diff --git a/cli/azd/CHANGELOG.md b/cli/azd/CHANGELOG.md
index 24219ac34d4..83b6d20f6c4 100644
--- a/cli/azd/CHANGELOG.md
+++ b/cli/azd/CHANGELOG.md
@@ -1,5 +1,15 @@
 # Release History
 
+## 1.38.0-beta.1 (Unreleased)
+
+### Features Added
+
+### Breaking Changes
+
+### Bugs Fixed
+
+### Other Changes
+
 ## 1.37.3 (2026-11-04)
 
 ### Features Added
diff --git a/cli/azd/pkg/azdext/version.go b/cli/azd/pkg/azdext/version.go
index 556fdbb7dc0..d0ae425c485 100644
--- a/cli/azd/pkg/azdext/version.go
+++ b/cli/azd/pkg/azdext/version.go
@@ -6,4 +6,4 @@ package azdext
 // Version is the semantic version of the azdext SDK package.
 // This value mirrors the CLI version in cli/version.txt and is
 // automatically updated by eng/scripts/Update-CliVersion.ps1.
-const Version = "1.37.3"
+const Version = "1.38.0-beta.1"
diff --git a/cli/version.txt b/cli/version.txt
index d2829d87d65..78e5fa4da5b 100644
--- a/cli/version.txt
+++ b/cli/version.txt
@@ -1 +1 @@
-1.37.3
+1.38.0-beta.1