diff --git a/tests/integration/test_daytona_terminal.py b/tests/integration/test_daytona_terminal.py
new file mode 100644
index 000000000..b8b72fb26
--- /dev/null
+++ b/tests/integration/test_daytona_terminal.py
@@ -0,0 +1,123 @@
+"""Integration tests for the Daytona terminal backend.
+
+Requires DAYTONA_API_KEY to be set. Run with:
+    TERMINAL_ENV=daytona pytest tests/integration/test_daytona_terminal.py -v
+"""
+
+import json
+import os
+import sys
+from pathlib import Path
+
+import pytest
+
+pytestmark = pytest.mark.integration
+
+# Skip entire module if no API key
+if not os.getenv("DAYTONA_API_KEY"):
+    pytest.skip("DAYTONA_API_KEY not set", allow_module_level=True)
+
+# Import terminal_tool via importlib to avoid tools/__init__.py side effects
+import importlib.util
+
+parent_dir = Path(__file__).parent.parent.parent
+sys.path.insert(0, str(parent_dir))
+
+spec = importlib.util.spec_from_file_location(
+    "terminal_tool", parent_dir / "tools" / "terminal_tool.py"
+)
+terminal_module = importlib.util.module_from_spec(spec)
+spec.loader.exec_module(terminal_module)
+
+terminal_tool = terminal_module.terminal_tool
+cleanup_vm = terminal_module.cleanup_vm
+
+
+@pytest.fixture(autouse=True)
+def _force_daytona(monkeypatch):
+    monkeypatch.setenv("TERMINAL_ENV", "daytona")
+    monkeypatch.setenv("TERMINAL_CONTAINER_DISK", "10240")
+    monkeypatch.setenv("TERMINAL_CONTAINER_PERSISTENT", "false")
+
+
+@pytest.fixture()
+def task_id(request):
+    """Provide a unique task_id and clean up the sandbox after the test."""
+    tid = f"daytona_test_{request.node.name}"
+    yield tid
+    cleanup_vm(tid)
+
+
+def _run(command, task_id, **kwargs):
+    result = terminal_tool(command, task_id=task_id, **kwargs)
+    return json.loads(result)
+
+
+class TestDaytonaBasic:
+    def test_echo(self, task_id):
+        r = _run("echo 'Hello from Daytona!'", task_id)
+        assert r["exit_code"] == 0
+        assert "Hello from Daytona!" in r["output"]
+
+    def test_python_version(self, task_id):
+        r = _run("python3 --version", task_id)
+        assert r["exit_code"] == 0
+        assert "Python" in r["output"]
+
+    def test_nonzero_exit(self, task_id):
+        r = _run("exit 42", task_id)
+        assert r["exit_code"] == 42
+
+    def test_os_info(self, task_id):
+        r = _run("uname -a", task_id)
+        assert r["exit_code"] == 0
+        assert "Linux" in r["output"]
+
+
+class TestDaytonaFilesystem:
+    def test_write_and_read_file(self, task_id):
+        _run("echo 'test content' > /tmp/daytona_test.txt", task_id)
+        r = _run("cat /tmp/daytona_test.txt", task_id)
+        assert r["exit_code"] == 0
+        assert "test content" in r["output"]
+
+    def test_persistence_within_session(self, task_id):
+        _run("pip install cowsay 2>/dev/null", task_id, timeout=120)
+        r = _run('python3 -c "import cowsay; print(cowsay.__file__)"', task_id)
+        assert r["exit_code"] == 0
+        assert "cowsay" in r["output"]
+
+
+class TestDaytonaPersistence:
+    def test_filesystem_survives_stop_and_resume(self):
+        """Write a file, stop the sandbox, resume it, assert the file persists."""
