diff --git a/go.mod b/go.mod
index 05ae49f275..be50ba2b44 100644
--- a/go.mod
+++ b/go.mod
@@ -13,7 +13,7 @@ require (
 	github.com/mikefarah/yq/v3 v3.0.0-20201202084205-8846255d1c37
 	github.com/onsi/ginkgo/v2 v2.1.3
 	github.com/openshift/api v0.0.0-20220525145417-ee5b62754c68
-	github.com/operator-framework/api v0.16.0
+	github.com/operator-framework/api v0.17.1
 	github.com/operator-framework/operator-lifecycle-manager v0.0.0-00010101000000-000000000000
 	github.com/operator-framework/operator-registry v1.17.5
 	github.com/sirupsen/logrus v1.8.1
diff --git a/staging/operator-lifecycle-manager/deploy/chart/crds/0000_50_olm_00-catalogsources.crd.yaml b/staging/operator-lifecycle-manager/deploy/chart/crds/0000_50_olm_00-catalogsources.crd.yaml
index 318393f814..5da15cc938 100644
--- a/staging/operator-lifecycle-manager/deploy/chart/crds/0000_50_olm_00-catalogsources.crd.yaml
+++ b/staging/operator-lifecycle-manager/deploy/chart/crds/0000_50_olm_00-catalogsources.crd.yaml
@@ -79,6 +79,13 @@ spec:
                     priorityClassName:
                       description: If specified, indicates the pod's priority. If not specified, the pod priority will be default or zero if there is no default.
                       type: string
+                    securityContextConfig:
+                      description: 'SecurityContextConfig can be one of `legacy` or `restricted`. The CatalogSource''s pod is either injected with the right pod.spec.securityContext and pod.spec.container[*].securityContext values to allow the pod to run in Pod Security Admission(PSA) controller''s `restricted` mode, or doesn''t set these values at all, in which case the pod can only be run in PSA `baseline` or `privileged` namespaces. By default, SecurityContextConfig is set to `restricted`. If the value is unspecified, the default value of `restricted` is used.  Specifying any other value will result in a validation error. When using older catalog images, which could not be run in `restricted` mode, the SecurityContextConfig should be set to `legacy`. More information about PSA can be found here: https://kubernetes.io/docs/concepts/security/pod-security-admission/'''
+                      type: string
+                      default: restricted
+                      enum:
+                        - legacy
+                        - restricted
                     tolerations:
                       description: Tolerations are the catalog source's pod's tolerations.
                       type: array
diff --git a/staging/operator-lifecycle-manager/go.mod b/staging/operator-lifecycle-manager/go.mod
index 87fc82abb2..b1802e4368 100644
--- a/staging/operator-lifecycle-manager/go.mod
+++ b/staging/operator-lifecycle-manager/go.mod
@@ -24,7 +24,7 @@ require (
 	github.com/onsi/gomega v1.18.1
 	github.com/openshift/api v0.0.0-20220525145417-ee5b62754c68
 	github.com/openshift/client-go v0.0.0-20220525160904-9e1acff93e4a
-	github.com/operator-framework/api v0.16.0
+	github.com/operator-framework/api v0.17.1
 	github.com/operator-framework/operator-registry v1.17.5
 	github.com/otiai10/copy v1.2.0
 	github.com/pkg/errors v0.9.1
diff --git a/staging/operator-lifecycle-manager/go.sum b/staging/operator-lifecycle-manager/go.sum
index fb2a952e86..9a15c91e15 100644
--- a/staging/operator-lifecycle-manager/go.sum
+++ b/staging/operator-lifecycle-manager/go.sum
@@ -1080,8 +1080,8 @@ github.com/openshift/cluster-policy-controller v0.0.0-20220825134653-523e4104074
 github.com/opentracing/opentracing-go v1.1.0/go.mod h1:UkNAQd3GIcIGf0SeVgPpRdFStlNbqXla1AfSYxPUl2o=
 github.com/openzipkin/zipkin-go v0.1.6/go.mod h1:QgAqvLzwWbR/WpD4A3cGpPtJrZXNIiJc5AZX7/PBEpw=
 github.com/operator-framework/api v0.7.1/go.mod h1:L7IvLd/ckxJEJg/t4oTTlnHKAJIP/p51AvEslW3wYdY=
-github.com/operator-framework/api v0.16.0 h1:swUOhVv7QDszxBTwYM8QAtyeqI4EQHNVAiKMS+xjakY=
-github.com/operator-framework/api v0.16.0/go.mod h1:kk8xJahHJR3bKqrA+A+1VIrhOTmyV76k+ARv+iV+u1Q=
+github.com/operator-framework/api v0.17.1 h1:J/6+Xj4IEV8C7hcirqUFwOiZAU3PbnJhWvB0/bB51c4=
+github.com/operator-framework/api v0.17.1/go.mod h1:kk8xJahHJR3bKqrA+A+1VIrhOTmyV76k+ARv+iV+u1Q=
 github.com/operator-framework/operator-registry v1.17.5 h1:LR8m1rFz5Gcyje8WK6iYt+gIhtzqo52zMRALdmTYHT0=
 github.com/operator-framework/operator-registry v1.17.5/go.mod h1:sRQIgDMZZdUcmHltzyCnM6RUoDF+WS8Arj1BQIARDS8=
 github.com/otiai10/copy v1.2.0 h1:HvG945u96iNadPoG2/Ja2+AUJeW5YuFQMixq9yirC+k=
diff --git a/staging/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go b/staging/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go
index 45bf8dcba4..eada0099fe 100644
--- a/staging/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go
+++ b/staging/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go
@@ -182,11 +182,7 @@ func Pod(source *operatorsv1alpha1.CatalogSource, name string, image string, saN
 						},
 					},
 					SecurityContext: &corev1.SecurityContext{
-						ReadOnlyRootFilesystem:   pointer.Bool(false),
-						AllowPrivilegeEscalation: pointer.Bool(false),
-						Capabilities: &corev1.Capabilities{
-							Drop: []corev1.Capability{"ALL"},
-						},
+						ReadOnlyRootFilesystem: pointer.Bool(false),
 					},
 					ImagePullPolicy:          pullPolicy,
 					TerminationMessagePolicy: corev1.TerminationMessageFallbackToLogsOnError,
@@ -195,19 +191,18 @@ func Pod(source *operatorsv1alpha1.CatalogSource, name string, image string, saN
 			NodeSelector: map[string]string{
 				"kubernetes.io/os": "linux",
 			},
-			SecurityContext: &corev1.PodSecurityContext{
-				SeccompProfile: &corev1.SeccompProfile{
-					Type: corev1.SeccompProfileTypeRuntimeDefault,
-				},
-			},
 			ServiceAccountName: saName,
 		},
 	}
 
-	if runAsUser > 0 {
-		pod.Spec.SecurityContext.RunAsUser = &runAsUser
-		pod.Spec.SecurityContext.RunAsNonRoot = pointer.Bool(true)
+	if source.Spec.GrpcPodConfig != nil {
+		if source.Spec.GrpcPodConfig.SecurityContextConfig == operatorsv1alpha1.Restricted {
+			addSecurityContext(pod, runAsUser)
+		}
+	} else {
+		addSecurityContext(pod, runAsUser)
 	}
+
 	// Override scheduling options if specified
 	if source.Spec.GrpcPodConfig != nil {
 		grpcPodConfig := source.Spec.GrpcPodConfig
@@ -256,3 +251,19 @@ func hashPodSpec(spec corev1.PodSpec) string {
 	hashutil.DeepHashObject(hasher, &spec)
 	return rand.SafeEncodeString(fmt.Sprint(hasher.Sum32()))
 }
+
+func addSecurityContext(pod *corev1.Pod, runAsUser int64) {
+	pod.Spec.Containers[0].SecurityContext.AllowPrivilegeEscalation = pointer.Bool(false)
+	pod.Spec.Containers[0].SecurityContext.Capabilities = &corev1.Capabilities{
+		Drop: []corev1.Capability{"ALL"},
