diff --git a/packages/db/drizzle.config.ts b/packages/db/drizzle.config.ts
new file mode 100644
index 00000000..319dbb7b
--- /dev/null
+++ b/packages/db/drizzle.config.ts
@@ -0,0 +1,10 @@
+import { defineConfig } from "drizzle-kit";
+
+export default defineConfig({
+  schema: "./src/schema/index.ts",
+  out: "./src/migrations",
+  dialect: "postgresql",
+  dbCredentials: {
+    url: process.env.DATABASE_URL!,
+  },
+});
diff --git a/packages/db/package.json b/packages/db/package.json
new file mode 100644
index 00000000..7f1b1580
--- /dev/null
+++ b/packages/db/package.json
@@ -0,0 +1,27 @@
+{
+  "name": "@paperclip/db",
+  "version": "0.0.1",
+  "private": true,
+  "type": "module",
+  "exports": {
+    ".": "./src/index.ts",
+    "./*": "./src/*.ts"
+  },
+  "scripts": {
+    "typecheck": "tsc --noEmit",
+    "generate": "drizzle-kit generate",
+    "migrate": "tsx src/migrate.ts",
+    "seed": "tsx src/seed.ts"
+  },
+  "dependencies": {
+    "@paperclip/shared": "workspace:*",
+    "drizzle-orm": "^0.38.4",
+    "postgres": "^3.4.5"
+  },
+  "devDependencies": {
+    "drizzle-kit": "^0.30.4",
+    "tsx": "^4.19.2",
+    "typescript": "^5.7.3",
+    "vitest": "^3.0.5"
+  }
+}
diff --git a/packages/db/src/client.ts b/packages/db/src/client.ts
new file mode 100644
index 00000000..6bfe8cbb
--- /dev/null
+++ b/packages/db/src/client.ts
@@ -0,0 +1,10 @@
+import { drizzle } from "drizzle-orm/postgres-js";
+import postgres from "postgres";
+import * as schema from "./schema/index.js";
+
+export function createDb(url: string) {
+  const sql = postgres(url);
+  return drizzle(sql, { schema });
+}
+
+export type Db = ReturnType<typeof createDb>;
diff --git a/packages/db/src/index.ts b/packages/db/src/index.ts
new file mode 100644
index 00000000..90a6463f
--- /dev/null
+++ b/packages/db/src/index.ts
@@ -0,0 +1,2 @@
+export { createDb, type Db } from "./client.js";
+export * from "./schema/index.js";
diff --git a/packages/db/src/migrate.ts b/packages/db/src/migrate.ts
new file mode 100644
index 00000000..146d5b2b
--- /dev/null
+++ b/packages/db/src/migrate.ts
@@ -0,0 +1,13 @@
+import { migrate } from "drizzle-orm/postgres-js/migrator";
+import postgres from "postgres";
+import { drizzle } from "drizzle-orm/postgres-js";
+
+const url = process.env.DATABASE_URL;
+if (!url) throw new Error("DATABASE_URL is required");
+
+const sql = postgres(url, { max: 1 });
+const db = drizzle(sql);
+
+await migrate(db, { migrationsFolder: new URL("./migrations", import.meta.url).pathname });
+await sql.end();
+console.log("Migrations complete");
diff --git a/packages/db/src/schema/activity_log.ts b/packages/db/src/schema/activity_log.ts
new file mode 100644
index 00000000..4db9e42e
--- /dev/null
+++ b/packages/db/src/schema/activity_log.ts
@@ -0,0 +1,12 @@
+import { pgTable, uuid, text, timestamp, jsonb } from "drizzle-orm/pg-core";
+import { agents } from "./agents.js";
+
+export const activityLog = pgTable("activity_log", {
+  id: uuid("id").primaryKey().defaultRandom(),
+  action: text("action").notNull(),
+  entityType: text("entity_type").notNull(),
+  entityId: uuid("entity_id").notNull(),
+  agentId: uuid("agent_id").references(() => agents.id),
+  details: jsonb("details"),
+  createdAt: timestamp("created_at", { withTimezone: true }).notNull().defaultNow(),
