diff --git a/browser/base/content/browser-addons.js b/browser/base/content/browser-addons.js
index e262a9650cee..6b1faf1d1f33 100644
--- a/browser/base/content/browser-addons.js
+++ b/browser/base/content/browser-addons.js
@@ -580,6 +580,16 @@ var gXPInstallObserver = {
           args = [brandShortName, Services.appinfo.version, install.name];
         }
 
+        if (install.addon && !Services.policies.mayInstallAddon(install.addon)) {
+          error = "addonInstallBlockedByPolicy";
+          let extensionSettings = Services.policies.getExtensionSettings(install.addon.id);
+          let message = "";
+          if (extensionSettings && "blocked_install_message" in extensionSettings) {
+            message = " " + extensionSettings.blocked_install_message;
+          }
+          args = [install.name, install.addon.id, message];
+        }
+
         // Add Learn More link when refusing to install an unsigned add-on
         if (install.error == AddonManager.ERROR_SIGNEDSTATE_REQUIRED) {
           options.learnMoreURL = Services.urlFormatter.formatURLPref("app.support.baseURL") + "unsigned-addons";
diff --git a/browser/components/enterprisepolicies/Policies.jsm b/browser/components/enterprisepolicies/Policies.jsm
index 993e4e141334..8e4a76aa8ab1 100644
--- a/browser/components/enterprisepolicies/Policies.jsm
+++ b/browser/components/enterprisepolicies/Policies.jsm
@@ -542,7 +542,7 @@ var Policies = {
                 await addon.uninstall();
               } catch (e) {
                 // This can fail for add-ons that can't be uninstalled.
-                // Just ignore.
+                log.debug(`Add-on ID (${addon.id}) couldn't be uninstalled.`);
               }
             }
           }
@@ -552,61 +552,29 @@ var Policies = {
         runOncePerModification("extensionsInstall", JSON.stringify(param.Install), async () => {
           await uninstallingPromise;
           for (let location of param.Install) {
-            let url;
-            if (location.includes("://")) {
-              // Assume location is an URI
-              url = location;
-            } else {
+            let uri;
+            try {
+              uri = Services.io.newURI(location);
+            } catch (e) {
+              // If it's not a URL, it's probably a file path.
               // Assume location is a file path
-              let xpiFile = Cc["@mozilla.org/file/local;1"].createInstance(Ci.nsIFile);
+              // This is done for legacy support (old API)
               try {
-                xpiFile.initWithPath(location);
-              } catch (e) {
+                let xpiFile = new FileUtils.File(location);
+                uri = Services.io.newFileURI(xpiFile);
+              } catch (ex) {
                 log.error(`Invalid extension path location - ${location}`);
-                continue;
-              }
-              url = Services.io.newFileURI(xpiFile).spec;
-            }
-            AddonManager.getInstallForURL(url, {
-              telemetryInfo: {source: "enterprise-policy"},
-            }).then(install => {
-              if (install.addon && install.addon.appDisabled) {
-                log.error(`Incompatible add-on - ${location}`);
-                install.cancel();
                 return;
               }
-              let listener = {
-              /* eslint-disable-next-line no-shadow */
-                onDownloadEnded: (install) => {
-                  if (install.addon && install.addon.appDisabled) {
-                    log.error(`Incompatible add-on - ${location}`);
-                    install.removeListener(listener);
-                    install.cancel();
-                  }
-                },
-                onDownloadFailed: () => {
-                  install.removeListener(listener);
-                  log.error(`Download failed - ${location}`);
-                  clearRunOnceModification("extensionsInstall");
-                },
-                onInstallFailed: () => {
-                  install.removeListener(listener);
-                  log.error(`Installation failed - ${location}`);
-                },
-                onInstallEnded: () => {
-                  install.removeListener(listener);
-                  log.debug(`Installation succeeded - ${location}`);
-                },
-              };
-              install.addListener(listener);
-              install.install();
-            });
+            }
+            installAddonFromURL(uri.spec);
           }
         });
       }
       if ("Locked" in param) {
         for (let ID of param.Locked) {
-          manager.disallowFeature(`modify-extension:${ID}`);
+          manager.disallowFeature(`uninstall-extension:${ID}`);
+          manager.disallowFeature(`disable-extension:${ID}`);
         }
       }
     },
@@ -614,7 +582,79 @@ var Policies = {
 
