diff --git a/cli/azd/extensions/azure.ai.agents/internal/cmd/init.go b/cli/azd/extensions/azure.ai.agents/internal/cmd/init.go
index 7de32ade10d..6147ab32006 100644
--- a/cli/azd/extensions/azure.ai.agents/internal/cmd/init.go
+++ b/cli/azd/extensions/azure.ai.agents/internal/cmd/init.go
@@ -195,18 +195,134 @@ func newInitCommand(rootFlags *rootFlagsDefinition) *cobra.Command {
 					return err
 				}
 			} else {
-				action := &InitFromCodeAction{
-					azdClient:  azdClient,
-					flags:      flags,
-					httpClient: httpClient,
-				}
-
-				if err := action.Run(ctx); err != nil {
+				// No manifest provided - prompt user for init mode
+				initMode, err := promptInitMode(ctx, azdClient)
+				if err != nil {
 					if exterrors.IsCancellation(err) {
 						return exterrors.Cancelled("initialization was cancelled")
 					}
 					return err
 				}
+
+				switch initMode {
+				case initModeTemplate:
+					// User chose to start from a template - select one
+					selectedTemplate, err := promptAgentTemplate(ctx, azdClient, httpClient)
+					if err != nil {
+						if exterrors.IsCancellation(err) {
+							return exterrors.Cancelled("initialization was cancelled")
+						}
+						return err
+					}
+
+					switch selectedTemplate.EffectiveType() {
+					case TemplateTypeAzd:
+						// Full azd template - dispatch azd init -t <repo>
+						initArgs := []string{"init", "-t", selectedTemplate.Source}
+						if flags.env != "" {
+							initArgs = append(initArgs, "--environment", flags.env)
+						} else {
+							cwd, err := os.Getwd()
+							if err == nil {
+								sanitizedDirectoryName := sanitizeAgentName(filepath.Base(cwd))
+								initArgs = append(initArgs, "--environment", sanitizedDirectoryName+"-dev")
+							}
+						}
+
+						workflow := &azdext.Workflow{
+							Name: "init",
+							Steps: []*azdext.WorkflowStep{
+								{Command: &azdext.WorkflowCommand{Args: initArgs}},
+							},
+						}
+
+						_, err := azdClient.Workflow().Run(ctx, &azdext.RunWorkflowRequest{
+							Workflow: workflow,
+						})
+						if err != nil {
+							if exterrors.IsCancellation(err) {
+								return exterrors.Cancelled("initialization was cancelled")
+							}
+							return exterrors.Dependency(
+								exterrors.CodeProjectInitFailed,
+								fmt.Sprintf("failed to initialize project from template: %s", err),
+								"",
+							)
+						}
+
+						fmt.Printf("\nProject initialized from template: %s\n", selectedTemplate.Title)
+
+					default:
+						// Agent manifest template - use existing -m flow
+						flags.manifestPointer = selectedTemplate.Source
+
+						azureContext, projectConfig, environment, err := ensureAzureContext(ctx, flags, azdClient)
+						if err != nil {
+							if exterrors.IsCancellation(err) {
+								return exterrors.Cancelled("initialization was cancelled")
+							}
+							return err
+						}
+
+						credential, err := azidentity.NewAzureDeveloperCLICredential(&azidentity.AzureDeveloperCLICredentialOptions{
+							TenantID:                   azureContext.Scope.TenantId,
+							AdditionallyAllowedTenants: []string{"*"},
+						})
+						if err != nil {
+							return exterrors.Auth(
+								exterrors.CodeCredentialCreationFailed,
+								fmt.Sprintf("failed to create Azure credential: %s", err),
+								"run 'azd auth login' to authenticate",
+							)
+						}
+
+						console := input.NewConsole(
+							false, // noPrompt
+							true,  // isTerminal
+							input.Writers{Output: os.Stdout},
+							input.ConsoleHandles{
+								Stderr: os.Stderr,
+								Stdin:  os.Stdin,
+								Stdout: os.Stdout,
+							},
+							nil, // formatter
+							nil, // externalPromptCfg
+						)
+
+						action := &InitAction{
