Python: [BREAKING] Observability updates (#2782)

* fixes Python: Add env_file_path parameter to setup_observability() similar to AzureOpenAIChatClient
Fixes #2186

* WIP on updates using configure_azure_monitor

* improved setup and clarity

* fixed root .env.example

* revert changes

* updated files

* updated sample

* updated zero code

* test fixes and fixed links

* fix devui

* removed planning docs

* added enable method and updated readme and samples

* clarified docstring

* add return annotation

* updated naming

* update capatilized version

* updated readme and some fixes

* updated decorator name inline with the rest

* feedback from comments addressed

python/packages/a2a/agent_framework_a2a/_agent.py

@@ -5,7 +5,7 @@ import json
 import re
 import uuid
 from collections.abc import AsyncIterable, Sequence
-from typing import Any, cast
+from typing import Any, Final, cast
 
 import httpx
 from a2a.client import Client, ClientConfig, ClientFactory, minimal_agent_card
@@ -38,6 +38,7 @@ from agent_framework import (
     UriContent,
     prepend_agent_framework_to_user_agent,
 )
+from agent_framework.observability import use_agent_instrumentation
 
 __all__ = ["A2AAgent"]
 
@@ -58,6 +59,7 @@ def _get_uri_data(uri: str) -> str:
     return match.group("base64_data")
 
 
+@use_agent_instrumentation
 class A2AAgent(BaseAgent):
     """Agent2Agent (A2A) protocol implementation.
 
@@ -69,6 +71,8 @@ class A2AAgent(BaseAgent):
     Can be initialized with a URL, AgentCard, or existing A2A Client instance.
     """
 
+    AGENT_PROVIDER_NAME: Final[str] = "A2A"
+
     def __init__(
         self,
         *,

python/packages/ag-ui/agent_framework_ag_ui/_client.py

@@ -23,7 +23,7 @@ from agent_framework import (
 from agent_framework._middleware import use_chat_middleware
 from agent_framework._tools import use_function_invocation
 from agent_framework._types import BaseContent, Contents
-from agent_framework.observability import use_observability
+from agent_framework.observability import use_instrumentation
 
 from ._event_converters import AGUIEventConverter
 from ._http_service import AGUIHttpService
@@ -89,7 +89,7 @@ def _apply_server_function_call_unwrap(chat_client: TBaseChatClient) -> TBaseCha
 
 @_apply_server_function_call_unwrap
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class AGUIChatClient(BaseChatClient):
     """Chat client for communicating with AG-UI compliant servers.

python/packages/anthropic/agent_framework_anthropic/_chat_client.py

@@ -35,7 +35,7 @@ from agent_framework import (
 )
 from agent_framework._pydantic import AFBaseSettings
 from agent_framework.exceptions import ServiceInitializationError
-from agent_framework.observability import use_observability
+from agent_framework.observability import use_instrumentation
 from anthropic import AsyncAnthropic
 from anthropic.types.beta import (
     BetaContentBlock,
@@ -110,7 +110,7 @@ TAnthropicClient = TypeVar("TAnthropicClient", bound="AnthropicClient")
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class AnthropicClient(BaseChatClient):
     """Anthropic Chat client."""

python/packages/azure-ai/agent_framework_azure_ai/_chat_client.py

@@ -43,7 +43,7 @@ from agent_framework import (
     use_function_invocation,
 )
 from agent_framework.exceptions import ServiceInitializationError, ServiceResponseException
-from agent_framework.observability import use_observability
+from agent_framework.observability import use_instrumentation
 from azure.ai.agents.aio import AgentsClient
 from azure.ai.agents.models import (
     Agent,
@@ -107,7 +107,7 @@ TAzureAIAgentClient = TypeVar("TAzureAIAgentClient", bound="AzureAIAgentClient")
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class AzureAIAgentClient(BaseChatClient):
     """Azure AI Agent Chat client."""

python/packages/azure-ai/agent_framework_azure_ai/_client.py

@@ -15,7 +15,7 @@ from agent_framework import (
     use_function_invocation,
 )
 from agent_framework.exceptions import ServiceInitializationError, ServiceInvalidRequestError
-from agent_framework.observability import use_observability
+from agent_framework.observability import use_instrumentation
 from agent_framework.openai._responses_client import OpenAIBaseResponsesClient
 from azure.ai.projects.aio import AIProjectClient
 from azure.ai.projects.models import (
@@ -49,7 +49,7 @@ TAzureAIClient = TypeVar("TAzureAIClient", bound="AzureAIClient")
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class AzureAIClient(OpenAIBaseResponsesClient):
     """Azure AI Agent client."""
@@ -164,27 +164,94 @@ class AzureAIClient(OpenAIBaseResponsesClient):
         # Track whether we should close client connection
         self._should_close_client = should_close_client
 
-    async def setup_azure_ai_observability(self, enable_sensitive_data: bool | None = None) -> None:
-        """Use this method to setup tracing in your Azure AI Project.
+    async def configure_azure_monitor(
+        self,
+        enable_sensitive_data: bool = False,
+        **kwargs: Any,
+    ) -> None:
+        """Setup observability with Azure Monitor (Azure AI Foundry integration).
 
-        This will take the connection string from the project project_client.
-        It will override any connection string that is set in the environment variables.
-        It will disable any OTLP endpoint that might have been set.
+        This method configures Azure Monitor for telemetry collection using the
+        connection string from the Azure AI project client.
+
+        Args:
+            enable_sensitive_data: Enable sensitive data logging (prompts, responses).
+                Should only be enabled in development/test environments. Default is False.
+            **kwargs: Additional arguments passed to configure_azure_monitor().
+                Common options include:
+                - enable_live_metrics (bool): Enable Azure Monitor Live Metrics
+                - credential (TokenCredential): Azure credential for Entra ID auth
+                - resource (Resource): Custom OpenTelemetry resource
+                See https://learn.microsoft.com/python/api/azure-monitor-opentelemetry/azure.monitor.opentelemetry.configure_azure_monitor
+                for full list of options.
+
+        Raises:
+            ImportError: If azure-monitor-opentelemetry-exporter is not installed.
+
+        Examples:
+            .. code-block:: python
+
+                from agent_framework.azure import AzureAIClient
+                from azure.ai.projects.aio import AIProjectClient
+                from azure.identity.aio import DefaultAzureCredential
+
+                async with (
+                    DefaultAzureCredential() as credential,
+                    AIProjectClient(
+                        endpoint="https://your-project.api.azureml.ms", credential=credential
+                    ) as project_client,
+                    AzureAIClient(project_client=project_client) as client,
+                ):
+                    # Setup observability with defaults
+                    await client.configure_azure_monitor()
+
+                    # With live metrics enabled
+                    await client.configure_azure_monitor(enable_live_metrics=True)
+
+                    # With sensitive data logging (dev/test only)
+                    await client.configure_azure_monitor(enable_sensitive_data=True)
+
+        Note:
+            This method retrieves the Application Insights connection string from the
+            Azure AI project client automatically. You must have Application Insights
+            configured in your Azure AI project for this to work.
         """
+        # Get connection string from project client
         try:
             conn_string = await self.project_client.telemetry.get_application_insights_connection_string()
         except ResourceNotFoundError:
             logger.warning(
-                "No Application Insights connection string found for the Azure AI Project, "
-                "please call setup_observability() manually."
+                "No Application Insights connection string found for the Azure AI Project. "
+                "Please ensure Application Insights is configured in your Azure AI project, "
+                "or call configure_otel_providers() manually with custom exporters."
             )
             return
-        from agent_framework.observability import setup_observability
 
-        setup_observability(
-            applicationinsights_connection_string=conn_string, enable_sensitive_data=enable_sensitive_data
+        # Import Azure Monitor with proper error handling
+        try:
+            from azure.monitor.opentelemetry import configure_azure_monitor
+        except ImportError as exc:
+            raise ImportError(
+                "azure-monitor-opentelemetry is required for Azure Monitor integration. "
+                "Install it with: pip install azure-monitor-opentelemetry"
+            ) from exc
+
+        from agent_framework.observability import create_metric_views, create_resource, enable_instrumentation
+
+        # Create resource if not provided in kwargs
+        if "resource" not in kwargs:
+            kwargs["resource"] = create_resource()
+
+        # Configure Azure Monitor with connection string and kwargs
+        configure_azure_monitor(
+            connection_string=conn_string,
+            views=create_metric_views(),
+            **kwargs,
         )
 
+        # Complete setup with core observability
+        enable_instrumentation(enable_sensitive_data=enable_sensitive_data)
+
     async def __aenter__(self) -> "Self":
         """Async context manager entry."""
         return self

python/packages/core/agent_framework/_agents.py

@@ -34,7 +34,7 @@ from ._types import (
     ToolMode,
 )
 from .exceptions import AgentExecutionException, AgentInitializationError
-from .observability import use_agent_observability
+from .observability import use_agent_instrumentation
 
 if sys.version_info >= (3, 12):
     from typing import override  # type: ignore # pragma: no cover
@@ -516,8 +516,8 @@ class BaseAgent(SerializationMixin):
 
 
 @use_agent_middleware
-@use_agent_observability
-class ChatAgent(BaseAgent):
+@use_agent_instrumentation(capture_usage=False)  # type: ignore[arg-type,misc]
+class ChatAgent(BaseAgent):  # type: ignore[misc]
     """A Chat Client Agent.
 