   "ExtensionSettings": {
     onBeforeAddons(manager, param) {
-      manager.setExtensionSettings(param);
+      try {
+        manager.setExtensionSettings(param);
+      } catch (e) {
+       log.error("Invalid ExtensionSettings");
+      }
+    },
+    async onBeforeUIStartup(manager, param) {
+      let extensionSettings = param;
+      let blockAllExtensions = false;
+      if ("*" in extensionSettings) {
+        if ("installation_mode" in extensionSettings["*"] &&
+            extensionSettings["*"].installation_mode == "blocked") {
+          blockAllExtensions = true;
+          // Turn off discovery pane in about:addons
+          setAndLockPref("extensions.getAddons.showPane", false);
+          // Block about:debugging
+          blockAboutPage(manager, "about:debugging");
+        }
+      }
+      let {addons} = await AddonManager.getActiveAddons();
+      let allowedExtensions = [];
+      for (let extensionID in extensionSettings) {
+        if (extensionID == "*") {
+          // Ignore global settings
+          continue;
+        }
+        if ("installation_mode" in extensionSettings[extensionID]) {
+          if (extensionSettings[extensionID].installation_mode == "force_installed" ||
+              extensionSettings[extensionID].installation_mode == "normal_installed") {
+            if (!extensionSettings[extensionID].install_url) {
+              throw new Error(`Missing install_url for ${extensionID}`);
+            }
+            if (!addons.find(addon => addon.id == extensionID)) {
+              installAddonFromURL(extensionSettings[extensionID].install_url, extensionID);
+            }
+            manager.disallowFeature(`uninstall-extension:${extensionID}`);
+            if (extensionSettings[extensionID].installation_mode == "force_installed") {
+              manager.disallowFeature(`disable-extension:${extensionID}`);
+            }
+            allowedExtensions.push(extensionID);
+          } else if (extensionSettings[extensionID].installation_mode == "allowed") {
+            allowedExtensions.push(extensionID);
+          } else if (extensionSettings[extensionID].installation_mode == "blocked") {
+            if (addons.find(addon => addon.id == extensionID)) {
+              // Can't use the addon from getActiveAddons since it doesn't have uninstall.
+              let addon = await AddonManager.getAddonByID(extensionID);
+              try {
+                await addon.uninstall();
+              } catch (e) {
+                // This can fail for add-ons that can't be uninstalled.
+                log.debug(`Add-on ID (${addon.id}) couldn't be uninstalled.`);
+              }
+            }
+          }
+        }
+      }
+      if (blockAllExtensions) {
+        for (let addon of addons) {
+          if (addon.isSystem || addon.isBuiltin) {
+            continue;
+          }
+          if (!allowedExtensions.includes(addon.id)) {
+            try {
+              // Can't use the addon from getActiveAddons since it doesn't have uninstall.
+              let addonToUninstall = await AddonManager.getAddonByID(addon.id);
+              await addonToUninstall.uninstall();
+            } catch (e) {
+              // This can fail for add-ons that can't be uninstalled.
+              log.debug(`Add-on ID (${addon.id}) couldn't be uninstalled.`);
+            }
+          }
+        }
+      }
     },
   },
 
@@ -1304,6 +1344,54 @@ function replacePathVariables(path) {
   return path;
 }
 
+/**
+ * installAddonFromURL
+ *
+ * Helper function that installs an addon from a URL
+ * and verifies that the addon ID matches.
+*/
+function installAddonFromURL(url, extensionID) {
+  AddonManager.getInstallForURL(url, {
+    telemetryInfo: {source: "enterprise-policy"},
+  }).then(install => {
+    if (install.addon && install.addon.appDisabled) {
+      log.error(`Incompatible add-on - ${location}`);
+      install.cancel();
+      return;
+    }
+    let listener = {
+    /* eslint-disable-next-line no-shadow */
+      onDownloadEnded: (install) => {
+        if (extensionID && install.addon.id != extensionID) {
+          log.error(`Add-on downloaded from ${url} had unexpected id (got ${install.addon.id} expected ${extensionID})`);
+          install.removeListener(listener);
+          install.cancel();
+        }
+        if (install.addon && install.addon.appDisabled) {
+          log.error(`Incompatible add-on - ${url}`);
+          install.removeListener(listener);
+          install.cancel();
+        }
+      },
+      onDownloadFailed: () => {
+        install.removeListener(listener);
+        log.error(`Download failed - ${url}`);
+        clearRunOnceModification("extensionsInstall");
+      },
+      onInstallFailed: () => {
+        install.removeListener(listener);
+        log.error(`Installation failed - ${url}`);
+      },
+      onInstallEnded: () => {
+        install.removeListener(listener);
+        log.debug(`Installation succeeded - ${url}`);
+      },
+    };
+    install.addListener(listener);
+    install.install();
+  });
+}
+
 let gChromeURLSBlocked = false;
 
 // If any about page is blocked, we block the loading of all
diff --git a/browser/components/enterprisepolicies/schemas/policies-schema.json b/browser/components/enterprisepolicies/schemas/policies-schema.json
index f87605cb62f9..6e4d690ad2ed 100644
--- a/browser/components/enterprisepolicies/schemas/policies-schema.json
+++ b/browser/components/enterprisepolicies/schemas/policies-schema.json
@@ -323,10 +323,44 @@
 
     "ExtensionSettings": {
       "type": "object",
+      "properties": {
+        "*": {
+          "type": "object",
+          "properties": {
+            "installation_mode": {
+              "type": "string",
+              "enum": ["allowed", "blocked"]
+            },
+            "allowed_types": {
+              "type": "array",
+              "items": {
+                "type": "string",
+                "enum": ["extension", "dictionary", "locale", "theme"]
+              }
+            },
+            "blocked_install_message": {
+              "type": "string"
+            },
+            "install_sources": {
+              "type": "array",
+              "items": {
+                "type": "string"
+              }
+            }
+          }
+        }
+      },
       "patternProperties": {
         "^.*$": {
           "type": "object",
           "properties": {
+            "installation_mode": {
+              "type": "string",
+              "enum": ["allowed", "blocked", "force_installed", "normal_installed"]
+            },
+            "install_url": {
+              "type": "string"
+            },
             "blocked_install_message": {
               "type": "string"
             }
diff --git a/browser/components/enterprisepolicies/tests/browser/browser.ini b/browser/components/enterprisepolicies/tests/browser/browser.ini
index ba93bafcd9ec..bd46f3b251f4 100644
--- a/browser/components/enterprisepolicies/tests/browser/browser.ini
+++ b/browser/components/enterprisepolicies/tests/browser/browser.ini
@@ -9,6 +9,7 @@ support-files =
   policy_websitefilter_exception.html
   ../../../../../toolkit/components/antitracking/test/browser/page.html
   ../../../../../toolkit/components/antitracking/test/browser/subResources.sjs
+  extensionsettings.html
 
 [browser_policies_getActivePolicies.js]
 skip-if = os != 'mac'
diff --git a/browser/components/enterprisepolicies/tests/browser/browser_policy_extensionsettings.js b/browser/components/enterprisepolicies/tests/browser/browser_policy_extensionsettings.js
index dbdd5c2f3710..1736bf4a2be5 100644
--- a/browser/components/enterprisepolicies/tests/browser/browser_policy_extensionsettings.js
+++ b/browser/components/enterprisepolicies/tests/browser/browser_policy_extensionsettings.js
@@ -2,22 +2,206 @@
  * http://creativecommons.org/publicdomain/zero/1.0/ */
 "use strict";
 
-add_task(async function test_extensionsettings() {
+const BASE_URL = "http://mochi.test:8888/browser/browser/components/enterprisepolicies/tests/browser/";
+
+/**
+ * Wait for the given PopupNotification to display
+ *
+ * @param {string} name
+ *        The name of the notification to wait for.
+ *
+ * @returns {Promise}
+ *          Resolves with the notification window.
+ */
+function promisePopupNotificationShown(name) {
+  return new Promise(resolve => {
+    function popupshown() {
+      let notification = PopupNotifications.getNotification(name);
+      if (!notification) { return; }
+
+      ok(notification, `${name} notification shown`);
+      ok(PopupNotifications.isPanelOpen, "notification panel open");
+
+      PopupNotifications.panel.removeEventListener("popupshown", popupshown);
+      resolve(PopupNotifications.panel.firstElementChild);
+    }
+
+    PopupNotifications.panel.addEventListener("popupshown", popupshown);
+  });
+}
+
+add_task(async function test_install_source_blocked_link() {
   await setupPolicyEngineWithJson({
     "policies": {
       "ExtensionSettings": {
-        "extension1@mozilla.com": {
-          "blocked_install_message": "Extension1 error message.",
-        },
         "*": {
-          "blocked_install_message": "Generic error message.",
+          "install_sources": ["http://blocks.other.install.sources/*"],
         },
       },
     },
   });
+  let popupPromise = promisePopupNotificationShown("addon-install-origin-blocked");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
 
