diff --git a/adk/README.md b/adk/README.md
index ef7c553d9..0aa5bc493 100644
--- a/adk/README.md
+++ b/adk/README.md
@@ -20,6 +20,14 @@ pip install agentex-sdk
 
 This automatically pulls in [`agentex-client`](../) (the slim Stainless-generated REST client) so `from agentex import Agentex, AsyncAgentex` works the same as before.
 
+Datadog support is optional. To use it (for example `ddtrace-run`, or `dd.trace_id` / `dd.span_id` in JSON logs), install the `datadog` extra or add `ddtrace` to your own dependencies:
+
+```sh
+pip install 'agentex-sdk[datadog]'
+```
+
+Without it, the SDK does not install or import `ddtrace`. JSON logs still carry `dd.service`, `dd.env` and `dd.version` from `DD_SERVICE`, `DD_ENV` and `DD_VERSION`.
+
 ## When to use this vs `agentex-client`
 
 - **`agentex-sdk`** — you're authoring agents. Pulls everything: ACP server, Temporal, MCP, LLM providers, observability, CLI. ~37 deps.
diff --git a/adk/pyproject.toml b/adk/pyproject.toml
index a5f393374..44f684211 100644
--- a/adk/pyproject.toml
+++ b/adk/pyproject.toml
@@ -56,8 +56,7 @@ dependencies = [
     "scale-gp>=0.1.0a59",
     "scale-gp-beta>=0.5.0",
     "mcp>=1.4.1",
-    # Observability
-    "ddtrace>=3.13.0",
+    # Observability (ddtrace is opt-in via the `datadog` extra below)
     "opentelemetry-api>=1.20.0",
     "opentelemetry-sdk>=1.20.0",
     "json_log_formatter>=1.1.1",
@@ -78,6 +77,12 @@ classifiers = [
   "License :: OSI Approved :: Apache Software License",
 ]
 
+[project.optional-dependencies]
+# Some deployments do not allow Datadog software to be installed, so ddtrace is
+# opt-in. Without it, logs skip the dd.trace_id/dd.span_id fields and the
+# dd_only obs helpers return no ids.
+datadog = ["ddtrace>=3.13.0"]
+
 # No `obs` extra, deliberately — do not add one for sgp-obs.
 #
 # sgp-obs is not on public PyPI (it is served from Scale's curated CodeArtifact
diff --git a/requirements-dev.lock b/requirements-dev.lock
index ff876c6b5..c5e7eb9cf 100644
--- a/requirements-dev.lock
+++ b/requirements-dev.lock
@@ -35,8 +35,10 @@ attrs==25.4.0
     #   aiohttp
     #   jsonschema
     #   referencing
-bytecode==0.17.0
-    # via ddtrace
+azure-core==1.41.0
+    # via azure-identity
+azure-identity==1.27.0
+    # via agentex-sdk
 certifi==2026.1.4
     # via
     #   httpcore
@@ -65,9 +67,10 @@ colorama==0.4.6 ; sys_platform == 'win32'
 comm==0.2.3
     # via ipywidgets
 cryptography==48.0.0
-    # via pyjwt
-ddtrace==4.10.1
-    # via agentex-sdk
+    # via
+    #   azure-identity
+    #   msal
+    #   pyjwt
 debugpy==1.8.21
 decorator==5.3.1
     # via ipython
@@ -80,8 +83,6 @@ distro==1.9.0
     #   scale-gp-beta
 durationpy==0.10
     # via kubernetes
-envier==0.6.1
-    # via ddtrace
 execnet==2.1.2
     # via pytest-xdist
 executing==2.2.1
@@ -207,6 +208,12 @@ mcp==1.27.2
     #   openai-agents
 mdurl==0.1.2
     # via markdown-it-py
+msal==1.39.0
+    # via
+    #   azure-identity
+    #   msal-extensions
+msal-extensions==1.3.1
+    # via azure-identity
 multidict==6.7.0
     # via
     #   aiohttp
@@ -234,7 +241,6 @@ openai-agents==0.14.8
 opentelemetry-api==1.42.1
     # via
     #   agentex-sdk
-    #   ddtrace
     #   opentelemetry-sdk
     #   opentelemetry-semantic-conventions
     #   pydantic-ai-slim
@@ -312,7 +318,9 @@ pygments==2.19.2
     #   pytest
     #   rich
 pyjwt==2.13.0
-    # via mcp
+    # via
+    #   mcp
+    #   msal
 pyright==1.1.399
 pytest==9.0.2
     # via
@@ -350,8 +358,10 @@ regex==2026.5.9
     # via tiktoken
 requests==2.34.2
     # via
+    #   azure-core
     #   kubernetes
     #   langsmith
+    #   msal
     #   openai-agents
     #   python-on-whales
     #   requests-oauthlib
@@ -373,7 +383,7 @@ rpds-py==2026.5.1
 ruff==0.14.13
 scale-gp==0.1.0a62
     # via agentex-sdk
-scale-gp-beta==0.2.0
+scale-gp-beta==0.5.0
     # via agentex-sdk
 shellingham==1.5.4
     # via typer
@@ -439,6 +449,8 @@ typing-extensions==4.15.0
     #   agentex-client
     #   aiosignal
     #   anyio
+    #   azure-core
+    #   azure-identity
     #   fastapi
     #   huggingface-hub
     #   langchain-core
@@ -496,8 +508,6 @@ websockets==16.0
     #   openai-agents
 widgetsnbextension==4.0.15
     # via ipywidgets
-wrapt==2.2.1
-    # via ddtrace
 xxhash==3.7.0
     # via langsmith
 yarl==1.22.0
diff --git a/scripts/check-wheel-install b/scripts/check-wheel-install
index b80aed2d2..6b98fe112 100755
--- a/scripts/check-wheel-install
+++ b/scripts/check-wheel-install
@@ -22,4 +22,11 @@ from agentex.types import Event  # client surface — ships in agentex-client
 from agentex.resources import states  # client surface that "didn't land" in the incident
 
