diff --git a/amplifier_module_context_simple/__init__.py b/amplifier_module_context_simple/__init__.py
index ab57c14..ad8eabb 100644
--- a/amplifier_module_context_simple/__init__.py
+++ b/amplifier_module_context_simple/__init__.py
@@ -29,6 +29,14 @@
 
 logger = logging.getLogger(__name__)
 
+# Budget policy for extended context windows (e.g. Anthropic 1M beta).
+# When context_window exceeds this threshold, use fraction-based budgeting
+# instead of the standard (context_window - reserved_output) formula.
+# This keeps sessions in the standard pricing zone while using the extended
+# window as a safety net against overflow errors.
+EXTENDED_CONTEXT_THRESHOLD = 200_000
+DEFAULT_EXTENDED_BUDGET_FRACTION = 0.15
+
 
 async def mount(coordinator: ModuleCoordinator, config: dict[str, Any] | None = None):
     """
@@ -47,6 +55,8 @@ async def mount(coordinator: ModuleCoordinator, config: dict[str, Any] | None =
             - compaction_notice_token_reserve: Tokens to reserve for notice (default: 800)
             - compaction_notice_verbosity: Notice detail level - "minimal", "normal", "verbose" (default: "normal")
             - compaction_notice_min_level: Only show notice if compaction level >= this (default: 1)
+            - extended_context_budget_fraction: Budget as fraction of context_window when
+              context_window > 200k (default: 0.15). Only applies to extended context windows.
 
     Returns:
         Optional cleanup function
@@ -65,6 +75,11 @@ async def mount(coordinator: ModuleCoordinator, config: dict[str, Any] | None =
         ),
         compaction_notice_verbosity=config.get("compaction_notice_verbosity", "normal"),
         compaction_notice_min_level=config.get("compaction_notice_min_level", 1),
+        extended_context_budget_fraction=float(
+            config.get(
+                "extended_context_budget_fraction", DEFAULT_EXTENDED_BUDGET_FRACTION
+            )
+        ),
         hooks=getattr(coordinator, "hooks", None),
     )
     await coordinator.mount("context", context)
@@ -118,6 +133,7 @@ def __init__(
         compaction_notice_token_reserve: int = 800,
         compaction_notice_verbosity: str = "normal",
         compaction_notice_min_level: int = 1,
+        extended_context_budget_fraction: float = DEFAULT_EXTENDED_BUDGET_FRACTION,
         hooks: Any = None,
     ):
         """
@@ -134,6 +150,9 @@ def __init__(
             compaction_notice_token_reserve: Tokens to reserve for notice
             compaction_notice_verbosity: Notice detail level ("minimal", "normal", "verbose")
             compaction_notice_min_level: Only show notice if compaction level >= this
+            extended_context_budget_fraction: Budget as fraction of context_window for
+                extended context windows (>200k). Default 0.15 keeps sessions in the
+                standard pricing zone. Only applies when context_window > 200k.
             hooks: Optional hooks instance for emitting observability events
         """
         self.messages: list[dict[str, Any]] = []
@@ -147,6 +166,7 @@ def __init__(
         self.compaction_notice_token_reserve = compaction_notice_token_reserve
         self.compaction_notice_verbosity = compaction_notice_verbosity
         self.compaction_notice_min_level = compaction_notice_min_level
+        self.extended_context_budget_fraction = extended_context_budget_fraction
         self._hooks = hooks
         self._last_compaction_stats: dict[str, Any] | None = None
         self._system_prompt_factory: Callable[[], Awaitable[str]] | None = None
@@ -1181,6 +1201,20 @@ def _calculate_budget(self, token_budget: int | None, provider: Any | None) -> i
                         context_window = getattr(model_info, "context_window", None)
                         max_output = getattr(model_info, "max_output_tokens", None)
                         if context_window and max_output:
+                            if context_window > EXTENDED_CONTEXT_THRESHOLD:
+                                budget = (
+                                    int(
+                                        context_window
+                                        * self.extended_context_budget_fraction
+                                    )
+                                    - safety_margin
+                                )
+                                logger.info(
+                                    f"Budget from extended context fraction: {budget:,} "
+                                    f"({self.extended_context_budget_fraction:.0%} of "
+                                    f"{context_window:,})"
+                                )
+                                return budget
                             reserved_output = int(max_output * output_reserve_fraction)
                             budget = context_window - reserved_output - safety_margin
                             logger.info(
@@ -1197,6 +1231,17 @@ def _calculate_budget(self, token_budget: int | None, provider: Any | None) -> i
                 max_output_tokens = defaults.get("max_output_tokens")
 
                 if context_window and max_output_tokens:
+                    if context_window > EXTENDED_CONTEXT_THRESHOLD:
+                        budget = (
+                            int(context_window * self.extended_context_budget_fraction)
+                            - safety_margin
+                        )
+                        logger.info(
+                            f"Budget from extended context fraction: {budget:,} "
+                            f"({self.extended_context_budget_fraction:.0%} of "
+                            f"{context_window:,})"
+                        )
+                        return budget
                     reserved_output = int(max_output_tokens * output_reserve_fraction)
                     budget = context_window - reserved_output - safety_margin
                     logger.info(