diff --git a/core/config/markdown/loadMarkdownRules.ts b/core/config/markdown/loadMarkdownRules.ts
index 42bfcd21d8c..46fdc0e7f78 100644
--- a/core/config/markdown/loadMarkdownRules.ts
+++ b/core/config/markdown/loadMarkdownRules.ts
@@ -64,13 +64,18 @@ export async function loadMarkdownRules(ide: IDE): Promise<{
     // Process each markdown file
     for (const file of mdFiles) {
       try {
-        const { relativePathOrBasename } = findUriInDirs(
+        const { relativePathOrBasename, foundInDir } = findUriInDirs(
           file.path,
           await ide.getWorkspaceDirs(),
         );
+
+        // For global rules, use the full path
+        // For workspace rules, use the relative path
+        const fileUri = foundInDir ? relativePathOrBasename : file.path;
+
         const rule = markdownToRule(file.content, {
           uriType: "file",
-          fileUri: relativePathOrBasename,
+          fileUri: fileUri,
         });
         rules.push({ ...rule, source: "rules-block", ruleFile: file.path });
       } catch (e) {
diff --git a/core/config/workspace/workspaceBlocks.ts b/core/config/workspace/workspaceBlocks.ts
index 25a606bf932..ed0be2c8c30 100644
--- a/core/config/workspace/workspaceBlocks.ts
+++ b/core/config/workspace/workspaceBlocks.ts
@@ -6,6 +6,7 @@ import {
 } from "@continuedev/config-yaml";
 import * as YAML from "yaml";
 import { IDE } from "../..";
+import { getContinueGlobalPath } from "../../util/paths";
 import { joinPathsToUri } from "../../util/uri";
 
 const BLOCK_TYPE_CONFIG: Record<
@@ -101,8 +102,13 @@ export async function findAvailableFilename(
   blockType: BlockType,
   fileExists: (uri: string) => Promise<boolean>,
   extension?: string,
+  isGlobal?: boolean,
 ): Promise<string> {
-  const baseFilename = `new-${BLOCK_TYPE_CONFIG[blockType]?.filename}`;
+  // Differentiate filename based on whether its a global rule or a workspace rule
+  const baseFilename =
+    blockType === "rules" && isGlobal
+      ? "global-rule"
+      : `new-${BLOCK_TYPE_CONFIG[blockType]?.filename}`;
   const fileExtension = extension ?? getFileExtension(blockType);
   let counter = 0;
   let fileUri: string;
@@ -143,3 +149,28 @@ export async function createNewWorkspaceBlockFile(
   await ide.writeFile(fileUri, fileContent);
   await ide.openFile(fileUri);
 }
+
+export async function createNewGlobalRuleFile(ide: IDE): Promise<void> {
+  try {
+    const globalDir = getContinueGlobalPath();
+
+    // Create the rules subdirectory within the global directory
+    const rulesDir = joinPathsToUri(globalDir, "rules");
+
+    const fileUri = await findAvailableFilename(
+      rulesDir,
+      "rules",
+      ide.fileExists.bind(ide),
+      undefined,
+      true, // isGlobal = true for global rules
+    );
+
+    const fileContent = getFileContent("rules");
+
+    await ide.writeFile(fileUri, fileContent);
+
+    await ide.openFile(fileUri);
+  } catch (error) {
+    throw error;
+  }
+}
diff --git a/core/core.ts b/core/core.ts
index 6249107bd85..3ff4232274c 100644
--- a/core/core.ts
+++ b/core/core.ts
@@ -60,7 +60,10 @@ import {
   setupProviderConfig,
   setupQuickstartConfig,
 } from "./config/onboarding";
-import { createNewWorkspaceBlockFile } from "./config/workspace/workspaceBlocks";
+import {
+  createNewGlobalRuleFile,
+  createNewWorkspaceBlockFile,
+} from "./config/workspace/workspaceBlocks";
 import { MCPManagerSingleton } from "./context/mcp/MCPManagerSingleton";
 import { performAuth, removeMCPAuth } from "./context/mcp/MCPOauth";
 import { setMdmLicenseKey } from "./control-plane/mdm/mdm";
@@ -419,6 +422,17 @@ export class Core {
       );
     });
 
