diff --git a/docs/systems/federation.md b/docs/systems/federation.md
index 9f817d57..e489f9c7 100644
--- a/docs/systems/federation.md
+++ b/docs/systems/federation.md
@@ -51,10 +51,20 @@ Backspace federation is peer-to-peer with no central authority. Each instance ma
 **Phase 2 -- Accept** (`POST /api/federation/peer/accept`)
 - Auth: **none** (first contact -- no JWT, no HMAC)
 - Rate-limited: 10 requests per minute per IP (in-memory sliding window, buckets cleaned every 60s)
-- Validates `sourceOrigin`, `challenge`, and `hmacSecret` from body
+- Validates `sourceOrigin`, `challenge`, `hmacSecret`, and (optional) `instanceName` from body
 - Handles existing peers: active -> return 200 (idempotent), revoked -> return 403, pending -> update with new secret and activate
 - New peer: creates record with provided `hmacSecret`, sets `status='active'`
-- Returns `{ accepted: true }` on success
+- Returns `{ accepted: true, instanceName: <ourName | null> }` on success — see "Instance name exchange" below
+
+### Instance name exchange
+
+The handshake is bidirectional for the `instance_name` label rendered in the federation panel and in DM-call toasts (`peerLabel`):
+
+- **Initiator → responder:** the request body to `/peer/accept` carries `{ sourceOrigin, hmacSecret, instanceName }`. The responder reads `instanceName` and persists it to `federation_peers.instance_name` on every state-mutating activation path: `pending → active`, `awaiting_approval → active`, `rejected → active` (override), and new-peer create. The idempotent early-return path for already-`active` and `needs_attention` peers does NOT overwrite — same security posture that already refuses to overwrite `hmac_secret` on these paths from an unauthenticated request.
+
+- **Responder → initiator:** the `/peer/accept` response body is `{ accepted: true, instanceName: <ourName | null> }`. The initiator (`performHandshake` in `utils/federationPeering.ts` and `/peer/initiate` in `routes/federation.ts`) parses it and persists alongside the `status='active'` write. Older peers that omit the field are tolerated — the column stays `null`. Non-JSON bodies are tolerated defensively.
+
+`instance_name` is cosmetic metadata, eventually-consistent. Anywhere `peerLabel` is rendered falls back to origin hostname when `instance_name IS NULL`. Instance renames do not currently re-broadcast — that's a separate, unimplemented feature.
 
