs.mkdirSync(badExtDir, { recursive: true });
       const badConfigPath = path.join(badExtDir, EXTENSIONS_CONFIG_FILENAME);
       fs.writeFileSync(badConfigPath, '{ "name": "bad-ext"'); // Malformed
 
@@ -548,7 +674,7 @@ describe('extension tests', () => {
 
       expect(extensions).toHaveLength(1);
       expect(extensions[0].name).toBe('good-ext');
-      expect(consoleSpy).toHaveBeenCalledExactlyOnceWith(
+      expect(consoleSpy).toHaveBeenCalledWith(
         expect.stringContaining(
           `Warning: Skipping extension in ${badExtDir}: Failed to load extension config from ${badConfigPath}`,
         ),
@@ -571,7 +697,7 @@ describe('extension tests', () => {
 
       // Bad extension
       const badExtDir = path.join(userExtensionsDir, 'bad-ext-no-name');
-      fs.mkdirSync(badExtDir);
+      fs.mkdirSync(badExtDir, { recursive: true });
       const badConfigPath = path.join(badExtDir, EXTENSIONS_CONFIG_FILENAME);
       fs.writeFileSync(badConfigPath, JSON.stringify({ version: '1.0.0' }));
 
@@ -579,7 +705,7 @@ describe('extension tests', () => {
 
       expect(extensions).toHaveLength(1);
       expect(extensions[0].name).toBe('good-ext');
-      expect(consoleSpy).toHaveBeenCalledExactlyOnceWith(
+      expect(consoleSpy).toHaveBeenCalledWith(
         expect.stringContaining(
           `Warning: Skipping extension in ${badExtDir}: Failed to load extension config from ${badConfigPath}: Invalid configuration in ${badConfigPath}: missing "name"`,
         ),
diff --git a/packages/cli/src/config/policy-engine.integration.test.ts b/packages/cli/src/config/policy-engine.integration.test.ts
index 1d7573337e..02515815d0 100644
--- a/packages/cli/src/config/policy-engine.integration.test.ts
+++ b/packages/cli/src/config/policy-engine.integration.test.ts
@@ -177,13 +177,13 @@ describe('Policy Engine Integration Tests', () => {
       );
       const engine = new PolicyEngine(config);
 
-      // MCP server allowed (priority 3.1) provides general allow for server
-      // MCP server allowed (priority 3.1) provides general allow for server
+      // MCP server allowed (priority 4.1) provides general allow for server
+      // MCP server allowed (priority 4.1) provides general allow for server
       expect(
         (await engine.check({ name: 'my-server__safe-tool' }, undefined))
           .decision,
       ).toBe(PolicyDecision.ALLOW);
-      // But specific tool exclude (priority 3.4) wins over server allow
+      // But specific tool exclude (priority 4.4) wins over server allow
       expect(
         (await engine.check({ name: 'my-server__dangerous-tool' }, undefined))
           .decision,
@@ -476,25 +476,25 @@ describe('Policy Engine Integration Tests', () => {
 
       // Find rules and verify their priorities
       const blockedToolRule = rules.find((r) => r.toolName === 'blocked-tool');
-      expect(blockedToolRule?.priority).toBe(3.4); // Command line exclude
+      expect(blockedToolRule?.priority).toBe(4.4); // Command line exclude
 
       const blockedServerRule = rules.find(
         (r) => r.toolName === 'blocked-server__*',
       );
-      expect(blockedServerRule?.priority).toBe(3.9); // MCP server exclude
+      expect(blockedServerRule?.priority).toBe(4.9); // MCP server exclude
 
       const specificToolRule = rules.find(
         (r) => r.toolName === 'specific-tool',
       );
-      expect(specificToolRule?.priority).toBe(3.3); // Command line allow
+      expect(specificToolRule?.priority).toBe(4.3); // Command line allow
 
       const trustedServerRule = rules.find(
         (r) => r.toolName === 'trusted-server__*',
       );
-      expect(trustedServerRule?.priority).toBe(3.2); // MCP trusted server
+      expect(trustedServerRule?.priority).toBe(4.2); // MCP trusted server
 
       const mcpServerRule = rules.find((r) => r.toolName === 'mcp-server__*');
-      expect(mcpServerRule?.priority).toBe(3.1); // MCP allowed server
+      expect(mcpServerRule?.priority).toBe(4.1); // MCP allowed server
 
       const readOnlyToolRule = rules.find((r) => r.toolName === 'glob');
       // Priority 70 in default tier → 1.07 (Overriding Plan Mode Deny)
@@ -641,16 +641,16 @@ describe('Policy Engine Integration Tests', () => {
 
