diff --git a/lib/braintrust/api/datasets.rb b/lib/braintrust/api/datasets.rb
index 39e7639d..a979eb95 100644
--- a/lib/braintrust/api/datasets.rb
+++ b/lib/braintrust/api/datasets.rb
@@ -164,7 +164,7 @@ def http_request(method, path, params: {}, payload: nil, base_url: nil, parse_js
           raise ArgumentError, "Unsupported HTTP method: #{method}"
         end
 
-        request["Authorization"] = "Bearer #{@state.api_key}"
+        request["Authorization"] = "Bearer #{@state.require_api_key}"
 
         # Execute request with timing
         start_time = Time.now
diff --git a/lib/braintrust/api/functions.rb b/lib/braintrust/api/functions.rb
index 45c02b02..98384277 100644
--- a/lib/braintrust/api/functions.rb
+++ b/lib/braintrust/api/functions.rb
@@ -239,7 +239,7 @@ def http_request(method, path, params: {}, payload: nil, parse_json: true)
           raise ArgumentError, "Unsupported HTTP method: #{method}"
         end
 
-        request["Authorization"] = "Bearer #{@state.api_key}"
+        request["Authorization"] = "Bearer #{@state.require_api_key}"
 
         # Execute request with timing
         start_time = Time.now
diff --git a/lib/braintrust/api/internal/btql.rb b/lib/braintrust/api/internal/btql.rb
index 1df598b9..89ff3717 100644
--- a/lib/braintrust/api/internal/btql.rb
+++ b/lib/braintrust/api/internal/btql.rb
@@ -63,7 +63,7 @@ def execute_query(payload)
 
           request = Net::HTTP::Post.new(uri)
           request["Content-Type"] = "application/json"
-          request["Authorization"] = "Bearer #{@state.api_key}"
+          request["Authorization"] = "Bearer #{@state.require_api_key}"
           request["Accept"] = "application/x-jsonlines"
           request.body = JSON.dump(payload)
 
diff --git a/lib/braintrust/api/internal/experiments.rb b/lib/braintrust/api/internal/experiments.rb
index 923a785e..2d7e3870 100644
--- a/lib/braintrust/api/internal/experiments.rb
+++ b/lib/braintrust/api/internal/experiments.rb
@@ -39,7 +39,7 @@ def create(name:, project_id:, ensure_new: true, tags: nil, metadata: nil,
 
           request = Net::HTTP::Post.new(uri)
           request["Content-Type"] = "application/json"
-          request["Authorization"] = "Bearer #{@state.api_key}"
+          request["Authorization"] = "Bearer #{@state.require_api_key}"
           request.body = JSON.dump(payload)
 
           response = Braintrust::Internal::Http.with_redirects(uri, request)
@@ -59,7 +59,7 @@ def delete(id:)
           uri = URI("#{@state.api_url}/v1/experiment/#{id}")
 
           request = Net::HTTP::Delete.new(uri)
-          request["Authorization"] = "Bearer #{@state.api_key}"
+          request["Authorization"] = "Bearer #{@state.require_api_key}"
 
           response = Braintrust::Internal::Http.with_redirects(uri, request)
 
diff --git a/lib/braintrust/api/internal/projects.rb b/lib/braintrust/api/internal/projects.rb
index 58ed4938..4cb1b32b 100644
--- a/lib/braintrust/api/internal/projects.rb
+++ b/lib/braintrust/api/internal/projects.rb
@@ -24,7 +24,7 @@ def create(name:)
 
           request = Net::HTTP::Post.new(uri)
           request["Content-Type"] = "application/json"
-          request["Authorization"] = "Bearer #{@state.api_key}"
+          request["Authorization"] = "Bearer #{@state.require_api_key}"
           request.body = JSON.dump({name: name})
 
           response = Braintrust::Internal::Http.with_redirects(uri, request)
@@ -44,7 +44,7 @@ def delete(id:)
           uri = URI("#{@state.api_url}/v1/project/#{id}")
 
           request = Net::HTTP::Delete.new(uri)
-          request["Authorization"] = "Bearer #{@state.api_key}"
+          request["Authorization"] = "Bearer #{@state.require_api_key}"
 
           response = Braintrust::Internal::Http.with_redirects(uri, request)
 
diff --git a/lib/braintrust/config.rb b/lib/braintrust/config.rb
index 336f8459..701b80da 100644
--- a/lib/braintrust/config.rb
+++ b/lib/braintrust/config.rb
@@ -1,15 +1,18 @@
 # frozen_string_literal: true
 
+require_relative "internal/api_key_resolver"
+
 module Braintrust
   # Configuration object that reads from environment variables
   # and allows overriding with explicit options
   class Config
-    attr_reader :api_key, :org_name, :default_project, :app_url, :api_url,
+    attr_reader :org_name, :default_project, :app_url, :api_url,
       :filter_ai_spans, :span_filter_funcs
 
     def initialize(api_key: nil, org_name: nil, default_project: nil, app_url: nil, api_url: nil,
       filter_ai_spans: nil, span_filter_funcs: nil)
       @api_key = api_key
+      @api_key_resolver = nil
       @org_name = org_name
       @default_project = default_project
       @app_url = app_url
@@ -18,6 +21,11 @@ def initialize(api_key: nil, org_name: nil, default_project: nil, app_url: nil,
       @span_filter_funcs = span_filter_funcs || []
     end
 
+    def api_key
+      @api_key = @api_key_resolver.api_key if @api_key.nil? && @api_key_resolver
+      @api_key
+    end
+
     # Create a Config from environment variables, with option overrides
     # Passed-in options take priority over ENV vars
     # @param api_key [String, nil] Braintrust API key (overrides BRAINTRUST_API_KEY env var)
@@ -30,6 +38,8 @@ def initialize(api_key: nil, org_name: nil, default_project: nil, app_url: nil,
     # @return [Config] the created config
     def self.from_env(api_key: nil, org_name: nil, default_project: nil, app_url: nil, api_url: nil,
       filter_ai_spans: nil, span_filter_funcs: nil)
+      api_key_resolver = Internal::ApiKeyResolver.new(explicit_api_key: api_key)
+
       # Parse filter_ai_spans from ENV if not explicitly provided
       env_filter_ai_spans = ENV["BRAINTRUST_OTEL_FILTER_AI_SPANS"]
       filter_ai_spans_value = if filter_ai_spans.nil?
@@ -38,8 +48,8 @@ def self.from_env(api_key: nil, org_name: nil, default_project: nil, app_url: ni
         filter_ai_spans
       end
 
