diff --git a/.github/workflows/cli-e2e.yml b/.github/workflows/cli-e2e.yml
index f1413c4f7..9dce4fd72 100644
--- a/.github/workflows/cli-e2e.yml
+++ b/.github/workflows/cli-e2e.yml
@@ -35,7 +35,7 @@ jobs:
       - name: Install workspace dependencies
         run: pnpm install --frozen-lockfile
 
-      - name: Build CLI and templates
+      - name: Build CLI
         run: pnpm --filter @openuidev/cli build
 
       - name: Pack CLI
diff --git a/packages/openui-cli/package.json b/packages/openui-cli/package.json
index 001376a23..1ea689230 100644
--- a/packages/openui-cli/package.json
+++ b/packages/openui-cli/package.json
@@ -11,8 +11,7 @@
   ],
   "scripts": {
     "build:cli": "tsc -p .",
-    "build:templates": "node scripts/build-templates.js",
-    "build": "pnpm run build:cli && pnpm run build:templates",
+    "build": "pnpm run build:cli",
     "build:exec": "node dist/index.js",
     "lint:check": "eslint ./src --ignore-pattern 'src/templates/**'",
     "lint:fix": "eslint ./src --fix --ignore-pattern 'src/templates/**'",
@@ -23,8 +22,7 @@
   },
   "devDependencies": {
     "@types/cross-spawn": "^6.0.6",
-    "@types/node": "catalog:",
-    "rimraf": "^5.0.7"
+    "@types/node": "catalog:"
   },
   "keywords": [
     "openui",
@@ -58,6 +56,7 @@
     "esbuild": "^0.25.10",
     "open": "^10.1.0",
     "openid-client": "^6.1.7",
-    "posthog-node": "^5.35.6"
+    "posthog-node": "^5.35.6",
+    "tar": "^7.4.3"
   }
 }
diff --git a/packages/openui-cli/scripts/build-templates.js b/packages/openui-cli/scripts/build-templates.js
deleted file mode 100644
index 1978d3c7c..000000000
--- a/packages/openui-cli/scripts/build-templates.js
+++ /dev/null
@@ -1,23 +0,0 @@
-const fs = require("node:fs");
-const path = require("node:path");
-const { rimrafSync } = require("rimraf");
-
-const TEMPLATES = ["openui-self-hosted", "openui-cloud"];
-
-for (const template of TEMPLATES) {
-  const srcDir = path.resolve(__dirname, "../src/templates", template);
-  const destDir = path.resolve(__dirname, "../dist/templates", template);
-
-  if (!fs.existsSync(srcDir)) {
-    throw new Error(`Template source directory not found: ${srcDir}`);
-  }
-
-  // Equivalent to: rm -rf dist/templates/<template>
-  fs.rmSync(destDir, { recursive: true, force: true });
-
-  // Equivalent to: mkdir -p dist/templates
-  fs.mkdirSync(path.dirname(destDir), { recursive: true });
-
-  // Equivalent to: cp -R src/templates/<template> dist/templates/<template>
-  fs.cpSync(srcDir, destDir, { recursive: true });
-}
diff --git a/packages/openui-cli/src/commands/create-app.ts b/packages/openui-cli/src/commands/create-app.ts
index 9fa63d7ce..d78fb78d2 100644
--- a/packages/openui-cli/src/commands/create-app.ts
+++ b/packages/openui-cli/src/commands/create-app.ts
@@ -9,12 +9,29 @@ import {
   resolveInstallPackageManager,
   type PackageManagerName,
 } from "../lib/detect-package-manager";
+import {
+  fetchTemplate,
+  getTemplateIndex,
+  prefetchTemplate,
+  type FetchedTemplate,
+} from "../lib/fetch-template";
 import { runSkillInstall, shouldInstallSkill } from "../lib/install-skill";
 import { runCommand } from "../lib/process-runner";
 import { resolveArgs } from "../lib/resolve-args";
 import { CliCancelledError, CreateError, telemetry } from "../lib/telemetry";
 import { cliErrorProperties, processErrorProperties } from "../lib/utils";
 
+const FALLBACK_TEMPLATE_CHOICES = [
+  {
+    value: "openui-cloud",
+    name: "OpenUI Cloud — free hosted models, managed history, tools & artifacts; fastest setup (recommended)",
+  },
+  {
+    value: "openui-self-hosted",
+    name: "Self-hosted — bring your own provider and self-manage the entire backend",
+  },
+];
+
 function shouldCopyTemplatePath(templateDir: string, src: string): boolean {
   const rel = path.relative(templateDir, src);
   if (!rel) return true;
@@ -121,6 +138,14 @@ export async function runCreateApp(options: CreateAppOptions): Promise<void> {
     immediate_arg: options.immediate,
   });
 
+  // Prefetched at CLI startup; falls back to the built-in list when the
+  // index.json fetch fails (offline, GitHub down).
+  let templateChoices = FALLBACK_TEMPLATE_CHOICES;
+  if (!options.template && interactive) {
+    const index = await getTemplateIndex();
+    if (index) templateChoices = index.map((t) => ({ value: t.name, name: t.description }));
+  }
+
   const args = await resolveArgs(
     {
       name: options.name
@@ -135,16 +160,7 @@ export async function runCreateApp(options: CreateAppOptions): Promise<void> {
             prompt: {
               type: "select",
               message: "Choose your agent backend",
-              choices: [
-                {
-                  value: "openui-cloud",
-                  name: "OpenUI Cloud — free hosted models or bring your own key, managed history, tools & artifacts; fastest setup (recommended)",
-                },
-                {
-                  value: "openui-self-hosted",
-                  name: "Self-hosted — bring your own provider and self-manage the entire backend",
-                },
-              ],
+              choices: templateChoices,
             },
             required: true,
           },
@@ -153,6 +169,9 @@ export async function runCreateApp(options: CreateAppOptions): Promise<void> {
   );
 
   const { name, template } = args as { name: string; template: TemplateName };
+  // Start the template download now so it runs while the user answers the
+  // remaining prompts (auth, skill, dev-server).
+  prefetchTemplate(template);
   const aiSetup = aiSetupFromTemplate(template);
   telemetry.register({ template, ai_setup: aiSetup });
   telemetry.capture("cli_ai_setup_selected", {
@@ -171,16 +190,6 @@ export async function runCreateApp(options: CreateAppOptions): Promise<void> {
     );
   }
 
-  const templateDir = path.join(__dirname, "..", "templates", template);
-  if (!fs.existsSync(templateDir)) {
-    throw new CreateError(
-      "preflight",
-      `Template "${template}" not found. Rebuild the CLI with \`pnpm build\`.`,
-      "filesystem",
-      "TEMPLATE_MISSING",
-    );
-  }
-
   telemetry.capture("cli_env_resolution_started", {
     ...createFunnelProps("env_resolution_started"),
     template,
@@ -214,7 +223,11 @@ export async function runCreateApp(options: CreateAppOptions): Promise<void> {
     template,
     ai_setup: aiSetup,
   });
+
+  let fetchedTemplate: FetchedTemplate | undefined;
   try {
+    fetchedTemplate = await fetchTemplate(template);
+    const templateDir = fetchedTemplate.dir;
     fs.cpSync(templateDir, targetDir, {
       recursive: true,
       filter: (src) => shouldCopyTemplatePath(templateDir, src),
@@ -250,6 +263,8 @@ export async function runCreateApp(options: CreateAppOptions): Promise<void> {
       properties.error_class,
       properties.error_code,
     );
+  } finally {
+    fetchedTemplate?.cleanup();
   }
   telemetry.capture("cli_scaffold_succeeded", {
     ...createFunnelProps("scaffold_succeeded"),
diff --git a/packages/openui-cli/src/index.ts b/packages/openui-cli/src/index.ts
index 9e18f4ac3..09860d598 100644
--- a/packages/openui-cli/src/index.ts
+++ b/packages/openui-cli/src/index.ts
@@ -9,12 +9,20 @@ import { Command } from "commander";
 import { runCreateApp } from "./commands/create-app";
 import { GenerateOptions, runGenerate } from "./commands/generate";
 import { detectAgent, UNKNOWN_AGENT_NAME } from "./lib/detect-agent";
+import { prefetchTemplateIndex } from "./lib/fetch-template";
 import { resolveArgs } from "./lib/resolve-args";
 import { telemetry } from "./lib/telemetry";
 import { handleCliError, normalizeAuth, normalizeTemplate } from "./lib/utils"; // Ensure utils.ts is included for type declarations
 
 const program = new Command();
 
