diff --git a/packages/atxp-express/src/atxpExpress.test.ts b/packages/atxp-express/src/atxpExpress.test.ts
index 002d2cf..227c77c 100644
--- a/packages/atxp-express/src/atxpExpress.test.ts
+++ b/packages/atxp-express/src/atxpExpress.test.ts
@@ -1,4 +1,4 @@
-import { describe, it, expect} from 'vitest';
+import { describe, it, expect, vi, beforeEach, afterEach } from 'vitest';
 import { atxpExpress } from './atxpExpress.js';
 import { MemoryOAuthDb } from '@atxp/common';
 import * as TH from '@atxp/server/serverTestHelpers';
@@ -163,4 +163,96 @@ describe('ATXP', () => {
       scopes_supported: ['read', 'write'],
     });
   });
+
+  // The forwarding is one line at atxpExpress.ts (new ProtocolSettlement(...,
+  // { appName: config.appName })), but it's the glue most likely to silently
+  // break if someone refactors the settlement instantiation — a missing
+  // passthrough would still compile and pass unit tests. Close the loop by
+  // asserting the header actually reaches the outgoing fetch.
+  describe('X-ATXP-APP-NAME header forwarding', () => {
+    const mockFetch = vi.fn();
+
+    beforeEach(() => {
+      mockFetch.mockReset();
+      // Default: swallow the settle call so the middleware moves on to the
+      // handler. Tests assert on the headers recorded here.
+      mockFetch.mockResolvedValue({
+        ok: true,
+        json: async () => ({ txHash: '0xabc', settledAmount: '100' }),
+        text: async () => '',
+      });
+      // vi.stubGlobal + unstubAllGlobals is the idiomatic vitest pattern; plain
+      // reassignment of globalThis.fetch doesn't always propagate through the
+      // `fetch.bind(globalThis)` used in atxpExpress under all vitest configs.
+      vi.stubGlobal('fetch', mockFetch);
+    });
+
+    afterEach(() => {
+      vi.unstubAllGlobals();
+    });
+
+    const atxpCredential = JSON.stringify({
+      sourceAccountId: 'atxp_acct_test123',
+      sourceAccountToken: 'tok_abc',
+    });
+
+    const findSettleCall = () => mockFetch.mock.calls.find(
+      ([url]) => typeof url === 'string' && url.includes('/settle/'),
+    );
+
+    // The middleware only runs the settle path on MCP requests — non-MCP
+    // requests bail out at parseMcpRequestsNode, which is why the older
+    // omniChallenge.test.ts tests observe that fetch isn't called.
+    const sendMcpToolCall = (app: express.Application) =>
+      request(app)
+        .post('/')
+        .set('Content-Type', 'application/json')
+        .set('Authorization', 'Bearer test-access-token')
+        .set('X-ATXP-PAYMENT', atxpCredential)
+        .send(TH.mcpToolRequest());
+
+    it('forwards config.appName into the X-ATXP-APP-NAME header on /settle/*', async () => {
+      const router = atxpExpress(TH.config({
+        appName: 'music-mcp',
+        oAuthClient: TH.oAuthClient({ introspectResult: TH.tokenData({ active: true, sub: 'test-user' }) }),
+      }));
+
+      const app = express();
+      app.use(express.json());
+      app.use(router);
+      app.post('/', (_req, res) => res.json({ ok: true }));
+
+      await sendMcpToolCall(app).expect(200);
+
+      const settleCall = findSettleCall();
+      expect(settleCall, 'atxpExpress should have called /settle/*').toBeDefined();
+      const headers = settleCall![1].headers as Record<string, string>;
+      expect(headers['X-ATXP-APP-NAME']).toBe('music-mcp');
+    });
+
+    it('omits the header when config.appName is unset and APP_NAME env is empty', async () => {
+      const savedAppName = process.env.APP_NAME;
+      delete process.env.APP_NAME;
+      try {
+        const router = atxpExpress(TH.config({
+          oAuthClient: TH.oAuthClient({ introspectResult: TH.tokenData({ active: true, sub: 'test-user' }) }),
+        }));
+
+        const app = express();
+        app.use(express.json());
+        app.use(router);
+        app.post('/', (_req, res) => res.json({ ok: true }));
+
+        await sendMcpToolCall(app).expect(200);
+
+        const settleCall = findSettleCall();
+        expect(settleCall, 'atxpExpress should have called /settle/*').toBeDefined();
+        const headers = settleCall![1].headers as Record<string, string>;
+        expect(headers).not.toHaveProperty('X-ATXP-APP-NAME');
+      } finally {
+        if (savedAppName === undefined) delete process.env.APP_NAME;
+        else process.env.APP_NAME = savedAppName;
+      }
+    });
+  });
 });
\ No newline at end of file
diff --git a/packages/atxp-express/src/atxpExpress.ts b/packages/atxp-express/src/atxpExpress.ts
index 06091ab..7259b91 100644
--- a/packages/atxp-express/src/atxpExpress.ts
+++ b/packages/atxp-express/src/atxpExpress.ts
@@ -126,6 +126,7 @@ export function atxpExpress(args: ATXPArgs): Router {
             logger,
             fetch.bind(globalThis),
             destinationAccountId,
+            { appName: config.appName },
           );
 