 print("agentex namespace OK:", Event.__name__, states.__name__)
+
+# ddtrace is opt-in (agentex-sdk[datadog]); a plain install must not pull it in.
+import importlib.util
+assert importlib.util.find_spec("ddtrace") is None, "ddtrace installed without the datadog extra"
+from agentex.lib.utils.logging import make_logger  # top-level ddtrace import used to live here
+
+make_logger("agentex.check_wheel_install").info("logging OK without ddtrace")
 PY
diff --git a/src/agentex/lib/utils/logging.py b/src/agentex/lib/utils/logging.py
index e2d5d5cb4..87eb4dd62 100644
--- a/src/agentex/lib/utils/logging.py
+++ b/src/agentex/lib/utils/logging.py
@@ -2,11 +2,15 @@
 import logging
 import contextvars
 
-import ddtrace
 import json_log_formatter
 from rich.console import Console
 from rich.logging import RichHandler
 
+try:
+    import ddtrace
+except ImportError:  # ddtrace ships only with the `datadog` extra
+    ddtrace = None  # type: ignore[assignment]
+
 _is_datadog_configured = bool(os.environ.get("DD_AGENT_HOST"))
 
 ctx_var_request_id = contextvars.ContextVar[str]("request_id")
@@ -73,24 +77,22 @@ def json_record(self, message: str, extra: dict, record: logging.LogRecord) -> d
         extra["lineno"] = record.lineno
         extra["pathname"] = record.pathname
         extra["request_id"] = ctx_var_request_id.get(None)
-        if _is_datadog_configured:
-            extra["dd.trace_id"] = ddtrace.tracer.get_log_correlation_context().get("dd.trace_id", None) or getattr(  # type: ignore[attr-defined]
-                record, "dd.trace_id", 0
-            )
-            extra["dd.span_id"] = ddtrace.tracer.get_log_correlation_context().get("dd.span_id", None) or getattr(  # type: ignore[attr-defined]
-                record, "dd.span_id", 0
-            )
+        if _is_datadog_configured and ddtrace is not None:
+            dd_context = ddtrace.tracer.get_log_correlation_context()  # type: ignore[attr-defined]
+            extra["dd.trace_id"] = dd_context.get("dd.trace_id", None) or getattr(record, "dd.trace_id", 0)
+            extra["dd.span_id"] = dd_context.get("dd.span_id", None) or getattr(record, "dd.span_id", 0)
         # add the env, service, and version configured for the tracer
         # If tracing is not set up, then this should pull values from DD_ENV, DD_SERVICE, and DD_VERSION.
-        service_override = ddtrace.config.service or os.getenv("DD_SERVICE")
+        dd_config = ddtrace.config if ddtrace is not None else None
+        service_override = (dd_config.service if dd_config is not None else None) or os.getenv("DD_SERVICE")
         if service_override:
             extra["dd.service"] = service_override
 