 ### Secret Storage & Rotation
 
diff --git a/packages/server/src/routes/dm.federatedId.test.ts b/packages/server/src/routes/dm.federatedId.test.ts
new file mode 100644
index 00000000..67669804
--- /dev/null
+++ b/packages/server/src/routes/dm.federatedId.test.ts
@@ -0,0 +1,144 @@
+import { describe, it, expect, beforeEach, vi } from 'vitest';
+import Fastify, { type FastifyInstance } from 'fastify';
+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 { setWorkerId } from '../utils/snowflake.js';
+
+setWorkerId(1);
+
+const __dirname = path.dirname(fileURLToPath(import.meta.url));
+
+type TestDb = ReturnType<typeof drizzle<typeof schema>>;
+let sqlite: Database.Database;
+let testDb: TestDb;
+let currentUserId = 'user-A';
+
+vi.mock('../db/index.js', () => ({
+  getDb: () => testDb,
+  schema,
+}));
+
+vi.mock('../utils/auth.js', () => ({
+  authenticate: async (req: { userId?: string }) => {
+    req.userId = currentUserId;
+  },
+}));
+
+vi.mock('../ws/handler.js', () => ({
+  connectionManager: {
+    sendToUser: vi.fn(),
+    sendToDmMembers: vi.fn(),
+    sendToAdmins: vi.fn(),
+    getAllOnlineUserIds: () => [],
+  },
+}));
+
+vi.mock('../utils/federationOutbox.js', async () => {
+  const actual = await vi.importActual<typeof import('../utils/federationOutbox.js')>('../utils/federationOutbox.js');
+  return {
+    ...actual,
+    isFederationRelayEnabled: () => true,
+    queueDmCloseRelay: vi.fn(),
+    sendTypingRelay: vi.fn(),
+    queueDmRelay: vi.fn(),
+    queueOutboxEvent: vi.fn(),
+    appendMutationLog: 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 sqlText = fs.readFileSync(path.join(migrationsDir, f), 'utf8');
+    const statements = sqlText.split(/-->\s*statement-breakpoint/);
+    for (const stmt of statements) {
+      const clean = stmt.trim();
+      if (clean) db.exec(clean);
+    }
+  }
+}
+
+function seedTwoUsers(): void {
+  testDb.insert(schema.users).values({
+    id: 'user-A',
+    username: 'alice',
+    displayName: 'Alice',
+    passwordHash: 'x',
+    homeUserId: 'user-A',
+    homeInstance: 'https://local.example',
+    createdAt: Date.now(),
+  }).run();
+
+  testDb.insert(schema.users).values({
+    id: 'user-B',
+    username: 'bob',
+    displayName: 'Bob',
+    passwordHash: 'x',
+    homeUserId: 'remote-bob',
+    homeInstance: 'https://remote.example',
+    createdAt: Date.now(),
+  }).run();
+}
+
+async function buildApp(): Promise<FastifyInstance> {
+  const app = Fastify({ logger: false });
+  const { dmRoutes } = await import('./dm.js');
+  await app.register(dmRoutes);
+  await app.ready();
+  return app;
+}
+
+describe('POST /api/dm — idempotent existing DM response includes federatedId', () => {
+  let app: FastifyInstance;
+
+  beforeEach(async () => {
+    sqlite = new Database(':memory:');
+    testDb = drizzle(sqlite, { schema });
+    applyMigrations(sqlite);
+    seedTwoUsers();
+    currentUserId = 'user-A';
+    app = await buildApp();
+  });
+
+  it('fresh-create returns a federatedId for federated 1-on-1 DM', async () => {
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/dm',
+      payload: { userId: 'user-B' },
+    });
+
+    expect(response.statusCode).toBe(201);
+    const body = response.json() as { id: string; federatedId: string | null };
+    expect(body.federatedId).toMatch(/^[a-f0-9]{32}$/);
+  });
+
+  it('idempotent existing-DM path returns the same federatedId field', async () => {
+    // First call creates the DM
+    const first = await app.inject({
+      method: 'POST',
+      url: '/api/dm',
+      payload: { userId: 'user-B' },
+    });
+    expect(first.statusCode).toBe(201);
+    const firstBody = first.json() as { id: string; federatedId: string | null };
+    const expectedFederatedId = firstBody.federatedId;
+    expect(expectedFederatedId).toMatch(/^[a-f0-9]{32}$/);
+
+    // Second call returns the existing DM idempotently — must carry federatedId
+    const second = await app.inject({
+      method: 'POST',
+      url: '/api/dm',
+      payload: { userId: 'user-B' },
+    });
+    expect(second.statusCode).toBe(200);
+    const secondBody = second.json() as { id: string; federatedId: string | null };
+
+    expect(secondBody.id).toBe(firstBody.id);
+    expect(secondBody.federatedId).toBe(expectedFederatedId);
+  });
+});
diff --git a/packages/server/src/routes/dm.ts b/packages/server/src/routes/dm.ts
index 532e8c5f..d35ba09b 100644
--- a/packages/server/src/routes/dm.ts
+++ b/packages/server/src/routes/dm.ts
@@ -471,6 +471,7 @@ export async function dmRoutes(app: FastifyInstance): Promise<void> {
         const result: DmChannel = {
           id: dmChannel.id,
           ownerId: dmChannel.ownerId ?? null,
+          federatedId: dmChannel.federatedId ?? null,
           createdAt: dmChannel.createdAt,
           members: users.map(u => sanitizeUser(u)),
           lastMessage: lastMsg ? {
diff --git a/packages/server/src/routes/federation.peerAccept.test.ts b/packages/server/src/routes/federation.peerAccept.test.ts
new file mode 100644
index 00000000..6ce1e1c3
--- /dev/null
+++ b/packages/server/src/routes/federation.peerAccept.test.ts
@@ -0,0 +1,431 @@
+import { describe, it, expect, beforeEach, afterEach, vi } from 'vitest';
+import Fastify, { type FastifyInstance } from 'fastify';
+import Database from 'better-sqlite3';
+import { drizzle } from 'drizzle-orm/better-sqlite3';
+import { eq } from 'drizzle-orm';
+import fs from 'node:fs';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
+import * as schema from '../db/schema.js';
+import { setWorkerId } from '../utils/snowflake.js';