-  let extensionSettings =  Services.policies.getExtensionSettings("extension1@mozilla.com");
-  is(extensionSettings.blocked_install_message, "Extension1 error message.", "Should have extension specific message.");
-  extensionSettings =  Services.policies.getExtensionSettings("extension2@mozilla.com");
-  is(extensionSettings.blocked_install_message, "Generic error message.", "Should have generic message.");
+  await ContentTask.spawn(tab.linkedBrowser, {}, () => {
+    content.document.getElementById("policytest").click();
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_blocked_installtrigger() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://blocks.other.install.sources/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-install-origin-blocked");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {}, () => {
+    content.document.getElementById("policytest_installtrigger").click();
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_blocked_otherdomain() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://mochi.test/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-install-origin-blocked");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {}, () => {
+    content.document.getElementById("policytest_otherdomain").click();
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_blocked_direct() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://blocks.other.install.sources/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-install-origin-blocked");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {baseUrl: BASE_URL}, async function({baseUrl}) {
+    content.document.location.href = baseUrl + "policytest_v0.1.xpi";
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_allowed_link() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://mochi.test/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-webext-permissions");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {}, () => {
+    content.document.getElementById("policytest").click();
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_allowed_installtrigger() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://mochi.test/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-webext-permissions");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {}, () => {
+    content.document.getElementById("policytest_installtrigger").click();
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_allowed_otherdomain() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://mochi.test/*", "http://example.org/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-webext-permissions");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {}, () => {
+    content.document.getElementById("policytest_otherdomain").click();
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
+});
+
+add_task(async function test_install_source_allowed_direct() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "*": {
+          "install_sources": ["http://mochi.test/*"],
+        },
+      },
+    },
+  });
+  let popupPromise = promisePopupNotificationShown("addon-webext-permissions");
+  let tab = await BrowserTestUtils.openNewForegroundTab({gBrowser,
+    opening: BASE_URL + "extensionsettings.html",
+    waitForStateStop: true});
+
+  await ContentTask.spawn(tab.linkedBrowser, {baseUrl: BASE_URL}, async function({baseUrl}) {
+    content.document.location.href = baseUrl + "policytest_v0.1.xpi";
+  });
+  await popupPromise;
+  BrowserTestUtils.removeTab(tab);
 });
diff --git a/browser/components/enterprisepolicies/tests/browser/extensionsettings.html b/browser/components/enterprisepolicies/tests/browser/extensionsettings.html
new file mode 100644
index 000000000000..1370a2b5c473
--- /dev/null
+++ b/browser/components/enterprisepolicies/tests/browser/extensionsettings.html
@@ -0,0 +1,23 @@
+
+<!DOCTYPE html>
+<html>
+<head>
+<meta charset="UTF-8">
+<script type="text/javascript">
+function installTrigger(url) {
+  InstallTrigger.install({extension: url});
+}
+</script>
+</head>
+<body>
+<p>
+<a id="policytest" href="policytest_v0.1.xpi">policytest@mozilla.com</a>
+</p>
+<p>
+<a id="policytest_installtrigger" onclick="installTrigger(this.href);return false;" href="policytest_v0.1.xpi">policytest@mozilla.com</a>
+</p>
+<p>
+<a id="policytest_otherdomain" href="http://example.org:80/browser/browser/components/enterprisepolicies/tests/browser/policytest_v0.1.xpi">policytest@mozilla.com</a>
+</p>
+</body>
+</html>
diff --git a/browser/components/enterprisepolicies/tests/xpcshell/test_extensionsettings.js b/browser/components/enterprisepolicies/tests/xpcshell/test_extensionsettings.js
new file mode 100644
index 000000000000..47e72bff6c01
--- /dev/null
+++ b/browser/components/enterprisepolicies/tests/xpcshell/test_extensionsettings.js
@@ -0,0 +1,155 @@
+/* Any copyright is dedicated to the Public Domain.
+ * http://creativecommons.org/publicdomain/zero/1.0/ */
+"use strict";
+
+const {AddonTestUtils} = ChromeUtils.import("resource://testing-common/AddonTestUtils.jsm");
+const {AddonManager} = ChromeUtils.import("resource://gre/modules/AddonManager.jsm");
+
+AddonTestUtils.init(this);
+AddonTestUtils.overrideCertDB();
+AddonTestUtils.createAppInfo("xpcshell@tests.mozilla.org", "XPCShell", "48", "48");
+
+const server = AddonTestUtils.createHttpServer({hosts: ["example.com"]});
+const BASE_URL = `http://example.com/data`;
+
+let addonID = "policytest2@mozilla.com";
+
+add_task(async function setup() {
+  await AddonTestUtils.promiseStartupManager();
+
+  let webExtensionFile = AddonTestUtils.createTempWebExtensionFile({
+    manifest: {
