diff --git a/setup-magento/action.yml b/setup-magento/action.yml
index 250b189..e31b723 100644
--- a/setup-magento/action.yml
+++ b/setup-magento/action.yml
@@ -84,6 +84,11 @@ runs:
       name: Create Magento ${{ inputs.magento_version }} Project
       if: inputs.mode == 'extension'
 
+    - run: mkdir -p ${{ steps.setup-magento-compute-directory.outputs.MAGENTO_DIRECTORY }}/app/etc
+      shell: bash
+      name: Ensure app/etc exists for magento composer plugin
+      if: inputs.mode == 'extension'
+
     - uses: mage-os/github-actions/fix-magento-install@main
       name: Fix Magento Out of Box Install Issues
       with: