diff --git a/README.md b/README.md
index fa4074755..bcdf0d841 100644
--- a/README.md
+++ b/README.md
@@ -47,9 +47,11 @@ The Model Context Protocol allows applications to provide context for LLMs in a
 ## Installation
 
 ```bash
-npm install @modelcontextprotocol/sdk
+npm install @modelcontextprotocol/sdk zod
 ```
 
+This SDK has a **required peer dependency** on `zod` for schema validation. The SDK internally imports from `zod/v4`, but maintains backwards compatibility with projects using Zod v3.25 or later. You can use either API in your code by importing from `zod/v3` or `zod/v4`:
+
 ## Quick Start
 
 Let's create a simple MCP server that exposes a calculator tool and some data. Save the following as `server.ts`:
@@ -130,7 +132,7 @@ app.listen(port, () => {
 });
 ```
 
-Install the deps with `npm install @modelcontextprotocol/sdk express zod@3`, and run with `npx -y tsx server.ts`.
+Install the deps with `npm install @modelcontextprotocol/sdk express zod`, and run with `npx -y tsx server.ts`.
 
 You can connect to it using any MCP client that supports streamable http, such as: