diff --git a/src/extension.ts b/src/extension.ts
index 7af18c3..d21467f 100644
--- a/src/extension.ts
+++ b/src/extension.ts
@@ -81,7 +81,7 @@ export function activate(context: vscode.ExtensionContext): void {
     const decisionsProvider = new DecisionsTreeProvider(dataProvider, squadFolderName);
 
     // Wire up GitHub Issues service
-    const issuesService = new GitHubIssuesService();
+    const issuesService = new GitHubIssuesService({ squadFolder: squadFolderName });
     teamProvider.setIssuesService(issuesService);
 
     // Create dashboard webview
diff --git a/src/services/GitHubIssuesService.ts b/src/services/GitHubIssuesService.ts
index 0cdbc5c..4233e0f 100644
--- a/src/services/GitHubIssuesService.ts
+++ b/src/services/GitHubIssuesService.ts
@@ -50,6 +50,9 @@ export interface GitHubIssuesServiceOptions {
 
     /** GitHub API base URL (default: https://api.github.com) */
     apiBaseUrl?: string;
+
+    /** Squad folder name (default: '.ai-team') */
+    squadFolder?: '.squad' | '.ai-team';
 }
 
 /**
@@ -66,7 +69,7 @@ export class GitHubIssuesService {
     private issueSourceCache: IssueSourceConfig | null = null;
 
     constructor(options: GitHubIssuesServiceOptions = {}) {
-        this.teamMdService = new TeamMdService();
+        this.teamMdService = new TeamMdService(options.squadFolder);
         this.cacheTtlMs = options.cacheTtlMs ?? DEFAULT_CACHE_TTL_MS;
         this.token = options.token;
         this.apiBaseUrl = (options.apiBaseUrl ?? 'https://api.github.com').replace(/\/+$/, '');
diff --git a/src/test/suite/gitHubIssuesService.test.ts b/src/test/suite/gitHubIssuesService.test.ts
index 1285ebe..78d5125 100644
--- a/src/test/suite/gitHubIssuesService.test.ts
+++ b/src/test/suite/gitHubIssuesService.test.ts
@@ -58,6 +58,37 @@ suite('GitHubIssuesService', () => {
             }
         });
 
+        test('reads team.md from .squad folder when squadFolder option is set', async () => {
+            const tempDir = path.join(TEST_FIXTURES_ROOT, 'temp-squad-folder');
+            const squadDir = path.join(tempDir, '.squad');
+            await fs.promises.mkdir(squadDir, { recursive: true });
+            await fs.promises.writeFile(path.join(squadDir, 'team.md'), [
+                '# Team',
+                '',
+                '## Issue Source',
+                '',
+                '| Field | Value |',
+                '|-------|-------|',
+                '| **Repository** | testowner/testrepo |',
+            ].join('\n'));
+
+            try {
+                // Without squadFolder option, service looks in .ai-team (misses .squad)
+                const defaultService = new GitHubIssuesService();
+                const defaultConfig = await defaultService.getIssueSource(tempDir);
+                assert.strictEqual(defaultConfig, null, 'Default service should not find .squad/team.md');
+
+                // With squadFolder option, service finds team.md in .squad
+                const squadService = new GitHubIssuesService({ squadFolder: '.squad' });
+                const squadConfig = await squadService.getIssueSource(tempDir);
+                assert.ok(squadConfig, 'Squad service should find .squad/team.md');
+                assert.strictEqual(squadConfig!.owner, 'testowner');
+                assert.strictEqual(squadConfig!.repo, 'testrepo');
+            } finally {
+                await fs.promises.rm(tempDir, { recursive: true, force: true });
+            }
+        });
+
         test('parses owner/repo format correctly', async () => {
             const tempDir = path.join(TEST_FIXTURES_ROOT, 'temp-repo-format');
             const aiTeamDir = path.join(tempDir, '.ai-team');
@@ -423,5 +454,19 @@ suite('GitHubIssuesService', () => {
             const token = (service as unknown as { token: string }).token;
             assert.strictEqual(token, 'ghp_test123');
         });
+
+        test('passes squadFolder to internal TeamMdService', () => {
+            const service = new GitHubIssuesService({ squadFolder: '.squad' });
+
+            const teamMdService = (service as unknown as { teamMdService: { squadFolder: string } }).teamMdService;
+            assert.strictEqual(teamMdService.squadFolder, '.squad');
+        });
+
+        test('defaults to .ai-team when squadFolder not specified', () => {
+            const service = new GitHubIssuesService();
+
+            const teamMdService = (service as unknown as { teamMdService: { squadFolder: string } }).teamMdService;
+            assert.strictEqual(teamMdService.squadFolder, '.ai-team');
+        });
     });
 });