diff --git a/.env.test.example b/.env.test.example
new file mode 100644
index 0000000..5d6c1aa
--- /dev/null
+++ b/.env.test.example
@@ -0,0 +1,11 @@
+# Test Environment Configuration
+
+# Home Assistant Test Instance
+TEST_HASS_HOST=http://localhost:8123
+TEST_HASS_TOKEN=test_token
+TEST_HASS_SOCKET_URL=ws://localhost:8123/api/websocket
+
+# Test Server Configuration
+TEST_PORT=3001
+NODE_ENV=test
+DEBUG=false 
\ No newline at end of file
diff --git a/README.md b/README.md
index 9a61627..b0078c3 100644
--- a/README.md
+++ b/README.md
@@ -136,6 +136,11 @@ npm run build
     # Server Configuration
     PORT=3000
     NODE_ENV=production
+    DEBUG=false
+
+    # Test Configuration
+    TEST_HASS_HOST=http://localhost:8123
+    TEST_HASS_TOKEN=test_token
     ```
 
 3. **Launch with Docker Compose:**
@@ -143,6 +148,32 @@ npm run build
     docker-compose up -d
     ```
 
+## Configuration
+
+### Environment Variables
+
+```env
+# Home Assistant Configuration
+HASS_HOST=http://homeassistant.local:8123  # Your Home Assistant instance URL
+HASS_TOKEN=your_home_assistant_token       # Long-lived access token
+HASS_SOCKET_URL=ws://homeassistant.local:8123/api/websocket  # WebSocket URL
+
+# Server Configuration
+PORT=3000                # Server port (default: 3000)
+NODE_ENV=production     # Environment (production/development)
+DEBUG=false            # Enable debug mode
+
+# Test Configuration
+TEST_HASS_HOST=http://localhost:8123  # Test instance URL
+TEST_HASS_TOKEN=test_token           # Test token
+```
+
+### Configuration Files
+
+1. **Development**: Copy `.env.example` to `.env.development`
+2. **Production**: Copy `.env.example` to `.env.production`
+3. **Testing**: Copy `.env.example` to `.env.test`
+
 ## API Reference
 
