diff --git a/src/backend/commands/extension.c b/src/backend/commands/extension.c
index 63437b57ea..accf1ab87b 100644
--- a/src/backend/commands/extension.c
+++ b/src/backend/commands/extension.c
@@ -887,6 +887,16 @@ execute_extension_script(Oid extensionOid, ExtensionControlFile *control,
 		char	   *c_sql = read_extension_script_file(control, filename);
 		Datum		t_sql;
 
+		/*
+		 * We filter each substitution through quote_identifier().  When the
+		 * arg contains one of the following characters, no one collection of
+		 * quoting can work inside $$dollar-quoted string literals$$,
+		 * 'single-quoted string literals', and outside of any literal.  To
+		 * avoid a security snare for extension authors, error on substitution
+		 * for arguments containing these.
+		 */
+		const char *quoting_relevant_chars = "\"$'\\";
+
 		/* We use various functions that want to operate on text datums */
 		t_sql = CStringGetTextDatum(c_sql);
 
@@ -911,12 +921,18 @@ execute_extension_script(Oid extensionOid, ExtensionControlFile *control,
 		 */
 		if (!control->relocatable)
 		{
+			Datum		old = t_sql;
 			const char *qSchemaName = quote_identifier(schemaName);
 
 			t_sql = DirectFunctionCall3(replace_text,
 										t_sql,
 										CStringGetTextDatum("@extschema@"),
 										CStringGetTextDatum(qSchemaName));
+			if (t_sql != old && strpbrk(schemaName, quoting_relevant_chars))
+				ereport(ERROR,
+						(errcode(ERRCODE_INVALID_TEXT_REPRESENTATION),
+						 errmsg("invalid character in extension \"%s\" schema: must not contain any of \"%s\"",
+								control->name, quoting_relevant_chars)));
 		}
 
 		/*
diff --git a/src/test/modules/test_extensions/Makefile b/src/test/modules/test_extensions/Makefile
index 07c26dd055..016e7e2879 100644
--- a/src/test/modules/test_extensions/Makefile
+++ b/src/test/modules/test_extensions/Makefile
@@ -5,13 +5,15 @@ PGFILEDESC = "test_extensions - regression testing for EXTENSION support"
 
 EXTENSION = test_ext1 test_ext2 test_ext3 test_ext4 test_ext5 test_ext6 \
             test_ext7 test_ext8 test_ext_cine test_ext_cor \
-            test_ext_cyclic1 test_ext_cyclic2
+            test_ext_cyclic1 test_ext_cyclic2 \
+            test_ext_extschema
 DATA = test_ext1--1.0.sql test_ext2--1.0.sql test_ext3--1.0.sql \
        test_ext4--1.0.sql test_ext5--1.0.sql test_ext6--1.0.sql \
        test_ext7--1.0.sql test_ext7--1.0--2.0.sql test_ext8--1.0.sql \
        test_ext_cine--1.0.sql test_ext_cine--1.0--1.1.sql \
        test_ext_cor--1.0.sql \
-       test_ext_cyclic1--1.0.sql test_ext_cyclic2--1.0.sql
+       test_ext_cyclic1--1.0.sql test_ext_cyclic2--1.0.sql \
+       test_ext_extschema--1.0.sql
 
 REGRESS = test_extensions test_extdepend
 
diff --git a/src/test/modules/test_extensions/expected/test_extensions.out b/src/test/modules/test_extensions/expected/test_extensions.out
index 1e91640062..8639af36fe 100644
--- a/src/test/modules/test_extensions/expected/test_extensions.out
+++ b/src/test/modules/test_extensions/expected/test_extensions.out
@@ -1,3 +1,4 @@
+CREATE SCHEMA has$dollar;
 -- test some errors
 CREATE EXTENSION test_ext1;
 ERROR:  required extension "test_ext2" is not installed
@@ -6,35 +7,35 @@ CREATE EXTENSION test_ext1 SCHEMA test_ext1;
 ERROR:  schema "test_ext1" does not exist
 CREATE EXTENSION test_ext1 SCHEMA test_ext;
 ERROR:  schema "test_ext" does not exist
-CREATE SCHEMA test_ext;
-CREATE EXTENSION test_ext1 SCHEMA test_ext;
+CREATE EXTENSION test_ext1 SCHEMA has$dollar;
 ERROR:  extension "test_ext1" must be installed in schema "test_ext1"
 -- finally success
-CREATE EXTENSION test_ext1 SCHEMA test_ext CASCADE;
+CREATE EXTENSION test_ext1 SCHEMA has$dollar CASCADE;
 NOTICE:  installing required extension "test_ext2"
 NOTICE:  installing required extension "test_ext3"
 NOTICE:  installing required extension "test_ext5"
 NOTICE:  installing required extension "test_ext4"
 SELECT extname, nspname, extversion, extrelocatable FROM pg_extension e, pg_namespace n WHERE extname LIKE 'test_ext%' AND e.extnamespace = n.oid ORDER BY 1;
-  extname  |  nspname  | extversion | extrelocatable 
------------+-----------+------------+----------------
- test_ext1 | test_ext1 | 1.0        | f
- test_ext2 | test_ext  | 1.0        | t
- test_ext3 | test_ext  | 1.0        | t
- test_ext4 | test_ext  | 1.0        | t
- test_ext5 | test_ext  | 1.0        | t
+  extname  |  nspname   | extversion | extrelocatable 
+-----------+------------+------------+----------------
+ test_ext1 | test_ext1  | 1.0        | f
+ test_ext2 | has$dollar | 1.0        | t
+ test_ext3 | has$dollar | 1.0        | t
+ test_ext4 | has$dollar | 1.0        | t
+ test_ext5 | has$dollar | 1.0        | t
 (5 rows)
 
