diff --git a/tests/unittests/cli/test_api_server_instrumentation.py b/tests/unittests/cli/test_api_server_instrumentation.py
new file mode 100644
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+++ b/tests/unittests/cli/test_api_server_instrumentation.py
@@ -0,0 +1,263 @@
+# Copyright 2026 Google LLC
+#
+# Licensed under the Apache License, Version 2.0 (the "License");
+# you may not use this file except in compliance with the License.
+# You may obtain a copy of the License at
+#
+#     http://www.apache.org/licenses/LICENSE-2.0
+#
+# Unless required by applicable law or agreed to in writing, software
+# distributed under the License is distributed on an "AS IS" BASIS,
+# WITHOUT WARRANTIES OR CONDITIONS OF ANY KIND, either express or implied.
+# See the License for the specific language governing permissions and
+# limitations under the License.
+
+"""Unit tests for optional OTel instrumentation setup in api_server.
+
+These tests call the private `_setup_instrumentation_lib_if_installed()`
+directly. No public entry point reaches it without real telemetry setup: both
+callers first build GCP exporters or mutate the global OTel providers.
+
+The optional instrumentation packages are replaced with fakes through
+`sys.modules`, so the tests behave the same with and without the
+`google-adk[otel-gcp]` extra installed. The fakes are installed by an autouse
+fixture because the real `GoogleGenAiSdkInstrumentor().instrument()` patches
+the `google.genai` SDK process-globally and is never undone.
+"""
+
+from __future__ import annotations
+
+import logging
+import sys
+import types
+from typing import Protocol
+
+from google.adk.cli import api_server
+import pytest
+
+_GENAI_MODULE = "opentelemetry.instrumentation.google_genai"
+_GENAI_CLASS = "GoogleGenAiSdkInstrumentor"
+_HTTPX_MODULE = "opentelemetry.instrumentation.httpx"
+_HTTPX_CLASS = "HTTPXClientInstrumentor"
+_GRPC_MODULE = "opentelemetry.instrumentation.grpc"
+_GRPC_CLASS = "GrpcInstrumentorClient"
+
+_INSTRUMENTOR_CLASSES = {
+    _GENAI_MODULE: _GENAI_CLASS,
+    _HTTPX_MODULE: _HTTPX_CLASS,
+    _GRPC_MODULE: _GRPC_CLASS,
+}
+
+_AGENT_ENGINE_ID_ENV = "GOOGLE_CLOUD_AGENT_ENGINE_ID"
+_AGENT_ENGINE_ID = "test-engine-id"
+
+_LOGGER_NAME = api_server.logger.name
+
+
+class _FailInstrumentor(Protocol):
+  """Makes one optional instrumentation module fail for the current test."""
+
+  def __call__(self, module_name: str, error: Exception | None = None) -> None:
+    ...
+
+
+def _fake_instrumentation_module(
+    module_name: str,
+    calls: list[str],
+    error: Exception | None = None,
+) -> types.ModuleType:
+  """Builds a stand-in for an optional opentelemetry instrumentation module.
+
+  Args:
+    module_name: The dotted name of the module to stand in for.
+    calls: The recorder that each successful `instrument()` appends to.
+    error: Raised by `instrument()` instead of recording the call.
+
+  Returns:
+    A module exposing the instrumentor class that `api_server` imports from
+    `module_name`.
+  """
+  class_name = _INSTRUMENTOR_CLASSES[module_name]
+
+  class _FakeInstrumentor:
+
+    def instrument(self) -> None:
+      if error is not None:
+        raise error
+      calls.append(class_name)
+
+  module = types.ModuleType(module_name)
+  setattr(module, class_name, _FakeInstrumentor)
+  return module
+
+
+def _warnings(caplog: pytest.LogCaptureFixture) -> list[str]:
+  """Returns the messages of the warning-or-worse records in `caplog`."""
+  return [
+      record.getMessage()
+      for record in caplog.records
+      if record.levelno >= logging.WARNING
+  ]
+
+
+@pytest.fixture
+def calls() -> list[str]:
+  """Records the name of every instrumentor that took effect, in order."""
+  return []
+
+
+@pytest.fixture(autouse=True)
+def fail_instrumentor(
+    monkeypatch: pytest.MonkeyPatch, calls: list[str]
+) -> _FailInstrumentor:
+  """Installs a working fake for every optional instrumentation module.
+
+  Also clears the Agent Engine id, so every test starts off Agent Engine.
+
+  Returns:
+    A helper that makes one module unimportable, or - when given an `error` -
+    makes its `instrument()` raise.
