How do I resolve the value of a databinding inside a MarkupExtension?

The toxvaerd’s answer is not universal. It breaks if the original binding already had a converter. Or when writing a converter is not possible.

There’s a better solution. We can declare two constructors. The second one accepting BindingBase will be called by XAML when a binding is used. To resolve the value of the binding, we can declare a private attached property. For this to work we need to know the target element of the markup extension.

There’s a catch: when the markup extension is used inside a template, there is no target element (obviously). In this case you are supposed to use return this in ProvideValue() – this way the extension will be called again when the template is applied.

public class TranslateExtension : MarkupExtension
{
    private readonly BindingBase _binding;

    public TranslateExtension(BindingBase binding)
    {
        _binding = binding;
    }

    public TranslateExtension(string key)
    {
        Key = key;
    }

    [ConstructorArgument("key")]
    public string Key { get; set; }

    public override object ProvideValue(IServiceProvider serviceProvider)
    {
        if (_binding != null)
        {
            var pvt = (IProvideValueTarget)serviceProvider.GetService(typeof(IProvideValueTarget));
            var target = pvt.TargetObject as DependencyObject;

            // if we are inside a template, WPF will call us again when it is applied
            if (target == null)
                return this; 

            BindingOperations.SetBinding(target, ValueProperty, _binding);
            Key = (string)target.GetValue(ValueProperty);
            BindingOperations.ClearBinding(target, ValueProperty);
        }

        // now do the translation using Key
        return ...;
    }

    private static readonly DependencyProperty ValueProperty = 
        DependencyProperty.RegisterAttached("Value", typeof(string), typeof(TranslateExtension));
}