+});
diff --git a/packages/db/src/schema/agents.ts b/packages/db/src/schema/agents.ts
new file mode 100644
index 00000000..52e79a7a
--- /dev/null
+++ b/packages/db/src/schema/agents.ts
@@ -0,0 +1,15 @@
+import { type AnyPgColumn, pgTable, uuid, text, integer, timestamp, jsonb } from "drizzle-orm/pg-core";
+
+export const agents = pgTable("agents", {
+  id: uuid("id").primaryKey().defaultRandom(),
+  name: text("name").notNull(),
+  role: text("role").notNull().default("general"),
+  status: text("status").notNull().default("idle"),
+  budgetCents: integer("budget_cents").notNull().default(0),
+  spentCents: integer("spent_cents").notNull().default(0),
+  lastHeartbeat: timestamp("last_heartbeat", { withTimezone: true }),
+  reportsTo: uuid("reports_to").references((): AnyPgColumn => agents.id),
+  metadata: jsonb("metadata"),
+  createdAt: timestamp("created_at", { withTimezone: true }).notNull().defaultNow(),
+  updatedAt: timestamp("updated_at", { withTimezone: true }).notNull().defaultNow(),
+});
diff --git a/packages/db/src/schema/goals.ts b/packages/db/src/schema/goals.ts
new file mode 100644
index 00000000..5eeeb55e
--- /dev/null
+++ b/packages/db/src/schema/goals.ts
@@ -0,0 +1,13 @@
+import { type AnyPgColumn, pgTable, uuid, text, timestamp } from "drizzle-orm/pg-core";
+import { agents } from "./agents.js";
+
+export const goals = pgTable("goals", {
+  id: uuid("id").primaryKey().defaultRandom(),
+  title: text("title").notNull(),
+  description: text("description"),
+  level: text("level").notNull().default("task"),
+  parentId: uuid("parent_id").references((): AnyPgColumn => goals.id),
+  ownerId: uuid("owner_id").references(() => agents.id),
+  createdAt: timestamp("created_at", { withTimezone: true }).notNull().defaultNow(),
+  updatedAt: timestamp("updated_at", { withTimezone: true }).notNull().defaultNow(),
+});
diff --git a/packages/db/src/schema/index.ts b/packages/db/src/schema/index.ts
new file mode 100644
index 00000000..2862bf22
--- /dev/null
+++ b/packages/db/src/schema/index.ts
@@ -0,0 +1,5 @@
+export { agents } from "./agents.js";
+export { projects } from "./projects.js";
+export { goals } from "./goals.js";
+export { issues } from "./issues.js";
+export { activityLog } from "./activity_log.js";
diff --git a/packages/db/src/schema/issues.ts b/packages/db/src/schema/issues.ts
new file mode 100644
index 00000000..4e0edd5a
--- /dev/null
+++ b/packages/db/src/schema/issues.ts
@@ -0,0 +1,17 @@
+import { pgTable, uuid, text, timestamp } from "drizzle-orm/pg-core";
+import { agents } from "./agents.js";
+import { projects } from "./projects.js";
+import { goals } from "./goals.js";
+
+export const issues = pgTable("issues", {
+  id: uuid("id").primaryKey().defaultRandom(),
+  title: text("title").notNull(),
+  description: text("description"),
+  status: text("status").notNull().default("backlog"),
+  priority: text("priority").notNull().default("medium"),
+  projectId: uuid("project_id").references(() => projects.id),
+  assigneeId: uuid("assignee_id").references(() => agents.id),
+  goalId: uuid("goal_id").references(() => goals.id),
+  createdAt: timestamp("created_at", { withTimezone: true }).notNull().defaultNow(),
+  updatedAt: timestamp("updated_at", { withTimezone: true }).notNull().defaultNow(),
