diff --git a/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_constants.py b/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_constants.py
index 21f1286390cd..5a766389be95 100644
--- a/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_constants.py
+++ b/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_constants.py
@@ -19,6 +19,7 @@ class Constants:
 
     # Tracing
     APPLICATIONINSIGHTS_CONNECTION_STRING = "APPLICATIONINSIGHTS_CONNECTION_STRING"
+    APPLICATIONINSIGHTS_AUTH_MODE = "APPLICATIONINSIGHTS_AUTH_MODE"
     OTEL_EXPORTER_OTLP_ENDPOINT = "OTEL_EXPORTER_OTLP_ENDPOINT"
     FOUNDRY_AGENT365_TRACING_ENABLED = "FOUNDRY_AGENT365_TRACING_ENABLED"
     OTEL_INSTRUMENTATION_GENAI_CAPTURE_MESSAGE_CONTENT = "OTEL_INSTRUMENTATION_GENAI_CAPTURE_MESSAGE_CONTENT"
diff --git a/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_tracing.py b/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_tracing.py
index b0ed26bbeda1..9e5310d7ff6f 100644
--- a/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_tracing.py
+++ b/sdk/agentserver/azure-ai-agentserver-core/azure/ai/agentserver/core/_tracing.py
@@ -246,6 +246,15 @@ def _setup_distro_export(
         kwargs["enable_azure_monitor"] = True
         kwargs["azure_monitor_connection_string"] = connection_string
 
+        # When Entra-based auth is requested, export to Azure Monitor using a
+        # system-assigned managed identity (no client id) rather than the
+        # connection string's instrumentation key alone.
+        auth_mode = os.environ.get("APPLICATIONINSIGHTS_AUTH_MODE", "")
+        if auth_mode.strip().lower() == "entra":
+            credential = _create_managed_identity_credential()
+            if credential is not None:
+                kwargs["azure_monitor_exporter_credential"] = credential
+
     # A365 tracing export — enabled only in hosted environments.
     if (
         os.environ.get("FOUNDRY_HOSTING_ENVIRONMENT", "")
@@ -259,6 +268,28 @@ def _setup_distro_export(
     use_microsoft_opentelemetry(**kwargs)
 
 
+def _create_managed_identity_credential() -> Optional[Any]:
+    """Create a system-assigned :class:`ManagedIdentityCredential`.
+
+    Instantiated without a ``client_id`` so the platform-assigned (system)
+    managed identity is used for Entra-based Azure Monitor export.  Returns
+    ``None`` when ``azure-identity`` is not installed so tracing setup can
+    continue without export credentials.
+
+    :return: A managed identity credential, or ``None`` if unavailable.
+    :rtype: Any or None
+    """
+    try:
+        from azure.identity import ManagedIdentityCredential
+    except ImportError:
+        logger.warning(
+            "APPLICATIONINSIGHTS_AUTH_MODE=Entra requires azure-identity, "
+            "which is not installed — Azure Monitor export credential disabled."
+        )
+        return None
+    return ManagedIdentityCredential()
+
+
 # ======================================================================
 # Public API: span operations
 # ======================================================================
diff --git a/sdk/agentserver/azure-ai-agentserver-core/tests/test_tracing.py b/sdk/agentserver/azure-ai-agentserver-core/tests/test_tracing.py
index bacf0f4d6dea..40a3a35258a3 100644
--- a/sdk/agentserver/azure-ai-agentserver-core/tests/test_tracing.py
+++ b/sdk/agentserver/azure-ai-agentserver-core/tests/test_tracing.py
@@ -148,6 +148,60 @@ def test_distro_called_without_conn_str(self) -> None:
             assert kwargs["connection_string"] is None
 
 
+# ------------------------------------------------------------------ #
+# Entra-based Azure Monitor export credential
+# ------------------------------------------------------------------ #
+
+
+class TestEntraAuthMode:
+    """Verify _setup_distro_export wires a managed identity credential for Entra auth."""
+
+    def _run(self, env: dict) -> dict:
+        from azure.ai.agentserver.core import _tracing
+        with mock.patch("microsoft.opentelemetry.use_microsoft_opentelemetry") as mock_use, \
+                mock.patch.dict(os.environ, env, clear=False):
+            _tracing._setup_distro_export(
+                resource=Resource.create({}),
+                span_processors=[],
+                log_record_processors=[],
+                connection_string="InstrumentationKey=00000000-0000-0000-0000-000000000000",
+            )
+            mock_use.assert_called_once()
+            return mock_use.call_args[1]
+
+    def test_entra_auth_mode_passes_managed_identity_credential(self) -> None:
+        sentinel = object()
+        with mock.patch(
+            "azure.ai.agentserver.core._tracing._create_managed_identity_credential",
+            return_value=sentinel,
+        ):
+            kwargs = self._run({"APPLICATIONINSIGHTS_AUTH_MODE": "Entra"})
+        assert kwargs["enable_azure_monitor"] is True
+        assert kwargs["azure_monitor_exporter_credential"] is sentinel
+
+    def test_entra_auth_mode_case_insensitive(self) -> None:
+        sentinel = object()
+        with mock.patch(
+            "azure.ai.agentserver.core._tracing._create_managed_identity_credential",
+            return_value=sentinel,
+        ):
+            kwargs = self._run({"APPLICATIONINSIGHTS_AUTH_MODE": "entra"})
+        assert kwargs["azure_monitor_exporter_credential"] is sentinel
+
+    def test_no_credential_when_auth_mode_not_entra(self) -> None:
+        env = {"APPLICATIONINSIGHTS_AUTH_MODE": ""}
+        with mock.patch.dict(os.environ, {}, clear=False):
+            os.environ.pop("APPLICATIONINSIGHTS_AUTH_MODE", None)
+            kwargs = self._run(env)
+        assert "azure_monitor_exporter_credential" not in kwargs
+
+    def test_managed_identity_credential_has_no_client_id(self) -> None:
+        from azure.ai.agentserver.core import _tracing
+        with mock.patch("azure.identity.ManagedIdentityCredential") as mock_cred:
+            _tracing._create_managed_identity_credential()
+            mock_cred.assert_called_once_with()
+
+
 # ------------------------------------------------------------------ #
 # Constructor passes / skips connection string
 # ------------------------------------------------------------------ #