+							azdClient:     azdClient,
+							azureContext:  azureContext,
+							console:       console,
+							credential:    credential,
+							projectConfig: projectConfig,
+							environment:   environment,
+							flags:         flags,
+							httpClient:    httpClient,
+						}
+
+						if err := action.Run(ctx); err != nil {
+							if exterrors.IsCancellation(err) {
+								return exterrors.Cancelled("initialization was cancelled")
+							}
+							return err
+						}
+					}
+
+				default:
+					// initModeFromCode - use existing code in current directory
+					action := &InitFromCodeAction{
+						azdClient:  azdClient,
+						flags:      flags,
+						httpClient: httpClient,
+					}
+
+					if err := action.Run(ctx); err != nil {
+						if exterrors.IsCancellation(err) {
+							return exterrors.Cancelled("initialization was cancelled")
+						}
+						return err
+					}
+				}
 			}
 
 			return nil
diff --git a/cli/azd/extensions/azure.ai.agents/internal/cmd/init_templates.go b/cli/azd/extensions/azure.ai.agents/internal/cmd/init_templates.go
new file mode 100644
index 00000000000..6d63329355a
--- /dev/null
+++ b/cli/azd/extensions/azure.ai.agents/internal/cmd/init_templates.go
@@ -0,0 +1,190 @@
+// Copyright (c) Microsoft Corporation. All rights reserved.
+// Licensed under the MIT License.
+
+package cmd
+
+import (
+	"context"
+	"encoding/json"
+	"fmt"
+	"io"
+	"net/http"
+	"strings"
+
+	"azureaiagent/internal/exterrors"
+
+	"github.com/azure/azure-dev/cli/azd/pkg/azdext"
+)
+
+const agentTemplatesURL = "https://aka.ms/foundry-agents"
+
+// Template type constants
+const (
+	// TemplateTypeAgent is a template that points to an agent.yaml manifest file.
+	TemplateTypeAgent = "agent"
+
+	// TemplateTypeAzd is a full azd template repository.
+	TemplateTypeAzd = "azd"
+)
+
+// AgentTemplate represents an agent template entry from the remote JSON catalog.
+type AgentTemplate struct {
+	Title       string   `json:"title"`
+	Description string   `json:"description"`
+	Language    string   `json:"language"`
+	Framework   string   `json:"framework"`
+	Source      string   `json:"source"`
+	Tags        []string `json:"tags"`
+}
+
+// EffectiveType determines the template type by inspecting the source URL.
+// If it ends with agent.yaml or agent.manifest.yaml, it's an agent manifest.
+// Otherwise, it's treated as a full azd template repo.
+func (t *AgentTemplate) EffectiveType() string {
+	lower := strings.ToLower(t.Source)
+	if strings.HasSuffix(lower, "/agent.yaml") ||
+		strings.HasSuffix(lower, "/agent.manifest.yaml") ||
+		lower == "agent.yaml" ||
+		lower == "agent.manifest.yaml" {
+		return TemplateTypeAgent
+	}
+	return TemplateTypeAzd
+}
+
+const (
+	initModeFromCode = "from_code"
+	initModeTemplate = "template"
+)
+
+// promptInitMode asks the user whether to use existing code or start from a template.
+// Returns initModeFromCode or initModeTemplate.
+func promptInitMode(ctx context.Context, azdClient *azdext.AzdClient) (string, error) {
+	choices := []*azdext.SelectChoice{
+		{Label: "Use the code in the current directory", Value: initModeFromCode},
+		{Label: "Start new from a template", Value: initModeTemplate},
+	}
+
+	resp, err := azdClient.Prompt().Select(ctx, &azdext.SelectRequest{
+		Options: &azdext.SelectOptions{
+			Message: "How do you want to initialize your agent?",
+			Choices: choices,
+		},
+	})
+	if err != nil {
+		if exterrors.IsCancellation(err) {
+			return "", exterrors.Cancelled("initialization mode selection was cancelled")
+		}
+		return "", fmt.Errorf("failed to prompt for initialization mode: %w", err)
+	}
+
+	return choices[*resp.Value].Value, nil
+}
+
+// fetchAgentTemplates retrieves the agent template catalog from the remote JSON URL.