+});
diff --git a/packages/db/src/schema/projects.ts b/packages/db/src/schema/projects.ts
new file mode 100644
index 00000000..defc6ac7
--- /dev/null
+++ b/packages/db/src/schema/projects.ts
@@ -0,0 +1,9 @@
+import { pgTable, uuid, text, timestamp } from "drizzle-orm/pg-core";
+
+export const projects = pgTable("projects", {
+  id: uuid("id").primaryKey().defaultRandom(),
+  name: text("name").notNull(),
+  description: text("description"),
+  createdAt: timestamp("created_at", { withTimezone: true }).notNull().defaultNow(),
+  updatedAt: timestamp("updated_at", { withTimezone: true }).notNull().defaultNow(),
+});
diff --git a/packages/db/src/seed.ts b/packages/db/src/seed.ts
new file mode 100644
index 00000000..3d02cefb
--- /dev/null
+++ b/packages/db/src/seed.ts
@@ -0,0 +1,66 @@
+import { eq, inArray } from "drizzle-orm";
+import { createDb } from "./client.js";
+import { agents, projects, issues, goals } from "./schema/index.js";
+
+const url = process.env.DATABASE_URL;
+if (!url) throw new Error("DATABASE_URL is required");
+
+const db = createDb(url);
+
+console.log("Seeding database...");
+
+const [ceo, engineer, researcher] = await db
+  .insert(agents)
+  .values([
+    { name: "CEO Agent", role: "ceo", status: "active" },
+    { name: "Engineer Agent", role: "engineer", status: "idle" },
+    { name: "Researcher Agent", role: "researcher", status: "idle" },
+  ])
+  .returning();
+
+// Wire up reporting hierarchy: engineer and researcher report to CEO
+await db
+  .update(agents)
+  .set({ reportsTo: ceo!.id })
+  .where(inArray(agents.id, [engineer!.id, researcher!.id]));
+
+const [project] = await db
+  .insert(projects)
+  .values([{ name: "Paperclip MVP", description: "Build the initial paperclip management platform" }])
+  .returning();
+
+const [goal] = await db
+  .insert(goals)
+  .values([
+    {
+      title: "Launch MVP",
+      description: "Ship the minimum viable product",
+      level: "milestone",
+      ownerId: ceo!.id,
+    },
+  ])
+  .returning();
+
+await db.insert(issues).values([
+  {
+    title: "Set up database schema",
+    description: "Create initial Drizzle schema with all core tables",
+    status: "done",
+    priority: "high",
+    projectId: project!.id,
+    assigneeId: engineer!.id,
+    goalId: goal!.id,
+  },
+  {
+    title: "Implement agent heartbeat",
+    description: "Add periodic heartbeat mechanism for agent health monitoring",
+    status: "in_progress",
+    priority: "medium",
+    projectId: project!.id,
+    assigneeId: engineer!.id,
+    goalId: goal!.id,
+  },
+]);
+
+console.log("Seed complete");
+process.exit(0);
diff --git a/packages/db/tsconfig.json b/packages/db/tsconfig.json
new file mode 100644
index 00000000..a086b149
--- /dev/null
+++ b/packages/db/tsconfig.json
@@ -0,0 +1,8 @@
+{
+  "extends": "../../tsconfig.json",
+  "compilerOptions": {
+    "outDir": "dist",
+    "rootDir": "src"
+  },
+  "include": ["src"]
+}
diff --git a/packages/db/vitest.config.ts b/packages/db/vitest.config.ts
new file mode 100644
index 00000000..f624398e
--- /dev/null
+++ b/packages/db/vitest.config.ts
@@ -0,0 +1,7 @@
+import { defineConfig } from "vitest/config";
+
+export default defineConfig({
+  test: {
+    environment: "node",
+  },
+});