 ### Device Control
@@ -258,6 +289,268 @@ npm run build
 }
 ```
 
+### Core Functions
+
+#### State Management
+```http
+GET /api/state
+POST /api/state
+```
+
+Manages the current state of the system.
+
+**Example Request:**
+```json
+POST /api/state
+{
+  "context": "living_room",
+  "state": {
+    "lights": "on",
+    "temperature": 22
+  }
+}
+```
+
+#### Context Updates
+```http
+POST /api/context
+```
+
+Updates the current context with new information.
+
+**Example Request:**
+```json
+POST /api/context
+{
+  "user": "john",
+  "location": "kitchen",
+  "time": "morning",
+  "activity": "cooking"
+}
+```
+
+### Action Endpoints
+
+#### Execute Action
+```http
+POST /api/action
+```
+
+Executes a specified action with given parameters.
+
+**Example Request:**
+```json
+POST /api/action
+{
+  "action": "turn_on_lights",
+  "parameters": {
+    "room": "living_room",
+    "brightness": 80
+  }
+}
+```
+
+#### Batch Actions
+```http
+POST /api/actions/batch
+```
+
+Executes multiple actions in sequence.
+
+**Example Request:**
+```json
+POST /api/actions/batch
+{
+  "actions": [
+    {
+      "action": "turn_on_lights",
+      "parameters": {
+        "room": "living_room"
+      }
+    },
+    {
+      "action": "set_temperature",
+      "parameters": {
+        "temperature": 22
+      }
+    }
+  ]
+}
+```
+
+### Query Functions
+
+#### Get Available Actions
+```http
+GET /api/actions
+```
+
+Returns a list of all available actions.
+
+**Example Response:**
+```json
+{
+  "actions": [
+    {
+      "name": "turn_on_lights",
+      "parameters": ["room", "brightness"],
+      "description": "Turns on lights in specified room"
+    },
+    {
+      "name": "set_temperature",
+      "parameters": ["temperature"],
+      "description": "Sets temperature in current context"
+    }
+  ]
+}
+```
+
+#### Context Query
+```http
+GET /api/context?type=current
+```
+
+Retrieves context information.
+
+**Example Response:**
+```json
+{
+  "current_context": {
+    "user": "john",
+    "location": "kitchen",
+    "time": "morning",
+    "activity": "cooking"
+  }
+}
+```
+
+### WebSocket Events
+
+The server supports real-time updates via WebSocket connections.
+
+```javascript
+// Client-side connection example
+const ws = new WebSocket('ws://localhost:3000/ws');
+
+ws.onmessage = (event) => {
+  const data = JSON.parse(event.data);
+  console.log('Received update:', data);
+};
+```
+
+#### Supported Events
+
+- `state_change`: Emitted when system state changes
+- `context_update`: Emitted when context is updated
+- `action_executed`: Emitted when an action is completed
+- `error`: Emitted when an error occurs
+
+**Example Event Data:**
+```json
+{
+  "event": "state_change",
+  "data": {
+    "previous_state": {
+      "lights": "off"
+    },
+    "current_state": {
+      "lights": "on"
+    },
+    "timestamp": "2024-03-20T10:30:00Z"
+  }
+}
+```
+
+### Error Handling
+
+All endpoints return standard HTTP status codes:
+
+- 200: Success
+- 400: Bad Request
+- 401: Unauthorized
+- 403: Forbidden
+- 404: Not Found
+- 500: Internal Server Error
+
+**Error Response Format:**
+```json
+{
+  "error": {
+    "code": "INVALID_PARAMETERS",
+    "message": "Missing required parameter: room",
+    "details": {
+      "missing_fields": ["room"]
+    }
+  }
+}
+```
+
+### Rate Limiting
+
+The API implements rate limiting to prevent abuse:
+
+- 100 requests per minute per IP for regular endpoints
+- 1000 requests per minute per IP for WebSocket connections
+
+When rate limit is exceeded, the server returns:
+
+```json
+{
+  "error": {
+    "code": "RATE_LIMIT_EXCEEDED",
+    "message": "Too many requests",
+    "reset_time": "2024-03-20T10:31:00Z"
+  }
+}
+```
+
+### Example Usage
+
+#### Using curl
+```bash
+# Get current state
+curl -X GET \
+  http://localhost:3000/api/state \
+  -H 'Authorization: ApiKey your_api_key_here'
+
+# Execute action
+curl -X POST \
+  http://localhost:3000/api/action \
+  -H 'Authorization: ApiKey your_api_key_here' \
+  -H 'Content-Type: application/json' \
+  -d '{
+    "action": "turn_on_lights",
+    "parameters": {
+      "room": "living_room",
+      "brightness": 80
+    }
+  }'
+```
+
+#### Using JavaScript
+```javascript
+// Execute action
+async function executeAction() {
+  const response = await fetch('http://localhost:3000/api/action', {
+    method: 'POST',
+    headers: {
+      'Authorization': 'ApiKey your_api_key_here',
+      'Content-Type': 'application/json'
+    },
+    body: JSON.stringify({
+      action: 'turn_on_lights',
+      parameters: {
+        room: 'living_room',
+        brightness: 80
+      }
+    })
+  });
+  
+  const data = await response.json();
+  console.log('Action result:', data);
+}
+```
+
 ## Development
 
 ```bash
diff --git a/__tests__/index.test.ts b/__tests__/index.test.ts
index dfb2b65..ef548bc 100644
--- a/__tests__/index.test.ts
+++ b/__tests__/index.test.ts
@@ -4,9 +4,15 @@ import { LiteMCP } from 'litemcp';
 import { get_hass } from '../src/hass/index.js';
 import type { WebSocket } from 'ws';
 
