diff --git a/packages/server/src/routes/federation.presenceUpdate.test.ts b/packages/server/src/routes/federation.presenceUpdate.test.ts
new file mode 100644
index 00000000..69fd7d8d
--- /dev/null
+++ b/packages/server/src/routes/federation.presenceUpdate.test.ts
@@ -0,0 +1,166 @@
+import { describe, it, expect, beforeEach, vi } from 'vitest';
+import Database from 'better-sqlite3';
+import { drizzle } from 'drizzle-orm/better-sqlite3';
+import fs from 'node:fs';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
+import * as schema from '../db/schema.js';
+import { eq } from 'drizzle-orm';
+import type { FederationRelayEvent } from '@backspace/shared';
+
+const __dirname = path.dirname(fileURLToPath(import.meta.url));
+type TestDb = ReturnType<typeof drizzle<typeof schema>>;
+let sqlite: Database.Database;
+let testDb: TestDb;
+
+const sentToUserCalls: Array<{ userId: string; payload: any }> = [];
+
+vi.mock('../db/index.js', () => ({
+  getDb: () => testDb,
+  getRawDb: () => sqlite,
+  schema,
+}));
+
+vi.mock('../ws/handler.js', () => ({
+  connectionManager: {
+    sendToUser: vi.fn((uid: string, p: any) => sentToUserCalls.push({ userId: uid, payload: p })),
+    sendToSpace: vi.fn(),
+    sendToDmMembers: vi.fn(),
+    sendToAdmins: vi.fn(),
+    getAllOnlineUserIds: () => [],
+    evictFederatedCallsForHost: vi.fn(),
+    federatedCalls: new Map(),
+    isUserOnline: vi.fn(),
+    lateBindFederatedCall: vi.fn(),
+  },
+}));
+
+function applyMigrations(db: Database.Database): void {
+  const migrationsDir = path.resolve(__dirname, '../../drizzle');
+  const files = fs.readdirSync(migrationsDir).filter(f => f.endsWith('.sql')).sort();
+  for (const f of files) {
+    const sql = fs.readFileSync(path.join(migrationsDir, f), 'utf8');
+    for (const stmt of sql.split(/-->\s*statement-breakpoint/)) {
+      const clean = stmt.trim();
+      if (clean) db.exec(clean);
+    }
+  }
+}
+
+beforeEach(() => {
+  sqlite = new Database(':memory:');
+  testDb = drizzle(sqlite, { schema });
+  applyMigrations(sqlite);
+  sentToUserCalls.length = 0;
+  // Local user (youruser) and replicated stub (pbtest3) — they're friends.
+  testDb.insert(schema.users).values([
+    {
+      id: 'local-youruser', username: 'youruser', passwordHash: 'x', status: 'online', isAdmin: 0,
+      homeUserId: 'local-youruser', createdAt: Date.now(),
+    },
+    {
+      id: 'stub-pbtest3', username: 'pbtest3@orbit.ddns.net', displayName: 'pbtest3',
+      passwordHash: '!federation-replicated', status: 'offline', isAdmin: 0,
+      homeInstance: 'orbit.ddns.net', homeUserId: 'home-pbtest3', createdAt: Date.now(),
+    },
+  ]).run();
+  testDb.insert(schema.friends).values({
+    userId: 'local-youruser', friendId: 'stub-pbtest3', createdAt: Date.now(),
+  }).run();
+});
+
+describe('processPresenceUpdateEvent', () => {
+  it('updates stub status and broadcasts presence_update to local friends', async () => {
+    const fed = await import('./federation.js');
+    const event: FederationRelayEvent = {
+      eventType: 'presence_update',
+      contextType: 'profile',
+      messageId: 'p1',
+      encryptionVersion: 0,
+      timestamp: Date.now(),
+      presenceUpdate: {
+        homeUserId: 'home-pbtest3',
+        homeInstance: 'orbit.ddns.net',
+        status: 'online',
+        ts: Date.now(),
+      },
+    };
+    const accepted: string[] = [];
+    const rejected: Array<{ messageId: string; reason: string }> = [];
+    fed.processPresenceUpdateEvent(event, 'orbit.ddns.net', testDb, accepted, rejected);
+
+    expect(rejected).toEqual([]);
+    expect(accepted).toEqual(['p1']);
+    const row = testDb.select().from(schema.users).where(eq(schema.users.id, 'stub-pbtest3')).get();
+    expect(row!.status).toBe('online');
+
+    const broadcast = sentToUserCalls.find((c) => c.userId === 'local-youruser');
+    expect(broadcast).toBeDefined();
