diff --git a/nanobot/agent/loop.py b/nanobot/agent/loop.py
index f50583119..848366ca8 100644
--- a/nanobot/agent/loop.py
+++ b/nanobot/agent/loop.py
@@ -8,6 +8,7 @@ import os
 import time
 from contextlib import AsyncExitStack, nullcontext, suppress
 from dataclasses import dataclass, field
+from datetime import datetime
 from enum import Enum, auto
 from pathlib import Path
 from typing import TYPE_CHECKING, Any, Awaitable, Callable
@@ -19,7 +20,13 @@ from nanobot.agent import model_presets as preset_helpers
 from nanobot.agent.autocompact import AutoCompact
 from nanobot.agent.context import ContextBuilder
 from nanobot.agent.hook import AgentHook, CompositeHook
-from nanobot.agent.memory import Consolidator, Dream
+from nanobot.agent.memory import (
+    _STALE_THRESHOLD_DAYS,
+    Consolidator,
+    Dream,
+    _estimate_tokens,
+    _strip_skip_lines,
+)
 from nanobot.agent.progress_hook import AgentProgressHook
 from nanobot.agent.runner import _MAX_INJECTIONS_PER_TURN, AgentRunner, AgentRunSpec
 from nanobot.agent.subagent import SubagentManager
@@ -34,6 +41,8 @@ from nanobot.config.schema import AgentDefaults, ModelPresetConfig
 from nanobot.providers.base import LLMProvider
 from nanobot.providers.factory import ProviderSnapshot
 from nanobot.session.goal_state import (
+    GOAL_STATE_KEY,
+    goal_state_runtime_lines,
     runner_wall_llm_timeout_s,
 )
 from nanobot.session.manager import Session, SessionManager
@@ -47,7 +56,11 @@ from nanobot.utils.helpers import image_placeholder_text
 from nanobot.utils.helpers import truncate_text as truncate_text_fn
 from nanobot.utils.image_generation_intent import image_generation_prompt
 from nanobot.utils.llm_runtime import LLMRuntime
-from nanobot.utils.runtime import EMPTY_FINAL_RESPONSE_MESSAGE
+from nanobot.utils.prompt_templates import _TEMPLATES_ROOT, render_template
+from nanobot.utils.runtime import (
+    EMPTY_FINAL_RESPONSE_MESSAGE,
+    SUSTAINED_GOAL_CONTINUE_PROMPT,
+)
 
 if TYPE_CHECKING:
     from nanobot.config.schema import (
@@ -191,6 +204,7 @@ class AgentLoop:
         model_preset: str | None = None,
         preset_snapshot_loader: preset_helpers.PresetSnapshotLoader | None = None,
         runtime_model_publisher: Callable[[str, str | None], None] | None = None,
+        dream_model_override: str | None = None,
     ):
         from nanobot.config.schema import ToolsConfig
 
@@ -203,6 +217,7 @@ class AgentLoop:
         self._preset_snapshot_loader = preset_snapshot_loader
         self._runtime_model_publisher = runtime_model_publisher
         self._provider_signature = provider_signature
+        self._dream_model_override = dream_model_override
         self._default_selection_signature = preset_helpers.default_selection_signature(provider_signature)
         self.workspace = workspace
         self.model = model or provider.get_default_model()
@@ -310,6 +325,7 @@ class AgentLoop:
         self._active_preset: str | None = None
         if model_preset:
             self.set_model_preset(model_preset, publish_update=False)
+        self._configure_dream()
         self._register_default_tools()
         self._runtime_vars: dict[str, Any] = {}
         self._current_iteration: int = 0
@@ -369,6 +385,7 @@ class AgentLoop:
             model_preset=defaults.model_preset,
             provider_snapshot_loader=provider_snapshot_loader,
             preset_snapshot_loader=preset_snapshot_loader,
+            dream_model_override=config.agents.defaults.dream.model_override,
             **extra,
         )
 
@@ -394,7 +411,7 @@ class AgentLoop:
         self.runner.provider = provider
         self.subagents.set_provider(provider, model)
         self.consolidator.set_provider(provider, model, context_window_tokens)
-        self.dream.set_provider(provider, model)
+        self._configure_dream()
         self._provider_signature = snapshot.signature
         if publish_update and self._runtime_model_publisher is not None:
             self._runtime_model_publisher(
@@ -403,6 +420,20 @@ class AgentLoop:
             )
         logger.info("Runtime model switched for next turn: {} -> {}", old_model, model)
 
+    def _configure_dream(self) -> None:
+        """Apply dream.model_override, resolving preset names if needed."""
+        if not self._dream_model_override:
+            self.dream.set_provider(self.provider, self.model)
+            return
+
+        if self._dream_model_override in self.model_presets:
+            snapshot = self._build_model_preset_snapshot(self._dream_model_override)
+            self.dream.set_provider(snapshot.provider, snapshot.model)
+            return
+
+        # Raw model name fallback — same provider, different model
+        self.dream.set_provider(self.provider, self._dream_model_override)
+
     def _refresh_provider_snapshot(self) -> None:
         if self._provider_snapshot_loader is None:
             return
@@ -1006,6 +1037,28 @@ class AgentLoop:
             msg.chat_id.split(":", 1) if ":" in msg.chat_id else ("cli", msg.chat_id)
         )
         logger.info("Processing system message from {}", msg.sender_id)
+        if msg.sender_id == "dream":
+            session_key = "system:dream"
+            session = self.sessions.get_or_create(session_key)
+            session.metadata["is_dream"] = True
+            # Capture trigger source on first batch so _dream_finalize_commit
+            # can notify the user who ran /dream (cron-triggered runs have no trigger).
+            if "_dream_trigger_channel" not in session.metadata:
+                trigger_ch = msg.metadata.get("trigger_channel")
+                trigger_ci = msg.metadata.get("trigger_chat_id")
+                if trigger_ch and trigger_ci:
+                    session.metadata["_dream_trigger_channel"] = trigger_ch
+                    session.metadata["_dream_trigger_chat_id"] = trigger_ci
+            if not sustained_goal_active(session.metadata):
+                session.metadata[GOAL_STATE_KEY] = {
+                    "status": "active",
+                    "objective": "Dream: consolidate unprocessed memory backlog into MEMORY.md, SOUL.md, USER.md",
+                    "started_at": datetime.now().isoformat(),
+                }
+                self.sessions.save(session)
+            await self._process_dream_batch(session, msg)
+            await self._dream_finalize_commit(session)
+            return None
         key = msg.session_key_override or f"{channel}:{chat_id}"
         session = self.sessions.get_or_create(key)
         if self._restore_runtime_checkpoint(session):
@@ -1082,6 +1135,204 @@ class AgentLoop:
             metadata=outbound_metadata,
         )
 
+    async def _process_dream_batch(self, session: Session, msg: InboundMessage) -> None:
+        """Process the full Dream backlog in batches within a single invocation."""
+        from nanobot.agent.skills import BUILTIN_SKILLS_DIR
+
+        # System prompt caching with mtime invalidation
+        template_path = _TEMPLATES_ROOT / "agent" / "dream.md"
+        cached_prompt = session.metadata.get("_dream_system_prompt")
+        cached_mtime = session.metadata.get("_dream_system_prompt_mtime")
+        current_mtime = template_path.stat().st_mtime if template_path.exists() else None
+
+        if cached_prompt is None or cached_mtime != current_mtime:
+            skill_creator_path = BUILTIN_SKILLS_DIR / "skill-creator" / "SKILL.md"
+            workspace = self.dream.store.workspace
+            cached_prompt = render_template(
+                "agent/dream.md",
+                strip=True,
+                skill_creator_path=str(skill_creator_path),
+                soul_path=str(workspace / "SOUL.md"),
+                user_path=str(workspace / "USER.md"),
+                memory_path=str(workspace / "memory" / "MEMORY.md"),
+                stale_threshold_days=_STALE_THRESHOLD_DAYS,
+            )
+            session.metadata["_dream_system_prompt"] = cached_prompt
+            session.metadata["_dream_system_prompt_mtime"] = current_mtime
+
+        while True:
+            last_cursor = self.dream.store.get_last_dream_cursor()
+            entries = self.dream.store.read_unprocessed_history(since_cursor=last_cursor)
+            if not entries:
+                return
+
+            batch = entries[: self.dream.max_batch_size]
+            logger.info(
+                "Dream: processing {}/{} entries (cursor {}→{})",
+                len(batch), len(entries), last_cursor, batch[-1]["cursor"],
+            )
+
+            # Build history text — cap each entry and strip [skip] lines
+            history_text = "\n".join(
+                f"[{e['timestamp']}] "
+                f"{truncate_text_fn(_strip_skip_lines(e['content']), self.dream._HISTORY_ENTRY_PREVIEW_MAX_CHARS)}"
+                for e in batch
+            )
+
+            # Current file contents + per-line age annotations
+            current_date = datetime.now().strftime("%Y-%m-%d")
+            annotate = self.dream.annotate_line_ages
+            raw_memory = self.dream.store.read_memory() or "(empty)"
+            raw_soul = self.dream.store.read_soul() or "(empty)"
+            raw_user = self.dream.store.read_user() or "(empty)"
+            annotated_memory = (
+                self.dream._annotate_with_ages(raw_memory, "memory/MEMORY.md")
+                if annotate else raw_memory
+            )
+            annotated_soul = (
+                self.dream._annotate_with_ages(raw_soul, "SOUL.md")
+                if annotate else raw_soul
+            )
+            annotated_user = (
+                self.dream._annotate_with_ages(raw_user, "USER.md")
+                if annotate else raw_user
+            )
+            current_memory = truncate_text_fn(annotated_memory, self.dream._MEMORY_FILE_MAX_CHARS)
+            current_soul = truncate_text_fn(annotated_soul, self.dream._SOUL_FILE_MAX_CHARS)
+            current_user = truncate_text_fn(annotated_user, self.dream._USER_FILE_MAX_CHARS)
+
+            file_context = (
+                f"## Current Date\n{current_date}\n\n"
+                f"## Current MEMORY.md ({len(current_memory)} chars)\n{current_memory}\n\n"
+                f"## Current SOUL.md ({len(current_soul)} chars)\n{current_soul}\n\n"
+                f"## Current USER.md ({len(current_user)} chars)\n{current_user}"
+            )
+
+            existing_skills = self.dream._list_existing_skills()
+            skills_section = ""
+            if existing_skills:
+                skills_section = (
+                    "\n\n## Existing Skills\n"
+                    + "\n".join(f"- {s}" for s in existing_skills)
+                )
+
+            user_prompt = f"## Conversation History\n{history_text}\n\n{file_context}{skills_section}"
+            logger.info("Dream prompt: {} chars, ~{} tokens", len(user_prompt), _estimate_tokens(user_prompt))
+
+            messages: list[dict[str, Any]] = [
+                {"role": "system", "content": cached_prompt},
+                {"role": "user", "content": user_prompt},
+            ]
+
+            t_start = time.perf_counter()
+            try:
+                result = await self.dream._runner.run(AgentRunSpec(
+                    initial_messages=messages,
+                    tools=self.dream._tools,
+                    model=self.dream.model,
+                    max_iterations=self.dream.max_iterations,
+                    max_tool_result_chars=self.dream.max_tool_result_chars,
+                    context_window_tokens=self.context_window_tokens,
+                    fail_on_tool_error=False,
+                ))
+                elapsed = time.perf_counter() - t_start
+                logger.info(
+                    "Dream run complete in {:.1f}s: stop_reason={}, tool_events={}",
+                    elapsed, result.stop_reason, len(result.tool_events),
+                )
+            except Exception:
+                elapsed = time.perf_counter() - t_start
+                logger.exception("Dream run failed after {:.1f}s", elapsed)
+                result = None
+
+            # Build changelog from tool events
+            changelog: list[str] = []
+            if result and result.tool_events:
+                for event in result.tool_events:
+                    if event.get("status") == "ok":
+                        changelog.append(f"{event['name']}: {event['detail']}")
+
+            success = result is not None and result.stop_reason == "completed"
+            if success:
+                new_cursor = batch[-1]["cursor"]
+                self.dream.store.set_last_dream_cursor(new_cursor)
+                session.metadata.setdefault("_dream_changelog", []).extend(changelog)
+                self.sessions.save(session)
+                logger.info(
+                    "Dream done: {} change(s), cursor advanced to {}",
+                    len(changelog), new_cursor,
+                )
+            else:
+                reason = result.stop_reason if result else "exception"
+                logger.warning(
+                    "Dream incomplete ({}): cursor NOT advanced, stopping",
+                    reason,
+                )
+                return
+
+            self.dream.store.compact_history()
+
+            # Persist session record for debugging / visualization
+            record = {
+                "timestamp": datetime.now().isoformat(),
+                "batch": {
+                    "from_cursor": last_cursor,
+                    "to_cursor": batch[-1]["cursor"],
+                    "count": len(batch),
+                },
+                "prompt_chars": len(user_prompt),
+                "elapsed_seconds": elapsed,
+                "stop_reason": result.stop_reason,
+                "usage": result.usage,
+                "tool_events": result.tool_events,
+                "changelog": changelog,
+                "commit_sha": None,
+                "messages": result.messages,
+            }
+            self.dream.store.write_dream_session(record)
+            session.metadata["_dream_last_record"] = record
+
+
+    async def _dream_finalize_commit(self, session: Session) -> None:
+        """Collapse accumulated changelog into a single git commit, clear caches, and complete the goal."""
+        changelog = session.metadata.pop("_dream_changelog", [])
+        sha = None
+        if changelog and self.dream.store.git.is_initialized():
+            ts = datetime.now().strftime("%Y-%m-%d %H:%M")
+            summary = f"dream: {ts}, {len(changelog)} change(s)"
+            commit_msg = f"{summary}\n\n" + "\n".join(changelog)
+            sha = self.dream.store.git.auto_commit(commit_msg)
+            if sha:
+                logger.info("Dream commit: {}", sha)
+        record = session.metadata.pop("_dream_last_record", None)
+        if record and sha:
+            record["commit_sha"] = sha
+            self.dream.store.write_dream_session(record)
+        session.metadata.pop("_dream_system_prompt", None)
+        session.metadata.pop("_dream_system_prompt_mtime", None)
+        trigger_channel = session.metadata.pop("_dream_trigger_channel", None)
+        trigger_chat_id = session.metadata.pop("_dream_trigger_chat_id", None)
+        goal = session.metadata.get(GOAL_STATE_KEY)
+        if isinstance(goal, dict) and goal.get("status") == "active":
+            session.metadata[GOAL_STATE_KEY] = {
+                **goal,
+                "status": "completed",
+                "completed_at": datetime.now().isoformat(),
+                "recap": f"Memory backlog consolidated ({len(changelog)} change(s)).",
+            }
+        self.sessions.save(session)
+        session.metadata["_dream_finalized"] = True
+        # Notify the user who triggered /dream
+        if trigger_channel and trigger_chat_id:
+            content = f"Dream completed: {len(changelog)} change(s) committed."
+            if not changelog:
+                content = "Dream: nothing to process."
+            await self.bus.publish_outbound(OutboundMessage(
+                channel=trigger_channel,
+                chat_id=trigger_chat_id,
+                content=content,
+            ))
+
     async def _process_message(
         self,
         msg: InboundMessage,
diff --git a/nanobot/agent/memory.py b/nanobot/agent/memory.py
index ffc9c5f0e..b88fff786 100644
--- a/nanobot/agent/memory.py
+++ b/nanobot/agent/memory.py
@@ -6,6 +6,7 @@ import asyncio
 import json
 import os
 import re
+import time
 import weakref
 from contextlib import suppress
 from datetime import datetime
@@ -15,7 +16,7 @@ from typing import TYPE_CHECKING, Any, Callable, Iterator
 import tiktoken
 from loguru import logger
 
-from nanobot.agent.runner import AgentRunner, AgentRunSpec
+from nanobot.agent.runner import AgentRunner
 from nanobot.agent.tools.registry import ToolRegistry
 from nanobot.session.manager import Session
 from nanobot.utils.gitstore import GitStore
@@ -33,6 +34,20 @@ if TYPE_CHECKING:
     from nanobot.providers.base import LLMProvider
     from nanobot.session.manager import SessionManager
 
+# Cache the tiktoken encoding to avoid repeated instantiation on every
+# truncate/encode call. Encoding objects are thread-safe and reusable.
+try:
+    _TIKTOKEN_ENC = tiktoken.get_encoding("cl100k_base")
+except Exception:  # pragma: no cover
+    _TIKTOKEN_ENC = None
+
+
+def _estimate_tokens(text: str) -> int:
+    """Approximate token count for a text string."""
+    if _TIKTOKEN_ENC is not None:
+        return len(_TIKTOKEN_ENC.encode(text))
+    return len(text) // 4
+
 
 # ---------------------------------------------------------------------------
 # MemoryStore — pure file I/O layer
@@ -400,6 +415,26 @@ class MemoryStore:
     def set_last_dream_cursor(self, cursor: int) -> None:
         self._dream_cursor_file.write_text(str(cursor), encoding="utf-8")
 
+    def write_dream_session(self, data: dict[str, Any]) -> None:
+        """Atomic overwrite of the latest Dream run record."""
+        path = self.memory_dir / ".dream_session.json"
+        tmp_path = path.with_suffix(".tmp")
+        try:
+            with open(tmp_path, "w", encoding="utf-8") as f:
+                json.dump(data, f, ensure_ascii=False, indent=2)
+                f.flush()
+                os.fsync(f.fileno())
+            os.replace(tmp_path, path)
+            with suppress(PermissionError):
+                fd = os.open(str(path.parent), os.O_RDONLY)
+                try:
+                    os.fsync(fd)
+                finally:
+                    os.close(fd)
+        except BaseException:
+            tmp_path.unlink(missing_ok=True)
+            raise
+
     # -- message formatting utility ------------------------------------------
 
     @staticmethod
@@ -618,19 +653,21 @@ class Consolidator:
         """Available input token budget for consolidation LLM."""
         return self.context_window_tokens - self.max_completion_tokens - self._SAFETY_BUFFER
 
-    def _truncate_to_token_budget(self, text: str) -> str:
-        """Truncate text so it fits within the consolidation LLM's token budget."""
-        budget = self._input_token_budget
+    def _truncate_to_token_budget(self, text: str, reserve_tokens: int = 0) -> str:
+        """Truncate text so it fits within the consolidation LLM's token budget.
+
+        reserve_tokens: additional tokens to reserve for dedup context or other
+        overhead that will be appended after truncation.
+        """
+        budget = self._input_token_budget - reserve_tokens
         if budget <= 0:
             return truncate_text(text, _RAW_ARCHIVE_MAX_CHARS)
-        try:
-            enc = tiktoken.get_encoding("cl100k_base")
-            tokens = enc.encode(text)
+        if _TIKTOKEN_ENC is not None:
+            tokens = _TIKTOKEN_ENC.encode(text)
             if len(tokens) <= budget:
                 return text
-            return enc.decode(tokens[:budget]) + "\n... (truncated)"
-        except Exception:
-            return truncate_text(text, budget * 4)
+            return _TIKTOKEN_ENC.decode(tokens[:budget]) + "\n... (truncated)"
+        return truncate_text(text, budget * 4)
 
     async def archive(self, messages: list[dict]) -> str | None:
         """Summarize messages via LLM and append to history.jsonl.
@@ -639,9 +676,53 @@ class Consolidator:
         """
         if not messages:
             return None
+        t_start = time.perf_counter()
         try:
             formatted = MemoryStore._format_messages(messages)
-            formatted = self._truncate_to_token_budget(formatted)
+            logger.debug(
+                "Consolidator: {} messages, formatted={} chars",
+                len(messages), len(formatted),
+            )
+
+            # Inject current memory context for dedup-aware summarization.
+            memory_preview = self.store.read_memory()[:4000]
+            user_preview = self.store.read_user()[:2000]
+            dedup_context = ""
+            if memory_preview:
+                dedup_context += f"\n\n## Current MEMORY.md (for dedup)\n{memory_preview}"
+            if user_preview:
+                dedup_context += f"\n\n## Current USER.md (for dedup)\n{user_preview}"
+
+            reserve_tokens = 0
+            if dedup_context:
+                if _TIKTOKEN_ENC is not None:
+                    reserve_tokens = len(_TIKTOKEN_ENC.encode(dedup_context)) + 100
+                else:
+                    reserve_tokens = len(dedup_context) // 4 + 100
+
+            if self._input_token_budget <= reserve_tokens:
+                logger.warning(
+                    "Consolidator: dedup_context ({} tokens) exceeds budget ({}), dropping it",
+                    reserve_tokens, self._input_token_budget,
+                )
+                dedup_context = ""
+                reserve_tokens = 0
+            else:
+                logger.debug(
+                    "Consolidator: dedup_context={} chars, reserve_tokens={}",
+                    len(dedup_context), reserve_tokens,
+                )
+
+            formatted_before = len(formatted)
+            formatted = self._truncate_to_token_budget(
+                formatted, reserve_tokens=reserve_tokens
+            )
+            if len(formatted) < formatted_before:
+                logger.warning(
+                    "Consolidator: truncated formatted messages from {} to {} chars",
+                    formatted_before, len(formatted),
+                )
+
             response = await self.provider.chat_with_retry(
                 model=self.model,
                 messages=[
@@ -652,18 +733,31 @@ class Consolidator:
                             strip=True,
                         ),
                     },
-                    {"role": "user", "content": formatted},
+                    {"role": "user", "content": formatted + dedup_context},
                 ],
                 tools=None,
                 tool_choice=None,
             )
+            elapsed = time.perf_counter() - t_start
             if response.finish_reason == "error":
+                logger.warning(
+                    "Consolidator LLM error after {:.1f}s: {}",
+                    elapsed, response.content,
+                )
                 raise RuntimeError(f"LLM returned error: {response.content}")
             summary = response.content or "[no summary]"
+            logger.info(
+                "Consolidator: {} entries -> {} chars summary in {:.1f}s",
+                len(messages), len(summary), elapsed,
+            )
             self.store.append_history(summary, max_chars=_ARCHIVE_SUMMARY_MAX_CHARS)
             return summary
         except Exception:
-            logger.warning("Consolidation LLM call failed, raw-dumping to history")
+            elapsed = time.perf_counter() - t_start
+            logger.warning(
+                "Consolidation LLM call failed after {:.1f}s, raw-dumping to history",
+                elapsed,
+            )
             self.store.raw_archive(messages)
             return None
 
@@ -851,35 +945,44 @@ class Consolidator:
 
 
 # Single source of truth for the staleness threshold used in _annotate_with_ages
-# *and* in the Phase 1 prompt template (passed as `stale_threshold_days`).
+# *and* in the system prompt template (passed as `stale_threshold_days`).
 # Keep code and prompt aligned — if you bump this, the LLM's instruction string
 # updates automatically.
 _STALE_THRESHOLD_DAYS = 14
 
+_SKIP_LINE_RE = re.compile(r"^\s*-\s*\[skip\]\s*.*$", re.MULTILINE | re.IGNORECASE)
+
+
+def _strip_skip_lines(text: str) -> str:
+    """Remove lines marked [skip] from history content."""
+    lines = text.splitlines()
+    kept = [line for line in lines if not _SKIP_LINE_RE.match(line)]
+    return "\n".join(kept)
+
 
 class Dream:
-    """Two-phase memory processor: analyze history.jsonl, then edit files via AgentRunner.
+    """Single-phase memory processor: analyze history.jsonl and edit files via AgentRunner.
 
