diff --git a/README.md b/README.md
index 6dd3d39..8e49afd 100644
--- a/README.md
+++ b/README.md
@@ -23,10 +23,27 @@ An MCP (Model Context Protocol) Bundle that exposes Obsidian CLI capabilities to
 
 ### Install via Claude Desktop
 
-1. Download the latest `.mcpb` file from releases
-2. Open Claude Desktop settings
-3. Add the bundle to your MCP servers configuration
-4. Configure your vault name in the settings
+**Installing custom desktop extensions:**
+
+1. Build or obtain the `.mcpb` bundle file:
+   ```bash
+   npm run build
+   npm run pack
+   ```
+
+2. Open Claude Desktop and navigate to **Settings > Extensions**
+
+3. Click **"Advanced settings"** to access the **Extension Developer** section
+
+4. Click **"Install Extension…"** and select the `obsidian-mcp.mcpb` file
+
+5. Follow the prompts to configure the extension:
+   - Set your **vault_name** (the name of your Obsidian vault)
+   - Claude Desktop will encrypt sensitive configuration using your OS's secure storage
+
+6. The extension will appear in your installed extensions list and tools will be available in Claude
+
+For more details, see [Getting started with local MCP servers on Claude Desktop](https://support.claude.com/en/articles/10949351-getting-started-with-local-mcp-servers-on-claude-desktop).
 
 ### Manual Installation
 
@@ -43,7 +60,16 @@ npm run pack
 
 ## Configuration
 
-The bundle requires a `vault_name` parameter to target your Obsidian vault:
+The bundle requires a `vault_name` parameter to target your Obsidian vault.
+
+**Via Claude Desktop Extensions UI:**
+
+After installing the extension through Claude Desktop (see installation steps above), you'll be prompted to configure:
+- **vault_name**: The name of your Obsidian vault (required)
+
+**Manual configuration (advanced):**
+
+If configuring manually in Claude Desktop's MCP servers configuration:
 
 ```json
 {
@@ -75,19 +101,13 @@ Assistant: [Uses obsidian_add_task tool]
 
 ## Available Tools
 
-The bundle provides 95+ MCP tools covering:
+The bundle provides 20 MCP tools covering:
 
-- **File Operations**: create_note, read_note, append_to_note, delete_note, move_note, rename_note, open_note, get_file_info
-- **Search**: search (content), search_tags, search_properties
-- **Links**: get_backlinks, get_outbound_links, get_unresolved_links
-- **Tasks**: add_task, list_tasks, update_task
-- **Properties**: get_properties, add_property, update_property, remove_property
-- **Tags**: get_tags, add_tag, remove_tag
-- **Navigation**: list_files, list_folders, get_folder_info
-- **Daily Notes**: create_daily_note, goto_daily_note
-- **And more**: templates, bookmarks, plugins, themes, history, sync
+- **File Operations** (8 tools): create_note, read_note, append_to_note, prepend_to_note, delete_note, move_note, rename_note, open_note
+- **Search & Discovery** (11 tools): search, list_backlinks, list_links, list_unresolved_links, list_tags, list_tag_counts, list_aliases, list_alias_counts, list_properties, list_property_counts, get_property_values
+- **Tasks & Properties** (planned): Task management and property operations (User Story 3)
 
-See full tool documentation in the [contracts/tools.md](specs/001-obsidian-mcp-bundle/contracts/tools.md) file.
+See full tool documentation in the manifest.json file or via `tools/list` MCP call.
 
 ## Development