diff --git a/frontend/__tests__/services/notification.test.tsx b/frontend/__tests__/services/notification.test.tsx
new file mode 100644
index 000000000000..1471c6be59b4
--- /dev/null
+++ b/frontend/__tests__/services/notification.test.tsx
@@ -0,0 +1,75 @@
+import { describe, it, expect, beforeEach, vi, Mock } from 'vitest';
+import { sendNotification } from '../../src/services/notification';
+
+interface NotificationConstructor {
+  new (title: string, options?: NotificationOptions): Notification;
+  readonly permission: NotificationPermission;
+  readonly maxActions: number;
+  requestPermission(): Promise<NotificationPermission>;
+}
+
+describe('sendNotification', () => {
+  let mockNotification: Mock;
+
+  beforeEach(() => {
+    // Mock localStorage
+    Storage.prototype.getItem = vi.fn();
+    Storage.prototype.setItem = vi.fn();
+
+    // Mock Notification API
+    mockNotification = vi.fn((title: string, options?: NotificationOptions) => ({
+      title,
+      ...options,
+    }));
+    Object.defineProperty(mockNotification, 'permission', {
+      get: () => 'granted',
+      configurable: true
+    });
+
+    // Set up the window.Notification mock
+    const NotificationMock = mockNotification as unknown as NotificationConstructor;
+    Object.defineProperty(window, 'Notification', {
+      value: NotificationMock,
+      writable: true,
+    });
+  });
+
+  it('should send notification when notifications are enabled', () => {
+    // Mock notifications being enabled
+    vi.mocked(Storage.prototype.getItem).mockReturnValue('true');
+
+    const title = 'Test Title';
+    const options = {
+      body: 'Test Body',
+      icon: '/test-icon.png'
+    };
+
+    sendNotification(title, options);
+
+    expect(mockNotification).toHaveBeenCalledWith(title, options);
+  });
+
+  it('should not send notification when notifications are disabled', () => {
+    // Mock notifications being disabled
+    vi.mocked(Storage.prototype.getItem).mockReturnValue('false');
+
+    sendNotification('Test Title', { body: 'Test Body' });
+
+    expect(mockNotification).not.toHaveBeenCalled();
+  });
+
+  it('should not send notification when permission is not granted', () => {
+    // Mock notifications being enabled but permission not granted
+    vi.mocked(Storage.prototype.getItem).mockReturnValue('true');
+
+    // Change permission to denied
+    Object.defineProperty(mockNotification, 'permission', {
+      get: () => 'denied',
+      configurable: true
+    });
+
+    sendNotification('Test Title', { body: 'Test Body' });
+
+    expect(mockNotification).not.toHaveBeenCalled();
+  });
+});
\ No newline at end of file
diff --git a/frontend/__tests__/services/observations.test.tsx b/frontend/__tests__/services/observations.test.tsx
new file mode 100644
index 000000000000..136d7974ffbf
--- /dev/null
+++ b/frontend/__tests__/services/observations.test.tsx
@@ -0,0 +1,87 @@
+import { describe, it, expect, vi, beforeEach } from 'vitest';
+import { handleObservationMessage } from '../../src/services/observations';
+import { AgentState } from '../../src/types/agent-state';
+import { sendNotification } from '../../src/services/notification';
+import store from '../../src/store';
+
+vi.mock('../../src/services/notification');
+vi.mock('../../src/store', () => ({
+  default: {
+    dispatch: vi.fn(),
+  },
+}));
+
+describe('handleObservationMessage', () => {
+  beforeEach(() => {
+    vi.clearAllMocks();
+  });
+
+  it('should trigger notification when agent state changes to AWAITING_USER_INPUT', () => {
+    const message = {
+      id: 1,
+      source: 'agent' as const,
+      observation: 'agent_state_changed',
+      extras: {
+        agent_state: AgentState.AWAITING_USER_INPUT,
+        metadata: {},
+        error_id: '',
+      },
+      message: 'Agent state changed',
+      content: '',
+      cause: 0,
+      timestamp: new Date().toISOString(),
+    };
+
+    handleObservationMessage(message);
+
+    expect(sendNotification).toHaveBeenCalledWith('OpenHands', {
+      body: 'Agent is awaiting user input...',
+      icon: '/favicon.ico',
+    });
+  });
+
+  it('should trigger notification when agent state changes to FINISHED', () => {
+    const message = {
+      id: 2,
+      source: 'agent' as const,
+      observation: 'agent_state_changed',
+      extras: {
+        agent_state: AgentState.FINISHED,
+        metadata: {},
+        error_id: '',
+      },
+      message: 'Agent state changed',
+      content: '',
+      cause: 0,
+      timestamp: new Date().toISOString(),
+    };
+
+    handleObservationMessage(message);
+
+    expect(sendNotification).toHaveBeenCalledWith('OpenHands', {
+      body: 'Task completed successfully!',
+      icon: '/favicon.ico',
+    });
+  });
+
+  it('should not trigger notification for other agent states', () => {
+    const message = {
+      id: 3,
+      source: 'agent' as const,
+      observation: 'agent_state_changed',
+      extras: {
+        agent_state: AgentState.RUNNING,
+        metadata: {},
+        error_id: '',
+      },
+      message: 'Agent state changed',
+      content: '',
+      cause: 0,
+      timestamp: new Date().toISOString(),
+    };
+
+    handleObservationMessage(message);
+
+    expect(sendNotification).not.toHaveBeenCalled();
+  });
+});
\ No newline at end of file
diff --git a/frontend/src/services/notification.ts b/frontend/src/services/notification.ts
new file mode 100644
index 000000000000..784fc26653e0
--- /dev/null
+++ b/frontend/src/services/notification.ts
@@ -0,0 +1,21 @@
+export const sendNotification = (
+  title: string,
+  options?: NotificationOptions,
+) => {
+  if (!("Notification" in window)) {
+    // eslint-disable-next-line no-console
+    console.warn("This browser does not support desktop notifications");
+    return;
+  }
+
+  const notificationsEnabled =
+    localStorage.getItem("notifications-enabled") === "true";
+  if (!notificationsEnabled) {
+    return;
+  }
+
+  if (Notification.permission === "granted") {
+    // eslint-disable-next-line no-new
+    new Notification(title, options);
+  }
+};
diff --git a/frontend/src/services/observations.ts b/frontend/src/services/observations.ts
index 1ec6a784d910..443a9f43a941 100644
--- a/frontend/src/services/observations.ts
+++ b/frontend/src/services/observations.ts
@@ -10,6 +10,7 @@ import {
   addAssistantMessage,
   addAssistantObservation,
 } from "#/state/chat-slice";
+import { sendNotification } from "./notification";
 
 export function handleObservationMessage(message: ObservationMessage) {
   switch (message.observation) {
@@ -39,6 +40,17 @@ export function handleObservationMessage(message: ObservationMessage) {
       break;
     case ObservationType.AGENT_STATE_CHANGED:
       store.dispatch(setCurrentAgentState(message.extras.agent_state));
+      if (message.extras.agent_state === AgentState.AWAITING_USER_INPUT) {
+        sendNotification("OpenHands", {
+          body: "Agent is awaiting user input...",
+          icon: "/favicon.ico",
+        });
+      } else if (message.extras.agent_state === AgentState.FINISHED) {
+        sendNotification("OpenHands", {
+          body: "Task completed successfully!",
+          icon: "/favicon.ico",
+        });
+      }
       break;
     case ObservationType.DELEGATE:
       // TODO: better UI for delegation result (#2309)