+// Kick off the template index download the moment the process starts, so it
+// runs in the background while commander parses and prompts render. The
+// template folder itself prefetches once its name is known (see create-app).
+if (process.argv[2] === "create") {
+  prefetchTemplateIndex();
+}
+
 const cliVersion = (
   JSON.parse(fs.readFileSync(path.join(__dirname, "..", "package.json"), "utf8")) as {
     version: string;
diff --git a/packages/openui-cli/src/lib/fetch-template.ts b/packages/openui-cli/src/lib/fetch-template.ts
new file mode 100644
index 000000000..5e6e90c7d
--- /dev/null
+++ b/packages/openui-cli/src/lib/fetch-template.ts
@@ -0,0 +1,180 @@
+import { execFile } from "node:child_process";
+import * as fs from "node:fs";
+import * as os from "node:os";
+import * as path from "node:path";
+import { promisify } from "node:util";
+
+import * as tar from "tar";
+
+// Templates live in the dedicated thesysdev/openui-templates repo: one folder
+// per template at the root, listed in index.json. They are fetched from main
+// at scaffold time, so template changes go live on merge — no CLI release.
+// Fetches start in the background as soon as they can (see prefetch*) so the
+// network overlaps with the interactive prompts instead of blocking scaffold.
+const TEMPLATES_REPO = "thesysdev/openui-templates";
+const INDEX_URL = `https://raw.githubusercontent.com/${TEMPLATES_REPO}/main/index.json`;
+
+const execFileAsync = promisify(execFile);
+
+export interface TemplateIndexEntry {
+  name: string;
+  description: string;
+}
+
+export interface FetchedTemplate {
+  dir: string;
+  /** Removes the temp extraction dir once the scaffold copy is done. */
+  cleanup: () => void;
+}
+
+// Prefetched templates that were never consumed (user cancelled mid-prompt)
+// still get their temp dirs removed on exit.
+const pendingCleanups = new Set<() => void>();
+process.on("exit", () => {
+  for (const cleanup of pendingCleanups) cleanup();
+});
+
+function makeTempRoot(): { tempRoot: string; cleanup: () => void } {
+  const tempRoot = fs.mkdtempSync(path.join(os.tmpdir(), "openui-template-"));
+  const cleanup = () => {
+    pendingCleanups.delete(cleanup);
+    // maxRetries: git object files are read-only, which Windows rm can race on.
+    fs.rmSync(tempRoot, { recursive: true, force: true, maxRetries: 3 });
+  };
+  pendingCleanups.add(cleanup);
+  return { tempRoot, cleanup };
+}
+
+/** Sparse partial clone: transfers only commit/tree metadata plus the
+ * requested template's blobs. Returns `null` when git is unavailable or the
+ * clone fails, so the caller can fall back to the tarball download.
+ **/
+async function tryGitSparseFetch(template: string): Promise<FetchedTemplate | null> {
+  const git = (args: string[]) =>
+    // autocrlf=false: byte-identical checkout even when the user's global git
+    // config would rewrite line endings (Windows default).
+    execFileAsync("git", ["-c", "core.autocrlf=false", ...args], { timeout: 60_000 });
+  try {
+    await git(["--version"]);
+  } catch {
+    return null;
+  }
+
+  const { tempRoot, cleanup } = makeTempRoot();
+  const repoDir = path.join(tempRoot, "repo");
+  try {
+    // Step 1: clone the latest main commit with tree metadata only —
+    // --depth=1 (no history), --filter=blob:none (no file contents yet),
+    // --sparse (start with just the repo-root files checked out).
+    await git([
+      "clone",
+      "--depth=1",
+      "--filter=blob:none",
+      "--sparse",
+      "--single-branch",
+      "--branch=main",
+      `https://github.com/${TEMPLATES_REPO}.git`,
+      repoDir,
+    ]);
+    // Step 2: widen the checkout to the template's folder — git fetches only
+    // that subtree's blobs and writes them into the working tree.