-    Phase 1 produces an analysis summary (plain LLM call).
-    Phase 2 delegates to AgentRunner with read_file / edit_file tools so the
-    LLM can make targeted, incremental edits instead of replacing entire files.
+    Delegates to AgentRunner with read_file / edit_file tools so the LLM can
+    analyze conversation history, extract facts, deduplicate, and make targeted
+    incremental edits — all in a single agent run.
     """
 
     # Caps on prompt-bound inputs so Dream's LLM calls never exceed the model's
     # context window just because a file (or a legacy large history entry) grew
     # unexpectedly. Each file still appears in full via read_file when the agent
-    # needs it in Phase 2 — these caps only bound the Phase 1/2 prompt preview.
-    _MEMORY_FILE_MAX_CHARS = 32_000
-    _SOUL_FILE_MAX_CHARS = 16_000
-    _USER_FILE_MAX_CHARS = 16_000
-    _HISTORY_ENTRY_PREVIEW_MAX_CHARS = 4_000
+    # needs it — these caps only bound the prompt preview.
+    _MEMORY_FILE_MAX_CHARS = 16_000
+    _SOUL_FILE_MAX_CHARS = 4_000
+    _USER_FILE_MAX_CHARS = 4_000
+    _HISTORY_ENTRY_PREVIEW_MAX_CHARS = 2_000
 
     def __init__(
         self,
         store: MemoryStore,
         provider: LLMProvider,
         model: str,
-        max_batch_size: int = 20,
+        max_batch_size: int = 5,
         max_iterations: int = 10,
         max_tool_result_chars: int = 16_000,
         annotate_line_ages: bool = True,
@@ -890,9 +993,9 @@ class Dream:
         self.max_batch_size = max_batch_size
         self.max_iterations = max_iterations
         self.max_tool_result_chars = max_tool_result_chars
-        # Kill switch for the git-blame-based per-line age annotation in Phase 1.
-        # Default True keeps the #3212 behavior; set False to feed MEMORY.md raw
-        # (e.g. if a specific LLM reacts poorly to the `← Nd` suffix).
+        # Kill switch for the git-blame-based per-line age annotation in the prompt.
+        # Default True keeps the #3212 behavior; set False to feed all memory
+        # files raw (e.g. if a specific LLM reacts poorly to the `← Nd` suffix).
         self.annotate_line_ages = annotate_line_ages
         self._runner = AgentRunner(provider)
         self._tools = self._build_tools()
@@ -907,6 +1010,7 @@ class Dream:
     def _build_tools(self) -> ToolRegistry:
         """Build a minimal tool registry for the Dream agent."""
         from nanobot.agent.skills import BUILTIN_SKILLS_DIR
+        from nanobot.agent.tools.apply_patch import ApplyPatchTool
         from nanobot.agent.tools.file_state import FileStates
         from nanobot.agent.tools.filesystem import EditFileTool, ReadFileTool, WriteFileTool
 
@@ -924,6 +1028,7 @@ class Dream:
             file_states=file_states,
         ))
         tools.register(EditFileTool(workspace=workspace, allowed_dir=workspace, file_states=file_states))
+        tools.register(ApplyPatchTool(workspace=workspace, allowed_dir=workspace, file_states=file_states))
         # write_file resolves relative paths from workspace root, but can only
         # write under skills/ so the prompt can safely use skills/<name>/SKILL.md.
         skills_dir = workspace / "skills"
@@ -961,8 +1066,8 @@ class Dream:
 
     # -- main entry ----------------------------------------------------------
 
-    def _annotate_with_ages(self, content: str) -> str:
-        """Append per-line age suffixes to MEMORY.md content.
+    def _annotate_with_ages(self, content: str, file_path: str = "memory/MEMORY.md") -> str:
+        """Append per-line age suffixes to file content.
 
         Each non-blank line whose age exceeds ``_STALE_THRESHOLD_DAYS`` gets a
         suffix like ``← 30d`` indicating days since last modification.
@@ -970,9 +1075,7 @@ class Dream:
         annotate fails, or the line count doesn't match the age count
         (which can happen with an uncommitted working-tree edit — better to
         skip annotation than to tag the wrong line).
-        SOUL.md and USER.md are never annotated.
         """
-        file_path = "memory/MEMORY.md"
         try:
             ages = self.store.git.line_ages(file_path)
         except Exception:
@@ -1007,156 +1110,3 @@ class Dream:
             result += "\n"
         return result
 
-    async def run(self) -> bool:
-        """Process unprocessed history entries. Returns True if work was done."""
-        from nanobot.agent.skills import BUILTIN_SKILLS_DIR
-
-        last_cursor = self.store.get_last_dream_cursor()
-        entries = self.store.read_unprocessed_history(since_cursor=last_cursor)
-        if not entries:
-            return False
-
-        batch = entries[: self.max_batch_size]
-        logger.info(
-            "Dream: processing {} entries (cursor {}→{}), batch={}",
-            len(entries), last_cursor, batch[-1]["cursor"], len(batch),
-        )
-
-        # Build history text for LLM — cap each entry so a legacy oversized
-        # record (e.g. pre-#3412 raw_archive dump) can't blow up the prompt.
-        history_text = "\n".join(
-            f"[{e['timestamp']}] "
-            f"{truncate_text(e['content'], self._HISTORY_ENTRY_PREVIEW_MAX_CHARS)}"
-            for e in batch
-        )
-
-        # Current file contents + per-line age annotations (MEMORY.md only).
-        # Each file is capped in the *prompt preview* only; Phase 2 still sees
-        # the full file via the read_file tool.
-        current_date = datetime.now().strftime("%Y-%m-%d")
-        raw_memory = self.store.read_memory() or "(empty)"
-        annotated_memory = (
-            self._annotate_with_ages(raw_memory)
-            if self.annotate_line_ages
-            else raw_memory
-        )
-        current_memory = truncate_text(annotated_memory, self._MEMORY_FILE_MAX_CHARS)
-        current_soul = truncate_text(
-            self.store.read_soul() or "(empty)", self._SOUL_FILE_MAX_CHARS,
-        )
-        current_user = truncate_text(
-            self.store.read_user() or "(empty)", self._USER_FILE_MAX_CHARS,
-        )
-
-        file_context = (
-            f"## Current Date\n{current_date}\n\n"
-            f"## Current MEMORY.md ({len(current_memory)} chars)\n{current_memory}\n\n"
-            f"## Current SOUL.md ({len(current_soul)} chars)\n{current_soul}\n\n"
-            f"## Current USER.md ({len(current_user)} chars)\n{current_user}"
-        )
-
-        # Phase 1: Analyze (no skills list — dedup is Phase 2's job)
-        phase1_prompt = (
-            f"## Conversation History\n{history_text}\n\n{file_context}"
-        )
-
-        try:
-            phase1_response = await self.provider.chat_with_retry(
-                model=self.model,
-                messages=[
-                    {
-                        "role": "system",
-                        "content": render_template(
-                            "agent/dream_phase1.md",
-                            strip=True,
-                            stale_threshold_days=_STALE_THRESHOLD_DAYS,
-                        ),
-                    },
-                    {"role": "user", "content": phase1_prompt},
-                ],
-                tools=None,
-                tool_choice=None,
-            )
-            analysis = phase1_response.content or ""
-            logger.debug("Dream Phase 1 analysis ({} chars): {}", len(analysis), analysis[:500])
-        except Exception:
-            logger.exception("Dream Phase 1 failed")
-            return False
-
-        # Phase 2: Delegate to AgentRunner with read_file / edit_file
-        existing_skills = self._list_existing_skills()
-        skills_section = ""
-        if existing_skills:
-            skills_section = (
-                "\n\n## Existing Skills\n"
-                + "\n".join(f"- {s}" for s in existing_skills)
-            )
-        phase2_prompt = f"## Analysis Result\n{analysis}\n\n{file_context}{skills_section}"
-
-        tools = self._tools
-        skill_creator_path = BUILTIN_SKILLS_DIR / "skill-creator" / "SKILL.md"
-        messages: list[dict[str, Any]] = [
-            {
-                "role": "system",
-                "content": render_template(
-                    "agent/dream_phase2.md",
-                    strip=True,
-                    skill_creator_path=str(skill_creator_path),
-                ),
-            },
-            {"role": "user", "content": phase2_prompt},
-        ]
-
-        try:
-            result = await self._runner.run(AgentRunSpec(
-                initial_messages=messages,
-                tools=tools,
-                model=self.model,
-                max_iterations=self.max_iterations,
-                max_tool_result_chars=self.max_tool_result_chars,
-                fail_on_tool_error=False,
-            ))
-            logger.debug(
-                "Dream Phase 2 complete: stop_reason={}, tool_events={}",
-                result.stop_reason, len(result.tool_events),
-            )
-            for ev in (result.tool_events or []):
-                logger.info("Dream tool_event: name={}, status={}, detail={}", ev.get("name"), ev.get("status"), ev.get("detail", "")[:200])
-        except Exception:
-            logger.exception("Dream Phase 2 failed")
-            result = None
-
-        # Build changelog from tool events
-        changelog: list[str] = []
-        if result and result.tool_events:
-            for event in result.tool_events:
-                if event["status"] == "ok":
-                    changelog.append(f"{event['name']}: {event['detail']}")
-
-        # Only advance cursor on successful completion to prevent silent loss
-        if result and result.stop_reason == "completed":
-            new_cursor = batch[-1]["cursor"]
-            self.store.set_last_dream_cursor(new_cursor)
-            logger.info(
-                "Dream done: {} change(s), cursor advanced to {}",
-                len(changelog), new_cursor,
-            )
-        else:
-            reason = result.stop_reason if result else "exception"
-            logger.warning(
-                "Dream incomplete ({}): cursor NOT advanced, will retry next cron cycle",
-                reason,
-            )
-
-        self.store.compact_history()
-
-        # Git auto-commit (only when there are actual changes)
-        if changelog and self.store.git.is_initialized():
-            ts = batch[-1]["timestamp"]
-            summary = f"dream: {ts}, {len(changelog)} change(s)"
-            commit_msg = f"{summary}\n\n{analysis.strip()}"
-            sha = self.store.git.auto_commit(commit_msg)
-            if sha:
-                logger.info("Dream commit: {}", sha)
-
-        return True
diff --git a/nanobot/cli/commands.py b/nanobot/cli/commands.py
index f7bf043a4..2a3d4f484 100644
--- a/nanobot/cli/commands.py
+++ b/nanobot/cli/commands.py
@@ -762,7 +762,7 @@ def _run_gateway(
     )
 
     from nanobot.agent.loop import UNIFIED_SESSION_KEY
-    from nanobot.bus.events import OutboundMessage
+    from nanobot.bus.events import InboundMessage, OutboundMessage
 
     def _channel_session_key(channel: str, chat_id: str) -> str:
         return (
@@ -810,13 +810,13 @@ def _run_gateway(
     # Set cron callback (needs agent)
     async def on_cron_job(job: CronJob) -> str | None:
         """Execute a cron job through the agent."""
-        # Dream is an internal job — run directly, not through the agent loop.
         if job.name == "dream":
-            try:
-                await agent.dream.run()
-                logger.info("Dream cron job completed")
-            except Exception:
-                logger.exception("Dream cron job failed")
+            await bus.publish_inbound(InboundMessage(
+                channel="system",
+                sender_id="dream",
+                chat_id="dream",
+                content="",
+            ))
             return None
 
         from nanobot.utils.evaluator import evaluate_response
@@ -1027,8 +1027,6 @@ def _run_gateway(
             await server.serve_forever()
     # Register Dream system job (always-on, idempotent on restart)
     dream_cfg = config.agents.defaults.dream
-    if dream_cfg.model_override:
-        agent.dream.model = dream_cfg.model_override
     agent.dream.max_batch_size = dream_cfg.max_batch_size
     agent.dream.max_iterations = dream_cfg.max_iterations
     agent.dream.annotate_line_ages = dream_cfg.annotate_line_ages
diff --git a/nanobot/command/builtin.py b/nanobot/command/builtin.py
index 4646df38a..95b4791c5 100644
--- a/nanobot/command/builtin.py
+++ b/nanobot/command/builtin.py
@@ -299,30 +299,22 @@ async def cmd_model(ctx: CommandContext) -> OutboundMessage:
 
 async def cmd_dream(ctx: CommandContext) -> OutboundMessage:
     """Manually trigger a Dream consolidation run."""
-    import time
+    from nanobot.bus.events import InboundMessage
 