       // Verify each rule has the expected priority
       const tool3Rule = rules.find((r) => r.toolName === 'tool3');
-      expect(tool3Rule?.priority).toBe(3.4); // Excluded tools (user tier)
+      expect(tool3Rule?.priority).toBe(4.4); // Excluded tools (user tier)
 
       const server2Rule = rules.find((r) => r.toolName === 'server2__*');
-      expect(server2Rule?.priority).toBe(3.9); // Excluded servers (user tier)
+      expect(server2Rule?.priority).toBe(4.9); // Excluded servers (user tier)
 
       const tool1Rule = rules.find((r) => r.toolName === 'tool1');
-      expect(tool1Rule?.priority).toBe(3.3); // Allowed tools (user tier)
+      expect(tool1Rule?.priority).toBe(4.3); // Allowed tools (user tier)
 
       const server1Rule = rules.find((r) => r.toolName === 'server1__*');
-      expect(server1Rule?.priority).toBe(3.1); // Allowed servers (user tier)
+      expect(server1Rule?.priority).toBe(4.1); // Allowed servers (user tier)
 
       const globRule = rules.find((r) => r.toolName === 'glob');
       // Priority 70 in default tier → 1.07
diff --git a/packages/core/src/config/config.ts b/packages/core/src/config/config.ts
index 2f5d452446..32d74479e7 100644
--- a/packages/core/src/config/config.ts
+++ b/packages/core/src/config/config.ts
@@ -107,7 +107,12 @@ import { FileExclusions } from '../utils/ignorePatterns.js';
 import { MessageBus } from '../confirmation-bus/message-bus.js';
 import type { EventEmitter } from 'node:events';
 import { PolicyEngine } from '../policy/policy-engine.js';
-import { ApprovalMode, type PolicyEngineConfig } from '../policy/types.js';
+import {
+  ApprovalMode,
+  type PolicyEngineConfig,
+  type PolicyRule,
+  type SafetyCheckerRule,
+} from '../policy/types.js';
 import { HookSystem } from '../hooks/index.js';
 import type {
   UserTierId,
@@ -324,6 +329,14 @@ export interface GeminiCLIExtension {
    * These themes will be registered when the extension is activated.
    */
   themes?: CustomTheme[];
+  /**
+   * Policy rules contributed by this extension.
+   */
+  rules?: PolicyRule[];
+  /**
+   * Safety checkers contributed by this extension.
+   */
+  checkers?: SafetyCheckerRule[];
 }
 
 export interface ExtensionInstallMetadata {
diff --git a/packages/core/src/policy/config.test.ts b/packages/core/src/policy/config.test.ts
index a9fae7a1fa..3ded361084 100644
--- a/packages/core/src/policy/config.test.ts
+++ b/packages/core/src/policy/config.test.ts
@@ -169,7 +169,7 @@ describe('createPolicyEngineConfig', () => {
         r.decision === PolicyDecision.ALLOW,
     );
     expect(rule).toBeDefined();
-    expect(rule?.priority).toBeCloseTo(3.3, 5); // Command line allow
+    expect(rule?.priority).toBeCloseTo(4.3, 5); // Command line allow
   });
 
   it('should deny tools in tools.exclude', async () => {
@@ -188,7 +188,7 @@ describe('createPolicyEngineConfig', () => {
         r.decision === PolicyDecision.DENY,
     );
     expect(rule).toBeDefined();
-    expect(rule?.priority).toBeCloseTo(3.4, 5); // Command line exclude
+    expect(rule?.priority).toBeCloseTo(4.4, 5); // Command line exclude
   });
 
   it('should allow tools from allowed MCP servers', async () => {
@@ -206,7 +206,7 @@ describe('createPolicyEngineConfig', () => {
         r.toolName === 'my-server__*' && r.decision === PolicyDecision.ALLOW,
     );
     expect(rule).toBeDefined();
-    expect(rule?.priority).toBe(3.1); // MCP allowed server
+    expect(rule?.priority).toBe(4.1); // MCP allowed server
   });
 
   it('should deny tools from excluded MCP servers', async () => {
@@ -224,7 +224,7 @@ describe('createPolicyEngineConfig', () => {
         r.toolName === 'my-server__*' && r.decision === PolicyDecision.DENY,
     );
     expect(rule).toBeDefined();
-    expect(rule?.priority).toBe(3.9); // MCP excluded server
+    expect(rule?.priority).toBe(4.9); // MCP excluded server
   });
 
   it('should allow tools from trusted MCP servers', async () => {
@@ -251,7 +251,7 @@ describe('createPolicyEngineConfig', () => {
         r.decision === PolicyDecision.ALLOW,
     );
     expect(trustedRule).toBeDefined();
-    expect(trustedRule?.priority).toBe(3.2); // MCP trusted server
+    expect(trustedRule?.priority).toBe(4.2); // MCP trusted server
 
     // Untrusted server should not have an allow rule
     const untrustedRule = config.rules?.find(
@@ -288,7 +288,7 @@ describe('createPolicyEngineConfig', () => {
         r.decision === PolicyDecision.ALLOW,
     );
     expect(allowedRule).toBeDefined();
-    expect(allowedRule?.priority).toBe(3.1); // MCP allowed server
+    expect(allowedRule?.priority).toBe(4.1); // MCP allowed server
 
     // Check trusted server
     const trustedRule = config.rules?.find(
@@ -297,7 +297,7 @@ describe('createPolicyEngineConfig', () => {
         r.decision === PolicyDecision.ALLOW,
     );
     expect(trustedRule).toBeDefined();
-    expect(trustedRule?.priority).toBe(3.2); // MCP trusted server
+    expect(trustedRule?.priority).toBe(4.2); // MCP trusted server
 