     This is the primary agent implementation that uses a chat client to interact
@@ -583,7 +583,7 @@ class ChatAgent(BaseAgent):
                 print(update.text, end="")
     """
 
-    AGENT_SYSTEM_NAME: ClassVar[str] = "microsoft.agent_framework"
+    AGENT_PROVIDER_NAME: ClassVar[str] = "microsoft.agent_framework"
 
     def __init__(
         self,

python/packages/core/agent_framework/_clients.py

@@ -8,7 +8,6 @@ from typing import TYPE_CHECKING, Any, ClassVar, Literal, Protocol, TypeVar, run
 from pydantic import BaseModel
 
 from ._logging import get_logger
-from ._mcp import MCPTool
 from ._memory import AggregateContextProvider, ContextProvider
 from ._middleware import (
     ChatMiddleware,
@@ -426,6 +425,8 @@ class BaseChatClient(SerializationMixin, ABC):
             else [tools]
         )
         for tool in tools_list:  # type: ignore[reportUnknownType]
+            from ._mcp import MCPTool
+
             if isinstance(tool, MCPTool):
                 if not tool.is_connected:
                     await tool.connect()

python/packages/core/agent_framework/_memory.py

@@ -6,11 +6,13 @@ from abc import ABC, abstractmethod
 from collections.abc import MutableSequence, Sequence
 from contextlib import AsyncExitStack
 from types import TracebackType
-from typing import Any, Final, cast
+from typing import TYPE_CHECKING, Any, Final, cast
 
-from ._tools import ToolProtocol
 from ._types import ChatMessage
 
+if TYPE_CHECKING:
+    from ._tools import ToolProtocol
+
 if sys.version_info >= (3, 12):
     from typing import override  # type: ignore # pragma: no cover
 else:
@@ -54,7 +56,7 @@ class Context:
         self,
         instructions: str | None = None,
         messages: Sequence[ChatMessage] | None = None,
-        tools: Sequence[ToolProtocol] | None = None,
+        tools: Sequence["ToolProtocol"] | None = None,
     ):
         """Create a new Context object.
 
@@ -65,7 +67,7 @@ class Context:
         """
         self.instructions = instructions
         self.messages: Sequence[ChatMessage] = messages or []
-        self.tools: Sequence[ToolProtocol] = tools or []
+        self.tools: Sequence["ToolProtocol"] = tools or []
 
 
 # region ContextProvider
@@ -247,7 +249,7 @@ class AggregateContextProvider(ContextProvider):
         contexts = await asyncio.gather(*[provider.invoking(messages, **kwargs) for provider in self.providers])
         instructions: str = ""
         return_messages: list[ChatMessage] = []
-        tools: list[ToolProtocol] = []
+        tools: list["ToolProtocol"] = []
         for ctx in contexts:
             if ctx.instructions:
                 instructions += ctx.instructions

python/packages/core/agent_framework/_serialization.py

@@ -339,11 +339,17 @@ class SerializationMixin:
                     continue
                 # Handle dicts containing SerializationProtocol values
                 if isinstance(value, dict):
+                    from datetime import date, datetime, time
+
                     serialized_dict: dict[str, Any] = {}
                     for k, v in value.items():
                         if isinstance(v, SerializationProtocol):
                             serialized_dict[k] = v.to_dict(exclude=exclude, exclude_none=exclude_none)
                             continue
+                        # Convert datetime objects to strings
+                        if isinstance(v, (datetime, date, time)):
+                            serialized_dict[k] = str(v)
+                            continue
                         # Check if the value is JSON serializable
                         if is_serializable(v):
                             serialized_dict[k] = v

python/packages/core/agent_framework/_types.py

@@ -1816,13 +1816,14 @@ def prepare_function_call_results(content: Contents | Any | list[Contents | Any]
     """Prepare the values of the function call results."""
     if isinstance(content, Contents):
         # For BaseContent objects, use to_dict and serialize to JSON
-        return json.dumps(content.to_dict(exclude={"raw_representation", "additional_properties"}))
+        # Use default=str to handle datetime and other non-JSON-serializable objects
+        return json.dumps(content.to_dict(exclude={"raw_representation", "additional_properties"}), default=str)
 
     dumpable = _prepare_function_call_results_as_dumpable(content)
     if isinstance(dumpable, str):
         return dumpable
-    # fallback
-    return json.dumps(dumpable)
+    # fallback - use default=str to handle datetime and other non-JSON-serializable objects
+    return json.dumps(dumpable, default=str)
 
 
 # region Chat Response constants

python/packages/core/agent_framework/azure/_chat_client.py

@@ -21,7 +21,7 @@ from agent_framework import (
     use_function_invocation,
 )
 from agent_framework.exceptions import ServiceInitializationError
-from agent_framework.observability import use_observability
+from agent_framework.observability import use_instrumentation
 from agent_framework.openai._chat_client import OpenAIBaseChatClient
 
 from ._shared import (
@@ -41,7 +41,7 @@ TAzureOpenAIChatClient = TypeVar("TAzureOpenAIChatClient", bound="AzureOpenAICha
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class AzureOpenAIChatClient(AzureOpenAIConfigMixin, OpenAIBaseChatClient):
     """Azure OpenAI Chat completion class."""

python/packages/core/agent_framework/azure/_responses_client.py

@@ -10,7 +10,7 @@ from pydantic import ValidationError
 
 from agent_framework import use_chat_middleware, use_function_invocation
 from agent_framework.exceptions import ServiceInitializationError
-from agent_framework.observability import use_observability
+from agent_framework.observability import use_instrumentation
 from agent_framework.openai._responses_client import OpenAIBaseResponsesClient
 
 from ._shared import (
@@ -22,7 +22,7 @@ TAzureOpenAIResponsesClient = TypeVar("TAzureOpenAIResponsesClient", bound="Azur
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class AzureOpenAIResponsesClient(AzureOpenAIConfigMixin, OpenAIBaseResponsesClient):
     """Azure Responses completion class."""

python/packages/core/agent_framework/openai/_assistants_client.py

@@ -40,7 +40,7 @@ from .._types import (
     prepare_function_call_results,
 )
 from ..exceptions import ServiceInitializationError
-from ..observability import use_observability
+from ..observability import use_instrumentation
 from ._shared import OpenAIConfigMixin, OpenAISettings
 
 if sys.version_info >= (3, 11):
@@ -53,7 +53,7 @@ __all__ = ["OpenAIAssistantsClient"]
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class OpenAIAssistantsClient(OpenAIConfigMixin, BaseChatClient):
     """OpenAI Assistants client."""

python/packages/core/agent_framework/openai/_chat_client.py

@@ -44,7 +44,7 @@ from ..exceptions import (
     ServiceInvalidRequestError,
     ServiceResponseException,
 )
-from ..observability import use_observability
+from ..observability import use_instrumentation
 from ._exceptions import OpenAIContentFilterException
 from ._shared import OpenAIBase, OpenAIConfigMixin, OpenAISettings
 
@@ -467,7 +467,7 @@ TOpenAIChatClient = TypeVar("TOpenAIChatClient", bound="OpenAIChatClient")
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class OpenAIChatClient(OpenAIConfigMixin, OpenAIBaseChatClient):
     """OpenAI Chat completion class."""