+    expect(broadcast!.payload.type).toBe('presence_update');
+    expect(broadcast!.payload.userId).toBe('stub-pbtest3');
+    expect(broadcast!.payload.status).toBe('online');
+  });
+
+  it('rejects on attribution mismatch', async () => {
+    const fed = await import('./federation.js');
+    const event: FederationRelayEvent = {
+      eventType: 'presence_update', contextType: 'profile', messageId: 'p2',
+      encryptionVersion: 0, timestamp: Date.now(),
+      presenceUpdate: {
+        homeUserId: 'home-pbtest3', homeInstance: 'orbit.ddns.net',
+        status: 'online', ts: Date.now(),
+      },
+    };
+    const rejected: Array<{ messageId: string; reason: string }> = [];
+    fed.processPresenceUpdateEvent(event, 'evil.example.com', testDb, [], rejected);
+    expect(rejected).toEqual([{ messageId: 'p2', reason: 'attribution_mismatch' }]);
+  });
+
+  it('silently accepts when no replica exists locally', async () => {
+    const fed = await import('./federation.js');
+    const event: FederationRelayEvent = {
+      eventType: 'presence_update', contextType: 'profile', messageId: 'p3',
+      encryptionVersion: 0, timestamp: Date.now(),
+      presenceUpdate: {
+        homeUserId: 'unknown-id', homeInstance: 'orbit.ddns.net',
+        status: 'online', ts: Date.now(),
+      },
+    };
+    const accepted: string[] = [];
+    const rejected: Array<{ messageId: string; reason: string }> = [];
+    fed.processPresenceUpdateEvent(event, 'orbit.ddns.net', testDb, accepted, rejected);
+    expect(accepted).toEqual(['p3']);
+    expect(rejected).toEqual([]);
+  });
+
+  it('rejects invalid status values', async () => {
+    const fed = await import('./federation.js');
+    const event: FederationRelayEvent = {
+      eventType: 'presence_update', contextType: 'profile', messageId: 'p4',
+      encryptionVersion: 0, timestamp: Date.now(),
+      presenceUpdate: {
+        homeUserId: 'home-pbtest3', homeInstance: 'orbit.ddns.net',
+        status: 'invisible' as any, ts: Date.now(),
+      },
+    };
+    const rejected: Array<{ messageId: string; reason: string }> = [];
+    fed.processPresenceUpdateEvent(event, 'orbit.ddns.net', testDb, [], rejected);
+    expect(rejected).toEqual([{ messageId: 'p4', reason: 'invalid_status' }]);
+  });
+
+  it('passes activities through to the WS broadcast when present', async () => {
+    const fed = await import('./federation.js');
+    const event: FederationRelayEvent = {
+      eventType: 'presence_update', contextType: 'profile', messageId: 'p5',
+      encryptionVersion: 0, timestamp: Date.now(),
+      presenceUpdate: {
+        homeUserId: 'home-pbtest3', homeInstance: 'orbit.ddns.net',
+        status: 'online', activities: [{ type: 'playing', name: 'Test' }],
+        ts: Date.now(),
+      },
+    };
+    fed.processPresenceUpdateEvent(event, 'orbit.ddns.net', testDb, [], []);
+    const broadcast = sentToUserCalls.find((c) => c.userId === 'local-youruser');
+    expect(broadcast!.payload.activities).toEqual([{ type: 'playing', name: 'Test' }]);
+  });
+});
diff --git a/packages/server/src/routes/federation.ts b/packages/server/src/routes/federation.ts
index fbf244cf..3d3e9079 100644
--- a/packages/server/src/routes/federation.ts
+++ b/packages/server/src/routes/federation.ts
@@ -3004,6 +3004,9 @@ export async function processRelayEvents(
         case 'profile_update':
           await processProfileUpdateEvent(event, sourceInstance, db, accepted, rejected);
           break;
+        case 'presence_update':
+          processPresenceUpdateEvent(event, sourceInstance, db, accepted, rejected);
+          break;
         case 'read_state_update':
           processReadStateUpdateEvent(event, sourceInstance, db, accepted, rejected);
           break;
@@ -5841,6 +5844,90 @@ export async function processProfileUpdateEvent(
   accepted.push(event.messageId);
 }
 
+/**
+ * Inbound presence_update relay handler.
