diff --git a/CHANGELOG.md b/CHANGELOG.md
index edd01986089c2..98b10eb01494f 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -1,5 +1,13 @@
 # Change Log
 
+## v1.9.0
+
+- [plugin-ext-vscode] added support for the command `workbench.extensions.installExtension`. [#8745](https://github.com/eclipse-theia/theia/pull/8745)
+
+<a name="breaking_changes_1.9.0">[Breaking Changes:](#breaking_changes_1.9.0)</a>
+
+- [plugin-ext] `LocalDirectoryPluginDeployerResolver` has moved from `packages/plugin-ext/src/main/node/resolvers/plugin-local-dir-resolver.ts` to `packages/plugin-ext/src/main/node/resolvers/local-file-plugin-deployer-resolver.ts` and now derives from `LocalPluginDeployerResolver`.
+
 ## v1.8.0 - 26/11/2020
 
 - [api-tests] fixed issue with `saveable` test suite [#8736](https://github.com/eclipse-theia/theia/pull/8736)
diff --git a/packages/plugin-ext-vscode/src/browser/plugin-vscode-commands-contribution.ts b/packages/plugin-ext-vscode/src/browser/plugin-vscode-commands-contribution.ts
index 440730fb20a6b..f818455723ff2 100755
--- a/packages/plugin-ext-vscode/src/browser/plugin-vscode-commands-contribution.ts
+++ b/packages/plugin-ext-vscode/src/browser/plugin-vscode-commands-contribution.ts
@@ -53,6 +53,7 @@ import { DiffService } from '@theia/workspace/lib/browser/diff-service';
 import { inject, injectable } from 'inversify';
 import { Position } from '@theia/plugin-ext/lib/common/plugin-api-rpc';
 import { URI } from 'vscode-uri';
+import { PluginServer } from '@theia/plugin-ext/lib/common/plugin-protocol';
 import { MonacoEditor } from '@theia/monaco/lib/browser/monaco-editor';
 import { TerminalFrontendContribution } from '@theia/terminal/lib/browser/terminal-frontend-contribution';
 import { QuickOpenWorkspace } from '@theia/workspace/lib/browser/quick-open-workspace';
@@ -63,6 +64,7 @@ import {
 } from '@theia/navigator/lib/browser/navigator-contribution';
 import { FILE_NAVIGATOR_ID, FileNavigatorWidget } from '@theia/navigator/lib/browser';
 import { SelectableTreeNode } from '@theia/core/lib/browser/tree/tree-selection';
+import { UriComponents } from '@theia/plugin-ext/lib/common/uri-components';
 
 export namespace VscodeCommands {
     export const OPEN: Command = {
@@ -106,6 +108,8 @@ export class PluginVscodeCommandsContribution implements CommandContribution {
     protected readonly terminalService: TerminalService;
     @inject(CodeEditorWidgetUtil)
     protected readonly codeEditorWidgetUtil: CodeEditorWidgetUtil;
+    @inject(PluginServer)
+    protected readonly pluginServer: PluginServer;
 
     registerCommands(commands: CommandRegistry): void {
         commands.registerCommand(VscodeCommands.OPEN, {
@@ -208,6 +212,15 @@ export class PluginVscodeCommandsContribution implements CommandContribution {
         commands.registerCommand({ id: 'workbench.action.openSettings' }, {
             execute: () => commands.executeCommand(CommonCommands.OPEN_PREFERENCES.id)
         });
+        commands.registerCommand({ id: 'workbench.extensions.installExtension' }, {
+            execute: async (vsixUriOrExtensionId: UriComponents | string) => {
+                if (typeof vsixUriOrExtensionId === 'string') {
+                    this.pluginServer.deploy(`vscode:extension/${vsixUriOrExtensionId}`);
+                } else {
+                    this.pluginServer.deploy(`local-file:${URI.revive(vsixUriOrExtensionId).fsPath}`);
+                }
+            }
+        });
         commands.registerCommand({ id: 'workbench.action.files.save', }, {
             execute: (uri?: monaco.Uri) => {
                 if (uri) {
diff --git a/packages/plugin-ext/src/main/node/plugin-cli-contribution.ts b/packages/plugin-ext/src/main/node/plugin-cli-contribution.ts
index e989b1527b15d..614c63bc4ce54 100644
--- a/packages/plugin-ext/src/main/node/plugin-cli-contribution.ts
+++ b/packages/plugin-ext/src/main/node/plugin-cli-contribution.ts
@@ -17,7 +17,7 @@
 import { injectable } from 'inversify';
 import { Argv, Arguments } from 'yargs';
 import { CliContribution } from '@theia/core/lib/node/cli';
-import { LocalDirectoryPluginDeployerResolver } from './resolvers/plugin-local-dir-resolver';
+import { LocalDirectoryPluginDeployerResolver } from './resolvers/local-directory-plugin-deployer-resolver';
 