+  """
+  monkeypatch.delenv(_AGENT_ENGINE_ID_ENV, raising=False)
+  for module_name in _INSTRUMENTOR_CLASSES:
+    monkeypatch.setitem(
+        sys.modules,
+        module_name,
+        _fake_instrumentation_module(module_name, calls),
+    )
+
+  def fail(module_name: str, error: Exception | None = None) -> None:
+    # `None` in sys.modules makes the import raise ModuleNotFoundError.
+    replacement = (
+        None
+        if error is None
+        else _fake_instrumentation_module(module_name, calls, error)
+    )
+    monkeypatch.setitem(sys.modules, module_name, replacement)
+
+  return fail
+
+
+def test_instruments_genai_sdk_when_available(
+    calls: list[str], caplog: pytest.LogCaptureFixture
+):
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_GENAI_CLASS]
+  assert _warnings(caplog) == []
+
+
+def test_warns_when_genai_instrumentor_missing(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    fail_instrumentor: _FailInstrumentor,
+):
+  fail_instrumentor(_GENAI_MODULE)
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == []
+  assert "Unable to import GoogleGenAiSdkInstrumentor" in caplog.text
+  assert "google-adk[otel-gcp]" in caplog.text
+
+
+def test_instruments_httpx_and_grpc_on_agent_engine(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    monkeypatch: pytest.MonkeyPatch,
+):
+  monkeypatch.setenv(_AGENT_ENGINE_ID_ENV, _AGENT_ENGINE_ID)
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_GENAI_CLASS, _HTTPX_CLASS, _GRPC_CLASS]
+  assert _warnings(caplog) == []
+
+
+def test_warns_when_httpx_and_grpc_missing_on_agent_engine(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    monkeypatch: pytest.MonkeyPatch,
+    fail_instrumentor: _FailInstrumentor,
+):
+  monkeypatch.setenv(_AGENT_ENGINE_ID_ENV, _AGENT_ENGINE_ID)
+  fail_instrumentor(_HTTPX_MODULE)
+  fail_instrumentor(_GRPC_MODULE)
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_GENAI_CLASS]
+  assert "without HTTPX instrumentation" in caplog.text
+  assert "without gRPC instrumentation" in caplog.text
+  assert len(_warnings(caplog)) == 2
+
+
+def test_httpx_failure_does_not_block_grpc(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    monkeypatch: pytest.MonkeyPatch,
+    fail_instrumentor: _FailInstrumentor,
+):
+  monkeypatch.setenv(_AGENT_ENGINE_ID_ENV, _AGENT_ENGINE_ID)
+  fail_instrumentor(_HTTPX_MODULE)
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_GENAI_CLASS, _GRPC_CLASS]
+  assert "without HTTPX instrumentation" in caplog.text
+  assert "without gRPC instrumentation" not in caplog.text
+
+
+def test_genai_failure_does_not_block_agent_engine_instrumentors(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    monkeypatch: pytest.MonkeyPatch,
+    fail_instrumentor: _FailInstrumentor,
+):
+  monkeypatch.setenv(_AGENT_ENGINE_ID_ENV, _AGENT_ENGINE_ID)
+  fail_instrumentor(_GENAI_MODULE)
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_HTTPX_CLASS, _GRPC_CLASS]
+  assert "Unable to import GoogleGenAiSdkInstrumentor" in caplog.text
+  assert "without HTTPX instrumentation" not in caplog.text
+  assert "without gRPC instrumentation" not in caplog.text
+
+
+def test_httpx_attribute_error_is_tolerated(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    monkeypatch: pytest.MonkeyPatch,
+    fail_instrumentor: _FailInstrumentor,
+):
+  monkeypatch.setenv(_AGENT_ENGINE_ID_ENV, _AGENT_ENGINE_ID)
+  fail_instrumentor(_HTTPX_MODULE, AttributeError("no attribute 'instrument'"))
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_GENAI_CLASS, _GRPC_CLASS]
+  assert "without HTTPX instrumentation" in caplog.text
+
+
+def test_grpc_attribute_error_is_tolerated(
+    calls: list[str],
+    caplog: pytest.LogCaptureFixture,
+    monkeypatch: pytest.MonkeyPatch,
+    fail_instrumentor: _FailInstrumentor,
+):
+  monkeypatch.setenv(_AGENT_ENGINE_ID_ENV, _AGENT_ENGINE_ID)
+  fail_instrumentor(_GRPC_MODULE, AttributeError("no attribute 'instrument'"))
+
+  with caplog.at_level(logging.WARNING, logger=_LOGGER_NAME):
+    api_server._setup_instrumentation_lib_if_installed()
+
+  assert calls == [_GENAI_CLASS, _HTTPX_CLASS]
+  assert "without gRPC instrumentation" in caplog.text