+      applications: {
+        gecko: {
+          id: addonID,
+        },
+      },
+    },
+  });
+
+  server.registerFile("/data/policy_test.xpi", webExtensionFile);
+});
+
+add_task(async function test_extensionsettings() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "extension1@mozilla.com": {
+          "blocked_install_message": "Extension1 error message.",
+        },
+        "*": {
+          "blocked_install_message": "Generic error message.",
+        },
+      },
+    },
+  });
+
+  let extensionSettings =  Services.policies.getExtensionSettings("extension1@mozilla.com");
+  equal(extensionSettings.blocked_install_message, "Extension1 error message.", "Should have extension specific message.");
+  extensionSettings =  Services.policies.getExtensionSettings("extension2@mozilla.com");
+  equal(extensionSettings.blocked_install_message, "Generic error message.", "Should have generic message.");
+});
+
+add_task(async function test_addon_blocked() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "policytest2@mozilla.com": {
+          "installation_mode": "blocked",
+        },
+      },
+    },
+  });
+
+  let install = await AddonManager.getInstallForURL(BASE_URL + "/policy_test.xpi");
+  await install.install();
+  notEqual(install.addon, null, "Addon should not be null");
+  equal(install.addon.appDisabled, true, "Addon should be disabled");
+  await install.addon.uninstall();
+});
+
+add_task(async function test_addon_allowed() {
+  await setupPolicyEngineWithJson({
+    "policies": {
+      "ExtensionSettings": {
+        "policytest2@mozilla.com": {
+          "installation_mode": "allowed",
+        },
+        "*": {
+          "installation_mode": "blocked",
+        },
+      },
+    },
+  });
+
+  let install = await AddonManager.getInstallForURL(BASE_URL + "/policy_test.xpi");
+  await install.install();
+  notEqual(install.addon, null, "Addon should not be null");
+  equal(install.addon.appDisabled, false, "Addon should not be disabled");
+  await install.addon.uninstall();
+});
+
+add_task(async function test_addon_uninstalled() {
+  let install = await AddonManager.getInstallForURL(BASE_URL + "/policy_test.xpi");
+  await install.install();
+  notEqual(install.addon, null, "Addon should not be null");
+
+  await Promise.all([
+    AddonTestUtils.promiseAddonEvent("onUninstalled"),
+    setupPolicyEngineWithJson({
+      "policies": {
+        "ExtensionSettings": {
+          "*": {
+            "installation_mode": "blocked",
+          },
+        },
+      },
+    }),
+  ]);
+  let addon = await AddonManager.getAddonByID(addonID);
+  equal(addon, null, "Addon should be null");
+});
+
+add_task(async function test_addon_forceinstalled() {
+  await Promise.all([
+    AddonTestUtils.promiseInstallEvent("onInstallEnded"),
+    setupPolicyEngineWithJson({
+      "policies": {
+        "ExtensionSettings": {
+          "policytest2@mozilla.com": {
+            "installation_mode": "force_installed",
+            "install_url": BASE_URL + "/policy_test.xpi",
+          },
+        },
+      },
+    }),
+  ]);
+  let addon = await AddonManager.getAddonByID(addonID);
+  notEqual(addon, null, "Addon should not be null");
+  equal(addon.appDisabled, false, "Addon should not be disabled");
+  equal(addon.permissions & AddonManager.PERM_CAN_UNINSTALL, 0, "Addon should not be able to be uninstalled.");
+  equal(addon.permissions & AddonManager.PERM_CAN_DISABLE, 0, "Addon should not be able to be disabled.");
+  await addon.uninstall();
+});
+
+add_task(async function test_addon_normalinstalled() {
+  await Promise.all([
+    AddonTestUtils.promiseInstallEvent("onInstallEnded"),
+    setupPolicyEngineWithJson({
+      "policies": {
+        "ExtensionSettings": {
+          "policytest2@mozilla.com": {
+            "installation_mode": "normal_installed",
+            "install_url": BASE_URL + "/policy_test.xpi",
+          },
+        },
+      },
+    }),
+  ]);
+  let addon = await AddonManager.getAddonByID(addonID);
+  notEqual(addon, null, "Addon should not be null");
+  equal(addon.appDisabled, false, "Addon should not be disabled");
+  equal(addon.permissions & AddonManager.PERM_CAN_UNINSTALL, 0, "Addon should not be able to be uninstalled.");
+  notEqual(addon.permissions & AddonManager.PERM_CAN_DISABLE, 0, "Addon should be able to be disabled.");
+  await addon.uninstall();
+});
diff --git a/browser/components/enterprisepolicies/tests/xpcshell/xpcshell.ini b/browser/components/enterprisepolicies/tests/xpcshell/xpcshell.ini
index bbd46f1f7cad..107020f4c2cd 100644
--- a/browser/components/enterprisepolicies/tests/xpcshell/xpcshell.ini
+++ b/browser/components/enterprisepolicies/tests/xpcshell/xpcshell.ini
@@ -6,6 +6,7 @@ head = head.js
 [test_appupdateurl.js]
 [test_clear_blocked_cookies.js]
 [test_defaultbrowsercheck.js]
+[test_extensionsettings.js]
 [test_macosparser_unflatten.js]
 skip-if = os != 'mac'
 [test_permissions.js]
diff --git a/browser/locales/en-US/browser/policies/policies-descriptions.ftl b/browser/locales/en-US/browser/policies/policies-descriptions.ftl
index 55b1937c5518..b649c64b328d 100644
--- a/browser/locales/en-US/browser/policies/policies-descriptions.ftl
+++ b/browser/locales/en-US/browser/policies/policies-descriptions.ftl
@@ -90,6 +90,8 @@ policy-EnableTrackingProtection = Enable or disable Content Blocking and optiona
 # English or translate them as verbs.
 policy-Extensions = Install, uninstall or lock extensions. The Install option takes URLs or paths as parameters. The Uninstall and Locked options take extension IDs.
 
