diff --git a/src-tauri/Cargo.lock b/src-tauri/Cargo.lock
index 03e3ab82..dfcbae76 100644
--- a/src-tauri/Cargo.lock
+++ b/src-tauri/Cargo.lock
@@ -118,6 +118,16 @@ version = "0.7.6"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "7c02d123df017efcdfbd739ef81735b36c5ba83ec3c59c80a9d7ecc718f92e50"
 
+[[package]]
+name = "assert-json-diff"
+version = "2.0.2"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "47e4f2b81832e72834d7518d8487a0396a28cc408186a2e8854c0f98011faf12"
+dependencies = [
+ "serde",
+ "serde_json",
+]
+
 [[package]]
 name = "async-trait"
 version = "0.1.89"
@@ -516,6 +526,15 @@ version = "1.1.0"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "3d7b894f5411737b7867f4827955924d7c254fc9f4d91a6aad6b097804b1018b"
 
+[[package]]
+name = "colored"
+version = "3.1.1"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "faf9468729b8cbcea668e36183cb69d317348c2e08e994829fb56ebfdfbaac34"
+dependencies = [
+ "windows-sys 0.61.2",
+]
+
 [[package]]
 name = "combine"
 version = "4.6.7"
@@ -720,6 +739,7 @@ source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "78c8292055d1c1df0cce5d180393dc8cce0abec0a7102adb6c7b1eef6016d60a"
 dependencies = [
  "generic-array",
+ "rand_core 0.6.4",
  "typenum",
 ]
 
@@ -2025,6 +2045,12 @@ version = "1.10.1"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "6dbf3de79e51f3d586ab4cb9d5c3e2c14aa28ed23d180cf89b4df0454a69cc87"
 
+[[package]]
+name = "httpdate"
+version = "1.0.3"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "df3b46402a9d5adb4c86a0cf463f42e19994e3ee891101b1841f30a545cb49a9"
+
 [[package]]
 name = "hyper"
 version = "1.8.1"
@@ -2039,6 +2065,7 @@ dependencies = [
  "http",
  "http-body",
  "httparse",
+ "httpdate",
  "itoa",
  "pin-project-lite",
  "pin-utils",
@@ -2824,6 +2851,31 @@ dependencies = [
  "windows-sys 0.61.2",
 ]
 
+[[package]]
+name = "mockito"
+version = "1.7.2"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "90820618712cab19cfc46b274c6c22546a82affcb3c3bdf0f29e3db8e1bb92c0"
+dependencies = [
+ "assert-json-diff",
+ "bytes",
+ "colored",
+ "futures-core",
+ "http",
+ "http-body",
+ "http-body-util",
+ "hyper",
+ "hyper-util",
+ "log",
+ "pin-project-lite",
+ "rand 0.9.2",
+ "regex",
+ "serde_json",
+ "serde_urlencoded",
+ "similar",
+ "tokio",
+]
+
 [[package]]
 name = "moxcms"
 version = "0.8.1"
@@ -4705,6 +4757,12 @@ version = "0.3.8"
 source = "registry+https://github.com/rust-lang/crates.io-index"
 checksum = "e320a6c5ad31d271ad523dcf3ad13e2767ad8b1cb8f047f75a8aeaf8da139da2"
 
+[[package]]
+name = "similar"
+version = "2.7.0"
+source = "registry+https://github.com/rust-lang/crates.io-index"
+checksum = "bbbb5d9659141646ae647b42fe094daf6c6192d1620870b449d9557f748b2daa"
+
 [[package]]
 name = "siphasher"
 version = "0.3.11"
@@ -5440,6 +5498,7 @@ dependencies = [
 name = "tftsr"
 version = "0.1.0"
 dependencies = [
+ "aes-gcm",
  "aho-corasick",
  "anyhow",
  "async-trait",
@@ -5449,7 +5508,9 @@ dependencies = [
  "docx-rs",
  "futures",
  "hex",
+ "mockito",
  "printpdf",
+ "rand 0.8.5",
  "regex",
  "reqwest 0.12.28",
  "rusqlite",
diff --git a/src-tauri/Cargo.toml b/src-tauri/Cargo.toml
index cc23649e..03d6a6e9 100644
--- a/src-tauri/Cargo.toml
+++ b/src-tauri/Cargo.toml
@@ -38,9 +38,12 @@ futures = "0.3"
 async-trait = "0.1"
 base64 = "0.22"
 dirs = "5"
+aes-gcm = "0.10"
+rand = "0.8"
 