+	}
+	pod.Spec.SecurityContext = &corev1.PodSecurityContext{
+		SeccompProfile: &corev1.SeccompProfile{
+			Type: corev1.SeccompProfileTypeRuntimeDefault,
+		},
+	}
+	if runAsUser > 0 {
+		pod.Spec.SecurityContext.RunAsUser = &runAsUser
+		pod.Spec.SecurityContext.RunAsNonRoot = pointer.Bool(true)
+	}
+}
diff --git a/staging/operator-lifecycle-manager/test/e2e/catalog_e2e_test.go b/staging/operator-lifecycle-manager/test/e2e/catalog_e2e_test.go
index e02436d375..007ccc75ea 100644
--- a/staging/operator-lifecycle-manager/test/e2e/catalog_e2e_test.go
+++ b/staging/operator-lifecycle-manager/test/e2e/catalog_e2e_test.go
@@ -53,7 +53,11 @@ var _ = Describe("Starting CatalogSource e2e tests", func() {
 	)
 
 	BeforeEach(func() {
-		namespaceName := genName("catsrc-e2e-")
+		// In OPC, PSA labels for any namespace created that is not prefixed with "openshift-" is overriden to enforce
+		// PSA restricted. This test namespace needs to prefixed with openshift- so that baseline/privileged enforcement
+		// for the PSA specific tests are not overridden,
+		// Change it only after https://github.com/operator-framework/operator-lifecycle-manager/issues/2859 is closed.
+		namespaceName := genName("openshift-catsrc-e2e-")
 		og := operatorsv1.OperatorGroup{
 			ObjectMeta: metav1.ObjectMeta{
 				Name:      fmt.Sprintf("%s-operatorgroup", namespaceName),
@@ -1396,7 +1400,147 @@ var _ = Describe("Starting CatalogSource e2e tests", func() {
 			})
 		})
 	})
+	When("The namespace is labled as Pod Security Admission policy enforce:restricted", func() {
+		BeforeEach(func() {
+			var err error
+			testNS := &corev1.Namespace{}
+			Eventually(func() error {
+				testNS, err = c.KubernetesInterface().CoreV1().Namespaces().Get(context.TODO(), ns.GetName(), metav1.GetOptions{})
+				if err != nil {
+					return err
+				}
+				return nil
+			}).Should(BeNil())
+
+			testNS.ObjectMeta.Labels = map[string]string{
+				"pod-security.kubernetes.io/enforce":         "restricted",
+				"pod-security.kubernetes.io/enforce-version": "latest",
+			}
+
+			Eventually(func() error {
+				_, err := c.KubernetesInterface().CoreV1().Namespaces().Update(context.TODO(), testNS, metav1.UpdateOptions{})
+				if err != nil {
+					return err
+				}
+				return nil
+			}).Should(BeNil())
+		})
+		When("A CatalogSource built with opm v1.21.0 (<v1.23.2)is created without spec.GrpcPodConfig.SecurityContextConfig set to legacy", func() {
+			var sourceName string
+			BeforeEach(func() {
+				sourceName = genName("catalog-")
+				source := &v1alpha1.CatalogSource{
+					TypeMeta: metav1.TypeMeta{
+						Kind:       v1alpha1.CatalogSourceKind,
+						APIVersion: v1alpha1.CatalogSourceCRDAPIVersion,
+					},
+					ObjectMeta: metav1.ObjectMeta{
+						Name:      sourceName,
+						Namespace: ns.GetName(),
+						Labels:    map[string]string{"olm.catalogSource": sourceName},
+					},
+					Spec: v1alpha1.CatalogSourceSpec{
+						SourceType: v1alpha1.SourceTypeGrpc,
+						Image:      "quay.io/olmtest/old-opm-catsrc:v1.21.0",
+					},
+				}
+
+				Eventually(func() error {
+					_, err := crc.OperatorsV1alpha1().CatalogSources(source.GetNamespace()).Create(context.Background(), source, metav1.CreateOptions{})
+					return err
+				}).Should(Succeed())
+			})
