diff --git a/build.ps1 b/build.ps1
index 78f71004..375bbb78 100755
--- a/build.ps1
+++ b/build.ps1
@@ -63,6 +63,8 @@ $filesForWindowsPackage = @(
     'NOTICE.txt',
     'osinfo.exe',
     'osinfo.dsc.resource.json',
+    'powershell.discover.ps1',
+    'powershell.dsc.extension.json',
     'powershell.dsc.resource.json',
     'psDscAdapter/',
     'psscript.ps1',
@@ -101,6 +103,8 @@ $filesForLinuxPackage = @(
     'NOTICE.txt',
     'osinfo',
     'osinfo.dsc.resource.json',
+    'powershell.discover.ps1',
+    'powershell.dsc.extension.json',
     'powershell.dsc.resource.json',
     'psDscAdapter/',
     'psscript.ps1',
@@ -126,6 +130,8 @@ $filesForMacPackage = @(
     'NOTICE.txt',
     'osinfo',
     'osinfo.dsc.resource.json',
+    'powershell.discover.ps1',
+    'powershell.dsc.extension.json',
     'powershell.dsc.resource.json',
     'psDscAdapter/',
     'psscript.ps1',
@@ -331,9 +337,9 @@ if (!$SkipBuild) {
     New-Item -ItemType Directory $target -ErrorAction Ignore > $null
 
     # make sure dependencies are built first so clippy runs correctly
-    $windows_projects = @("pal", "registry_lib", "registry", "reboot_pending", "wmi-adapter", "configurations/windows", 'extensions/appx')
-    $macOS_projects = @("resources/brew")
-    $linux_projects = @("resources/apt")
+    $windows_projects = @("pal", "registry_lib", "registry", "reboot_pending", "wmi-adapter", "configurations/windows", "extensions/appx", "extensions/powershell")
+    $macOS_projects = @("resources/brew", "extensions/powershell")
+    $linux_projects = @("resources/apt", "extensions/powershell")
 
     # projects are in dependency order
     $projects = @(
diff --git a/dsc/tests/dsc_extension_discover.tests.ps1 b/dsc/tests/dsc_extension_discover.tests.ps1
index d3745546..f09cca1a 100644
--- a/dsc/tests/dsc_extension_discover.tests.ps1
+++ b/dsc/tests/dsc_extension_discover.tests.ps1
@@ -23,30 +23,30 @@ Describe 'Discover extension tests' {
     It 'Discover extensions' {
         $out = dsc extension list | ConvertFrom-Json
         $LASTEXITCODE | Should -Be 0
-        if ($IsWindows) {
-            $out.Count | Should -Be 3 -Because ($out | Out-String)
-            $out[0].type | Should -Be 'Microsoft.DSC.Extension/Bicep'
-            $out[0].version | Should -Be '0.1.0'
-            $out[0].capabilities | Should -BeExactly @('import')
-            $out[0].manifest | Should -Not -BeNullOrEmpty
-            $out[1].type | Should -Be 'Microsoft.Windows.Appx/Discover'
-            $out[1].version | Should -Be '0.1.0'
-            $out[1].capabilities | Should -BeExactly @('discover')
-            $out[1].manifest | Should -Not -BeNullOrEmpty
-            $out[2].type | Should -BeExactly 'Test/Discover'
-            $out[2].version | Should -BeExactly '0.1.0'
-            $out[2].capabilities | Should -BeExactly @('discover')
-            $out[2].manifest | Should -Not -BeNullOrEmpty
+        $expectedExtensions = if ($IsWindows) {
+            @(
+            @{ type = 'Microsoft.DSC.Extension/Bicep'; version = '0.1.0'; capabilities = @('import') }
+            @{ type = 'Microsoft.DSC.Transitional/PSDesiredStateConfiguration'; version = '0.1.0'; capabilities = @('import') }
+            @{ type = 'Microsoft.Windows.Appx/Discover'; version = '0.1.0'; capabilities = @('discover') }
+            @{ type = 'Microsoft.PowerShell/Discover'; version = '0.1.0'; capabilities = @('discover') }
+            @{ type = 'Test/Discover'; version = '0.1.0'; capabilities = @('discover') }
+            )
         } else {
-            $out.Count | Should -Be 2 -Because ($out | Out-String)
-            $out[0].type | Should -Be 'Microsoft.DSC.Extension/Bicep'
-            $out[0].version | Should -Be '0.1.0'
-            $out[0].capabilities | Should -BeExactly @('import')
-            $out[0].manifest | Should -Not -BeNullOrEmpty
-            $out[1].type | Should -BeExactly 'Test/Discover'
-            $out[1].version | Should -BeExactly '0.1.0'
-            $out[1].capabilities | Should -BeExactly @('discover')
-            $out[1].manifest | Should -Not -BeNullOrEmpty
+            @(
+            @{ type = 'Microsoft.DSC.Extension/Bicep'; version = '0.1.0'; capabilities = @('import') }
+            @{ type = 'Microsoft.PowerShell/Discover'; version = '0.1.0'; capabilities = @('discover') }
+            @{ type = 'Test/Discover'; version = '0.1.0'; capabilities = @('discover') }
+            )
+        }
+
+        $out.Count | Should -Be $expectedExtensions.Count -Because ($out | Out-String)
+        
+        foreach ($expected in $expectedExtensions) {
+            $extension = $out | Where-Object { $_.type -eq $expected.type }
+            $extension | Should -Not -BeNullOrEmpty -Because "Extension $($expected.type) should exist"
+            $extension.version | Should -BeExactly $expected.version
+            $extension.capabilities | Should -BeExactly $expected.capabilities
+            $extension.manifest | Should -Not -BeNullOrEmpty
         }
     }
 
