diff --git a/packages/grafana-data/src/types/panel.ts b/packages/grafana-data/src/types/panel.ts
index 99c580deeac..5f9bf8b54b4 100644
--- a/packages/grafana-data/src/types/panel.ts
+++ b/packages/grafana-data/src/types/panel.ts
@@ -163,7 +163,7 @@ export interface PanelOptionsEditorConfig<TOptions, TSettings = any, TValue = an
  * @internal
  */
 export interface PanelMenuItem {
-  type?: 'submenu' | 'divider';
+  type?: 'submenu' | 'divider' | 'group';
   text: string;
   iconClassName?: IconName;
   onClick?: (event: React.MouseEvent<any>) => void;
diff --git a/packages/grafana-data/src/types/pluginExtensions.ts b/packages/grafana-data/src/types/pluginExtensions.ts
index 93229833e16..7bed037bb9a 100644
--- a/packages/grafana-data/src/types/pluginExtensions.ts
+++ b/packages/grafana-data/src/types/pluginExtensions.ts
@@ -29,6 +29,7 @@ export type PluginExtensionLink = PluginExtensionBase & {
   path?: string;
   onClick?: (event?: React.MouseEvent) => void;
   icon?: IconName;
+  category?: string;
 };
 
 export type PluginExtensionComponent = PluginExtensionBase & {
@@ -65,11 +66,15 @@ export type PluginExtensionLinkConfig<Context extends object = object> = {
         path: string;
         onClick: (event: React.MouseEvent | undefined, helpers: PluginExtensionEventHelpers<Context>) => void;
         icon: IconName;
+        category: string;
       }>
     | undefined;
 
   // (Optional) A icon that can be displayed in the ui for the extension option.
   icon?: IconName;
+
+  // (Optional) A category to be used when grouping the options in the ui
+  category?: string;
 };
 
 export type PluginExtensionComponentConfig<Context extends object = object> = {
diff --git a/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenu.tsx b/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenu.tsx
index 885c598faf0..b32a6f67228 100644
--- a/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenu.tsx
+++ b/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenu.tsx
@@ -44,30 +44,61 @@ export class PanelHeaderMenu extends PureComponent<Props> {
   render() {
     return (
       <div className={classnames('panel-menu-container', 'dropdown', 'open', this.props.className)}>
-        {this.renderItems(this.props.items)}
+        {this.renderItems(flattenGroups(this.props.items))}
       </div>
     );
   }
 }
 
+function flattenGroups(items: PanelMenuItem[]): PanelMenuItem[] {
+  return items.reduce((all: PanelMenuItem[], item) => {
+    if (Array.isArray(item.subMenu) && item.type === 'submenu') {
+      all.push({
+        ...item,
+        subMenu: flattenGroups(item.subMenu),
+      });
+      return all;
+    }
+
+    if (Array.isArray(item.subMenu) && item.type === 'group') {
+      const { subMenu, ...rest } = item;
+      all.push(rest);
+      all.push.apply(all, flattenGroups(subMenu));
+      return all;
+    }
+
+    all.push(item);
+    return all;
+  }, []);
+}
+
 export function PanelHeaderMenuNew({ items }: Props) {
   const renderItems = (items: PanelMenuItem[]) => {
-    return items.map((item) =>
-      item.type === 'divider' ? (
-        <Menu.Divider key={item.text} />
-      ) : (
-        <Menu.Item
-          key={item.text}
-          label={item.text}
-          icon={item.iconClassName}
-          childItems={item.subMenu ? renderItems(item.subMenu) : undefined}
-          url={item.href}
-          onClick={item.onClick}
-          shortcut={item.shortcut}
-          testId={selectors.components.Panels.Panel.menuItems(item.text)}
-        />
-      )
-    );
+    return items.map((item) => {
+      switch (item.type) {
+        case 'divider':
+          return <Menu.Divider key={item.text} />;
+        case 'group':
+          return (
+            <Menu.Group key={item.text} label={item.text}>
+              {item.subMenu ? renderItems(item.subMenu) : undefined}
+            </Menu.Group>
+          );
+        default:
+          return (
+            <Menu.Item
+              key={item.text}
+              label={item.text}
+              icon={item.iconClassName}
+              childItems={item.subMenu ? renderItems(item.subMenu) : undefined}
+              url={item.href}
+              onClick={item.onClick}
+              shortcut={item.shortcut}
+              testId={selectors.components.Panels.Panel.menuItems(item.text)}
+            />
+          );
+      }
+    });
   };
 