+        task = "daytona_test_persist"
+        try:
+            # Enable persistence for this test
+            os.environ["TERMINAL_CONTAINER_PERSISTENT"] = "true"
+
+            # Write a marker file and stop the sandbox
+            _run("echo 'survive' > /tmp/persist_test.txt", task)
+            cleanup_vm(task)  # stops (not deletes) because persistent=true
+
+            # Resume with the same task_id — file should still exist
+            r = _run("cat /tmp/persist_test.txt", task)
+            assert r["exit_code"] == 0
+            assert "survive" in r["output"]
+        finally:
+            # Force-delete so the sandbox doesn't leak
+            os.environ["TERMINAL_CONTAINER_PERSISTENT"] = "false"
+            cleanup_vm(task)
+
+
+class TestDaytonaIsolation:
+    def test_different_tasks_isolated(self):
+        task_a = "daytona_test_iso_a"
+        task_b = "daytona_test_iso_b"
+        try:
+            _run("echo 'secret' > /tmp/isolated.txt", task_a)
+            r = _run("cat /tmp/isolated.txt 2>&1 || echo NOT_FOUND", task_b)
+            assert "secret" not in r["output"] or "NOT_FOUND" in r["output"]
+        finally:
+            cleanup_vm(task_a)
+            cleanup_vm(task_b)
diff --git a/tests/tools/test_daytona_environment.py b/tests/tools/test_daytona_environment.py
new file mode 100644
index 000000000..a7fe71e26
--- /dev/null
+++ b/tests/tools/test_daytona_environment.py
@@ -0,0 +1,340 @@
+"""Unit tests for the Daytona cloud sandbox environment backend."""
+
+import threading
+from types import SimpleNamespace
+from unittest.mock import MagicMock, patch, PropertyMock
+
+import pytest
+
+
+# ---------------------------------------------------------------------------
+# Helpers to build mock Daytona SDK objects
+# ---------------------------------------------------------------------------
+
+def _make_exec_response(result="", exit_code=0):
+    return SimpleNamespace(result=result, exit_code=exit_code)
+
+
+def _make_sandbox(sandbox_id="sb-123", state="started"):
+    sb = MagicMock()
+    sb.id = sandbox_id
+    sb.state = state
+    sb.process.exec.return_value = _make_exec_response()
+    return sb
+
+
+def _patch_daytona_imports(monkeypatch):
+    """Patch the daytona SDK so DaytonaEnvironment can be imported without it."""
+    import types as _types
+
+    daytona_mod = _types.ModuleType("daytona")
+    daytona_mod.Daytona = MagicMock
+    daytona_mod.CreateSandboxFromImageParams = MagicMock
+    daytona_mod.DaytonaError = type("DaytonaError", (Exception,), {})
+    daytona_mod.Resources = MagicMock(name="Resources")
+
+    monkeypatch.setitem(__import__("sys").modules, "daytona", daytona_mod)
+    return daytona_mod
+
+
+# ---------------------------------------------------------------------------
+# Fixtures
+# ---------------------------------------------------------------------------
+
+@pytest.fixture()
+def daytona_sdk(monkeypatch):
+    """Provide a mock daytona SDK module and return it for assertions."""
+    return _patch_daytona_imports(monkeypatch)
+
+
+@pytest.fixture()
+def make_env(daytona_sdk, monkeypatch):
+    """Factory that creates a DaytonaEnvironment with a mocked SDK."""
+    # Prevent is_interrupted from interfering
+    monkeypatch.setattr("tools.interrupt.is_interrupted", lambda: False)
+
+    def _factory(
+        sandbox=None,
+        find_one_side_effect=None,
+        home_dir="/root",
+        persistent=True,
+        **kwargs,
+    ):
+        sandbox = sandbox or _make_sandbox()
+        # Mock the $HOME detection
+        sandbox.process.exec.return_value = _make_exec_response(result=home_dir)
+
+        mock_client = MagicMock()
+        mock_client.create.return_value = sandbox
+
+        if find_one_side_effect is not None:
+            mock_client.find_one.side_effect = find_one_side_effect
+        else:
+            # Default: no existing sandbox found
+            mock_client.find_one.side_effect = daytona_sdk.DaytonaError("not found")
+
+        daytona_sdk.Daytona = MagicMock(return_value=mock_client)
+
+        from tools.environments.daytona import DaytonaEnvironment
+
+        kwargs.setdefault("disk", 10240)
+        env = DaytonaEnvironment(
+            image="test-image:latest",
+            persistent_filesystem=persistent,
+            **kwargs,
+        )
+        env._mock_client = mock_client  # expose for assertions
+        return env
+
+    return _factory
+
+
+# ---------------------------------------------------------------------------
+# Constructor / cwd resolution
+# ---------------------------------------------------------------------------
+