python/packages/core/agent_framework/openai/_responses_client.py

@@ -64,7 +64,7 @@ from ..exceptions import (
     ServiceInvalidRequestError,
     ServiceResponseException,
 )
-from ..observability import use_observability
+from ..observability import use_instrumentation
 from ._exceptions import OpenAIContentFilterException
 from ._shared import OpenAIBase, OpenAIConfigMixin, OpenAISettings
 
@@ -1127,7 +1127,7 @@ TOpenAIResponsesClient = TypeVar("TOpenAIResponsesClient", bound="OpenAIResponse
 
 
 @use_function_invocation
-@use_observability
+@use_instrumentation
 @use_chat_middleware
 class OpenAIResponsesClient(OpenAIConfigMixin, OpenAIBaseResponsesClient):
     """OpenAI Responses client class."""

python/packages/core/pyproject.toml

@@ -30,7 +30,6 @@ dependencies = [
     # telemetry
     "opentelemetry-api>=1.39.0",
     "opentelemetry-sdk>=1.39.0",
-    "opentelemetry-exporter-otlp-proto-grpc>=1.39.0",
     "opentelemetry-semantic-conventions-ai>=0.4.13",
     # connectors and functions
     "openai>=1.99.0",

python/packages/core/tests/conftest.py

@@ -10,7 +10,7 @@ from pytest import fixture
 
 
 @fixture
-def enable_otel(request: Any) -> bool:
+def enable_instrumentation(request: Any) -> bool:
     """Fixture that returns a boolean indicating if Otel is enabled."""
     return request.param if hasattr(request, "param") else True
 
@@ -22,20 +22,31 @@ def enable_sensitive_data(request: Any) -> bool:
 
 
 @fixture
-def span_exporter(monkeypatch, enable_otel: bool, enable_sensitive_data: bool) -> Generator[SpanExporter]:
+def span_exporter(monkeypatch, enable_instrumentation: bool, enable_sensitive_data: bool) -> Generator[SpanExporter]:
     """Fixture to remove environment variables for ObservabilitySettings."""
 
     env_vars = [
-        "ENABLE_OTEL",
+        "ENABLE_INSTRUMENTATION",
         "ENABLE_SENSITIVE_DATA",
-        "OTLP_ENDPOINT",
-        "APPLICATIONINSIGHTS_CONNECTION_STRING",
+        "ENABLE_CONSOLE_EXPORTERS",
+        "OTEL_EXPORTER_OTLP_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_TRACES_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_METRICS_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_LOGS_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_PROTOCOL",
+        "OTEL_EXPORTER_OTLP_HEADERS",
+        "OTEL_EXPORTER_OTLP_TRACES_HEADERS",
+        "OTEL_EXPORTER_OTLP_METRICS_HEADERS",
+        "OTEL_EXPORTER_OTLP_LOGS_HEADERS",
+        "OTEL_SERVICE_NAME",
+        "OTEL_SERVICE_VERSION",
+        "OTEL_RESOURCE_ATTRIBUTES",
     ]
 
     for key in env_vars:
         monkeypatch.delenv(key, raising=False)  # type: ignore
-    monkeypatch.setenv("ENABLE_OTEL", str(enable_otel))  # type: ignore
-    if not enable_otel:
+    monkeypatch.setenv("ENABLE_INSTRUMENTATION", str(enable_instrumentation))  # type: ignore
+    if not enable_instrumentation:
         # we overwrite sensitive data for tests
         enable_sensitive_data = False
     monkeypatch.setenv("ENABLE_SENSITIVE_DATA", str(enable_sensitive_data))  # type: ignore
@@ -51,15 +62,22 @@ def span_exporter(monkeypatch, enable_otel: bool, enable_sensitive_data: bool) -
 
     # recreate observability settings with values from above and no file.
     observability_settings = observability.ObservabilitySettings(env_file_path="test.env")
-    observability_settings._configure()  # pyright: ignore[reportPrivateUsage]
+
+    # Configure providers manually without calling _configure() to avoid OTLP imports
+    if enable_instrumentation or enable_sensitive_data:
+        from opentelemetry.sdk.trace import TracerProvider
+
+        tracer_provider = TracerProvider(resource=observability_settings._resource)
+        trace.set_tracer_provider(tracer_provider)
+
     monkeypatch.setattr(observability, "OBSERVABILITY_SETTINGS", observability_settings, raising=False)  # type: ignore
 
     with (
         patch("agent_framework.observability.OBSERVABILITY_SETTINGS", observability_settings),
-        patch("agent_framework.observability.setup_observability"),
+        patch("agent_framework.observability.configure_otel_providers"),
     ):
         exporter = InMemorySpanExporter()
-        if enable_otel or enable_sensitive_data:
+        if enable_instrumentation or enable_sensitive_data:
             tracer_provider = trace.get_tracer_provider()
             if not hasattr(tracer_provider, "add_span_processor"):
                 raise RuntimeError("Tracer provider does not support adding span processors.")

python/packages/core/tests/core/test_observability.py

@@ -33,8 +33,8 @@ from agent_framework.observability import (
     ChatMessageListTimestampFilter,
     OtelAttr,
     get_function_span,
-    use_agent_observability,
-    use_observability,
+    use_agent_instrumentation,
+    use_instrumentation,
 )
 
 # region Test constants
@@ -157,7 +157,7 @@ def test_start_span_with_tool_call_id(span_exporter: InMemorySpanExporter):
     assert span.attributes[OtelAttr.TOOL_TYPE] == "function"
 
 
-# region Test use_observability decorator
+# region Test use_instrumentation decorator
 
 
 def test_decorator_with_valid_class():
@@ -175,7 +175,7 @@ def test_decorator_with_valid_class():
             return gen()
 
     # Apply the decorator
-    decorated_class = use_observability(MockChatClient)
+    decorated_class = use_instrumentation(MockChatClient)
     assert hasattr(decorated_class, OPEN_TELEMETRY_CHAT_CLIENT_MARKER)
 
 
@@ -187,7 +187,7 @@ def test_decorator_with_missing_methods():
 
     # Apply the decorator - should not raise an error
     with pytest.raises(ChatClientInitializationError):
-        use_observability(MockChatClient)
+        use_instrumentation(MockChatClient)
 
 
 def test_decorator_with_partial_methods():
@@ -200,7 +200,7 @@ def test_decorator_with_partial_methods():
             return Mock()
 
     with pytest.raises(ChatClientInitializationError):
-        use_observability(MockChatClient)
+        use_instrumentation(MockChatClient)
 
 
 # region Test telemetry decorator with mock client
@@ -235,7 +235,7 @@ def mock_chat_client():
 @pytest.mark.parametrize("enable_sensitive_data", [True, False], indirect=True)
 async def test_chat_client_observability(mock_chat_client, span_exporter: InMemorySpanExporter, enable_sensitive_data):
     """Test that when diagnostics are enabled, telemetry is applied."""
-    client = use_observability(mock_chat_client)()
+    client = use_instrumentation(mock_chat_client)()
 
     messages = [ChatMessage(role=Role.USER, text="Test message")]
     span_exporter.clear()
@@ -258,8 +258,8 @@ async def test_chat_client_observability(mock_chat_client, span_exporter: InMemo
 async def test_chat_client_streaming_observability(
     mock_chat_client, span_exporter: InMemorySpanExporter, enable_sensitive_data
 ):
-    """Test streaming telemetry through the use_observability decorator."""
-    client = use_observability(mock_chat_client)()
+    """Test streaming telemetry through the use_instrumentation decorator."""
+    client = use_instrumentation(mock_chat_client)()
     messages = [ChatMessage(role=Role.USER, text="Test")]
     span_exporter.clear()
     # Collect all yielded updates
@@ -282,7 +282,7 @@ async def test_chat_client_streaming_observability(
 
 async def test_chat_client_without_model_id_observability(mock_chat_client, span_exporter: InMemorySpanExporter):
     """Test telemetry shouldn't fail when the model_id is not provided for unknown reason."""
-    client = use_observability(mock_chat_client)()
+    client = use_instrumentation(mock_chat_client)()
     messages = [ChatMessage(role=Role.USER, text="Test")]
     span_exporter.clear()
     response = await client.get_response(messages=messages)
@@ -301,7 +301,7 @@ async def test_chat_client_streaming_without_model_id_observability(
     mock_chat_client, span_exporter: InMemorySpanExporter
 ):
     """Test streaming telemetry shouldn't fail when the model_id is not provided for unknown reason."""
-    client = use_observability(mock_chat_client)()
+    client = use_instrumentation(mock_chat_client)()
     messages = [ChatMessage(role=Role.USER, text="Test")]
     span_exporter.clear()
     # Collect all yielded updates
@@ -329,7 +329,7 @@ def test_prepend_user_agent_with_none_value():
     assert AGENT_FRAMEWORK_USER_AGENT in str(result["User-Agent"])
 
 
-# region Test use_agent_observability decorator
+# region Test use_agent_instrumentation decorator
 
 
 def test_agent_decorator_with_valid_class():
@@ -337,7 +337,7 @@ def test_agent_decorator_with_valid_class():
 
     # Create a mock class with the required methods
     class MockChatClientAgent:
-        AGENT_SYSTEM_NAME = "test_agent_system"
+        AGENT_PROVIDER_NAME = "test_agent_system"
 
         def __init__(self):
             self.id = "test_agent_id"
@@ -358,7 +358,7 @@ def test_agent_decorator_with_valid_class():
             return AgentThread()
 
     # Apply the decorator
-    decorated_class = use_agent_observability(MockChatClientAgent)
+    decorated_class = use_agent_instrumentation(MockChatClientAgent)
 
     assert hasattr(decorated_class, OPEN_TELEMETRY_AGENT_MARKER)
 
@@ -367,19 +367,19 @@ def test_agent_decorator_with_missing_methods():
     """Test that agent decorator handles classes missing required methods gracefully."""
 
     class MockAgent:
-        AGENT_SYSTEM_NAME = "test_agent_system"
+        AGENT_PROVIDER_NAME = "test_agent_system"
 
     # Apply the decorator - should not raise an error
     with pytest.raises(AgentInitializationError):
-        use_agent_observability(MockAgent)
+        use_agent_instrumentation(MockAgent)
 
 
 def test_agent_decorator_with_partial_methods():
     """Test agent decorator when only one method is present."""
-    from agent_framework.observability import use_agent_observability
+    from agent_framework.observability import use_agent_instrumentation
 
     class MockAgent:
-        AGENT_SYSTEM_NAME = "test_agent_system"
+        AGENT_PROVIDER_NAME = "test_agent_system"
 
         def __init__(self):
             self.id = "test_agent_id"
@@ -390,7 +390,7 @@ def test_agent_decorator_with_partial_methods():
             return Mock()
 
     with pytest.raises(AgentInitializationError):
-        use_agent_observability(MockAgent)
+        use_agent_instrumentation(MockAgent)
 
 
 # region Test agent telemetry decorator with mock agent
@@ -401,7 +401,7 @@ def mock_chat_agent():
     """Create a mock chat client agent for testing."""
 
     class MockChatClientAgent:
-        AGENT_SYSTEM_NAME = "test_agent_system"
+        AGENT_PROVIDER_NAME = "test_agent_system"
 
         def __init__(self):
             self.id = "test_agent_id"
@@ -433,7 +433,7 @@ async def test_agent_instrumentation_enabled(
 ):
     """Test that when agent diagnostics are enabled, telemetry is applied."""
 
-    agent = use_agent_observability(mock_chat_agent)()
+    agent = use_agent_instrumentation(mock_chat_agent)()
 