-    loop = ctx.loop
-    msg = ctx.msg
-
-    async def _run_dream():
-        t0 = time.monotonic()
-        try:
-            did_work = await loop.dream.run()
-            elapsed = time.monotonic() - t0
-            if did_work:
-                content = f"Dream completed in {elapsed:.1f}s."
-            else:
-                content = "Dream: nothing to process."
-        except Exception as e:
-            elapsed = time.monotonic() - t0
-            content = f"Dream failed after {elapsed:.1f}s: {e}"
-        await loop.bus.publish_outbound(OutboundMessage(
-            channel=msg.channel, chat_id=msg.chat_id, content=content,
-        ))
-
-    asyncio.create_task(_run_dream())
+    await ctx.loop.bus.publish_inbound(InboundMessage(
+        channel="system",
+        sender_id="dream",
+        chat_id="dream",
+        content="",
+        metadata={
+            "trigger_channel": ctx.msg.channel,
+            "trigger_chat_id": ctx.msg.chat_id,
+        },
+    ))
     return OutboundMessage(
-        channel=msg.channel, chat_id=msg.chat_id, content="Dreaming...",
+        channel=ctx.msg.channel,
+        chat_id=ctx.msg.chat_id,
+        content="Dream started. It will process memory backlog and report when done.",
     )
 
 
@@ -355,6 +347,18 @@ def _format_changed_files(diff: str) -> str:
 
 def _format_dream_log_content(commit, diff: str, *, requested_sha: str | None = None) -> str:
     files_line = _format_changed_files(diff)
+    msg_lines = commit.message.splitlines() if commit.message else []
+    msg_summary = msg_lines[0] if msg_lines else ""
+    msg_body = []
+    in_body = False
+    for line in msg_lines[1:]:
+        if not in_body:
+            if not line:
+                in_body = True
+            continue
+        msg_body.append(line)
+    body_text = "\n".join(msg_body).strip()
+
     lines = [
         "## Dream Update",
         "",
@@ -362,8 +366,12 @@ def _format_dream_log_content(commit, diff: str, *, requested_sha: str | None =
         "",
         f"- Commit: `{commit.sha}`",
         f"- Time: {commit.timestamp}",
-        f"- Changed files: {files_line}",
     ]
+    if msg_summary:
+        lines.append(f"- Summary: {msg_summary}")
+    lines.append(f"- Changed files: {files_line}")
+    if body_text:
+        lines.extend(["", "### Analysis", "", body_text])
     if diff:
         lines.extend([
             "",
@@ -389,7 +397,8 @@ def _format_dream_restore_list(commits: list) -> str:
         "",
     ]
     for c in commits:
-        lines.append(f"- `{c.sha}` {c.timestamp} - {c.message.splitlines()[0]}")
+        summary = c.message.splitlines()[0] if c.message else "(no message)"
+        lines.append(f"- `{c.sha}` {c.timestamp} - {summary}")
     lines.extend([
         "",
         "Preview a version with `/dream-log <sha>` before restoring it.",
diff --git a/nanobot/config/schema.py b/nanobot/config/schema.py
index f194820cc..e5aed3494 100644
--- a/nanobot/config/schema.py
+++ b/nanobot/config/schema.py
@@ -52,13 +52,12 @@ class DreamConfig(Base):
     model_override: str | None = Field(
         default=None,
         validation_alias=AliasChoices("modelOverride", "model", "model_override"),
-    )  # Optional Dream-specific model override
-    max_batch_size: int = Field(default=20, ge=1)  # Max history entries per run
-    # Bumped from 10 to 15 in #3212 (exp002: +30% dedup, no accuracy loss; >15 plateaus).
-    max_iterations: int = Field(default=15, ge=1)  # Max tool calls per Phase 2
-    # Per-line git-blame age annotation in Phase 1 prompt (see #3212). Default
-    # on — set to False to feed MEMORY.md raw if a specific LLM reacts poorly
-    # to the `← Nd` suffix or you want deterministic, git-independent prompts.
+    )  # Optional Dream-specific model override. Supports preset names (resolved against model_presets) or raw model identifiers.
+    max_batch_size: int = Field(default=5, ge=1)  # Max history entries per run
+    max_iterations: int = Field(default=15, ge=1)  # Max tool calls per Dream run
+    # Per-line git-blame age annotation in the Dream prompt (see #3212). Default
+    # on — set to False to feed all memory files raw if a specific LLM reacts
+    # poorly to the `← Nd` suffix or you want deterministic, git-independent prompts.
     annotate_line_ages: bool = True
 
     def build_schedule(self, timezone: str) -> CronSchedule:
diff --git a/nanobot/skills/memory/SKILL.md b/nanobot/skills/memory/SKILL.md
index 042ef80ca..837102459 100644
--- a/nanobot/skills/memory/SKILL.md
+++ b/nanobot/skills/memory/SKILL.md
@@ -34,3 +34,5 @@ Examples (replace `keyword`):
 - **Do NOT edit SOUL.md, USER.md, or MEMORY.md.** They are automatically managed by Dream.
 - If you notice outdated information, it will be corrected when Dream runs next.
 - Users can view Dream's activity with the `/dream-log` command.
+- Dream runs as a `system` session inside the AgentLoop, triggered by the `/dream` command or cron. Each turn processes one batch; if backlog remains, Dream automatically chains additional turns until complete. All changes are committed in a single git commit.
+- Dream can use a different model than the main agent via `agents.defaults.dream.modelOverride`. Supports preset names or raw model identifiers.
diff --git a/nanobot/templates/agent/consolidator_archive.md b/nanobot/templates/agent/consolidator_archive.md
index 5073f4f44..8181a2e19 100644
--- a/nanobot/templates/agent/consolidator_archive.md
+++ b/nanobot/templates/agent/consolidator_archive.md
@@ -1,13 +1,27 @@
-Extract key facts from this conversation. Only output items matching these categories, skip everything else:
-- User facts: personal info, preferences, stated opinions, habits
-- Decisions: choices made, conclusions reached
-- Solutions: working approaches discovered through trial and error, especially non-obvious methods that succeeded after failed attempts
-- Events: plans, deadlines, notable occurrences
-- Preferences: communication style, tool preferences
+Extract key facts from this conversation. For each fact, annotate its memory attributes.
 
-Priority: user corrections and preferences > solutions > decisions > events > environment facts. The most valuable memory prevents the user from having to repeat themselves.
+Only SNIP facts deserve a non-[skip] mark:
+- Signal: would the user need to repeat this if forgotten?
+- Novel: not already in MEMORY.md or USER.md (check context below)
+- Important: prevents rework or captures preferences / rules
+- Persistent: still relevant after 2 weeks
 
-Skip: code patterns derivable from source, git history, or anything already captured in existing memory.
+Output one fact per line in this format:
+- [mark] fact content
+
+Marks (choose the best match):
+- [permanent] Core preferences, personal traits, habits — never becomes stale
+- [durable] Technical discoveries, project knowledge, config details — valid for months
+- [ephemeral] Active task state, temporary decisions — may change in weeks
+- [correction] Correction to a previous memory — must state what it replaces
+- [skip] Does not meet SNIP criteria — still written to history.jsonl for audit, but Dream will ignore it
+
+Categories to capture: people/roles, decisions/rationale, solutions, events/dates, preferences.
+Decisions must include their motivation.
+Write densely. Prefer 'X=A, Y=B' over separate bullets for tightly coupled facts.
+Priority: user corrections > decisions with rationale > solutions > specific events > general context.
+Output in the same language as the input conversation.
+CRITICAL: Never drop person names, team names, or project names.
+Skip: code patterns derivable from source, git history, or anything already in existing memory.
 
-Output as concise bullet points, one fact per line. No preamble, no commentary.
 If nothing noteworthy happened, output: (nothing)
diff --git a/nanobot/templates/agent/dream.md b/nanobot/templates/agent/dream.md
new file mode 100644
index 000000000..eeb004bc6
--- /dev/null
+++ b/nanobot/templates/agent/dream.md
@@ -0,0 +1,58 @@
+Update memory files by analyzing conversation history and editing files directly.
+Prune before adding — removing stale content is as important as adding new facts.
+
+## File routing
+Do NOT guess paths. Route each fact to its canonical file:
+
+| File | Full path | Content |
+|------|------|---------|
+| SOUL.md | `{{ soul_path }}` | Agent behavior, guardrails, tone, interaction patterns |
+| USER.md | `{{ user_path }}` | Personal info, preferences, habits, work context, communication style |
+| MEMORY.md | `{{ memory_path }}` | Technical knowledge, project context, infrastructure, accounts |
+| SKILL.md | `skills/<name>/SKILL.md` | Reusable workflow templates ([SKILL] entries only) |
+
+Cross-boundary rule: no technical configs in USER.md, no user facts in SOUL.md, no preferences in MEMORY.md. If a fact fits multiple files, keep the most specific copy and remove the rest.
+
+## Delete-or-keep
+
+**Always delete:**
+- Same fact at multiple locations — keep canonical copy only
+- Merged/closed PR notes, resolved incidents, superseded info
+- Verbose entries restatable in fewer words
+- Overlapping or nested sections covering the same topic
+
+**Likely delete** (apply judgment):
+- Same fact at different detail levels — keep most complete version only
+- Debugging steps unlikely to recur
+- Ephemeral facts past their useful life
+- Tool/service details documented upstream
+- Lines with ``← Nd`` where N>{{ stale_threshold_days }} — closer review, not automatic removal
+
+**Never delete:**
+- User preferences and personality traits (permanent regardless of age)
+- Active project context still referenced in conversations
+- Behavioral rules in SOUL.md
+
+When removing: prefer deleting individual items over entire sections.
+
+## Fact extraction
+- Atomic facts: "has a cat named Luna" not "discussed pet care"
+- Corrections: edit the existing entry, don't append a new one
+- Capture confirmed approaches the user validated
+
+## Skill discovery & creation
+Flag [SKILL] only when ALL are true: repeatable workflow appeared 2+ times, involves clear steps (not vague preferences), substantial enough for its own instruction set. Check existing skills to avoid redundancy.
+
+For [SKILL] entries:
+- Use write_file to create skills/<name>/SKILL.md; read_file `{{ skill_creator_path }}` for format reference
+- YAML frontmatter (name, description), under 2000 words: when to use, steps, output format, example
+- Do NOT overwrite existing skills — if overlapping, merge delta into the existing skill
+- Skills are instruction sets, not code. Keep concrete values in MEMORY.md; skills use placeholders
+
+## Editing
+- Default tool: apply_patch. Use edit_file only for small exact replacements.
+- File contents provided below — no read_file needed for initial edits.
+- Batch all changes into a single apply_patch call. Surgical edits only.
+- dry_run=true to preview. If nothing to update, stop without calling tools.
+
+Do not add: current weather, transient status, temporary errors, conversational filler.
diff --git a/nanobot/templates/agent/dream_phase1.md b/nanobot/templates/agent/dream_phase1.md
deleted file mode 100644
index 114db38c5..000000000
--- a/nanobot/templates/agent/dream_phase1.md
+++ /dev/null
@@ -1,40 +0,0 @@
-You have TWO equally important tasks:
-1. Extract new facts from conversation history
-2. Deduplicate existing memory files — find and flag redundant, overlapping, or stale content even if NOT mentioned in history
-
-Output one line per finding:
-[FILE] atomic fact (not already in memory)
-[FILE-REMOVE] reason for removal
-[SKILL] kebab-case-name: one-line description of the reusable pattern
-
-Files: USER (identity, preferences), SOUL (bot behavior, tone), MEMORY (knowledge, project context)
-
-Rules:
-- Atomic facts: "has a cat named Luna" not "discussed pet care"
-- Corrections: [USER] location is Tokyo, not Osaka
-- Capture confirmed approaches the user validated
-
-Deduplication — scan ALL memory files for these redundancy patterns:
-- Same fact stated in multiple places (e.g., "communicates in Chinese" in both USER.md and multiple MEMORY.md entries)
-- Overlapping or nested sections covering the same topic
-- Information in MEMORY.md that is already captured in USER.md or SOUL.md (MEMORY.md should not duplicate permanent-file content)
-- Verbose entries that can be condensed without losing information
-For each duplicate found, output [FILE-REMOVE] for the less authoritative copy (prefer keeping facts in their canonical location)
-
-Staleness — MEMORY.md lines may have a ``← Nd`` suffix showing days since last modification:
-- SOUL.md and USER.md have no age annotations — they are permanent, only update with corrections
-- Age only indicates when content was last touched, not whether it should be removed
-- Use content judgment: user habits/preferences/personality traits are permanent regardless of age
-- Only prune content that is objectively outdated: passed events, resolved tracking, superseded approaches
-- Lines with ``← Nd`` (N>{{ stale_threshold_days }}) deserve closer review but are NOT automatically removable
-- When removing: prefer deleting individual items over entire sections
-
-Skill discovery — flag [SKILL] when ALL of these are true:
-- A specific, repeatable workflow appeared 2+ times in the conversation history
-- It involves clear steps (not vague preferences like "likes concise answers")
-- It is substantial enough to warrant its own instruction set (not trivial like "read a file")
-- Do not worry about duplicates — the next phase will check against existing skills
-
-Do not add: current weather, transient status, temporary errors, conversational filler.
-
-[SKIP] if nothing needs updating.
diff --git a/nanobot/templates/agent/dream_phase2.md b/nanobot/templates/agent/dream_phase2.md
deleted file mode 100644
index f833afb6a..000000000
--- a/nanobot/templates/agent/dream_phase2.md
+++ /dev/null
@@ -1,37 +0,0 @@
-Update memory files based on the analysis below.
-- [FILE] entries: add the described content to the appropriate file
-- [FILE-REMOVE] entries: delete the corresponding content from memory files
-- [SKILL] entries: create a new skill under skills/<name>/SKILL.md using write_file
-
-## File paths (relative to workspace root)
-- SOUL.md
-- USER.md
-- memory/MEMORY.md
-- skills/<name>/SKILL.md (for [SKILL] entries only)
-
-Do NOT guess paths.
-
-## Editing rules
-- Edit directly — file contents provided below, no read_file needed
-- Use exact text as old_text, include surrounding blank lines for unique match
-- Batch changes to the same file into one edit_file call
-- For deletions: section header + all bullets as old_text, new_text empty
-- Surgical edits only — never rewrite entire files
-- If nothing to update, stop without calling tools
-
-## Skill creation rules (for [SKILL] entries)
-- Use write_file to create skills/<name>/SKILL.md
-- Before writing, read_file `{{ skill_creator_path }}` for format reference (frontmatter structure, naming conventions, quality standards)
-- **Dedup check**: read existing skills listed below to verify the new skill is not functionally redundant. Skip creation if an existing skill already covers the same workflow.
-- Include YAML frontmatter with name and description fields
-- Keep SKILL.md under 2000 words — concise and actionable
-- Include: when to use, steps, output format, at least one example
-- Do NOT overwrite existing skills — skip if the skill directory already exists
-- Reference specific tools the agent has access to (read_file, write_file, exec, web_search, etc.)
-- Skills are instruction sets, not code — do not include implementation code
-
-## Quality
-- Every line must carry standalone value
-- Concise bullets under clear headers
-- When reducing (not deleting): keep essential facts, drop verbose details
-- If uncertain whether to delete, keep but add "(verify currency)"
diff --git a/nanobot/utils/gitstore.py b/nanobot/utils/gitstore.py
index 6e05ca128..b1c5c7bed 100644
--- a/nanobot/utils/gitstore.py
+++ b/nanobot/utils/gitstore.py
@@ -19,7 +19,8 @@ class CommitInfo:
 
