diff --git a/src/Aspire.Cli/Aspire.Cli.csproj b/src/Aspire.Cli/Aspire.Cli.csproj
index a3633f025f6..0140c148a9c 100644
--- a/src/Aspire.Cli/Aspire.Cli.csproj
+++ b/src/Aspire.Cli/Aspire.Cli.csproj
@@ -24,6 +24,9 @@
     <DefineConstants>$(DefineConstants);CLI</DefineConstants>
     <EnableConfigurationBindingGenerator>true</EnableConfigurationBindingGenerator>
     <CopyOutputSymbolsToPublishDirectory>false</CopyOutputSymbolsToPublishDirectory>
+    <!-- Controls whether the CLI binary should perform self-extraction of embedded bundle at runtime.
+         Defaults to false; set to true only for dotnet-tool distribution (Aspire.Cli.Tool.csproj). -->
+    <SelfExtractingBundle Condition="'$(SelfExtractingBundle)' == ''">false</SelfExtractingBundle>
   </PropertyGroup>
 
   <!-- Set the nuget properties when building as a global tool. -->
@@ -39,6 +42,8 @@
          To do this we make sure it doesn't PublishAOT, and ensure that it doesn't publish for any RIDs at all. -->
     <PublishAot>false</PublishAot>
     <RuntimeIdentifiers></RuntimeIdentifiers>
+    <!-- dotnet-tool distribution needs self-extraction because NuGet enforces a fixed package layout. -->
+    <SelfExtractingBundle>true</SelfExtractingBundle>
   </PropertyGroup>
 
   <ItemGroup Condition="'$(PublishAot)' == 'true'">
diff --git a/src/Aspire.Cli/Bundles/BundleService.cs b/src/Aspire.Cli/Bundles/BundleService.cs
index c06ff55b5b1..fee20a63601 100644
--- a/src/Aspire.Cli/Bundles/BundleService.cs
+++ b/src/Aspire.Cli/Bundles/BundleService.cs
@@ -29,6 +29,9 @@ internal sealed class BundleService(ILayoutDiscovery layoutDiscovery, ILogger<Bu
     /// <inheritdoc/>
     public bool IsBundle => s_isBundle;
 
+    /// <inheritdoc/>
+    public bool IsSelfExtracting => false;
+
     /// <summary>
     /// Opens a read-only stream over the embedded bundle payload.
     /// Returns <see langword="null"/> if no payload is embedded.
@@ -54,6 +57,9 @@ public async Task EnsureExtractedAsync(CancellationToken cancellationToken = def
             return;
         }
 
+        // TODO: When IsSelfExtracting is wired to the MSBuild property (future PR),
+        // non-self-extracting distributions can skip extraction when the layout is on disk.
+
         var processPath = Environment.ProcessPath;
         if (string.IsNullOrEmpty(processPath))
         {
diff --git a/src/Aspire.Cli/Bundles/IBundleService.cs b/src/Aspire.Cli/Bundles/IBundleService.cs
index a486ef788a1..06427b1804e 100644
--- a/src/Aspire.Cli/Bundles/IBundleService.cs
+++ b/src/Aspire.Cli/Bundles/IBundleService.cs
@@ -15,6 +15,12 @@ internal interface IBundleService
     /// </summary>
     bool IsBundle { get; }
 
+    /// <summary>
+    /// Gets whether the CLI binary should perform self-extraction of the embedded bundle at runtime.
+    /// When <see langword="false"/>, the layout is expected to already be on disk (e.g. archive/installer distributions).
+    /// </summary>
+    bool IsSelfExtracting { get; }
+
     /// <summary>
     /// Ensures the bundle is extracted for the current CLI binary if it contains an embedded payload.
     /// No-ops if no payload is embedded, or if the layout is already extracted and up to date.
diff --git a/tests/Aspire.Cli.Tests/BundleServiceTests.cs b/tests/Aspire.Cli.Tests/BundleServiceTests.cs
index 9d8f5f015f5..d01f9fbc304 100644
--- a/tests/Aspire.Cli.Tests/BundleServiceTests.cs
+++ b/tests/Aspire.Cli.Tests/BundleServiceTests.cs
@@ -2,6 +2,8 @@
 // The .NET Foundation licenses this file to you under the MIT license.
 