-        env_override = ddtrace.config.env or os.getenv("DD_ENV")
+        env_override = (dd_config.env if dd_config is not None else None) or os.getenv("DD_ENV")
         if env_override:
             extra["dd.env"] = env_override
 
-        version_override = ddtrace.config.version or os.getenv("DD_VERSION")
+        version_override = (dd_config.version if dd_config is not None else None) or os.getenv("DD_VERSION")
         if version_override:
             extra["dd.version"] = version_override
 
diff --git a/tests/test_ddtrace_optional.py b/tests/test_ddtrace_optional.py
new file mode 100644
index 000000000..728df0022
--- /dev/null
+++ b/tests/test_ddtrace_optional.py
@@ -0,0 +1,120 @@
+"""ddtrace is an optional dependency (the ``datadog`` extra).
+
+Some deployments do not allow Datadog software to be installed, so the SDK has to
+import and log cleanly without it. These tests hide ddtrace via ``sys.modules`` (a
+``None`` entry makes the import raise ImportError) and check that nothing breaks.
+"""
+
+from __future__ import annotations
+
+import os
+import sys
+import json
+import logging
+import subprocess
+
+import pytest
+
+from agentex.lib.utils import logging as agentex_logging
+from agentex.lib.core.tracing import obs_ids, obs_span
+
+
+def _hide_ddtrace(monkeypatch: pytest.MonkeyPatch) -> None:
+    monkeypatch.setitem(sys.modules, "ddtrace", None)
+    monkeypatch.setitem(sys.modules, "ddtrace.trace", None)
+
+
+def _format(formatter: logging.Formatter) -> dict:
+    record = logging.LogRecord("agentex.test", logging.INFO, __file__, 1, "hello", None, None)
+    return json.loads(formatter.format(record))
+
+
+# A fresh interpreter, so the import-time `import ddtrace` in agentex modules runs
+# with ddtrace hidden rather than reusing the copy this test process already loaded.
+_IMPORT_WITHOUT_DDTRACE = """
+import sys, logging
+sys.modules["ddtrace"] = None
+
+import agentex
+from agentex.lib.utils import logging as agentex_logging
+import agentex.lib.adk
+import agentex.lib.sdk.fastacp.fastacp
+import agentex.lib.core.tracing.trace
+import agentex.lib.cli.commands.main
+
+assert agentex_logging.ddtrace is None
+record = logging.LogRecord("agentex.test", logging.INFO, "test.py", 1, "hello", None, None)
+print(agentex_logging.CustomJSONFormatter().format(record))
+"""
+
+
+def test_agentex_imports_and_logs_without_ddtrace() -> None:
+    env = {"DD_AGENT_HOST": "localhost", "DD_SERVICE": "svc", "DD_ENV": "test", "DD_VERSION": "1.2.3"}
+    result = subprocess.run(
+        [sys.executable, "-c", _IMPORT_WITHOUT_DDTRACE],
+        capture_output=True,
+        text=True,
+        env={**{k: v for k, v in os.environ.items() if not k.startswith("DD_")}, **env},
+        check=False,
+    )
+    assert result.returncode == 0, result.stderr
+    payload = json.loads(result.stdout.strip().splitlines()[-1])
+    assert payload["message"] == "hello"
+    assert "dd.trace_id" not in payload
+    assert "dd.span_id" not in payload
+    # The env-var fallbacks still apply without ddtrace.
+    assert payload["dd.service"] == "svc"
+    assert payload["dd.env"] == "test"
+    assert payload["dd.version"] == "1.2.3"
+
+
+class TestJsonFormatter:
+    def test_without_ddtrace_skips_trace_ids_and_keeps_env_fallbacks(self, monkeypatch: pytest.MonkeyPatch) -> None:
+        monkeypatch.setattr(agentex_logging, "ddtrace", None)
+        monkeypatch.setattr(agentex_logging, "_is_datadog_configured", True)
+        monkeypatch.setenv("DD_SERVICE", "svc")