 [dev-dependencies]
 tokio-test = "0.4"
+mockito = "1.2"
 
 [profile.release]
 opt-level = "s"
diff --git a/src-tauri/src/integrations/auth.rs b/src-tauri/src/integrations/auth.rs
index d74bc2fd..fc9d1dba 100644
--- a/src-tauri/src/integrations/auth.rs
+++ b/src-tauri/src/integrations/auth.rs
@@ -1,3 +1,4 @@
+use rusqlite::OptionalExtension;
 use serde::{Deserialize, Serialize};
 
 #[derive(Debug, Clone, Serialize, Deserialize)]
@@ -64,38 +65,100 @@ pub fn build_auth_url(
     )
 }
 
-/// Exchange an authorization code for tokens. Placeholder for v0.2.
+/// Exchange an authorization code for tokens using PKCE.
 pub async fn exchange_code(
-    _token_endpoint: &str,
-    _client_id: &str,
-    _code: &str,
-    _redirect_uri: &str,
-    _code_verifier: &str,
+    token_endpoint: &str,
+    client_id: &str,
+    code: &str,
+    redirect_uri: &str,
+    code_verifier: &str,
 ) -> Result<OAuthToken, String> {
-    Err("OAuth token exchange available in v0.2".to_string())
+    let client = reqwest::Client::new();
+
+    let params = [
+        ("grant_type", "authorization_code"),
+        ("code", code),
+        ("redirect_uri", redirect_uri),
+        ("client_id", client_id),
+        ("code_verifier", code_verifier),
+    ];
+
+    let resp = client
+        .post(token_endpoint)
+        .form(&params)
+        .send()
+        .await
+        .map_err(|e| format!("Failed to send token exchange request: {}", e))?;
+
+    if !resp.status().is_success() {
+        return Err(format!(
+            "Token exchange failed with status {}: {}",
+            resp.status(),
+            resp.text().await.unwrap_or_default()
+        ));
+    }
+
+    let body: serde_json::Value = resp
+        .json()
+        .await
+        .map_err(|e| format!("Failed to parse token response: {}", e))?;
+
+    let access_token = body["access_token"]
+        .as_str()
+        .ok_or_else(|| "No access_token in response".to_string())?
+        .to_string();
+
+    let refresh_token = body["refresh_token"].as_str().map(|s| s.to_string());
+
+    let expires_in = body["expires_in"].as_i64().unwrap_or(3600);
+    let expires_at = chrono::Utc::now().timestamp() + expires_in;
+
+    let token_type = body["token_type"].as_str().unwrap_or("Bearer").to_string();
+
+    Ok(OAuthToken {
+        access_token,
+        refresh_token,
+        expires_at,
+        token_type,
+    })
 }
 
-/// Store a PAT credential securely. Placeholder - in production, use OS keychain.
+/// Store a PAT credential securely with AES-256-GCM encryption.
 pub fn store_pat(conn: &rusqlite::Connection, credential: &PatCredential) -> Result<(), String> {
     let id = uuid::Uuid::now_v7().to_string();
-    let now = chrono::Utc::now().timestamp_millis();
+    let token_hash = hash_token(&credential.token);
+    let encrypted_token = encrypt_token(&credential.token)?;
+    let now = chrono::Utc::now().format("%Y-%m-%d %H:%M:%S").to_string();
+
     conn.execute(
-        "INSERT OR REPLACE INTO credentials (id, service, token_hash, created_at) VALUES (?1, ?2, ?3, ?4)",
-        rusqlite::params![id, credential.service, hash_token(&credential.token), now],
+        "INSERT OR REPLACE INTO credentials (id, service, token_hash, encrypted_token, created_at)
+         VALUES (?1, ?2, ?3, ?4, ?5)",
+        rusqlite::params![id, credential.service, token_hash, encrypted_token, now],
     )
     .map_err(|e| e.to_string())?;
     Ok(())
 }
 
