diff --git a/README.md b/README.md
index fa721c7..ee337d3 100644
--- a/README.md
+++ b/README.md
@@ -7,6 +7,10 @@ API gateway, metering, and billing backend for the AgentPay protocol (machine-to
 - **Stack:** Node.js, Express, TypeScript
 - **Endpoints:** Health check, version, and placeholders for usage/billing APIs
 
+## Documentation
+
+- [Audit event taxonomy and payload schemas](docs/events.md)
+
 ## Prerequisites
 
 - Node.js 18.18+
diff --git a/docs/events.md b/docs/events.md
new file mode 100644
index 0000000..b6cf0ce
--- /dev/null
+++ b/docs/events.md
@@ -0,0 +1,185 @@
+# Audit Event Taxonomy
+
+AgentPay records process-local audit events with `recordEvent(type, payload)`.
+The current event log powers `GET /api/v1/events`,
+`GET /api/v1/events/summary`, and the planned webhook delivery surface.
+
+## Common Envelope
+
+Every event returned by `GET /api/v1/events` has the same envelope:
+
+| Field     | Type   | Description |
+| --------- | ------ | ----------- |
+| `id`      | string | UUID generated when the event is appended. |
+| `ts`      | number | Unix epoch timestamp in milliseconds from `Date.now()`. |
+| `type`    | string | Stable dot-separated event type. |
+| `payload` | object | Event-specific payload documented below. |
+
+Example envelope:
+
+```json
+{
+  "id": "45ceae9a-7f74-4f88-a08c-6d5f43cb7a8f",
+  "ts": 1782230400000,
+  "type": "usage.recorded",
+  "payload": {
+    "agent": "agent-alpha",
+    "serviceId": "svc-search",
+    "requests": 3,
+    "total": 8
+  }
+}
+```
+
+## Retention, Ordering, And Query Semantics
+
+- Events are kept in memory only; they do not survive process restarts.
+- `EVENT_LOG_CAP` is `10000`. When the log grows beyond that cap, the oldest
+  event is evicted.
+- Events are appended in creation order.
+- `GET /api/v1/events` filters by `since` with inclusive `e.ts >= since`
+  semantics, filters `type` by exact match, and returns the most recent
+  `limit` matching events in chronological order.
+- `GET /api/v1/events/summary` counts only the events still present in the
+  bounded in-memory log.
+
+## Event Types
+
+### `usage.recorded`
+
+Emitted by:
+
+- `POST /api/v1/usage`
+- `POST /api/v1/usage/bulk`, once for each valid item
+
+Single usage payload:
+
+| Field       | Type   | Description |
+| ----------- | ------ | ----------- |
+| `agent`     | string | Agent identifier from the request body. |
+| `serviceId` | string | Service identifier from the request body. |
+| `requests`  | number | Positive integer request count recorded by this call. |
+| `total`     | number | New accumulated usage total for the agent/service pair. |
+
+Example:
+
+```json
+{
+  "agent": "agent-alpha",
+  "serviceId": "svc-search",
+  "requests": 3,
+  "total": 8
+}
+```
+
+Bulk usage payload:
+
+| Field       | Type    | Description |
+| ----------- | ------- | ----------- |
+| `agent`     | string  | Agent identifier from the valid bulk item. |
+| `serviceId` | string  | Service identifier from the valid bulk item. |
+| `requests`  | number  | Positive integer request count from the valid bulk item. |
+| `total`     | number  | New accumulated usage total for the agent/service pair. |
+| `bulk`      | boolean | Always `true` for events emitted by `POST /api/v1/usage/bulk`. |
+
+Example:
+
+```json
+{
+  "agent": "agent-alpha",
+  "serviceId": "svc-search",
+  "requests": 2,
+  "total": 10,
+  "bulk": true
+}
+```
+
+Invalid bulk items do not emit events.
+
+### `usage.settled`
+
+Emitted by:
+
+- `POST /api/v1/settle`
+
+Payload:
+
+| Field           | Type   | Description |
+| --------------- | ------ | ----------- |
+| `agent`         | string | Agent identifier from the request body. |
+| `serviceId`     | string | Service identifier from the request body. |
+| `requests`      | number | Outstanding usage count before the settle operation drains it. |
+| `billedStroops` | number | `requests * priceStroops` for the service at settle time. |
+
+Example:
+
+```json
+{
+  "agent": "agent-alpha",
+  "serviceId": "svc-search",
+  "requests": 10,
+  "billedStroops": 250
+}
+```
+
+### `webhook.test`
+
+Emitted by:
+
+- `POST /api/v1/webhooks/:id/test`
+
+Payload:
+
+| Field | Type   | Description |
+| ----- | ------ | ----------- |
+| `id`  | string | Registered webhook identifier from the route parameter. |
+| `url` | string | Registered webhook URL at the time of the synthetic test. |
+
+Example:
+
+```json
+{
+  "id": "wh_13b2fd90b4a64a70",
+  "url": "https://example.test/hook"
+}
+```
+
+The current test route records the event and returns a simulated delivery
+response. It does not perform an outbound webhook delivery.
+
+## Endpoint Mapping
+
+| Endpoint | Events emitted |
+| -------- | -------------- |
+| `POST /api/v1/usage` | One `usage.recorded` event for a valid request. |
+| `POST /api/v1/usage/bulk` | One `usage.recorded` event with `bulk: true` for each valid item. |
+| `POST /api/v1/settle` | One `usage.settled` event. |
+| `POST /api/v1/webhooks/:id/test` | One `webhook.test` event for a registered webhook. |
+
+## Security And Privacy Notes
+
+- Event payloads must not include API-key secrets, credentials, bearer tokens,
+  private keys, or payment secrets.
+- Current webhook events include the registered webhook URL because that is the
+  object being tested; consumers should still treat all event payload fields as
+  untrusted input.
+- Future event payloads should prefer stable identifiers and numeric state over
+  raw request bodies.
+
+## Naming Convention For Future Events
+
+Use lower-case dot-separated names in the form:
+
+```text
+<domain>.<past-tense-action>
+```
+
+Examples:
+
+- `usage.recorded`
+- `usage.settled`
+- `webhook.test`
+
+Keep event names stable once released. Prefer additive payload changes, and use
+explicit fields such as `bulk: true` for variants when they preserve the same
+event meaning.