-// Mock environment variables
-process.env.HASS_HOST = 'http://localhost:8123';
-process.env.HASS_TOKEN = 'test_token';
+// Load test environment variables with defaults
+const TEST_HASS_HOST = process.env.TEST_HASS_HOST || 'http://localhost:8123';
+const TEST_HASS_TOKEN = process.env.TEST_HASS_TOKEN || 'test_token';
+const TEST_HASS_SOCKET_URL = process.env.TEST_HASS_SOCKET_URL || 'ws://localhost:8123/api/websocket';
+
+// Set environment variables for testing
+process.env.HASS_HOST = TEST_HASS_HOST;
+process.env.HASS_TOKEN = TEST_HASS_TOKEN;
+process.env.HASS_SOCKET_URL = TEST_HASS_SOCKET_URL;
 
 // Mock fetch
 const mockFetchResponse = {
@@ -230,11 +236,11 @@ describe('Home Assistant MCP Server', () => {
 
             // Verify the fetch call
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/light/turn_on',
+                `${TEST_HASS_HOST}/api/services/light/turn_on`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -312,11 +318,11 @@ describe('Home Assistant MCP Server', () => {
 
             // Verify the fetch call
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/climate/set_temperature',
+                `${TEST_HASS_HOST}/api/services/climate/set_temperature`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -354,11 +360,11 @@ describe('Home Assistant MCP Server', () => {
 
             // Verify the fetch call
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/cover/set_position',
+                `${TEST_HASS_HOST}/api/services/cover/set_position`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -415,7 +421,7 @@ describe('Home Assistant MCP Server', () => {
                 expect.stringContaining('/api/history/period/2024-01-01T00:00:00Z?'),
                 expect.objectContaining({
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     }
                 })
@@ -513,11 +519,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.message).toBe('Successfully activated scene scene.movie_time');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/scene/turn_on',
+                `${TEST_HASS_HOST}/api/services/scene/turn_on`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -550,11 +556,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.message).toBe('Notification sent successfully');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/notify/mobile_app_phone',
+                `${TEST_HASS_HOST}/api/services/notify/mobile_app_phone`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -581,7 +587,7 @@ describe('Home Assistant MCP Server', () => {
             });
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/notify/notify',
+                `${TEST_HASS_HOST}/api/services/notify/notify`,
                 expect.any(Object)
             );
         });
@@ -657,11 +663,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.message).toBe('Successfully toggled automation automation.morning_routine');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/automation/toggle',
+                `${TEST_HASS_HOST}/api/services/automation/toggle`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -690,11 +696,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.message).toBe('Successfully triggered automation automation.morning_routine');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/services/automation/trigger',
+                `${TEST_HASS_HOST}/api/services/automation/trigger`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -782,11 +788,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.message).toBe('Successfully installed add-on core_configurator');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/hassio/addons/core_configurator/install',
+                `${TEST_HASS_HOST}/api/hassio/addons/core_configurator/install`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({ version: '5.6.0' })
@@ -851,11 +857,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.message).toBe('Successfully installed package hacs/integration');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/hacs/repository/install',
+                `${TEST_HASS_HOST}/api/hacs/repository/install`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify({
@@ -910,11 +916,11 @@ describe('Home Assistant MCP Server', () => {
             expect(result.automation_id).toBe('new_automation_1');
 
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/config/automation/config',
+                `${TEST_HASS_HOST}/api/config/automation/config`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify(mockAutomationConfig)
@@ -950,17 +956,17 @@ describe('Home Assistant MCP Server', () => {
 
