diff --git a/local_code_assistant/tests/test_services.py b/local_code_assistant/tests/test_services.py
new file mode 100644
index 0000000..5e1fc02
--- /dev/null
+++ b/local_code_assistant/tests/test_services.py
@@ -0,0 +1,140 @@
+"""Tests for Local Code Assistant services."""
+
+import pytest
+from unittest.mock import Mock, patch, MagicMock
+
+from local_code_assistant.services.ollama import (
+    OllamaService,
+    OllamaServiceError,
+    OllamaConnectionError,
+    OllamaModelError
+)
+from local_code_assistant.services.config import ConfigService
+
+
+class TestOllamaService:
+    """Tests for the Ollama service."""
+
+    @pytest.fixture
+    def mock_config(self):
+        """Create a mock configuration."""
+        config = Mock(spec=ConfigService)
+        config.ollama_base_url = "http://localhost:11434"
+        config.ollama_model = "codellama"
+        config.ollama_timeout = 30
+        config.streaming = True
+        return config
+
+    @pytest.fixture
+    def ollama_service(self, mock_config):
+        """Create an Ollama service with mock config."""
+        return OllamaService(mock_config)
+
+    def test_init(self, ollama_service, mock_config):
+        """Test service initialization."""
+        assert ollama_service.base_url == mock_config.ollama_base_url
+        assert ollama_service.config == mock_config
+
+    @patch('local_code_assistant.services.ollama.requests.get')
+    def test_check_connection_success(self, mock_get, ollama_service):
+        """Test successful connection check."""
+        mock_response = Mock()
+        mock_response.json.return_value = {"models": []}
+        mock_response.raise_for_status = Mock()
+        mock_get.return_value = mock_response
+
+        result = ollama_service.check_connection()
+        assert result is True
+
+    @patch('local_code_assistant.services.ollama.requests.get')
+    def test_check_connection_failure(self, mock_get, ollama_service):
+        """Test failed connection check."""
+        import requests
+        mock_get.side_effect = requests.exceptions.ConnectionError()
+
+        result = ollama_service.check_connection()
+        assert result is False
+
+    @patch('local_code_assistant.services.ollama.requests.get')
+    def test_list_models(self, mock_get, ollama_service):
+        """Test listing models."""
+        mock_response = Mock()
+        mock_response.json.return_value = {
+            "models": [
+                {"name": "codellama:latest"},
+                {"name": "llama3:latest"}
+            ]
+        }
+        mock_response.raise_for_status = Mock()
+        mock_get.return_value = mock_response
+
+        models = ollama_service.list_models()
+        assert models == ["codellama:latest", "llama3:latest"]
+
+    @patch('local_code_assistant.services.ollama.requests.post')
+    def test_generate(self, mock_post, ollama_service):
+        """Test code generation."""
+        mock_response = Mock()
+        mock_response.json.return_value = {
+            "response": "def hello(): pass"
+        }
+        mock_response.raise_for_status = Mock()
+        mock_post.return_value = mock_response
+
+        result = ollama_service.generate("Say hello")
+        assert result == "def hello(): pass"
+
+    @patch('local_code_assistant.services.ollama.requests.post')
+    def test_generate_with_model(self, mock_post, ollama_service):
+        """Test generation with specific model."""
+        mock_response = Mock()
+        mock_response.json.return_value = {
+            "response": "print('hello')"
+        }
+        mock_response.raise_for_status = Mock()
+        mock_post.return_value = mock_response
+
+        result = ollama_service.generate("Say hello", model="llama3")
+        assert result == "print('hello')"
+
+    def test_connection_error(self, ollama_service):
+        """Test connection error handling."""
+        with pytest.raises(OllamaConnectionError):
+            raise OllamaConnectionError("Connection failed")
+
+
+class TestConfigService:
+    """Tests for the configuration service."""
+
+    @pytest.fixture
+    def temp_config_file(self, tmp_path):
+        """Create a temporary config file."""
+        config_content = """
+ollama:
+  base_url: http://localhost:11434
+  model: test-model
+  timeout: 60
+"""
+        config_file = tmp_path / "config.yaml"
+        config_file.write_text(config_content)
+        return str(config_file)
+
+    def test_default_config(self):
+        """Test default configuration values."""
+        with patch('os.getenv', return_value=None):
+            config = ConfigService("/nonexistent/path")
+            assert config.ollama_base_url == "http://localhost:11434"
+            assert config.ollama_model == "codellama"
+            assert config.ollama_timeout == 8000
+
+    def test_env_override(self):
+        """Test environment variable override."""
+        with patch.dict('os.environ', {'OLLAMA_MODEL': 'env-model'}):
+            config = ConfigService()
+            assert config.ollama_model == "env-model"
+
+    def test_properties(self, temp_config_file):
+        """Test configuration property access."""
+        config = ConfigService(temp_config_file)
+        assert config.ollama_model == "test-model"
+        assert config.ollama_timeout == 60
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