diff --git a/pkg/rpc/server/server.go b/pkg/rpc/server/server.go
index fb07058c9..661edec35 100644
--- a/pkg/rpc/server/server.go
+++ b/pkg/rpc/server/server.go
@@ -24,6 +24,7 @@ import (
 	"github.com/evstack/ev-node/pkg/config"
 	"github.com/evstack/ev-node/pkg/p2p"
 	"github.com/evstack/ev-node/pkg/store"
+	"github.com/evstack/ev-node/pkg/telemetry"
 	"github.com/evstack/ev-node/types"
 	pb "github.com/evstack/ev-node/types/pb/evnode/v1"
 	rpc "github.com/evstack/ev-node/types/pb/evnode/v1/v1connect"
@@ -413,8 +414,13 @@ func NewServiceHandler(
 	// Register custom HTTP endpoints
 	RegisterCustomHTTPEndpoints(mux, store, peerManager, config, bestKnown, logger)
 
+	var handler http.Handler = mux
+	if config.Instrumentation.IsTracingEnabled() {
+		handler = telemetry.ExtractTraceContext(mux)
+	}
+
 	// Use h2c to support HTTP/2 without TLS
-	return h2c.NewHandler(mux, &http2.Server{
+	return h2c.NewHandler(handler, &http2.Server{
 		IdleTimeout:          120 * time.Second,
 		MaxReadFrameSize:     1 << 24,
 		MaxConcurrentStreams: 100,
diff --git a/pkg/telemetry/http_extract.go b/pkg/telemetry/http_extract.go
new file mode 100644
index 000000000..0cbe77077
--- /dev/null
+++ b/pkg/telemetry/http_extract.go
@@ -0,0 +1,20 @@
+package telemetry
+
+import (
+	"net/http"
+
+	"go.opentelemetry.io/otel"
+	"go.opentelemetry.io/otel/propagation"
+)
+
+// ExtractTraceContext returns HTTP middleware that extracts W3C Trace Context
+// headers (traceparent, tracestate) from incoming requests and adds them to
+// the request context. This enables spans created downstream to be children
+// of the caller's trace.
+func ExtractTraceContext(next http.Handler) http.Handler {
+	return http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		prop := otel.GetTextMapPropagator()
+		ctx := prop.Extract(r.Context(), propagation.HeaderCarrier(r.Header))
+		next.ServeHTTP(w, r.WithContext(ctx))
+	})
+}
diff --git a/pkg/telemetry/http_extract_test.go b/pkg/telemetry/http_extract_test.go
new file mode 100644
index 000000000..41f035ddc
--- /dev/null
+++ b/pkg/telemetry/http_extract_test.go
@@ -0,0 +1,86 @@
+package telemetry
+
+import (
+	"context"
+	"net/http"
+	"net/http/httptest"
+	"testing"
+
+	"github.com/stretchr/testify/require"
+	"go.opentelemetry.io/otel"
+	"go.opentelemetry.io/otel/propagation"
+	sdktrace "go.opentelemetry.io/otel/sdk/trace"
+	"go.opentelemetry.io/otel/sdk/trace/tracetest"
+	"go.opentelemetry.io/otel/trace"
+)
+
+func TestExtractTraceContext_WithParentTrace(t *testing.T) {
+	sr := tracetest.NewSpanRecorder()
+	tp := sdktrace.NewTracerProvider(sdktrace.WithSpanProcessor(sr))
+	t.Cleanup(func() { _ = tp.Shutdown(context.Background()) })
+	otel.SetTracerProvider(tp)
+	otel.SetTextMapPropagator(propagation.TraceContext{})
+
+	tracer := tp.Tracer("test")
+
+	// create a parent span to get a valid trace context
+	parentCtx, parentSpan := tracer.Start(context.Background(), "parent")
+	parentSpanCtx := parentSpan.SpanContext()
+	parentSpan.End()
+
+	// inject the parent context into headers
+	headers := make(http.Header)
+	otel.GetTextMapPropagator().Inject(parentCtx, propagation.HeaderCarrier(headers))
+
+	var extractedSpanCtx trace.SpanContext
+	handler := ExtractTraceContext(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		// create a child span using the extracted context
+		_, childSpan := tracer.Start(r.Context(), "child")
+		extractedSpanCtx = childSpan.SpanContext()
+		childSpan.End()
+		w.WriteHeader(http.StatusOK)
+	}))
+
+	req := httptest.NewRequest(http.MethodGet, "/test", nil)
+	req.Header = headers
+	rec := httptest.NewRecorder()
+
+	handler.ServeHTTP(rec, req)
+
+	require.Equal(t, http.StatusOK, rec.Code)
+	require.True(t, extractedSpanCtx.IsValid(), "child span should be valid")
+	require.Equal(t, parentSpanCtx.TraceID(), extractedSpanCtx.TraceID(), "child should have same trace ID as parent")
+}
+
+func TestExtractTraceContext_WithoutParentTrace(t *testing.T) {
+	sr := tracetest.NewSpanRecorder()
+	tp := sdktrace.NewTracerProvider(sdktrace.WithSpanProcessor(sr))
+	t.Cleanup(func() { _ = tp.Shutdown(context.Background()) })
+	otel.SetTracerProvider(tp)
+	otel.SetTextMapPropagator(propagation.TraceContext{})
+
+	tracer := tp.Tracer("test")
+
+	var extractedSpanCtx trace.SpanContext
+	handler := ExtractTraceContext(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		// create a span - should be a root span since no parent headers
+		_, span := tracer.Start(r.Context(), "root")
+		extractedSpanCtx = span.SpanContext()
+		span.End()
+		w.WriteHeader(http.StatusOK)
+	}))
+
+	req := httptest.NewRequest(http.MethodGet, "/test", nil)
+	// no trace headers
+	rec := httptest.NewRecorder()
+
+	handler.ServeHTTP(rec, req)
+
+	require.Equal(t, http.StatusOK, rec.Code)
+	require.True(t, extractedSpanCtx.IsValid(), "span should be valid")
+
+	// verify it's a root span by checking no parent exists in the recorded spans
+	spans := sr.Ended()
+	require.Len(t, spans, 1)
+	require.False(t, spans[0].Parent().IsValid(), "span should be a root span with no parent")
+}