 @injectable()
 export class PluginCliContribution implements CliContribution {
diff --git a/packages/plugin-ext/src/main/node/plugin-ext-backend-module.ts b/packages/plugin-ext/src/main/node/plugin-ext-backend-module.ts
index 440e5f138f032..412cb3ddeffd3 100644
--- a/packages/plugin-ext/src/main/node/plugin-ext-backend-module.ts
+++ b/packages/plugin-ext/src/main/node/plugin-ext-backend-module.ts
@@ -24,7 +24,8 @@ import {
     PluginDeployerDirectoryHandler, PluginServer, pluginServerJsonRpcPath, PluginDeployerParticipant
 } from '../../common/plugin-protocol';
 import { PluginDeployerImpl } from './plugin-deployer-impl';
-import { LocalDirectoryPluginDeployerResolver } from './resolvers/plugin-local-dir-resolver';
+import { LocalFilePluginDeployerResolver } from './resolvers/local-file-plugin-deployer-resolver';
+import { LocalDirectoryPluginDeployerResolver } from './resolvers/local-directory-plugin-deployer-resolver';
 import { PluginTheiaFileHandler } from './handlers/plugin-theia-file-handler';
 import { PluginTheiaDirectoryHandler } from './handlers/plugin-theia-directory-handler';
 import { GithubPluginDeployerResolver } from './plugin-github-resolver';
@@ -47,6 +48,7 @@ export function bindMainBackend(bind: interfaces.Bind): void {
     bind(BackendApplicationContribution).toService(PluginDeployerContribution);
 
     bind(PluginDeployerResolver).to(LocalDirectoryPluginDeployerResolver).inSingletonScope();
+    bind(PluginDeployerResolver).to(LocalFilePluginDeployerResolver).inSingletonScope();
     bind(PluginDeployerResolver).to(GithubPluginDeployerResolver).inSingletonScope();
     bind(PluginDeployerResolver).to(HttpPluginDeployerResolver).inSingletonScope();
 