+
+setWorkerId(1);
+
+const __dirname = path.dirname(fileURLToPath(import.meta.url));
+
+type TestDb = ReturnType<typeof drizzle<typeof schema>>;
+let sqlite: Database.Database;
+let testDb: TestDb;
+
+vi.mock('../db/index.js', () => ({
+  getDb: () => testDb,
+  getRawDb: () => sqlite,
+  schema,
+}));
+
+vi.mock('../utils/auth.js', () => ({
+  authenticate: async (req: { userId?: string }) => {
+    req.userId = 'admin-user';
+  },
+  requireAdmin: async () => {
+    // no-op (peer/accept endpoint is unauthenticated anyway)
+  },
+}));
+
+vi.mock('../ws/handler.js', () => ({
+  connectionManager: {
+    sendToAdmins: vi.fn(),
+    getAllOnlineUserIds: () => [],
+    sendToUser: vi.fn(),
+    sendToDmMembers: vi.fn(),
+  },
+}));
+
+vi.mock('../utils/federationPeerActivation.js', () => ({
+  onPeerActivated: vi.fn(async () => undefined),
+}));
+
+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 sqlText = fs.readFileSync(path.join(migrationsDir, f), 'utf8');
+    const statements = sqlText.split(/-->\s*statement-breakpoint/);
+    for (const stmt of statements) {
+      const clean = stmt.trim();
+      if (clean) db.exec(clean);
+    }
+  }
+}
+
+function seedInstanceSettings(name: string): void {
+  testDb.insert(schema.instanceSettings).values({
+    id: 1,
+    instanceName: name,
+    autoAcceptPeering: 1,
+    registrationOpen: 1,
+    updatedAt: Date.now(),
+  }).run();
+}
+
+async function buildApp(): Promise<FastifyInstance> {
+  const app = Fastify({ logger: false });
+  const { federationRoutes } = await import('./federation.js');
+  await app.register(federationRoutes);
+  await app.ready();
+  return app;
+}
+
+describe('POST /api/federation/peer/accept — instance_name persistence', () => {
+  let app: FastifyInstance;
+
+  beforeEach(async () => {
+    sqlite = new Database(':memory:');
+    testDb = drizzle(sqlite, { schema });
+    applyMigrations(sqlite);
+    seedInstanceSettings('Local Backspace');
+    app = await buildApp();
+  });
+
+  it('writes instance_name when creating a new peer (autoAccept=1, no existing row)', async () => {
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'remote-secret',
+        instanceName: 'Remote Backspace',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row).toBeTruthy();
+    expect(row?.instanceName).toBe('Remote Backspace');
+    expect(row?.status).toBe('active');
+  });
+
+  it('writes instance_name when activating an existing pending peer', async () => {
+    testDb.insert(schema.federationPeers).values({
+      id: 'peer-pending',
+      origin: 'https://remote.example',
+      hmacSecret: 'old-secret',
+      status: 'pending',
+      createdAt: Date.now(),
+    }).run();
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'new-secret',
+        instanceName: 'Remote Backspace',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.id, 'peer-pending')).get();
+    expect(row?.instanceName).toBe('Remote Backspace');
+    expect(row?.status).toBe('active');
+  });
+
+  it('writes instance_name when activating an existing awaiting_approval peer', async () => {
+    testDb.insert(schema.federationPeers).values({
+      id: 'peer-await',
+      origin: 'https://remote.example',
+      hmacSecret: 'old-secret',
+      status: 'awaiting_approval',
+      createdAt: Date.now(),
+    }).run();
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'new-secret',
+        instanceName: 'Remote Backspace',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.id, 'peer-await')).get();
+    expect(row?.instanceName).toBe('Remote Backspace');
+    expect(row?.status).toBe('active');
+  });
+
+  it('writes instance_name when overriding rejected → active', async () => {
+    testDb.insert(schema.federationPeers).values({
+      id: 'peer-rejected',
+      origin: 'https://remote.example',
+      hmacSecret: 'old-secret',
+      status: 'rejected',
+      createdAt: Date.now(),
+    }).run();
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'new-secret',
+        instanceName: 'Remote Backspace',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.id, 'peer-rejected')).get();
+    expect(row?.instanceName).toBe('Remote Backspace');
+    expect(row?.status).toBe('active');
+  });
+
+  it('does NOT overwrite instance_name on the active idempotent early-return path', async () => {
+    testDb.insert(schema.federationPeers).values({
+      id: 'peer-active',
+      origin: 'https://remote.example',
+      hmacSecret: 'existing-secret',
+      status: 'active',
+      instanceName: 'Original Name',
+      createdAt: Date.now(),
+    }).run();
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'attacker-secret',
+        instanceName: 'Attacker Name',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.id, 'peer-active')).get();
+    expect(row?.instanceName).toBe('Original Name');
+    expect(row?.hmacSecret).toBe('existing-secret');
+  });
+
+  it('writes null instance_name when body omits the field', async () => {
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'remote-secret',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.instanceName).toBeNull();
+  });
+});
+
+describe('POST /api/federation/peer/accept — response body carries instanceName', () => {
+  let app: FastifyInstance;
+
+  beforeEach(async () => {
+    sqlite = new Database(':memory:');
+    testDb = drizzle(sqlite, { schema });
+    applyMigrations(sqlite);
+    seedInstanceSettings('Local Backspace');
+    app = await buildApp();
+  });
+
+  it('returns our own instanceName in the response body on new-peer accept', async () => {