+    await git(["-C", repoDir, "sparse-checkout", "set", template]);
+  } catch {
+    cleanup();
+    return null;
+  }
+
+  const dir = path.join(repoDir, template);
+  if (!fs.existsSync(path.join(dir, "package.json"))) {
+    // The clone worked, so the template genuinely doesn't exist on main —
+    // don't burn a tarball download discovering the same thing.
+    cleanup();
+    throw new Error(`Template "${template}" not found`);
+  }
+  return { dir, cleanup };
+}
+
+async function fetchTemplateTarball(template: string): Promise<FetchedTemplate> {
+  // codeload serves plain tarballs for any ref without the rate limits of
+  // api.github.com.
+  const url = `https://codeload.github.com/${TEMPLATES_REPO}/tar.gz/main`;
+  let response: Response;
+  try {
+    response = await fetch(url, { signal: AbortSignal.timeout(120_000) });
+  } catch (err) {
+    const reason = err instanceof Error ? err.message : String(err);
+    throw new Error(
+      `Could not download the "${template}" template from GitHub (${reason}). ` +
+        "Scaffolding needs network access — check your connection and retry.",
+    );
+  }
+  if (!response.ok) {
+    throw new Error(`Template download failed: ${url} responded ${response.status}`);
+  }
+
+  const tarball = Buffer.from(await response.arrayBuffer());
+
+  const { tempRoot, cleanup } = makeTempRoot();
+  try {
+    const tarFile = path.join(tempRoot, "repo.tgz");
+    const extractDir = path.join(tempRoot, template);
+    fs.writeFileSync(tarFile, tarball);
+    fs.mkdirSync(extractDir);
+    // Entries are prefixed "<repo>-<ref>/"; keep only the requested template's
+    // folder and strip the prefix so it extracts at extractDir.
+    await tar.extract({
+      file: tarFile,
+      cwd: extractDir,
+      strip: 2,
+      filter: (entryPath: string) => entryPath.split("/")[1] === template,
+    });
+    if (!fs.existsSync(path.join(extractDir, "package.json"))) {
+      throw new Error(`Template "${template}" not found`);
+    }
+    return { dir: extractDir, cleanup };
+  } catch (err) {
+    cleanup();
+    throw err;
+  }
+}
+
+const templateFetches = new Map<string, Promise<FetchedTemplate>>();
+
+/** Starts downloading a template in the background. Errors are surfaced when
+ * the promise is consumed by fetchTemplate at scaffold time. */
+export function prefetchTemplate(template: string): void {
+  if (templateFetches.has(template)) return;
+  const fetching = (async () =>
+    (await tryGitSparseFetch(template)) ?? fetchTemplateTarball(template))();
+  fetching.catch(() => {}); // avoid unhandled rejection while in the background
+  templateFetches.set(template, fetching);
+}
+
+export function fetchTemplate(template: string): Promise<FetchedTemplate> {
+  prefetchTemplate(template);
+  return templateFetches.get(template)!;
+}
+
+let indexFetch: Promise<TemplateIndexEntry[] | null> | undefined;
+
+async function fetchIndex(): Promise<TemplateIndexEntry[] | null> {
+  const response = await fetch(INDEX_URL, { signal: AbortSignal.timeout(10_000) });
+  if (!response.ok) return null;
+  const parsed = (await response.json()) as { templates?: TemplateIndexEntry[] };
+  const templates = parsed.templates?.filter(
+    (t) => typeof t?.name === "string" && typeof t?.description === "string",
+  );
+  return templates?.length ? templates : null;
+}
+
+/** Starts downloading index.json in the background. */
+export function prefetchTemplateIndex(): void {
+  indexFetch ??= fetchIndex().catch(() => null);
+}
+
+/** Resolves to the template list, or null when the index can't be fetched —
+ * callers fall back to the built-in list. */
+export function getTemplateIndex(): Promise<TemplateIndexEntry[] | null> {
+  prefetchTemplateIndex();
+  return indexFetch!;
+}