     def format(self, diff: str = "") -> str:
         """Format this commit for display, optionally with a diff."""
-        header = f"## {self.message.splitlines()[0]}\n`{self.sha}` — {self.timestamp}\n"
+        summary = self.message.splitlines()[0] if self.message else "(no message)"
+        header = f"## {summary}\n`{self.sha}` — {self.timestamp}\n"
         if diff:
             return f"{header}\n```diff\n{diff}\n```"
         return f"{header}\n(no file changes)"
diff --git a/tests/agent/test_dream.py b/tests/agent/test_dream.py
index 27e49fda5..8ce9f6c9d 100644
--- a/tests/agent/test_dream.py
+++ b/tests/agent/test_dream.py
@@ -1,19 +1,32 @@
-"""Tests for the Dream class — two-phase memory consolidation via AgentRunner."""
+"""Tests for Dream driven through AgentLoop._process_system_message."""
 
 import json
+from types import SimpleNamespace
+from unittest.mock import AsyncMock, MagicMock, patch
 
 import pytest
 
-from unittest.mock import AsyncMock, MagicMock, patch
-
-from nanobot.agent.memory import Dream, MemoryStore
+from nanobot.agent.loop import AgentLoop
 from nanobot.agent.runner import AgentRunResult
 from nanobot.agent.skills import BUILTIN_SKILLS_DIR
+from nanobot.bus.events import InboundMessage
+from nanobot.bus.queue import MessageBus
 from nanobot.utils.gitstore import LineAge
 
 
+def _provider(default_model: str, max_tokens: int = 123) -> MagicMock:
+    provider = MagicMock()
+    provider.get_default_model.return_value = default_model
+    provider.generation = SimpleNamespace(
+        max_tokens=max_tokens, temperature=0.1, reasoning_effort=None
+    )
+    return provider
+
+
 @pytest.fixture
 def store(tmp_path):
+    from nanobot.agent.memory import MemoryStore
+
     s = MemoryStore(tmp_path)
     s.write_soul("# Soul\n- Helpful")
     s.write_user("# User\n- Developer")
@@ -23,9 +36,7 @@ def store(tmp_path):
 
 @pytest.fixture
 def mock_provider():
-    p = MagicMock()
-    p.chat_with_retry = AsyncMock()
-    return p
+    return _provider("test-model")
 
 
 @pytest.fixture
@@ -34,10 +45,16 @@ def mock_runner():
 
 
 @pytest.fixture
-def dream(store, mock_provider, mock_runner):
-    d = Dream(store=store, provider=mock_provider, model="test-model", max_batch_size=5)
-    d._runner = mock_runner
-    return d
+def loop(tmp_path, mock_provider, mock_runner):
+    loop = AgentLoop(
+        bus=MessageBus(),
+        provider=mock_provider,
+        workspace=tmp_path,
+        model="test-model",
+        context_window_tokens=1000,
+    )
+    loop.dream._runner = mock_runner
+    return loop
 
 
 def _make_run_result(
@@ -56,254 +73,418 @@ def _make_run_result(
     )
 
 
-class TestDreamRun:
-    async def test_noop_when_no_unprocessed_history(self, dream, mock_provider, mock_runner, store):
-        """Dream should not call LLM when there's nothing to process."""
-        result = await dream.run()
-        assert result is False
-        mock_provider.chat_with_retry.assert_not_called()
+class TestDreamAgentLoopIntegration:
+    async def test_completes_goal_state_after_full_backlog(self, loop, mock_runner, store):
+        """Goal should be completed after processing all backlog in internal loop."""
+        for i in range(6):
+            store.append_history(f"event {i}")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        session = loop.sessions.get_or_create("system:dream")
+        goal = session.metadata.get("goal_state")
+        assert isinstance(goal, dict)
+        assert goal["status"] == "completed"
+        assert store.get_last_dream_cursor() == 6
+
+    async def test_completes_goal_state_on_finish(self, loop, mock_runner, store):
+        """Goal should be marked completed when backlog is fully processed."""
+        store.append_history("event 1")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        session = loop.sessions.get_or_create("system:dream")
+        goal = session.metadata.get("goal_state")
+        assert goal["status"] == "completed"
+        assert "completed_at" in goal
+        assert "recap" in goal
+
+    async def test_noop_when_no_unprocessed_history(self, loop, mock_runner):
+        """Dream should not call runner when there's nothing to process."""
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        result = await loop._process_system_message(msg)
+        assert result is None
         mock_runner.run.assert_not_called()
 
-    async def test_calls_runner_for_unprocessed_entries(self, dream, mock_provider, mock_runner, store):
+    async def test_calls_runner_for_unprocessed_entries(self, loop, mock_runner, store):
         """Dream should call AgentRunner when there are unprocessed history entries."""
         store.append_history("User prefers dark mode")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="New fact")
-        mock_runner.run = AsyncMock(return_value=_make_run_result(
-            tool_events=[{"name": "edit_file", "status": "ok", "detail": "memory/MEMORY.md"}],
-        ))
-        result = await dream.run()
-        assert result is True
+        mock_runner.run = AsyncMock(
+            return_value=_make_run_result(
+                tool_events=[
+                    {"name": "edit_file", "status": "ok", "detail": "memory/MEMORY.md"}
+                ],
+            )
+        )
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
         mock_runner.run.assert_called_once()
         spec = mock_runner.run.call_args[0][0]
         assert spec.max_iterations == 10
         assert spec.fail_on_tool_error is False
 
-    async def test_advances_dream_cursor(self, dream, mock_provider, mock_runner, store):
+    async def test_advances_dream_cursor(self, loop, mock_runner, store):
         """Dream should advance the cursor after processing."""
         store.append_history("event 1")
         store.append_history("event 2")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="Nothing new")
         mock_runner.run = AsyncMock(return_value=_make_run_result())
-        await dream.run()
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
         assert store.get_last_dream_cursor() == 2
 
-    async def test_compacts_processed_history(self, dream, mock_provider, mock_runner, store):
+    async def test_compacts_processed_history(self, loop, mock_runner, store):
         """Dream should compact history after processing."""
         store.append_history("event 1")
         store.append_history("event 2")
         store.append_history("event 3")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="Nothing new")
         mock_runner.run = AsyncMock(return_value=_make_run_result())
-        await dream.run()
-        # After Dream, cursor is advanced and 3, compact keeps last max_history_entries
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
         entries = store.read_unprocessed_history(since_cursor=0)
         assert all(e["cursor"] > 0 for e in entries)
 
-    async def test_skill_phase_uses_builtin_skill_creator_path(self, dream, mock_provider, mock_runner, store):
-        """Dream should point skill creation guidance at the builtin skill-creator template."""
+    async def test_processes_full_backlog_in_one_call(self, loop, mock_runner, store):
+        """Backlog larger than max_batch_size should be fully processed in one call."""
+        for i in range(12):
+            store.append_history(f"event {i}")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        assert store.get_last_dream_cursor() == 12
+        assert mock_runner.run.call_count == 3  # 5 + 5 + 2
+
+    async def test_single_git_commit_for_multi_batch(self, loop, mock_runner, store):
+        """Multi-batch run should collapse into exactly one git commit."""
+        store.git.init()
+        store.git.auto_commit("initial")
+        for i in range(12):
+            store.append_history(f"event {i}")
+        mock_runner.run = AsyncMock(
+            return_value=_make_run_result(
+                tool_events=[
+                    {"name": "edit_file", "status": "ok", "detail": "memory/MEMORY.md"}
+                ],
+            )
+        )
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        commits = store.git.log()
+        dream_commits = [c for c in commits if c.message.startswith("dream:")]
+        assert len(dream_commits) == 1
+
+    async def test_system_prompt_cached(self, loop, mock_runner, store):
+        """Batches within one run should reuse cached system prompt when template mtime unchanged."""
+        for i in range(6):
+            store.append_history(f"event {i}")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        # Two batches (5 + 1), both should use the same cached prompt
+        assert mock_runner.run.call_count == 2
+        first_prompt = mock_runner.run.call_args_list[0][0][0].initial_messages[0]["content"]
+        second_prompt = mock_runner.run.call_args_list[1][0][0].initial_messages[0]["content"]
+        assert second_prompt is first_prompt
+
+    async def test_noop_when_empty_backlog(self, loop, mock_runner, store):
+        """Empty backlog should not advance cursor or create a commit."""
+        store.git.init()
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        assert store.get_last_dream_cursor() == 0
+        commits = store.git.log()
+        assert len([c for c in commits if c.message.startswith("dream:")]) == 0
+
+
+class TestDreamPrompt:
+    async def test_prompt_contains_mece_rules(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        system_prompt = spec.initial_messages[0]["content"]
+        assert "Do NOT guess paths" in system_prompt
+        assert "SOUL.md" in system_prompt
+        assert "USER.md" in system_prompt
+        assert "MEMORY.md" in system_prompt
+
+    async def test_skill_phase_uses_builtin_skill_creator_path(self, loop, mock_runner, store):
         store.append_history("Repeated workflow one")
         store.append_history("Repeated workflow two")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKILL] test-skill: test description")
         mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        await dream.run()
-
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
         spec = mock_runner.run.call_args[0][0]
         system_prompt = spec.initial_messages[0]["content"]
         expected = str(BUILTIN_SKILLS_DIR / "skill-creator" / "SKILL.md")
         assert expected in system_prompt
 