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'remote-secret',
+        instanceName: 'Remote Backspace',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const body = response.json() as { accepted: boolean; instanceName?: string | null };
+    expect(body.accepted).toBe(true);
+    expect(body.instanceName).toBe('Local Backspace');
+  });
+
+  it('returns our instanceName on the active idempotent path too', async () => {
+    testDb.insert(schema.federationPeers).values({
+      id: 'peer-active',
+      origin: 'https://remote.example',
+      hmacSecret: 'existing-secret',
+      status: 'active',
+      instanceName: 'Original Name',
+      createdAt: Date.now(),
+    }).run();
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'remote-secret',
+        instanceName: 'Remote Backspace',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const body = response.json() as { accepted: boolean; instanceName?: string | null };
+    expect(body.instanceName).toBe('Local Backspace');
+  });
+
+  it('returns instanceName: null when instanceSettings table is empty', async () => {
+    testDb.delete(schema.instanceSettings).run();
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/accept',
+      payload: {
+        sourceOrigin: 'https://remote.example',
+        hmacSecret: 'remote-secret',
+      },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const body = response.json() as { accepted: boolean; instanceName?: string | null };
+    expect(body.instanceName).toBeNull();
+  });
+});
+
+describe('POST /api/federation/peer/initiate — persists remote instanceName from handshake response', () => {
+  let app: FastifyInstance;
+
+  beforeEach(async () => {
+    sqlite = new Database(':memory:');
+    testDb = drizzle(sqlite, { schema });
+    applyMigrations(sqlite);
+    seedInstanceSettings('Local Backspace');
+    app = await buildApp();
+  });
+
+  afterEach(() => {
+    vi.unstubAllGlobals();
+  });
+
+  it('writes remote.instanceName when remote /peer/accept succeeds', async () => {
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response(JSON.stringify({ accepted: true, instanceName: 'Remote Backspace' }), {
+        status: 200,
+        headers: { 'content-type': 'application/json' },
+      }),
+    ));
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/initiate',
+      payload: { remoteOrigin: 'https://remote.example' },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.status).toBe('active');
+    expect(row?.instanceName).toBe('Remote Backspace');
+  });
+
+  it('writes null instanceName when remote response omits the field', async () => {
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response(JSON.stringify({ accepted: true }), {
+        status: 200,
+        headers: { 'content-type': 'application/json' },
+      }),
+    ));
+
+    const response = await app.inject({
+      method: 'POST',
+      url: '/api/federation/peer/initiate',
+      payload: { remoteOrigin: 'https://remote.example' },
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.instanceName).toBeNull();
+  });
+});
+
+describe('POST /api/federation/approval-requests/:id/approve — persists remote instanceName from handshake response', () => {
+  let app: FastifyInstance;
+
+  beforeEach(async () => {
+    sqlite = new Database(':memory:');
+    testDb = drizzle(sqlite, { schema });
+    applyMigrations(sqlite);
+    seedInstanceSettings('Local Backspace');
+    app = await buildApp();
+  });
+
+  afterEach(() => {
+    vi.unstubAllGlobals();
+  });
+
+  function seedApprovalRequest(): string {
+    const id = 'approval-1';
+    testDb.insert(schema.peerApprovalRequests).values({
+      id,
+      origin: 'https://remote.example',
+      instanceName: 'Stale Name',
+      hmacSecret: 'their-old-secret',
+      requestedAt: Date.now(),
+      expiresAt: Date.now() + 30 * 24 * 60 * 60 * 1000,
+    }).run();
+    return id;
+  }
+
+  it('writes remote.instanceName when remote /peer/accept succeeds', async () => {
+    const approvalId = seedApprovalRequest();
+
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response(JSON.stringify({ accepted: true, instanceName: 'Remote Backspace' }), {
+        status: 200,
+        headers: { 'content-type': 'application/json' },
+      }),
+    ));
+
+    const response = await app.inject({
+      method: 'POST',
+      url: `/api/federation/approval-requests/${approvalId}/approve`,
+      payload: {},
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.status).toBe('active');
+    expect(row?.instanceName).toBe('Remote Backspace');
+  });
+
+  it('writes null instanceName when remote response omits the field', async () => {
+    const approvalId = seedApprovalRequest();
+
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response(JSON.stringify({ accepted: true }), {
+        status: 200,
+        headers: { 'content-type': 'application/json' },
+      }),
+    ));
+
+    const response = await app.inject({
+      method: 'POST',
+      url: `/api/federation/approval-requests/${approvalId}/approve`,
+      payload: {},
+    });
+
+    expect(response.statusCode).toBe(200);
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.instanceName).toBeNull();
+  });
+});
diff --git a/packages/server/src/routes/federation.ts b/packages/server/src/routes/federation.ts
index b14a9121..11136582 100644
--- a/packages/server/src/routes/federation.ts
+++ b/packages/server/src/routes/federation.ts
@@ -351,9 +351,21 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
           return reply.code(502).send({ error: errorMessage, statusCode: 502 });
         }
 