     // Check excluded server
     const excludedRule = config.rules?.find(
@@ -306,7 +306,7 @@ describe('createPolicyEngineConfig', () => {
         r.decision === PolicyDecision.DENY,
     );
     expect(excludedRule).toBeDefined();
-    expect(excludedRule?.priority).toBe(3.9); // MCP excluded server
+    expect(excludedRule?.priority).toBe(4.9); // MCP excluded server
   });
 
   it('should allow all tools in YOLO mode', async () => {
@@ -387,11 +387,11 @@ describe('createPolicyEngineConfig', () => {
     );
 
     expect(serverDenyRule).toBeDefined();
-    expect(serverDenyRule?.priority).toBe(3.9); // MCP excluded server
+    expect(serverDenyRule?.priority).toBe(4.9); // MCP excluded server
     expect(toolAllowRule).toBeDefined();
-    expect(toolAllowRule?.priority).toBeCloseTo(3.3, 5); // Command line allow
+    expect(toolAllowRule?.priority).toBeCloseTo(4.3, 5); // Command line allow
 
-    // Server deny (3.9) has higher priority than tool allow (3.3),
+    // Server deny (4.9) has higher priority than tool allow (4.3),
     // so server deny wins (this is expected behavior - server-level blocks are security critical)
   });
 
@@ -424,7 +424,7 @@ describe('createPolicyEngineConfig', () => {
 
     expect(serverAllowRule).toBeDefined();
     expect(toolDenyRule).toBeDefined();
-    // Command line exclude (3.4) has higher priority than MCP server trust (3.2)
+    // Command line exclude (4.4) has higher priority than MCP server trust (4.2)
     // This is the correct behavior - specific exclusions should beat general server trust
     expect(toolDenyRule!.priority).toBeGreaterThan(serverAllowRule!.priority!);
   });
@@ -432,16 +432,16 @@ describe('createPolicyEngineConfig', () => {
   it('should handle complex priority scenarios correctly', async () => {
     const settings: PolicySettings = {
       tools: {
-        allowed: ['my-server__tool1', 'other-tool'], // Priority 3.3
-        exclude: ['my-server__tool2', 'glob'], // Priority 3.4
+        allowed: ['my-server__tool1', 'other-tool'], // Priority 4.3
+        exclude: ['my-server__tool2', 'glob'], // Priority 4.4
       },
       mcp: {
-        allowed: ['allowed-server'], // Priority 3.1
-        excluded: ['excluded-server'], // Priority 3.9
+        allowed: ['allowed-server'], // Priority 4.1
+        excluded: ['excluded-server'], // Priority 4.9
       },
       mcpServers: {
         'trusted-server': {
-          trust: true, // Priority 90 -> 3.2
+          trust: true, // Priority 4.2
         },
       },
     };
@@ -517,7 +517,7 @@ describe('createPolicyEngineConfig', () => {
     expect(globDenyRule).toBeDefined();
     expect(globAllowRule).toBeDefined();
     // Deny from settings (user tier)
-    expect(globDenyRule!.priority).toBeCloseTo(3.4, 5); // Command line exclude
+    expect(globDenyRule!.priority).toBeCloseTo(4.4, 5); // Command line exclude
     // Allow from default TOML: 1 + 50/1000 = 1.05
     expect(globAllowRule!.priority).toBeCloseTo(1.05, 5);
 
@@ -530,11 +530,11 @@ describe('createPolicyEngineConfig', () => {
       }))
       .sort((a, b) => (b.priority ?? 0) - (a.priority ?? 0));
 
-    // Check that the highest priority items are the excludes (user tier: 3.4 and 3.9)
+    // Check that the highest priority items are the excludes (user tier: 4.4 and 4.9)
     const highestPriorityExcludes = priorities?.filter(
       (p) =>
-        Math.abs(p.priority! - 3.4) < 0.01 ||
-        Math.abs(p.priority! - 3.9) < 0.01,
+        Math.abs(p.priority! - 4.4) < 0.01 ||
+        Math.abs(p.priority! - 4.9) < 0.01,
     );
     expect(
       highestPriorityExcludes?.every((p) => p.decision === PolicyDecision.DENY),
@@ -626,7 +626,7 @@ describe('createPolicyEngineConfig', () => {
         r.toolName === 'dangerous-tool' && r.decision === PolicyDecision.DENY,
     );
     expect(excludeRule).toBeDefined();
-    expect(excludeRule?.priority).toBeCloseTo(3.4, 5); // Command line exclude
+    expect(excludeRule?.priority).toBeCloseTo(4.4, 5); // Command line exclude
   });
 
   it('should support argsPattern in policy rules', async () => {
@@ -733,8 +733,8 @@ priority = 150
         r.decision === PolicyDecision.ALLOW,
     );
     expect(rule).toBeDefined();
-    // Priority 150 in user tier → 3.150
-    expect(rule?.priority).toBeCloseTo(3.15, 5);
+    // Priority 150 in user tier → 4.150
+    expect(rule?.priority).toBeCloseTo(4.15, 5);
     expect(rule?.argsPattern).toBeInstanceOf(RegExp);
     expect(rule?.argsPattern?.test('{"command":"git status"}')).toBe(true);
     expect(rule?.argsPattern?.test('{"command":"git diff"}')).toBe(true);
@@ -1046,7 +1046,7 @@ name = "invalid-name"
         r.decision === PolicyDecision.ALLOW,
     );
     expect(rule).toBeDefined();
-    expect(rule?.priority).toBeCloseTo(3.3, 5); // Command line allow
+    expect(rule?.priority).toBeCloseTo(4.3, 5); // Command line allow
 