 using Aspire.Cli.Bundles;
+using Aspire.Cli.Layout;
+using Microsoft.Extensions.Logging.Abstractions;
 
 namespace Aspire.Cli.Tests;
 
@@ -74,4 +76,39 @@ public void GetCurrentVersion_ReturnsNonNull()
         Assert.NotNull(version);
         Assert.NotEqual("unknown", version);
     }
+
+    [Fact]
+    public void IsSelfExtracting_ReturnsFalse_WhenMetadataNotSetToTrue()
+    {
+        // Test assembly builds with default SelfExtractingBundle=false,
+        // so IsSelfExtracting should be false.
+        var layoutDiscovery = new LayoutDiscovery(NullLogger<LayoutDiscovery>.Instance);
+        var service = new BundleService(layoutDiscovery, NullLogger<BundleService>.Instance);
+        Assert.False(service.IsSelfExtracting);
+    }
+
+    [Fact]
+    public async Task EnsureExtractedAndGetLayoutAsync_ReturnsNull_WhenNoBundleAndNoLayout()
+    {
+        // Test assembly has no embedded bundle and IsSelfExtracting=false.
+        // EnsureExtractedAsync should no-op and DiscoverLayout should return null.
+        var layoutDiscovery = new LayoutDiscovery(NullLogger<LayoutDiscovery>.Instance);
+        var service = new BundleService(layoutDiscovery, NullLogger<BundleService>.Instance);
+
+        var layout = await service.EnsureExtractedAndGetLayoutAsync();
+        Assert.Null(layout);
+    }
+
+    [Fact]
+    public async Task EnsureExtractedAsync_DoesNotThrow_WhenNotSelfExtractingAndNoLayout()
+    {
+        // When IsSelfExtracting=false and no layout exists, EnsureExtractedAsync
+        // should not throw — it should gracefully no-op (since IsBundle is also false
+        // in the test assembly). This verifies the method doesn't unconditionally
+        // short-circuit in a way that prevents DiscoverLayout from being called.
+        var layoutDiscovery = new LayoutDiscovery(NullLogger<LayoutDiscovery>.Instance);
+        var service = new BundleService(layoutDiscovery, NullLogger<BundleService>.Instance);
+
+        await service.EnsureExtractedAsync();
+    }
 }
diff --git a/tests/Aspire.Cli.Tests/Utils/CliTestHelper.cs b/tests/Aspire.Cli.Tests/Utils/CliTestHelper.cs
index 6d4d2f1ea84..c3d80740eb4 100644
--- a/tests/Aspire.Cli.Tests/Utils/CliTestHelper.cs
+++ b/tests/Aspire.Cli.Tests/Utils/CliTestHelper.cs
@@ -606,6 +606,8 @@ internal sealed class NullBundleService : IBundleService
 {
     public bool IsBundle => false;
 
+    public bool IsSelfExtracting => false;
+
     public Task EnsureExtractedAsync(CancellationToken cancellationToken = default) => Task.CompletedTask;
 
     public Task<BundleExtractResult> ExtractAsync(string destinationPath, bool force = false, CancellationToken cancellationToken = default)
@@ -618,10 +620,12 @@ public Task<BundleExtractResult> ExtractAsync(string destinationPath, bool force
 /// <summary>
 /// A configurable bundle service for testing bundle-dependent behavior.
 /// </summary>
-internal sealed class TestBundleService(bool isBundle) : IBundleService
+internal sealed class TestBundleService(bool isBundle, bool isSelfExtracting = false) : IBundleService
 {
     public bool IsBundle => isBundle;
 
+    public bool IsSelfExtracting => isSelfExtracting;
+
     public Layout.LayoutConfiguration? Layout { get; set; }
 
     public Task EnsureExtractedAsync(CancellationToken cancellationToken = default) => Task.CompletedTask;