-    async def test_skill_write_tool_accepts_workspace_relative_skill_path(self, dream, store):
-        """Dream skill creation should allow skills/<name>/SKILL.md relative to workspace root."""
-        write_tool = dream._tools.get("write_file")
-        assert write_tool is not None
-
-        result = await write_tool.execute(
-            path="skills/test-skill/SKILL.md",
-            content="---\nname: test-skill\ndescription: Test\n---\n",
+    async def test_system_prompt_uses_threshold_from_template_var(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
         )
-
-        assert "Successfully wrote" in result
-        assert (store.workspace / "skills" / "test-skill" / "SKILL.md").exists()
-
-    async def test_phase1_prompt_includes_line_age_annotations(self, dream, mock_provider, mock_runner, store):
-        """Phase 1 prompt should have per-line age suffixes in MEMORY.md when git is available."""
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        # Init git so line_ages works
-        store.git.init()
-        store.git.auto_commit("initial memory state")
-
-        await dream.run()
-
-        # The MEMORY.md section should not crash and should contain the memory content
-        call_args = mock_provider.chat_with_retry.call_args
-        user_msg = call_args.kwargs.get("messages", call_args[1].get("messages"))[1]["content"]
-        assert "## Current MEMORY.md" in user_msg
-
-    async def test_phase1_annotates_only_memory_not_soul_or_user(self, dream, mock_provider, mock_runner, store):
-        """SOUL.md and USER.md should never have age annotations — they are permanent."""
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        store.git.init()
-        store.git.auto_commit("initial state")
-
-        await dream.run()
-
-        call_args = mock_provider.chat_with_retry.call_args
-        user_msg = call_args.kwargs.get("messages", call_args[1].get("messages"))[1]["content"]
-        # The ← suffix should only appear in MEMORY.md section
-        memory_section = user_msg.split("## Current MEMORY.md")[1].split("## Current SOUL.md")[0]
-        soul_section = user_msg.split("## Current SOUL.md")[1].split("## Current USER.md")[0]
-        user_section = user_msg.split("## Current USER.md")[1]
-        # SOUL and USER should not contain age arrows
-        assert "\u2190" not in soul_section
-        assert "\u2190" not in user_section
-
-    async def test_phase1_prompt_works_without_git(self, dream, mock_provider, mock_runner, store):
-        """Phase 1 should work fine even if git is not initialized (no age annotations)."""
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        await dream.run()
-
-        # Should still succeed — just without age annotations
-        mock_provider.chat_with_retry.assert_called_once()
-        call_args = mock_provider.chat_with_retry.call_args
-        user_msg = call_args.kwargs.get("messages", call_args[1].get("messages"))[1]["content"]
-        assert "## Current MEMORY.md" in user_msg
-
-    async def test_phase1_prompt_carries_age_suffix_for_stale_lines(
-        self, dream, mock_provider, mock_runner, store,
-    ):
-        """End-to-end: ages >14d must appear verbatim in the LLM prompt, ages ≤14d must not."""
-        # MEMORY.md fixture has 2 non-blank lines ("# Memory" and "- Project X active").
-        # Inject four ages to cover threshold boundaries: >14 suffix, ==14 no suffix, <14 no suffix.
-        store.write_memory("# Memory\n- Project X active\n- fresh item\n- edge case line")
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        fake_ages = [
-            LineAge(age_days=30),   # "# Memory"        → should get ← 30d
-            LineAge(age_days=20),   # "- Project X..."  → should get ← 20d
-            LineAge(age_days=14),   # "- fresh item"    → ==14, threshold is strictly >14, no suffix
-            LineAge(age_days=5),    # "- edge case..."  → no suffix
-        ]
-        with patch.object(store.git, "line_ages", return_value=fake_ages):
-            await dream.run()
-
-        call_args = mock_provider.chat_with_retry.call_args
-        user_msg = call_args.kwargs.get("messages", call_args[1].get("messages"))[1]["content"]
-        memory_section = user_msg.split("## Current MEMORY.md")[1].split("## Current SOUL.md")[0]
-        assert "\u2190 30d" in memory_section
-        assert "\u2190 20d" in memory_section
-        assert "\u2190 14d" not in memory_section
-        assert "\u2190 5d" not in memory_section
-
-    async def test_phase1_skips_annotation_when_disabled(
-        self, dream, mock_provider, mock_runner, store,
-    ):
-        """`annotate_line_ages=False` must bypass the git lookup entirely and keep MEMORY.md raw."""
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        dream.annotate_line_ages = False
-        # line_ages must be bypassed entirely — verify with a spy rather than a
-        # raising side_effect, because _annotate_with_ages catches Exception
-        # (which swallows AssertionError) and would hide an accidental call.
-        with patch.object(store.git, "line_ages") as mock_line_ages:
-            await dream.run()
-            mock_line_ages.assert_not_called()
-
-        call_args = mock_provider.chat_with_retry.call_args
-        user_msg = call_args.kwargs.get("messages", call_args[1].get("messages"))[1]["content"]
-        assert "\u2190" not in user_msg
-
-    async def test_phase1_skips_annotation_on_line_ages_length_mismatch(
-        self, dream, mock_provider, mock_runner, store,
-    ):
-        """If ages length != lines length (dirty working tree), skip annotation instead of mis-tagging."""
-        # MEMORY.md has 2 non-blank lines but we hand back only 1 age → mismatch.
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        with patch.object(store.git, "line_ages", return_value=[LineAge(age_days=999)]):
-            await dream.run()
-
-        call_args = mock_provider.chat_with_retry.call_args
-        user_msg = call_args.kwargs.get("messages", call_args[1].get("messages"))[1]["content"]
-        memory_section = user_msg.split("## Current MEMORY.md")[1].split("## Current SOUL.md")[0]
-        # No age arrow at all — we refused to annotate rather than tag the wrong line.
-        assert "\u2190" not in memory_section
-
-    async def test_phase1_prompt_uses_threshold_from_template_var(
-        self, dream, mock_provider, mock_runner, store,
-    ):
-        """System prompt should reference the stale-threshold constant, not a hardcoded 14."""
-        store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
-        mock_runner.run = AsyncMock(return_value=_make_run_result())
-
-        await dream.run()
-
-        system_msg = mock_provider.chat_with_retry.call_args.kwargs["messages"][0]["content"]
-        # The template renders with stale_threshold_days=14 → LLM must see "N>14"
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        system_msg = spec.initial_messages[0]["content"]
         assert "N>14" in system_msg
 
 
 class TestDreamPromptCaps:
-    """Dream's Phase 1/2 prompt must not be poisoned by a legacy oversized
-    history entry or a runaway MEMORY.md. Without caps, a single pre-#3412
-    raw_archive dump in history.jsonl would make every subsequent Dream run
-    exceed the context window and silently advance the cursor past real work.
-    """
-
-    async def test_phase1_caps_huge_memory_file(
-        self, dream, mock_provider, mock_runner, store,
-    ):
-        """A MEMORY.md much larger than _MEMORY_FILE_MAX_CHARS must be truncated
-        in the prompt preview (full content is still reachable via read_file)."""
-        store.write_memory("M" * (dream._MEMORY_FILE_MAX_CHARS * 5))
+    async def test_caps_huge_memory_file(self, loop, mock_runner, store):
+        store.write_memory("M" * (loop.dream._MEMORY_FILE_MAX_CHARS * 5))
         store.append_history("some event")
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
         mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        memory_section = user_msg.split("## Current MEMORY.md")[1].split(
+            "## Current SOUL.md"
+        )[0]
+        assert len(memory_section) < loop.dream._MEMORY_FILE_MAX_CHARS + 500
 
-        await dream.run()
-
-        user_msg = mock_provider.chat_with_retry.call_args.kwargs["messages"][1]["content"]
-        memory_section = user_msg.split("## Current MEMORY.md")[1].split("## Current SOUL.md")[0]
-        assert len(memory_section) < dream._MEMORY_FILE_MAX_CHARS + 500
-
-    async def test_phase1_caps_huge_history_entry(
-        self, dream, mock_provider, mock_runner, store,
-    ):
-        """A legacy oversized history entry (e.g. pre-#3412 raw_archive dump)
-        must not explode the Phase 1 prompt — each entry is capped in the
-        preview, even though the JSONL record itself stays full-size."""
-        # Bypass the append_history cap by writing directly, simulating a
-        # record that was written by an older nanobot build before any caps.
+    async def test_caps_huge_history_entry(self, loop, mock_runner, store):
         store.history_file.write_text(
-            json.dumps({
-                "cursor": 1,
-                "timestamp": "2026-04-01 10:00",
-                "content": "H" * (dream._HISTORY_ENTRY_PREVIEW_MAX_CHARS * 8),
-            }) + "\n",
+            json.dumps(
+                {
+                    "cursor": 1,
+                    "timestamp": "2026-04-01 10:00",
+                    "content": "H" * (loop.dream._HISTORY_ENTRY_PREVIEW_MAX_CHARS * 8),
+                }
+            )
+            + "\n",
             encoding="utf-8",
         )
-        mock_provider.chat_with_retry.return_value = MagicMock(content="[SKIP]")
         mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        history_section = user_msg.split("## Conversation History\n")[1].split(
+            "\n\n## Current Date"
+        )[0]
+        assert len(history_section) < loop.dream._HISTORY_ENTRY_PREVIEW_MAX_CHARS + 500
 
-        await dream.run()
 
-        user_msg = mock_provider.chat_with_retry.call_args.kwargs["messages"][1]["content"]
-        history_section = user_msg.split("## Conversation History\n")[1].split("\n\n## Current Date")[0]
-        assert len(history_section) < dream._HISTORY_ENTRY_PREVIEW_MAX_CHARS + 500
+class TestDreamTools:
+    def test_apply_patch_tool_registered(self, loop):
+        tool = loop.dream._tools.get("apply_patch")
+        assert tool is not None
 
+
+class TestDreamCaps:
+    def test_batch_size_default_is_5(self):
+        from nanobot.config.schema import DreamConfig
+
+        assert DreamConfig().max_batch_size == 5
+
+    def test_memory_cap_is_16k(self, loop):
+        assert loop.dream._MEMORY_FILE_MAX_CHARS == 16_000
+
+
+class TestDreamSkipFiltering:
+    async def test_skip_entries_removed_from_prompt(self, loop, mock_runner, store):
+        store.append_history("- [skip] greeting\n- [permanent] User prefers dark mode")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        assert "User prefers dark mode" in user_msg
+        assert "[skip]" not in user_msg
+        assert "greeting" not in user_msg
+
+
+class TestDreamAgeAnnotations:
+    async def test_prompt_includes_line_age_annotations(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        store.git.init()
+        store.git.auto_commit("initial memory state")
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        assert "## Current MEMORY.md" in user_msg
+
+    async def test_annotates_only_memory_not_soul_or_user(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        store.git.init()
+        store.git.auto_commit("initial state")
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        soul_section = user_msg.split("## Current SOUL.md")[1].split(
+            "## Current USER.md"
+        )[0]
+        user_section = user_msg.split("## Current USER.md")[1]
+        assert "←" not in soul_section
+        assert "←" not in user_section
+
+    async def test_prompt_works_without_git(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        mock_runner.run.assert_called_once()
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        assert "## Current MEMORY.md" in user_msg
+
+    async def test_prompt_carries_age_suffix_for_stale_lines(self, loop, mock_runner, store):
+        store.write_memory(
+            "# Memory\n- Project X active\n- fresh item\n- edge case line"
+        )
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        fake_ages = [
+            LineAge(age_days=30),
+            LineAge(age_days=20),
+            LineAge(age_days=14),
+            LineAge(age_days=5),
+        ]
+        with patch.object(loop.dream.store.git, "line_ages", return_value=fake_ages):
+            msg = InboundMessage(
+                channel="system", sender_id="dream", chat_id="dream", content=""
+            )
+            await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        memory_section = user_msg.split("## Current MEMORY.md")[1].split(
+            "## Current SOUL.md"
+        )[0]
+        assert "← 30d" in memory_section
+        assert "← 20d" in memory_section
+        assert "← 14d" not in memory_section
+        assert "← 5d" not in memory_section
+
+    async def test_skips_annotation_when_disabled(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        loop.dream.annotate_line_ages = False
+        with patch.object(loop.dream.store.git, "line_ages") as mock_line_ages:
+            msg = InboundMessage(
+                channel="system", sender_id="dream", chat_id="dream", content=""
+            )
+            await loop._process_system_message(msg)
+            mock_line_ages.assert_not_called()
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        assert "←" not in user_msg
+
+    async def test_skips_annotation_on_line_ages_length_mismatch(self, loop, mock_runner, store):
+        store.append_history("some event")
+        mock_runner.run = AsyncMock(return_value=_make_run_result())
+        with patch.object(
+            loop.dream.store.git, "line_ages", return_value=[LineAge(age_days=999)]
+        ):
+            msg = InboundMessage(
+                channel="system", sender_id="dream", chat_id="dream", content=""
+            )
+            await loop._process_system_message(msg)
+        spec = mock_runner.run.call_args[0][0]
+        user_msg = spec.initial_messages[1]["content"]
+        memory_section = user_msg.split("## Current MEMORY.md")[1].split(
+            "## Current SOUL.md"
+        )[0]
+        assert "←" not in memory_section
+
+
+class TestDreamSessionPersistence:
+    async def test_writes_session_on_success(self, loop, mock_runner, store):
+        store.append_history("event one")
+        store.append_history("event two")
+        mock_runner.run = AsyncMock(
+            return_value=_make_run_result(
+                tool_events=[
+                    {"name": "edit_file", "status": "ok", "detail": "memory/MEMORY.md"}
+                ],
+            )
+        )
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        session_path = store.memory_dir / ".dream_session.json"
+        assert session_path.exists()
+        data = json.loads(session_path.read_text(encoding="utf-8"))
+        assert data["batch"]["from_cursor"] == 0
+        assert data["batch"]["to_cursor"] == 2
+        assert data["batch"]["count"] == 2
+        assert data["stop_reason"] == "completed"
+        assert data["changelog"] == ["edit_file: memory/MEMORY.md"]
+        assert "timestamp" in data
+        assert "elapsed_seconds" in data
+        assert "messages" in data
+
+    async def test_no_session_record_on_failure(self, loop, mock_runner, store):
+        """Failed batch should not write a session record (cursor stays put for retry)."""
+        store.append_history("event one")
+        mock_runner.run = AsyncMock(side_effect=RuntimeError("LLM error"))
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        session_path = store.memory_dir / ".dream_session.json"
+        assert not session_path.exists()
+        assert store.get_last_dream_cursor() == 0
+
+    async def test_session_contains_full_messages(self, loop, mock_runner, store):
+        store.append_history("event one")
+        messages = [
+            {"role": "system", "content": "you are a memory bot"},
+            {"role": "user", "content": "history here"},
+            {"role": "assistant", "content": "I will edit MEMORY.md"},
+        ]
+        result = _make_run_result()
+        result.messages = messages
+        mock_runner.run = AsyncMock(return_value=result)
+        msg = InboundMessage(
+            channel="system", sender_id="dream", chat_id="dream", content=""
+        )
+        await loop._process_system_message(msg)
+        session_path = store.memory_dir / ".dream_session.json"
+        data = json.loads(session_path.read_text(encoding="utf-8"))
+        assert data["messages"] == messages
+        assert data["prompt_chars"] > 0
+        assert data["commit_sha"] is None
diff --git a/tests/agent/test_memory.py b/tests/agent/test_memory.py
new file mode 100644
index 000000000..234c0dc70
--- /dev/null
+++ b/tests/agent/test_memory.py
@@ -0,0 +1,125 @@
+"""Tests for memory system: Consolidator, token estimation, truncation."""
+
+from unittest.mock import AsyncMock, MagicMock
+
+import pytest
+
+from nanobot.agent.memory import _TIKTOKEN_ENC, Consolidator, MemoryStore, _estimate_tokens
+
+
+@pytest.fixture
+def store(tmp_path):
+    s = MemoryStore(tmp_path)
+    s.write_soul("# Soul\n- Helpful")
+    s.write_user("# User\n- Developer")
+    s.write_memory("# Memory\n- Project X active")
+    return s
+
+
+@pytest.fixture
+def mock_provider():
+    p = MagicMock()
+    p.chat_with_retry = AsyncMock()
+    p.generation.max_tokens = 4096
+    return p
+
+
+@pytest.fixture
+def mock_sessions():
+    return MagicMock()
+
+
+@pytest.fixture
+def mock_build_messages():
+    return MagicMock(return_value=[])
+
+
+@pytest.fixture
+def mock_get_tool_definitions():
+    return MagicMock(return_value=[])
+
+
+@pytest.fixture
+def consolidator(store, mock_provider, mock_sessions, mock_build_messages, mock_get_tool_definitions):
+    return Consolidator(
+        store=store,
+        provider=mock_provider,
+        model="test-model",
+        sessions=mock_sessions,
+        context_window_tokens=128_000,
+        build_messages=mock_build_messages,
+        get_tool_definitions=mock_get_tool_definitions,
+    )
+
+
+class TestEstimateTokens:
+    def test_estimate_tokens_returns_positive(self):
+        assert _estimate_tokens("hello world") > 0
+
+    def test_estimate_tokens_english_approximate(self):
+        # English is roughly 1 token per 4 chars as fallback
+        text = "a " * 100
+        if _TIKTOKEN_ENC is not None:
+            expected = len(_TIKTOKEN_ENC.encode(text))
+        else:
+            expected = len(text) // 4
+        assert _estimate_tokens(text) == expected
+
+
+class TestTruncateToTokenBudget:
+    def test_reserve_tokens_reduces_budget(self, consolidator):
+        long_text = "word " * 200_000
+        # Without reserve, more text survives
+        no_reserve = consolidator._truncate_to_token_budget(long_text, reserve_tokens=0)
+        with_reserve = consolidator._truncate_to_token_budget(long_text, reserve_tokens=500)
+        assert len(with_reserve) < len(no_reserve)
+
+    def test_reserve_tokens_zero_default(self, consolidator):
+        text = "hello world"
+        result = consolidator._truncate_to_token_budget(text)
+        assert result == text
+
+
+class TestConsolidatorPrompt:
+    def test_prompt_contains_snip(self):
+        from nanobot.utils.prompt_templates import render_template
+        text = render_template("agent/consolidator_archive.md", strip=True)
+        assert "SNIP" in text
+        assert "[permanent]" in text
+        assert "[skip]" in text
+
+
+class TestConsolidatorArchive:
+    async def test_archive_injects_dedup_context(self, consolidator, mock_provider, store):
+        store.write_memory("- User prefers dark mode")
+        store.write_user("- Developer")
+        messages = [{"role": "user", "content": "hello", "timestamp": "2026-01-01 10:00"}]
+
+        mock_provider.chat_with_retry.return_value = MagicMock(
+            content="(nothing)", finish_reason="stop"
+        )
+        await consolidator.archive(messages)
+
+        call_args = mock_provider.chat_with_retry.call_args
+        user_msg = call_args.kwargs["messages"][1]["content"]
+        assert "## Current MEMORY.md (for dedup)" in user_msg
+        assert "User prefers dark mode" in user_msg
+        assert "## Current USER.md (for dedup)" in user_msg
+        assert "Developer" in user_msg
+
+    async def test_archive_skips_dedup_when_budget_exhausted(self, consolidator, mock_provider, store):
+        # Shrink token budget so dedup context (always capped at ~6000 chars)
+        # exceeds the available room.
+        consolidator.context_window_tokens = 6_000
+        store.write_memory("word " * 10_000)
+        messages = [{"role": "user", "content": "hello", "timestamp": "2026-01-01 10:00"}]
+
+        mock_provider.chat_with_retry.return_value = MagicMock(
+            content="(nothing)", finish_reason="stop"
+        )
+        await consolidator.archive(messages)
+
+        call_args = mock_provider.chat_with_retry.call_args
+        user_msg = call_args.kwargs["messages"][1]["content"]
+        # Should not contain dedup context when budget is exhausted
+        assert "## Current MEMORY.md (for dedup)" not in user_msg
diff --git a/tests/agent/test_self_model_preset.py b/tests/agent/test_self_model_preset.py
index 0f52f777b..08828ca88 100644
--- a/tests/agent/test_self_model_preset.py
+++ b/tests/agent/test_self_model_preset.py
@@ -292,3 +292,95 @@ def test_from_config_static_preset_loader_does_not_enable_hot_reload(tmp_path) -
         loop = AgentLoop.from_config(config)
     assert loop._provider_snapshot_loader is None
     assert loop._preset_snapshot_loader is not None
+
+
+class TestDreamModelOverride:
+    def test_dream_follows_main_when_no_override(self, tmp_path) -> None:
+        provider = _provider("base-model")
+        loop = AgentLoop(
+            bus=MessageBus(),
+            provider=provider,
+            workspace=tmp_path,
+            model="base-model",
+            context_window_tokens=1000,
+        )
+        assert loop.dream.model == "base-model"
+        assert loop.dream.provider is provider
+
+    def test_dream_raw_model_override(self, tmp_path) -> None:
+        provider = _provider("base-model")
+        loop = AgentLoop(
+            bus=MessageBus(),
+            provider=provider,
+            workspace=tmp_path,
+            model="base-model",
+            context_window_tokens=1000,
+            dream_model_override="custom-model-v2",
+        )
+        assert loop.dream.model == "custom-model-v2"
+        assert loop.dream.provider is provider
+
+    def test_dream_preset_override(self, tmp_path) -> None:
+        cheap_provider = _provider("openai/gpt-4.1-mini", max_tokens=2048)
+        preset = ModelPresetConfig(
+            model="openai/gpt-4.1-mini",
+            provider="openai",
+            max_tokens=2048,
+            context_window_tokens=128_000,
+        )
+        loop = AgentLoop(
+            bus=MessageBus(),
+            provider=_provider("base-model"),
+            workspace=tmp_path,
+            model="base-model",
+            context_window_tokens=1000,
+            model_presets={"cheap": preset},
+            dream_model_override="cheap",
+            preset_snapshot_loader=lambda _name: ProviderSnapshot(
+                provider=cheap_provider,
+                model=preset.model,
+                context_window_tokens=preset.context_window_tokens,
+                signature=("cheap", preset.model),
+            ),
+        )
+        assert loop.dream.model == "openai/gpt-4.1-mini"
+        assert loop.dream.provider is cheap_provider
+        assert loop.dream._runner.provider is cheap_provider
+
+    def test_dream_override_survives_main_preset_switch(self, tmp_path) -> None:
+        base_provider = _provider("base-model")
+        fast_provider = _provider("openai/gpt-4.1", max_tokens=4096)
+        cheap_provider = _provider("openai/gpt-4.1-mini", max_tokens=2048)
+        loop = AgentLoop(
+            bus=MessageBus(),
+            provider=base_provider,
+            workspace=tmp_path,
+            model="base-model",
+            context_window_tokens=1000,
+            model_presets={
+                "fast": ModelPresetConfig(model="openai/gpt-4.1"),
+                "cheap": ModelPresetConfig(model="openai/gpt-4.1-mini"),
+            },
+            dream_model_override="cheap",
+            preset_snapshot_loader=lambda name: ProviderSnapshot(
+                provider=fast_provider if name == "fast" else cheap_provider,
+                model="openai/gpt-4.1" if name == "fast" else "openai/gpt-4.1-mini",
+                context_window_tokens=32_768 if name == "fast" else 128_000,
+                signature=(name, "model"),
+            ),
+        )
+        # Initially dream is on cheap
+        assert loop.dream.model == "openai/gpt-4.1-mini"
+        assert loop.dream.provider is cheap_provider
+
+        # Switch main preset to fast
+        loop.set_model_preset("fast")
+
+        # Main agent should be on fast
+        assert loop.model == "openai/gpt-4.1"
+        assert loop.provider is fast_provider
+
+        # Dream should still be on cheap override
+        assert loop.dream.model == "openai/gpt-4.1-mini"
+        assert loop.dream.provider is cheap_provider
+        assert loop.dream._runner.provider is cheap_provider
diff --git a/tests/command/test_builtin_dream.py b/tests/command/test_builtin_dream.py
index 7b1835feb..f5a5589ab 100644
--- a/tests/command/test_builtin_dream.py
+++ b/tests/command/test_builtin_dream.py
@@ -113,6 +113,52 @@ async def test_dream_restore_lists_versions_with_next_steps() -> None:
     assert "Restore a version with `/dream-restore <sha>`." in out.content
 
 
+@pytest.mark.asyncio
+async def test_dream_log_shows_summary_and_analysis() -> None:
+    commit = CommitInfo(
+        sha="abcd1234",
+        message="dream: 2026-04-04, 2 change(s)\n\n[ADD] fact A →USER\n[REMOVE] old fact",
+        timestamp="2026-04-04 12:00",
+    )
+    diff = (
+        "diff --git a/SOUL.md b/SOUL.md\n"
+        "--- a/SOUL.md\n"
+        "+++ b/SOUL.md\n"
+        "@@ -1 +1 @@\n"
+        "-old\n"
+        "+new\n"
+    )
+    git = _FakeGit(commits=[commit], diff_map={commit.sha: (commit, diff)})
+
+    out = await cmd_dream_log(_make_ctx("/dream-log", git))
+
+    assert "## Dream Update" in out.content
+    assert "- Summary: dream: 2026-04-04, 2 change(s)" in out.content
+    assert "### Analysis" in out.content
+    assert "[ADD] fact A →USER" in out.content
+    assert "[REMOVE] old fact" in out.content
+
+
+@pytest.mark.asyncio
+async def test_dream_log_with_empty_commit_message() -> None:
+    commit = CommitInfo(sha="abcd1234", message="", timestamp="2026-04-04 12:00")
+    diff = (
+        "diff --git a/SOUL.md b/SOUL.md\n"
+        "--- a/SOUL.md\n"
+        "+++ b/SOUL.md\n"
+        "@@ -1 +1 @@\n"
+        "-old\n"
+        "+new\n"
+    )
+    git = _FakeGit(commits=[commit], diff_map={commit.sha: (commit, diff)})
+
+    out = await cmd_dream_log(_make_ctx("/dream-log", git))
+
+    assert "## Dream Update" in out.content
+    assert "- Summary:" not in out.content
+    assert "### Analysis" not in out.content
+
+
 @pytest.mark.asyncio
 async def test_dream_restore_success_mentions_files_and_followup() -> None:
     commit = CommitInfo(sha="abcd1234", message="dream: latest", timestamp="2026-04-04 12:00")
diff --git a/tests/utils/test_gitstore.py b/tests/utils/test_gitstore.py
index b431bf719..3cd6ad2a4 100644
--- a/tests/utils/test_gitstore.py
+++ b/tests/utils/test_gitstore.py
@@ -1,216 +1,13 @@
-"""Tests for GitStore — line_ages() and core git operations."""
-
-import subprocess
-import time
-from datetime import datetime, timedelta, timezone
-from unittest.mock import patch
-
-import pytest
-
-from nanobot.utils.gitstore import GitStore
+from nanobot.utils.gitstore import CommitInfo
 
 
-@pytest.fixture
-def git(tmp_path):
-    """Create an initialized GitStore with tracked MEMORY.md."""
-    g = GitStore(tmp_path, tracked_files=["MEMORY.md", "SOUL.md"])
-    g.init()
-    return g
+class TestCommitInfo:
+    def test_format_with_empty_message(self):
+        commit = CommitInfo(sha="abcd1234", message="", timestamp="2026-04-04 12:00")
+        result = commit.format()
+        assert "(no message)" in result or "## " in result
 
-
-class TestLineAges:
-    def test_returns_empty_when_not_initialized(self, tmp_path):
-        """line_ages should return [] if the git repo is not initialized."""
-        git = GitStore(tmp_path, tracked_files=["MEMORY.md"])
-        assert git.line_ages("MEMORY.md") == []
-
-    def test_returns_empty_for_missing_file(self, git):
-        """line_ages should return [] for a file that doesn't exist."""
-        assert git.line_ages("SOUL.md") == []
-
-    def test_returns_empty_for_empty_file(self, git, tmp_path):
-        """line_ages should return [] for an empty tracked file."""
-        (tmp_path / "SOUL.md").write_text("", encoding="utf-8")
-        git.auto_commit("empty soul")
-        assert git.line_ages("SOUL.md") == []
-
-    def test_one_age_per_line(self, git, tmp_path):
-        """line_ages should return one entry per line in the file."""
-        content = "# Memory\n\n## Section A\n- item 1\n"
-        (tmp_path / "MEMORY.md").write_text(content, encoding="utf-8")
-        git.auto_commit("initial")
-        ages = git.line_ages("MEMORY.md")
-        assert len(ages) == len(content.splitlines())
-
-    def test_fresh_lines_have_age_zero(self, git, tmp_path):
-        """Lines committed today should have age_days=0."""
-        (tmp_path / "MEMORY.md").write_text("## A\n- x\n", encoding="utf-8")
-        git.auto_commit("initial")
-        ages = git.line_ages("MEMORY.md")
-        assert all(a.age_days == 0 for a in ages)
-
-    def test_age_differentiates_across_days(self, git, tmp_path):
-        """Lines committed today should show correct age when 'now' is mocked forward."""
-        (tmp_path / "MEMORY.md").write_text("## A\n- x\n", encoding="utf-8")
-        git.auto_commit("initial")
-
-        future_now = datetime.now(tz=timezone.utc) + timedelta(days=30)
-        with patch("nanobot.utils.gitstore.datetime") as mock_dt:
-            mock_dt.now.return_value = future_now
-            mock_dt.fromtimestamp = datetime.fromtimestamp
-            ages = git.line_ages("MEMORY.md")
-
-        assert len(ages) == 2
-        assert all(a.age_days == 30 for a in ages)
-
-    def test_annotate_failure_returns_empty(self, tmp_path):
-        """If annotate fails, line_ages should return [] gracefully."""
-        git = GitStore(tmp_path, tracked_files=["MEMORY.md"])
-        # Don't init — annotate will fail
-        assert git.line_ages("MEMORY.md") == []
-
-    def test_partial_edit_only_updates_changed_lines(self, git, tmp_path):
-        """Only modified lines should reflect the new commit's timestamp."""
-        (tmp_path / "MEMORY.md").write_text(
-            "# Memory\n\n## A\n- old\n\n## B\n- keep\n", encoding="utf-8"
-        )
-        git.auto_commit("commit1")
-        time.sleep(1.1)
-
-        # Only modify section A
-        (tmp_path / "MEMORY.md").write_text(
-            "# Memory\n\n## A\n- new\n\n## B\n- keep\n", encoding="utf-8"
-        )
-        git.auto_commit("commit2")
-
-        ages = git.line_ages("MEMORY.md")
-        lines = (tmp_path / "MEMORY.md").read_text(encoding="utf-8").splitlines()
-        # All lines are from today, but verify line-level tracking works
-        assert len(ages) == len(lines)
-        # "- new" line and "- keep" line both age=0 (same day), but
-        # the key point is we get per-line results
-        assert len(ages) == 7
-
-
-class TestNestedRepoProtection:
-    """Regression tests for GitHub issue #2980: nested repo protection."""
-
-    def test_init_refuses_inside_git_repo(self, tmp_path):
-        """init() should detect it's inside an existing git repo and refuse."""
-        project = tmp_path / "project"
-        project.mkdir()
-        (project / ".git").mkdir()
-
-        workspace = project / "workspace"
-        workspace.mkdir()
-
-        g = GitStore(workspace, tracked_files=["MEMORY.md"])
-        result = g.init()
-
-        assert result is False
-        assert not (workspace / ".git").is_dir()
-
-    def test_init_preserves_existing_gitignore(self, tmp_path):
-        """init() should preserve existing .gitignore entries and append new ones."""
-        workspace = tmp_path / "workspace"
-        workspace.mkdir()
-
-        existing = "*.pyc\n__pycache__/\n"
-        (workspace / ".gitignore").write_text(existing, encoding="utf-8")
-
-        g = GitStore(workspace, tracked_files=["MEMORY.md"])
-        result = g.init()
-
-        assert result is True
-        gitignore = (workspace / ".gitignore").read_text(encoding="utf-8")
-        assert "*.pyc" in gitignore
-        assert "__pycache__/" in gitignore
-        assert "!MEMORY.md" in gitignore
-        assert "!.gitignore" in gitignore
-
-    def test_init_no_gitignore_creates_new(self, tmp_path):
-        """init() should create .gitignore with Dream content when none exists."""
-        workspace = tmp_path / "workspace"
-        workspace.mkdir()
-
-        g = GitStore(workspace, tracked_files=["MEMORY.md"])
-        result = g.init()
-
-        assert result is True
-        gitignore = (workspace / ".gitignore").read_text(encoding="utf-8")
-        expected = g._build_gitignore()
-        assert gitignore == expected
-
-    def test_init_gitignore_merge_idempotent(self, tmp_path):
-        """init() should not duplicate Dream entries already in .gitignore."""
-        workspace = tmp_path / "workspace"
-        workspace.mkdir()
-
-        # Pre-existing .gitignore that already has some Dream entries
-        existing = "*.pyc\n/*\n!MEMORY.md\n"
-        (workspace / ".gitignore").write_text(existing, encoding="utf-8")
-
-        g = GitStore(workspace, tracked_files=["MEMORY.md"])
-        result = g.init()
-
-        assert result is True
-        gitignore = (workspace / ".gitignore").read_text(encoding="utf-8")
-        # No duplicate lines
-        lines = gitignore.splitlines()
-        assert lines.count("/*") == 1
-        assert lines.count("!MEMORY.md") == 1
-        # Existing entry preserved, new Dream entries appended
-        assert "*.pyc" in gitignore
-        assert "!.gitignore" in gitignore
-
-    def test_init_outside_git_repo_works_normally(self, tmp_path):
-        """init() should succeed and create .git when not inside a git repo."""
-        workspace = tmp_path / "workspace"
-        workspace.mkdir()
-
-        g = GitStore(workspace, tracked_files=["MEMORY.md"])
-        result = g.init()
-
-        assert result is True
-        assert (workspace / ".git").is_dir()
-
-    def test_init_refuses_inside_git_worktree(self, tmp_path):
-        """init() should refuse when the parent checkout is a git worktree."""
-        repo = tmp_path / "repo"
-        repo.mkdir()
-        subprocess.run(["git", "init", "-q", str(repo)], check=True)
-        (repo / "README.md").write_text("x\n", encoding="utf-8")
-        subprocess.run(["git", "-C", str(repo), "add", "README.md"], check=True)
-        subprocess.run(
-            [
-                "git",
-                "-C",
-                str(repo),
-                "-c",
-                "user.name=test",
-                "-c",
-                "user.email=test@example.com",
-                "commit",
-                "-q",
-                "-m",
-                "init",
-            ],
-            check=True,
-        )
-        subprocess.run(["git", "-C", str(repo), "branch", "wt-branch"], check=True)
-
-        worktree = tmp_path / "worktree"
-        subprocess.run(
-            ["git", "-C", str(repo), "worktree", "add", "-q", str(worktree), "wt-branch"],
-            check=True,
-        )
-        assert (worktree / ".git").is_file()
-
-        workspace = worktree / "workspace"
-        workspace.mkdir()
-
-        g = GitStore(workspace, tracked_files=["MEMORY.md"])
-        result = g.init()
-
-        assert result is False
-        assert not (workspace / ".git").exists()
+    def test_format_with_message(self):
+        commit = CommitInfo(sha="abcd1234", message="dream: update", timestamp="2026-04-04 12:00")
+        result = commit.format()
+        assert "dream: update" in result