   return <Menu>{renderItems(items)}</Menu>;
diff --git a/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenuItem.tsx b/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenuItem.tsx
index 12d589bb68c..e9d8291a48e 100644
--- a/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenuItem.tsx
+++ b/public/app/features/dashboard/dashgrid/PanelHeader/PanelHeaderMenuItem.tsx
@@ -12,35 +12,42 @@ interface Props {
 export const PanelHeaderMenuItem = (props: Props & PanelMenuItem) => {
   const [ref, setRef] = useState<HTMLLIElement | null>(null);
   const isSubMenu = props.type === 'submenu';
-  const isDivider = props.type === 'divider';
   const styles = useStyles2(getStyles);
-
   const icon = props.iconClassName ? toIconName(props.iconClassName) : undefined;
 
-  return isDivider ? (
-    <li className="divider" />
-  ) : (
-    <li
-      className={isSubMenu ? `dropdown-submenu ${getDropdownLocationCssClass(ref)}` : undefined}
-      ref={setRef}
-      data-testid={selectors.components.Panels.Panel.menuItems(props.text)}
-    >
-      <a onClick={props.onClick} href={props.href} role="menuitem">
-        {icon && <Icon name={icon} className={styles.menuIconClassName} />}
-        <span className="dropdown-item-text" aria-label={selectors.components.Panels.Panel.headerItems(props.text)}>
-          {props.text}
-          {isSubMenu && <Icon name="angle-right" className={styles.shortcutIconClassName} />}
-        </span>
+  switch (props.type) {
+    case 'divider':
+      return <li className="divider" />;
+    case 'group':
+      return (
+        <li>
+          <span className={styles.groupLabel}>{props.text}</span>
+        </li>
+      );
+    default:
+      return (
+        <li
+          className={isSubMenu ? `dropdown-submenu ${getDropdownLocationCssClass(ref)}` : undefined}
+          ref={setRef}
+          data-testid={selectors.components.Panels.Panel.menuItems(props.text)}
+        >
+          <a onClick={props.onClick} href={props.href} role="menuitem">
+            {icon && <Icon name={icon} className={styles.menuIconClassName} />}
+            <span className="dropdown-item-text" aria-label={selectors.components.Panels.Panel.headerItems(props.text)}>
+              {props.text}
+              {isSubMenu && <Icon name="angle-right" className={styles.shortcutIconClassName} />}
+            </span>
 
-        {props.shortcut && (
-          <span className="dropdown-menu-item-shortcut">
-            <Icon name="keyboard" className={styles.menuIconClassName} /> {props.shortcut}
-          </span>
-        )}
-      </a>
-      {props.children}
-    </li>
-  );
+            {props.shortcut && (
+              <span className="dropdown-menu-item-shortcut">
+                <Icon name="keyboard" className={styles.menuIconClassName} /> {props.shortcut}
+              </span>
+            )}
+          </a>
+          {props.children}
+        </li>
+      );
+  }
 };
 
 function getDropdownLocationCssClass(element: HTMLElement | null) {
@@ -76,5 +83,10 @@ function getStyles(theme: GrafanaTheme2) {
       right: theme.spacing(0.5),
       color: theme.colors.text.secondary,
     }),
+    groupLabel: css({
+      color: theme.colors.text.secondary,
+      fontSize: theme.typography.size.sm,
+      padding: theme.spacing(0.5, 1),
+    }),
   };
 }
diff --git a/public/app/features/dashboard/utils/getPanelMenu.test.ts b/public/app/features/dashboard/utils/getPanelMenu.test.ts
index b5bf987ae18..88bbb6cf1ff 100644
--- a/public/app/features/dashboard/utils/getPanelMenu.test.ts
+++ b/public/app/features/dashboard/utils/getPanelMenu.test.ts
@@ -10,7 +10,7 @@ import {
   PluginExtensionTypes,
   toDataFrame,
 } from '@grafana/data';
-import { AngularComponent, getPluginExtensions } from '@grafana/runtime';
+import { AngularComponent, getPluginLinkExtensions } from '@grafana/runtime';
 import config from 'app/core/config';
 import * as actions from 'app/features/explore/state/main';
 import { setStore } from 'app/store/store';
@@ -29,13 +29,15 @@ jest.mock('app/core/services/context_srv', () => ({
 jest.mock('@grafana/runtime', () => ({
   ...jest.requireActual('@grafana/runtime'),
   setPluginExtensionGetter: jest.fn(),
-  getPluginExtensions: jest.fn(),
+  getPluginLinkExtensions: jest.fn(),
 }));
 