-      new(
-        api_key: api_key || ((ENV["BRAINTRUST_API_KEY"] && ENV["BRAINTRUST_API_KEY"].empty?) ? nil : ENV["BRAINTRUST_API_KEY"]),
+      config = new(
+        api_key: api_key_resolver.immediate_api_key,
         org_name: org_name || ENV["BRAINTRUST_ORG_NAME"],
         default_project: default_project || ENV["BRAINTRUST_DEFAULT_PROJECT"],
         app_url: app_url || ENV["BRAINTRUST_APP_URL"] || "https://www.braintrust.dev",
@@ -47,6 +57,8 @@ def self.from_env(api_key: nil, org_name: nil, default_project: nil, app_url: ni
         filter_ai_spans: filter_ai_spans_value,
         span_filter_funcs: span_filter_funcs
       )
+      config.instance_variable_set(:@api_key_resolver, api_key_resolver)
+      config
     end
   end
 end
diff --git a/lib/braintrust/internal/api_key_resolver.rb b/lib/braintrust/internal/api_key_resolver.rb
new file mode 100644
index 00000000..abd1b176
--- /dev/null
+++ b/lib/braintrust/internal/api_key_resolver.rb
@@ -0,0 +1,164 @@
+# frozen_string_literal: true
+
+module Braintrust
+  module Internal
+    # Resolves the Braintrust API key from explicit options, ENV, or the nearest
+    # .env.braintrust file without mutating the process environment.
+    class ApiKeyResolver
+      ENV_KEY = "BRAINTRUST_API_KEY"
+      ENV_FILE = ".env.braintrust"
+      SEARCH_PARENT_LIMIT = 64
+      ASSIGNMENT_REGEXP = /\A#{Regexp.escape(ENV_KEY)}\s*=\s*(.*)\z/o
+
+      attr_reader :immediate_api_key
+
+      def initialize(explicit_api_key: nil)
+        @mutex = Mutex.new
+        @resolved = false
+        @api_key = nil
+        @thread = nil
+
+        if !explicit_api_key.nil?
+          resolve_immediately(explicit_api_key)
+        else
+          env_api_key = ENV[ENV_KEY]
+          resolve_immediately(env_api_key) if env_api_key && !env_api_key.strip.empty?
+        end
+
+        @immediate_api_key = @api_key
+      end
+
+      def api_key
+        thread = start
+        thread&.join
+
+        @mutex.synchronize { @api_key }
+      end
+
+      def start
+        @mutex.synchronize do
+          return nil if @resolved
+          return @thread if @thread
+
+          search_start_dir = Dir.pwd
+          @thread = Thread.new(search_start_dir) do |start_dir|
+            key = self.class.find_file_api_key(start_dir)
+            @mutex.synchronize do
+              @api_key = key
+              @resolved = true
+            end
+          rescue
+            @mutex.synchronize do
+              @api_key = nil
+              @resolved = true
+            end
+          end
+          @thread.report_on_exception = false
+          @thread
+        end
+      end
+
+      def self.find_file_api_key(start_dir = Dir.pwd)
+        dir = start_dir
+
+        0.upto(SEARCH_PARENT_LIMIT) do
+          env_path = File.join(dir, ENV_FILE)
+
+          begin
+            contents = File.read(env_path)
+          rescue Errno::ENOENT, Errno::ENOTDIR
+            # Missing candidates are not boundaries; keep walking upward.
+          rescue
+            return nil
+          else
+            return parse_api_key(contents)
+          end
+
+          parent = File.dirname(dir)
+          break if parent == dir
+          dir = parent
+        end
+
+        nil
+      rescue
+        nil
+      end
+
+      def self.parse_api_key(contents)
+        value = nil
+
+        contents.each_line do |line|
+          found, parsed_value = parse_assignment(line)
+          value = parsed_value if found
+        end
+
+        (value && !value.strip.empty?) ? value : nil
+      rescue
+        nil
+      end
+
+      def self.parse_assignment(line)
+        stripped = line.delete_suffix("\n").delete_suffix("\r").lstrip
+        return [false, nil] if stripped.empty? || stripped.start_with?("#")
+
+        stripped = stripped.sub(/\Aexport\s+/, "")
+        match = stripped.match(ASSIGNMENT_REGEXP)
+        return [false, nil] unless match
+
+        [true, parse_value(match[1])]
+      end
+
+      def self.parse_value(raw_value)
+        value = raw_value.lstrip
+
+        case value[0]
+        when '"'
+          parse_double_quoted_value(value[1..])
+        when "'"
+          parse_single_quoted_value(value[1..])
+        else
+          value.sub(/\s+#.*\z/, "").strip
+        end
+      end
+
+      def self.parse_double_quoted_value(value)
+        parsed = +""
+        escaped = false
+
+        value.each_char do |char|
+          if escaped
+            parsed << case char
+            when "n" then "\n"
+            when "r" then "\r"
+            when "t" then "\t"
+            else char
+            end
+            escaped = false
+          elsif char == "\\"
+            escaped = true
+          elsif char == '"'
+            return parsed
+          else
+            parsed << char
+          end
+        end
+
+        parsed
+      end
+
+      def self.parse_single_quoted_value(value)
+        quote_index = value.index("'")
+        quote_index ? value[0...quote_index] : value
+      end
+
+      private_class_method :parse_assignment, :parse_value, :parse_double_quoted_value, :parse_single_quoted_value
+
+      private
+
+      def resolve_immediately(api_key)
+        @api_key = api_key
+        @resolved = true
+      end
+    end
+  end
+end
diff --git a/lib/braintrust/setup.rb b/lib/braintrust/setup.rb
index b947ac21..0c9265b6 100644
--- a/lib/braintrust/setup.rb
+++ b/lib/braintrust/setup.rb
@@ -11,7 +11,7 @@
 #   require "braintrust/setup"
 #
 # Environment variables:
-#   BRAINTRUST_API_KEY - Required for tracing to work
+#   BRAINTRUST_API_KEY - Required for tracing to work; falls back to .env.braintrust
 #   BRAINTRUST_AUTO_INSTRUMENT - Set to "false" to disable (default: true)
 #   BRAINTRUST_INSTRUMENT_ONLY - Comma-separated whitelist
 #   BRAINTRUST_INSTRUMENT_EXCEPT - Comma-separated blacklist
diff --git a/lib/braintrust/state.rb b/lib/braintrust/state.rb
index f8c6275d..486c7d94 100644
--- a/lib/braintrust/state.rb
+++ b/lib/braintrust/state.rb
@@ -6,6 +6,8 @@ module Braintrust
   # State object that holds Braintrust configuration
   # Thread-safe global state management
   class State
+    class MissingAPIKeyError < ArgumentError; end
+
     attr_reader :api_key, :org_name, :org_id, :default_project, :app_url, :api_url, :proxy_url, :logged_in, :config
 