diff --git a/packages/plugin-ext/src/main/node/resolvers/local-directory-plugin-deployer-resolver.ts b/packages/plugin-ext/src/main/node/resolvers/local-directory-plugin-deployer-resolver.ts
new file mode 100644
index 0000000000000..6e0ea92da99e3
--- /dev/null
+++ b/packages/plugin-ext/src/main/node/resolvers/local-directory-plugin-deployer-resolver.ts
@@ -0,0 +1,37 @@
+/********************************************************************************
+ * Copyright (C) 2018 Red Hat, Inc. and others.
+ *
+ * This program and the accompanying materials are made available under the
+ * terms of the Eclipse Public License v. 2.0 which is available at
+ * http://www.eclipse.org/legal/epl-2.0.
+ *
+ * This Source Code may also be made available under the following Secondary
+ * Licenses when the conditions for such availability set forth in the Eclipse
+ * Public License v. 2.0 are satisfied: GNU General Public License, version 2
+ * with the GNU Classpath Exception which is available at
+ * https://www.gnu.org/software/classpath/license.html.
+ *
+ * SPDX-License-Identifier: EPL-2.0 OR GPL-2.0 WITH Classpath-exception-2.0
+ ********************************************************************************/
+
+import { PluginDeployerResolverContext } from '../../../common/plugin-protocol';
+import { injectable } from 'inversify';
+import * as fs from 'fs-extra';
+import * as path from 'path';
+import { LocalPluginDeployerResolver } from './local-plugin-deployer-resolver';
+
+@injectable()
+export class LocalDirectoryPluginDeployerResolver extends LocalPluginDeployerResolver {
+    static LOCAL_DIR = 'local-dir';
+
+    protected get supportedScheme(): string {
+        return LocalDirectoryPluginDeployerResolver.LOCAL_DIR;
+    }
+
+    protected async resolveFromLocalPath(pluginResolverContext: PluginDeployerResolverContext, localPath: string): Promise<void> {
+        const files = await fs.readdir(localPath);
+        files.forEach(file =>
+            pluginResolverContext.addPlugin(file, path.resolve(localPath, file))
+        );
+    }
+}
diff --git a/packages/plugin-ext/src/main/node/resolvers/local-file-plugin-deployer-resolver.ts b/packages/plugin-ext/src/main/node/resolvers/local-file-plugin-deployer-resolver.ts
new file mode 100644
index 0000000000000..9635024ddf0b3
--- /dev/null
+++ b/packages/plugin-ext/src/main/node/resolvers/local-file-plugin-deployer-resolver.ts
@@ -0,0 +1,34 @@
+/********************************************************************************
+ * Copyright (C) 2018 Red Hat, Inc. and others.
+ *
+ * This program and the accompanying materials are made available under the
+ * terms of the Eclipse Public License v. 2.0 which is available at
+ * http://www.eclipse.org/legal/epl-2.0.
+ *
+ * This Source Code may also be made available under the following Secondary
+ * Licenses when the conditions for such availability set forth in the Eclipse
+ * Public License v. 2.0 are satisfied: GNU General Public License, version 2
+ * with the GNU Classpath Exception which is available at
+ * https://www.gnu.org/software/classpath/license.html.
+ *
+ * SPDX-License-Identifier: EPL-2.0 OR GPL-2.0 WITH Classpath-exception-2.0
+ ********************************************************************************/
+
+import { PluginDeployerResolverContext } from '../../../common/plugin-protocol';
+import { injectable } from 'inversify';
+import * as path from 'path';
+import { LocalPluginDeployerResolver } from './local-plugin-deployer-resolver';
+
+@injectable()
+export class LocalFilePluginDeployerResolver extends LocalPluginDeployerResolver {
+    static LOCAL_FILE = 'local-file';
+
+    protected get supportedScheme(): string {
+        return LocalFilePluginDeployerResolver.LOCAL_FILE;
+    }
+
+    async resolveFromLocalPath(pluginResolverContext: PluginDeployerResolverContext, localPath: string): Promise<void> {
+        const fileName = path.basename(localPath);
+        pluginResolverContext.addPlugin(fileName, localPath);
+    }
+}
diff --git a/packages/plugin-ext/src/main/node/resolvers/local-plugin-deployer-resolver.ts b/packages/plugin-ext/src/main/node/resolvers/local-plugin-deployer-resolver.ts
new file mode 100644
index 0000000000000..8eaa16688feb6
--- /dev/null
+++ b/packages/plugin-ext/src/main/node/resolvers/local-plugin-deployer-resolver.ts
@@ -0,0 +1,60 @@
+/********************************************************************************
+ * Copyright (C) 2020 Red Hat, Inc. and others.
+ *
+ * This program and the accompanying materials are made available under the
+ * terms of the Eclipse Public License v. 2.0 which is available at
+ * http://www.eclipse.org/legal/epl-2.0.
+ *
+ * This Source Code may also be made available under the following Secondary
+ * Licenses when the conditions for such availability set forth in the Eclipse
+ * Public License v. 2.0 are satisfied: GNU General Public License, version 2
+ * with the GNU Classpath Exception which is available at
+ * https://www.gnu.org/software/classpath/license.html.