+        monkeypatch.delenv("DD_ENV", raising=False)
+        monkeypatch.delenv("DD_VERSION", raising=False)
+
+        payload = _format(agentex_logging.CustomJSONFormatter())
+
+        assert "dd.trace_id" not in payload
+        assert "dd.span_id" not in payload
+        assert payload["dd.service"] == "svc"
+        assert "dd.env" not in payload
+
+    def test_with_ddtrace_adds_trace_ids(self, monkeypatch: pytest.MonkeyPatch) -> None:
+        ddtrace = pytest.importorskip("ddtrace")
+        monkeypatch.setattr(agentex_logging, "_is_datadog_configured", True)
+
+        # Inside a real span, so the log must carry that span's ids, not placeholders.
+        with ddtrace.tracer.trace("agentex.test"):
+            expected = ddtrace.tracer.get_log_correlation_context()
+            payload = _format(agentex_logging.CustomJSONFormatter())
+
+        assert expected["dd.trace_id"] not in (None, 0, "0")
+        assert expected["dd.span_id"] not in (None, 0, "0")
+        assert payload["dd.trace_id"] == expected["dd.trace_id"]
+        assert payload["dd.span_id"] == expected["dd.span_id"]
+
+
+class TestObsHelpersWithoutDdtrace:
+    def test_ddtrace_ids_is_none(self, monkeypatch: pytest.MonkeyPatch) -> None:
+        _hide_ddtrace(monkeypatch)
+        assert obs_ids._ddtrace_ids() is None
+
+    def test_default_mode_correlation_is_empty(self, monkeypatch: pytest.MonkeyPatch) -> None:
+        monkeypatch.delenv("SGP_OBS_MODE", raising=False)  # default is dd_only
+        _hide_ddtrace(monkeypatch)
+        assert obs_ids.obs_correlation() == {}
+
+    def test_default_mode_open_span_is_none(self, monkeypatch: pytest.MonkeyPatch) -> None:
+        monkeypatch.delenv("SGP_OBS_MODE", raising=False)
+        _hide_ddtrace(monkeypatch)
+        assert obs_span.open_obs_span("step", "biz-span", "biz-trace") is None
+
+    def test_tag_ambient_is_false_and_never_raises(self, monkeypatch: pytest.MonkeyPatch) -> None:
+        monkeypatch.delenv("SGP_OBS_MODE", raising=False)
+        _hide_ddtrace(monkeypatch)
+        assert obs_span._tag_ddtrace_ambient("biz-span", "biz-trace") is False
+        obs_span.tag_ambient_obs_span("biz-span", "biz-trace")
diff --git a/uv.lock b/uv.lock
index 41c325f25..1dc2fdeda 100644
--- a/uv.lock
+++ b/uv.lock
@@ -99,7 +99,6 @@ dependencies = [
     { name = "azure-identity" },
     { name = "claude-agent-sdk" },
     { name = "cloudpickle" },
-    { name = "ddtrace" },
     { name = "fastapi" },
     { name = "jinja2" },
     { name = "json-log-formatter" },
@@ -129,6 +128,11 @@ dependencies = [
     { name = "yaspin" },
 ]
 
+[package.optional-dependencies]
+datadog = [
+    { name = "ddtrace" },
+]
+
 [package.metadata]
 requires-dist = [
     { name = "agentex-client", editable = "." },
@@ -136,7 +140,7 @@ requires-dist = [
     { name = "azure-identity", specifier = ">=1.16.1,<2.0.0" },
     { name = "claude-agent-sdk", specifier = ">=0.1.0" },
     { name = "cloudpickle", specifier = ">=3.1.1" },
-    { name = "ddtrace", specifier = ">=3.13.0" },
+    { name = "ddtrace", marker = "extra == 'datadog'", specifier = ">=3.13.0" },
     { name = "fastapi", specifier = ">=0.115.0" },
     { name = "jinja2", specifier = ">=3.1.3,<4" },
     { name = "json-log-formatter", specifier = ">=1.1.1" },
@@ -165,6 +169,7 @@ requires-dist = [
     { name = "watchfiles", specifier = ">=0.24.0,<1.0" },
     { name = "yaspin", specifier = ">=3.1.0" },
 ]
+provides-extras = ["datadog"]
 
 [[package]]
 name = "aiohappyeyeballs"