     @mutex = Mutex.new
@@ -66,7 +68,7 @@ def self.from_env(api_key: nil, org_name: nil, default_project: nil, app_url: ni
     def initialize(api_key: nil, org_name: nil, org_id: nil, default_project: nil, app_url: nil, api_url: nil, proxy_url: nil, blocking_login: false, enable_tracing: true, tracer_provider: nil, config: nil, exporter: nil)
       # Instance-level mutex for thread-safe login
       @login_mutex = Mutex.new
-      raise ArgumentError, "api_key is required" if api_key.nil? || api_key.empty?
+      raise MissingAPIKeyError, "api_key is required" if api_key.nil? || api_key.empty?
 
       @api_key = api_key
       @org_name = org_name
@@ -101,6 +103,12 @@ def initialize(api_key: nil, org_name: nil, org_id: nil, default_project: nil, a
       end
     end
 
+    def require_api_key
+      key = @api_key
+      raise MissingAPIKeyError, "api_key is required" if key.nil? || key.empty?
+      key
+    end
+
     # Thread-safe global state getter
     def self.global
       @mutex.synchronize { @global_state }
@@ -121,9 +129,10 @@ def login
       @login_mutex.synchronize do
         # Return early if already logged in
         return self if @logged_in
+        api_key = require_api_key
 
         result = API::Internal::Auth.login(
-          api_key: @api_key,
+          api_key: api_key,
           app_url: @app_url,
           org_name: @org_name
         )
@@ -167,6 +176,9 @@ def login_in_thread
           login
           Log.debug("Background login succeeded")
           break
+        rescue MissingAPIKeyError => e
+          Log.debug("Background login skipped: #{e.message}")
+          break
         rescue => e
           retry_count += 1
           delay = [0.001 * 2**(retry_count - 1), max_delay].min
@@ -190,7 +202,7 @@ def wait_for_login(timeout = nil)
     # Raises ArgumentError if state is invalid
     # @return [self]
     def validate
-      raise ArgumentError, "api_key is required" if @api_key.nil? || @api_key.empty?
+      require_api_key
       raise ArgumentError, "api_url is required" if @api_url.nil? || @api_url.empty?
       raise ArgumentError, "app_url is required" if @app_url.nil? || @app_url.empty?
 
diff --git a/lib/braintrust/trace/span_exporter.rb b/lib/braintrust/trace/span_exporter.rb
index fc7502fa..d0718e6f 100644
--- a/lib/braintrust/trace/span_exporter.rb
+++ b/lib/braintrust/trace/span_exporter.rb
@@ -1,6 +1,7 @@
 # frozen_string_literal: true
 
 require "opentelemetry/exporter/otlp"
+require_relative "../state"
 
 module Braintrust
   module Trace
@@ -18,6 +19,8 @@ class SpanExporter < OpenTelemetry::Exporter::OTLP::Exporter
       FAILURE = OpenTelemetry::SDK::Trace::Export::FAILURE
 
       def initialize(endpoint:, api_key:)
+        raise State::MissingAPIKeyError, "api_key is required" if api_key.nil? || api_key.empty?
+
         super(endpoint: endpoint, headers: {"Authorization" => "Bearer #{api_key}"})
       end
 
diff --git a/test/braintrust/config_test.rb b/test/braintrust/config_test.rb
index 0c9edbef..6252f6c1 100644
--- a/test/braintrust/config_test.rb
+++ b/test/braintrust/config_test.rb
@@ -1,6 +1,8 @@
 # frozen_string_literal: true
 
 require "test_helper"
+require "fileutils"
+require "tmpdir"
 
 BRAINTRUST_CONFIG_ENV_VALUES = {
   "BRAINTRUST_API_KEY" => ENV["BRAINTRUST_API_KEY"],
@@ -13,9 +15,15 @@ class Braintrust::ConfigTest < Minitest::Test
   def setup
     # Setup a clean state
     BRAINTRUST_CONFIG_ENV_VALUES.keys.each { |env_var| ENV.delete(env_var) }
+    @original_cwd = Dir.pwd
+    @tmpdir = Dir.mktmpdir("braintrust-config-test")
+    Dir.chdir(@tmpdir)
   end
 