-        // Remote accepted — activate the peer
+        // Remote accepted — activate the peer. Parse the remote's instanceName
+        // from the response body so the federation panel renders a friendly
+        // label. Tolerate omission and non-JSON bodies.
+        let remoteInstanceName: string | null = null;
+        try {
+          const body = (await response.json()) as { instanceName?: string | null };
+          if (typeof body?.instanceName === 'string' && body.instanceName.length > 0) {
+            remoteInstanceName = body.instanceName;
+          }
+        } catch {
+          // Non-JSON body — leave null.
+        }
+
         db.update(schema.federationPeers)
-          .set({ status: 'active', lastSeenAt: Date.now() })
+          .set({ status: 'active', lastSeenAt: Date.now(), instanceName: remoteInstanceName })
           .where(eq(schema.federationPeers.id, peerId))
           .run();
         connectionManager.sendToAdmins({ type: 'federation_peers_changed' as const });
@@ -394,7 +406,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
   // ─── POST /api/federation/peer/accept ──────────────────────────────────────
   // Server-to-server: accept a peering request from a remote instance.
   // No JWT auth — this is first contact. Rate-limited by IP.
-  app.post<{ Body: { sourceOrigin: string; challenge?: string; hmacSecret: string } }>(
+  app.post<{ Body: { sourceOrigin: string; challenge?: string; hmacSecret: string; instanceName?: string } }>(
     '/api/federation/peer/accept',
     async (request, reply) => {
       const clientIp = request.ip;
@@ -405,7 +417,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
         });
       }
 