     vi.doUnmock('node:fs/promises');
   });
@@ -1188,7 +1188,7 @@ modes = ["plan"]
         r.modes?.includes(ApprovalMode.PLAN),
     );
     expect(subagentRule).toBeDefined();
-    expect(subagentRule?.priority).toBeCloseTo(3.1, 5);
+    expect(subagentRule?.priority).toBeCloseTo(4.1, 5);
 
     vi.doUnmock('node:fs/promises');
   });
diff --git a/packages/core/src/policy/config.ts b/packages/core/src/policy/config.ts
index 7de415cb37..800006e27e 100644
--- a/packages/core/src/policy/config.ts
+++ b/packages/core/src/policy/config.ts
@@ -13,8 +13,9 @@ import {
   type PolicyEngineConfig,
   PolicyDecision,
   type PolicyRule,
-  type ApprovalMode,
+  ApprovalMode,
   type PolicySettings,
+  type SafetyCheckerRule,
 } from './types.js';
 import type { PolicyEngine } from './policy-engine.js';
 import { loadPoliciesFromToml, type PolicyFileError } from './toml-loader.js';
@@ -39,14 +40,15 @@ export const DEFAULT_CORE_POLICIES_DIR = path.join(__dirname, 'policies');
 
 // Policy tier constants for priority calculation
 export const DEFAULT_POLICY_TIER = 1;
-export const WORKSPACE_POLICY_TIER = 2;
-export const USER_POLICY_TIER = 3;
-export const ADMIN_POLICY_TIER = 4;
+export const EXTENSION_POLICY_TIER = 2;
+export const WORKSPACE_POLICY_TIER = 3;
+export const USER_POLICY_TIER = 4;
+export const ADMIN_POLICY_TIER = 5;
 
 // Specific priority offsets and derived priorities for dynamic/settings rules.
 // These are added to the tier base (e.g., USER_POLICY_TIER).
 
-// Workspace tier (2) + high priority (950/1000) = ALWAYS_ALLOW_PRIORITY
+// Workspace tier (3) + high priority (950/1000) = ALWAYS_ALLOW_PRIORITY
 // This ensures user "always allow" selections are high priority
 // within the workspace tier but still lose to user/admin policies.
 export const ALWAYS_ALLOW_PRIORITY = WORKSPACE_POLICY_TIER + 0.95;
@@ -59,7 +61,9 @@ export const ALLOWED_MCP_SERVER_PRIORITY = USER_POLICY_TIER + 0.1;
 
 /**
  * Gets the list of directories to search for policy files, in order of increasing priority
- * (Default -> User -> Project -> Admin).
+ * (Default -> Extension -> Workspace -> User -> Admin).
+ *
+ * Note: Extension policies are loaded separately by the extension manager.
  *
  * @param defaultPoliciesDir Optional path to a directory containing default policies.
  * @param policyPaths Optional user-provided policy paths (from --policy flag).
@@ -95,7 +99,7 @@ export function getPolicyDirectories(
 }
 
 /**
- * Determines the policy tier (1=default, 2=user, 3=workspace, 4=admin) for a given directory.
+ * Determines the policy tier (1=default, 2=extension, 3=workspace, 4=user, 5=admin) for a given directory.
  * This is used by the TOML loader to assign priority bands.
  */
 export function getPolicyTier(
@@ -178,6 +182,69 @@ async function filterSecurePolicyDirectories(
   return results.filter((dir): dir is string => dir !== null);
 }
 
+/**
+ * Loads and sanitizes policies from an extension's policies directory.
+ * Security: Filters out 'ALLOW' rules and YOLO mode configurations.
+ */
+export async function loadExtensionPolicies(
+  extensionName: string,
+  policyDir: string,
+): Promise<{
+  rules: PolicyRule[];
+  checkers: SafetyCheckerRule[];
+  errors: PolicyFileError[];
+}> {
+  const result = await loadPoliciesFromToml(
+    [policyDir],
+    () => EXTENSION_POLICY_TIER,
+  );
+
+  const rules = result.rules.filter((rule) => {
+    // Security: Extensions are not allowed to automatically approve tool calls.
+    if (rule.decision === PolicyDecision.ALLOW) {
+      debugLogger.warn(
+        `[PolicyConfig] Extension "${extensionName}" attempted to contribute an ALLOW rule for tool "${rule.toolName}". Ignoring this rule for security.`,
+      );
+      return false;
+    }
+
+    // Security: Extensions are not allowed to contribute YOLO mode rules.
+    if (rule.modes?.includes(ApprovalMode.YOLO)) {
+      debugLogger.warn(
+        `[PolicyConfig] Extension "${extensionName}" attempted to contribute a rule for YOLO mode. Ignoring this rule for security.`,
+      );
+      return false;
+    }
+
+    // Prefix source with extension name to avoid collisions and double prefixing.
+    // toml-loader.ts adds "Extension: file.toml", we transform it to "Extension (name): file.toml".
+    rule.source = rule.source?.replace(
+      /^Extension: /,
+      `Extension (${extensionName}): `,
+    );
+    return true;
+  });
+
+  const checkers = result.checkers.filter((checker) => {
+    // Security: Extensions are not allowed to contribute YOLO mode checkers.
+    if (checker.modes?.includes(ApprovalMode.YOLO)) {
+      debugLogger.warn(
+        `[PolicyConfig] Extension "${extensionName}" attempted to contribute a safety checker for YOLO mode. Ignoring this checker for security.`,
+      );
+      return false;
+    }
+
+    // Prefix source with extension name.
+    checker.source = checker.source?.replace(
+      /^Extension: /,
+      `Extension (${extensionName}): `,
+    );
+    return true;
+  });
+
+  return { rules, checkers, errors: result.errors };
+}
+
 export async function createPolicyEngineConfig(
   settings: PolicySettings,
   approvalMode: ApprovalMode,
@@ -234,17 +301,19 @@ export async function createPolicyEngineConfig(
   const checkers = [...tomlCheckers];
 