+class TestCwdResolution:
+    def test_default_cwd_resolves_home(self, make_env):
+        env = make_env(home_dir="/home/testuser")
+        assert env.cwd == "/home/testuser"
+
+    def test_tilde_cwd_resolves_home(self, make_env):
+        env = make_env(cwd="~", home_dir="/home/testuser")
+        assert env.cwd == "/home/testuser"
+
+    def test_explicit_cwd_not_overridden(self, make_env):
+        env = make_env(cwd="/workspace", home_dir="/root")
+        assert env.cwd == "/workspace"
+
+    def test_home_detection_failure_falls_back_to_root(self, make_env):
+        sb = _make_sandbox()
+        sb.process.exec.side_effect = RuntimeError("exec failed")
+        env = make_env(sandbox=sb)
+        assert env.cwd == "/root"
+
+    def test_empty_home_falls_back_to_root(self, make_env):
+        env = make_env(home_dir="")
+        assert env.cwd == "/root"
+
+
+# ---------------------------------------------------------------------------
+# Sandbox persistence / resume
+# ---------------------------------------------------------------------------
+
+class TestPersistence:
+    def test_persistent_resumes_existing_sandbox(self, make_env):
+        existing = _make_sandbox(sandbox_id="sb-existing")
+        existing.process.exec.return_value = _make_exec_response(result="/root")
+        env = make_env(find_one_side_effect=lambda **kw: existing, persistent=True)
+        existing.start.assert_called_once()
+        # Should NOT have called create since find_one succeeded
+        env._mock_client.create.assert_not_called()
+
+    def test_persistent_creates_new_when_none_found(self, make_env, daytona_sdk):
+        env = make_env(
+            find_one_side_effect=daytona_sdk.DaytonaError("not found"),
+            persistent=True,
+        )
+        env._mock_client.create.assert_called_once()
+
+    def test_non_persistent_skips_find_one(self, make_env):
+        env = make_env(persistent=False)
+        env._mock_client.find_one.assert_not_called()
+        env._mock_client.create.assert_called_once()
+
+
+# ---------------------------------------------------------------------------
+# Cleanup
+# ---------------------------------------------------------------------------
+
+class TestCleanup:
+    def test_persistent_cleanup_stops_sandbox(self, make_env):
+        env = make_env(persistent=True)
+        sb = env._sandbox
+        env.cleanup()
+        sb.stop.assert_called_once()
+
+    def test_non_persistent_cleanup_deletes_sandbox(self, make_env):
+        env = make_env(persistent=False)
+        sb = env._sandbox
+        env.cleanup()
+        env._mock_client.delete.assert_called_once_with(sb)
+
+    def test_cleanup_idempotent(self, make_env):
+        env = make_env(persistent=True)
+        env.cleanup()
+        env.cleanup()  # should not raise
+
+    def test_cleanup_swallows_errors(self, make_env):
+        env = make_env(persistent=True)
+        env._sandbox.stop.side_effect = RuntimeError("stop failed")
+        env.cleanup()  # should not raise
+        assert env._sandbox is None
+
+
+# ---------------------------------------------------------------------------
+# Execute
+# ---------------------------------------------------------------------------
+
+class TestExecute:
+    def test_basic_command(self, make_env):
+        sb = _make_sandbox()
+        # First call: $HOME detection; subsequent calls: actual commands
+        sb.process.exec.side_effect = [
+            _make_exec_response(result="/root"),       # $HOME
+            _make_exec_response(result="hello", exit_code=0),  # actual cmd
+        ]
+        sb.state = "started"
+        env = make_env(sandbox=sb)
+
+        result = env.execute("echo hello")
+        assert result["output"] == "hello"
+        assert result["returncode"] == 0
+
+    def test_nonzero_exit_code(self, make_env):
+        sb = _make_sandbox()
+        sb.process.exec.side_effect = [
+            _make_exec_response(result="/root"),
+            _make_exec_response(result="not found", exit_code=127),
+        ]
+        sb.state = "started"
+        env = make_env(sandbox=sb)
+
+        result = env.execute("bad_cmd")
+        assert result["returncode"] == 127
+
+    def test_stdin_data_wraps_heredoc(self, make_env):
+        sb = _make_sandbox()
+        sb.process.exec.side_effect = [
+            _make_exec_response(result="/root"),
+            _make_exec_response(result="ok", exit_code=0),
+        ]
+        sb.state = "started"
+        env = make_env(sandbox=sb)
+
+        env.execute("python3", stdin_data="print('hi')")
+        # Check that the command passed to exec contains heredoc markers