     span_exporter.clear()
     response = await agent.run("Test message")
@@ -457,8 +457,8 @@ async def test_agent_instrumentation_enabled(
 async def test_agent_streaming_response_with_diagnostics_enabled_via_decorator(
     mock_chat_agent: AgentProtocol, span_exporter: InMemorySpanExporter, enable_sensitive_data
 ):
-    """Test agent streaming telemetry through the use_agent_observability decorator."""
-    agent = use_agent_observability(mock_chat_agent)()
+    """Test agent streaming telemetry through the use_agent_instrumentation decorator."""
+    agent = use_agent_instrumentation(mock_chat_agent)()
     span_exporter.clear()
     updates = []
     async for update in agent.run_stream("Test message"):
@@ -522,3 +522,393 @@ async def test_function_call_with_error_handling(span_exporter: InMemorySpanExpo
     exception_message = exception_event.attributes["exception.message"]
     assert isinstance(exception_message, str)
     assert "Function execution failed" in exception_message
+
+
+# region Test OTEL environment variable parsing
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_with_grpc_endpoint(monkeypatch):
+    """Test _get_exporters_from_env with OTEL_EXPORTER_OTLP_ENDPOINT (gRPC)."""
+    from agent_framework.observability import _get_exporters_from_env
+
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_ENDPOINT", "http://localhost:4317")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_PROTOCOL", "grpc")
+
+    exporters = _get_exporters_from_env()
+
+    # Should return 3 exporters (trace, metrics, logs)
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_with_http_endpoint(monkeypatch):
+    """Test _get_exporters_from_env with OTEL_EXPORTER_OTLP_ENDPOINT (HTTP)."""
+    from agent_framework.observability import _get_exporters_from_env
+
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_ENDPOINT", "http://localhost:4318")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_PROTOCOL", "http")
+
+    exporters = _get_exporters_from_env()
+
+    # Should return 3 exporters (trace, metrics, logs)
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_with_individual_endpoints(monkeypatch):
+    """Test _get_exporters_from_env with individual signal endpoints."""
+    from agent_framework.observability import _get_exporters_from_env
+
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_TRACES_ENDPOINT", "http://localhost:4317")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_METRICS_ENDPOINT", "http://localhost:4318")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_LOGS_ENDPOINT", "http://localhost:4319")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_PROTOCOL", "grpc")
+
+    exporters = _get_exporters_from_env()
+
+    # Should return 3 exporters (trace, metrics, logs)
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_with_headers(monkeypatch):
+    """Test _get_exporters_from_env with OTEL_EXPORTER_OTLP_HEADERS."""
+    from agent_framework.observability import _get_exporters_from_env
+
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_ENDPOINT", "http://localhost:4317")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_PROTOCOL", "grpc")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_HEADERS", "key1=value1,key2=value2")
+
+    exporters = _get_exporters_from_env()
+
+    # Should return 3 exporters with headers
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_with_signal_specific_headers(monkeypatch):
+    """Test _get_exporters_from_env with signal-specific headers."""
+    from agent_framework.observability import _get_exporters_from_env
+
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_TRACES_ENDPOINT", "http://localhost:4317")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_TRACES_HEADERS", "trace-key=trace-value")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_PROTOCOL", "grpc")
+
+    exporters = _get_exporters_from_env()
+
+    # Should have at least the traces exporter
+    assert len(exporters) >= 1
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_without_env_vars(monkeypatch):
+    """Test _get_exporters_from_env returns empty list when no env vars set."""
+    from agent_framework.observability import _get_exporters_from_env
+
+    # Clear all OTEL env vars
+    for key in [
+        "OTEL_EXPORTER_OTLP_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_TRACES_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_METRICS_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_LOGS_ENDPOINT",
+    ]:
+        monkeypatch.delenv(key, raising=False)
+
+    exporters = _get_exporters_from_env()
+
+    # Should return empty list
+    assert len(exporters) == 0
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_get_exporters_from_env_missing_grpc_dependency(monkeypatch):
+    """Test _get_exporters_from_env raises ImportError when gRPC exporters not installed."""
+
+    from agent_framework.observability import _get_exporters_from_env
+
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_ENDPOINT", "http://localhost:4317")
+    monkeypatch.setenv("OTEL_EXPORTER_OTLP_PROTOCOL", "grpc")
+
+    # Mock the import to raise ImportError
+    original_import = __builtins__.__import__
+
+    def mock_import(name, *args, **kwargs):
+        if "opentelemetry.exporter.otlp.proto.grpc" in name:
+            raise ImportError("No module named 'opentelemetry.exporter.otlp.proto.grpc'")
+        return original_import(name, *args, **kwargs)
+
+    monkeypatch.setattr(__builtins__, "__import__", mock_import)
+
+    with pytest.raises(ImportError, match="opentelemetry-exporter-otlp-proto-grpc"):
+        _get_exporters_from_env()
+
+
+# region Test create_resource
+
+
+def test_create_resource_from_env(monkeypatch):
+    """Test create_resource reads OTEL environment variables."""
+    from agent_framework.observability import create_resource
+
+    monkeypatch.setenv("OTEL_SERVICE_NAME", "test-service")
+    monkeypatch.setenv("OTEL_SERVICE_VERSION", "1.0.0")
+    monkeypatch.setenv("OTEL_RESOURCE_ATTRIBUTES", "deployment.environment=production,host.name=server1")
+
+    resource = create_resource()
+
+    assert resource.attributes["service.name"] == "test-service"
+    assert resource.attributes["service.version"] == "1.0.0"
+    assert resource.attributes["deployment.environment"] == "production"
+    assert resource.attributes["host.name"] == "server1"
+
+
+def test_create_resource_with_parameters_override_env(monkeypatch):
+    """Test create_resource parameters override environment variables."""
+    from agent_framework.observability import create_resource
+
+    monkeypatch.setenv("OTEL_SERVICE_NAME", "env-service")
+    monkeypatch.setenv("OTEL_SERVICE_VERSION", "0.1.0")
+
+    resource = create_resource(service_name="param-service", service_version="2.0.0")
+
+    # Parameters should override env vars
+    assert resource.attributes["service.name"] == "param-service"
+    assert resource.attributes["service.version"] == "2.0.0"
+
+
+def test_create_resource_with_custom_attributes(monkeypatch):
+    """Test create_resource accepts custom attributes."""
+    from agent_framework.observability import create_resource
+
+    resource = create_resource(custom_attr="custom_value", another_attr=123)
+
+    assert resource.attributes["custom_attr"] == "custom_value"
+    assert resource.attributes["another_attr"] == 123
+
+
+# region Test _create_otlp_exporters
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_create_otlp_exporters_grpc_with_single_endpoint():
+    """Test _create_otlp_exporters creates gRPC exporters with single endpoint."""
+    from agent_framework.observability import _create_otlp_exporters
+
+    exporters = _create_otlp_exporters(endpoint="http://localhost:4317", protocol="grpc")
+
+    # Should return 3 exporters (trace, metrics, logs)
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_create_otlp_exporters_http_with_single_endpoint():
+    """Test _create_otlp_exporters creates HTTP exporters with single endpoint."""
+    from agent_framework.observability import _create_otlp_exporters
+
+    exporters = _create_otlp_exporters(endpoint="http://localhost:4318", protocol="http")
+
+    # Should return 3 exporters (trace, metrics, logs)
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_create_otlp_exporters_with_individual_endpoints():
+    """Test _create_otlp_exporters with individual signal endpoints."""
+    from agent_framework.observability import _create_otlp_exporters
+
+    exporters = _create_otlp_exporters(
+        protocol="grpc",
+        traces_endpoint="http://localhost:4317",
+        metrics_endpoint="http://localhost:4318",
+        logs_endpoint="http://localhost:4319",
+    )
+
+    # Should return 3 exporters
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_create_otlp_exporters_with_headers():
+    """Test _create_otlp_exporters with headers."""
+    from agent_framework.observability import _create_otlp_exporters
+
+    exporters = _create_otlp_exporters(
+        endpoint="http://localhost:4317", protocol="grpc", headers={"Authorization": "Bearer token"}
+    )
+
+    # Should return 3 exporters with headers
+    assert len(exporters) == 3
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_create_otlp_exporters_grpc_missing_dependency():
+    """Test _create_otlp_exporters raises ImportError when gRPC exporters not installed."""
+    import sys
+    from unittest.mock import patch
+
+    from agent_framework.observability import _create_otlp_exporters
+
+    # Mock the import to raise ImportError
+    with (
+        patch.dict(sys.modules, {"opentelemetry.exporter.otlp.proto.grpc.trace_exporter": None}),
+        pytest.raises(ImportError, match="opentelemetry-exporter-otlp-proto-grpc"),
+    ):
+        _create_otlp_exporters(endpoint="http://localhost:4317", protocol="grpc")
+
+
+# region Test configure_otel_providers with views
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_configure_otel_providers_with_views(monkeypatch):
+    """Test configure_otel_providers accepts views parameter."""
+    from opentelemetry.sdk.metrics import View
+    from opentelemetry.sdk.metrics.view import DropAggregation
+
+    from agent_framework.observability import configure_otel_providers
+
+    # Clear all OTEL env vars
+    for key in [
+        "OTEL_EXPORTER_OTLP_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_TRACES_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_METRICS_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_LOGS_ENDPOINT",
+    ]:
+        monkeypatch.delenv(key, raising=False)
+
+    # Create a view that drops all metrics
+    views = [View(instrument_name="*", aggregation=DropAggregation())]
+
+    # Should not raise an error
+    configure_otel_providers(views=views)
+
+
+@pytest.mark.skipif(
+    True,
+    reason="Skipping OTLP exporter tests - optional dependency not installed by default",
+)
+def test_configure_otel_providers_without_views(monkeypatch):
+    """Test configure_otel_providers works without views parameter."""
+    from agent_framework.observability import configure_otel_providers
+
+    # Clear all OTEL env vars
+    for key in [
+        "OTEL_EXPORTER_OTLP_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_TRACES_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_METRICS_ENDPOINT",
+        "OTEL_EXPORTER_OTLP_LOGS_ENDPOINT",
+    ]:
+        monkeypatch.delenv(key, raising=False)
+
+    # Should not raise an error with default empty views
+    configure_otel_providers()
+
+
+# region Test console exporters opt-in
+
+
+def test_console_exporters_opt_in_false(monkeypatch):
+    """Test console exporters are not added when ENABLE_CONSOLE_EXPORTERS is false."""
+    from agent_framework.observability import ObservabilitySettings
+
+    monkeypatch.setenv("ENABLE_CONSOLE_EXPORTERS", "false")
+    monkeypatch.delenv("OTEL_EXPORTER_OTLP_ENDPOINT", raising=False)
+
+    settings = ObservabilitySettings(env_file_path="test.env")
+    assert settings.enable_console_exporters is False
+
+
+def test_console_exporters_opt_in_true(monkeypatch):
+    """Test console exporters are added when ENABLE_CONSOLE_EXPORTERS is true."""
+    from agent_framework.observability import ObservabilitySettings
+
+    monkeypatch.setenv("ENABLE_CONSOLE_EXPORTERS", "true")
+
+    settings = ObservabilitySettings(env_file_path="test.env")
+    assert settings.enable_console_exporters is True
+
+
+def test_console_exporters_default_false(monkeypatch):
+    """Test console exporters default to False when not set."""
+    from agent_framework.observability import ObservabilitySettings
+
+    monkeypatch.delenv("ENABLE_CONSOLE_EXPORTERS", raising=False)
+
+    settings = ObservabilitySettings(env_file_path="test.env")
+    assert settings.enable_console_exporters is False
+
+
+# region Test _parse_headers helper
+
+
+def test_parse_headers_valid():
+    """Test _parse_headers with valid header string."""
+    from agent_framework.observability import _parse_headers
+
+    headers = _parse_headers("key1=value1,key2=value2")
+    assert headers == {"key1": "value1", "key2": "value2"}
+
+
+def test_parse_headers_with_spaces():
+    """Test _parse_headers handles spaces around keys and values."""
+    from agent_framework.observability import _parse_headers
+
+    headers = _parse_headers("key1 = value1 , key2 = value2 ")
+    assert headers == {"key1": "value1", "key2": "value2"}
+
+
+def test_parse_headers_empty_string():
+    """Test _parse_headers with empty string."""
+    from agent_framework.observability import _parse_headers
+
+    headers = _parse_headers("")
+    assert headers == {}
+
+
+def test_parse_headers_invalid_format():
+    """Test _parse_headers ignores invalid pairs."""
+    from agent_framework.observability import _parse_headers
+
+    headers = _parse_headers("key1=value1,invalid,key2=value2")
+    # Should only include valid pairs
+    assert headers == {"key1": "value1", "key2": "value2"}

python/packages/core/tests/openai/test_openai_responses_client.py

@@ -832,7 +832,7 @@ def test_create_streaming_response_content_with_mcp_approval_request() -> None:
     assert fa.function_call.name == "do_stream_action"
 