+func fetchAgentTemplates(ctx context.Context, httpClient *http.Client) ([]AgentTemplate, error) {
+	req, err := http.NewRequestWithContext(ctx, http.MethodGet, agentTemplatesURL, nil)
+	if err != nil {
+		return nil, fmt.Errorf("failed to create request: %w", err)
+	}
+
+	resp, err := httpClient.Do(req)
+	if err != nil {
+		return nil, fmt.Errorf("failed to fetch agent templates: %w", err)
+	}
+	defer resp.Body.Close()
+
+	if resp.StatusCode != http.StatusOK {
+		return nil, fmt.Errorf("failed to fetch agent templates: HTTP %d", resp.StatusCode)
+	}
+
+	body, err := io.ReadAll(resp.Body)
+	if err != nil {
+		return nil, fmt.Errorf("failed to read agent templates response: %w", err)
+	}
+
+	var templates []AgentTemplate
+	if err := json.Unmarshal(body, &templates); err != nil {
+		return nil, fmt.Errorf("failed to parse agent templates: %w", err)
+	}
+
+	return templates, nil
+}
+
+// promptAgentTemplate guides the user through language selection and template selection.
+// Returns the selected AgentTemplate. The caller should check EffectiveType() to determine
+// whether to use the agent.yaml manifest flow or the full azd template flow.
+func promptAgentTemplate(
+	ctx context.Context,
+	azdClient *azdext.AzdClient,
+	httpClient *http.Client,
+) (*AgentTemplate, error) {
+	fmt.Println("Retrieving agent templates...")
+
+	templates, err := fetchAgentTemplates(ctx, httpClient)
+	if err != nil {
+		return nil, fmt.Errorf("failed to retrieve agent templates: %w", err)
+	}
+
+	if len(templates) == 0 {
+		return nil, fmt.Errorf("no agent templates available")
+	}
+
+	// Prompt for language
+	languageChoices := []*azdext.SelectChoice{
+		{Label: "Python", Value: "python"},
+		{Label: "C#", Value: "csharp"},
+	}
+
+	langResp, err := azdClient.Prompt().Select(ctx, &azdext.SelectRequest{
+		Options: &azdext.SelectOptions{
+			Message: "Select a language:",
+			Choices: languageChoices,
+		},
+	})
+	if err != nil {
+		if exterrors.IsCancellation(err) {
+			return nil, exterrors.Cancelled("language selection was cancelled")
+		}
+		return nil, fmt.Errorf("failed to prompt for language: %w", err)
+	}
+
+	selectedLanguage := languageChoices[*langResp.Value].Value
+
+	// Filter templates by selected language
+	var filtered []AgentTemplate
+	for _, t := range templates {
+		if t.Language == selectedLanguage {
+			filtered = append(filtered, t)
+		}
+	}
+
+	if len(filtered) == 0 {
+		return nil, fmt.Errorf("no agent templates available for %s", languageChoices[*langResp.Value].Label)
+	}
+
+	// Build template choices with framework in label
+	templateChoices := make([]*azdext.SelectChoice, len(filtered))
+	for i, t := range filtered {
+		label := fmt.Sprintf("%s (%s)", t.Title, t.Framework)
+		templateChoices[i] = &azdext.SelectChoice{
+			Label: label,
+			Value: fmt.Sprintf("%d", i),
+		}
+	}
+
+	templateResp, err := azdClient.Prompt().Select(ctx, &azdext.SelectRequest{
+		Options: &azdext.SelectOptions{
+			Message: "Select an agent template:",
+			Choices: templateChoices,
+		},
+	})
+	if err != nil {
+		if exterrors.IsCancellation(err) {
+			return nil, exterrors.Cancelled("template selection was cancelled")
+		}
+		return nil, fmt.Errorf("failed to prompt for template: %w", err)
+	}
+
+	selectedTemplate := filtered[*templateResp.Value]
+	return &selectedTemplate, nil
+}