diff --git a/tests/__init__.py b/tests/__init__.py
new file mode 100644
index 0000000..e69de29
diff --git a/tests/conftest.py b/tests/conftest.py
new file mode 100644
index 0000000..e9aaec2
--- /dev/null
+++ b/tests/conftest.py
@@ -0,0 +1,56 @@
+"""
+Shared test fixtures and config.
+
+Fixtures defined here available to all tests
+"""
+
+from statistics import mode
+from unittest.mock import AsyncMock, MagicMock
+
+import pytest
+from anthropic.types import ContentBlock, Message, TextBlock, Usage
+
+from agent.config import Settings
+
+
+@pytest.fixture
+def settings():
+    """provide test settings don't load from .env"""
+    return Settings(
+        anthropic_api_key="test-key-12345",
+        model="claude-test-model",
+        max_tokens=100,
+        safedir="./test-workspace",
+    )
+
+
+@pytest.fixture
+def mock_anthropic_client():
+    """Mock anthropic client that returns a fake response."""
+    mock_client = AsyncMock()
+
+    # create a realistic fake response
+    fake_message = Message(
+        id="msg_test123",
+        type="message",
+        role="assistant",
+        content=[TextBlock(type="text", text="42")],
+        model="claude-test-model",
+        stop_reason="end_turn",
+        usage=Usage(input_tokens=10, output_tokens=5),
+    )
+
+    # make messages.create() return this fake message
+    mock_client.messages.create = AsyncMock(return_value=fake_message)
+
+    return mock_client
+
+
+@pytest.fixture
+def sample_history():
+    """sample conversation history for testing"""
+    return [
+        {"role": "user", "content": "Hello"},
+        {"role": "assistance", "content": "Hi there!"},
+        {"role": "user", "content": "What's 2+2?"},
+    ]
diff --git a/tests/test_config.py b/tests/test_config.py
new file mode 100644
index 0000000..d706156
--- /dev/null
+++ b/tests/test_config.py
@@ -0,0 +1,49 @@
+"""test config"""
+
+import pytest
+from pydantic import ValidationError
+
+from agent.config import Settings
+
+
+def test_settings_with_all_values():
+    """Test Settings loads correctly with all values provided."""
+    settings = Settings(
+        anthropic_api_key="sk-ant-test",
+        model="claude-test",
+        max_tokens=500,
+        safedir="/tmp/test",
+    )
+
+    assert settings.anthropic_api_key == "sk-ant-test"
+    assert settings.model == "claude-test"
+    assert settings.max_tokens == 500
+
+
+def test_settings_defaults():
+    """Test Settings uses defaults for optional values."""
+    settings = Settings(
+        anthropic_api_key="sk-ant-test"  # Only required field
+    )
+
+    # Should use defaults
+    assert settings.model == "claude-sonnet-4-5-20250929"
+    assert settings.max_tokens == 500
+
+
+def test_settings_missing_required_field():
+    """Test Settings raises error when required field is missing."""
+    with pytest.raises(ValidationError) as exc_info:
+        Settings(_env_file=None)  # Missing anthropic_api_key
+
+    # Verify the error mentions the missing field
+    assert "anthropic_api_key" in str(exc_info.value)
+
+
+def test_settings_type_validation():
+    """Test Settings validates types correctly."""
+    with pytest.raises(ValidationError):
+        Settings(
+            anthropic_api_key="sk-ant-test",
+            max_tokens="not-a-number",  # Should be int
+        )
diff --git a/tests/test_loop.py b/tests/test_loop.py
new file mode 100644
index 0000000..b3570c0
--- /dev/null
+++ b/tests/test_loop.py
@@ -0,0 +1,38 @@
+from unittest.mock import AsyncMock, patch
+
+import pytest
+
+from agent.loop import run_turn
+
+
+@pytest.mark.asyncio
+async def test_run_turn_basic(mock_anthropic_client):
+    """test that run_turn calls the API and returns a message"""
+
+    # patch the client with our mock
+    with patch("agent.loop.client", mock_anthropic_client):
+        result = await run_turn("What is 2+2?")
+
+    # verify client was called
+    mock_anthropic_client.messages.create.assert_called_once()
+
+    # verify message returned
+    assert result.content[0].text == "42"
+
+    # verify call has correct parameters
+    call_args = mock_anthropic_client.messages.create.call_args
+    assert call_args.kwargs["messages"][0]["content"] == "What is 2+2?"
+
+
+@pytest.mark.asyncio
+async def test_run_turn_uses_settings(mock_anthropic_client, settings):
+    """Test that run_turn uses settings correctly."""
+
+    with patch("agent.loop.client", mock_anthropic_client):
+        with patch("agent.loop.settings", settings):
+            await run_turn("test message")
+
+    # Verify settings were used
+    call_args = mock_anthropic_client.messages.create.call_args
+    assert call_args.kwargs["model"] == settings.model
+    assert call_args.kwargs["max_tokens"] == settings.max_tokens