diff --git a/.rubocop.yml b/.rubocop.yml
index b55e282..c365e01 100644
--- a/.rubocop.yml
+++ b/.rubocop.yml
@@ -11,3 +11,6 @@ Style/StringLiteralsInInterpolation:
 
 Style/RedundantReturn:
   Enabled: false
+
+Style/StderrPuts:
+  Enabled: false
diff --git a/lib/psdk/cli.rb b/lib/psdk/cli.rb
index 946df13..f8fc1a3 100644
--- a/lib/psdk/cli.rb
+++ b/lib/psdk/cli.rb
@@ -20,6 +20,12 @@ def version
         Version.run(options[:no_psdk_version])
       end
 
+      desc 'update', 'update the psdk-cli'
+      def update
+        require_relative 'helpers/version_update'
+        VersionUpdate.check_and_update
+      end
+
       desc 'plugin', 'manage PSDK plugins'
       subcommand 'plugin', Plugin
     end
diff --git a/lib/psdk/cli/configuration.rb b/lib/psdk/cli/configuration.rb
index e5a876a..ae0064b 100644
--- a/lib/psdk/cli/configuration.rb
+++ b/lib/psdk/cli/configuration.rb
@@ -10,10 +10,10 @@ class Configuration
       PROJECT_CONFIGURATION_FILENAME = '.psdk-cli.yml'
 
       # Path where all the global configuration are stored
-      PATH = ENV.fetch('PSDK_CLI_DIR', Dir.home || ENV['USERPROFILE'] || '~')
+      PATH = File.join(ENV.fetch('PSDK_CLI_DIR', Dir.home || ENV['USERPROFILE'] || '~'), '.psdk-cli')
 
       # Filename of the global configuration
-      GLOBAL_CONFIGURATION_FILENAME = File.join(PATH, '.psdk-cli/config.yml')
+      GLOBAL_CONFIGURATION_FILENAME = File.join(PATH, 'config.yml')
 