diff --git a/extensions/powershell/copy_files.txt b/extensions/powershell/copy_files.txt
new file mode 100644
index 00000000..e3b12dc1
--- /dev/null
+++ b/extensions/powershell/copy_files.txt
@@ -0,0 +1,2 @@
+powershell.discover.ps1
+powershell.dsc.extension.json
diff --git a/extensions/powershell/powershell.discover.ps1 b/extensions/powershell/powershell.discover.ps1
new file mode 100644
index 00000000..43c4130d
--- /dev/null
+++ b/extensions/powershell/powershell.discover.ps1
@@ -0,0 +1,18 @@
+# Copyright (c) Microsoft Corporation.
+# Licensed under the MIT License.
+
+$psPaths = $env:PSModulePath -split [System.IO.Path]::PathSeparator | Where-Object { $_ -notmatch 'WindowsPowerShell' }
+
+$manifests = $psPaths | ForEach-Object -Parallel {
+    $searchPatterns = @('*.dsc.resource.json', '*.dsc.resource.yaml', '*.dsc.resource.yml')
+    $enumOptions = [System.IO.EnumerationOptions]@{ IgnoreInaccessible = $false; RecurseSubdirectories = $true }
+    foreach ($pattern in $searchPatterns) {
+        try {
+            [System.IO.Directory]::EnumerateFiles($_, $pattern, $enumOptions) | ForEach-Object {
+                @{ manifestPath = $_ }
+            }
+        } catch { }
+    }
+} -ThrottleLimit 10
+
+$manifests | ForEach-Object { $_ | ConvertTo-Json -Compress }
\ No newline at end of file
diff --git a/extensions/powershell/powershell.discover.tests.ps1 b/extensions/powershell/powershell.discover.tests.ps1
new file mode 100644
index 00000000..6b321d47
--- /dev/null
+++ b/extensions/powershell/powershell.discover.tests.ps1
@@ -0,0 +1,32 @@
+# Copyright (c) Microsoft Corporation.
+# Licensed under the MIT License.
+
+BeforeAll {
+    $fakeManifest = @{
+        '$schema' = "https://aka.ms/dsc/schemas/v3/bundled/resource/manifest.json"
+        type = "Test/FakeResource"
+        version = "0.1.0"
+        get = @{
+            executable = "fakeResource"
+            args = @(
+                "get",
+                @{
+                    jsonInputArg = "--input"
+                    mandatory = $true
+                }
+            )
+        }
+    }
+    
+    $manifestPath = Join-Path $TestDrive "fake.dsc.resource.json"
+    $fakeManifest | ConvertTo-Json -Depth 10 | Set-Content -Path $manifestPath
+    $env:PSModulePath += [System.IO.Path]::PathSeparator + $TestDrive
+}
+
+Describe 'Tests for PowerShell resource discovery' {
+    It 'Should find DSC PowerShell resources' {
+        $out = dsc resource list | ConvertFrom-Json
+        $LASTEXITCODE | Should -Be 0
+        $out.directory | Should -Contain $TestDrive
+    }
+}
diff --git a/extensions/powershell/powershell.dsc.extension.json b/extensions/powershell/powershell.dsc.extension.json
new file mode 100644
index 00000000..aa10cffa
--- /dev/null
+++ b/extensions/powershell/powershell.dsc.extension.json
@@ -0,0 +1,18 @@
+{
+    "$schema": "https://aka.ms/dsc/schemas/v3/bundled/resource/manifest.json",
+    "type": "Microsoft.PowerShell/Discover",
+    "version": "0.1.0",
+    "description": "Discovers DSC resources packaged in PowerShell 7 modules.",
+    "discover": {
+        "executable": "pwsh",
+        "args": [
+            "-NoLogo",
+            "-NonInteractive",
+            "-ExecutionPolicy",
+            "Bypass",
+            "-NoProfile",
+            "-Command",
+            "./powershell.discover.ps1"
+            ]
+    }
+}