+			It("The registry pod fails to become come up because of lack of permission", func() {
+				Eventually(func() (bool, error) {
+					podList, err := c.KubernetesInterface().CoreV1().Pods(ns.GetName()).List(context.TODO(), metav1.ListOptions{})
+					if err != nil {
+						return false, err
+					}
+					for _, pod := range podList.Items {
+						if pod.ObjectMeta.OwnerReferences != nil && pod.ObjectMeta.OwnerReferences[0].Name == sourceName {
+							if pod.Status.ContainerStatuses != nil && pod.Status.ContainerStatuses[0].State.Terminated != nil {
+								return true, nil
+							}
+						}
+					}
+					return false, nil
+				}).Should(BeTrue())
+			})
+		})
+	})
+	When("The namespace is labled as Pod Security Admission policy enforce:baseline", func() {
+		BeforeEach(func() {
+			var err error
+			testNS := &corev1.Namespace{}
+			Eventually(func() error {
+				testNS, err = c.KubernetesInterface().CoreV1().Namespaces().Get(context.TODO(), ns.GetName(), metav1.GetOptions{})
+				if err != nil {
+					return err
+				}
+				return nil
+			}).Should(BeNil())
+
+			testNS.ObjectMeta.Labels = map[string]string{
+				"pod-security.kubernetes.io/enforce":         "baseline",
+				"pod-security.kubernetes.io/enforce-version": "latest",
+			}
 
+			Eventually(func() error {
+				_, err := c.KubernetesInterface().CoreV1().Namespaces().Update(context.TODO(), testNS, metav1.UpdateOptions{})
+				if err != nil {
+					return err
+				}
+				return nil
+			}).Should(BeNil())
+		})
+		When("A CatalogSource built with opm v1.21.0 (<v1.23.2)is created with spec.GrpcPodConfig.SecurityContextConfig set to legacy", func() {
+			var sourceName string
+			BeforeEach(func() {
+				sourceName = genName("catalog-")
+				source := &v1alpha1.CatalogSource{
+					TypeMeta: metav1.TypeMeta{
+						Kind:       v1alpha1.CatalogSourceKind,
+						APIVersion: v1alpha1.CatalogSourceCRDAPIVersion,
+					},
+					ObjectMeta: metav1.ObjectMeta{
+						Name:      sourceName,
+						Namespace: ns.GetName(),
+						Labels:    map[string]string{"olm.catalogSource": sourceName},
+					},
+					Spec: v1alpha1.CatalogSourceSpec{
+						GrpcPodConfig: &v1alpha1.GrpcPodConfig{
+							SecurityContextConfig: operatorsv1alpha1.Legacy,
+						},
+						SourceType: v1alpha1.SourceTypeGrpc,
+						Image:      "quay.io/olmtest/old-opm-catsrc:v1.21.0",
+					},
+				}
+
+				Eventually(func() error {
+					_, err := crc.OperatorsV1alpha1().CatalogSources(source.GetNamespace()).Create(context.Background(), source, metav1.CreateOptions{})
+					return err
+				}).Should(Succeed())
+			})
+			It("The registry pod comes up successfully", func() {
+				Eventually(func() (bool, error) {
+					podList, err := c.KubernetesInterface().CoreV1().Pods(ns.GetName()).List(context.TODO(), metav1.ListOptions{})
+					if err != nil {
+						return false, err
+					}
+					for _, pod := range podList.Items {
+						if pod.ObjectMeta.OwnerReferences != nil && pod.ObjectMeta.OwnerReferences[0].Name == sourceName {
+							if pod.Status.ContainerStatuses != nil {
+								if *pod.Status.ContainerStatuses[0].Started == true {
+									return true, nil
+								}
+							}
+						}
+					}
+					return false, nil
+				}).Should(BeTrue())
+			})
+		})
+	})
 })
 
 func getOperatorDeployment(c operatorclient.ClientInterface, namespace string, operatorLabels labels.Set) (*appsv1.Deployment, error) {