 
-@pytest.mark.parametrize("enable_otel", [False], indirect=True)
+@pytest.mark.parametrize("enable_instrumentation", [False], indirect=True)
 @pytest.mark.parametrize("enable_sensitive_data", [False], indirect=True)
 async def test_end_to_end_mcp_approval_flow(span_exporter) -> None:
     """End-to-end mocked test:

python/packages/core/tests/test_observability_datetime.py

@@ -22,5 +22,5 @@ def test_datetime_in_tool_results() -> None:
     result = _to_otel_part(content)
     parsed = json.loads(result["response"])
 
-    # Datetime should be converted to string
-    assert isinstance(parsed["timestamp"], str)
+    # Datetime should be converted to string in the result field
+    assert isinstance(parsed["result"]["timestamp"], str)

python/packages/core/tests/workflow/test_workflow_observability.py

@@ -229,8 +229,10 @@ async def test_trace_context_handling(span_exporter: InMemorySpanExporter) -> No
     assert processing_span.attributes.get("message.payload_type") == "str"
 
 
-@pytest.mark.parametrize("enable_otel", [False], indirect=True)
-async def test_trace_context_disabled_when_tracing_disabled(enable_otel, span_exporter: InMemorySpanExporter) -> None:
+@pytest.mark.parametrize("enable_instrumentation", [False], indirect=True)
+async def test_trace_context_disabled_when_tracing_disabled(
+    enable_instrumentation, span_exporter: InMemorySpanExporter
+) -> None:
     """Test that no trace context is added when tracing is disabled."""
     # Tracing should be disabled by default
     executor = MockExecutor("test-executor")
@@ -433,7 +435,7 @@ async def test_workflow_error_handling_in_tracing(span_exporter: InMemorySpanExp
     assert workflow_span.status.status_code.name == "ERROR"
 
 
-@pytest.mark.parametrize("enable_otel", [False], indirect=True)
+@pytest.mark.parametrize("enable_instrumentation", [False], indirect=True)
 async def test_message_trace_context_serialization(span_exporter: InMemorySpanExporter) -> None:
     """Test that message trace context is properly serialized/deserialized."""
     ctx = InProcRunnerContext(InMemoryCheckpointStorage())

python/packages/devui/agent_framework_devui/__init__.py

@@ -177,9 +177,9 @@ def serve(
         import os
 
         # Only set if not already configured by user
-        if not os.environ.get("ENABLE_OTEL"):
-            os.environ["ENABLE_OTEL"] = "true"
-            logger.info("Set ENABLE_OTEL=true for tracing")
+        if not os.environ.get("ENABLE_INSTRUMENTATION"):
+            os.environ["ENABLE_INSTRUMENTATION"] = "true"
+            logger.info("Set ENABLE_INSTRUMENTATION=true for tracing")
 
         if not os.environ.get("ENABLE_SENSITIVE_DATA"):
             os.environ["ENABLE_SENSITIVE_DATA"] = "true"

python/packages/devui/agent_framework_devui/_executor.py

@@ -82,27 +82,23 @@ class AgentFrameworkExecutor:
 
     def _setup_agent_framework_tracing(self) -> None:
         """Set up Agent Framework's built-in tracing."""
-        # Configure Agent Framework tracing only if ENABLE_OTEL is set
-        if os.environ.get("ENABLE_OTEL"):
+        # Configure Agent Framework tracing only if ENABLE_INSTRUMENTATION is set
+        if os.environ.get("ENABLE_INSTRUMENTATION"):
             try:
-                from agent_framework.observability import OBSERVABILITY_SETTINGS, setup_observability
+                from agent_framework.observability import OBSERVABILITY_SETTINGS, configure_otel_providers
 
                 # Only configure if not already executed
                 if not OBSERVABILITY_SETTINGS._executed_setup:
-                    # Get OTLP endpoint from either custom or standard env var
-                    # This handles the case where env vars are set after ObservabilitySettings was imported
-                    otlp_endpoint = os.environ.get("OTLP_ENDPOINT") or os.environ.get("OTEL_EXPORTER_OTLP_ENDPOINT")
-
-                    # Pass the endpoint explicitly to setup_observability
+                    # Run the configure_otel_providers
                     # This ensures OTLP exporters are created even if env vars were set late
-                    setup_observability(enable_sensitive_data=True, otlp_endpoint=otlp_endpoint)
+                    configure_otel_providers(enable_sensitive_data=True)
                     logger.info("Enabled Agent Framework observability")
                 else:
                     logger.debug("Agent Framework observability already configured")
             except Exception as e:
                 logger.warning(f"Failed to enable Agent Framework observability: {e}")
         else:
-            logger.debug("ENABLE_OTEL not set, skipping observability setup")
+            logger.debug("ENABLE_INSTRUMENTATION not set, skipping observability setup")
 
     async def discover_entities(self) -> list[EntityInfo]:
         """Discover all available entities.

python/packages/devui/agent_framework_devui/_server.py

@@ -407,7 +407,7 @@ class DevServer:
                 framework="agent_framework",
                 runtime="python",  # Python DevUI backend
                 capabilities={
-                    "tracing": os.getenv("ENABLE_OTEL") == "true",
+                    "tracing": os.getenv("ENABLE_INSTRUMENTATION") == "true",
                     "openai_proxy": openai_executor.is_configured,
                     "deployment": True,  # Deployment feature is available
                 },

python/packages/devui/frontend/src/components/layout/debug-panel.tsx

@@ -321,8 +321,7 @@ function processEventsForDisplay(
         } else {
           // Shouldn't happen if output_item.added was emitted first
           console.warn(
-            `Received argument delta for unknown call with item_id: ${
-              "item_id" in event ? event.item_id : "unknown"
+            `Received argument delta for unknown call with item_id: ${"item_id" in event ? event.item_id : "unknown"
             }`
           );
         }
@@ -416,17 +415,15 @@ function getEventSummary(event: ExtendedResponseStreamEvent): string {
             ? data.arguments.slice(0, 30)
             : JSON.stringify(data.arguments).slice(0, 30)
           : "";
-        return `Calling ${functionName}(${argsStr}${
-          argsStr.length >= 30 ? "..." : ""
-        })`;
+        return `Calling ${functionName}(${argsStr}${argsStr.length >= 30 ? "..." : ""
+          })`;
       }
       return "Function call";
 
     case "response.function_call_arguments.delta":
       if ("delta" in event && event.delta) {
-        return `Function arg delta: ${event.delta.slice(0, 30)}${
-          event.delta.length > 30 ? "..." : ""
-        }`;
+        return `Function arg delta: ${event.delta.slice(0, 30)}${event.delta.length > 30 ? "..." : ""
+          }`;
       }
       return "Function arguments...";
 
@@ -434,9 +431,8 @@ function getEventSummary(event: ExtendedResponseStreamEvent): string {
       const resultEvent =
         event as import("@/types").ResponseFunctionResultComplete;
       const truncated = resultEvent.output.slice(0, 40);
-      return `Function result: ${truncated}${
-        truncated.length >= 40 ? "..." : ""
-      }`;
+      return `Function result: ${truncated}${truncated.length >= 40 ? "..." : ""
+        }`;
     }
 
     case "response.output_item.added": {
@@ -595,9 +591,8 @@ function EventItem({ event }: EventItemProps) {
 