           // For X402: the credential's parsed payload contains `accepted` — the
diff --git a/packages/atxp-server/src/index.ts b/packages/atxp-server/src/index.ts
index 91b65d8..0a7cdd2 100644
--- a/packages/atxp-server/src/index.ts
+++ b/packages/atxp-server/src/index.ts
@@ -96,6 +96,7 @@ export {
   detectProtocol,
   parseCredentialBase64,
   ProtocolSettlement,
+  type ProtocolSettlementOptions,
 } from './protocol.js';
 
 // Omni-challenge builders
diff --git a/packages/atxp-server/src/protocol.test.ts b/packages/atxp-server/src/protocol.test.ts
index 10c62cb..37ef919 100644
--- a/packages/atxp-server/src/protocol.test.ts
+++ b/packages/atxp-server/src/protocol.test.ts
@@ -1,4 +1,4 @@
-import { describe, it, expect, vi, beforeEach } from 'vitest';
+import { describe, it, expect, vi, beforeEach, afterEach } from 'vitest';
 import { detectProtocol, ProtocolSettlement } from './protocol.js';
 
 describe('detectProtocol', () => {
@@ -415,4 +415,127 @@ describe('ProtocolSettlement', () => {
       });
     });
   });
+
+  describe('X-ATXP-APP-NAME header', () => {
+    // Auth reads this header and attaches it to settle observability events
+    // so dashboards can slice by calling service. See auth#254.
+    const savedAppName = process.env.APP_NAME;
+    afterEach(() => {
+      if (savedAppName === undefined) delete process.env.APP_NAME;
+      else process.env.APP_NAME = savedAppName;
+    });
+
+    const okResponse = () => ({ ok: true, json: async () => ({ txHash: '0xabc', settledAmount: '1' }) });
+    const credential = Buffer.from(JSON.stringify({ signature: '0xabc' })).toString('base64');
+
+    const headersFromFetch = (fetch: ReturnType<typeof vi.fn>) =>
+      fetch.mock.calls[0][1].headers as Record<string, string>;
+
+    it('sends X-ATXP-APP-NAME when the explicit appName option is set', async () => {
+      mockFetch.mockResolvedValue(okResponse());
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+        undefined,
+        { appName: 'llm' },
+      );
+
+      await s.settle('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)['X-ATXP-APP-NAME']).toBe('llm');
+    });
+
+    it('falls back to process.env.APP_NAME when appName option is omitted', async () => {
+      process.env.APP_NAME = 'music-mcp';
+      mockFetch.mockResolvedValue(okResponse());
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+      );
+
+      await s.settle('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)['X-ATXP-APP-NAME']).toBe('music-mcp');
+    });
+
+    it('explicit appName option overrides process.env.APP_NAME', async () => {
+      process.env.APP_NAME = 'from-env';
+      mockFetch.mockResolvedValue(okResponse());
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+        undefined,
+        { appName: 'from-option' },
+      );
+
+      await s.settle('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)['X-ATXP-APP-NAME']).toBe('from-option');
+    });
+
+    it('explicit empty string disables env fallback (header omitted)', async () => {
+      // Empty-string override lets tests and oddball configs opt out of the
+      // env fallback without mutating process.env.
+      process.env.APP_NAME = 'would-have-used-this';
+      mockFetch.mockResolvedValue(okResponse());
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+        undefined,
+        { appName: '' },
+      );
+
+      await s.settle('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)).not.toHaveProperty('X-ATXP-APP-NAME');
+    });
+
+    it('omits the header when neither option nor env is set', async () => {
+      delete process.env.APP_NAME;
+      mockFetch.mockResolvedValue(okResponse());
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+      );
+
+      await s.settle('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)).not.toHaveProperty('X-ATXP-APP-NAME');
+    });
+
+    it('trims whitespace-only values to undefined (header omitted)', async () => {
+      mockFetch.mockResolvedValue(okResponse());
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+        undefined,