-      const { sourceOrigin: rawOrigin, hmacSecret } = request.body ?? {};
+      const { sourceOrigin: rawOrigin, hmacSecret, instanceName: reqInstanceName } = request.body ?? {};
 
       if (!rawOrigin || typeof rawOrigin !== 'string') {
         return reply.code(400).send({ error: 'sourceOrigin is required', statusCode: 400 });
@@ -421,16 +433,22 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
 
       const db = getDb();
 
+      const settings = db
+        .select({
+          instanceName: schema.instanceSettings.instanceName,
+          autoAcceptPeering: schema.instanceSettings.autoAcceptPeering,
+        })
+        .from(schema.instanceSettings)
+        .where(eq(schema.instanceSettings.id, 1))
+        .get();
+
+      const ourInstanceName = settings?.instanceName ?? null;
+      const autoAccept = settings?.autoAcceptPeering ?? 1;
+
       // ── autoAcceptPeering gate ──────────────────────────────────────────
       // When auto-accept is disabled, only allow incoming accept requests
       // that correspond to a local pending peer (i.e., a local admin
       // initiated the handshake). Unsolicited requests are rejected.
-      const settings = db
-        .select({ autoAcceptPeering: schema.instanceSettings.autoAcceptPeering })
-        .from(schema.instanceSettings)
-        .where(eq(schema.instanceSettings.id, 1))
-        .get();
-      const autoAccept = settings?.autoAcceptPeering ?? 1;
 
       if (autoAccept === 0) {
         // Check if the local admin already initiated or approved peering with this origin.
@@ -471,7 +489,6 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
           }
 
           // Queue for admin approval — upsert into peer_approval_requests
-          const { instanceName: reqInstanceName } = request.body as { instanceName?: string };
           const now = Date.now();
           const THIRTY_DAYS_MS = 30 * 24 * 60 * 60 * 1000;
 
@@ -537,7 +554,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
           // Legitimate recovery path: local admin clicks "Reset peering" →
           // row is deleted → remote's /peer/accept then lands on a
           // non-existent row and the normal handshake path runs.
-          return reply.code(200).send({ accepted: true });
+          return reply.code(200).send({ accepted: true, instanceName: ourInstanceName });
         }
         if (existing.status === 'revoked') {
           return reply.code(403).send({
@@ -551,6 +568,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
           db.update(schema.federationPeers)
             .set({
               hmacSecret,
+              instanceName: reqInstanceName ?? null,
               status: 'active',
               lastSeenAt: Date.now(),
             })
@@ -570,13 +588,14 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
             console.error('[federation] onPeerActivated from /peer/accept (rejected override) failed:', err)
           );
 
-          return reply.code(200).send({ accepted: true });
+          return reply.code(200).send({ accepted: true, instanceName: ourInstanceName });
         }
         if (existing.status === 'awaiting_approval') {
           // Remote admin approved — this is a fresh handshake from them.
           db.update(schema.federationPeers)
             .set({
               hmacSecret,
+              instanceName: reqInstanceName ?? null,
               status: 'active',
               lastSeenAt: Date.now(),
             })
@@ -596,12 +615,13 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
             console.error('[federation] onPeerActivated from /peer/accept (awaiting_approval) failed:', err)
           );
 
-          return reply.code(200).send({ accepted: true });
+          return reply.code(200).send({ accepted: true, instanceName: ourInstanceName });
         }
         // Pending — update with new secret and activate
         db.update(schema.federationPeers)
           .set({
             hmacSecret,
+            instanceName: reqInstanceName ?? null,
             status: 'active',
             lastSeenAt: Date.now(),
           })
@@ -613,7 +633,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
           console.error('[federation] onPeerActivated from /peer/accept (pending) failed:', err)
         );
 
