diff --git a/news/216.bugfix b/news/216.bugfix
new file mode 100644
index 00000000..b63c32e0
--- /dev/null
+++ b/news/216.bugfix
@@ -0,0 +1 @@
+Add a CMake variable `MBED_OUTPUT_EXT` for the output image extension.
diff --git a/src/mbed_tools/build/_internal/templates/mbed_config.tmpl b/src/mbed_tools/build/_internal/templates/mbed_config.tmpl
index 16e0300d..8fb21191 100644
--- a/src/mbed_tools/build/_internal/templates/mbed_config.tmpl
+++ b/src/mbed_tools/build/_internal/templates/mbed_config.tmpl
@@ -9,6 +9,7 @@ set(MBED_TARGET "{{target_name}}" CACHE STRING "")
 set(MBED_CPU_CORE "{{core}}" CACHE STRING "")
 set(MBED_C_LIB "{{c_lib}}" CACHE STRING "")
 set(MBED_PRINTF_LIB "{{printf_lib}}" CACHE STRING "")
+set(MBED_OUTPUT_EXT "{{OUTPUT_EXT}}" CACHE STRING "")
 
 list(APPEND MBED_TARGET_SUPPORTED_C_LIBS {% for supported_c_lib in supported_c_libs %}
     {{supported_c_lib}}
diff --git a/tests/build/test_generate_config.py b/tests/build/test_generate_config.py
index b2e70083..b18bb2b1 100644
--- a/tests/build/test_generate_config.py
+++ b/tests/build/test_generate_config.py
@@ -47,6 +47,7 @@
     "supported_form_factors": ["ARDUINO"],
     "supported_toolchains": ["ARM", "GCC_ARM", "IAR"],
     "trustzone": False,
+    "OUTPUT_EXT": "hex",
 }
 
 
@@ -288,6 +289,7 @@ def test_overrides_target_config_param_from_app(matching_target_and_filter, prog
         ("target.macros", ["DEFINE"], "DEFINE"),
         ("target.device_has", ["NOTHING"], "DEVICE_NOTHING"),
         ("target.features", ["ELECTRICITY"], "FEATURE_ELECTRICITY"),
+        ("OUTPUT_EXT", "hex", 'MBED_OUTPUT_EXT "hex"'),
     ],
 )
 def test_overrides_target_non_config_params_from_app(