+const getPluginLinkExtensionsMock = jest.mocked(getPluginLinkExtensions);
+
 describe('getPanelMenu()', () => {
   beforeEach(() => {
-    (getPluginExtensions as jest.Mock).mockRestore();
-    (getPluginExtensions as jest.Mock).mockReturnValue({ extensions: [] });
+    getPluginLinkExtensionsMock.mockRestore();
+    getPluginLinkExtensionsMock.mockReturnValue({ extensions: [] });
   });
 
   it('should return the correct panel menu items', () => {
@@ -119,9 +121,10 @@ describe('getPanelMenu()', () => {
 
   describe('when extending panel menu from plugins', () => {
     it('should contain menu item from link extension', () => {
-      (getPluginExtensions as jest.Mock).mockReturnValue({
+      getPluginLinkExtensionsMock.mockReturnValue({
         extensions: [
           {
+            id: '1',
             pluginId: '...',
             type: PluginExtensionTypes.link,
             title: 'Declare incident',
@@ -147,9 +150,10 @@ describe('getPanelMenu()', () => {
     });
 
     it('should truncate menu item title to 25 chars', () => {
-      (getPluginExtensions as jest.Mock).mockReturnValue({
+      getPluginLinkExtensionsMock.mockReturnValue({
         extensions: [
           {
+            id: '1',
             pluginId: '...',
             type: PluginExtensionTypes.link,
             title: 'Declare incident when pressing this amazing menu item',
@@ -177,9 +181,10 @@ describe('getPanelMenu()', () => {
     it('should pass onClick from plugin extension link to menu item', () => {
       const expectedOnClick = jest.fn();
 
-      (getPluginExtensions as jest.Mock).mockReturnValue({
+      getPluginLinkExtensionsMock.mockReturnValue({
         extensions: [
           {
+            id: '1',
             pluginId: '...',
             type: PluginExtensionTypes.link,
             title: 'Declare incident when pressing this amazing menu item',
@@ -287,7 +292,126 @@ describe('getPanelMenu()', () => {
         data,
       };
 