-/// Retrieve a stored PAT. In production, retrieve from OS keychain.
+/// Retrieve and decrypt a stored PAT.
 pub fn get_pat(conn: &rusqlite::Connection, service: &str) -> Result<Option<String>, String> {
     let mut stmt = conn
-        .prepare("SELECT token_hash FROM credentials WHERE service = ?1 ORDER BY created_at DESC LIMIT 1")
+        .prepare(
+            "SELECT encrypted_token FROM credentials WHERE service = ?1 ORDER BY created_at DESC LIMIT 1",
+        )
         .map_err(|e| e.to_string())?;
-    let result = stmt
+
+    let encrypted = stmt
         .query_row([service], |row| row.get::<_, String>(0))
-        .ok();
-    Ok(result)
+        .optional()
+        .map_err(|e| e.to_string())?;
+
+    match encrypted {
+        Some(enc) => {
+            let decrypted = decrypt_token(&enc)?;
+            Ok(Some(decrypted))
+        }
+        None => Ok(None),
+    }
 }
 
 fn hash_token(token: &str) -> String {
@@ -116,6 +179,88 @@ fn urlencoding_encode(s: &str) -> String {
         .replace('+', "%2B")
 }
 
+/// Encrypt a token using AES-256-GCM.
+/// Key is derived from TFTSR_ENCRYPTION_KEY env var or a default dev key.
+/// Returns base64-encoded ciphertext with nonce prepended.
+pub fn encrypt_token(token: &str) -> Result<String, String> {
+    use aes_gcm::{
+        aead::{Aead, KeyInit},
+        Aes256Gcm, Nonce,
+    };
+    use rand::{thread_rng, RngCore};
+
+    // Get encryption key from env or use default (WARNING: insecure for production)
+    let key_material = std::env::var("TFTSR_ENCRYPTION_KEY")
+        .unwrap_or_else(|_| "dev-key-change-me-in-production-32b".to_string());
+
+    let mut key_bytes = [0u8; 32];
+    let src = key_material.as_bytes();
+    let len = std::cmp::min(src.len(), 32);
+    key_bytes[..len].copy_from_slice(&src[..len]);
+
+    let cipher = Aes256Gcm::new(&key_bytes.into());
+
+    // Generate random nonce
+    let mut nonce_bytes = [0u8; 12];
+    thread_rng().fill_bytes(&mut nonce_bytes);
+    let nonce = Nonce::from_slice(&nonce_bytes);
+
+    // Encrypt
+    let ciphertext = cipher
+        .encrypt(nonce, token.as_bytes())
+        .map_err(|e| format!("Encryption failed: {}", e))?;
+
+    // Prepend nonce to ciphertext
+    let mut result = nonce_bytes.to_vec();
+    result.extend_from_slice(&ciphertext);
+
+    // Base64 encode
+    use base64::engine::general_purpose::STANDARD;
+    use base64::Engine;
+    Ok(STANDARD.encode(&result))
+}
+
+/// Decrypt a token that was encrypted with encrypt_token().
+pub fn decrypt_token(encrypted: &str) -> Result<String, String> {
+    use aes_gcm::{
+        aead::{Aead, KeyInit},
+        Aes256Gcm, Nonce,
+    };
+
+    // Base64 decode
+    use base64::engine::general_purpose::STANDARD;
+    use base64::Engine;
+    let data = STANDARD
+        .decode(encrypted)
+        .map_err(|e| format!("Base64 decode failed: {}", e))?;
+
+    if data.len() < 12 {
+        return Err("Invalid encrypted data: too short".to_string());
+    }
+
+    // Extract nonce (first 12 bytes) and ciphertext (rest)
+    let nonce = Nonce::from_slice(&data[..12]);
+    let ciphertext = &data[12..];
+
+    // Get encryption key
+    let key_material = std::env::var("TFTSR_ENCRYPTION_KEY")
+        .unwrap_or_else(|_| "dev-key-change-me-in-production-32b".to_string());
+
+    let mut key_bytes = [0u8; 32];
+    let src = key_material.as_bytes();
+    let len = std::cmp::min(src.len(), 32);
+    key_bytes[..len].copy_from_slice(&src[..len]);
+
+    let cipher = Aes256Gcm::new(&key_bytes.into());
+
+    // Decrypt
+    let plaintext = cipher
+        .decrypt(nonce, ciphertext)
+        .map_err(|e| format!("Decryption failed: {}", e))?;
+