+policy-ExtensionSettings = Manage all aspects of extension installation.
+
 policy-ExtensionUpdate = Enable or disable automatic extension updates.
 
 policy-FirefoxHome = Configure Firefox Home.
diff --git a/browser/locales/en-US/chrome/browser/browser.properties b/browser/locales/en-US/chrome/browser/browser.properties
index 161b442d06f1..dbb66b3a5eca 100644
--- a/browser/locales/en-US/chrome/browser/browser.properties
+++ b/browser/locales/en-US/chrome/browser/browser.properties
@@ -41,6 +41,13 @@ xpinstallDisabledMessage=Software installation is currently disabled. Click Enab
 xpinstallDisabledButton=Enable
 xpinstallDisabledButton.accesskey=n
 
+# LOCALIZATION NOTE (addonInstallBlockedByPolicy)
+# This message is shown when the installation of an add-on is blocked by
+# enterprise policy. %1$S is replaced by the name of the add-on.
+# %2$S is replaced by the ID of add-on. %3$S is a custom message that
+# the administration can add to the message.
+addonInstallBlockedByPolicy=%1$S (%2$S) is blocked by your system administrator.%3$S
+
 # LOCALIZATION NOTE (webextPerms.header)
 # This string is used as a header in the webextension permissions dialog,
 # %S is replaced with the localized name of the extension being installed.
diff --git a/toolkit/components/enterprisepolicies/EnterprisePolicies.js b/toolkit/components/enterprisepolicies/EnterprisePolicies.js
index 0f5e590364ba..c219d4edf670 100644
--- a/toolkit/components/enterprisepolicies/EnterprisePolicies.js
+++ b/toolkit/components/enterprisepolicies/EnterprisePolicies.js
@@ -300,23 +300,61 @@ EnterprisePoliciesManager.prototype = {
 
   setExtensionSettings(extensionSettings) {
     ExtensionSettings = extensionSettings;
+    if ("*" in extensionSettings &&
+        "install_sources" in extensionSettings["*"]) {
+      InstallSources = new MatchPatternSet(extensionSettings["*"].install_sources);
+    }
   },
 
