diff --git a/tests/api/v2/test_memory_hydration.py b/tests/api/v2/test_memory_hydration.py
new file mode 100644
index 00000000..2c6b2337
--- /dev/null
+++ b/tests/api/v2/test_memory_hydration.py
@@ -0,0 +1,187 @@
+"""Tests for graph context hydration in to_graph_context().
+
+Proves that recent-activity/build-context hydration batches entity lookups
+for entities, observations, and relations in a single repository call.
+"""
+
+from __future__ import annotations
+
+from datetime import datetime, timezone
+from types import SimpleNamespace
+
+import pytest
+
+from basic_memory.api.v2.utils import to_graph_context
+from basic_memory.schemas.search import SearchItemType
+from basic_memory.services.context_service import (
+    ContextMetadata,
+    ContextResult as ServiceContextResult,
+    ContextResultItem,
+    ContextResultRow,
+)
+
+
+# --- Helpers ---
+
+
+def _make_entity(id: int, title: str, external_id: str) -> SimpleNamespace:
+    return SimpleNamespace(id=id, title=title, external_id=external_id)
+
+
+def _make_row(*, type: str, id: int, root_id: int, **kwargs) -> ContextResultRow:
+    now = kwargs.pop("created_at", datetime.now(timezone.utc))
+    defaults = dict(
+        title=f"Item {id}",
+        permalink=f"notes/{id}",
+        file_path=f"notes/{id}.md",
+        depth=0,
+        root_id=root_id,
+        created_at=now,
+    )
+    defaults.update(kwargs)
+    return ContextResultRow(type=type, id=id, **defaults)
+
+
+class SpyEntityRepository:
+    """Tracks batched ID lookups and returns entities from a preset map."""
+
+    def __init__(self, entities_by_id: dict[int, SimpleNamespace]):
+        self.entities_by_id = entities_by_id
+        self.calls: list[list[int]] = []
+
+    async def find_by_ids(self, ids: list[int]):
+        self.calls.append(ids)
+        return [self.entities_by_id[i] for i in ids if i in self.entities_by_id]
+
+
+# --- Single batch fetch (N+1 elimination) ---
+
+
+@pytest.mark.asyncio
+async def test_to_graph_context_batches_entity_hydration_for_recent_activity():
+    """Mixed entity, observation, and relation items must hydrate in one lookup."""
+    repo = SpyEntityRepository(
+        {
+            1: _make_entity(1, "Root", "ext-root"),
+            2: _make_entity(2, "Child", "ext-child"),
+            3: _make_entity(3, "Peer", "ext-peer"),
+        }
+    )
+    now = datetime.now(timezone.utc)
+
+    root_entity = _make_row(
+        type="entity",
+        id=1,
+        root_id=1,
+        title="Root",
+        permalink="notes/root",
+        file_path="notes/root.md",
+        created_at=now,
+    )
+    root_observation = _make_row(
+        type="observation",
+        id=10,
+        root_id=1,
+        title="fact: observed",
+        permalink="notes/root/observations/fact/observed",
+        file_path="notes/root.md",
+        category="fact",
+        content="observed",
+        entity_id=1,
+        created_at=now,
+    )
+    root_relation = _make_row(
+        type="relation",
+        id=20,
+        root_id=1,
+        title="links_to: Child",
+        permalink="notes/root",
+        file_path="notes/root.md",
+        relation_type="links_to",
+        from_id=1,
+        to_id=2,
+        depth=1,
+        created_at=now,
+    )
+    child_observation = _make_row(
+        type="observation",
+        id=11,
+        root_id=11,
+        title="note: child update",
+        permalink="notes/child/observations/note/update",
+        file_path="notes/child.md",
+        category="note",
+        content="child update",
+        entity_id=2,
+        created_at=now,
+    )
+    peer_entity = _make_row(
+        type="entity",
+        id=3,
+        root_id=11,
+        title="Peer",
+        permalink="notes/peer",
+        file_path="notes/peer.md",
+        depth=1,
+        created_at=now,
+    )
+
+    context = ServiceContextResult(
+        results=[
+            ContextResultItem(
+                primary_result=root_entity,
+                observations=[root_observation],
+                related_results=[root_relation],
+            ),
+            ContextResultItem(
+                primary_result=child_observation,
+                observations=[],
+                related_results=[peer_entity],
+            ),
+        ],
+        metadata=ContextMetadata(
+            types=[
+                SearchItemType.ENTITY,
+                SearchItemType.OBSERVATION,
+                SearchItemType.RELATION,
+            ],
+            depth=1,
+            primary_count=2,
+            related_count=2,
+            total_relations=1,
+            total_observations=1,
+        ),
+    )
+
+    graph = await to_graph_context(context, entity_repository=repo, page=1, page_size=10)
+
+    assert len(repo.calls) == 1, f"Expected 1 entity lookup, got {len(repo.calls)}"
+    assert set(repo.calls[0]) == {1, 2, 3}
+
+    first_result = graph.results[0]
+    assert first_result.primary_result.external_id == "ext-root"
+    assert first_result.observations[0].entity_external_id == "ext-root"
+    assert first_result.observations[0].title == "Root"
+
+    relation = first_result.related_results[0]
+    assert relation.from_entity == "Root"
+    assert relation.from_entity_external_id == "ext-root"
+    assert relation.to_entity == "Child"
+    assert relation.to_entity_external_id == "ext-child"
+
+    second_result = graph.results[1]
+    assert second_result.primary_result.entity_external_id == "ext-child"
+    assert second_result.primary_result.title == "Child"
+    assert second_result.related_results[0].external_id == "ext-peer"
+
+
+@pytest.mark.asyncio
+async def test_to_graph_context_empty_results_skip_entity_lookup():
+    """An empty context result should not perform any entity hydration lookup."""
+    repo = SpyEntityRepository({})
+    context = ServiceContextResult(results=[], metadata=ContextMetadata(depth=1))
+
+    graph = await to_graph_context(context, entity_repository=repo)
+
+    assert repo.calls == []
+    assert list(graph.results) == []