   def teardown
+    Dir.chdir(@original_cwd)
+    FileUtils.rm_rf(@tmpdir)
+
     # Restore original env vars
     BRAINTRUST_CONFIG_ENV_VALUES.each do |env_var, env_value|
       if env_value
@@ -61,4 +69,139 @@ def test_env_vars_override_defaults
 
     assert_equal "https://custom.braintrust.dev", config.app_url
   end
+
+  def test_falls_back_to_env_braintrust_file
+    write_braintrust_env("BRAINTRUST_API_KEY=file-key\n")
+
+    config = Braintrust::Config.from_env
+
+    assert_equal "file-key", config.api_key
+  end
+
+  def test_env_braintrust_lookup_uses_cwd_from_api_key_lookup
+    config = Braintrust::Config.from_env
+    other_dir = File.join(@tmpdir, "other")
+    FileUtils.mkdir_p(other_dir)
+    write_braintrust_env("BRAINTRUST_API_KEY=file-key\n", dir: other_dir)
+
+    Dir.chdir(other_dir)
+
+    assert_equal "file-key", config.api_key
+  end
+
+  def test_falls_back_to_env_braintrust_when_process_env_is_blank
+    ENV["BRAINTRUST_API_KEY"] = "   "
+    write_braintrust_env("BRAINTRUST_API_KEY=file-key\n")
+
+    config = Braintrust::Config.from_env
+
+    assert_equal "file-key", config.api_key
+  end
+
+  def test_process_env_overrides_env_braintrust
+    ENV["BRAINTRUST_API_KEY"] = "env-key"
+    write_braintrust_env("BRAINTRUST_API_KEY=file-key\n")
+
+    config = Braintrust::Config.from_env
+
+    assert_equal "env-key", config.api_key
+  end
+
+  def test_explicit_api_key_overrides_env_and_env_braintrust
+    ENV["BRAINTRUST_API_KEY"] = "env-key"
+    write_braintrust_env("BRAINTRUST_API_KEY=file-key\n")
+
+    config = Braintrust::Config.from_env(api_key: "explicit-key")
+
+    assert_equal "explicit-key", config.api_key
+  end
+
+  def test_finds_nearest_parent_env_braintrust
+    nested = File.join(@tmpdir, "packages", "app")
+    FileUtils.mkdir_p(nested)
+    write_braintrust_env("BRAINTRUST_API_KEY=root-key\n")
+    write_braintrust_env("BRAINTRUST_API_KEY=package-key\n", dir: File.dirname(nested))
+
+    Dir.chdir(nested)
+    config = Braintrust::Config.from_env
+
+    assert_equal "package-key", config.api_key
+  end
+
+  def test_nearest_env_braintrust_without_key_is_boundary
+    nested = File.join(@tmpdir, "packages", "app")
+    package_dir = File.dirname(nested)
+    FileUtils.mkdir_p(nested)
+    write_braintrust_env("BRAINTRUST_API_KEY=root-key\n")
+    write_braintrust_env("OTHER=value\n", dir: package_dir)
+
+    Dir.chdir(nested)
+    config = Braintrust::Config.from_env
+
+    assert_nil config.api_key
+  end
+
+  def test_nearest_env_braintrust_with_blank_key_is_boundary
+    nested = File.join(@tmpdir, "packages", "app")
+    package_dir = File.dirname(nested)
+    FileUtils.mkdir_p(nested)
+    write_braintrust_env("BRAINTRUST_API_KEY=root-key\n")
+    write_braintrust_env("BRAINTRUST_API_KEY=\"   \"\n", dir: package_dir)
+
+    Dir.chdir(nested)
+    config = Braintrust::Config.from_env
+
+    assert_nil config.api_key
+  end
+
+  def test_unreadable_nearest_env_braintrust_is_boundary
+    nested = File.join(@tmpdir, "packages", "app")
+    package_dir = File.dirname(nested)
+    FileUtils.mkdir_p(nested)
+    write_braintrust_env("BRAINTRUST_API_KEY=root-key\n")
+    FileUtils.mkdir_p(File.join(package_dir, ".env.braintrust"))
+
+    Dir.chdir(nested)
+    config = Braintrust::Config.from_env
+
+    assert_nil config.api_key
+  end
+
+  def test_searches_cwd_and_at_most_64_parents
+    segments = Array.new(65) { |i| "d#{i}" }
+    nested = File.join(@tmpdir, *segments)
+    FileUtils.mkdir_p(nested)
+    write_braintrust_env("BRAINTRUST_API_KEY=too-high\n")
+
+    Dir.chdir(nested)
+    assert_nil Braintrust::Config.from_env.api_key
+
+    write_braintrust_env("BRAINTRUST_API_KEY=boundary-key\n", dir: File.join(@tmpdir, segments.first))
+
+    assert_equal "boundary-key", Braintrust::Config.from_env.api_key
+  end
+
+  def test_supports_dotenv_syntax_without_loading_other_variables
+    write_braintrust_env("export BRAINTRUST_API_KEY=\"quoted-key\" # comment\nOTHER=value\n")
+
+    config = Braintrust::Config.from_env
+
+    assert_equal "quoted-key", config.api_key
+    assert_nil ENV["OTHER"]
+  end
+
+  def test_does_not_mutate_process_env
+    write_braintrust_env("BRAINTRUST_API_KEY=file-key\n")
+
+    config = Braintrust::Config.from_env
+
+    assert_equal "file-key", config.api_key
+    assert_nil ENV["BRAINTRUST_API_KEY"]
+  end
+
+  private
+
+  def write_braintrust_env(contents, dir: @tmpdir)
+    File.write(File.join(dir, ".env.braintrust"), contents)
+  end
 end
diff --git a/test/braintrust/trace/span_exporter_test.rb b/test/braintrust/trace/span_exporter_test.rb
index 45a5c753..bb53a834 100644
--- a/test/braintrust/trace/span_exporter_test.rb
+++ b/test/braintrust/trace/span_exporter_test.rb
@@ -30,10 +30,10 @@ def make_span(name, parent: nil)
   class RecordingExporter < Braintrust::Trace::SpanExporter
     attr_reader :calls
 