       <div className="text-sm">
         <div
-          className={`flex items-center gap-2 ${
-            hasExpandableContent ? "cursor-pointer" : ""
-          }`}
+          className={`flex items-center gap-2 ${hasExpandableContent ? "cursor-pointer" : ""
+            }`}
           onClick={() => hasExpandableContent && setIsExpanded(!isExpanded)}
         >
           {hasExpandableContent && (
@@ -757,11 +752,10 @@ function EventExpandedContent({
                 Status:
               </span>
               <span
-                className={`ml-2 px-2 py-1 rounded text-xs font-medium ${
-                  resultEvent.status === "completed"
+                className={`ml-2 px-2 py-1 rounded text-xs font-medium ${resultEvent.status === "completed"
                     ? "bg-green-100 dark:bg-green-900 text-green-800 dark:text-green-200"
                     : "bg-red-100 dark:bg-red-900 text-red-800 dark:text-red-200"
-                }`}
+                  }`}
               >
                 {resultEvent.status}
               </span>
@@ -802,11 +796,10 @@ function EventExpandedContent({
                   Status:
                 </span>
                 <span
-                  className={`ml-2 px-2 py-1 rounded text-xs font-medium ${
-                    result.status === "completed"
+                  className={`ml-2 px-2 py-1 rounded text-xs font-medium ${result.status === "completed"
                       ? "bg-green-100 dark:bg-green-900 text-green-800 dark:text-green-200"
                       : "bg-red-100 dark:bg-red-900 text-red-800 dark:text-red-200"
-                  }`}
+                    }`}
                 >
                   {result.status}
                 </span>
@@ -936,11 +929,10 @@ function EventExpandedContent({
                     Status:
                   </span>
                   <span
-                    className={`ml-2 px-2 py-1 rounded text-xs font-medium ${
-                      data.status === "StatusCode.UNSET" || data.status === "OK"
+                    className={`ml-2 px-2 py-1 rounded text-xs font-medium ${data.status === "StatusCode.UNSET" || data.status === "OK"
                         ? "bg-green-100 dark:bg-green-900 text-green-800 dark:text-green-200"
                         : "bg-red-100 dark:bg-red-900 text-red-800 dark:text-red-200"
-                    }`}
+                      }`}
                   >
                     {data.status || "unknown"}
                   </span>
@@ -1191,7 +1183,7 @@ function TracesTab({ events }: { events: ExtendedResponseStreamEvent[] }) {
                   <Info className="inline h-4 w-4 mr-1  " />
                   You may have to set the environment variable{" "}
                   <span className="font-mono bg-accent/10 px-1 rounded">
-                    ENABLE_OTEL=true
+                    ENABLE_INSTRUMENTATION=true
                   </span>{" "}
                   or restart devui with the tracing flag{" "}
                   <div className="font-mono bg-accent/10 px-1 rounded">
@@ -1351,12 +1343,11 @@ function TraceEventItem({ event }: { event: ExtendedResponseStreamEvent }) {
                       Status:
                     </span>
                     <span
-                      className={`ml-2 px-2 py-1 rounded text-xs font-medium ${
-                        data.status === "StatusCode.UNSET" ||
-                        data.status === "OK"
+                      className={`ml-2 px-2 py-1 rounded text-xs font-medium ${data.status === "StatusCode.UNSET" ||
+                          data.status === "OK"
                           ? "bg-green-100 dark:bg-green-900 text-green-800 dark:text-green-200"
                           : "bg-red-100 dark:bg-red-900 text-red-800 dark:text-red-200"
-                      }`}
+                        }`}
                     >
                       {data.status || "unknown"}
                     </span>

python/packages/devui/frontend/src/components/layout/deployment-modal.tsx

@@ -249,7 +249,7 @@ services:
       - AZURE_OPENAI_ENDPOINT=\${AZURE_OPENAI_ENDPOINT}
       - AZURE_OPENAI_CHAT_DEPLOYMENT_NAME=\${AZURE_OPENAI_CHAT_DEPLOYMENT_NAME}
       # Optional: Enable tracing
-      - ENABLE_OTEL=\${ENABLE_OTEL:-false}
+      - ENABLE_INSTRUMENTATION=\${ENABLE_INSTRUMENTATION:-false}
     ports:
       - "8080:8080"
     restart: unless-stopped
@@ -282,11 +282,10 @@ openai>=1.0.0
         <div className="flex border-b px-6">
           <button
             onClick={() => setActiveTab("docker")}
-            className={`px-4 py-2 text-sm font-medium transition-colors relative ${
-              activeTab === "docker"
+            className={`px-4 py-2 text-sm font-medium transition-colors relative ${activeTab === "docker"
                 ? "text-foreground"
                 : "text-muted-foreground hover:text-foreground"
-            }`}
+              }`}
           >
             <Container className="h-4 w-4 mr-2 inline" />
             Docker
@@ -297,11 +296,10 @@ openai>=1.0.0
           {deploymentSupported && (
             <button
               onClick={() => setActiveTab("azure")}
-              className={`px-4 py-2 text-sm font-medium transition-colors relative ${
-                activeTab === "azure"
+              className={`px-4 py-2 text-sm font-medium transition-colors relative ${activeTab === "azure"
                   ? "text-foreground"
                   : "text-muted-foreground hover:text-foreground"
-              }`}
+                }`}
             >
               <Cloud className="h-4 w-4 mr-2 inline" />
               Azure
@@ -536,8 +534,8 @@ openai>=1.0.0
                       <div className="mt-2 p-2 bg-blue-100 dark:bg-blue-900 rounded text-xs">
                         <p className="mb-1">Run these commands once per subscription:</p>
                         <code className="block font-mono">
-                          az provider register -n Microsoft.App --wait<br/>
-                          az provider register -n Microsoft.ContainerRegistry --wait<br/>
+                          az provider register -n Microsoft.App --wait<br />
+                          az provider register -n Microsoft.ContainerRegistry --wait<br />
                           az provider register -n Microsoft.OperationalInsights --wait
                         </code>
                       </div>
@@ -564,9 +562,8 @@ openai>=1.0.0
                               <label className="text-sm font-medium">App Name</label>
                               <input
                                 type="text"
-                                className={`w-full mt-1 px-3 py-2 border rounded-md text-sm ${
-                                  appNameError ? "border-red-500" : ""
-                                }`}
+                                className={`w-full mt-1 px-3 py-2 border rounded-md text-sm ${appNameError ? "border-red-500" : ""
+                                  }`}
                                 placeholder="my-agent-app"
                                 value={appName}
                                 onChange={(e) => {
@@ -732,73 +729,73 @@ openai>=1.0.0
                       <div className="space-y-3">
                         <h4 className="font-medium text-sm">Deployment Steps</h4>
 
-                    <div className="space-y-3">
-                      {/* Step 1 */}
-                      <div className="border-l-2 border-primary pl-3">
-                        <div className="flex items-center gap-2 mb-1">
-                          <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
-                            1
-                          </div>
-                          <h5 className="font-medium text-sm">
-                            Create Azure Container Registry
-                          </h5>
-                        </div>
-                        <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
-                          {`# Create resource group
+                        <div className="space-y-3">
+                          {/* Step 1 */}
+                          <div className="border-l-2 border-primary pl-3">
+                            <div className="flex items-center gap-2 mb-1">
+                              <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
+                                1
+                              </div>
+                              <h5 className="font-medium text-sm">
+                                Create Azure Container Registry
+                              </h5>
+                            </div>
+                            <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
+                              {`# Create resource group
 az group create --name myResourceGroup --location eastus
 
