diff --git a/doc/source/admin/shared-file-systems-crud-share.rst b/doc/source/admin/shared-file-systems-crud-share.rst
index e07f45ad9d..8ab2dcfd05 100644
--- a/doc/source/admin/shared-file-systems-crud-share.rst
+++ b/doc/source/admin/shared-file-systems-crud-share.rst
@@ -562,13 +562,13 @@ You also can force-delete a share.
 The shares cannot be deleted in transitional states. The transitional
 states are ``creating``, ``deleting``, ``managing``, ``unmanaging``,
 ``migrating``, ``extending``, and ``shrinking`` statuses for the shares.
-Force-deletion deletes an object in any state. Use the ``policy.json`` file
+Force-deletion deletes an object in any state. Use the ``policy.yaml`` file
 to grant permissions for this action to other roles.
 
 .. tip::
 
-   The configuration file ``policy.json`` may be used from different places.
-   The path ``/etc/manila/policy.json`` is one of expected paths by default.
+   The configuration file ``policy.yaml`` may be used from different places.
+   The path ``/etc/manila/policy.yaml`` is one of expected paths by default.
 
 Use **manila delete <share_name_or_ID>** command to delete a specified share:
 
diff --git a/doc/source/admin/shared-file-systems-share-replication.rst b/doc/source/admin/shared-file-systems-share-replication.rst
index 869723a351..0632426405 100644
--- a/doc/source/admin/shared-file-systems-share-replication.rst
+++ b/doc/source/admin/shared-file-systems-share-replication.rst
@@ -599,7 +599,7 @@ Use the :command:`manila share-replica-delete` command with the
 .. note::
    This command has no output.
 
-Use the ``policy.json`` file to grant permissions for these actions to other
+Use the ``policy.yaml`` file to grant permissions for these actions to other
 roles.
 
 
diff --git a/doc/source/configuration/shared-file-systems/overview.rst b/doc/source/configuration/shared-file-systems/overview.rst
index bbba1c365d..14845de100 100644
--- a/doc/source/configuration/shared-file-systems/overview.rst
+++ b/doc/source/configuration/shared-file-systems/overview.rst
@@ -48,7 +48,7 @@ The Shared File Systems service contains the following components:
    allowed to perform. In the default configuration, most actions do not
    require a particular role unless they are restricted to administrators, but
    this can be configured by the system administrator in the appropriate
-   ``policy.json`` file that maintains the rules. A user's access to manage
+   ``policy.yaml`` file that maintains the rules. A user's access to manage
    particular shares is limited by tenant. Guest access to mount and use shares
    is secured by IP and/or user access rules. Quotas used to control resource
    consumption across available hardware resources are per tenant.
diff --git a/doc/source/configuration/shared-file-systems/samples/policy.rst b/doc/source/configuration/shared-file-systems/samples/policy.rst
index f41a381d98..8a630e3404 100644
--- a/doc/source/configuration/shared-file-systems/samples/policy.rst
+++ b/doc/source/configuration/shared-file-systems/samples/policy.rst
@@ -2,6 +2,14 @@
 Policy configuration
 ====================
 
+.. warning::
+
+   JSON formatted policy file is deprecated since Manila 12.0.0 (Wallaby).
+   This `oslopolicy-convert-json-to-yaml`__ tool will migrate your existing
+   JSON-formatted policy file to YAML in a backward-compatible way.
+
+.. __: https://docs.openstack.org/oslo.policy/latest/cli/oslopolicy-convert-json-to-yaml.html
+
 Configuration
 ~~~~~~~~~~~~~
 
diff --git a/doc/source/configuration/shared-file-systems/samples/sample_policy.rst b/doc/source/configuration/shared-file-systems/samples/sample_policy.rst
index 312fd273c4..e1f9b945d6 100644
--- a/doc/source/configuration/shared-file-systems/samples/sample_policy.rst
+++ b/doc/source/configuration/shared-file-systems/samples/sample_policy.rst
@@ -2,6 +2,14 @@
 Manila Sample Policy
 ====================
 
+.. warning::
+
+   JSON formatted policy file is deprecated since Manila 12.0.0 (Wallaby).
+   This `oslopolicy-convert-json-to-yaml`__ tool will migrate your existing
+   JSON-formatted policy file to YAML in a backward-compatible way.
+
+.. __: https://docs.openstack.org/oslo.policy/latest/cli/oslopolicy-convert-json-to-yaml.html
+
 The following is a sample Manila policy file that has been auto-generated
 from default policy values in code. If you're using the default policies, then
 the maintenance of this file is not necessary.
@@ -10,7 +18,7 @@ but it is not suggested to copy and paste into a deployment unless you're planni
 on providing a different policy for an operation that is not the default. For
 instance, if you want to change the default value of "share:create", you only
 need to keep this single rule in your policy config
-file (**/etc/manila/policy.json**).
+file (**/etc/manila/policy.yaml**).
 
 .. literalinclude:: ../../../_static/manila.policy.yaml.sample
    :language: ini
diff --git a/doc/source/contributor/documenting_your_work.rst b/doc/source/contributor/documenting_your_work.rst
index a31bcac1f5..843707aab0 100644
--- a/doc/source/contributor/documenting_your_work.rst
+++ b/doc/source/contributor/documenting_your_work.rst
@@ -105,7 +105,7 @@ OpenStack Security Guide
 - Any feature that has a security impact needs to be documented here.
 - In general, administrators will follow the guidelines regarding best
   practices of setting up their manila deployments with this guide.
-- Any changes to ``policy.json`` based authorization, share network related
+- Any changes to ``policy.yaml`` based authorization, share network related
   security, ``access`` to manila resources, tenant and user related
   information needs to be documented here.
 - **Link**: `Security guide <http://docs.openstack.org/security-guide/>`_
diff --git a/lower-constraints.txt b/lower-constraints.txt
index abf5f0e7cd..dbc4daecfd 100644
--- a/lower-constraints.txt
+++ b/lower-constraints.txt
@@ -64,12 +64,12 @@ oslo.i18n==5.0.1
 oslo.log==4.4.0
 oslo.messaging==12.5.0
 oslo.middleware==4.1.1
-oslo.policy==3.5.0
+oslo.policy==3.6.0
 oslo.reports==2.2.0
 oslo.rootwrap==6.2.0
 oslo.serialization==4.0.1
 oslo.service==2.4.0
-oslo.upgradecheck==1.1.1
+oslo.upgradecheck==1.3.0
 oslo.utils==4.7.0
 oslotest==4.4.1
 packaging==20.4
diff --git a/manila/cmd/status.py b/manila/cmd/status.py
index 56a33d9a6b..7a6171fde7 100644
--- a/manila/cmd/status.py
+++ b/manila/cmd/status.py
@@ -15,6 +15,7 @@
 import sys
 
 from oslo_config import cfg
+from oslo_upgradecheck import common_checks
 from oslo_upgradecheck import upgradecheck
 
 from manila.i18n import _
@@ -42,6 +43,8 @@ class Checks(upgradecheck.UpgradeCommands):
     _upgrade_checks = (
         # In the future there should be some real checks added here
         (_('Placeholder'), _check_placeholder),
+        (_('Policy File JSON to YAML Migration'),
+         (common_checks.check_policy_json, {'conf': cfg.CONF})),
     )
 
 
diff --git a/manila/common/config.py b/manila/common/config.py
index 50849bf922..f225b235ee 100644
--- a/manila/common/config.py
+++ b/manila/common/config.py
@@ -29,6 +29,7 @@ import socket
 from oslo_config import cfg
 from oslo_log import log
 from oslo_middleware import cors
+from oslo_policy import opts as policy_opts
 from oslo_utils import netutils
 import six
 
@@ -169,8 +170,8 @@ def verify_share_protocols():
         raise exception.ManilaException(message=msg)
 
 
-def set_middleware_defaults():
-    """Update default configuration options for oslo.middleware."""
+def set_lib_defaults():
+    """Update default configuration options for external lib namespace"""
     cors.set_defaults(
         allow_headers=['X-Auth-Token',
                        'X-OpenStack-Request-ID',
@@ -193,3 +194,5 @@ def set_middleware_defaults():
                        'DELETE',
                        'PATCH']
     )
+    # Update default value of oslo.policy policy_file config option.
+    policy_opts.set_defaults(CONF, 'policy.yaml')
diff --git a/manila/policy.py b/manila/policy.py
index 9d767ecddd..7c1bb13be5 100644
--- a/manila/policy.py
+++ b/manila/policy.py
@@ -20,6 +20,7 @@ import sys
 
 from oslo_config import cfg
 from oslo_log import log as logging
+from oslo_policy import opts
 from oslo_policy import policy
 from oslo_utils import excutils
 
@@ -31,6 +32,13 @@ LOG = logging.getLogger(__name__)
 _ENFORCER = None
 
 
+# TODO(gmann): Remove setting the default value of config policy_file
+# once oslo_policy change the default value to 'policy.yaml'.
+# https://github.com/openstack/oslo.policy/blob/a626ad12fe5a3abd49d70e3e5b95589d279ab578/oslo_policy/opts.py#L49
+DEFAULT_POLICY_FILE = 'policy.yaml'
+opts.set_defaults(CONF, DEFAULT_POLICY_FILE)
+
+
 def reset():
     global _ENFORCER
     if _ENFORCER:
diff --git a/manila/tests/conf_fixture.py b/manila/tests/conf_fixture.py
index 28a1325f25..f4d0316ad7 100644
--- a/manila/tests/conf_fixture.py
+++ b/manila/tests/conf_fixture.py
@@ -33,7 +33,7 @@ def set_defaults(conf):
     _safe_set_of_opts(conf, 'connection', "sqlite://", group='database')
     _safe_set_of_opts(conf, 'sqlite_synchronous', False)
     _POLICY_PATH = os.path.abspath(os.path.join(CONF.state_path,
-                                                'manila/tests/policy.json'))
+                                                'manila/tests/policy.yaml'))
     opts.set_defaults(conf, policy_file=_POLICY_PATH)
     _safe_set_of_opts(conf, 'share_export_ip', '0.0.0.0')
     _safe_set_of_opts(conf, 'service_instance_user', 'fake_user')
diff --git a/manila/tests/policy.json b/manila/tests/policy.json
deleted file mode 100644
index 1d5a0be257..0000000000
--- a/manila/tests/policy.json
+++ /dev/null
@@ -1,136 +0,0 @@
-{
-    "context_is_admin": "role:admin",
-    "admin_api": "is_admin:True",
-    "admin_or_owner": "is_admin:True or project_id:%(project_id)s",
-    "default": "rule:admin_or_owner",
-
-    "availability_zone:index": "rule:default",
-
-    "quota_set:update": "rule:admin_api",
-    "quota_set:show": "rule:default",
-    "quota_set:delete": "rule:admin_api",
-
-    "quota_class_set:show": "rule:default",
-    "quota_class_set:update": "rule:admin_api",
-
-    "service:index": "rule:admin_api",
-    "service:update": "rule:admin_api",
-
-    "share:create": "",
-    "share:list_by_share_server_id": "rule:admin_api",
-    "share:get": "",
-    "share:get_all": "",
-    "share:delete": "rule:default",
-    "share:update": "rule:default",
-    "share:snapshot_update": "",
-    "share:create_snapshot": "",
-    "share:delete_snapshot": "",
-    "share:get_snapshot": "",
-    "share:get_all_snapshots": "",
-    "share:extend": "",
-    "share:shrink": "",
-    "share:manage": "rule:admin_api",
-    "share:unmanage": "rule:admin_api",
-    "share:force_delete": "rule:admin_api",
-    "share:reset_status": "rule:admin_api",
-    "share:migration_start": "rule:admin_api",
-    "share:migration_complete": "rule:admin_api",
-    "share:migration_cancel": "rule:admin_api",
-    "share:migration_get_progress": "rule:admin_api",
-    "share_export_location:index": "rule:default",
-    "share_export_location:show": "rule:default",
-
-    "share_type:index": "rule:default",
-    "share_type:show": "rule:default",
-    "share_type:default": "rule:default",
-    "share_type:create": "rule:default",
-    "share_type:delete": "rule:default",
-    "share_type:add_project_access": "rule:admin_api",
-    "share_type:list_project_access": "rule:admin_api",
-    "share_type:remove_project_access": "rule:admin_api",
-
-    "share_types_extra_spec:create": "rule:default",
-    "share_types_extra_spec:update": "rule:default",
-    "share_types_extra_spec:show": "rule:default",
-    "share_types_extra_spec:index": "rule:default",
-    "share_types_extra_spec:delete": "rule:default",
-
-    "share_instance:index": "rule:admin_api",
-    "share_instance:show": "rule:admin_api",
-    "share_instance:force_delete": "rule:admin_api",
-    "share_instance:reset_status": "rule:admin_api",
-
-    "share_snapshot:force_delete": "rule:admin_api",
-    "share_snapshot:reset_status": "rule:admin_api",
-    "share_snapshot:manage_snapshot": "rule:admin_api",
-    "share_snapshot:unmanage_snapshot": "rule:admin_api",
-
-    "share_network:create": "",
-    "share_network:index": "",
-    "share_network:detail": "",
-    "share_network:show": "",
-    "share_network:update": "",
-    "share_network:delete": "",
-    "share_network:get_all_share_networks": "rule:admin_api",
-
-    "share_server:index": "rule:admin_api",
-    "share_server:show": "rule:admin_api",
-    "share_server:details": "rule:admin_api",
-    "share_server:delete": "rule:admin_api",
-
-    "share:get_share_metadata": "",
-    "share:delete_share_metadata": "",
-    "share:update_share_metadata": "",
-    "share_extension:availability_zones": "",
-
-     "security_service:index": "",
-     "security_service:get_all_security_services": "rule:admin_api",
-
-    "scheduler_stats:pools:index": "rule:admin_api",
-    "scheduler_stats:pools:detail": "rule:admin_api",
-
-    "share_group:create" : "rule:default",
-    "share_group:delete": "rule:default",
-    "share_group:update": "rule:default",
-    "share_group:get": "rule:default",
-    "share_group:get_all": "rule:default",
-    "share_group:force_delete": "rule:admin_api",
-    "share_group:reset_status": "rule:admin_api",
-
-    "share_group_snapshot:create" : "rule:default",
-    "share_group_snapshot:delete": "rule:default",
-    "share_group_snapshot:update" : "rule:default",
-    "share_group_snapshot:get": "rule:default",
-    "share_group_snapshot:get_all": "rule:default",
-    "share_group_snapshot:force_delete": "rule:admin_api",
-    "share_group_snapshot:reset_status": "rule:admin_api",
-
-    "share_replica:get_all": "rule:default",
-    "share_replica:show": "rule:default",
-    "share_replica:create" : "rule:default",
-    "share_replica:delete": "rule:default",
-    "share_replica:promote": "rule:default",
-    "share_replica:resync": "rule:admin_api",
-    "share_replica:reset_status": "rule:admin_api",
-    "share_replica:force_delete": "rule:admin_api",
-    "share_replica:reset_replica_state": "rule:admin_api",
-
-    "share_group_type:index": "rule:default",
-    "share_group_type:show": "rule:default",
-    "share_group_type:default": "rule:default",
-    "share_group_type:create": "rule:admin_api",
-    "share_group_type:delete": "rule:admin_api",
-    "share_group_type:add_project_access": "rule:admin_api",
-    "share_group_type:list_project_access": "rule:admin_api",
-    "share_group_type:remove_project_access": "rule:admin_api",
-
-    "share_group_types_spec:create": "rule:admin_api",
-    "share_group_types_spec:update": "rule:admin_api",
-    "share_group_types_spec:show": "rule:admin_api",
-    "share_group_types_spec:index": "rule:admin_api",
-    "share_group_types_spec:delete": "rule:admin_api",
-
-    "message:delete": "rule:default",
-    "message:get": "rule:default",
-    "message:get_all": "rule:default"
-}
diff --git a/manila/tests/policy.yaml b/manila/tests/policy.yaml
new file mode 100644
index 0000000000..964deaedd5
--- /dev/null
+++ b/manila/tests/policy.yaml
@@ -0,0 +1,117 @@
+# WARNING: Below rules are either deprecated rules
+# or extra rules in policy file, it is strongly
+# recommended to switch to new rules.
+"context_is_admin": "role:admin"
+"admin_api": "is_admin:True"
+"admin_or_owner": "is_admin:True or project_id:%(project_id)s"
+"default": "rule:admin_or_owner"
+"availability_zone:index": "rule:default"
+"quota_set:update": "rule:admin_api"
+"quota_set:show": "rule:default"
+"quota_set:delete": "rule:admin_api"
+"quota_class_set:show": "rule:default"
+"quota_class_set:update": "rule:admin_api"
+"service:index": "rule:admin_api"
+"service:update": "rule:admin_api"
+"share:create": ""
+"share:list_by_share_server_id": "rule:admin_api"
+"share:get": ""
+"share:get_all": ""
+"share:delete": "rule:default"
+"share:update": "rule:default"
+"share:snapshot_update": ""
+"share:create_snapshot": ""
+"share:delete_snapshot": ""
+"share:get_snapshot": ""
+"share:get_all_snapshots": ""
+"share:extend": ""
+"share:shrink": ""
+"share:manage": "rule:admin_api"
+"share:unmanage": "rule:admin_api"
+"share:force_delete": "rule:admin_api"
+"share:reset_status": "rule:admin_api"
+"share:migration_start": "rule:admin_api"
+"share:migration_complete": "rule:admin_api"
+"share:migration_cancel": "rule:admin_api"
+"share:migration_get_progress": "rule:admin_api"
+"share_export_location:index": "rule:default"
+"share_export_location:show": "rule:default"
+"share_type:index": "rule:default"
+"share_type:show": "rule:default"
+"share_type:default": "rule:default"
+"share_type:create": "rule:default"
+"share_type:delete": "rule:default"
+"share_type:add_project_access": "rule:admin_api"
+"share_type:list_project_access": "rule:admin_api"
+"share_type:remove_project_access": "rule:admin_api"
+"share_types_extra_spec:create": "rule:default"
+"share_types_extra_spec:update": "rule:default"
+"share_types_extra_spec:show": "rule:default"
+"share_types_extra_spec:index": "rule:default"
+"share_types_extra_spec:delete": "rule:default"
+"share_instance:index": "rule:admin_api"
+"share_instance:show": "rule:admin_api"
+"share_instance:force_delete": "rule:admin_api"
+"share_instance:reset_status": "rule:admin_api"
+"share_snapshot:force_delete": "rule:admin_api"
+"share_snapshot:reset_status": "rule:admin_api"
+"share_snapshot:manage_snapshot": "rule:admin_api"
+"share_snapshot:unmanage_snapshot": "rule:admin_api"
+"share_network:create": ""
+"share_network:index": ""
+"share_network:detail": ""
+"share_network:show": ""
+"share_network:update": ""
+"share_network:delete": ""
+"share_network:get_all_share_networks": "rule:admin_api"
+"share_server:index": "rule:admin_api"
+"share_server:show": "rule:admin_api"
+"share_server:details": "rule:admin_api"
+"share_server:delete": "rule:admin_api"
+"share:get_share_metadata": ""
+"share:delete_share_metadata": ""
+"share:update_share_metadata": ""
+"share_extension:availability_zones": ""
+"security_service:index": ""
+"security_service:get_all_security_services": "rule:admin_api"
+"scheduler_stats:pools:index": "rule:admin_api"
+"scheduler_stats:pools:detail": "rule:admin_api"
+"share_group:create": "rule:default"
+"share_group:delete": "rule:default"
+"share_group:update": "rule:default"
+"share_group:get": "rule:default"
+"share_group:get_all": "rule:default"
+"share_group:force_delete": "rule:admin_api"
+"share_group:reset_status": "rule:admin_api"
+"share_group_snapshot:create": "rule:default"
+"share_group_snapshot:delete": "rule:default"
+"share_group_snapshot:update": "rule:default"
+"share_group_snapshot:get": "rule:default"
+"share_group_snapshot:get_all": "rule:default"
+"share_group_snapshot:force_delete": "rule:admin_api"
+"share_group_snapshot:reset_status": "rule:admin_api"
+"share_replica:get_all": "rule:default"
