diff --git a/internal/config/config.go b/internal/config/config.go
index 1b24695c..f52a8084 100644
--- a/internal/config/config.go
+++ b/internal/config/config.go
@@ -26,8 +26,13 @@ func SetFileName(name string) {
 
 	filename = name
 
+	// Validate file extension before creating the file
+	err := validateConfigFileExtension(filename)
+	checkErr(err)
+
 	file.CreateEmptyIfNotExists(filename)
-	configureViper(filename)
+	err = configureViper(filename)
+	checkErr(err)
 }
 
 func SetFileNameForTest(t *testing.T) {
diff --git a/internal/config/viper.go b/internal/config/viper.go
index 9409fd8d..5f19a24c 100644
--- a/internal/config/viper.go
+++ b/internal/config/viper.go
@@ -5,6 +5,10 @@ package config
 
 import (
 	"bytes"
+	"path/filepath"
+	"strings"
+
+	"github.com/microsoft/go-sqlcmd/internal/localizer"
 	"github.com/microsoft/go-sqlcmd/internal/pal"
 	"github.com/spf13/viper"
 	"gopkg.in/yaml.v2"
@@ -56,16 +60,44 @@ func GetConfigFileUsed() string {
 	return viper.ConfigFileUsed()
 }
 
+// validateConfigFileExtension checks if the config file has a supported extension.
+// It allows .yaml, .yml, and no extension (for default sqlconfig file).
+// Returns an error if the extension is not supported.
+func validateConfigFileExtension(configFile string) error {
+	ext := strings.ToLower(filepath.Ext(configFile))
+
+	// Allow no extension (for default sqlconfig file)
+	if ext == "" {
+		return nil
+	}
+
+	// Allow .yaml and .yml extensions
+	if ext == ".yaml" || ext == ".yml" {
+		return nil
+	}
+
+	// Return error for unsupported extensions
+	return localizer.Errorf(
+		"Configuration files must use YAML format with .yaml or .yml extension. The file '%s' has an unsupported extension '%s'.",
+		configFile, ext)
+}
+
 // configureViper initializes the Viper library with the given configuration file.
 // This function sets the configuration file type to "yaml" and sets the environment variable prefix to "SQLCMD".
 // It also sets the configuration file to use to the one provided as an argument to the function.
 // This function is intended to be called at the start of the application to configure Viper before any other code uses it.
-func configureViper(configFile string) {
+func configureViper(configFile string) error {
 	if configFile == "" {
 		panic("Must provide configFile")
 	}
 
+	// Validate file extension
+	if err := validateConfigFileExtension(configFile); err != nil {
+		return err
+	}
+
 	viper.SetConfigType("yaml")
 	viper.SetEnvPrefix("SQLCMD")
 	viper.SetConfigFile(configFile)
+	return nil
 }
diff --git a/internal/config/viper_test.go b/internal/config/viper_test.go
index 3a606f6d..f192d018 100644
--- a/internal/config/viper_test.go
+++ b/internal/config/viper_test.go
@@ -14,6 +14,145 @@ func Test_configureViper(t *testing.T) {
 	})
 }
 
+func Test_validateConfigFileExtension(t *testing.T) {
+	tests := []struct {
+		name     string
+		filename string
+		wantErr  bool
+	}{
+		{
+			name:     "valid yaml extension",
+			filename: "config.yaml",
+			wantErr:  false,
+		},
+		{
+			name:     "valid yml extension",
+			filename: "config.yml",
+			wantErr:  false,
+		},
+		{
+			name:     "no extension (default sqlconfig)",
+			filename: "sqlconfig",
+			wantErr:  false,
+		},
+		{
+			name:     "no extension with path",
+			filename: "/home/user/.sqlcmd/sqlconfig",
+			wantErr:  false,
+		},
+		{
+			name:     "invalid txt extension",
+			filename: "config.txt",
+			wantErr:  true,
+		},
+		{
+			name:     "invalid json extension",
+			filename: "config.json",
+			wantErr:  true,
+		},
+		{
+			name:     "invalid xml extension",
+			filename: "config.xml",
+			wantErr:  true,
+		},
+		{
+			name:     "uppercase YAML extension",
+			filename: "config.YAML",
+			wantErr:  false,
+		},
+		{
+			name:     "uppercase YML extension",
+			filename: "config.YML",
+			wantErr:  false,
+		},
+		{
+			name:     "mixed case yaml extension",
+			filename: "config.Yaml",
+			wantErr:  false,
+		},
+		{
+			name:     "multiple dots with valid extension",
+			filename: "my.config.yaml",
+			wantErr:  false,
+		},
+		{
+			name:     "multiple dots with invalid extension",
+			filename: "my.config.txt",
+			wantErr:  true,
+		},
+		{
+			name:     "backup file with valid extension",
+			filename: "config.backup.yaml",
+			wantErr:  false,
+		},
+		{
+			name:     "backup file with invalid extension",
+			filename: "config.backup.txt",
+			wantErr:  true,
+		},
+		{
+			name:     "hidden file with yaml extension",
+			filename: ".config.yaml",
+			wantErr:  false,
+		},
+		{
+			name:     "hidden file with yml extension",
+			filename: ".config.yml",
+			wantErr:  false,
+		},
+		{
+			name:     "hidden file with invalid extension",
+			filename: ".config.txt",
+			wantErr:  true,
+		},
+		{
+			name:     "file with only dot and yaml",
+			filename: ".yaml",
+			wantErr:  false,
+		},
+		{
+			name:     "file with only dot and yml",
+			filename: ".yml",
+			wantErr:  false,
+		},
+	}
+
+	for _, tt := range tests {
+		t.Run(tt.name, func(t *testing.T) {
+			err := validateConfigFileExtension(tt.filename)
+			if tt.wantErr {
+				assert.Error(t, err, "Expected error for filename: %s", tt.filename)
+				assert.Contains(t, err.Error(), "Configuration files must use YAML format")
+			} else {
+				assert.NoError(t, err, "Expected no error for filename: %s", tt.filename)
+			}
+		})
+	}
+}
+
+func Test_configureViper_withInvalidExtension(t *testing.T) {
+	err := configureViper("myconfig.txt")
+	assert.Error(t, err)
+	assert.Contains(t, err.Error(), "Configuration files must use YAML format")
+	assert.Contains(t, err.Error(), ".txt")
+}
+
+func Test_configureViper_withValidExtensions(t *testing.T) {
+	testCases := []string{
+		"config.yaml",
+		"config.yml",
+		"sqlconfig",
+		"/path/to/config.yaml",
+	}
+
+	for _, filename := range testCases {
+		t.Run(filename, func(t *testing.T) {
+			err := configureViper(filename)
+			assert.NoError(t, err, "Expected no error for filename: %s", filename)
+		})
+	}
+}
+
 func Test_Load(t *testing.T) {
 	SetFileNameForTest(t)
 	Clean()