+        call_args = sb.process.exec.call_args_list[-1]
+        cmd = call_args[0][0]
+        assert "HERMES_EOF_" in cmd
+        assert "print('hi')" in cmd
+
+    def test_custom_cwd_passed_through(self, make_env):
+        sb = _make_sandbox()
+        sb.process.exec.side_effect = [
+            _make_exec_response(result="/root"),
+            _make_exec_response(result="/tmp", exit_code=0),
+        ]
+        sb.state = "started"
+        env = make_env(sandbox=sb)
+
+        env.execute("pwd", cwd="/tmp")
+        call_kwargs = sb.process.exec.call_args_list[-1][1]
+        assert call_kwargs["cwd"] == "/tmp"
+
+    def test_daytona_error_triggers_retry(self, make_env, daytona_sdk):
+        sb = _make_sandbox()
+        sb.state = "started"
+        sb.process.exec.side_effect = [
+            _make_exec_response(result="/root"),  # $HOME
+            daytona_sdk.DaytonaError("transient"),  # first attempt fails
+            _make_exec_response(result="ok", exit_code=0),  # retry succeeds
+        ]
+        env = make_env(sandbox=sb)
+
+        result = env.execute("echo retry")
+        assert result["output"] == "ok"
+        assert result["returncode"] == 0
+
+
+# ---------------------------------------------------------------------------
+# Resource conversion
+# ---------------------------------------------------------------------------
+
+class TestResourceConversion:
+    def _get_resources_kwargs(self, daytona_sdk):
+        return daytona_sdk.Resources.call_args.kwargs
+
+    def test_memory_converted_to_gib(self, make_env, daytona_sdk):
+        env = make_env(memory=5120)
+        assert self._get_resources_kwargs(daytona_sdk)["memory"] == 5
+
+    def test_disk_converted_to_gib(self, make_env, daytona_sdk):
+        env = make_env(disk=10240)
+        assert self._get_resources_kwargs(daytona_sdk)["disk"] == 10
+
+    def test_small_values_clamped_to_1(self, make_env, daytona_sdk):
+        env = make_env(memory=100, disk=100)
+        kw = self._get_resources_kwargs(daytona_sdk)
+        assert kw["memory"] == 1
+        assert kw["disk"] == 1
+
+
+# ---------------------------------------------------------------------------
+# Ensure sandbox ready
+# ---------------------------------------------------------------------------
+
+class TestInterrupt:
+    def test_interrupt_stops_sandbox_and_returns_130(self, make_env, monkeypatch):
+        sb = _make_sandbox()
+        sb.state = "started"
+        event = threading.Event()
+        calls = {"n": 0}
+
+        def exec_side_effect(*args, **kwargs):
+            calls["n"] += 1
+            if calls["n"] == 1:
+                return _make_exec_response(result="/root")  # $HOME detection
+            event.wait(timeout=5)  # simulate long-running command
+            return _make_exec_response(result="done", exit_code=0)
+
+        sb.process.exec.side_effect = exec_side_effect
+        env = make_env(sandbox=sb)
+
+        monkeypatch.setattr(
+            "tools.environments.daytona.is_interrupted", lambda: True
+        )
+        try:
+            result = env.execute("sleep 10")
+            assert result["returncode"] == 130
+            sb.stop.assert_called()
+        finally:
+            event.set()
+
+
+# ---------------------------------------------------------------------------
+# Retry exhaustion
+# ---------------------------------------------------------------------------
+
+class TestRetryExhausted:
+    def test_both_attempts_fail(self, make_env, daytona_sdk):
+        sb = _make_sandbox()
+        sb.state = "started"
+        sb.process.exec.side_effect = [
+            _make_exec_response(result="/root"),       # $HOME
+            daytona_sdk.DaytonaError("fail1"),         # first attempt
+            daytona_sdk.DaytonaError("fail2"),         # retry
+        ]
+        env = make_env(sandbox=sb)
+
+        result = env.execute("echo x")
+        assert result["returncode"] == 1
+        assert "Daytona execution error" in result["output"]
+
+
+# ---------------------------------------------------------------------------
+# Ensure sandbox ready
+# ---------------------------------------------------------------------------
+
+class TestEnsureSandboxReady:
+    def test_restarts_stopped_sandbox(self, make_env):
+        env = make_env()
+        env._sandbox.state = "stopped"
+        env._ensure_sandbox_ready()
+        env._sandbox.start.assert_called()
+
+    def test_no_restart_when_running(self, make_env):
+        env = make_env()
+        env._sandbox.state = "started"
+        env._ensure_sandbox_ready()
+        env._sandbox.start.assert_not_called()