+        { appName: '   ' },
+      );
+
+      await s.settle('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)).not.toHaveProperty('X-ATXP-APP-NAME');
+    });
+
+    it('sets the header on verify() as well as settle()', async () => {
+      mockFetch.mockResolvedValue({ ok: true, json: async () => ({ valid: true }) });
+      const s = new ProtocolSettlement(
+        'https://auth.atxp.ai' as any,
+        mockLogger,
+        mockFetch,
+        undefined,
+        { appName: 'llm' },
+      );
+
+      await s.verify('x402', credential, { paymentRequirements: { network: 'base' } });
+
+      expect(headersFromFetch(mockFetch)['X-ATXP-APP-NAME']).toBe('llm');
+    });
+  });
 });
diff --git a/packages/atxp-server/src/protocol.ts b/packages/atxp-server/src/protocol.ts
index ae6a469..c7928ed 100644
--- a/packages/atxp-server/src/protocol.ts
+++ b/packages/atxp-server/src/protocol.ts
@@ -171,18 +171,78 @@ export function parseCredentialBase64(credential: string): Record<string, unknow
   }
 }
 
+/**
+ * Constructor options for `ProtocolSettlement`. Kept as a trailing options
+ * bag so new knobs can be added without shifting positional arguments.
+ */
+export interface ProtocolSettlementOptions {
+  /**
+   * Identifier for the calling service (e.g. `"llm"`, `"music-mcp"`). Sent
+   * as the `X-ATXP-APP-NAME` header on every /settle/* and /verify/* request
+   * so auth can attribute observability events to the originating app.
+   *
+   * Resolution order:
+   *   1. this option, if set to a non-empty string
+   *   2. `process.env.APP_NAME`, if set to a non-empty string
+   *   3. header omitted
+   *
+   * An explicit empty string disables the env fallback for this instance.
+   *
+   * Expected format (enforced on the auth side): 1–64 characters,
+   * `[a-zA-Z0-9._-]+`. Values outside this range are accepted by the SDK
+   * but silently dropped by auth's `readAppNameHeader` validator — the
+   * span attribute will be missing rather than the settle failing.
+   */
+  appName?: string;
+}
+
+const APP_NAME_HEADER = 'X-ATXP-APP-NAME';
+
 /**
  * Client for calling auth service verify/settle endpoints.
  * Routes to the appropriate protocol-specific endpoint.
  */
 export class ProtocolSettlement {
+  private readonly appName: string | undefined;
+
   constructor(
     private readonly authServer: AuthorizationServerUrl,
     private readonly logger: Logger,
     private readonly fetchFn: FetchLike = fetch.bind(globalThis),
     /** Destination account ID for ATXP settle (the server/LLM's own account) */
     private readonly destinationAccountId?: string,
-  ) {}
+    options?: ProtocolSettlementOptions,
+  ) {
+    // Resolve appName once per instance. Long-lived callers (LLM constructs
+    // once at startup) get a stable value; short-lived callers that rebuild
+    // the instance — notably @atxp/express, which instantiates per-request
+    // at atxpExpress.ts:~124 — re-read process.env.APP_NAME each time, which
+    // is fine because APP_NAME is a deployment-time constant, not runtime
+    // config.
+    //
+    // An explicit empty string (options.appName === '') opts out of the env
+    // fallback — useful when a single process hosts two services and wants
+    // to suppress cross-attribution, or in tests asserting header-omitted
+    // behavior.
+    const explicit = options?.appName;
+    if (explicit !== undefined) {
+      const trimmed = explicit.trim();
+      this.appName = trimmed || undefined;
+    } else {
+      const envValue = (typeof process !== 'undefined' ? process.env.APP_NAME : undefined)?.trim();
+      this.appName = envValue || undefined;
+    }
+  }
+
+  /**
+   * Build the headers sent to auth on every /settle/* and /verify/* request.
+   * Always JSON; adds X-ATXP-APP-NAME when a non-empty app name is configured.
+   */
+  private buildHeaders(): Record<string, string> {
+    const headers: Record<string, string> = { 'Content-Type': 'application/json' };
+    if (this.appName) headers[APP_NAME_HEADER] = this.appName;
+    return headers;
+  }
 
