diff --git a/src/vs/platform/extensionManagement/common/abstractExtensionManagementService.ts b/src/vs/platform/extensionManagement/common/abstractExtensionManagementService.ts
index 2500040f7a0..0329c7b9d4a 100644
--- a/src/vs/platform/extensionManagement/common/abstractExtensionManagementService.ts
+++ b/src/vs/platform/extensionManagement/common/abstractExtensionManagementService.ts
@@ -352,7 +352,7 @@ export abstract class AbstractExtensionManagementService extends Disposable impl
 		return allDependenciesAndPacks.filter(e => !installed.some(i => areSameExtensions(i.identifier, e.gallery.identifier)));
 	}
 
-	private async checkAndGetCompatibleVersion(extension: IGalleryExtension, fetchCompatibleVersion: boolean, includePreRelease: boolean): Promise<{ extension: IGalleryExtension, manifest: IExtensionManifest }> {
+	private async checkAndGetCompatibleVersion(extension: IGalleryExtension, fetchCompatibleVersion: boolean, installPreRelease: boolean): Promise<{ extension: IGalleryExtension, manifest: IExtensionManifest }> {
 		if (await this.isMalicious(extension)) {
 			throw new ExtensionManagementError(nls.localize('malicious extension', "Can't install '{0}' extension since it was reported to be problematic.", extension.identifier.id), ExtensionManagementErrorCode.Malicious);
 		}
@@ -362,10 +362,10 @@ export abstract class AbstractExtensionManagementService extends Disposable impl
 			throw new ExtensionManagementError(nls.localize('incompatible platform', "The '{0}' extension is not available in {1} for {2}.", extension.identifier.id, this.productService.nameLong, TargetPlatformToString(targetPlatform)), ExtensionManagementErrorCode.IncompatibleTargetPlatform);
 		}
 
-		const compatibleExtension = await this.getCompatibleVersion(extension, fetchCompatibleVersion, includePreRelease);
+		const compatibleExtension = await this.getCompatibleVersion(extension, fetchCompatibleVersion, installPreRelease);
 		if (compatibleExtension) {
-			if (includePreRelease && !compatibleExtension.properties.isPreReleaseVersion && extension.hasPreReleaseVersion) {
-				throw new ExtensionManagementError(nls.localize('notFoundCompatiblePrereleaseDependency', "Can't install pre-release version of '{0}' extension because it is not compatible with the current version of {1} (version {2}).", extension.identifier.id, this.productService.nameLong, this.productService.version), ExtensionManagementErrorCode.Incompatible);
+			if (installPreRelease && extension.hasPreReleaseVersion && !compatibleExtension.properties.isPreReleaseVersion) {
+				throw new ExtensionManagementError(nls.localize('notFoundCompatiblePrereleaseDependency', "Can't install pre-release version of '{0}' extension because it is not compatible with the current version of {1} (version {2}).", extension.identifier.id, this.productService.nameLong, this.productService.version), ExtensionManagementErrorCode.IncompatiblePreRelease);
 			}
 		} else {
 			throw new ExtensionManagementError(nls.localize('notFoundCompatibleDependency', "Can't install '{0}' extension because it is not compatible with the current version of {1} (version {2}).", extension.identifier.id, this.productService.nameLong, this.productService.version), ExtensionManagementErrorCode.Incompatible);
diff --git a/src/vs/platform/extensionManagement/common/extensionManagement.ts b/src/vs/platform/extensionManagement/common/extensionManagement.ts
index 5254a77cd81..556150baccf 100644
--- a/src/vs/platform/extensionManagement/common/extensionManagement.ts
+++ b/src/vs/platform/extensionManagement/common/extensionManagement.ts
@@ -365,6 +365,7 @@ export enum ExtensionManagementErrorCode {
 	Unsupported = 'Unsupported',
 	Malicious = 'Malicious',
 	Incompatible = 'Incompatible',
+	IncompatiblePreRelease = 'IncompatiblePreRelease',
 	IncompatibleTargetPlatform = 'IncompatibleTargetPlatform',
 	Invalid = 'Invalid',
 	Download = 'Download',
diff --git a/src/vs/platform/userDataSync/common/extensionsSync.ts b/src/vs/platform/userDataSync/common/extensionsSync.ts
index eabe5968200..86563619e8e 100644
--- a/src/vs/platform/userDataSync/common/extensionsSync.ts
+++ b/src/vs/platform/userDataSync/common/extensionsSync.ts
@@ -419,7 +419,7 @@ export class ExtensionsSynchroniser extends AbstractSynchroniser implements IUse
 						}
 					} catch (error) {
 						addToSkipped.push(e);
-						if (error instanceof ExtensionManagementError && (error.code === ExtensionManagementErrorCode.Incompatible || error.code === ExtensionManagementErrorCode.IncompatibleTargetPlatform)) {
+						if (error instanceof ExtensionManagementError && [ExtensionManagementErrorCode.Incompatible, ExtensionManagementErrorCode.IncompatiblePreRelease, ExtensionManagementErrorCode.IncompatibleTargetPlatform].includes(error.code)) {
 							this.logService.info(`${this.syncResourceLogLabel}: Skipped synchronizing extension because the compatible extension is not found.`, extension.displayName || extension.identifier.id);
 						} else {
 							this.logService.error(error);
diff --git a/src/vs/workbench/contrib/extensions/browser/extensions.contribution.ts b/src/vs/workbench/contrib/extensions/browser/extensions.contribution.ts
index bc284327540..5dbf7c83eaa 100644
--- a/src/vs/workbench/contrib/extensions/browser/extensions.contribution.ts
+++ b/src/vs/workbench/contrib/extensions/browser/extensions.contribution.ts
@@ -612,7 +612,7 @@ class ExtensionsContributions extends Disposable implements IWorkbenchContributi
 					try {
 						await this.extensionsWorkbenchService.install(extension);
 					} catch (err) {
-						runAction(this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Update, err));
+						runAction(this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Update, undefined, err));
 					}
 				}));
 			}
diff --git a/src/vs/workbench/contrib/extensions/browser/extensionsActions.ts b/src/vs/workbench/contrib/extensions/browser/extensionsActions.ts
index 93a88c70587..d2c027bbe8c 100644
--- a/src/vs/workbench/contrib/extensions/browser/extensionsActions.ts
+++ b/src/vs/workbench/contrib/extensions/browser/extensionsActions.ts
@@ -105,6 +105,7 @@ export class PromptExtensionInstallFailureAction extends Action {
 		private readonly extension: IExtension,
 		private readonly version: string,
 		private readonly installOperation: InstallOperation,
+		private readonly installOptions: InstallOptions | undefined,
 		private readonly error: Error,
 		@IProductService private readonly productService: IProductService,
 		@IOpenerService private readonly openerService: IOpenerService,
@@ -113,6 +114,7 @@ export class PromptExtensionInstallFailureAction extends Action {
 		@ICommandService private readonly commandService: ICommandService,
 		@ILogService private readonly logService: ILogService,
 		@IExtensionManagementServerService private readonly extensionManagementServerService: IExtensionManagementServerService,
+		@IInstantiationService private readonly instantiationService: IInstantiationService,
 	) {
 		super('extension.promptExtensionInstallFailure');
 	}
@@ -139,8 +141,26 @@ export class PromptExtensionInstallFailureAction extends Action {
 			return;
 		}
 
