diff --git a/src/valence/core/config.py b/src/valence/core/config.py
index 0f49a76a..094eb88f 100644
--- a/src/valence/core/config.py
+++ b/src/valence/core/config.py
@@ -17,7 +17,7 @@
 
 from __future__ import annotations
 
-from pydantic import Field
+from pydantic import Field, model_validator
 from pydantic_settings import BaseSettings, SettingsConfigDict
 
 
@@ -229,6 +229,24 @@ class CoreSettings(BaseSettings):
     # These are checked via os.environ in health.py
 
     # ==========================================================================
+    # VALIDATORS
+    # ==========================================================================
+
+    @model_validator(mode="after")
+    def _auto_select_embedding_provider(self) -> CoreSettings:
+        """Auto-select openai embedding provider when API key is available."""
+        # Only auto-select if no explicit provider was set (still default "local")
+        # and an OpenAI API key is available
+        if self.embedding_provider == "local" and self.openai_api_key:
+            import os
+
+            # Check if VALENCE_EMBEDDING_PROVIDER was explicitly set
+            if not os.environ.get("VALENCE_EMBEDDING_PROVIDER"):
+                self.embedding_provider = "openai"
+        return self
+
+        # ==========================================================================
+
     # COMPUTED PROPERTIES
     # ==========================================================================
 
diff --git a/tests/core/test_config.py b/tests/core/test_config.py
index 7b5bb862..99867daa 100644
--- a/tests/core/test_config.py
+++ b/tests/core/test_config.py
@@ -383,3 +383,39 @@ def test_int_coercion_seed_port(self, monkeypatch, clean_env):
         settings = CoreSettings()
         assert settings.seed_port == 9000
         assert isinstance(settings.seed_port, int)
+
+
+# ============================================================================
+# Embedding Provider Auto-Detection (#72)
+# ============================================================================
+
+
+class TestEmbeddingProviderAutoDetect:
+    """Test auto-detection of embedding provider based on available API keys."""
+
+    def test_autoselects_openai_when_key_available(self, monkeypatch, clean_env):
+        """When OPENAI_API_KEY is set and VALENCE_EMBEDDING_PROVIDER is NOT set,
+        provider should auto-select to 'openai'."""
+        monkeypatch.setenv("OPENAI_API_KEY", "sk-test-autodetect-key")
+        monkeypatch.delenv("VALENCE_EMBEDDING_PROVIDER", raising=False)
+
+        settings = CoreSettings()
+        assert settings.embedding_provider == "openai"
+
+    def test_explicit_local_override_respected(self, monkeypatch, clean_env):
+        """When VALENCE_EMBEDDING_PROVIDER is explicitly set to 'local',
+        it should stay 'local' even if OPENAI_API_KEY is set (user override)."""
+        monkeypatch.setenv("OPENAI_API_KEY", "sk-test-explicit-local")
+        monkeypatch.setenv("VALENCE_EMBEDDING_PROVIDER", "local")
+
+        settings = CoreSettings()
+        assert settings.embedding_provider == "local"
+
+    def test_stays_local_when_no_key(self, monkeypatch, clean_env):
+        """When neither OPENAI_API_KEY nor VALENCE_EMBEDDING_PROVIDER is set,
+        provider should remain the default 'local'."""
+        monkeypatch.delenv("OPENAI_API_KEY", raising=False)
+        monkeypatch.delenv("VALENCE_EMBEDDING_PROVIDER", raising=False)
+
+        settings = CoreSettings()
+        assert settings.embedding_provider == "local"