-    def initialize
+    def initialize(api_key: "test-key")
       @calls = []
       # Initialize headers directly — skip super to avoid HTTP setup
-      @headers = {"Authorization" => "Bearer test-key"}
+      @headers = {"Authorization" => "Bearer #{api_key}"}
       @shutdown = false
     end
 
@@ -102,6 +102,14 @@ def test_handles_nil_parent
     refute exporter.calls[0][:headers].key?("x-bt-parent")
   end
 
+  def test_requires_api_key
+    error = assert_raises(Braintrust::State::MissingAPIKeyError) do
+      Braintrust::Trace::SpanExporter.new(endpoint: "https://api.example.test/otel/v1/traces", api_key: nil)
+    end
+
+    assert_match(/api_key is required/, error.message)
+  end
+
   def test_mixed_nil_and_non_nil_parents
     exporter = RecordingExporter.new
 
diff --git a/test/braintrust_test.rb b/test/braintrust_test.rb
index b557fb7f..281c1ec9 100644
--- a/test/braintrust_test.rb
+++ b/test/braintrust_test.rb
@@ -1,6 +1,7 @@
 # frozen_string_literal: true
 
 require "test_helper"
+require "tmpdir"
 
 class BraintrustTest < Minitest::Test
   def setup
@@ -70,6 +71,41 @@ def test_init_merges_options_with_env
     assert_equal "my-project", state.default_project
   end
 
+  def test_init_uses_env_braintrust_api_key
+    ENV.delete("BRAINTRUST_API_KEY")
+    original_cwd = Dir.pwd
+
+    Dir.mktmpdir("braintrust-init-test") do |dir|
+      File.write(File.join(dir, ".env.braintrust"), "BRAINTRUST_API_KEY=test-api-key\n")
+      Dir.chdir(dir)
+
+      state = Braintrust.init(set_global: false, exporter: @memory_exporter)
+      state.wait_for_login(1)
+
+      assert_equal "test-api-key", state.api_key
+      assert state.logged_in
+    ensure
+      Dir.chdir(original_cwd)
+    end
+  end
+
+  def test_init_fails_without_api_key_or_env_braintrust
+    ENV.delete("BRAINTRUST_API_KEY")
+    original_cwd = Dir.pwd
+
+    Dir.mktmpdir("braintrust-missing-key-test") do |dir|
+      Dir.chdir(dir)
+
+      error = assert_raises(Braintrust::State::MissingAPIKeyError) do
+        Braintrust.init(set_global: false, enable_tracing: false)
+      end
+
+      assert_match(/api_key is required/, error.message)
+    ensure
+      Dir.chdir(original_cwd)
+    end
+  end
+
   def test_init_with_tracing_true_creates_tracer_provider
     # Verify we start with the default proxy provider
     assert_instance_of OpenTelemetry::Internal::ProxyTracerProvider, OpenTelemetry.tracer_provider