             // Verify both API calls
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/config/automation/config/automation.test',
+                `${TEST_HASS_HOST}/api/config/automation/config/automation.test`,
                 expect.any(Object)
             );
 
             const duplicateConfig = { ...mockAutomationConfig, alias: 'Test Automation (Copy)' };
             expect(mockFetch).toHaveBeenCalledWith(
-                'http://localhost:8123/api/config/automation/config',
+                `${TEST_HASS_HOST}/api/config/automation/config`,
                 {
                     method: 'POST',
                     headers: {
-                        Authorization: 'Bearer test_token',
+                        Authorization: `Bearer ${TEST_HASS_TOKEN}`,
                         'Content-Type': 'application/json'
                     },
                     body: JSON.stringify(duplicateConfig)
diff --git a/jest.config.cjs b/jest.config.cjs
index 14dd960..83ef389 100644
--- a/jest.config.cjs
+++ b/jest.config.cjs
@@ -1,9 +1,8 @@
 /** @type {import('ts-jest').JestConfigWithTsJest} */
 module.exports = {
-    preset: 'ts-jest/presets/default-esm',
+    preset: 'ts-jest',
     testEnvironment: 'node',
-    moduleFileExtensions: ['ts', 'tsx', 'js', 'jsx', 'json', 'node'],
-    extensionsToTreatAsEsm: ['.ts', '.tsx'],
+    setupFiles: ['./jest.setup.ts'],
     moduleNameMapper: {
         '^(\\.{1,2}/.*)\\.js$': '$1',
         '#(.*)': '<rootDir>/node_modules/$1',
@@ -13,20 +12,15 @@ module.exports = {
         '#supports-color': '<rootDir>/node_modules/supports-color/index.js'
     },
     transform: {
-        '^.+\\.(ts|tsx|js|jsx)$': [
-            'ts-jest',
-            {
-                useESM: true,
-                tsconfig: 'tsconfig.json'
-            },
-        ],
+        '^.+\\.tsx?$': ['ts-jest', {
+            useESM: true,
+        }],
     },
     transformIgnorePatterns: [
         'node_modules/(?!(@digital-alchemy|chalk|#ansi-styles|#supports-color)/)'
     ],
     resolver: '<rootDir>/jest-resolver.cjs',
     testMatch: ['**/__tests__/**/*.test.ts'],
-    setupFilesAfterEnv: ['<rootDir>/jest.setup.cjs'],
     globals: {
         'ts-jest': {
             useESM: true,
@@ -36,9 +30,9 @@ module.exports = {
     coverageDirectory: 'coverage',
     coverageReporters: ['text', 'lcov', 'clover', 'html'],
     collectCoverageFrom: [
-        'src/**/*.{ts,tsx}',
+        'src/**/*.ts',
         '!src/**/*.d.ts',
-        '!src/**/*.test.{ts,tsx}',
+        '!src/**/*.test.ts',
         '!src/types/**/*',
         '!src/polyfills.ts'
     ],
@@ -49,5 +43,6 @@ module.exports = {
             lines: 80,
             statements: 80
         }
-    }
+    },
+    verbose: true
 }; 
\ No newline at end of file
diff --git a/jest.setup.ts b/jest.setup.ts
new file mode 100644
index 0000000..99f15e2
--- /dev/null
+++ b/jest.setup.ts
@@ -0,0 +1,15 @@
+import { config } from 'dotenv';
+import { resolve } from 'path';
+
+// Load test environment variables
+const envFile = process.env.NODE_ENV === 'test' ? '.env.test' : '.env';
+config({ path: resolve(__dirname, envFile) });
+
+// Set default test environment variables if not provided
+process.env.TEST_HASS_HOST = process.env.TEST_HASS_HOST || 'http://localhost:8123';
+process.env.TEST_HASS_TOKEN = process.env.TEST_HASS_TOKEN || 'test_token';
+process.env.TEST_HASS_SOCKET_URL = process.env.TEST_HASS_SOCKET_URL || 'ws://localhost:8123/api/websocket';
+process.env.TEST_PORT = process.env.TEST_PORT || '3001';
+
+// Ensure test environment
+process.env.NODE_ENV = 'test'; 
\ No newline at end of file