   // Priority system for policy rules:
+
   // - Higher priority numbers win over lower priority numbers
   // - When multiple rules match, the highest priority rule is applied
   // - Rules are evaluated in order of priority (highest first)
   //
   // Priority bands (tiers):
   // - Default policies (TOML): 1 + priority/1000 (e.g., priority 100 → 1.100)
-  // - Workspace policies (TOML): 2 + priority/1000 (e.g., priority 100 → 2.100)
-  // - User policies (TOML): 3 + priority/1000 (e.g., priority 100 → 3.100)
-  // - Admin policies (TOML): 4 + priority/1000 (e.g., priority 100 → 4.100)
+  // - Extension policies (TOML): 2 + priority/1000 (e.g., priority 100 → 2.100)
+  // - Workspace policies (TOML): 3 + priority/1000 (e.g., priority 100 → 3.100)
+  // - User policies (TOML): 4 + priority/1000 (e.g., priority 100 → 4.100)
+  // - Admin policies (TOML): 5 + priority/1000 (e.g., priority 100 → 5.100)
   //
-  // This ensures Admin > User > Workspace > Default hierarchy is always preserved,
+  // This ensures Admin > User > Workspace > Extension > Default hierarchy is always preserved,
   // while allowing user-specified priorities to work within each tier.
   //
   // Settings-based and dynamic rules (mixed tiers):
@@ -254,7 +323,7 @@ export async function createPolicyEngineConfig(
   //   TRUSTED_MCP_SERVER_PRIORITY:  MCP servers with trust=true (persistent trusted servers)
   //   ALLOWED_MCP_SERVER_PRIORITY:  MCP servers allowed list (persistent general server allows)
   //   ALWAYS_ALLOW_PRIORITY:        Tools that the user has selected as "Always Allow" in the interactive UI
-  //                                 (Workspace tier 2.x - scoped to the project)
+  //                                 (Workspace tier 3.x - scoped to the project)
   //
   // TOML policy priorities (before transformation):
   //   10: Write tools default to ASK_USER (becomes 1.010 in default tier)
diff --git a/packages/core/src/policy/policy-engine.test.ts b/packages/core/src/policy/policy-engine.test.ts
index 7accf5c7e5..f93c9ad3b8 100644
--- a/packages/core/src/policy/policy-engine.test.ts
+++ b/packages/core/src/policy/policy-engine.test.ts
@@ -406,6 +406,40 @@ describe('PolicyEngine', () => {
       expect(remainingRules.some((r) => r.toolName === 'tool2')).toBe(true);
     });
 
+    it('should remove rules for specific tool and source', () => {
+      engine.addRule({
+        toolName: 'tool1',
+        decision: PolicyDecision.ALLOW,
+        source: 'source1',
+      });
+      engine.addRule({
+        toolName: 'tool1',
+        decision: PolicyDecision.DENY,
+        source: 'source2',
+      });
+      engine.addRule({
+        toolName: 'tool2',
+        decision: PolicyDecision.ALLOW,
+        source: 'source1',
+      });
+
+      expect(engine.getRules()).toHaveLength(3);
+
+      engine.removeRulesForTool('tool1', 'source1');
+
+      const rules = engine.getRules();
+      expect(rules).toHaveLength(2);
+      expect(
+        rules.some((r) => r.toolName === 'tool1' && r.source === 'source2'),
+      ).toBe(true);
+      expect(
+        rules.some((r) => r.toolName === 'tool2' && r.source === 'source1'),
+      ).toBe(true);
+      expect(
+        rules.some((r) => r.toolName === 'tool1' && r.source === 'source1'),
+      ).toBe(false);
+    });
+
     it('should handle removing non-existent tool', () => {
       engine.addRule({ toolName: 'existing', decision: PolicyDecision.ALLOW });
 
@@ -2836,6 +2870,34 @@ describe('PolicyEngine', () => {
     });
   });
 
+  describe('removeRulesBySource', () => {
+    it('should remove rules matching a specific source', () => {
+      engine.addRule({
+        toolName: 'rule1',
+        decision: PolicyDecision.ALLOW,
+        source: 'source1',
+      });
+      engine.addRule({
+        toolName: 'rule2',
+        decision: PolicyDecision.ALLOW,
+        source: 'source2',
+      });
+      engine.addRule({
+        toolName: 'rule3',
+        decision: PolicyDecision.ALLOW,
+        source: 'source1',
+      });
+
+      expect(engine.getRules()).toHaveLength(3);
+
+      engine.removeRulesBySource('source1');
+
+      const rules = engine.getRules();
+      expect(rules).toHaveLength(1);
+      expect(rules[0].toolName).toBe('rule2');
+    });
+  });
+
   describe('removeCheckersByTier', () => {
     it('should remove checkers matching a specific tier', () => {
       engine.addChecker({
@@ -2861,6 +2923,31 @@ describe('PolicyEngine', () => {
     });
   });
 
