diff --git a/x/asset/ft/spec/README.md b/x/asset/ft/spec/README.md
index 65d8715dc..e7a445424 100644
--- a/x/asset/ft/spec/README.md
+++ b/x/asset/ft/spec/README.md
@@ -193,8 +193,6 @@ Same rules apply to receiving tokens over IBC transfer protocol if IBC is enable
 
 When token is created, admin decides if users may send and receive it over IBC transfer protocol.
 If IBC feature is disabled token can never leave the Coreum chain.
-The IBC feature is incompatible with the extension feature. The reason for it is that extension can override
-the full functionality of ibc, so allowing the two features together can lead to confusion.
 
 ### Clawback
 
@@ -265,13 +263,16 @@ The fields are:
     - `ibc_purpose`: if it is an ibc transfer, indicates whether it's an outgoing, incoming, acknowledged or timed-out
       transfer
 
-_**Note**: The extension feature is not compatible with ibc and block smart contract feature. It will error out if you
-try
-to enable those features at the same time._
+_**Note**: The extension feature is not compatible with block smart contract feature. It will error out if you
+try to enable those features at the same time._
 
 There is a sample implementation of extension in `x/asset/ft/keeper/test-contracts/asset-extension` which can be used to
 take inspiration from, when implementing other extensions.
 
+#### DEX extension
+
+The `extension` is also integrate with the DEX check [DEX spec](../../../dex/spec/README.md#Extension) for more details.
+
 ### DEX unified ref amount.
 
 The `unified_ref_amount` DEX setting can be updated by the token admin or gov.
@@ -300,7 +301,7 @@ the `dex_whitelisted_denoms` feature is not enabled or not the `whitelisted_deno
   <tr>
     <th rowspan="3"></th>
     <th colspan="14">Features</th>
-    <th colspan="4">Extensions</th>
+    <th colspan="4">Extension</th>
   </tr>
   <tr>
     <th colspan="2">Default</th>
diff --git a/x/dex/spec/README.md b/x/dex/spec/README.md
index 3c2eb32ff..47326c342 100644
--- a/x/dex/spec/README.md
+++ b/x/dex/spec/README.md
@@ -280,7 +280,98 @@ This feature introduces an enhancement to the asset FT (`restrict_dex` feature),
 This adds a layer of control over trading pairs, ensuring that denom(asset FT) can only be exchanged with certain
 denoms/currencies or assets, as specified by the admin.
 
-### Extensions
+### Extension
+
+The `extension` feature integrates the DEX with the smart contract extension capability of asset FT. This integration
+enables asset FT extension contracts to define custom extension functions that the DEX invokes before executing an
+order. The extension functions can leverage order details, including the amounts expected to be spent and received
+post-execution, to implement custom rules. For example, they can validate an order against specific business logic or
+constraints.
+
+#### Asset FT features handling
+
+If the extension feature is enabled for a token but no contract extension function is implemented, all order
+placements will fail. When multiple asset FT features are enabled, the rules of the asset FT features are validated
+first, followed by invoking the extension.
+
+#### Example of WASM Call Implementation in an Extension Smart Contract
+
+Below is an example showcasing how to implement the extension functionality in a smart contract:
+
+##### Code Example
+
+```rust
+#[cw_serde]
+pub struct DEXOrder {
+    pub creator: String,
+    #[serde(rename = "type")]
+    pub order_type: String,
+    pub id: String,
+    pub base_denom: String,
+    pub quote_denom: String,
+    pub price: Option<String>,
+    pub quantity: Uint128,
+    pub side: String,
+}
+
+pub enum SudoMsg {
+    ExtensionTransfer {
+        recipient: String,
+        sender: String,
+        transfer_amount: Uint128,
+        commission_amount: Uint128,
+        burn_amount: Uint128,
+        context: TransferContext,
+    },
+    ExtensionPlaceOrder {
+        order: DEXOrder,
+        expected_to_spend: Coin,
+        expected_to_receive: Coin,
+    },
+}
+
+#[entry_point]
+pub fn sudo(deps: DepsMut, env: Env, msg: SudoMsg) -> CoreumResult<ContractError> {
+    match msg {
+        SudoMsg::ExtensionTransfer {
+            recipient,
+            sender,
+            transfer_amount,
+            commission_amount,
+            burn_amount,
+            context,
+        } => sudo_extension_transfer(
+            deps,
+            env,
+            recipient,
+            sender,
+            transfer_amount,
+            commission_amount,
+            burn_amount,
+            context,
+        ),
+        SudoMsg::ExtensionPlaceOrder {
+            order,
+            expected_to_spend,
+            expected_to_receive,
+        } => sudo_extension_place_order(
+            deps,
+            env,
+            order,
+            expected_to_spend,
+            expected_to_receive,
+        ),
+    }
+}
+```
+
+**`SudoMsg` Enum**:
+
+- Defines the types of messages the extension supports, such as `ExtensionTransfer` and `ExtensionPlaceOrder`.
+- Each variant carries the necessary information to execute specific logic.
+
+**`sudo` Entry Point**:
+
+- Acts as the main function that handles incoming messages.
+- Delegates to specific helper functions based on the message type.
 
-The current version of the DEX doesn't support the extensions. It means if a user places an order with the asset FT
-extension token, such an order will be rejected.