+		let operationMessage = this.installOperation === InstallOperation.Update ? localize('update operation', "Error while updating '{0}' extension.", this.extension.displayName || this.extension.identifier.id)
+			: localize('install operation', "Error while installing '{0}' extension.", this.extension.displayName || this.extension.identifier.id);
+		let additionalMessage;
 		const promptChoices: IPromptChoice[] = [];
-		if (this.extension.gallery && this.productService.extensionsGallery && (this.extensionManagementServerService.localExtensionManagementServer || this.extensionManagementServerService.remoteExtensionManagementServer) && !isIOS) {
+
+		if (ExtensionManagementErrorCode.IncompatiblePreRelease === (<ExtensionManagementErrorCode>this.error.name)) {
+			operationMessage = getErrorMessage(this.error);
+			additionalMessage = localize('install release version', "Would you like to install the released version?");
+			promptChoices.push({
+				label: localize('install released version', "Install Released Version"),
+				run: () => {
+					const installAction = this.installOptions?.isMachineScoped ? this.instantiationService.createInstance(InstallAction, !!this.installOptions.installPreReleaseVersion) : this.instantiationService.createInstance(InstallAndSyncAction, !!this.installOptions?.installPreReleaseVersion);
+					installAction.extension = this.extension;
+					return installAction.run();
+				}
+			});
+		}
+
+		else if (this.extension.gallery && this.productService.extensionsGallery && (this.extensionManagementServerService.localExtensionManagementServer || this.extensionManagementServerService.remoteExtensionManagementServer) && !isIOS) {
+			additionalMessage = localize('check logs', "Please check the [log]({0}) for more details.", `command:${Constants.showWindowLogActionId}`);
 			promptChoices.push({
 				label: localize('download', "Try Downloading Manually..."),
 				run: () => this.openerService.open(URI.parse(`${this.productService.extensionsGallery!.serviceUrl}/publishers/${this.extension.publisher}/vsextensions/${this.extension.name}/${this.version}/vspackage`)).then(() => {
@@ -156,10 +176,8 @@ export class PromptExtensionInstallFailureAction extends Action {
 			});
 		}
 
