diff --git a/providers/flagd/tests/BUILD b/providers/flagd/tests/BUILD
index 8dfb0d7..2cb5bd4 100644
--- a/providers/flagd/tests/BUILD
+++ b/providers/flagd/tests/BUILD
@@ -18,3 +18,13 @@ cc_test(
         "@nlohmann_json//:json",
     ],
 )
+
+cc_test(
+    name = "configuration_test",
+    srcs = ["configuration_test.cpp"],
+    deps = [
+        "//providers/flagd/src:flagd_configuration",
+        "@abseil-cpp//absl/strings",
+        "@googletest//:gtest_main",
+    ],
+)
diff --git a/providers/flagd/tests/configuration_test.cpp b/providers/flagd/tests/configuration_test.cpp
new file mode 100644
index 0000000..63e20df
--- /dev/null
+++ b/providers/flagd/tests/configuration_test.cpp
@@ -0,0 +1,103 @@
+#include "flagd/configuration.h"
+
+#include <gtest/gtest.h>
+
+#include "absl/strings/str_cat.h"
+
+namespace flagd {
+
+class ConfigurationTest : public ::testing::Test {
+ protected:
+  void SetUp() override { ClearFlagdEnvVars(); }
+
+  void TearDown() override { ClearFlagdEnvVars(); }
+
+ private:
+  void ClearFlagdEnvVars() {
+    unsetenv("FLAGD_HOST");
+    unsetenv("FLAGD_PORT");
+    unsetenv("FLAGD_TARGET_URI");
+    unsetenv("FLAGD_TLS");
+    unsetenv("FLAGD_SOCKET_PATH");
+    unsetenv("FLAGD_SERVER_CERT_PATH");
+    unsetenv("FLAGD_SOURCE_SELECTOR");
+    unsetenv("FLAGD_PROVIDER_ID");
+  }
+};
+
+TEST_F(ConfigurationTest, DefaultValues) {
+  FlagdProviderConfig config;
+  const std::string default_host = "localhost";
+  const int default_port = 8015;
+  EXPECT_EQ(config.GetHost(), default_host);
+  EXPECT_EQ(config.GetPort(), default_port);
+  EXPECT_FALSE(config.GetTls());
+  EXPECT_EQ(config.GetEffectiveTargetUri(),
+            absl::StrCat(default_host, ":", default_port));
+}
+
+TEST_F(ConfigurationTest, EnvironmentVariables) {
+  const std::string host = "myhost";
+  const int port = 9000;
+  setenv("FLAGD_HOST", host.c_str(), 1);
+  setenv("FLAGD_PORT", std::to_string(port).c_str(), 1);
+  setenv("FLAGD_TLS", "true", 1);
+  setenv("FLAGD_SOURCE_SELECTOR", "my-selector", 1);
+
+  FlagdProviderConfig config;
+  EXPECT_EQ(config.GetHost(), host);
+  EXPECT_EQ(config.GetPort(), port);
+  EXPECT_TRUE(config.GetTls());
+  EXPECT_TRUE(config.GetSelector().has_value());
+  EXPECT_EQ(config.GetSelector().value(), "my-selector");
+  EXPECT_EQ(config.GetEffectiveTargetUri(), absl::StrCat(host, ":", port));
+}
+
+TEST_F(ConfigurationTest, EffectiveTargetUriPrecedence) {
+  FlagdProviderConfig config;
+  const std::string host = "host";
+  const int port = 1234;
+
+  config.SetHost(host).SetPort(port);
+  EXPECT_EQ(config.GetEffectiveTargetUri(), absl::StrCat(host, ":", port));
+
+  const std::string socket_path = "/tmp/flagd.sock";
+  config.SetSocketPath(socket_path);
+  EXPECT_EQ(config.GetEffectiveTargetUri(),
+            absl::StrCat("unix://", socket_path));
+
+  const std::string target_uri = "grpc://custom:5000";
+  config.SetTargetUri(target_uri);
+  EXPECT_EQ(config.GetEffectiveTargetUri(), target_uri);
+}
+
+TEST_F(ConfigurationTest, GetEffectiveCredentialsInsecure) {
+  FlagdProviderConfig config;
+  config.SetTls(false);
+  absl::StatusOr<std::shared_ptr<grpc::ChannelCredentials>> creds =
+      config.GetEffectiveCredentials();
+  ASSERT_TRUE(creds.ok());
+  EXPECT_NE(*creds, nullptr);
+}
+
+TEST_F(ConfigurationTest, GetEffectiveCredentialsTlsNoCert) {
+  FlagdProviderConfig config;
+  config.SetTls(true);
+  absl::StatusOr<std::shared_ptr<grpc::ChannelCredentials>> creds =
+      config.GetEffectiveCredentials();
+  ASSERT_TRUE(creds.ok());
+  EXPECT_NE(*creds, nullptr);
+}
+
+TEST_F(ConfigurationTest, GetEffectiveCredentialsExplicit) {
+  FlagdProviderConfig config;
+  std::shared_ptr<grpc::ChannelCredentials> my_creds =
+      grpc::InsecureChannelCredentials();
+  config.SetChannelCredentials(my_creds);
+  absl::StatusOr<std::shared_ptr<grpc::ChannelCredentials>> creds =
+      config.GetEffectiveCredentials();
+  ASSERT_TRUE(creds.ok());
+  EXPECT_EQ(*creds, my_creds);
+}
+
+}  // namespace flagd