       # Create a new configuration
       # @param hash [Hash] configuration hash
diff --git a/lib/psdk/helpers/version_update.rb b/lib/psdk/helpers/version_update.rb
new file mode 100644
index 0000000..0508c72
--- /dev/null
+++ b/lib/psdk/helpers/version_update.rb
@@ -0,0 +1,60 @@
+# frozen_string_literal: true
+
+require_relative '../cli/version'
+
+module Psdk
+  module Cli
+    # Module holding the logic to update the psdk-cli gem
+    module VersionUpdate
+      module_function
+
+      # Check if the psdk-cli gem is up-to-date and update it if needed
+      def check_and_update
+        puts 'Checking for updates...'
+        local_version = Psdk::Cli::VERSION
+        remote_version = fetch_remote_version
+
+        compare_and_update_versions(local_version, remote_version)
+      rescue StandardError => e
+        $stderr.puts "Failed to update: #{e.message}"
+        exit(1)
+      end
+
+      # Compare local and remote versions and update if necessary
+      # @param local_version [String] The currently installed version
+      # @param remote_version [String] The latest version available
+      def compare_and_update_versions(local_version, remote_version)
+        if Gem::Version.new(remote_version) > Gem::Version.new(local_version)
+          puts "New version available: #{remote_version} (current: #{local_version})"
+          update_gem
+        else
+          puts 'psdk-cli is up-to-date.'
+        end
+      end
+
+      # Fetch the latest version of psdk-cli from rubygems
+      # @return [String]
+      def fetch_remote_version
+        output = `gem search -r psdk-cli`
+        match = output.match(/psdk-cli \(([\d.]+)\)/)
+        return match[1] if match
+
+        raise 'Could not find psdk-cli in remote gems'
+      end
+
+      # Update the psdk-cli gem
+      def update_gem
+        print 'Do you want to update psdk-cli? [Y/n] '
+        response = $stdin.gets.chomp
+        return unless response.empty? || response.casecmp('y').zero?
+
+        puts 'Updating psdk-cli...'
+        result = system('gem install psdk-cli')
+        raise 'gem install psdk-cli failed' unless result
+
+        puts 'Update complete.'
+        exit
+      end
+    end
+  end
+end
diff --git a/spec/psdk/helpers/version_update_spec.rb b/spec/psdk/helpers/version_update_spec.rb
new file mode 100644
index 0000000..a473f17
--- /dev/null
+++ b/spec/psdk/helpers/version_update_spec.rb
@@ -0,0 +1,88 @@
+# frozen_string_literal: true
+
+require 'spec_helper'
+require 'psdk/helpers/version_update'
+
+# rubocop:disable Metrics/BlockLength
+RSpec.describe Psdk::Cli::VersionUpdate do
+  describe '.check_and_update' do
+    let(:local_version) { '1.0.0' }
+    let(:remote_version) { '1.0.1' }
+    let(:gem_search_output) { "psdk-cli (#{remote_version})\n" }
+
+    before do
+      stub_const('Psdk::Cli::VERSION', local_version)
+      allow(Psdk::Cli::VersionUpdate).to receive(:`).with('gem search -r psdk-cli').and_return(gem_search_output)
+      allow(Psdk::Cli::VersionUpdate).to receive(:puts)
+      allow(Psdk::Cli::VersionUpdate).to receive(:system)
+      allow(Psdk::Cli::VersionUpdate).to receive(:exit)
+    end
+
+    context 'when a new version is available' do
+      before do
+        allow($stdin).to receive(:gets).and_return("y\n")
+        allow(Psdk::Cli::VersionUpdate).to receive(:system).and_return(true)
+      end
+
+      it 'updates the gem' do
+        expect(Psdk::Cli::VersionUpdate).to receive(:print).with('Do you want to update psdk-cli? [Y/n] ')
+        expect(Psdk::Cli::VersionUpdate).to receive(:system).with('gem install psdk-cli')
+        Psdk::Cli::VersionUpdate.check_and_update
+      end
+
+      it 'logs an error and exits if update fails' do
+        expect(Psdk::Cli::VersionUpdate).to receive(:print).with('Do you want to update psdk-cli? [Y/n] ')
+        expect(Psdk::Cli::VersionUpdate).to receive(:system).with('gem install psdk-cli').and_return(false)
+        expect(Psdk::Cli::VersionUpdate).to receive(:exit).with(1)
+        expect($stderr).to receive(:puts).with('Failed to update: gem install psdk-cli failed')
+        Psdk::Cli::VersionUpdate.check_and_update
+      end
+
+      it 'exits after update' do
+        expect(Psdk::Cli::VersionUpdate).to receive(:exit)
+        Psdk::Cli::VersionUpdate.check_and_update
+      end
+
+      context 'when user declines update' do
+        before do
+          allow($stdin).to receive(:gets).and_return("n\n")
+        end
+
+        it 'does not update the gem' do
+          expect(Psdk::Cli::VersionUpdate).not_to receive(:system)
+          Psdk::Cli::VersionUpdate.check_and_update
+        end
+      end
+    end
+
+    context 'when the local version is up-to-date' do
+      let(:remote_version) { '1.0.0' }
+
+      it 'does not update the gem' do
+        expect(Psdk::Cli::VersionUpdate).not_to receive(:system)
+        Psdk::Cli::VersionUpdate.check_and_update
+      end
+    end
+
+    context 'when the local version is newer than remote' do
+      let(:remote_version) { '0.9.9' }
+
+      it 'does not update the gem' do
+        expect(Psdk::Cli::VersionUpdate).not_to receive(:system)
+        Psdk::Cli::VersionUpdate.check_and_update
+      end
+    end
+
+    context 'when gem search fails to find the gem' do
+      let(:gem_search_output) { "No match found\n" }
+
+      it 'rescues the error and prints a message' do
+        expect($stderr).to receive(:puts).with(
+          'Failed to update: Could not find psdk-cli in remote gems'
+        )
+        Psdk::Cli::VersionUpdate.check_and_update
+      end
+    end
+  end
+end
+# rubocop:enable Metrics/BlockLength