   /**
    * Verify a payment credential at request start.
@@ -199,7 +259,7 @@ export class ProtocolSettlement {
 
     const response = await this.fetchFn(url.toString(), {
       method: 'POST',
-      headers: { 'Content-Type': 'application/json' },
+      headers: this.buildHeaders(),
       body: JSON.stringify(body),
     });
 
@@ -225,7 +285,7 @@ export class ProtocolSettlement {
 
     const response = await this.fetchFn(url.toString(), {
       method: 'POST',
-      headers: { 'Content-Type': 'application/json' },
+      headers: this.buildHeaders(),
       body: JSON.stringify(body),
     });
 
diff --git a/packages/atxp-server/src/serverConfig.ts b/packages/atxp-server/src/serverConfig.ts
index 79e0397..041a90b 100644
--- a/packages/atxp-server/src/serverConfig.ts
+++ b/packages/atxp-server/src/serverConfig.ts
@@ -6,7 +6,7 @@ type RequiredATXPConfigFields = 'destination';
 type RequiredATXPConfig = Pick<ATXPConfig, RequiredATXPConfigFields>;
 type OptionalATXPConfig = Omit<ATXPConfig, RequiredATXPConfigFields>;
 export type ATXPArgs = RequiredATXPConfig & Partial<OptionalATXPConfig>;
-type BuildableATXPConfigFields = 'oAuthDb' | 'oAuthClient' | 'paymentServer' | 'logger' | 'minimumPayment';
+type BuildableATXPConfigFields = 'oAuthDb' | 'oAuthClient' | 'paymentServer' | 'logger' | 'minimumPayment' | 'appName';
 
 export const DEFAULT_CONFIG: Required<Omit<OptionalATXPConfig, BuildableATXPConfigFields>> = {
   mountPath: '/',
diff --git a/packages/atxp-server/src/types.ts b/packages/atxp-server/src/types.ts
index 11d2135..6369641 100644
--- a/packages/atxp-server/src/types.ts
+++ b/packages/atxp-server/src/types.ts
@@ -74,6 +74,23 @@ export type ATXPConfig = {
   oAuthClient: OAuthResourceClient;
   paymentServer: PaymentServer;
   minimumPayment?: BigNumber;
+  /**
+   * Identifier for the calling service (e.g. `"llm"`, `"music-mcp"`). Sent to
+   * auth as the `X-ATXP-APP-NAME` request header on /settle/* and /verify/*
+   * calls so auth can attribute observability events to the originating app.
+   *
+   * When omitted, `ProtocolSettlement` falls back to `process.env.APP_NAME`.
+   * Explicit value takes precedence; set to empty string to disable the env
+   * fallback for this instance.
+   *
+   * Expected format (enforced on the auth side — values outside this format
+   * are silently dropped by the receiver, producing a missing span attribute
+   * rather than a failed settle): 1–64 characters, `[a-zA-Z0-9._-]+`.
+   *
+   * Observability metadata only — auth treats this as untrusted. Do not use
+   * for authorization or billing attribution.
+   */
+  appName?: string;
 }