+  describe('removeCheckersBySource', () => {
+    it('should remove checkers matching a specific source', () => {
+      engine.addChecker({
+        checker: { type: 'external', name: 'c1' },
+        source: 'sourceA',
+      });
+      engine.addChecker({
+        checker: { type: 'external', name: 'c2' },
+        source: 'sourceB',
+      });
+      engine.addChecker({
+        checker: { type: 'external', name: 'c3' },
+        source: 'sourceA',
+      });
+
+      expect(engine.getCheckers()).toHaveLength(3);
+
+      engine.removeCheckersBySource('sourceA');
+
+      const checkers = engine.getCheckers();
+      expect(checkers).toHaveLength(1);
+      expect(checkers[0].checker.name).toBe('c2');
+    });
+  });
+
   describe('Tool Annotations', () => {
     it('should match tools by semantic annotations', async () => {
       engine = new PolicyEngine({
@@ -2924,4 +3011,22 @@ describe('PolicyEngine', () => {
       ).toBe(PolicyDecision.ALLOW);
     });
   });
+
+  describe('hook checkers', () => {
+    it('should add and retrieve hook checkers in priority order', () => {
+      engine.addHookChecker({
+        checker: { type: 'external', name: 'h1' },
+        priority: 5,
+      });
+      engine.addHookChecker({
+        checker: { type: 'external', name: 'h2' },
+        priority: 10,
+      });
+
+      const hookCheckers = engine.getHookCheckers();
+      expect(hookCheckers).toHaveLength(2);
+      expect(hookCheckers[0].priority).toBe(10);
+      expect(hookCheckers[1].priority).toBe(5);
+    });
+  });
 });
diff --git a/packages/core/src/policy/policy-engine.ts b/packages/core/src/policy/policy-engine.ts
index 8f61d622c2..03087716ff 100644
--- a/packages/core/src/policy/policy-engine.ts
+++ b/packages/core/src/policy/policy-engine.ts
@@ -562,6 +562,13 @@ export class PolicyEngine {
     );
   }
 
+  /**
+   * Remove rules matching a specific source.
+   */
+  removeRulesBySource(source: string): void {
+    this.rules = this.rules.filter((rule) => rule.source !== source);
+  }
+
   /**
    * Remove checkers matching a specific tier (priority band).
    */
@@ -571,6 +578,15 @@ export class PolicyEngine {
     );
   }
 
+  /**
+   * Remove checkers matching a specific source.
+   */
+  removeCheckersBySource(source: string): void {
+    this.checkers = this.checkers.filter(
+      (checker) => checker.source !== source,
+    );
+  }
+
   /**
    * Remove rules for a specific tool.
    * If source is provided, only rules matching that source are removed.
diff --git a/packages/core/src/policy/toml-loader.test.ts b/packages/core/src/policy/toml-loader.test.ts
index 1e4c008c5d..54a81771b8 100644
--- a/packages/core/src/policy/toml-loader.test.ts
+++ b/packages/core/src/policy/toml-loader.test.ts
@@ -262,30 +262,34 @@ deny_message = "Deletion is permanent"
       expect(result.errors).toHaveLength(0);
     });
 
-    it('should support modes property for Tier 2 and Tier 3 policies', async () => {
+    it('should support modes property for Tier 4 and Tier 5 policies', async () => {
       await fs.writeFile(
-        path.join(tempDir, 'tier2.toml'),
+        path.join(tempDir, 'tier4.toml'),
         `
 [[rule]]
-toolName = "tier2-tool"
+toolName = "tier4-tool"
 decision = "allow"
 priority = 100
 modes = ["autoEdit"]
 `,
       );
 
-      const getPolicyTier2 = (_dir: string) => 2; // Tier 2
+      const getPolicyTier4 = (_dir: string) => 4; // Tier 4 (User)
+      const result4 = await loadPoliciesFromToml([tempDir], getPolicyTier4);
+
+      expect(result4.rules).toHaveLength(1);
+      expect(result4.rules[0].toolName).toBe('tier4-tool');
+      expect(result4.rules[0].modes).toEqual(['autoEdit']);
+      expect(result4.rules[0].source).toBe('User: tier4.toml');
+
+      const getPolicyTier2 = (_dir: string) => 2; // Tier 2 (Extension)
       const result2 = await loadPoliciesFromToml([tempDir], getPolicyTier2);
+      expect(result2.rules[0].source).toBe('Extension: tier4.toml');
 
