diff --git a/crates/wraith-core/src/server.rs b/crates/wraith-core/src/server.rs
deleted file mode 100644
index e69de29..0000000
diff --git a/crates/wraith-core/src/server/handler.rs b/crates/wraith-core/src/server/handler.rs
new file mode 100644
index 0000000..bf226c9
--- /dev/null
+++ b/crates/wraith-core/src/server/handler.rs
@@ -0,0 +1,303 @@
+use std::net::SocketAddr;
+use std::sync::Arc;
+
+use async_trait::async_trait;
+use russh::keys::ssh_key::HashAlg;
+use russh::server::{Auth, Handler, Msg, Session};
+use russh::Channel;
+
+use crate::auth::ServerAuthConfig;
+
+const WRAITH_PREFIX: &str = "wraith-";
+
+#[derive(Debug, Clone)]
+pub enum ProxyMode {
+    Direct,
+    Socks5(SocketAddr),
+    HttpConnect(SocketAddr),
+}
+
+#[derive(Debug, Clone)]
+pub struct ProxyConfig {
+    pub mode: ProxyMode,
+}
+
+pub struct ServerHandler {
+    auth_config: Arc<ServerAuthConfig>,
+    outbound_proxy: Option<ProxyConfig>,
+    remote_addr: Option<SocketAddr>,
+}
+
+impl ServerHandler {
+    pub fn new(
+        auth_config: Arc<ServerAuthConfig>,
+        outbound_proxy: Option<ProxyConfig>,
+        remote_addr: Option<SocketAddr>,
+    ) -> Self {
+        Self {
+            auth_config,
+            outbound_proxy,
+            remote_addr,
+        }
+    }
+}
+
+#[async_trait]
+impl Handler for ServerHandler {
+    type Error = russh::Error;
+
+    async fn auth_publickey(
+        &mut self,
+        user: &str,
+        public_key: &russh::keys::ssh_key::PublicKey,
+    ) -> Result<Auth, Self::Error> {
+        let fingerprint = format!("{}", public_key.fingerprint(HashAlg::Sha256));
+        let remote_addr_display = self
+            .remote_addr
+            .map_or("unknown".to_string(), |a| a.to_string());
+
+        let russh_pub = russh::keys::PublicKey::new(public_key.key_data().clone(), user);
+        let result = self.auth_config.authenticate_publickey(&russh_pub);
+
+        match result {
+            Ok(()) => {
+                tracing::info!(
+                    remote_addr = %remote_addr_display,
+                    key_fingerprint = %fingerprint,
+                    result = "accept",
+                    "auth attempt"
+                );
+                Ok(Auth::Accept)
+            }
+            Err(_) => {
+                tracing::info!(
+                    remote_addr = %remote_addr_display,
+                    key_fingerprint = %fingerprint,
+                    result = "reject",
+                    "auth attempt"
+                );
+                Ok(Auth::Reject {
+                    proceed_with_methods: None,
+                })
+            }
+        }
+    }
+
+    async fn channel_open_direct_tcpip(
+        &mut self,
+        channel: Channel<Msg>,
+        host_to_connect: &str,
+        port_to_connect: u32,
+        originator_address: &str,
+        originator_port: u32,
+        _session: &mut Session,
+    ) -> Result<bool, Self::Error> {
+        if host_to_connect.starts_with(WRAITH_PREFIX) {
+            tracing::info!(
+                host = host_to_connect,
+                port = port_to_connect,
+                "routing to internal control channel handler"
+            );
+            return Ok(true);
+        }
+
+        let proxy_info = self
+            .outbound_proxy
+            .as_ref()
+            .map(|p| format!("{:?}", p.mode))
+            .unwrap_or_else(|| "direct".to_string());
+
+        tracing::info!(
+            host = host_to_connect,
+            port = port_to_connect,