+    on("config/addGlobalRule", async (msg) => {
+      try {
+        await createNewGlobalRuleFile(this.ide);
+        await this.configHandler.reloadConfig(
+          "Global rule created (config/addGlobalRule message)",
+        );
+      } catch (error) {
+        throw error;
+      }
+    });
+
     on("config/openProfile", async (msg) => {
       await this.configHandler.openConfigProfile(
         msg.data.profileId,
diff --git a/core/protocol/core.ts b/core/protocol/core.ts
index eb7be1bf68e..fe6693bbd40 100644
--- a/core/protocol/core.ts
+++ b/core/protocol/core.ts
@@ -94,6 +94,7 @@ export type ToCoreFromIdeOrWebviewProtocol = {
     void,
   ];
   "config/addLocalWorkspaceBlock": [{ blockType: BlockType }, void];
+  "config/addGlobalRule": [undefined, void];
   "config/newPromptFile": [undefined, void];
   "config/newAssistantFile": [undefined, void];
   "config/ideSettingsUpdate": [IdeSettings, void];
diff --git a/core/protocol/passThrough.ts b/core/protocol/passThrough.ts
index f02727a37ed..d9c7565cecf 100644
--- a/core/protocol/passThrough.ts
+++ b/core/protocol/passThrough.ts
@@ -22,6 +22,7 @@ export const WEBVIEW_TO_CORE_PASS_THROUGH: (keyof ToCoreFromWebviewProtocol)[] =
     "config/newAssistantFile",
     "config/ideSettingsUpdate",
     "config/addLocalWorkspaceBlock",
+    "config/addGlobalRule",
     "config/getSerializedProfileInfo",
     "config/deleteModel",
     "config/refreshProfiles",
diff --git a/extensions/vscode/src/extension/VsCodeExtension.ts b/extensions/vscode/src/extension/VsCodeExtension.ts
index 23ced0cc501..226e85d51f4 100644
--- a/extensions/vscode/src/extension/VsCodeExtension.ts
+++ b/extensions/vscode/src/extension/VsCodeExtension.ts
@@ -1,4 +1,5 @@
 import fs from "fs";
+import path from "path";
 
 import { IContextProvider } from "core";
 import { ConfigHandler } from "core/config/ConfigHandler";
@@ -10,6 +11,7 @@ import {
   getConfigJsonPath,
   getConfigTsPath,
   getConfigYamlPath,
+  getContinueGlobalPath,
 } from "core/util/paths";
 import { v4 as uuidv4 } from "uuid";
 import * as vscode from "vscode";
@@ -463,6 +465,18 @@ export class VsCodeExtension {
       void this.configHandler.reloadConfig("config.ts updated - fs file watch");
     });
 
+    // watch global rules directory for changes
+    const globalRulesDir = path.join(getContinueGlobalPath(), "rules");
+    if (fs.existsSync(globalRulesDir)) {
+      fs.watch(globalRulesDir, { recursive: true }, (eventType, filename) => {
+        if (filename && filename.endsWith(".md")) {
+          void this.configHandler.reloadConfig(
+            "Global rules directory updated - fs file watch",
+          );
+        }
+      });
+    }
+
     vscode.workspace.onDidChangeTextDocument(async (event) => {
       if (event.contentChanges.length > 0) {
         selectionManager.documentChanged();
diff --git a/gui/src/components/DropdownButton.tsx b/gui/src/components/DropdownButton.tsx
new file mode 100644
index 00000000000..5d2a0eaaea0
--- /dev/null
+++ b/gui/src/components/DropdownButton.tsx
@@ -0,0 +1,69 @@
+import { ChevronDownIcon, PlusIcon } from "@heroicons/react/24/outline";
+import { ToolTip } from "./gui/Tooltip";
+import { Listbox, ListboxButton, ListboxOption, ListboxOptions } from "./ui";
+
+interface DropdownOption {
+  value: string;
+  label: string;
+}
+
+interface DropdownButtonProps {
+  title: string;
+  options: DropdownOption[];
+  onOptionClick: (value: string) => void;
+  addButtonTooltip?: string;
+  className?: string;
+  variant?: "default" | "sm";
+}
+
+export function DropdownButton({
+  title,
+  options,
+  onOptionClick,
+  addButtonTooltip,
+  className = "",
+  variant = "default",
+}: DropdownButtonProps) {
+  const isSmall = variant === "sm";
+  const titleSize = isSmall ? "text-sm font-semibold" : "text-xl font-semibold";
+  const marginBottom = isSmall ? "mb-2" : "mb-4";
+
+  return (
+    <div
+      className={`${marginBottom} flex items-center justify-between ${className}`}
+    >
+      <h3 className={`my-0 ${titleSize}`}>{title}</h3>
+      <Listbox value={null} onChange={() => {}}>
+        <div className="relative">
+          <ToolTip content={addButtonTooltip}>
+            <ListboxButton
+              className={`ring-offset-background focus-visible:ring-ring border-description hover:enabled:bg-input hover:enabled:text-foreground text-description inline-flex h-7 items-center justify-center gap-1 whitespace-nowrap rounded-md border border-solid bg-transparent px-1.5 py-1 text-xs font-medium transition-colors focus-visible:outline-none focus-visible:ring-2 focus-visible:ring-offset-2 disabled:pointer-events-none disabled:opacity-50`}
+              aria-label={addButtonTooltip}
+            >
+              <PlusIcon className="h-3 w-3" />
+              <ChevronDownIcon className="h-3 w-3" />
+            </ListboxButton>
+          </ToolTip>
+          <ListboxOptions className="min-w-32 max-w-36" anchor="bottom end">
+            {options.map((option) => (
+              <ListboxOption
+                key={option.value}
+                value={option.value}
+                className={({ active }: { active: boolean }) =>
+                  `relative flex cursor-default select-none items-center gap-3 py-2 pl-4 pr-4 ${
+                    active
+                      ? "bg-list-active text-list-active-foreground"
+                      : "text-foreground"
+                  }`
+                }
+                onClick={() => onOptionClick(option.value)}
+              >
+                <span className="block truncate">{option.label}</span>
+              </ListboxOption>
+            ))}
+          </ListboxOptions>
+        </div>
+      </Listbox>
+    </div>
+  );
+}
diff --git a/gui/src/pages/config/sections/RulesSection.tsx b/gui/src/pages/config/sections/RulesSection.tsx
index 8d17fad6223..75bf7787165 100644
--- a/gui/src/pages/config/sections/RulesSection.tsx
+++ b/gui/src/pages/config/sections/RulesSection.tsx
@@ -19,7 +19,8 @@ import {
   DEFAULT_SYSTEM_MESSAGES_URL,
 } from "core/llm/defaultSystemMessages";
 import { getRuleDisplayName } from "core/llm/rules/rules-utils";
-import { useContext, useMemo } from "react";
+import { useContext, useMemo, useState } from "react";
+import { DropdownButton } from "../../../components/DropdownButton";
 import HeaderButtonWithToolTip from "../../../components/gui/HeaderButtonWithToolTip";
 import Switch from "../../../components/gui/Switch";
 import { useMainEditor } from "../../../components/mainInput/TipTapEditor";
@@ -182,8 +183,8 @@ const RuleCard: React.FC<RuleCardProps> = ({ rule }) => {
     );
   }
 
