diff --git a/packages/coding-agent/CHANGELOG.md b/packages/coding-agent/CHANGELOG.md
index 7126a1a5..33b66b61 100644
--- a/packages/coding-agent/CHANGELOG.md
+++ b/packages/coding-agent/CHANGELOG.md
@@ -8,6 +8,7 @@
 
 ### Fixed
 
+- Extensions defined in `settings.json` were not loaded ([#463](https://github.com/badlogic/pi-mono/pull/463) by [@melihmucuk](https://github.com/melihmucuk))
 - OAuth refresh no longer logs users out when multiple pi instances are running ([#466](https://github.com/badlogic/pi-mono/pull/466) by [@Cursivez](https://github.com/Cursivez))
 - Migration warnings now ignore `fd.exe` and `rg.exe` in `tools/` on Windows ([#458](https://github.com/badlogic/pi-mono/pull/458) by [@carlosgtrz](https://github.com/carlosgtrz))
 - CI: add `examples/extensions/with-deps` to workspaces to fix typecheck ([#467](https://github.com/badlogic/pi-mono/pull/467) by [@aliou](https://github.com/aliou))
diff --git a/packages/coding-agent/docs/sdk.md b/packages/coding-agent/docs/sdk.md
index b1c04d4e..8d62c0f4 100644
--- a/packages/coding-agent/docs/sdk.md
+++ b/packages/coding-agent/docs/sdk.md
@@ -468,12 +468,15 @@ Custom tools passed via `customTools` are combined with extension-registered too
 
 ### Extensions
 
-Extensions are discovered from `~/.pi/agent/extensions/` and `.pi/extensions/`. You can also pass inline extensions or additional paths:
+By default, extensions are discovered from multiple locations:
+- `~/.pi/agent/extensions/` (global)
+- `.pi/extensions/` (project-local)
+- Paths listed in `settings.json` `"extensions"` array
 
 ```typescript
 import { createAgentSession, type ExtensionFactory } from "@mariozechner/pi-coding-agent";
 
-// Inline extension
+// Inline extension factory
 const myExtension: ExtensionFactory = (pi) => {
   pi.on("tool_call", async (event, ctx) => {
     console.log(`Tool: ${event.toolName}`);
@@ -487,15 +490,20 @@ const myExtension: ExtensionFactory = (pi) => {
   });
 };
 
-// Pass inline extensions (merged with discovery)
+// Pass inline extensions (skips file discovery)
 const { session } = await createAgentSession({
   extensions: [myExtension],
 });
 
-// Or add paths to load (merged with discovery)
+// Add paths to load (merged with discovery)
 const { session } = await createAgentSession({
   additionalExtensionPaths: ["/path/to/my-extension.ts"],
 });
+
+// Disable extension discovery entirely
+const { session } = await createAgentSession({
+  extensions: [],
+});
 ```
 
 Extensions can register tools, subscribe to events, add commands, and more. See [extensions.md](extensions.md) for the full API.
diff --git a/packages/coding-agent/src/core/sdk.ts b/packages/coding-agent/src/core/sdk.ts
index b89f6e85..e84901b0 100644
--- a/packages/coding-agent/src/core/sdk.ts
+++ b/packages/coding-agent/src/core/sdk.ts
@@ -101,7 +101,7 @@ export interface CreateAgentSessionOptions {
 	tools?: Tool[];
 	/** Custom tools to register (in addition to built-in tools). */
 	customTools?: ToolDefinition[];
-	/** Inline extensions (merged with discovery). */
+	/** Inline extensions. When provided (even if empty), skips file discovery. */
 	extensions?: ExtensionFactory[];
 	/** Additional extension paths to load (merged with discovery). */
 	additionalExtensionPaths?: string[];
diff --git a/packages/coding-agent/src/main.ts b/packages/coding-agent/src/main.ts
index d740b7fa..eaa164cd 100644
--- a/packages/coding-agent/src/main.ts
+++ b/packages/coding-agent/src/main.ts
@@ -298,7 +298,10 @@ export async function main(args: string[]) {
 	const cwd = process.cwd();
 	const agentDir = getAgentDir();
 	const eventBus = createEventBus();
-	const extensionPaths = firstPass.extensions ?? [];
+	const settingsManager = SettingsManager.create(cwd);
+	time("SettingsManager.create");
+	// Merge CLI --extension args with settings.json extensions
+	const extensionPaths = [...settingsManager.getExtensionPaths(), ...(firstPass.extensions ?? [])];
 	const { extensions: loadedExtensions } = await discoverAndLoadExtensions(extensionPaths, cwd, agentDir, eventBus);
 	time("discoverExtensionFlags");
 
@@ -357,8 +360,6 @@ export async function main(args: string[]) {
 		process.exit(1);
 	}
 
-	const settingsManager = SettingsManager.create(cwd);
-	time("SettingsManager.create");
 	const { initialMessage, initialImages } = await prepareInitialMessage(parsed, settingsManager.getImageAutoResize());
 	time("prepareInitialMessage");
 	const isInteractive = !parsed.print && parsed.mode === undefined;