+"share_replica:show": "rule:default"
+"share_replica:create": "rule:default"
+"share_replica:delete": "rule:default"
+"share_replica:promote": "rule:default"
+"share_replica:resync": "rule:admin_api"
+"share_replica:reset_status": "rule:admin_api"
+"share_replica:force_delete": "rule:admin_api"
+"share_replica:reset_replica_state": "rule:admin_api"
+"share_group_type:index": "rule:default"
+"share_group_type:show": "rule:default"
+"share_group_type:default": "rule:default"
+"share_group_type:create": "rule:admin_api"
+"share_group_type:delete": "rule:admin_api"
+"share_group_type:add_project_access": "rule:admin_api"
+"share_group_type:list_project_access": "rule:admin_api"
+"share_group_type:remove_project_access": "rule:admin_api"
+"share_group_types_spec:create": "rule:admin_api"
+"share_group_types_spec:update": "rule:admin_api"
+"share_group_types_spec:show": "rule:admin_api"
+"share_group_types_spec:index": "rule:admin_api"
+"share_group_types_spec:delete": "rule:admin_api"
+"message:delete": "rule:default"
+"message:get": "rule:default"
+"message:get_all": "rule:default"
diff --git a/releasenotes/notes/deprecate-json-formatted-policy-file-fd0345f215e6ccd5.yaml b/releasenotes/notes/deprecate-json-formatted-policy-file-fd0345f215e6ccd5.yaml
new file mode 100644
index 0000000000..c9c5300045
--- /dev/null
+++ b/releasenotes/notes/deprecate-json-formatted-policy-file-fd0345f215e6ccd5.yaml
@@ -0,0 +1,20 @@
+---
+upgrade:
+  - |
+    The default value of ``[oslo_policy] policy_file`` config option has
+    been changed from ``policy.json`` to ``policy.yaml``.
+    Operators who are utilizing customized or previously generated
+    static policy JSON files (which are not needed by default), should
+    generate new policy files or convert them in YAML format. Use the
+    `oslopolicy-convert-json-to-yaml
+    <https://docs.openstack.org/oslo.policy/latest/cli/oslopolicy-convert-json-to-yaml.html>`_
+    tool to convert a JSON to YAML formatted policy file in
+    backward compatible way.
+deprecations:
+  - |
+    Use of JSON policy files was deprecated by the ``oslo.policy`` library
+    during the Victoria development cycle. As a result, this deprecation is
+    being noted in the Wallaby cycle with an anticipated future removal of support
+    by ``oslo.policy``. As such operators will need to convert to YAML policy
+    files. Please see the upgrade notes for details on migration of any
+    custom policy files.
diff --git a/requirements.txt b/requirements.txt
index c70afc3abc..8ca9379303 100644
--- a/requirements.txt
+++ b/requirements.txt
@@ -17,12 +17,12 @@ oslo.i18n>=5.0.1 # Apache-2.0
 oslo.log>=4.4.0 # Apache-2.0
 oslo.messaging>=12.5.0 # Apache-2.0
 oslo.middleware>=4.1.1 # Apache-2.0
-oslo.policy>=3.5.0 # Apache-2.0
+oslo.policy>=3.6.0 # Apache-2.0
 oslo.reports>=2.2.0 # Apache-2.0
 oslo.rootwrap>=6.2.0 # Apache-2.0
 oslo.serialization>=4.0.1 # Apache-2.0
 oslo.service>=2.4.0 # Apache-2.0
-oslo.upgradecheck>=1.1.1 # Apache-2.0
+oslo.upgradecheck>=1.3.0 # Apache-2.0
 oslo.utils>=4.7.0 # Apache-2.0
 oslo.concurrency>=4.3.0 # Apache-2.0
 paramiko>=2.7.2 # LGPLv2.1+
diff --git a/setup.cfg b/setup.cfg
index d5a39cdcec..7e3146effb 100644
--- a/setup.cfg
+++ b/setup.cfg
@@ -72,7 +72,7 @@ oslo_messaging.notify.drivers =
 oslo.config.opts =
     manila = manila.opts:list_opts
 oslo.config.opts.defaults =
-    manila = manila.common.config:set_middleware_defaults
+    manila = manila.common.config:set_lib_defaults
 oslo.policy.enforcer =
     manila = manila.policy:get_enforcer
 oslo.policy.policies =