-		const operationMessage = this.installOperation === InstallOperation.Update ? localize('update operation', "Error while updating '{0}' extension.", this.extension.displayName || this.extension.identifier.id)
-			: localize('install operation', "Error while installing '{0}' extension.", this.extension.displayName || this.extension.identifier.id);
-		const checkLogsMessage = localize('check logs', "Please check the [log]({0}) for more details.", `command:${Constants.showWindowLogActionId}`);
-		this.notificationService.prompt(Severity.Error, `${operationMessage} ${checkLogsMessage}`, promptChoices);
+		let message = `${operationMessage}${additionalMessage ? ` ${additionalMessage}` : ''}`;
+		this.notificationService.prompt(Severity.Error, message, promptChoices);
 	}
 }
 
@@ -310,10 +328,11 @@ export abstract class AbstractInstallAction extends ExtensionAction {
 	}
 
 	private async install(extension: IExtension): Promise<IExtension | undefined> {
+		const installOptions = this.getInstallOptions();
 		try {
-			return await this.extensionsWorkbenchService.install(extension, this.getInstallOptions());
+			return await this.extensionsWorkbenchService.install(extension, installOptions);
 		} catch (error) {
-			await this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Install, error).run();
+			await this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Install, installOptions, error).run();
 			return undefined;
 		}
 	}
@@ -761,7 +780,7 @@ export class UpdateAction extends ExtensionAction {
 			await this.extensionsWorkbenchService.install(extension);
 			alert(localize('updateExtensionComplete', "Updating extension {0} to version {1} completed.", extension.displayName, extension.latestVersion));
 		} catch (err) {
-			this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Update, err).run();
+			this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Update, undefined, err).run();
 		}
 	}
 
@@ -1124,7 +1143,7 @@ export class InstallAnotherVersionAction extends ExtensionAction {
 					await this.extensionsWorkbenchService.installVersion(this.extension!, pick.id);
 				}
 			} catch (error) {
-				this.instantiationService.createInstance(PromptExtensionInstallFailureAction, this.extension!, pick.latest ? this.extension!.latestVersion : pick.id, InstallOperation.Install, error).run();
+				this.instantiationService.createInstance(PromptExtensionInstallFailureAction, this.extension!, pick.latest ? this.extension!.latestVersion : pick.id, InstallOperation.Install, undefined, error).run();
 			}
 		}
 		return null;
@@ -1715,7 +1734,7 @@ export class InstallRecommendedExtensionAction extends Action {
 			try {
 				await this.extensionWorkbenchService.install(extension);
 			} catch (err) {
-				this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Install, err).run();
+				this.instantiationService.createInstance(PromptExtensionInstallFailureAction, extension, extension.latestVersion, InstallOperation.Install, undefined, err).run();
 			}
 		}
 	}
diff --git a/src/vs/workbench/services/extensionManagement/electron-sandbox/remoteExtensionManagementService.ts b/src/vs/workbench/services/extensionManagement/electron-sandbox/remoteExtensionManagementService.ts
index 03e8a8ba247..3eba7863d31 100644
--- a/src/vs/workbench/services/extensionManagement/electron-sandbox/remoteExtensionManagementService.ts
+++ b/src/vs/workbench/services/extensionManagement/electron-sandbox/remoteExtensionManagementService.ts
@@ -103,7 +103,7 @@ export class NativeRemoteExtensionManagementService extends ExtensionManagementC
 		const compatible = await this.galleryService.getCompatibleExtension(extension, includePreRelease, await this.getTargetPlatform());
 		if (compatible) {
 			if (includePreRelease && !compatible.properties.isPreReleaseVersion && extension.hasPreReleaseVersion) {
-				throw new ExtensionManagementError(localize('notFoundCompatiblePrereleaseDependency', "Can't install pre-release version of '{0}' extension because it is not compatible with the current version of {1} (version {2}).", extension.identifier.id, this.productService.nameLong, this.productService.version), ExtensionManagementErrorCode.Incompatible);
+				throw new ExtensionManagementError(localize('notFoundCompatiblePrereleaseDependency', "Can't install pre-release version of '{0}' extension because it is not compatible with the current version of {1} (version {2}).", extension.identifier.id, this.productService.nameLong, this.productService.version), ExtensionManagementErrorCode.IncompatiblePreRelease);
 			}
 		} else {
 			throw new ExtensionManagementError(localize('notFoundCompatibleDependency', "Can't install '{0}' extension because it is not compatible with the current version of {1} (version {2}).", extension.identifier.id, this.productService.nameLong, this.productService.version), ExtensionManagementErrorCode.Incompatible);