-      expect(result2.rules).toHaveLength(1);
-      expect(result2.rules[0].toolName).toBe('tier2-tool');
-      expect(result2.rules[0].modes).toEqual(['autoEdit']);
-      expect(result2.rules[0].source).toBe('Workspace: tier2.toml');
-
-      const getPolicyTier3 = (_dir: string) => 3; // Tier 3
-      const result3 = await loadPoliciesFromToml([tempDir], getPolicyTier3);
-      expect(result3.rules[0].source).toBe('User: tier2.toml');
-      expect(result3.errors).toHaveLength(0);
+      const getPolicyTier5 = (_dir: string) => 5; // Tier 5 (Admin)
+      const result5 = await loadPoliciesFromToml([tempDir], getPolicyTier5);
+      expect(result5.rules[0].source).toBe('Admin: tier4.toml');
+      expect(result5.errors).toHaveLength(0);
     });
 
     it('should handle TOML parse errors', async () => {
diff --git a/packages/core/src/policy/toml-loader.ts b/packages/core/src/policy/toml-loader.ts
index 6b164d59b8..df4bd3ca9e 100644
--- a/packages/core/src/policy/toml-loader.ts
+++ b/packages/core/src/policy/toml-loader.ts
@@ -108,7 +108,7 @@ export type PolicyFileErrorType =
 export interface PolicyFileError {
   filePath: string;
   fileName: string;
-  tier: 'default' | 'user' | 'workspace' | 'admin';
+  tier: 'default' | 'extension' | 'user' | 'workspace' | 'admin';
   ruleIndex?: number;
   errorType: PolicyFileErrorType;
   message: string;
@@ -173,11 +173,14 @@ export async function readPolicyFiles(
 /**
  * Converts a tier number to a human-readable tier name.
  */
-function getTierName(tier: number): 'default' | 'user' | 'workspace' | 'admin' {
+function getTierName(
+  tier: number,
+): 'default' | 'extension' | 'user' | 'workspace' | 'admin' {
   if (tier === 1) return 'default';
-  if (tier === 2) return 'workspace';
-  if (tier === 3) return 'user';
-  if (tier === 4) return 'admin';
+  if (tier === 2) return 'extension';
+  if (tier === 3) return 'workspace';
+  if (tier === 4) return 'user';
+  if (tier === 5) return 'admin';
   return 'default';
 }
 
diff --git a/packages/core/src/policy/workspace-policy.test.ts b/packages/core/src/policy/workspace-policy.test.ts
index 999dae6f0d..0a277bc072 100644
--- a/packages/core/src/policy/workspace-policy.test.ts
+++ b/packages/core/src/policy/workspace-policy.test.ts
@@ -34,7 +34,7 @@ describe('Workspace-Level Policies', () => {
     vi.doUnmock('node:fs/promises');
   });
 
-  it('should load workspace policies with correct priority (Tier 2)', async () => {
+  it('should load workspace policies with correct priority (Tier 3)', async () => {
     const workspacePoliciesDir = '/mock/workspace/policies';
     const defaultPoliciesDir = '/mock/default/policies';
 
@@ -98,21 +98,21 @@ priority = 10
 toolName = "test_tool"
 decision = "deny"
 priority = 10
-`; // Tier 3 -> 3.010
+`; // Tier 4 -> 4.010
       }
       if (path.includes('workspace.toml')) {
         return `[[rule]]
 toolName = "test_tool"
 decision = "allow"
 priority = 10
-`; // Tier 2 -> 2.010
+`; // Tier 3 -> 3.010
       }
       if (path.includes('admin.toml')) {
         return `[[rule]]
 toolName = "test_tool"
 decision = "deny"
 priority = 10
-`; // Tier 4 -> 4.010
+`; // Tier 5 -> 5.010
       }
       return '';
     });
@@ -144,9 +144,9 @@ priority = 10
 
     // Check for all 4 rules
     const defaultRule = rules?.find((r) => r.priority === 1.01);
-    const workspaceRule = rules?.find((r) => r.priority === 2.01);
-    const userRule = rules?.find((r) => r.priority === 3.01);
-    const adminRule = rules?.find((r) => r.priority === 4.01);
+    const workspaceRule = rules?.find((r) => r.priority === 3.01);
+    const userRule = rules?.find((r) => r.priority === 4.01);
+    const adminRule = rules?.find((r) => r.priority === 5.01);
 
     expect(defaultRule).toBeDefined();
     expect(userRule).toBeDefined();
@@ -224,7 +224,7 @@ priority=10`,
     expect(rules![0].priority).toBe(1.01);
   });
 
-  it('should load workspace policies and correctly transform to Tier 2', async () => {
+  it('should load workspace policies and correctly transform to Tier 3', async () => {
     const workspacePoliciesDir = '/mock/workspace/policies';
 
     // Mock FS
@@ -284,7 +284,7 @@ priority=500`,
 
     const rule = config.rules?.find((r) => r.toolName === 'p_tool');
     expect(rule).toBeDefined();
-    // Workspace Tier (2) + 500/1000 = 2.5
-    expect(rule?.priority).toBe(2.5);
+    // Workspace Tier (3) + 500/1000 = 3.5
+    expect(rule?.priority).toBe(3.5);
   });
 });
diff --git a/packages/core/src/utils/extensionLoader.test.ts b/packages/core/src/utils/extensionLoader.test.ts
index 9cbcd51e06..17526b99a8 100644
--- a/packages/core/src/utils/extensionLoader.test.ts
+++ b/packages/core/src/utils/extensionLoader.test.ts
@@ -14,6 +14,7 @@ import {
   type MockInstance,
 } from 'vitest';
 import { SimpleExtensionLoader } from './extensionLoader.js';
+import { PolicyDecision } from '../policy/types.js';
 import type { Config, GeminiCLIExtension } from '../config/config.js';
 import { type McpClientManager } from '../tools/mcp-client-manager.js';
 import type { GeminiClient } from '../core/client.js';
@@ -38,6 +39,12 @@ describe('SimpleExtensionLoader', () => {
   let mockHookSystemInit: MockInstance;
   let mockAgentRegistryReload: MockInstance;
   let mockSkillsReload: MockInstance;
+  let mockPolicyEngine: {
+    addRule: MockInstance;
+    addChecker: MockInstance;
+    removeRulesBySource: MockInstance;
+    removeCheckersBySource: MockInstance;
+  };
 