-        return reply.code(200).send({ accepted: true });
+        return reply.code(200).send({ accepted: true, instanceName: ourInstanceName });
       }
 
       // New peer — create and activate
@@ -622,6 +642,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
         id: peerId,
         origin: sourceOrigin,
         hmacSecret,
+        instanceName: reqInstanceName ?? null,
         status: 'active',
         lastSeenAt: Date.now(),
         createdAt: Date.now(),
@@ -632,7 +653,7 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
         console.error('[federation] onPeerActivated from /peer/accept (new) failed:', err)
       );
 
-      return reply.code(200).send({ accepted: true });
+      return reply.code(200).send({ accepted: true, instanceName: ourInstanceName });
     },
   );
 
@@ -1148,8 +1169,21 @@ export async function federationRoutes(app: FastifyInstance): Promise<void> {
           return reply.code(502).send({ error: errorMessage, statusCode: 502 });
         }
 
+        // Parse the remote's instanceName from the response body so the
+        // federation panel renders a friendly label. Tolerate omission and
+        // non-JSON bodies — same pattern as performHandshake and /peer/initiate.
+        let remoteInstanceName: string | null = null;
+        try {
+          const body = (await response.json()) as { instanceName?: string | null };
+          if (typeof body?.instanceName === 'string' && body.instanceName.length > 0) {
+            remoteInstanceName = body.instanceName;
+          }
+        } catch {
+          // Non-JSON body — leave null.
+        }
+
         db.update(schema.federationPeers)
-          .set({ status: 'active', lastSeenAt: now })
+          .set({ status: 'active', lastSeenAt: now, instanceName: remoteInstanceName })
           .where(eq(schema.federationPeers.id, peerId))
           .run();
 
