diff --git a/edb/load_ext/main.py b/edb/load_ext/main.py
index cc849833f55..c3ab4c2aff4 100644
--- a/edb/load_ext/main.py
+++ b/edb/load_ext/main.py
@@ -34,6 +34,7 @@
 import shutil
 import subprocess
 import sys
+import tempfile
 import tomllib
 import zipfile
 
@@ -104,6 +105,37 @@ def get_pg_config(pg_config_path: pathlib.Path) -> dict[str, str]:
     return config
 
 
+def install_edgedb_extension(
+    pkg: pathlib.Path,
+    ext_dir: pathlib.Path,
+) -> None:
+    target = ext_dir / pkg.stem
+    print("Installing", target)
+
+    with tempfile.TemporaryDirectory() as tdir, \
+         zipfile.ZipFile(pkg) as z:
+
+        ttarget = pathlib.Path(tdir) / pkg.stem
+        os.mkdir(ttarget)
+
+        with z.open('MANIFEST.toml') as m:
+            manifest = tomllib.load(m)
+
+        files = ['MANIFEST.toml'] + manifest['files']
+
+        for f in files:
+            target_file = target / f
+            ttarget_file = ttarget / f
+
+            with z.open(f) as src:
+                with open(ttarget_file, "wb") as dst:
+                    print("Installing", target_file)
+                    shutil.copyfileobj(src, dst)
+
+        os.makedirs(ext_dir, exist_ok=True)
+        shutil.move(ttarget, ext_dir)
+
+
 def load_ext_main(
     package: pathlib.Path,
     skip_edgedb: bool,
@@ -114,9 +146,7 @@ def load_ext_main(
         from edb import buildmeta
 
         ext_dir = buildmeta.get_extension_dir_path()
-        os.makedirs(ext_dir, exist_ok=True)
-        print("Installing", ext_dir / package.name)
-        shutil.copyfile(package, ext_dir / package.name)
+        install_edgedb_extension(package, ext_dir)
 
     if not skip_postgres:
         if with_pg_config is None:
diff --git a/edb/server/tenant.py b/edb/server/tenant.py
index 5b0f84c41da..0ddfd019848 100644
--- a/edb/server/tenant.py
+++ b/edb/server/tenant.py
@@ -46,7 +46,6 @@
 import tomllib
 import uuid
 import weakref
-import zipfile
 
 import immutables
 
@@ -440,8 +439,11 @@ async def load_extension_packages(self, path: pathlib.Path) -> None:
         try:
             with os.scandir(path) as it:
                 for entry in it:
-                    if entry.is_file() and entry.name.endswith('.zip'):
-                        exts.append(entry)
+                    if (
+                        entry.is_dir()
+                        and (pathlib.Path(entry) / 'MANIFEST.toml').exists()
+                    ):
+                        exts.append(pathlib.Path(entry))
         except FileNotFoundError:
             pass
 
@@ -471,27 +473,26 @@ async def load_extension_packages(self, path: pathlib.Path) -> None:
 
     async def _load_extension_package(
         self,
-        path: os.PathLike,
+        path: pathlib.Path,
         ext_packages: set[tuple[str, verutils.Version]],
     ) -> None:
-        with zipfile.ZipFile(path) as z:
-            with z.open('MANIFEST.toml') as m:
-                manifest = tomllib.load(m)
-
-            name = manifest['name']
-            version = verutils.parse_version(manifest['version'])
-            if (name, version) in ext_packages:
-                logger.info(
-                    f"Extension package '{manifest['name']}' {version} "
-                    f"already installed"
-                )
+        with open(path / 'MANIFEST.toml', 'rb') as m:
+            manifest = tomllib.load(m)
 
-                return
+        name = manifest['name']
+        version = verutils.parse_version(manifest['version'])
+        if (name, version) in ext_packages:
+            logger.info(
+                f"Extension package '{manifest['name']}' {version} "
+                f"already installed"
+            )
+
+            return
 
-            scripts = []
-            for file in manifest['files']:
-                with z.open(file) as f:
-                    scripts.append(f.read().decode('utf-8'))
+        scripts = []
+        for file in manifest['files']:
+            with open(path / file, 'rb') as f:
+                scripts.append(f.read().decode('utf-8'))
 
         from edb.schema import schema as s_schema