diff --git a/pkg/update/filereader.go b/pkg/update/filereader.go
index b8da7dc3..e2f9cc00 100644
--- a/pkg/update/filereader.go
+++ b/pkg/update/filereader.go
@@ -93,7 +93,7 @@ func (r *ScreeningLocalReader) Read() ([]*yaml.RNode, error) {
 			return nil
 		}
 
-		if ext := filepath.Ext(p); ext != ".yaml" && ext != ".yml" {
+		if ext := filepath.Ext(p); ext != ".yaml" && ext != ".yml" && filepath.Base(p) != "Kustomization" {
 			return nil
 		}
 
diff --git a/pkg/update/filereader_test.go b/pkg/update/filereader_test.go
index 8df6c588..daaa65b0 100644
--- a/pkg/update/filereader_test.go
+++ b/pkg/update/filereader_test.go
@@ -33,11 +33,12 @@ func TestScreeningLocalReader(t *testing.T) {
 	}
 	nodes, err := r.Read()
 	g.Expect(err).ToNot(HaveOccurred())
-	// the test fixture has three files that contain the marker:
-	// - otherns.yaml
+	// the test fixture has four files that contain the marker:
 	// - marked.yaml
-	// - kustomization.yaml
-	g.Expect(len(nodes)).To(Equal(3))
+	// - otherns.yaml
+	// - kustomization.yml
+	// - Kustomization
+	g.Expect(len(nodes)).To(Equal(4))
 	filesSeen := map[string]struct{}{}
 	for i := range nodes {
 		path, _, err := kioutil.GetFileAnnotations(nodes[i])
@@ -45,9 +46,10 @@ func TestScreeningLocalReader(t *testing.T) {
 		filesSeen[path] = struct{}{}
 	}
 	g.Expect(filesSeen).To(Equal(map[string]struct{}{
-		"marked.yaml":        {},
-		"kustomization.yaml": {},
-		"otherns.yaml":       {},
+		"marked.yaml":       {},
+		"otherns.yaml":      {},
+		"kustomization.yml": {},
+		"Kustomization":     {},
 	}))
 
 }
diff --git a/pkg/update/testdata/setters/expected/Kustomization b/pkg/update/testdata/setters/expected/Kustomization
new file mode 100644
index 00000000..6235fec8
--- /dev/null
+++ b/pkg/update/testdata/setters/expected/Kustomization
@@ -0,0 +1,9 @@
+# This is not intended to be a working kustomization
+apiVersion: kustomize.config.k8s.io/v1beta1
+kind: Kustomization
+resources:
+  - irrelevant.yaml
+images:
+  - name: container
+    newName: index.repo.fake/updated # {"$imagepolicy": "automation-ns:policy:name"}
+    newTag: v1.0.1 # {"$imagepolicy": "automation-ns:policy:tag"}
diff --git a/pkg/update/testdata/setters/expected/kustomization.yaml b/pkg/update/testdata/setters/expected/kustomization.yml
similarity index 100%
rename from pkg/update/testdata/setters/expected/kustomization.yaml
rename to pkg/update/testdata/setters/expected/kustomization.yml
diff --git a/pkg/update/testdata/setters/original/Kustomization b/pkg/update/testdata/setters/original/Kustomization
new file mode 100644
index 00000000..155b73ab
--- /dev/null
+++ b/pkg/update/testdata/setters/original/Kustomization
@@ -0,0 +1,9 @@
+# This is not intended to be a working kustomization
+apiVersion: kustomize.config.k8s.io/v1beta1
+kind: Kustomization
+resources:
+  - irrelevant.yaml
+images:
+  - name: container
+    newName: replaced # {"$imagepolicy": "automation-ns:policy:name"}
+    newTag: v1 # {"$imagepolicy": "automation-ns:policy:tag"}
diff --git a/pkg/update/testdata/setters/original/kustomization.yaml b/pkg/update/testdata/setters/original/kustomization.yml
similarity index 100%
rename from pkg/update/testdata/setters/original/kustomization.yaml
rename to pkg/update/testdata/setters/original/kustomization.yml
diff --git a/pkg/update/update_test.go b/pkg/update/update_test.go
index 15c73a95..36f428b2 100644
--- a/pkg/update/update_test.go
+++ b/pkg/update/update_test.go
@@ -83,7 +83,14 @@ func TestUpdateWithSetters(t *testing.T) {
 
 	expectedResult := Result{
 		Files: map[string]FileResult{
-			"kustomization.yaml": {
+			"kustomization.yml": {
+				Objects: map[ObjectIdentifier][]ImageRef{
+					kustomizeResourceID: {
+						expectedImageRef,
+					},
+				},
+			},
+			"Kustomization": {
 				Objects: map[ObjectIdentifier][]ImageRef{
 					kustomizeResourceID: {
 						expectedImageRef,
@@ -111,7 +118,21 @@ func TestUpdateWithSetters(t *testing.T) {
 	expectedResultV2 := ResultV2{
 		ImageResult: expectedResult,
 		FileChanges: map[string]ObjectChanges{
-			"kustomization.yaml": {
+			"kustomization.yml": {
+				kustomizeResourceID: []Change{
+					{
+						OldValue: "replaced",
+						NewValue: "index.repo.fake/updated",
+						Setter:   "automation-ns:policy:name",
+					},
+					{
+						OldValue: "v1",
+						NewValue: "v1.0.1",
+						Setter:   "automation-ns:policy:tag",
+					},
+				},
+			},
+			"Kustomization": {
 				kustomizeResourceID: []Change{
 					{
 						OldValue: "replaced",