diff --git a/cli/azd/extensions/azure.ai.agents/CHANGELOG.md b/cli/azd/extensions/azure.ai.agents/CHANGELOG.md
index dae2e1da999..06aff3b4534 100644
--- a/cli/azd/extensions/azure.ai.agents/CHANGELOG.md
+++ b/cli/azd/extensions/azure.ai.agents/CHANGELOG.md
@@ -1,5 +1,9 @@
 # Release History
 
+## 0.1.16-preview (2026-03-23)
+
+- [[#7147]](https://github.com/Azure/azure-dev/pull/7147) Add template selection flow to `azd ai agent init`: when no manifest is provided, users are prompted to use code in the current directory or start from a curated list of agent templates; empty directories automatically go to template selection
+
 ## 0.1.15-preview (2026-03-13)
 
 - [[#7080]](https://github.com/Azure/azure-dev/pull/7080) Fix authentication failures (`AADSTS70043`/`AADSTS700082`) for multi-tenant and guest users by using `UserTenantId` for credential resolution
diff --git a/cli/azd/extensions/azure.ai.agents/extension.yaml b/cli/azd/extensions/azure.ai.agents/extension.yaml
index d2c7d065bde..9d8e232eb18 100644
--- a/cli/azd/extensions/azure.ai.agents/extension.yaml
+++ b/cli/azd/extensions/azure.ai.agents/extension.yaml
@@ -5,7 +5,7 @@ displayName: Foundry agents (Preview)
 description: Extension for the Foundry Agent Service. (Preview)
 usage: azd ai agent <command> [options]
 # NOTE: Make sure version.txt is in sync with this version.
-version: 0.1.15-preview
+version: 0.1.16-preview
 requiredAzdVersion: ">1.23.6"
 language: go
 capabilities:
diff --git a/cli/azd/extensions/azure.ai.agents/version.txt b/cli/azd/extensions/azure.ai.agents/version.txt
index b32f1fe5bba..42ab1a87a26 100644
--- a/cli/azd/extensions/azure.ai.agents/version.txt
+++ b/cli/azd/extensions/azure.ai.agents/version.txt
@@ -1 +1 @@
-0.1.15-preview
+0.1.16-preview