+    String::from_utf8(plaintext).map_err(|e| format!("Invalid UTF-8: {}", e))
+}
+
 #[cfg(test)]
 mod tests {
     use super::*;
@@ -200,4 +345,222 @@ mod tests {
         assert!(!encoded.contains('+'));
         assert!(!encoded.contains('/'));
     }
+
+    #[tokio::test]
+    async fn test_exchange_code_success() {
+        let mut server = mockito::Server::new_async().await;
+        let mock = server
+            .mock("POST", "/oauth/token")
+            .match_header("content-type", "application/x-www-form-urlencoded")
+            .with_status(200)
+            .with_header("content-type", "application/json")
+            .with_body(
+                r#"{
+                    "access_token": "test_access_token_123",
+                    "refresh_token": "test_refresh_token_456",
+                    "expires_in": 3600,
+                    "token_type": "Bearer"
+                }"#,
+            )
+            .create_async()
+            .await;
+
+        let token_endpoint = format!("{}/oauth/token", server.url());
+        let result = exchange_code(
+            &token_endpoint,
+            "test-client-id",
+            "auth_code_xyz",
+            "http://localhost:8765/callback",
+            "code_verifier_abc",
+        )
+        .await;
+
+        mock.assert_async().await;
+        assert!(result.is_ok());
+
+        let token = result.unwrap();
+        assert_eq!(token.access_token, "test_access_token_123");
+        assert_eq!(
+            token.refresh_token,
+            Some("test_refresh_token_456".to_string())
+        );
+        assert_eq!(token.token_type, "Bearer");
+    }
+
+    #[tokio::test]
+    async fn test_exchange_code_missing_access_token() {
+        let mut server = mockito::Server::new_async().await;
+        let _mock = server
+            .mock("POST", "/oauth/token")
+            .with_status(200)
+            .with_body(r#"{"expires_in": 3600}"#)
+            .create_async()
+            .await;
+
+        let token_endpoint = format!("{}/oauth/token", server.url());
+        let result = exchange_code(
+            &token_endpoint,
+            "test-client-id",
+            "code",
+            "http://localhost:8765/callback",
+            "verifier",
+        )
+        .await;
+
+        assert!(result.is_err());
+        assert!(result.unwrap_err().contains("access_token"));
+    }
+
+    #[tokio::test]
+    async fn test_exchange_code_http_error() {
+        let mut server = mockito::Server::new_async().await;
+        let _mock = server
+            .mock("POST", "/oauth/token")
+            .with_status(401)
+            .with_body(r#"{"error": "invalid_grant"}"#)
+            .create_async()
+            .await;
+
+        let token_endpoint = format!("{}/oauth/token", server.url());
+        let result = exchange_code(
+            &token_endpoint,
+            "test-client-id",
+            "invalid_code",
+            "http://localhost:8765/callback",
+            "verifier",
+        )
+        .await;
+
+        assert!(result.is_err());
+        let err = result.unwrap_err();
+        assert!(err.contains("401") || err.contains("Unauthorized") || err.contains("failed"));
+    }
+
+    #[tokio::test]
+    async fn test_exchange_code_network_error() {
+        // Use an unreachable endpoint
+        let result = exchange_code(
+            "http://localhost:9999/token",
+            "client",
+            "code",
+            "http://localhost/callback",
+            "verifier",
+        )
+        .await;
+
+        assert!(result.is_err());
+    }
+
+    #[test]
+    fn test_encrypt_decrypt_roundtrip() {
+        let original = "my-secret-token-12345";
+        let encrypted = encrypt_token(original).unwrap();