   const activeExtension: GeminiCLIExtension = {
     name: 'test-extension',
@@ -47,7 +54,22 @@ describe('SimpleExtensionLoader', () => {
     contextFiles: [],
     excludeTools: ['some-tool'],
     id: '123',
+    rules: [
+      {
+        toolName: 'test-tool',
+        decision: PolicyDecision.ALLOW,
+        source: 'Extension (test-extension): policies.toml',
+      },
+    ],
+    checkers: [
+      {
+        toolName: 'test-tool',
+        checker: { type: 'external', name: 'test-checker' },
+        source: 'Extension (test-extension): policies.toml',
+      },
+    ],
   };
+
   const inactiveExtension: GeminiCLIExtension = {
     name: 'test-extension',
     isActive: false,
@@ -67,6 +89,12 @@ describe('SimpleExtensionLoader', () => {
     mockHookSystemInit = vi.fn();
     mockAgentRegistryReload = vi.fn();
     mockSkillsReload = vi.fn();
+    mockPolicyEngine = {
+      addRule: vi.fn(),
+      addChecker: vi.fn(),
+      removeRulesBySource: vi.fn(),
+      removeCheckersBySource: vi.fn(),
+    };
     mockConfig = {
       getMcpClientManager: () => mockMcpClientManager,
       getEnableExtensionReloading: () => extensionReloadingEnabled,
@@ -81,6 +109,7 @@ describe('SimpleExtensionLoader', () => {
         reload: mockAgentRegistryReload,
       }),
       reloadSkills: mockSkillsReload,
+      getPolicyEngine: () => mockPolicyEngine,
     } as unknown as Config;
   });
 
@@ -88,6 +117,29 @@ describe('SimpleExtensionLoader', () => {
     vi.restoreAllMocks();
   });
 
+  it('should register policies when an extension starts', async () => {
+    const loader = new SimpleExtensionLoader([activeExtension]);
+    await loader.start(mockConfig);
+    expect(mockPolicyEngine.addRule).toHaveBeenCalledWith(
+      activeExtension.rules![0],
+    );
+    expect(mockPolicyEngine.addChecker).toHaveBeenCalledWith(
+      activeExtension.checkers![0],
+    );
+  });
+
+  it('should unregister policies when an extension stops', async () => {
+    const loader = new TestingSimpleExtensionLoader([activeExtension]);
+    await loader.start(mockConfig);
+    await loader.stopExtension(activeExtension);
+    expect(mockPolicyEngine.removeRulesBySource).toHaveBeenCalledWith(
+      'Extension (test-extension): policies.toml',
+    );
+    expect(mockPolicyEngine.removeCheckersBySource).toHaveBeenCalledWith(
+      'Extension (test-extension): policies.toml',
+    );
+  });
+
   it('should start active extensions', async () => {
     const loader = new SimpleExtensionLoader([activeExtension]);
     await loader.start(mockConfig);
diff --git a/packages/core/src/utils/extensionLoader.ts b/packages/core/src/utils/extensionLoader.ts
index 7110ba8615..8fdee33c2a 100644
--- a/packages/core/src/utils/extensionLoader.ts
+++ b/packages/core/src/utils/extensionLoader.ts
@@ -75,6 +75,21 @@ export abstract class ExtensionLoader {
       await this.config.getMcpClientManager()!.startExtension(extension);
       await this.maybeRefreshGeminiTools(extension);
 
+      // Register policy rules and checkers
+      if (extension.rules || extension.checkers) {
+        const policyEngine = this.config.getPolicyEngine();
+        if (extension.rules) {
+          for (const rule of extension.rules) {
+            policyEngine.addRule(rule);
+          }
+        }
+        if (extension.checkers) {
+          for (const checker of extension.checkers) {
+            policyEngine.addChecker(checker);
+          }
+        }
+      }
+
       // Note: Context files are loaded only once all extensions are done
       // loading/unloading to reduce churn, see the `maybeRefreshMemories` call
       // below.
@@ -168,6 +183,27 @@ export abstract class ExtensionLoader {
       await this.config.getMcpClientManager()!.stopExtension(extension);
       await this.maybeRefreshGeminiTools(extension);
 
+      // Unregister policy rules and checkers
+      if (extension.rules || extension.checkers) {
+        const policyEngine = this.config.getPolicyEngine();
+        const sources = new Set<string>();
+        if (extension.rules) {
+          for (const rule of extension.rules) {
+            if (rule.source) sources.add(rule.source);
+          }
+        }
+        if (extension.checkers) {
+          for (const checker of extension.checkers) {
+            if (checker.source) sources.add(checker.source);
+          }
+        }
+
+        for (const source of sources) {
+          policyEngine.removeRulesBySource(source);
+          policyEngine.removeCheckersBySource(source);
+        }
+      }
+
       // Note: Context files are loaded only once all extensions are done
       // loading/unloading to reduce churn, see the `maybeRefreshMemories` call
       // below.