   getExtensionSettings(extensionID) {
     let settings = null;
-    if (extensionID in ExtensionSettings) {
-      settings = ExtensionSettings[extensionID];
-    } else if ("*" in ExtensionSettings) {
-      settings = ExtensionSettings["*"];
+    if (ExtensionSettings) {
+      if (extensionID in ExtensionSettings) {
+        settings = ExtensionSettings[extensionID];
+      } else if ("*" in ExtensionSettings) {
+        settings = ExtensionSettings["*"];
+      }
     }
     return settings;
   },
+
+  mayInstallAddon(addon) {
+    // See https://dev.chromium.org/administrators/policy-list-3/extension-settings-full
+    if (!ExtensionSettings) {
+      return true;
+    }
+    if (addon.id in ExtensionSettings) {
+      if ("installation_mode" in ExtensionSettings[addon.id]) {
+        switch (ExtensionSettings[addon.id].installation_mode) {
+          case "blocked":
+            return false;
+          default:
+            return true;
+        }
+      }
+    }
+    if ("*" in ExtensionSettings) {
+      if (ExtensionSettings["*"].installation_mode &&
+          ExtensionSettings["*"].installation_mode == "blocked") {
+        return false;
+      }
+      if ("allowed_types" in ExtensionSettings["*"]) {
+        return ExtensionSettings["*"].allowed_types.includes(addon.type);
+      }
+    }
+    return true;
+  },
+
+  allowedInstallSource(uri) {
+    return InstallSources ? InstallSources.matches(uri) : true;
+  },
 };
 
 let DisallowedFeatures = {};
 let SupportMenu = null;
 let ExtensionPolicies = null;
 let ExtensionSettings = null;
+let InstallSources = null;
 
 /**
  * areEnterpriseOnlyPoliciesAllowed
diff --git a/toolkit/components/enterprisepolicies/nsIEnterprisePolicies.idl b/toolkit/components/enterprisepolicies/nsIEnterprisePolicies.idl
index 812304a70c55..fd81f5a9da0a 100644
--- a/toolkit/components/enterprisepolicies/nsIEnterprisePolicies.idl
+++ b/toolkit/components/enterprisepolicies/nsIEnterprisePolicies.idl
@@ -3,6 +3,7 @@
  * file, You can obtain one at http://mozilla.org/MPL/2.0/. */
 
 #include "nsISupports.idl"
+#include "nsIURI.idl"
 
 [scriptable, uuid(6a568972-cc91-4bf5-963e-3768f3319b8a)]
 interface nsIEnterprisePolicies : nsISupports
@@ -48,4 +49,20 @@ interface nsIEnterprisePolicies : nsISupports
    * @returns A JS object that settings or null if unavailable.
    */
   jsval getExtensionSettings(in ACString extensionID);
+
+  /**
+   * Uses the whitelist, blacklist and settings to determine if an extension
+   * may be installed.
+   *
+   * @returns A boolean - true of the extension may be installed.
+   */
+  bool mayInstallAddon(in jsval addon);
+
+  /**
+   * Uses install_sources to determine if an extension can be installed
+   * from the given URI.
+   *
+   * @returns A boolean - true of the extension may be installed.
+   */
+  bool allowedInstallSource(in nsIURI uri);
 };
diff --git a/toolkit/mozapps/extensions/AddonManager.jsm b/toolkit/mozapps/extensions/AddonManager.jsm
index 79dd227f783b..21ac1b84b01e 100644
--- a/toolkit/mozapps/extensions/AddonManager.jsm
+++ b/toolkit/mozapps/extensions/AddonManager.jsm
@@ -1663,6 +1663,10 @@ var AddonManagerInternal = {
       throw Components.Exception("aInstallingPrincipal must be a nsIPrincipal",
                                  Cr.NS_ERROR_INVALID_ARG);
 
+    if (this.isInstallAllowedByPolicy(aInstallingPrincipal, null, true /* explicit */)) {
+      return true;
+    }
+
     let providers = [...this.providers];
     for (let provider of providers) {
       if (callProvider(provider, "supportsMimetype", false, aMimetype) &&
@@ -1672,6 +1676,40 @@ var AddonManagerInternal = {
     return false;
   },
 