 # Create container registry
 az acr create --resource-group myResourceGroup \\
   --name myregistry --sku Basic`}
-                        </pre>
-                      </div>
-
-                      {/* Step 2 */}
-                      <div className="border-l-2 border-primary pl-3">
-                        <div className="flex items-center gap-2 mb-1">
-                          <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
-                            2
+                            </pre>
                           </div>
-                          <h5 className="font-medium text-sm">
-                            Build and Push Docker Image
-                          </h5>
-                        </div>
-                        <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
-                          {`# Build and push in one command
+
+                          {/* Step 2 */}
+                          <div className="border-l-2 border-primary pl-3">
+                            <div className="flex items-center gap-2 mb-1">
+                              <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
+                                2
+                              </div>
+                              <h5 className="font-medium text-sm">
+                                Build and Push Docker Image
+                              </h5>
+                            </div>
+                            <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
+                              {`# Build and push in one command
 az acr build --registry myregistry \\
   --image ${agentName.toLowerCase()}-agent:latest .`}
-                        </pre>
-                      </div>
-
-                      {/* Step 3 */}
-                      <div className="border-l-2 border-primary pl-3">
-                        <div className="flex items-center gap-2 mb-1">
-                          <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
-                            3
+                            </pre>
                           </div>
-                          <h5 className="font-medium text-sm">
-                            Create Container Apps Environment
-                          </h5>
-                        </div>
-                        <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
-                          {`az containerapp env create --name myEnvironment \\
+
+                          {/* Step 3 */}
+                          <div className="border-l-2 border-primary pl-3">
+                            <div className="flex items-center gap-2 mb-1">
+                              <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
+                                3
+                              </div>
+                              <h5 className="font-medium text-sm">
+                                Create Container Apps Environment
+                              </h5>
+                            </div>
+                            <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
+                              {`az containerapp env create --name myEnvironment \\
   --resource-group myResourceGroup \\
   --location eastus`}
-                        </pre>
-                      </div>
-
-                      {/* Step 4 */}
-                      <div className="border-l-2 border-primary pl-3">
-                        <div className="flex items-center gap-2 mb-1">
-                          <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
-                            4
+                            </pre>
                           </div>
-                          <h5 className="font-medium text-sm">
-                            Deploy Container App
-                          </h5>
-                        </div>
-                        <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
-                          {`az containerapp create --name ${agentName.toLowerCase()}-app \\
+
+                          {/* Step 4 */}
+                          <div className="border-l-2 border-primary pl-3">
+                            <div className="flex items-center gap-2 mb-1">
+                              <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
+                                4
+                              </div>
+                              <h5 className="font-medium text-sm">
+                                Deploy Container App
+                              </h5>
+                            </div>
+                            <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
+                              {`az containerapp create --name ${agentName.toLowerCase()}-app \\
   --resource-group myResourceGroup \\
   --environment myEnvironment \\
   --image myregistry.azurecr.io/${agentName.toLowerCase()}-agent:latest \\
@@ -806,51 +803,51 @@ az acr build --registry myregistry \\
   --ingress 'external' \\
   --registry-server myregistry.azurecr.io \\
   --env-vars OPENAI_API_KEY=secretref:openai-key OPENAI_CHAT_MODEL_ID=gpt-4o-mini`}
-                        </pre>
-                      </div>
-
-                      {/* Step 5 */}
-                      <div className="border-l-2 border-primary pl-3">
-                        <div className="flex items-center gap-2 mb-1">
-                          <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
-                            5
+                            </pre>
                           </div>
-                          <h5 className="font-medium text-sm">
-                            Get Application URL
-                          </h5>
-                        </div>
-                        <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
-                          {`az containerapp show --name ${agentName.toLowerCase()}-app \\
+
+                          {/* Step 5 */}
+                          <div className="border-l-2 border-primary pl-3">
+                            <div className="flex items-center gap-2 mb-1">
+                              <div className="w-5 h-5 rounded-full bg-primary text-primary-foreground flex items-center justify-center text-xs font-bold">
+                                5
+                              </div>
+                              <h5 className="font-medium text-sm">
+                                Get Application URL
+                              </h5>
+                            </div>
+                            <pre className="bg-muted p-2 rounded text-xs overflow-x-auto border mt-2">
+                              {`az containerapp show --name ${agentName.toLowerCase()}-app \\
   --resource-group myResourceGroup \\
   --query properties.configuration.ingress.fqdn`}
-                        </pre>
+                            </pre>
+                          </div>
+                        </div>
                       </div>
-                    </div>
-                  </div>
 
-                  {/* Learn More */}
-                  <div className="bg-blue-50 dark:bg-blue-950/50 border border-blue-200 dark:border-blue-800 rounded-md p-3">
-                    <h4 className="text-sm font-semibold mb-2">Learn More</h4>
-                    <p className="text-xs text-muted-foreground mb-3">
-                      Explore Azure Container Apps documentation for advanced
-                      features like scaling, monitoring, and CI/CD integration.
-                    </p>
-                    <Button
-                      size="sm"
-                      variant="outline"
-                      className="w-full"
-                      asChild
-                    >
-                      <a
-                        href="https://learn.microsoft.com/azure/container-apps/"
-                        target="_blank"
-                        rel="noopener noreferrer"
-                      >
-                        <ExternalLink className="h-3 w-3 mr-1" />
-                        View Azure Container Apps Documentation
-                      </a>
-                    </Button>
-                  </div>
+                      {/* Learn More */}
+                      <div className="bg-blue-50 dark:bg-blue-950/50 border border-blue-200 dark:border-blue-800 rounded-md p-3">
+                        <h4 className="text-sm font-semibold mb-2">Learn More</h4>
+                        <p className="text-xs text-muted-foreground mb-3">
+                          Explore Azure Container Apps documentation for advanced
+                          features like scaling, monitoring, and CI/CD integration.
+                        </p>
+                        <Button
+                          size="sm"
+                          variant="outline"
+                          className="w-full"
+                          asChild
+                        >
+                          <a
+                            href="https://learn.microsoft.com/azure/container-apps/"
+                            target="_blank"
+                            rel="noopener noreferrer"
+                          >
+                            <ExternalLink className="h-3 w-3 mr-1" />
+                            View Azure Container Apps Documentation
+                          </a>
+                        </Button>
+                      </div>
                     </>
                   )}
                 </div>

python/packages/lab/gaia/agent_framework_lab_gaia/gaia.py

@@ -30,7 +30,6 @@ class GAIATelemetryConfig:
         self,
         enable_tracing: bool = False,
         otlp_endpoint: str | None = None,
-        applicationinsights_connection_string: str | None = None,
         trace_to_file: bool = False,
         file_path: str | None = None,
     ):
@@ -39,24 +38,27 @@ class GAIATelemetryConfig:
         Args:
             enable_tracing: Whether to enable OpenTelemetry tracing
             otlp_endpoint: OTLP endpoint for trace export
-            applicationinsights_connection_string: Azure Monitor connection string
             trace_to_file: Whether to export traces to local file
             file_path: Path for local file export (defaults to gaia_traces.json)
+
+        Note:
+            For Azure Monitor integration, configure using environment variables
+            (OTEL_EXPORTER_OTLP_ENDPOINT, etc.) or use AzureAIClient.configure_azure_monitor()
+            before creating the GAIA instance.
         """
         self.enable_tracing = enable_tracing
         self.otlp_endpoint = otlp_endpoint
-        self.applicationinsights_connection_string = applicationinsights_connection_string
         self.trace_to_file = trace_to_file
         self.file_path = file_path or "gaia_traces.json"
 
-    def setup_observability(self) -> None:
+    def configure_otel_providers(self) -> None:
         """Set up OpenTelemetry based on configuration."""
         if not self.enable_tracing:
             return
 
-        # If only file tracing is requested (no OTLP or Application Insights),
-        # skip the default setup_observability which adds console exporter
-        if self.trace_to_file and not self.otlp_endpoint and not self.applicationinsights_connection_string:
+        # If only file tracing is requested (no OTLP),
+        # skip the default configure_otel_providers which adds console exporter
+        if self.trace_to_file and not self.otlp_endpoint:
             # Set up minimal tracing with only file export
             from opentelemetry.sdk.trace import TracerProvider
             from opentelemetry.trace import set_tracer_provider
@@ -65,13 +67,17 @@ class GAIATelemetryConfig:
             set_tracer_provider(tracer_provider)
             self._setup_file_export()
         else:
-            # Use full observability setup for OTLP/AppInsights
-            from agent_framework.observability import setup_observability
+            # Use full observability setup for OTLP
+            from agent_framework.observability import configure_otel_providers
 
-            setup_observability(
+            # Set OTLP endpoint env var if provided
+            if self.otlp_endpoint:
+                import os
+
+                os.environ.setdefault("OTEL_EXPORTER_OTLP_ENDPOINT", self.otlp_endpoint)
+
+            configure_otel_providers(
                 enable_sensitive_data=True,  # Enable for detailed task traces
-                otlp_endpoint=self.otlp_endpoint,
-                applicationinsights_connection_string=self.applicationinsights_connection_string,
             )
 
             # Set up local file export if requested
@@ -333,7 +339,7 @@ class GAIA:
         self.telemetry_config = telemetry_config or GAIATelemetryConfig()
 
         # Set up telemetry
-        self.telemetry_config.setup_observability()
+        self.telemetry_config.configure_otel_providers()
 
         # Initialize tracer
         if self.telemetry_config.enable_tracing:

python/packages/lab/lightning/agent_framework_lab_lightning/__init__.py

@@ -22,13 +22,13 @@ class AgentFrameworkTracer(AgentOpsTracer):  # type: ignore
 
     def init(self) -> None:
         """Initialize the agent-framework-lab-lightning for training."""
-        OBSERVABILITY_SETTINGS.enable_otel = True
+        OBSERVABILITY_SETTINGS.enable_instrumentation = True
         super().init()
 
     def teardown(self) -> None:
         """Teardown the agent-framework-lab-lightning for training."""
         super().teardown()
-        OBSERVABILITY_SETTINGS.enable_otel = False
+        OBSERVABILITY_SETTINGS.enable_instrumentation = False
 
 
 __all__: list[str] = ["AgentFrameworkTracer"]