 CREATE EXTENSION test_ext_cyclic1 CASCADE;
 NOTICE:  installing required extension "test_ext_cyclic2"
 ERROR:  cyclic dependency detected between extensions "test_ext_cyclic1" and "test_ext_cyclic2"
-DROP SCHEMA test_ext CASCADE;
+DROP SCHEMA has$dollar CASCADE;
 NOTICE:  drop cascades to 5 other objects
 DETAIL:  drop cascades to extension test_ext3
 drop cascades to extension test_ext5
 drop cascades to extension test_ext2
 drop cascades to extension test_ext4
 drop cascades to extension test_ext1
+CREATE SCHEMA has$dollar;
 CREATE EXTENSION test_ext6;
 DROP EXTENSION test_ext6;
 CREATE EXTENSION test_ext6;
@@ -307,3 +308,10 @@ Objects in extension "test_ext_cine"
  table ext_cine_tab3
 (9 rows)
 
+--
+-- Test @extschema@ syntax.
+--
+CREATE SCHEMA "has space";
+CREATE EXTENSION test_ext_extschema SCHEMA has$dollar;
+ERROR:  invalid character in extension "test_ext_extschema" schema: must not contain any of ""$'\"
+CREATE EXTENSION test_ext_extschema SCHEMA "has space";
diff --git a/src/test/modules/test_extensions/sql/test_extensions.sql b/src/test/modules/test_extensions/sql/test_extensions.sql
index b3d45793ca..fd082121ff 100644
--- a/src/test/modules/test_extensions/sql/test_extensions.sql
+++ b/src/test/modules/test_extensions/sql/test_extensions.sql
@@ -1,18 +1,20 @@
+CREATE SCHEMA has$dollar;
+
 -- test some errors
 CREATE EXTENSION test_ext1;
 CREATE EXTENSION test_ext1 SCHEMA test_ext1;
 CREATE EXTENSION test_ext1 SCHEMA test_ext;
-CREATE SCHEMA test_ext;
-CREATE EXTENSION test_ext1 SCHEMA test_ext;
+CREATE EXTENSION test_ext1 SCHEMA has$dollar;
 
 -- finally success
-CREATE EXTENSION test_ext1 SCHEMA test_ext CASCADE;
+CREATE EXTENSION test_ext1 SCHEMA has$dollar CASCADE;
 
 SELECT extname, nspname, extversion, extrelocatable FROM pg_extension e, pg_namespace n WHERE extname LIKE 'test_ext%' AND e.extnamespace = n.oid ORDER BY 1;
 
 CREATE EXTENSION test_ext_cyclic1 CASCADE;
 
-DROP SCHEMA test_ext CASCADE;
+DROP SCHEMA has$dollar CASCADE;
+CREATE SCHEMA has$dollar;
 
 CREATE EXTENSION test_ext6;
 DROP EXTENSION test_ext6;
@@ -203,3 +205,10 @@ CREATE EXTENSION test_ext_cine;
 ALTER EXTENSION test_ext_cine UPDATE TO '1.1';
 
 \dx+ test_ext_cine
+
+--
+-- Test @extschema@ syntax.
+--
+CREATE SCHEMA "has space";
+CREATE EXTENSION test_ext_extschema SCHEMA has$dollar;
+CREATE EXTENSION test_ext_extschema SCHEMA "has space";
diff --git a/src/test/modules/test_extensions/test_ext_extschema--1.0.sql b/src/test/modules/test_extensions/test_ext_extschema--1.0.sql
new file mode 100644
index 0000000000..aed53830aa
--- /dev/null
+++ b/src/test/modules/test_extensions/test_ext_extschema--1.0.sql
@@ -0,0 +1,5 @@
+/* src/test/modules/test_extensions/test_ext_extschema--1.0.sql */
+-- complain if script is sourced in psql, rather than via CREATE EXTENSION
+\echo Use "CREATE EXTENSION test_ext_extschema" to load this file. \quit
+
+SELECT 1 AS @extschema@;
diff --git a/src/test/modules/test_extensions/test_ext_extschema.control b/src/test/modules/test_extensions/test_ext_extschema.control
new file mode 100644
index 0000000000..b124d492c0
--- /dev/null
+++ b/src/test/modules/test_extensions/test_ext_extschema.control
@@ -0,0 +1,3 @@
+comment = 'test @extschema@'
+default_version = '1.0'
+relocatable = false