diff --git a/vendor/github.com/operator-framework/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go b/vendor/github.com/operator-framework/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go
index 45bf8dcba4..eada0099fe 100644
--- a/vendor/github.com/operator-framework/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go
+++ b/vendor/github.com/operator-framework/operator-lifecycle-manager/pkg/controller/registry/reconciler/reconciler.go
@@ -182,11 +182,7 @@ func Pod(source *operatorsv1alpha1.CatalogSource, name string, image string, saN
 						},
 					},
 					SecurityContext: &corev1.SecurityContext{
-						ReadOnlyRootFilesystem:   pointer.Bool(false),
-						AllowPrivilegeEscalation: pointer.Bool(false),
-						Capabilities: &corev1.Capabilities{
-							Drop: []corev1.Capability{"ALL"},
-						},
+						ReadOnlyRootFilesystem: pointer.Bool(false),
 					},
 					ImagePullPolicy:          pullPolicy,
 					TerminationMessagePolicy: corev1.TerminationMessageFallbackToLogsOnError,
@@ -195,19 +191,18 @@ func Pod(source *operatorsv1alpha1.CatalogSource, name string, image string, saN
 			NodeSelector: map[string]string{
 				"kubernetes.io/os": "linux",
 			},
-			SecurityContext: &corev1.PodSecurityContext{
-				SeccompProfile: &corev1.SeccompProfile{
-					Type: corev1.SeccompProfileTypeRuntimeDefault,
-				},
-			},
 			ServiceAccountName: saName,
 		},
 	}
 
-	if runAsUser > 0 {
-		pod.Spec.SecurityContext.RunAsUser = &runAsUser
-		pod.Spec.SecurityContext.RunAsNonRoot = pointer.Bool(true)
+	if source.Spec.GrpcPodConfig != nil {
+		if source.Spec.GrpcPodConfig.SecurityContextConfig == operatorsv1alpha1.Restricted {
+			addSecurityContext(pod, runAsUser)
+		}
+	} else {
+		addSecurityContext(pod, runAsUser)
 	}
+
 	// Override scheduling options if specified
 	if source.Spec.GrpcPodConfig != nil {
 		grpcPodConfig := source.Spec.GrpcPodConfig
@@ -256,3 +251,19 @@ func hashPodSpec(spec corev1.PodSpec) string {
 	hashutil.DeepHashObject(hasher, &spec)
 	return rand.SafeEncodeString(fmt.Sprint(hasher.Sum32()))
 }
+
+func addSecurityContext(pod *corev1.Pod, runAsUser int64) {
+	pod.Spec.Containers[0].SecurityContext.AllowPrivilegeEscalation = pointer.Bool(false)
+	pod.Spec.Containers[0].SecurityContext.Capabilities = &corev1.Capabilities{
+		Drop: []corev1.Capability{"ALL"},
+	}
+	pod.Spec.SecurityContext = &corev1.PodSecurityContext{
+		SeccompProfile: &corev1.SeccompProfile{
+			Type: corev1.SeccompProfileTypeRuntimeDefault,
+		},
+	}
+	if runAsUser > 0 {
+		pod.Spec.SecurityContext.RunAsUser = &runAsUser
+		pod.Spec.SecurityContext.RunAsNonRoot = pointer.Bool(true)
+	}
+}
diff --git a/vendor/modules.txt b/vendor/modules.txt
index c8fa7f6cb3..c5a67dc4ae 100644
--- a/vendor/modules.txt
+++ b/vendor/modules.txt
@@ -636,7 +636,7 @@ github.com/openshift/client-go/config/listers/config/v1
 # github.com/openshift/cluster-policy-controller v0.0.0-20220825134653-523e4104074f
 ## explicit; go 1.18
 github.com/openshift/cluster-policy-controller/pkg/psalabelsyncer/nsexemptions
-# github.com/operator-framework/api v0.16.0 => ./staging/api
+# github.com/operator-framework/api v0.17.1 => ./staging/api
 ## explicit; go 1.18
 github.com/operator-framework/api/crds
 github.com/operator-framework/api/pkg/constraints