-      expect(getPluginExtensions).toBeCalledWith(expect.objectContaining({ context }));
+      expect(getPluginLinkExtensionsMock).toBeCalledWith(expect.objectContaining({ context }));
+    });
+
+    it('should contain menu item with category', () => {
+      getPluginLinkExtensionsMock.mockReturnValue({
+        extensions: [
+          {
+            id: '1',
+            pluginId: '...',
+            type: PluginExtensionTypes.link,
+            title: 'Declare incident',
+            description: 'Declaring an incident in the app',
+            path: '/a/grafana-basic-app/declare-incident',
+            category: 'Incident',
+          },
+        ],
+      });
+
+      const panel = new PanelModel({});
+      const dashboard = createDashboardModelFixture({});
+      const menuItems = getPanelMenu(dashboard, panel);
+      const extensionsSubMenu = menuItems.find((i) => i.text === 'Extensions')?.subMenu;
+
+      expect(extensionsSubMenu).toEqual(
+        expect.arrayContaining([
+          expect.objectContaining({
+            text: 'Incident',
+            subMenu: expect.arrayContaining([
+              expect.objectContaining({
+                text: 'Declare incident',
+                href: '/a/grafana-basic-app/declare-incident',
+              }),
+            ]),
+          }),
+        ])
+      );
+    });
+
+    it('should truncate category to 25 chars', () => {
+      getPluginLinkExtensionsMock.mockReturnValue({
+        extensions: [
+          {
+            id: '1',
+            pluginId: '...',
+            type: PluginExtensionTypes.link,
+            title: 'Declare incident',
+            description: 'Declaring an incident in the app',
+            path: '/a/grafana-basic-app/declare-incident',
+            category: 'Declare incident when pressing this amazing menu item',
+          },
+        ],
+      });
+
+      const panel = new PanelModel({});
+      const dashboard = createDashboardModelFixture({});
+      const menuItems = getPanelMenu(dashboard, panel);
+      const extensionsSubMenu = menuItems.find((i) => i.text === 'Extensions')?.subMenu;
+
+      expect(extensionsSubMenu).toEqual(
+        expect.arrayContaining([
+          expect.objectContaining({
+            text: 'Declare incident when...',
+            subMenu: expect.arrayContaining([
+              expect.objectContaining({
+                text: 'Declare incident',
+                href: '/a/grafana-basic-app/declare-incident',
+              }),
+            ]),
+          }),
+        ])
+      );
+    });
+
+    it('should contain menu item with category and append items without category after divider', () => {
+      getPluginLinkExtensionsMock.mockReturnValue({
+        extensions: [
+          {
+            id: '1',
+            pluginId: '...',
+            type: PluginExtensionTypes.link,
+            title: 'Declare incident',
+            description: 'Declaring an incident in the app',
+            path: '/a/grafana-basic-app/declare-incident',
+            category: 'Incident',
+          },
+          {
+            id: '2',
+            pluginId: '...',
+            type: PluginExtensionTypes.link,
+            title: 'Create forecast',
+            description: 'Declaring an incident in the app',
+            path: '/a/grafana-basic-app/declare-incident',
+          },
+        ],
+      });
+
+      const panel = new PanelModel({});
+      const dashboard = createDashboardModelFixture({});
+      const menuItems = getPanelMenu(dashboard, panel);
+      const extensionsSubMenu = menuItems.find((i) => i.text === 'Extensions')?.subMenu;
+
+      expect(extensionsSubMenu).toEqual(
+        expect.arrayContaining([
+          expect.objectContaining({
+            text: 'Incident',
+            subMenu: expect.arrayContaining([
+              expect.objectContaining({
+                text: 'Declare incident',
+                href: '/a/grafana-basic-app/declare-incident',
+              }),
+            ]),
+          }),
+          expect.objectContaining({
+            type: 'divider',
+          }),
+          expect.objectContaining({
+            text: 'Create forecast',
+          }),
+        ])
+      );
     });
   });
 
diff --git a/public/app/features/dashboard/utils/getPanelMenu.ts b/public/app/features/dashboard/utils/getPanelMenu.ts
index ac58b5b3b85..00477588ee0 100644
--- a/public/app/features/dashboard/utils/getPanelMenu.ts
+++ b/public/app/features/dashboard/utils/getPanelMenu.ts
@@ -1,11 +1,15 @@
-import { PanelMenuItem, PluginExtensionPoints, type PluginExtensionPanelContext } from '@grafana/data';
 import {
-  isPluginExtensionLink,
+  PanelMenuItem,
+  PluginExtensionLink,
+  PluginExtensionPoints,
+  type PluginExtensionPanelContext,
+} from '@grafana/data';
+import {
   AngularComponent,
   getDataSourceSrv,
-  getPluginExtensions,
   locationService,
   reportInteraction,
+  getPluginLinkExtensions,
 } from '@grafana/runtime';
 import { PanelCtrl } from 'app/angular/panel/panel_ctrl';
 import config from 'app/core/config';
@@ -275,31 +279,18 @@ export function getPanelMenu(
     });
   }
 
-  const { extensions } = getPluginExtensions({
+  const { extensions } = getPluginLinkExtensions({
     extensionPointId: PluginExtensionPoints.DashboardPanelMenu,
     context: createExtensionContext(panel, dashboard),
     limitPerPlugin: 2,
   });
 
   if (extensions.length > 0 && !panel.isEditing) {
-    const extensionsMenu: PanelMenuItem[] = [];
-
-    for (const extension of extensions) {
-      if (isPluginExtensionLink(extension)) {
-        extensionsMenu.push({
-          text: truncateTitle(extension.title, 25),
-          href: extension.path,
-          onClick: extension.onClick,
-        });
-        continue;
-      }
-    }
-
     menu.push({
       text: 'Extensions',
       iconClassName: 'plug',
       type: 'submenu',
-      subMenu: extensionsMenu,
+      subMenu: createExtensionSubMenu(extensions),
     });
   }
 
@@ -344,3 +335,53 @@ function createExtensionContext(panel: PanelModel, dashboard: DashboardModel): P
     data: panel.getQueryRunner().getLastResult(),
   };
 }
+
+function createExtensionSubMenu(extensions: PluginExtensionLink[]): PanelMenuItem[] {
+  const categorized: Record<string, PanelMenuItem[]> = {};
+  const uncategorized: PanelMenuItem[] = [];
+
+  for (const extension of extensions) {
+    const category = extension.category;
+
+    if (!category) {
+      uncategorized.push({
+        text: truncateTitle(extension.title, 25),
+        href: extension.path,
+        onClick: extension.onClick,
+      });
+      continue;
+    }
+
+    if (!Array.isArray(categorized[category])) {
+      categorized[category] = [];
+    }
+
+    categorized[category].push({
+      text: truncateTitle(extension.title, 25),
+      href: extension.path,
+      onClick: extension.onClick,
+    });
+  }
+
+  const subMenu = Object.keys(categorized).reduce((subMenu: PanelMenuItem[], category) => {
+    subMenu.push({
+      text: truncateTitle(category, 25),
+      type: 'group',
+      subMenu: categorized[category],
+    });
+    return subMenu;
+  }, []);
+
+  if (uncategorized.length > 0) {
+    if (subMenu.length > 0) {
+      subMenu.push({
+        text: 'divider',
+        type: 'divider',
+      });
+    }
+
+    Array.prototype.push.apply(subMenu, uncategorized);
+  }
+
+  return subMenu;
+}
diff --git a/public/app/features/plugins/extensions/getPluginExtensions.test.ts b/public/app/features/plugins/extensions/getPluginExtensions.test.ts
index 1b921dae87e..0ad86c5f080 100644
--- a/public/app/features/plugins/extensions/getPluginExtensions.test.ts
+++ b/public/app/features/plugins/extensions/getPluginExtensions.test.ts
@@ -117,6 +117,7 @@ describe('getPluginExtensions()', () => {
       description: 'Updated description',
       path: `/a/${pluginId}/updated-path`,
       icon: 'search',
+      category: 'Machine Learning',
     }));
 
     const registry = createPluginExtensionRegistry([{ pluginId, extensionConfigs: [link2] }]);
@@ -130,6 +131,7 @@ describe('getPluginExtensions()', () => {
     expect(extension.description).toBe('Updated description');
     expect(extension.path).toBe(`/a/${pluginId}/updated-path`);
     expect(extension.icon).toBe('search');
+    expect(extension.category).toBe('Machine Learning');
   });
 
   test('should hide the extension if it tries to override not-allowed properties with the configure() function', () => {
diff --git a/public/app/features/plugins/extensions/getPluginExtensions.ts b/public/app/features/plugins/extensions/getPluginExtensions.ts
index 8cccc936252..e878989ebf1 100644
--- a/public/app/features/plugins/extensions/getPluginExtensions.ts
+++ b/public/app/features/plugins/extensions/getPluginExtensions.ts
@@ -78,6 +78,7 @@ export const getPluginExtensions: GetExtensions = ({ context, extensionPointId,
           title: overrides?.title || extensionConfig.title,
           description: overrides?.description || extensionConfig.description,
           path: overrides?.path || extensionConfig.path,
+          category: overrides?.category || extensionConfig.category,
         };
 
         extensions.push(extension);
@@ -125,6 +126,7 @@ function getLinkExtensionOverrides(pluginId: string, config: PluginExtensionLink
       description = config.description,
       path = config.path,
       icon = config.icon,
+      category = config.category,
       ...rest
     } = overrides;
 
@@ -149,6 +151,7 @@ function getLinkExtensionOverrides(pluginId: string, config: PluginExtensionLink
       description,
       path,
       icon,
+      category,
     };
   } catch (error) {
     if (error instanceof Error) {