+ *
+ * Authority: home instance is exclusive. payload.homeInstance domain MUST equal
+ * the source peer's domain (attribution check, mirrors profile_update).
+ *
+ * Effect on success:
+ *   1. Update the local stub's status column.
+ *   2. Broadcast a WS presence_update to local users via collectProfileBroadcastTargetIds
+ *      (friends + DM members + space co-members), so the green dot updates without a
+ *      page refresh on every connected client that knows this user.
+ *
+ * Edge cases:
+ *   - No local replica → silently accept (peer broadcasts presence to all peers,
+ *     not all peers have a stub).
+ *   - homeInstance domain mismatch on the existing stub → ignore (collision against
+ *     a stub of a different identity).
+ *   - Invalid status string → reject; sender is buggy, surface for diagnosis.
+ */
+export function processPresenceUpdateEvent(
+  event: FederationRelayEvent,
+  sourceInstance: string,
+  db: ReturnType<typeof getDb>,
+  accepted: string[],
+  rejected: Array<{ messageId: string; reason: string }>,
+): void {
+  const payload = event.presenceUpdate;
+  if (!payload) {
+    rejected.push({ messageId: event.messageId, reason: 'missing_presence_update_payload' });
+    return;
+  }
+
+  const payloadDomain = extractDomain(payload.homeInstance);
+  const sourceDomain = extractDomain(sourceInstance);
+  if (payloadDomain !== sourceDomain) {
+    console.warn(`[federation] Attribution mismatch in presence_update: homeInstance=${payloadDomain} source=${sourceDomain}`);
+    rejected.push({ messageId: event.messageId, reason: 'attribution_mismatch' });
+    return;
+  }
+
+  if (!payload.status || !['online', 'idle', 'dnd', 'offline'].includes(payload.status)) {
+    rejected.push({ messageId: event.messageId, reason: 'invalid_status' });
+    return;
+  }
+
+  const localUser = db
+    .select()
+    .from(schema.users)
+    .where(and(
+      eq(schema.users.homeUserId, payload.homeUserId),
+      eq(schema.users.isDeleted, 0),
+    ))
+    .get();
+
+  if (!localUser) {
+    accepted.push(event.messageId);
+    return;
+  }
+
+  if (localUser.homeInstance && extractDomain(localUser.homeInstance) !== payloadDomain) {
+    accepted.push(event.messageId);
+    return;
+  }
+
+  db.update(schema.users)
+    .set({ status: payload.status })
+    .where(eq(schema.users.id, localUser.id))
+    .run();
+
+  // Broadcast presence_update WS event to local users who care.
+  const targetUserIds = collectProfileBroadcastTargetIds(localUser.id);
+  const wsPayload = {
+    type: 'presence_update' as const,
+    userId: localUser.id,
+    status: payload.status,
+    ...(payload.activities && payload.activities.length > 0 ? { activities: payload.activities } : {}),
+  };
+  for (const uid of targetUserIds) {
+    connectionManager.sendToUser(uid, wsPayload);
+  }
+
+  accepted.push(event.messageId);
+}
+
 // ─── Replicated Profile Asset Backfill ──────────────────────────────────────
 
 /**