+  /**
+   * Checks whether a particular source is allowed to install add-ons based
+   * on policy.
+   *
+   * @param  aInstallingPrincipal
+   *         The nsIPrincipal that initiated the install
+   * @param  aInstall
+   *         The AddonInstall to be installed
+   * @param  explicit
+   *         If this is set, we only return true if the source is explicitly
+   *         blocked via policy.
+   *
+   * @return boolean
+   *         By default, returns true if the source is blocked by policy
+   *         or there is no policy.
+   *         If explicit is set, only returns true of the source is
+   *         blocked by policy, false otherwise. This is needed for
+   *         handling inverse cases.
+   */
+  isInstallAllowedByPolicy(aInstallingPrincipal, aInstall, explicit) {
+    if (Services.policies) {
+      let extensionSettings = Services.policies.getExtensionSettings("*");
+      if (extensionSettings && extensionSettings.install_sources) {
+        if ((!aInstall || Services.policies.allowedInstallSource(aInstall.sourceURI)) &&
+            (!aInstallingPrincipal || !aInstallingPrincipal.URI ||
+            Services.policies.allowedInstallSource(aInstallingPrincipal.URI))) {
+          return true;
+        }
+        return false;
+      }
+    }
+    return !explicit;
+  },
+
   installNotifyObservers(aTopic, aBrowser, aUri, aInstall, aInstallFn) {
     let info = {
       wrappedJSObject: {
@@ -1809,7 +1847,9 @@ var AddonManagerInternal = {
         this.installNotifyObservers("addon-install-disabled", topBrowser,
                                     aInstallingPrincipal.URI, aInstall);
         return;
-      } else if (aInstallingPrincipal.isNullPrincipal || !aBrowser.contentPrincipal || !aInstallingPrincipal.subsumes(aBrowser.contentPrincipal)) {
+      } else if (aInstallingPrincipal.isNullPrincipal || !aBrowser.contentPrincipal ||
+                 !aInstallingPrincipal.subsumes(aBrowser.contentPrincipal) ||
+                 !this.isInstallAllowedByPolicy(aInstallingPrincipal, aInstall, false /* explicit */)) {
         aInstall.cancel();
 
         this.installNotifyObservers("addon-install-origin-blocked", topBrowser,
@@ -1855,6 +1895,13 @@ var AddonManagerInternal = {
    *         The AddonInstall to be installed
    */
   installAddonFromAOM(browser, uri, install) {
+    if (!this.isInstallAllowedByPolicy(null, install)) {
+      install.cancel();
+
+      this.installNotifyObservers("addon-install-origin-blocked", browser,
+                                  install.sourceURI, install);
+      return;
+    }
     if (!gStarted)
       throw Components.Exception("AddonManager is not initialized",
                                  Cr.NS_ERROR_NOT_INITIALIZED);
diff --git a/toolkit/mozapps/extensions/internal/XPIDatabase.jsm b/toolkit/mozapps/extensions/internal/XPIDatabase.jsm
index 0d6be5a04558..a9a55de12013 100644
--- a/toolkit/mozapps/extensions/internal/XPIDatabase.jsm
+++ b/toolkit/mozapps/extensions/internal/XPIDatabase.jsm
@@ -659,10 +659,13 @@ class AddonInternal {
       permissions |= AddonManager.PERM_CAN_CHANGE_PRIVATEBROWSING_ACCESS;
     }
 
-    if (Services.policies &&
-        !Services.policies.isAllowed(`modify-extension:${this.id}`)) {
-      permissions &= ~AddonManager.PERM_CAN_UNINSTALL;
-      permissions &= ~AddonManager.PERM_CAN_DISABLE;
+    if (Services.policies) {
+      if (!Services.policies.isAllowed(`uninstall-extension:${this.id}`)) {
+        permissions &= ~AddonManager.PERM_CAN_UNINSTALL;
+      }
+      if (!Services.policies.isAllowed(`disable-extension:${this.id}`)) {
+        permissions &= ~AddonManager.PERM_CAN_DISABLE;
+      }
     }
 
     return permissions;
@@ -1945,6 +1948,14 @@ this.XPIDatabase = {
       }
     }
 
+    if (aAddon.location.isSystem || aAddon.location.isBuiltin) {
+      return true;
+    }
+
+    if (Services.policies && !Services.policies.mayInstallAddon(aAddon)) {
+      return false;
+    }
+
     return true;
   },