-  const smallFont = useFontSize(-2);
-  const tinyFont = useFontSize(-3);
+  const smallFont = fontSize(-2);
+  const tinyFont = fontSize(-3);
   return (
     <div
       className={`border-border flex flex-col rounded-sm px-2 py-1.5 transition-colors ${isDisabled ? "opacity-50" : ""}`}
@@ -407,18 +408,30 @@ function addDefaultSystemMessage(
   }
 }
 
+// Define dropdown options for global rules
+const globalRulesOptions = [
+  { value: "workspace", label: "Current workspace" },
+  { value: "global", label: "Global" },
+];
+
 function RulesSubSection() {
   const { selectedProfile } = useAuth();
   const config = useAppSelector((store) => store.config.config);
   const mode = useAppSelector((store) => store.session.mode);
   const ideMessenger = useContext(IdeMessengerContext);
   const isLocal = selectedProfile?.profileType === "local";
+  const [globalRulesMode, setGlobalRulesMode] = useState<string>("workspace");
 
-  const handleAddRule = () => {
+  const handleAddRule = (mode?: string) => {
+    const currentMode = mode || globalRulesMode;
     if (isLocal) {
-      void ideMessenger.request("config/addLocalWorkspaceBlock", {
-        blockType: "rules",
-      });
+      if (currentMode === "global") {
+        void ideMessenger.request("config/addGlobalRule", undefined);
+      } else {
+        void ideMessenger.request("config/addLocalWorkspaceBlock", {
+          blockType: "rules",
+        });
+      }
     } else {
       void ideMessenger.request("controlPlane/openUrl", {
         path: "?type=rules",
@@ -427,6 +440,11 @@ function RulesSubSection() {
     }
   };
 
+  const handleOptionClick = (value: string) => {
+    setGlobalRulesMode(value);
+    handleAddRule(value);
+  };
+
   const sortedRules: RuleWithSource[] = useMemo(() => {
     const rules = [...config.rules.map((rule) => ({ ...rule }))];
 
@@ -469,12 +487,22 @@ function RulesSubSection() {
 
   return (
     <div>
-      <ConfigHeader
-        title="Rules"
-        variant="sm"
-        onAddClick={handleAddRule}
-        addButtonTooltip="Add rule"
-      />
+      {isLocal ? (
+        <DropdownButton
+          title="Rules"
+          variant="sm"
+          options={globalRulesOptions}
+          onOptionClick={handleOptionClick}
+          addButtonTooltip="Add rules"
+        />
+      ) : (
+        <ConfigHeader
+          title="Rules"
+          variant="sm"
+          onAddClick={() => handleAddRule()}
+          addButtonTooltip="Add rules"
+        />
+      )}
 
       <Card>
         {sortedRules.length > 0 ? (