+            originator_address = originator_address,
+            originator_port = originator_port,
+            proxy = %proxy_info,
+            "spawning tcp proxy task"
+        );
+
+        let _ = channel;
+        Ok(false)
+    }
+
+    async fn channel_open_session(
+        &mut self,
+        _channel: Channel<Msg>,
+        _session: &mut Session,
+    ) -> Result<bool, Self::Error> {
+        Ok(false)
+    }
+
+    async fn channel_open_x11(
+        &mut self,
+        _channel: Channel<Msg>,
+        _originator_address: &str,
+        _originator_port: u32,
+        _session: &mut Session,
+    ) -> Result<bool, Self::Error> {
+        Ok(false)
+    }
+
+    async fn channel_open_forwarded_tcpip(
+        &mut self,
+        _channel: Channel<Msg>,
+        _host_to_connect: &str,
+        _port_to_connect: u32,
+        _originator_address: &str,
+        _originator_port: u32,
+        _session: &mut Session,
+    ) -> Result<bool, Self::Error> {
+        Ok(false)
+    }
+}
+
+#[cfg(test)]
+mod tests {
+    use super::*;
+    use crate::auth::keys::KeySource;
+    use russh::keys::{decode_secret_key, PrivateKey};
+    use std::io::Write;
+
+    const ED25519_PRIVATE_KEY: &str = "-----BEGIN OPENSSH PRIVATE KEY-----\nb3BlbnNzaC1rZXktdjEAAAAABG5vbmUAAAAEbm9uZQAAAAAAAAABAAAAMwAAAAtzc2gtZW\nQyNTUxOQAAACBOfInDyRS33JEeDNT8xd10qRdwFN8z/QukCOgEIkv01QAAAJiQ+NvMkPjb\nzAAAAAtzc2gtZWQyNTUxOQAAACBOfInDyRS33JEeDNT8xd10qRdwFN8z/QukCOgEIkv01Q\nAAAECIWwJf7+7MOuZAOOWmoQbE9i/5GxjKsFrtJHjZ34E/fk58icPJFLfckR4M1PzF3XSp\nF3AU3zP9C6QI6AQiS/TVAAAAD3VidW50dUBuczUyODA5NgECAwQFBg==\n-----END OPENSSH PRIVATE KEY-----\n";
+
+    const ED25519_PUBLIC_KEY: &str = "ssh-ed25519 AAAAC3NzaC1lZDI1NTE5AAAAIE58icPJFLfckR4M1PzF3XSpF3AU3zP9C6QI6AQiS/TV ubuntu@ns528096";
+
+    fn make_authorized_keys_file(keys_content: &str) -> tempfile::NamedTempFile {
+        let mut f = tempfile::NamedTempFile::new().unwrap();
+        f.write_all(keys_content.as_bytes()).unwrap();
+        f.flush().unwrap();
+        f
+    }
+
+    fn load_key() -> PrivateKey {
+        decode_secret_key(ED25519_PRIVATE_KEY, None).unwrap()
+    }
+
+    fn make_auth_config(keys_content: &str) -> Arc<ServerAuthConfig> {
+        let f = make_authorized_keys_file(keys_content);
+        Arc::new(
+            ServerAuthConfig::from_keys_and_ca(
+                Some(KeySource::File(f.path().to_path_buf())),
+                None,
+            )
+            .unwrap(),
+        )
+    }
+
+    fn make_empty_auth_config() -> Arc<ServerAuthConfig> {
+        Arc::new(ServerAuthConfig::from_keys_and_ca(None, None).unwrap())
+    }
+
+    #[tokio::test]
+    async fn auth_delegation_accepts_known_key() {
+        let auth_config = make_auth_config(ED25519_PUBLIC_KEY);
+        let mut handler = ServerHandler::new(auth_config, None, None);
+
+        let ssh_key = load_key().public_key().clone();
+        let result = handler.auth_publickey("testuser", &ssh_key).await.unwrap();
+        assert_eq!(result, Auth::Accept);
+    }
+
+    #[tokio::test]
+    async fn auth_delegation_rejects_unknown_key() {
+        let auth_config = make_auth_config(ED25519_PUBLIC_KEY);
+        let mut handler = ServerHandler::new(auth_config, None, None);
+
+        let other_key_text = "ssh-ed25519 AAAAC3NzaC1lZDI1NTE5AAAAIHeLC1lWiCYrXsf/85O/pkbUFZ6OGIt49PX3nw8iRoXE other@host";
+        let other_ssh_key = russh::keys::parse_public_key_base64(
+            other_key_text.split_whitespace().nth(1).unwrap(),
+        )
+        .unwrap();
+
+        let result = handler
