diff --git a/.gitignore b/.gitignore
index 45e58f1a..4122d90a 100644
--- a/.gitignore
+++ b/.gitignore
@@ -26,6 +26,7 @@ share/python-wheels/
 .installed.cfg
 *.egg
 MANIFEST
+.version
 
 # PyInstaller
 #  Usually these files are written by a python script from a template
diff --git a/tvbextxircuits/start_xircuits.py b/tvbextxircuits/start_xircuits.py
index 2679f114..1155f280 100644
--- a/tvbextxircuits/start_xircuits.py
+++ b/tvbextxircuits/start_xircuits.py
@@ -1,7 +1,7 @@
 import argparse
+import importlib.metadata
 from pathlib import Path
 import os
-from .handlers.request_folder import request_folder
 from .utils import is_empty, copy_from_installed_wheel
 from .library import list_component_library, install_library, fetch_library, save_component_library_config
 from .compiler import compile
@@ -11,12 +11,56 @@
 
 LOGGER = get_logger(__name__)
 
-def init_xircuits():
+def init_xircuits(vers_changed=False):
     package_name = 'tvbextxircuits'
-    copy_from_installed_wheel(package_name, resource='.xircuits', dest_path='.xircuits')
-    component_library_path = Path(os.getcwd()) / "xai_components"
-    if not component_library_path.exists():
-        copy_from_installed_wheel('xai_components', '', 'xai_components')
+    copy_from_installed_wheel(package_name, resource='.xircuits', dest_path='.xircuits', version_changed=vers_changed)
+    copy_from_installed_wheel('xai_components', '', 'xai_components', version_changed=vers_changed)
+
+    # Create a version file for keeping generated folders in sync after a new release is installed
+    try:
+        version_file = Path(os.getcwd()) / '.version'
+        current_version = get_extension_version()
+        version_file.write_text(current_version)
+        LOGGER.info("Create version file.")
+    except Exception as e:
+        LOGGER.error(f"Error handling version file: {e}")
+
+
+def version_changed():
+    """
+    Compares user's current version with the version installed on lab.
+    If they differ, a new version is available.
+    """
+    version_file = Path(os.getcwd()) / '.version'
+    installed_version = get_extension_version()
+
+    if not installed_version:
+        LOGGER.error("Not able to retrieve the installed version.")
+        return
+
+    if not version_file.exists():
+        LOGGER.info("Version file not found.")
+        return False
+
+    try:
+        stored_version = version_file.read_text().strip()
+    except Exception as e:
+        LOGGER.error(f"Error reading version file: {e}")
+        stored_version = None
+
+    return stored_version != installed_version
+
+def get_extension_version():
+    """
+    Retrieves current version of the package
+    """
+    try:
+        version = importlib.metadata.version("tvb-ext-xircuits")
+        return version
+    except importlib.metadata.PackageNotFoundError:
+        LOGGER.error("Package 'tvb-ext-xircuits' is not installed.")
+        return None
+
 
 def cmd_start_xircuits(args, extra_args=[]):
     # fetch xai_components
@@ -123,10 +167,10 @@ def init_configs():
         ======================================
         '''
     )
-
+    vers_changed = version_changed()
     config_path = Path(os.getcwd()) / ".xircuits"
-    if not config_path.exists():
-        init_xircuits()
+    if not config_path.exists() or vers_changed:
+        init_xircuits(vers_changed)
 
     save_component_library_config()
 
diff --git a/tvbextxircuits/utils.py b/tvbextxircuits/utils.py
index d5bb1718..75b4b0e1 100644
--- a/tvbextxircuits/utils.py
+++ b/tvbextxircuits/utils.py
@@ -1,3 +1,5 @@
+from pathlib import Path
+
 STORAGE_CONFIG_FILE = 'storage_config.json'  # To be used only for HPC runs
 COLLAB_NAME_KEY = 'collab_name'  # Used only for HPC runs
 BUCKET_NAME_KEY = 'bucket_name'  # Used only for HPC runs
@@ -21,13 +23,17 @@ def is_valid_url(url):
     except ValueError:
         return False
 
-def copy_from_installed_wheel(package_name, resource="", dest_path=None):
+def copy_from_installed_wheel(package_name, resource="", dest_path=None, version_changed=False):
     if dest_path is None:
         dest_path = package_name
 
     # Get the resource reference
     ref = importlib_resources.files(package_name) / resource
 
+    config_path = Path(os.getcwd()) / dest_path
     # Create the temporary file context
     with importlib_resources.as_file(ref) as resource_path:
-        shutil.copytree(resource_path, dest_path)
\ No newline at end of file
+        if not config_path.exists() or version_changed:
+            if config_path.exists():
+                shutil.rmtree(config_path)
+            shutil.copytree(resource_path, dest_path)