+        let decrypted = decrypt_token(&encrypted).unwrap();
+        assert_eq!(original, decrypted);
+    }
+
+    #[test]
+    fn test_encrypt_produces_different_output_each_time() {
+        // Ensure env var is not set from other tests
+        std::env::remove_var("TFTSR_ENCRYPTION_KEY");
+
+        let token = "same-token";
+        let enc1 = encrypt_token(token).unwrap();
+        let enc2 = encrypt_token(token).unwrap();
+        // Different nonces mean different ciphertext
+        assert_ne!(enc1, enc2);
+        // But both decrypt to the same value
+        assert_eq!(decrypt_token(&enc1).unwrap(), token);
+        assert_eq!(decrypt_token(&enc2).unwrap(), token);
+    }
+
+    #[test]
+    fn test_decrypt_invalid_data_fails() {
+        let result = decrypt_token("invalid-base64-!!!!");
+        assert!(result.is_err());
+    }
+
+    #[test]
+    fn test_decrypt_too_short_fails() {
+        use base64::engine::general_purpose::STANDARD;
+        use base64::Engine;
+        let short_data = STANDARD.encode(b"short");
+        let result = decrypt_token(&short_data);
+        assert!(result.is_err());
+        assert!(result.unwrap_err().contains("too short"));
+    }
+
+    #[test]
+    fn test_decrypt_wrong_key_fails() {
+        // Encrypt with one key
+        std::env::set_var(
+            "TFTSR_ENCRYPTION_KEY",
+            "key-1-xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx",
+        );
+        let encrypted = encrypt_token("secret").unwrap();
+
+        // Try to decrypt with different key
+        std::env::set_var(
+            "TFTSR_ENCRYPTION_KEY",
+            "key-2-yyyyyyyyyyyyyyyyyyyyyyyyyyyyyyy",
+        );
+        let result = decrypt_token(&encrypted);
+
+        assert!(result.is_err());
+        assert!(result.unwrap_err().contains("Decryption failed"));
+
+        // Reset env var
+        std::env::remove_var("TFTSR_ENCRYPTION_KEY");
+    }
+
+    #[test]
+    fn test_store_and_retrieve_pat() {
+        // Set up test DB
+        let conn = rusqlite::Connection::open_in_memory().unwrap();
+        crate::db::migrations::run_migrations(&conn).unwrap();
+
+        // Store credential
+        let credential = PatCredential {
+            service: "confluence".to_string(),
+            token: "my-secret-pat-token-12345".to_string(),
+        };
+        store_pat(&conn, &credential).unwrap();
+
+        // Retrieve and verify
+        let retrieved = get_pat(&conn, "confluence").unwrap();
+        assert_eq!(retrieved, Some("my-secret-pat-token-12345".to_string()));
+    }
+
+    #[test]
+    fn test_get_pat_nonexistent_service() {
+        let conn = rusqlite::Connection::open_in_memory().unwrap();
+        crate::db::migrations::run_migrations(&conn).unwrap();
+
+        let result = get_pat(&conn, "nonexistent").unwrap();
+        assert_eq!(result, None);
+    }
+
+    #[test]
+    fn test_store_pat_replaces_existing() {
+        let conn = rusqlite::Connection::open_in_memory().unwrap();
+        crate::db::migrations::run_migrations(&conn).unwrap();
+
+        // Store first token
+        let cred1 = PatCredential {
+            service: "servicenow".to_string(),
+            token: "token-v1".to_string(),
+        };
+        store_pat(&conn, &cred1).unwrap();
+
+        // Store second token for same service
+        let cred2 = PatCredential {
+            service: "servicenow".to_string(),
+            token: "token-v2".to_string(),
+        };
+        store_pat(&conn, &cred2).unwrap();
+
+        // Should retrieve the most recent token
+        let retrieved = get_pat(&conn, "servicenow").unwrap();
+        assert_eq!(retrieved, Some("token-v2".to_string()));
+    }
 }