+ *
+ * SPDX-License-Identifier: EPL-2.0 OR GPL-2.0 WITH Classpath-exception-2.0
+ ********************************************************************************/
+
+import { injectable } from 'inversify';
+import { PluginDeployerResolver, PluginDeployerResolverContext } from '../../../common/plugin-protocol';
+import * as fs from 'fs-extra';
+import * as path from 'path';
+import { FileUri } from '@theia/core/lib/node';
+import URI from '@theia/core/lib/common/uri';
+
+@injectable()
+export abstract class LocalPluginDeployerResolver implements PluginDeployerResolver {
+    public async resolve(pluginResolverContext: PluginDeployerResolverContext): Promise<void> {
+        const localPath = await this.resolveLocalPluginPath(
+            pluginResolverContext,
+            this.supportedScheme);
+        if (localPath) {
+            await this.resolveFromLocalPath(pluginResolverContext, localPath);
+        }
+    }
+
+    public accept(pluginId: string): boolean {
+        return pluginId.startsWith(this.supportedScheme);
+    }
+
+    protected abstract get supportedScheme(): string;
+
+    protected abstract resolveFromLocalPath(pluginResolverContext: PluginDeployerResolverContext, localPath: string): Promise<void>;
+
+    private async resolveLocalPluginPath(
+        pluginResolverContext: PluginDeployerResolverContext,
+        expectedScheme: string): Promise<string | null> {
+        const localUri = new URI(pluginResolverContext.getOriginId());
+        if (localUri.scheme !== expectedScheme) {
+            return null;
+        }
+        let fsPath = FileUri.fsPath(localUri);
+        if (!path.isAbsolute(fsPath)) {
+            fsPath = path.resolve(process.cwd(), fsPath);
+        }
+        if (!await fs.pathExists(fsPath)) {
+            console.warn(`The local plugin referenced by ${pluginResolverContext.getOriginId()} does not exist.`);
+            return null;
+        }
+        return fsPath;
+    }
+}
diff --git a/packages/plugin-ext/src/main/node/resolvers/plugin-local-dir-resolver.ts b/packages/plugin-ext/src/main/node/resolvers/plugin-local-dir-resolver.ts
deleted file mode 100644
index 7e9de4a3d11c7..0000000000000
--- a/packages/plugin-ext/src/main/node/resolvers/plugin-local-dir-resolver.ts
+++ /dev/null
@@ -1,63 +0,0 @@
-/********************************************************************************
- * Copyright (C) 2018 Red Hat, Inc. and others.
- *
- * This program and the accompanying materials are made available under the
- * terms of the Eclipse Public License v. 2.0 which is available at
- * http://www.eclipse.org/legal/epl-2.0.
- *
- * This Source Code may also be made available under the following Secondary
- * Licenses when the conditions for such availability set forth in the Eclipse
- * Public License v. 2.0 are satisfied: GNU General Public License, version 2
- * with the GNU Classpath Exception which is available at
- * https://www.gnu.org/software/classpath/license.html.
- *
- * SPDX-License-Identifier: EPL-2.0 OR GPL-2.0 WITH Classpath-exception-2.0
- ********************************************************************************/
-
-/* eslint-disable @typescript-eslint/no-explicit-any */
-
-import { PluginDeployerResolver, PluginDeployerResolverContext } from '../../../common/plugin-protocol';
-import { injectable } from 'inversify';
-import * as fs from 'fs';
-import * as path from 'path';
-import { FileUri } from '@theia/core/lib/node';
-import URI from '@theia/core/lib/common/uri';
-
-@injectable()
-export class LocalDirectoryPluginDeployerResolver implements PluginDeployerResolver {
-
-    static LOCAL_DIR = 'local-dir';
-
-    /**
-     * Check all files/folder from the local-dir referenced and add them as plugins.
-     */
-    async resolve(pluginResolverContext: PluginDeployerResolverContext): Promise<void> {
-        // get directory
-        const localDirUri = new URI(pluginResolverContext.getOriginId());
-        if (localDirUri.scheme !== LocalDirectoryPluginDeployerResolver.LOCAL_DIR) {
-            return;
-        }
-        // get fs path
-        let dirPath = FileUri.fsPath(localDirUri);
-        if (!path.isAbsolute(dirPath)) {
-            dirPath = path.resolve(process.cwd(), dirPath);
-        }
-        // check directory exists
-        if (!fs.existsSync(dirPath)) {
-            console.warn(`The directory referenced by ${pluginResolverContext.getOriginId()} does not exist.`);
-            return;
-        }
-        // list all stuff from this directory
-        await new Promise((resolve: any, reject: any) => {
-            fs.readdir(dirPath, (err: any, files: any) => {
-                files.forEach((file: any) => {
-                    pluginResolverContext.addPlugin(file, path.resolve(dirPath, file));
-                });
-                resolve(true);
-            });
-        });
-    }
-    accept(pluginId: string): boolean {
-        return pluginId.startsWith(LocalDirectoryPluginDeployerResolver.LOCAL_DIR);
-    }
-}