+            .auth_publickey("testuser", &other_ssh_key)
+            .await
+            .unwrap();
+        assert_eq!(
+            result,
+            Auth::Reject {
+                proceed_with_methods: None
+            }
+        );
+    }
+
+    #[tokio::test]
+    async fn auth_delegation_empty_config_rejects_all() {
+        let auth_config = make_empty_auth_config();
+        let mut handler = ServerHandler::new(auth_config, None, None);
+
+        let ssh_key = load_key().public_key().clone();
+        let result = handler
+            .auth_publickey("testuser", &ssh_key)
+            .await
+            .unwrap();
+        assert_eq!(
+            result,
+            Auth::Reject {
+                proceed_with_methods: None
+            }
+        );
+    }
+
+    #[tokio::test]
+    async fn auth_logging_includes_remote_addr() {
+        let auth_config = make_auth_config(ED25519_PUBLIC_KEY);
+        let remote_addr: SocketAddr = "203.0.113.50:12345".parse().unwrap();
+        let mut handler = ServerHandler::new(auth_config, None, Some(remote_addr));
+
+        let ssh_key = load_key().public_key().clone();
+        let _ = handler.auth_publickey("root", &ssh_key).await.unwrap();
+    }
+
+    #[test]
+    fn reserved_wraith_destination_routing() {
+        assert!("wraith-control".starts_with(WRAITH_PREFIX));
+        assert!("wraith-status".starts_with(WRAITH_PREFIX));
+        assert!("wraith-events".starts_with(WRAITH_PREFIX));
+        assert!(!"example.com".starts_with(WRAITH_PREFIX));
+        assert!(!"localhost".starts_with(WRAITH_PREFIX));
+        assert!(!"wraith.example.com".starts_with(WRAITH_PREFIX));
+    }
+
+    #[test]
+    fn proxy_mode_variants() {
+        let direct = ProxyMode::Direct;
+        let socks5 = ProxyMode::Socks5("127.0.0.1:9050".parse().unwrap());
+        let http = ProxyMode::HttpConnect("127.0.0.1:8080".parse().unwrap());
+
+        match direct {
+            ProxyMode::Direct => {}
+            _ => panic!("expected Direct"),
+        }
+        match socks5 {
+            ProxyMode::Socks5(_) => {}
+            _ => panic!("expected Socks5"),
+        }
+        match http {
+            ProxyMode::HttpConnect(_) => {}
+            _ => panic!("expected HttpConnect"),
+        }
+    }
+
+    #[test]
+    fn server_handler_holds_config() {
+        let auth_config = make_empty_auth_config();
+        let proxy = Some(ProxyConfig {
+            mode: ProxyMode::Socks5("127.0.0.1:9050".parse().unwrap()),
+        });
+        let remote: Option<SocketAddr> = Some("10.0.0.1:22".parse().unwrap());
+
+        let handler = ServerHandler::new(auth_config, proxy.clone(), remote);
+        assert!(handler.outbound_proxy.is_some());
+        assert!(handler.remote_addr.is_some());
+    }
+
+    #[test]
+    fn one_handler_per_connection() {
+        let auth_config = make_empty_auth_config();
+        let handler1 = ServerHandler::new(auth_config.clone(), None, Some("10.0.0.1:22".parse().unwrap()));
+        let handler2 = ServerHandler::new(auth_config.clone(), None, Some("10.0.0.2:22".parse().unwrap()));
+
+        assert!(handler1.remote_addr != handler2.remote_addr);
+    }
+}
\ No newline at end of file
diff --git a/crates/wraith-core/src/server/mod.rs b/crates/wraith-core/src/server/mod.rs
new file mode 100644
index 0000000..1fd1705
--- /dev/null
+++ b/crates/wraith-core/src/server/mod.rs
@@ -0,0 +1,3 @@
+pub mod handler;
+
+pub use handler::{ProxyConfig, ProxyMode, ServerHandler};
\ No newline at end of file