diff --git a/packages/server/src/utils/federationPeering.instanceName.test.ts b/packages/server/src/utils/federationPeering.instanceName.test.ts
new file mode 100644
index 00000000..c19402d5
--- /dev/null
+++ b/packages/server/src/utils/federationPeering.instanceName.test.ts
@@ -0,0 +1,147 @@
+import { describe, it, expect, beforeEach, afterEach, vi } from 'vitest';
+import Database from 'better-sqlite3';
+import { drizzle } from 'drizzle-orm/better-sqlite3';
+import { eq } from 'drizzle-orm';
+import fs from 'node:fs';
+import path from 'node:path';
+import { fileURLToPath } from 'node:url';
+import * as schema from '../db/schema.js';
+import { setWorkerId } from './snowflake.js';
+
+setWorkerId(1);
+
+const __dirname = path.dirname(fileURLToPath(import.meta.url));
+type TestDb = ReturnType<typeof drizzle<typeof schema>>;
+let sqlite: Database.Database;
+let testDb: TestDb;
+
+vi.mock('../db/index.js', () => ({
+  getDb: () => testDb,
+  schema,
+}));
+
+vi.mock('./federationAuth.js', async () => {
+  const actual = await vi.importActual<typeof import('./federationAuth.js')>('./federationAuth.js');
+  return {
+    ...actual,
+    getOurOrigin: () => 'https://local.example',
+    generateHmacSecret: () => 'mock-hmac-secret',
+  };
+});
+
+vi.mock('../routes/federation.js', () => ({
+  validateOrigin: (raw: string) => {
+    try {
+      const url = new URL(raw);
+      return url.origin;
+    } catch {
+      return null;
+    }
+  },
+}));
+
+vi.mock('../ws/handler.js', () => ({
+  connectionManager: {
+    sendToAdmins: vi.fn(),
+    sendToUser: vi.fn(),
+    getAllOnlineUserIds: () => [],
+  },
+}));
+
+vi.mock('./federationPeerActivation.js', () => ({
+  onPeerActivated: vi.fn(async () => undefined),
+}));
+
+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 sqlText = fs.readFileSync(path.join(migrationsDir, f), 'utf8');
+    const statements = sqlText.split(/-->\s*statement-breakpoint/);
+    for (const stmt of statements) {
+      const clean = stmt.trim();
+      if (clean) db.exec(clean);
+    }
+  }
+}
+
+function seedInstanceSettings(): void {
+  testDb.insert(schema.instanceSettings).values({
+    id: 1,
+    instanceName: 'Local Backspace',
+    autoAcceptPeering: 1,
+    registrationOpen: 1,
+    updatedAt: Date.now(),
+  }).run();
+}
+
+describe('performHandshake — persist remote instanceName', () => {
+  beforeEach(() => {
+    sqlite = new Database(':memory:');
+    testDb = drizzle(sqlite, { schema });
+    applyMigrations(sqlite);
+    seedInstanceSettings();
+  });
+
+  afterEach(() => {
+    vi.restoreAllMocks();
+    sqlite.close();
+  });
+
+  it('writes remote.instanceName from response body when handshake succeeds', async () => {
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response(JSON.stringify({ accepted: true, instanceName: 'Remote Backspace' }), {
+        status: 200,
+        headers: { 'content-type': 'application/json' },
+      }),
+    ));
+
+    const { ensurePeered, _clearInFlightPeering } = await import('./federationPeering.js');
+    _clearInFlightPeering();
+    const result = await ensurePeered('https://remote.example');
+
+    expect(result.status).toBe('active');
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.instanceName).toBe('Remote Backspace');
+    expect(row?.status).toBe('active');
+  });
+
+  it('writes null instanceName when remote response omits the field (old peer)', async () => {
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response(JSON.stringify({ accepted: true }), {
+        status: 200,
+        headers: { 'content-type': 'application/json' },
+      }),
+    ));
+
+    const { ensurePeered, _clearInFlightPeering } = await import('./federationPeering.js');
+    _clearInFlightPeering();
+    const result = await ensurePeered('https://remote.example');
+
+    expect(result.status).toBe('active');
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.instanceName).toBeNull();
+    expect(row?.status).toBe('active');
+  });
+
+  it('does not crash when remote returns non-JSON body on 200', async () => {
+    vi.stubGlobal('fetch', vi.fn(async () =>
+      new Response('not json', {
+        status: 200,
+        headers: { 'content-type': 'text/plain' },
+      }),
+    ));
+
+    const { ensurePeered, _clearInFlightPeering } = await import('./federationPeering.js');
+    _clearInFlightPeering();
+    const result = await ensurePeered('https://remote.example');
+
+    expect(result.status).toBe('active');
+    const row = testDb.select().from(schema.federationPeers)
+      .where(eq(schema.federationPeers.origin, 'https://remote.example')).get();
+    expect(row?.status).toBe('active');
+    expect(row?.instanceName).toBeNull();
+  });
+});
diff --git a/packages/server/src/utils/federationPeering.ts b/packages/server/src/utils/federationPeering.ts
index 19ff03d8..4e8ea932 100644
--- a/packages/server/src/utils/federationPeering.ts
+++ b/packages/server/src/utils/federationPeering.ts
@@ -155,9 +155,21 @@ async function performHandshake(
     }
 
     if (response.ok) {
-      // 200 = peer accepted and activated
+      // 200 = peer accepted and activated. Parse remote's instanceName from
+      // the response body so we can render a friendly label for the peer.
+      // Tolerate omission (older peers) and non-JSON bodies (defensive).
+      let remoteInstanceName: string | null = null;
+      try {
+        const body = (await response.json()) as { instanceName?: string | null };
+        if (typeof body?.instanceName === 'string' && body.instanceName.length > 0) {
+          remoteInstanceName = body.instanceName;
+        }
+      } catch {
+        // Non-JSON or empty body — leave remoteInstanceName as null.
+      }
+
       db.update(schema.federationPeers)
-        .set({ status: 'active', lastSeenAt: Date.now() })
+        .set({ status: 'active', lastSeenAt: Date.now(), instanceName: remoteInstanceName })
         .where(eq(schema.federationPeers.id, peerId))
         .run();
       const { connectionManager } = await import('../ws/handler.js');